OT: SD Slim Pickings in Foreclosures…

[Coronita]

Why did i mark this as an off-topic. Because RE is now considered off-topic on piggington blog..

http://www.utsandiego.com/news/2012/jul/24/foreclosure-investors-face-slimmer-pickings/

Home buyers, particularly investors, in San Diego County have fewer foreclosed homes to choose from these days.

Properties that were foreclosed upon in the past year and resold in San Diego County made up 20 percent of total home resales in June, matching the recorded low in September 2007, DataQuick stats show. Their share of the resale market was 21.3 percent in May, 28.5 percent a year ago and had peaked at 55 percent three-and-a-half years ago. In other words, bank-owned resales are making up a smaller share of the total market as time passes.

The shrinking inventory of foreclosure resales and the heightened demand for them likely has helped drive up the median home price in the county, said Andrew LePage, an analyst at La Jolla-based DataQuick. Foreclosures, which can be in poor condition, tend to be sold at a discount.

As their presence in the county continued to subside in the past six months, home values in San Diego County have either stayed relatively flat or slow crept up.

“It has a significant impact on the market in how the market feels to buyers and sellers out there,” said LePage, referring to the latest foreclosure figure. “Buyers don’t have as many foreclosures to choose from and sellers don’t have as as many foreclosures to compete with.”

Even with a declining inventory of foreclosure resales, investors are still out in significant numbers. Investor sales comprised 27.5 percent of total sales in June, matching the percentage in May and up from 24.1 percent a year ago. They peaked in February, at 30.1 percent.

What kind of effect do investors have on neighborhoods?

It depends on your perspective and your neighborhood.

Investors, who typically snap up distressed properties because of their lower prices, may be doing areas a favor by rehabbing homes and selling them to first-time homebuyers who wouldn’t have the means to do the extensive rehabbing.

“It’s an ecosystem,” LePage said. “Investors are scavengers that pick up problem properties. If too many stack up, that has negative impacts on the way neighborhoods look and the quality of home values.”

On the flip side, stories have surfaced of investors crowding first-time buyers. Investors tend to have cash and cash is more attractive to home sellers, LePage said.

“It depends on your perspective,” he added.

[The-Shoveler]

I still maintain, if Europe drags us to the bottom with it,
Nothing is off the table.

[briansd1]

[quote=The-Shoveler]I still maintain, if Europe drags us to the bottom with it,
Nothing is off the table.[/quote]

True, but a Euro crisis will bring interest rates to new lows, thus creating a wave of buying and refinancing, before more employment cause house prices to stagnate or drop again.

I personally see a window of opportunity later this year, into next year, to refinance at very low interest rates, or buy and lock-in a historically low rate.

[briansd1]

Old news… same thing across major markets in the nation.

Interest rates are low, inventories are low, and housing is firming up and increasing. We’ll see if that holds through the winter… but people are getting off the fence and looking to buy.

Gas prices are low… The economy is not great, but people are seeing the end of the tunnel. Probably because of that, organic sellers are waiting for better days ahead, and banks are slowly trickling out the foreclosures and taking time on the short sales.

[an]

The small fry investors will not only have to deal with low supply but it seems like demand is increasing: http://finance.fortune.cnn.com/2012/07/24/wall-street-foreclosures/?iid=HP_LN

[briansd1]

Interesting, AN.

Back a few years ago, I didn’t believe that big funds could successfully buy and manage a portfolio of disparate properties all over the map. Some have failed miserably.

But, now prices are low enough, and the dearth of investment opportunities, are enticing the funds.

I am trying to buy some condos in Vegas from Fannie Mae, but to no avail. Apparently they want to sell them bulk to investors. Anyway, I will follow up to see how the sales pan out.

I personally believe the rush to buy will subside in the winter and more inventory will be released.

Also I question how the investment funds will manage the properties that they buy in different regions of the country. Management and maintenance are costly.

I just bought a foreclosure in Vegas. It was foreclosed late last year; and in the house they had a log of someone periodically coming to check the house. For safety, someone had to come out and cap off all the gas outlets. They had to pay a law firm in Pasadena to handle the paperwork.

In order to rent out the properties, you need agents to screen the tenants and manage the properties. The agents need to get paid and they don’t really care about damage since it doesn’t come out of their pockets. Then you need a maintenance crew to repair things. Then you need employees and software systems to keep track of the portfolio. All to make a few hundred bucks on each condo…. I’m afraid that the profits will get eaten up quickly.

Not sure if the investment funds will profit on residential properties. I think that market it best left to local operators.

The only reason I’m considering buying condos in Vegas is because I can physically be there to take care of issues myself.

[enron_by_the_sea]

[quote=briansd1]
In order to rent out the properties, you need agents to screen the tenants and manage the properties. The agents need to get paid and they don’t really care about damage since it doesn’t come out of their pockets. Then you need a maintenance crew to repair things. Then you need employees and software systems to keep track of the portfolio. All to make a few hundred bucks on each condo…. I’m afraid that the profits will get eaten up quickly.

Not sure if the investment funds will profit on residential properties. I think that market it best left to local operators.

[/quote]

Its not as if principals who put these funds together need to make profits.

They really only need to put funds together and then find other dumb individual/institutional investors to whom they will sell shares of these “can’t lose” funds. They (principals) will get paid to put these funds together and every time the next investor buys shares from them and also for running these funds.

If there are no profits here, it is really the problem of the next party who will own the paper. As long as there is demand for such “investments” fueled by articles in the media, someone on Wall Street will create this product…

[briansd1]

enron_by_the_sea, very true.

Also the initial investors, and subsequent investors, who get to buy into these funds would do so via off-shore accounts in Bermuda and the Caymans, so they won’t be paying US income taxes when they cash out.

But eventually, someone will be left holding the bag during the next crash.

Ah, the beauty of capitalism and financial alchemy.

[flyer]

Yes, very interesting article, AN. Have been reading much of the same.

Having owned investment properties for 20+ years, it’s very interesting now to sit on the sidelines and watch this new phase of real estate investment unfold.

As the article mentioned, I guess only time will tell how it all plays out from here.

[Author]

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