Happs, I’ve been asking the same thing myself here for several months now. The only individual investors (not local flipper teams or REITS) I see buying these mostly former rental-homes are the semi-retired or retired VERY local people buying properties in their home turf (that’s right, where they “grew up” over 40-50 years ago) or within a 15-mile radius of that area. These are individuals that know these areas intimately and would have no problems with being a landlord in them. In addition, ALL of them possess tools and DIY know-how and thus don’t spend a lot of money on contractors.
The flipper teams and REITS are a different animal. I could not read your article because I am not a subscriber but I watched the two WSJ videos. The second one, out of GA, showed auctions on the courthouse steps with representatives from Blackstone and CA’s Colony Capital (both very large REITS) attempting to buy as much SFR property as they could, either fully toured and previously “underwritten” by their reps or even sight unseen (inside the dwelling, due to being occupied). It was intriguing listening to the Colony Capital rep out in GA saying that they are on a mission to buy as much (SFR inventory) as they can. The REITS are evidently outbidding Joe and Jane Q. Local Investor in “trustee sales” (or whatever they are called in GA) for foreclosing properties at auction on the steps.
The truth is, these large REITS have the resources in place to hire local law firms and contractor teams to properly evict as well as clean up and rehab these properties to get back on the rental market (for a buy/hold investment for its investors) in as short a time frame as possible.
To be frank, I don’t think the typical Joe 6p Wanna-be Buyer in San Diego County who is in the $300K to $400K price range and looking for a personal residence to buy with a mortgage would be interested in making an offer on any of these properties. They would rather continue to rent. I have noticed that some SFR listings in a handful of zip codes I monitor south of I-8 have been on the market more than two months with no takers, due primarily to deferred maintenance or needing updating. Perhaps they DID get investor offers early on but since these recent sellers were not in distress, they would not lower their price sufficiently for the investor/flipper to make any (or enough) profit on a rehab so the listings are still sitting. 80-90% of these listings are in perfectly decent family areas but buyers in that price range are shunning them … even those who have families and REALLY NEED a house.
It’s astounding to me.
I don’t think the “buying pool” of “non-investors” is slim in this price range, Happs. I think the real problem here is that the (local) residence-buyer pool expects much, much more for $300-$400K, due to seeing their peers buy what they perceive are “better” homes for this price range in the last 3+ years so now think these properties are priced too high so they don’t place any offers, even if they wouldn’t be competing with any investors. They’re forgetting that those low-priced transactions of their peers were short sales and REOs which were plentiful 3 years ago. And the vast majority of THEM weren’t in great shape (even stripped) when they were purchased in ’09, ’10 or ’11, either. They probably don’t realize how much money their peers had to put into them to fix them up enough to move into. Most buyers in this price range can barely scrape together the downpayment and closing costs and don’t have the funds to fix the place like they want to before moving in. And they can’t stomach living in it like it is until they can afford to do the work, little by little.
The reality is that most of these properties have asking prices equivalent to their 2003 values and it’s not going to get any easier to buy a house in SD County.
