--(www.USEquityNews.com)-- 03/23/2009 - Real estate and gold - Do those words really belong in the same sentence? Could there be two things more economically opposite? People can't seem to buy gold fast enough. Gold is the one thing they feel they can trust. And it's not surprising that those same people view purchasing real estate as the logical equivalent to throwing money into the sea; because now, nobody seems to trust real estate.
Well, make that almost nobody. Today, although it's not something you hear much about, there are signs that, in some quarters, greed is actually beginning to overtake fear. Prices for houses and commercial properties have dropped so significantly (the biggest drop since the Great Depression) that they have begun to find a market, with distressed properties playing a major role.
Although nobody expects much of an improvement in the overall market until well into next year, sales of previously owned homes in the U.S. have unexpectedly begun to rise. Even sales of condos and co-ops have risen slightly. And nearly half of these sales were of distressed properties, such as foreclosures.
Small scale investors, if they can come up with a long term source of financing, are buying the properties and installing renters, rather than face the still comatose retail sales market. Ironically, those renters are sometimes former homeowners, thrown out by foreclosure. In some cases, people end up becoming tenants in their own house, or what was previously their own house, pressured into selling to an investor who agrees to let them stay in the house as renters.
But sometimes the investors are not so small scale. Angel Acquisition Corp. (OTCBB: AGEL), formerly Palomar Enterprises, for example buys, renovates, and sells distressed residential properties. The company looks primarily for foreclosure properties and land development opportunities, in addition to providing a variety of real estate mortgage services.
And now, even commercial properties, primarily retail, are showing up as distressed, battered because of the slowdown in retail sales. Tenants are going out of business and over-financed owners are unable to keep up the payments. Even though distressed properties make up a far smaller percentage of commercial property sales than they do of residential sales, there is an increasing group of investors and companies who see unprecedented opportunity where others see disaster.
Shares of Real Estate Investment Trusts (REITs), companies that buy real estate, have gotten hammered, especially those REITs investing in malls and shopping centers. But some REITs are holding up, with strong balance sheets and few debts, and are now beginning to look hungrily at distressed properties they can buy at a fraction of what they feel they are worth.
