Under $400,000 market

[Happs]

I was reading this article about investors buying houses and turning them into rentals and the second paragraph about the great number of houses under $400,000 in Orange County purchases by investors was startling. Do regular upper middle class workers not have the savings to be able to qualify for a mortgage on a $400,000 house? Is the buying pool of non investors that slim? One would think that all these government workers with their lavish pensions and benefits could pick up the slack.

http://online.wsj.com/article/SB10001424127887324034804578346800317118568.html

[bearishgurl]

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.

[bearishgurl]

Oh, and Happs, regarding the local gov’t workers with “lavish pensions” (as you call them), these pension formulas apply mostly to the worker bee with over 15 years seniority (who is probably not yet in a position to invest in rental/flipper property), the “soon-to-be-retired,” and the “already retired.”

The young gubment-worker-bees in family raising mode who would be shopping in the $300-$400K range for a principal residence often aren’t eligible for those pension formulas. In addition, it takes 8-11 years now to reach the top step in pay in a particular job classification instead of the 4.5 years it used to.

This was done to keep pay levels down (in the absence of a promotion) and thus have these ~newer hires’ eventual retirement formulas based upon lower annual earnings.

[SD Realtor]

Happ in San Diego county the buyers pool for people looking at homes under 400k is plenty large. There are plenty of them out there.

[bearishgurl]

I agree with SDR that the buyer pool is large for this price range but are they buyers who intend to occupy the properties themselves? And if so, are they actually making offers? And if so, are any of them successfully closing a SFR property in this price range using a mortgage for most of the purchase money?

What is your experience, SDR? Do you have any recent buyer clients who have been successful in closing a SFR property under $400K using a mortgage?

I’m referring to SFR, not PUD or condo.

[bearishgurl]

I wanted to clarify that in Happs’ second WSJ video, the loudspeaker on the steps appeared to indicate that opening bids on foreclosing houses there were $50K-$80K each.

The low prices (and the fact that there is a likely a lot of shadow inventory now being foreclosed on) could explain the extreme interest by out-of-state REITs.

IOW, I’m fairly certain the rental parity looks pretty good there for SFRs.

Of course, GA has a much different RE market than SD County, CA, and the two regions cannot really be compared.

[spdrun]

Makes sense if the GA market is anything like NJ right now. Oddly not a lot of REIT or flipper interest around here, but I’m seeing another property in the mid $100k range on Monday (estate sale) that will rent at 8-9% pro forma.

I think that the high RE taxes in NJ are actually a good thing for mom n pop investors looking to rent out – they’re poison to flippers. Also poison to institutional investors who prefer not to think about assessments that can vary unpredictably from area to area.

[desmond]

[quote=SD Realtor]Happ in San Diego county the buyers pool for people looking at homes under 400k is plenty large. There are plenty of them out there.[/quote]

Quite a statement SD. Really, people would like to buy a home from a value of $1 to $400K? Yes, most everybody would like to buy a home, to bad the $400K and under -Home- is dead in San Diego.

[all]

Few SD/OC upper middle class workers would be interested in a house that costs less than $400K unless they are looking for a rental. I see only one non-contingent SFR’s in PUSD with asking price under $400K. It is a 1000sf shack in a working class Poway neighborhood.

[bearishgurl]

[quote=all]Few SD/OC upper middle class workers would be interested in a house that costs less than $400K unless they are looking for a rental. I see only one non-contingent SFR’s in PUSD with asking price under $400K. It is a 1000sf shack in a working class Poway neighborhood.[/quote]

all, that’s because you’re “stuck” on shopping ONLY within the PUSD where its incompetent school board has made p!ss poor borrowing decisions which will end up causing the county assessor to raise taxes on EVERY landowner within it to pay off the bonds they took out at exorbitant usurious interest rates. These poor decisions could also very well end up bankrupting the City of Poway.

Not to mention that the temperature there is routinely 8-15 degrees hotter than metro SD for several months per year.

If you “broaden your horizons” a bit, you will find decent well-built family homes in decent areas of SD County which are not overtly encumbered (as those areas are within the PUSD) for under $400K.

Yes, even today.

OR, you can continue to shop ONLY within the PUSD and line up at the trough with dozens of your sheeple brethren (many obviously ignorant as to the actual long-term fiscal condition of the school district and city) to up-bid each other on every piece of property in sight to far beyond what it will actually ever be worth.

Your choice.

[all]

[quote=bearishgurl][quote=all]Few SD/OC upper middle class workers would be interested in a house that costs less than $400K unless they are looking for a rental. I see only one non-contingent SFR’s in PUSD with asking price under $400K. It is a 1000sf shack in a working class Poway neighborhood.[/quote]

all, that’s because you’re “stuck” on shopping ONLY within the PUSD where its incompetent school board has made p!ss poor borrowing decisions which will end up causing the county assessor to raise taxes on EVERY landowner within it to pay off the bonds they took out at exorbitant usurious interest rates. These poor decisions could also very well end up bankrupting the City of Poway.

Not to mention that the temperature there is routinely 8-15 degrees hotter than metro SD for several months per year.

If you “broaden your horizons” a bit, you will find decent well-built family homes in decent areas of SD County which are not overtly encumbered (as those areas are within the PUSD) for under $400K.

Yes, even today.

OR, you can continue to shop ONLY within the PUSD and line up at the trough with dozens of your sheeple brethren (many obviously ignorant as to the actual long-term fiscal condition of the school district and city) to up-bid each other on every piece of property in sight to far beyond what it will actually ever be worth.

Your choice.[/quote]

Don’t be so angry, it’s all right.

[bearishgurl]

[quote=all] . . . it’s all right.[/quote]

Actually, it isn’t “all right” now and is going to be less “all right” later for property owners within the PUSD.

If I owned any kind of property at all within the PUSD, whether residential, multifamily or commercial, I would be listing it for sale NOW, in hopes I could unload it before the SHTF.

This intractable problem can only get uglier as time marches on.

But far be it from me to attempt to burst the fantasy bubble you seem to be living under …

[all]

[quote=bearishgurl]
If I owned any kind of property at all within the PUSD, whether residential, multifamily or commercial, I would be listing it for sale NOW, in hopes I could unload it before the SHTF.
[/quote]

But you do not own any kind of property within the PUSD, so it’s all right.

[bearishgurl]

[quote=all][quote=bearishgurl]
If I owned any kind of property at all within the PUSD, whether residential, multifamily or commercial, I would be listing it for sale NOW, in hopes I could unload it before the SHTF.
[/quote]

But you do not own any kind of property within the PUSD, so it’s all right.[/quote]

Yes, you are entirely correct that it is and will be YOUR problem and not MINE … by choice.

🙂

[recordsclerk]

I wouldn’t sell anything right now. I wouldn’t sell anything for at least a couple years.

[Author]

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