Interest Rates & Bank-Owned Properties

Interest Rates

FED Chairman Bernanke gave a speech yesterday wherein he made an abrupt change from his former policy of not commenting on the dollar as, per his prior position, it is not within the province of the FED. By raising his concern over the weak dollar, as well as the lagging economy, he seemed to be posturing for future interest rate increases, or at minimum a freeze of the rate (2%) for the immediate future. (Source: MSNBC, WSJ)

Keeping the above in mind, for anyone contemplating a refinance, now may be your best opprtunity.

Bank-Owned Properties

On another note, I am seeing a bottom in multi-unit investment property prices, albeit artificially determined. It appears the banks are looking at individual properties and determining a floor price at which they are willing to sell each property. If a property does not sell at that price, they will then auction the property with the predetermined floor price being the minimum they will accept at auction. I am told that, if a bank does not obtain its floor price at the auction, it will then bundle the property with similar properties and sell the bundle to a large (institutional) investor.

What are the ramifications of the above? They are twofold:

First, this should stop the bleeding for those of you who own multi-unit properties in that the bank-owned properties will not remain on the market as a continuous drag on values. In theory, your property value will be determined by this floor price per unit in conjunction with the relative condition of your property. Without this process in place, your property would continue to decrease in value until such time as the floor was determined on the open market. This would naturally be lower than the floor price set by the banks.

Second, for those of you investing in these properties, keep an eye out for the unit price at which these properties are taken off the market in your area and compare the different prices/properties against one another. If the per unit price is fairly consistent taking into acount condition of the respective properties, you have a pretty accutate indication of the bottom and what you should expect to pay per unit.