The truth about vacant homes

[sdrealtor]

Yes the vacancies are significantly higher in condos. I believe this is mainly due to late investors/condo flippers and developers putting inventory in the MLS.

I don’t know the impact either but the percentage of vacanices is nothing to get excited over as its not all that different from what is has been over the last decade. Before that there is no data.

BTW, above you stated that “We know that 30% of homes bought in the last few years were for investment purposes”. How do we know this?

[powayseller]

The National Association of Realtors, a trade organization that represents real estate brokers, said in a study being released on Tuesday that the percentage of homes bought for investment might be as high as one-quarter of the 7.7 million sold last year.

“Americans are treating real estate as a viable alternative to stocks and bonds,” said David Lereah, chief economist at the Realtors association. And some are buying at least two properties at a time.’ 3/31/05

The second home market now accounts for 38 percent of the existing housing stock and 36 percent of all homes purchased last year, NAR said.

“These aren’t second homes. You know where that down payment is coming from. People are leveraging one price asset against another on a pure momentum play. We couldn’t be at greater risk right now,” said Robert M. Campbell Campbell a San Diego-based realty broker, investor and author of “Timing The Real Estate Market”.

According to La Jolla-based DataQuick Information Systems, 37 percent of buyers in local condo conversion projects last year were nonresident owners. Conversions – in which a developer buys an apartment complex, performs cosmetic upgrades and then sells the units as condos – have become popular as prices for new homes and condos have soared.

Downtown, nearly 30 percent of new or converted condos that changed hands were bought by nonresidents last year, according to DataQuick’s analysis of property tax records. Countywide, nonresidents make up only 15 percent of owners. “We’re convinced that the number of speculative investors in the downtown market hovers in the 30 percent range,” said Gary London of The London Group, a San Diego real estate research firm. “The market has been so hot, and people have profited from the relatively small number of units put on the market relative to demand.”
UT Story

[bmarum]

It’s too bad that the data on second homes isn’t subdivided into those that are purchased for investment and those that are purchased as true second homes. I can’t imagine that more than 5% to 10% of these “second” home purchases were truly second homes so the 30% of them representing investment purchases seems right (especially the condo conversions, I don’t see many people buying those as a true second home). It sure would be nice to know for certain though.

[lindismith]

sdrealtor, is 2006 28% or 23%? Your post is unclear.

Edit: Actually I get it now. You’re saying at some point in the year it jumped up, but ended up at 23%

[sdrealtor]

Lindismith,
It’s 23% of single family homes and 28% when you look at both single family and condos combined.

PS,
The national numbers are irrlevant as prices are cheaper in other places and speculation much higher. All the stats you point out in SD are areas where speculation far exceeded the mean in SD. Downtown and cheap condo conversion were full of speculation and are the exception. I saw a report for SD (cant remember exactly where) but they put the number of investors/2nd home buyers at 18% in SD overall.

[PerryChase]

I wonder how people determine if a home is for “investment” or not. If a buyer is applying for a loan, would he not be better off saying that the house will be his primary residence so he can get a lower rate? Once the loan is funded there’s not much the lender can do if the investor rents out his home.

I guess, we could analyze property tax records and see how many of the total have homeowners’ exemptions. Those would for sure be investment or 2nd homes.

[sdrealtor]

When you buy a home you need to disclose whether it is your primary residence. Sure you can lie but that is FRAUD! There is also a title search and a credit report. It’s not that believable to claim you are buying a $300K condo for a primary residence when you live in a beautiful single family home.

[PerryChase]

Humm… I would love do a comparaison of property tax records (homeowners’ exemptions) and compare that to loan application data to see if there’s a match on primary residence. If only I had time and ready access to the data….

As was discussed in another thread, people lie on stated income applications all the time, so fudging the numbers is not beyond imagination.

People move-up or down-size all the time. It’s not fraud if you intend to live in the home at the time of the loan application. But after the deal closes, you change your mind then turn that property into a rental or 2nd home.

I’m not advocating anything underhanded. I’m just wondering if the data concerning percentage of “investment” properties could be understated.

[PerryChase]

Rich Toscano, as a journalist, could you ask the County Assessor the percentage of homeowners that have homeowners’ exemption? I wonder if they keep that data and make it public.

[sdrealtor]

Perry
They angles you are playing sound like you are the type to risk taking adavntage of grey areas. The more you accumulate in the life the more you have to lose. Successful people that want to stay that way learn its not in their best interests to play that way. Sooner or later what comes around goes around.

[powayseller]

I’ve read about underreporting of occupancy, to get a cheaper loan. Getting the Assessor records is the only way to know for sure.

SD had many more speculators than other parts of the country. If the average for the country is 35%, then Omaha NE is 5%, Kansas City is 5%, and SD and Phoenix and FL are 40% or more. Again, we need assessor records to be sure. You ask the Assessor for a list of homeowners whose mailing address differs from the property address. Some County Assessors provide it – not sure if ours does so.

[sdrealtor]

As I mentioned, the survey I saw pegged SD at 18%, nowhere close to 40%. Its just too expensive here for that level of investors.

However, that number is irrelevant because as Rich pointed out there was alot of speculation going on regarding the purchase of primary residences. The difference is primary home speculators will fight to keep their homes whereas tru investors have and will bail more easily.

[PerryChase]

sdrealtor, as I said before I was not advocating anything underhanded. I was however, looking into buyer motivations. My background is audits and I was questioning the information volunteered by loan applicants.

My feeling is that “investors” were rampant in SD. Many middle class families stretched and did everything they could to get into the RE market and ride it to riches.

Because housing is cash flow negative, many “investors” would never have qualified for investor loans.

One mortgage broker told me that all his loans were residence loans, although he knew full well that 1/3 or them were “investors.”

PowaySeller, since you have a subscription to foreclosure.com, can you see if a particular “investment” property had a primary residence loan? I’m not sure if that info is even available for the public to see on a particular property.

[equalizer]

sdrealtor

Just because you are ethical, doesnt mean everyone else is. Perry is just relating stories we hear from co-workers, etc. For example, one co-worker said he couldn’t buy a condo in downtown because they didnt want investors, but he mentioned another co-worker who did buy condo with “shady” intentions. He’s not the only one in town doing this.

[Bugs]

I see examples of fraudulent occupancy reported on an occasional (but not constant) basis. In fact, one thing underwriters are now doing is asking/requiring appraisers to report if they suspect occupancy fraud on the properties they’re appraising.

Just a couple weeks ago I reviewed an appraisal that is located next door to a property for which I had reviewed another appraisal a couple months ago. Both appraisals were performed during the same week, for the same property owner, and both reported owner occupancy. The mailing address for that property owner is in Seattle. Now it’s obvious that the way occupancy is defined by the banks this borrower was attempting loan fraud on at least one of these loan applications, if not both.

[Author]

Posts