A company called ZetaBid has been auctioning off properties in the Los Angeles area recently and they have another big auction coming up in March.  They have over 250 homes to sell, and are expecting a big crowd.  I’ve been to auctions before and I’ve seen with my own eyes as suppossed bargain hunters get into bidding wars over dubious properties.

As a bit of advice for anyone contemplating an auction purchase at this time, I would advice against it unless you use caution.  First, the prices may seem low, but they could go lower.  Second, don’t make the mistake of over-bidding.

I remember years ago bidding at a car auction and I was fighting to buy a van against one other bidder.  The price went beyond my limit and I still bid higher because I wanted to beat that other guy.  I figured I wasn’t overpaying as long as someone else was bidding.  Wrong!  I lost money on that lousy purchase but I learned a valuable lesson.

Bidding on a house is a much larger investment and therefore a much larger risk.  There are no guaranteed profits, so be careful.

The Dow Jones Real Estate index (DJUSRE) has been beaten down recently as the overall market has dropped.  Although I think real estate has much more pain ahead, I think the DJUSRE will rebound soon.  I certainly hope so, as I’d like to get some of my money back.

What I learned recently from the stock market is that it is not enough to understand where the market is headed in the long term.  There are many short-term trends that can mask the underlying behavior.

I was going to post tonight but it will have to wait until tomorrow.  I don’t have the energy right now.

Patience in house hunting

My friend wants to buy a house.  She’s asked me for my advice and assistance.  I told her not to buy right now.  There is a lot of turmoil in the economy right now, and it’s fair to say that things will probably be as bad as they’ve been since the 1930’s.  Some people don’t believe that but from what I’v'e seen and read we are only at the beginning of our economic problems.  We’ve got banks and major corporations failing left and right.  We’ve got stimulus packages that are historically unprecedented, and yet we act like what’s another 75 billion program (foreclosure prevention) along with all the other programs that have been launched recently.

I told my friend that prices could still drop substantially as demand declines further.  Unemployment puts a major damper on home buying, and investors are probably becoming more cautious as well.  It’s easy to buy a cheap house these days, but not so easy to flip it at a profit,and who wants to hold the thing and risk price declines.

I hope my friend will exercise patience.  Buying just because you feel like it can be costly.

While I see very low interest rates as having potential to prop up the market and keep housing affordable, it’s never fun to lose money on your house and most people don’t buy and hold for 30 years.

With all that, keep a watchful eye on everything that happens this spring and don’t be too quick to jump into this real estate market.  We could see a spike due to the spring/summer buying season combined with low rates but I suspect that any spike or stabilization in prices will be short-lived as demand will soften further as the economic pressures mount.

Southern California real estate prices have been under great pressure as the economy has collapsed and foreclosures represent a substantial portion of real estate sales activity.  Below is a report that shows how prices fared during 2008.

This report covers both Los Angeles County and Orange County real estate prices.