Investing in the Fresno Market

************************************************************************************
October 29, 2009

As we start our series of postings on how we see the Real Estate Investing (REI) market in Fresno it is probably best to see where we have been, because any single point does not make a trend.

First off it should be noted that we have been investors in the Fresno market for 7+ years (been a crazy ride) so we have some experience. It should also be noted that we put our money where our mouth is as we have picked up 11 properties in the last 10 months. We focus on fixer type properties that need work in decent older areas. We avoid war zones and areas where we would feel unsafe getting out of car at night.

We look for deals everyday and are always looking to expand our network of experienced real estate professionals. If you support the Fresno/Madera market we would love to hear from you. Go to www.wealthbuildingpro.com for contact information.

On to the topic at hand: The current market.

In today's market it goes without saying that the lower end of the market is much stronger than any segment, especially when you compare it to 6-9 months ago at the peak of the financial storm. It is our opinion that at the beginning of the year the banks wanted CASH and they wanted it in a BIG way so they took some cash deals that they wouldn't take in today's market. SO if you were active during this window good for you, but that market is gone!!!!

As active investors we have to ask ourselves is this a short term buying storm caused by $8,000 tax incentives, low rates and limited new foreclosures (not to mention the summer buying season has just passed) or is this the new trend upward (or at least flat).

We obviously have no information outside of what we read but it is our opinion that we are in an artificial market that is acting like it is on a sugar high. When this wears off we will again test the lows of earlier in the year. We see all the pending and back up properties in the MLS which makes the available inventory look almost non existent (in our desired markets). How can this be? 6 months ago you could buy a vacant 3/1 REO house that needed work for around 50K, but today it probably would take 65K to 70K (For you math wizards out there that is a 30%+ increase inside of 6 months).

Can a 30%+ increase inside of 6 Months be healthy? I think you know the answer to that, "No".

So either what will prove to be the bottom was artificially depressed (certainly possible) or the sudden spike is artificial. It is our opinion that you can not have both.

So what is an investor to do when faced with a tough decision? Do you double down now and bet the market is racing back to replacement cost or do you take a deep breadth and pause for a few months and see what happens. Both options are risky and could cost you lost wealth.

We propose that you ask yourself a couple of hard questions and then decide:

Have Foreclosures peeked?Will the 8,000 Tax incentive be extended or enhanced a seond time?Has unemployment hit bottom in Fresno?Is net migration to Fresno up or down?Where are interest Rates going?Is Inflation around the corner?

No one every said investing was easy. But it certainly is fun.
************************************************************************************