Real Estate Opportunities presented by distressed property, foreclosures, and REO’s (Bank Owned Real Estate)

In the constant battle of supply and demand great opportunities present themselves for those that are patient and at the ready when the time of opportunity presents itself. In all of these battles, economic equilibrium is the ultimate winner!

With substantial short supplies, demand drives up prices, and those that control the supply win from price increases. In the end though, these price increases drive over development and speculation that ultimately lead to a mob

mentality driven oversupply and an ensuing drying up of demand. We began witnessing the beginning of this phenomenon in mid 2006 as demand began to dry up due to buyer exhaustion and extreme price escalation. In addition the pipeline of new supplies that were committed to continued to come on line further injuring the demand for the supply.

We are all quite aware what has occurred in the mean time – a huge supply with over leveraged ownership and a dried up demand. When this occurs prices must drop to the point that demand gets revived. In more moderate cycles these adjustments are not as readily visible, however we have experienced a grand super cycle and the downward adjustments have been as extreme as the preceding upward adjustments.

In the end Equilibrium will win the battle.  But for now, great opportunities await those that have been patient and waited for the over sold condition that presents deeply discounted opportunity.  In the commodities markets these overbought and oversold conditions find supply and demand equilibrium through pricing much more rapidly due to the portability of products, consumption of products, the exceptional liquidity of products using futures contracts, and a marketplace that is facilitated by market makers that free up liquidity in locked markets.

This is not the case with real estate and the adjustments to the markets equilibrium of supply and demand. While historically the real estate market has not seen the volatility that commodity markets do, in this grand cycle we have seen extreme downward volatility in pricing and the lack of market makers and ready liquidity make these adjustments long and painful for those that are on the wrong side of the price movement. At some point though the market will be oversold! Prices will have retreated to the point that bargains present themselves!

In real estate, “you make your money when you buy”. That means that you did not overpay and there is value there. It does not mean that you buy at will and there will always be a greater fool there to deliver a windfall.

Remember, Equilibrium will win the battle – always! We have seen the extreme highs in pricing that drove overbuilding and over supply.  We have seen prices fall off of the cliff due to speculation, poor lending standards, and a market that punished the guilty and the innocent alike from excesses within the economic landscape.

The question now is has the market adjusted down low enough for the elasticity of equilibrium to pull demand back into the market place and an increase in prices due to that renewed demand?

We do not have crystal balls, yet you must ask yourself if you were looking to buy property a few years ago, whether the environment for buying is better now.  We think it is and we are actively seeking opportunity in distressed properties.

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Pensacola Beach Pier was a great place for these guys to film their surfing exploits following Hurricane Ike.  A great video! 

Pensacola Beach Pier is also a very popular fishing spot when the surf isn’t quite so high.

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