As predicted, Fannie is beginning to sell blocks of assets in bulk to REITs

[bearishgurl]

[quote=livinincali]The market right now is one where there is low inventory and lower sales. Sales were good in the summer but they are weakening with the lower inventory. You have buyers that aren’t willing to pay significantly higher prices and you have sellers that won’t sell for current market prices. It’s a standoff and it could be this way for awhile.

I don’t buy the over corrected due to short sales and other arguments, the fact is there wasn’t a buyer at the higher prices whether you think there should be or not. There’s either a buyer that will pay you your price or there isn’t. If your neighbor found a buyer at a higher price you have to find your own buyer at a higher price. You only need to find and convince one to pay your price. In essence find your own sucker if you want to sell above market.[/quote]

livinincali, the reason there aren’t many buyers willing to pay prices circa when the market was ~normal (read: unmanipulated <=2003) in many local markets is because they are so used to "fire sales" at the market's "new normal" that they expect they are entitled to “fire sale” prices, even on well-located non-distressed properties which have been maintained properly. Close to zero percent of distressed property today priced at a “fire sale” price or whose seller is willing to accept a “fire sale” price has been maintained properly throughout the years … if ever at all. Much of it literally needs to be gutted and could likely not pass a termite clearance. In any case, the (institutional) sellers will not pay for the costly tenting and repairs.

You pay for what you get in this life … nothing more and nothing less. The “sucker” is actually the buyer (who is hell-bent on getting a “fire sale” price) who buys an REO without a Transfer Disclosure Stmt (TDS) . . . or a SS WITH a TDS where the (indigent or bankrupt) seller(s) lied through their teeth on it and also to their listing agent in order to consummate the deal and successfully dump “their” underwater property. The “sucker-buyer” then ends up finding out AFTER closing exactly what they bought (at the “fire sale” price). Practically speaking, a LOT of these issues cannot be seen and/or their extent cannot be determined by a $400 “home inspection” in escrow.

In other words, if there is a distressed listing in an area which attracts a buyer who wants it for a personal residence (but is otherwise unqualified to purchase in that area w/o buying a heavily-distressed property), there is very often a good reason for its “fire sale” price. If said listing was a “traditional or equity sale,” this same “sucker-buyer” would not even be considering it, as it would be too cost-prohibitive.

A REIT getting a few of these duds in a bulk sale can recover from this pickle, due to economies of scale and being well-funded. However, such a revelation AFTER closing can be financially devastating to an individual buyer, ESP a highly-leveraged FT buyer and/or head of a family with minor children.

[spdrun]

By “individual investor”, I’m more thinking of someone who has $500k to $1MM cash available. He is buying properties in the $100k to $300k range, and either flipping or renting them out, then pulling say 60-75% of the equity out to buy the next one. There’s a huge range between someone who wants to pay $10k down on an REO and has no other assets, and your average individual investor.

This kind of investor will also make a damn careful inspection of each property he’s buying, far more carefully than some REIT will check out a package of 700 properties in unknown shape.

Lastly, the manipulation of the market started long before 2003. Late 90s, I suspect.

[bearishgurl]

[quote=spdrun]~

Lastly, the manipulation of the market started long before 2003. Late 90s, I suspect.[/quote]

Agree with your post except for the above.

spdrun, what do you “suspect” caused the manipulation of the residential RE market between, say, ’99 and ’03?

[moneymaker]

The dot com run up would explain any price run up in silicon valley. I think the Fannie Mae sell off is a good idea, I’m only surprised the banks didn’t cut out the middlemen and flip/rent out the houses themselves. The only fixed cost in life that is out of whack behind credit card rates is rents. Rents should not be so high that they cover PITI 100%

[livinincali]

[quote=bearishgurl][quote=livinincali]The market right now is one where there is low inventory and lower sales. Sales were good in the summer but they are weakening with the lower inventory. You have buyers that aren’t willing to pay significantly higher prices and you have sellers that won’t sell for current market prices. It’s a standoff and it could be this way for awhile.

I don’t buy the over corrected due to short sales and other arguments, the fact is there wasn’t a buyer at the higher prices whether you think there should be or not. There’s either a buyer that will pay you your price or there isn’t. If your neighbor found a buyer at a higher price you have to find your own buyer at a higher price. You only need to find and convince one to pay your price. In essence find your own sucker if you want to sell above market.[/quote]

livinincali, the reason there aren’t many buyers willing to pay prices circa when the market was ~normal (read: unmanipulated <=2003) in many local markets is because they are so used to "fire sales" at the market's "new normal" that they expect they are entitled to “fire sale” prices, even on well-located non-distressed properties which have been maintained properly. Close to zero percent of distressed property today priced at a “fire sale” price or whose seller is willing to accept a “fire sale” price has been maintained properly throughout the years … if ever at all. Much of it literally needs to be gutted and could likely not pass a termite clearance. In any case, the (institutional) sellers will not pay for the costly tenting and repairs.

You pay for what you get in this life … nothing more and nothing less. The “sucker” is actually the buyer (who is hell-bent on getting a “fire sale” price) who buys an REO without a Transfer Disclosure Stmt (TDS) . . . or a SS WITH a TDS where the (indigent or bankrupt) seller(s) lied through their teeth on it and also to their listing agent in order to consummate the deal and successfully dump “their” underwater property. The “sucker-buyer” then ends up finding out AFTER closing exactly what they bought (at the “fire sale” price). Practically speaking, a LOT of these issues cannot be seen and/or their extent cannot be determined by a $400 “home inspection” in escrow.

In other words, if there is a distressed listing in an area which attracts a buyer who wants it for a personal residence (but is otherwise unqualified to purchase in that area w/o buying a heavily-distressed property), there is very often a good reason for its “fire sale” price. If said listing was a “traditional or equity sale,” this same “sucker-buyer” would not even be considering it, as it would be too cost-prohibitive.

A REIT getting a few of these duds in a bulk sale can recover from this pickle, due to economies of scale and being well-funded. However, such a revelation AFTER closing can be financially devastating to an individual buyer, ESP a highly-leveraged FT buyer and/or head of a family with minor children.[/quote]

This is complete nonsense. You bought an asset that is relatively illiquid and because you have a desire to sell in a short term time frame you think it’s unfair that you’d have to come to market pricing. Just accept that fact that you have 2 choices, wait or sell for what the market will bear under current supply and demand. You’re trying to tell me that people would be happy to pay your price if there was no other competition.

Your making an argument that if other people wouldn’t sell there apple stock for less than $1000/sh I’d be able to sell my apple shares for $1000/sh. It’s BS. Sorry for your personal situation but there’s a massive amount of asset collection going on right and there’s going to be winners and losers.

You bought an asset that isn’t as desirable as you thought it would be. This game is going to continue as the next generation doesn’t share the same values as the previous generation. The next generation might not want a 3000+ SF bomber with no yard. You can’t force them to pay a premium for that even if you assumed that’s what they would want. Good luck guessing what the next generation is willing to trade their productivity for. You might be better off with Nintendo consoles.

I don’t know want they want, but you’re in a competition with your fellow retirees for their productivity, better figure out what they want, or figure out how to be happy with a reduced standard of living.

[bearishgurl]

livinincali, my property is actually about a 2200 sf SFR with a larger yard. I’m not into mcmansions in lizardland and their requisite MR and HOA’s appurtenant. FWIW, it’s ~10 mi from dtn SD, one mile from the bay and I have about 50% equity. It’s no skin off my back if I rent it out for ~$2000 per month for a few years until Gen Y (the upcoming family-raising buyer-contingent) decide they don’t want to waste their valuable time and a huge chunk of their needed monthly income (needed to raise their children) to pay extra fees in lizardland anymore.

My ~65 yo hood (and its owners) are sufficiently “gentrified” that I don’t have too many of those types of “sellers” that borrowed their way into oblivion in recent years. In fact, the opposite is true. Most of them own free and clear 🙂

The problem I face is since I bought, my city (Chula Vista) has annexed two more zip codes and increased its population by about 175K people. Those two zips were entirely built between 2000 and 2006. There has been so much distressed new construction to choose from down here that the the vast majority of younger buyers in “family-raising-mode” have nearly all chosen the *newer* contruction at fire-sale prices in recent years. Never mind that they have a 3400-4400 sf lot (avg 3800 sf) and they can hear their neighbor’s toilet flush. Never mind that their MR is $4K to $5K annually. Never mind that their assn fees are $130 to $270 mo for an SFR or that their SFR is encumbered by two or more HOA’s. They want NEWER! They can’t see the value in OLDER areas with avg 7500 sf lots (many with 1/4 – 1/2 AC lots). They don’t want the 80+ yo trees to walk their dogs in … they want sticks and miniscule “community parks” for their ridiculous monthly fees. And they want to commute 8-12 miles farther from job centers on the fwys (with everyone else, lol) instead of take the surface street to dtn SD (like I can).

So there you have it. That is my “competition,” which was not known to me when I purchased the property. I can’t fix it now. It’s a “values issue.” My property will sell to a relative of a longtime neighbor. That’s the way it has always worked around here.

When it’s time, I’m going to go, regardless, and join my “brethren boomers” at a “typical boomer retirement haven” in Norcal (where I’m from), the sierras or the rockies.

There are MILLIONS of us who will NOT give away our property and all the improvements we did for NOTHING. So GET USED to the “inventory problem” and having to “pony up rent,” ostensibly to rent from a boomer who refuses to sell at “fire sale” prices.

It is what it is and it’s not going away…

[scaredyclassic]

i don’t understand the housing market.

[moneymaker]

I wish I had bought when my brother did back in 1993. I would have been 31 and although I didn’t think I could afford a home back then, if I waited until I thought I could afford a home I would probably still be on the sidelines waiting. My suggestion to anyone now that is 26-31 years old, would be to buy a house that costs the same as you would be paying for rent and you “can’t” make a mistake. Now is the time to buy and the “rich” know this and that is why the majority of purchases are going to cash buyers.

[spdrun]

Wrong-o: buy house(s) that cost LESS than paying for rent. And rent them to stupid suckers who can’t (or don’t want to) buy.

[CA renter]

BG,

What we’re seeing with interest rates and inventories is an anomaly that is specifically designed to artificially inflate prices and work in favor of sellers. It will not last forever, even though it could last for longer than most of us think wise.

If I were in your shoes, I’d be thinking very seriously about whether it’s best to sell and then buy or rent the retirement home, or rent your primary house out while renting the retirement home.

This is the time to SELL. The market is on fire with so little inventory and incredibly low interest rates. The bubble was not allowed to fully deflate, but that doesn’t mean they’ll be able to artificially prop up prices indefinitely. If you ever intend to sell, don’t let unrealistic pricing expectations get in your way. Sell sooner rather than later.

FWIW, in my old neighborhood prices had already doubled between ~1997 and ~2001. That likely marked the top of the “normal” RE cycle. When the Fed dropped rates in 2001, every investor started getting into “alternative” investments and ARMs started becoming the mortgage of choice. The bubble was well into an advanced stage by 2003, it wasn’t beginning in 2003.

Just MHO, and this is what I’d be doing if I were hoping to sell in the next 10-15 years. I do not believe prices will be higher in 10 years than they are today, especially if they don’t allow the markets (bond, stock, housing, commodities, etc.) to purge. Wages are going down for most people, not up. The global economy is slowing and has to reverse all of the artificial stimulus from the past 10+ years (all that debt needs to be paid down). Sure, they might print ceaselessly, but that will likely only increase commodity prices, not wages; and people will have LESS money to spend on housing, not more. As it stands, most working families can barely pay for their expenses outside of housing — just gas, utilities, car payments, food, medical insurance, etc. is maxing them out. That’s why so many people are so deep in debt. Most people from the Boomer generation have an inflation bias because that’s all they’ve ever seen. Inflation is not guaranteed, and in an economy where so many are so over-indebted and just struggling to survive, “healthy” inflation is very unlikely, IMHO.

[bearishgurl]

Closer to “home,” another REIT just bought up 970 foreclosed homes for $176M in CA, AZ and NV.

see: http://www.latimes.com/business/money/la-fi-mo-foreclosure-auction-20121102,0,1900684.story

[spdrun]

112%? So basically they’re selling off unknown assets with likely a lot of bad apples mixed in at market or above. Hope Mr. Barrack (No-BUM-a?) got a sweetheart interest rate and an enema of Bernanke Bucks as a kiss goodnight.

[no_such_reality]

[quote=spdrun]112%? So basically they’re selling off unknown assets with likely a lot of bad apples mixed in at market or above. Hope Mr. Barrack (No-BUM-a?) got a sweetheart interest rate and an enema of Bernanke Bucks as a kiss goodnight.[/quote]

Sigh, it’s actually a sweet heart deal. Basically a NINJA loan with give back provisions.

[bearishgurl]

[quote=CA renter]BG,

What we’re seeing with interest rates and inventories is an anomaly that is specifically designed to artificially inflate prices and work in favor of sellers. It will not last forever, even though it could last for longer than most of us think wise.

If I were in your shoes, I’d be thinking very seriously about whether it’s best to sell and then buy or rent the retirement home, or rent your primary house out while renting the retirement home.

This is the time to SELL. The market is on fire with so little inventory and incredibly low interest rates. The bubble was not allowed to fully deflate, but that doesn’t mean they’ll be able to artificially prop up prices indefinitely. If you ever intend to sell, don’t let unrealistic pricing expectations get in your way. Sell sooner rather than later…[/quote]

I understand what you’re saying here, CAR. But my PITI is “affordable” and we NEED someplace to live until kid goes to college. It is neither easy nor cheap to find a rental for pets close to where I need to live right now (here) and I don’t want to move twice. And I need to complete more repairs/replacements before selling, PREFERABLY within one year of putting my property on the market … to offset any possible capital gains tax I might have to pay for the tax year of the sale.

I really don’t care if I can’t get the price I want within a few weeks of marketing my residence. I really don’t have any problem with renting it out as it would have a substantial monthly positive cash flow. This would also give me the option of moving back into it in the future if I wished to come back to the area to live as I wouldn’t likely be able to qualify for a mortgage on my own. I will likely have to pay cash for any future properties I purchase.

I’ll have to take my chances on values increasing in the months/years to come … or not. So far, they have stabilized but I don’t see them (appreciably) increasing around here … yet.

[spdrun]

^^^

Sorry to say, but I’m glad that values haven’t appreciably increased. And hope they’ll stay steady and NOT increase. Looks like Bennie-boy is failing in his attempts to fellate the stock market to the stratosphere. Maybe property will go the same way. Here’s hoping! *clink*

[Author]

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