I dont understand, how is this gonna change anything?
ok, Lets say they buy 10 billion $ in CA houses at an average of 250k each. That is 40k homes. Sounds terrible right? As if the MLS will suddenly implode and go back to like 2 months inventory ala 2004.
But what are they gonna do with 40’000 houses? They could either A) rent them out, or B) sell them. If they rent, great! Rental values will take a serious hit as boatloads of new rentals hit markets all over CA. Since rent multipliers are a valued way of pricing RE, price will continue to fall, and rents fall state wide.
If they sell, well then those months of inventory are right back on the MLS. Plus, people wont have to deal with overloaded bank depts that take 4 months to get back on a short sale/REO offer.
I guess they could try to hold for a while, doing nothing and squeezing the market, but houses are living breathing things (not really, but you know what I mean) they need people. Landscaping will die or become overgrown, pests move in, squatters move in, they get robbed and stripped, they get moldy and nasty, etc. If they want to maintain them for the months-years it would take to unload all of them, kiss any profit good bye due to taxes and salaires of maintaince people and general upkeep expensis.
The only way this makes any sense is to buy a huge bulk order, and flip immediately. But that has problems too. Banks are not gonna sell the primo properties for pennies on the dollar, they are already balking at .4/$ because they know they can get more. These investors are still on the hook for taxes and maintaince/repairs for the entire time they own the properties. Even if it takes 6 months, that is alot of taxes to be paid. Alot of maintaince to be done, alot of security to be needed. Alot of Relator commissions to be subtracted.
Second, and this is pure speculation, but wouldn’t they be liable for disclosure? Banks are not, because they took it in a foreclosure and never occupied, but wouldn’t they be liable? REO’s are offen a complete mess, and any repair/tenting/clean up could easily kill any profits. Plus all the really good REO’s wont be sold this way, the banks have a system that works for those.
And even if they succeded, they pulled it all off and got tons of REO for pennies on the dollar and then flipped them all in a week and didnt have any liability problems, then there would be 40k fewer buyers out there, tons more foreclosures coming down the pipe, and prices still falling because the whole problem is unaffordability. Until normal people can reasonably afford their morgages, without BS loans, prices will continue to fall.
We have not changed incomes, populations, total number of houses or demographics. Nothing is different.
