Since May 2007, the California Median Home Price has plummeted from its peak of $469,000 (2007) to its current level of $232,000 (2011) according to the LA Times.
This shift represents a 51% drop. The result of these dramatic price reductions is an unparalleled wealth building opportunity in residential properties.
Investors with the ability to acquire, renovate, rent, and manage residential real estate over the next 60 months will see one of the most profitable appreciations in our state’s history.
The result of this abnormal correction in the median home price is that for the first time in 30 years, affordability for first-time-home-buyers has risen from 13% to 53%.
The result of these dramatic price reductions has created an un-paralleled wealth building opportunity in residential properties. Historically, CAP rates (Return on Investment) on residential properties have been 2% to 3% at best, largely due to tremendous competition. However, the literal flood of foreclosed, bank owned properties (REO), coupled with a reduced buyer pool, have created an opportunity to purchase residential properties with 9%, 10% and higher CAP rates.
While CAP rates of 9%, 10% and higher have long been considered an excellent investment, those returns are just the beginning when it comes to the investment opportunity in Southern California properties.
Below is a recent article about the government’s plan to sell foreclosures in bulk:
http://finance.yahoo.com/news/government-set-sell-foreclosures-bulk-150844587.html
