The Inventory Silver Lining
Investors and Colleagues,
There’s a question I get from colleagues and investors almost every day…
Matt, How is Ashford Capital able to invest so successfully even in this difficult economic environment?
It’s a fair question… The media headlines have been overly dramatic, and often don’t accurately portray what is going on in the economy (not to mention the local real estate market). To be quite honest, this is one of the most opportunistic periods I have seen in a number of years – and today I want to explain just how we are creating wealth for our investors…
Let’s take a quick example of the most recent housing statistics. This week the media jumped on a report that showed a lower “median” price for homes, and lower sales activity for the past month. Most investors failed to notice the good news behind the headlines.
Median Price – A Flawed Metric
To begin with, let’s look at the “price” component of the most recent report. Since the “median” price was lower, investors believe that home prices continue to drop.
There are certainly some areas that are seeing price drops – but at the same time there are key areas of our country (and key areas in Atlanta) where home values are actually rising!
When the statistics report a “median” price, it simply notes the middle price of houses that sold in the past month. If the middle price is lower, that could mean that the market for lower-priced houses is more robust – maybe because foreclosed properties are moving quickly.
It could mean that owners of higher-priced homes are making fewer transactions because they have the financial ability to wait until prices rise.
A fall in the “median price” of homes sold does NOT directly equate to the value of homes that were not engaged in a transaction over the past month. Because of the way that this metric is calculated, an increase in transactions from low-priced homes can actually skew the numbers and lead to the wrong interpretation.
Inventory – You Can’t Manipulate This Number
At Ashford Capital, we look much more closely at inventory statistics which tell us exactly how much real estate is on the market right now – giving us a better understanding of the supply and demand picture.
The good news from the most recent batch of statistics is that the number of new homes for sale has hit a record low. There simply aren’t enough units on the market to meet the growing demand.
Sure, there are a number of foreclosed homes being sold by banks, but have you seen the shape these homes are in? There is a certain subset of the market – home buyers who have good employment and a strong savings account – who aren’t interested in buying a “fixer-upper.”
And today, the number of new homes that they have to choose from is at its lowest level since Case-Shiller began keeping records. This is a tremendous opportunity for builders who cater to these new home buyers who want a unit that is “move-in” ready.
This is How We Do It…
Ok, apologies for the bad song reference…
But seriously, this is how we create value for our investors. We study the supply and demand dynamics in our specific market – the metro Atlanta area.
• We analyze the demand for new homes in specific neighborhoods.
• We study the assets held by troubled banks and the FDIC.
• We contact builders to determine who is ready to undertake new projects.
• We work with our investors to raise capital for attractive properties.
• And we profit when our developments are sold to builders who are fulfilling the demand for new homes.
It’s that simple! Despite this turbulent economic period, Ashford Capital is offering investors value, growth, and investment stability. We buy residential developments at dirt-cheap prices and then sell to builders as demand picks up.
Every time we complete a transaction, our investors win. We’re involved in a number of attractive properties right now that I would love to discuss with you.
If you’re tired of watching your net worth swing up and down on the whims of the market makers on Wall Street, then please give me a call. We can work on an investment program that meets your personal needs and set you on the path towards financial stability capital growth.
Wishing you every success,
Matt