[exsdgal]

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[exsdgal]

[quote=CA renter]

But, compared to other times, there was less leverage being used during this time in the housing market. The only reason there wasn’t a bubble in housing at that time was because of the huge deleveraging that was occurring at the same time. The money being pulled out of the housing market at that time offset the money going in…but only briefly. We quickly shot back up to fairly crazy levels (and I respectfully note that some would disagree with me on this).
[/quote]
I don’t quite understand… who was pulling the money out of the housing market, when the investors money was going in?

[quote=CA renter]
We can’t look to price/rent ratios during this time because the rental market has been affected by this speculation as well — more rental demand because people can’t compete with the investors, and the investors controlling rents in many markets because they (recent/large/institutional investors and speculators) control a significant portion of the rental inventory in many areas.[/quote]

IMO the rental demand was high during this time due to foreclosures or folks walking away from their homes, and not necessarily because people could not compete with the investors. Majority of the renters were not looking to buy a home, and those who desired had bankruptcy/foreclosure in their credit to get a loan.

[exsdgal]

[quote=CA renter]
Some are foreign investors who think the dollar is safer than their own currency and/or want to move money out of their own country for various reasons. Others are investors/managers/funds who are managing pooled investments from a variety of people and/or institutions. There are a lot of mega-millionaires and billionaires out there on a global level. That money goes wherever it’s perceived to be the safest and where it’s likely to yield the best returns. Whether it’s true or not, many people seem to think that the United States — and the USD — will give them the best return for the lowest possible risk.
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I don’t see it this way. Among all assets real estate is the most non-liquid asset. In a crunch one can not get out of it fast enough. For a foreign investor to purchase real estate in the US, especially single family homes (think that is what we are talking about) they need to have specific needs. Needs like the investor spends a significant amount of time in the US, or has an immediate family member who will. If the situation were reversed, would you spend your money in a foreign country buying residential property just because it is considered a safe investment?

As a foreign investor if my objective was to take dollar as a safe harbor, then I would consider large apartment buildings and hotel chains as better investment opportunities. Definitely not single family residences.

The other option for foreign investors seeking safe currencies are Treasury bills, or US based stocks. Just like a US based investor can diversify using a multitude of stocks and bonds depending on global economy trends.

[quote=CA renter]
I’ve mentioned a deep-pocketed investor who was looking for large blocks of REOs, but who was not well-connected here. That was all Chinese money, and they had ~$2 billion at their disposal. I’ve heard that there are Russians doing the same thing, especially on the east coast. And there are a fair number of investors from Latin America, too. Of course, we have our own wealthy folks who are desperately looking for a place to earn a yield, too.[/quote]

IMO there are better alternatives for these wealthy folks seeking yield to consider, than dealing with the hassles of managing residential properties.

[exsdgal]

[quote=ucodegen][quote=exsdgal]
Without knowing if the standing water under the house is a big pool or just small puddle(s) it is difficult to state the severity of the problem. Here are some general thoughts about the crawl space. Most crawl spaces have high humidity, generally from the lack of air circulation/ventilation[/quote]
There is a building code requirement for crawl-space vents to prevent humidity buildup. There should not be any standing water, which would cause black mold on the flooring joists.

I am seeing the approx amount is one 4×14 vent every 8 to 10 feet of crawlspace wall.

It is actually based upon area; approx 1 square foot ventilation per 150 square feet of crawl space.[/quote]

ucodegen, good info. I agree standing water is a problem. As for the air vents I assume existing homes were built to some code standards and have ventilation. The problem starts after an accident. In our case a water leak partially flooded the crawl space, and had a bear of a time cleaning the mess. It took a few months, and eventually combination of heater and air mover from costco did the trick.

[exsdgal]

[quote=CA renter]
Housing — 43% of the sales in Q1 2014 going to “all cash” buyers (though not using traditional mortgages, they can still be highly leveraged). The fact that so many are buying “all cash” says to me that speculators are heavily in the market, even though some of the institutional speculators have been pulling out.
[/quote]

From where do these buyers get their cash? I do not see banks giving out any of the easy loans. Just curious….

[exsdgal]

Buying a house is an anxious time, and one needs to be comfortable with all things before signing the papers. Only you can know if the house presents a value in terms of cost and associated hassles upon purchase.

Without knowing if the standing water under the house is a big pool or just small puddle(s) it is difficult to state the severity of the problem. Here are some general thoughts about the crawl space. Most crawl spaces have high humidity, generally from the lack of air circulation/ventilation.

Here are few no/low cost inspection options before spending further inspection dollars. 1) Walk around the exterior of the house and check for large visible cracks at the base of the house 2) see if the rain gutters are present and operational 3) any large trees/shrubs along the perimeter of the house 4) are there any concrete patios around the house (my guess is none)

The crawlspace dampness can be reduced by minimizing the water that seeps under the house. e.g. collect and divert roof rain water, install concrete patio (1-2′ deep) or a french drain to divert lot runoff water.

Regarding the plumbing, one of the main reasons pipes leak is due to high water pressure in the lines. You could check if the water pressure is within limits, and/or change the pressure regulator for the house. IMO most pressure regulators need replacement every 20-30 years. It is typically a couple of hundred dollar expense well worth the replacement cost in lieu of cost of replacing the house plumbing.

After your assessment if you decide to purchase the house, perhaps you can ask for a price reduction 5-10K. May be worth the effort. Good luck!

[exsdgal]

From your description of the water issues, I presume the house has a crawl space. Couple of suggestions come to mind, 1) to check if there is any active plumbing leak in the house, close all water outlets and see if the water main meter needle spins. If the needle spins, there is some water leak that needs further investigation 2) it is also possible with the recent rains and bad drainage around the house, the water could have collected under the crawl space.

IMO it is also a good time to check the attic for any roof related leaks. Good luck with your purchase.

[exsdgal]

I hadn’t considered automated irrigation earlier …. (though wished for a simpler task when dragging hoses to the various trees/shrubs). This also meant I missed watering the trees when necessary. The few cold nights couple of weeks ago was brutal. Waiting for Spring to see which of the trees survived.

Having invested a significant dollars on the trees, I want to ensure the trees get adequate attention so they establish and grow well.

Thanks for edyn link. It looks interesting, and I think it will work well for the vegetable garden. Have to check if it will work for the trees where I am starting to use 3-4” of mulch.

This is definitely a time consuming project for me, in the sense I need to read up on every aspect.

[exsdgal]

[quote=CA renter]
Yes, bundled junk…being sold for 10-20 cents on the dollar. Extremely profitable, and totally unavailable to those who were not well-connected.[/quote]

Are you saying a million dollar property was purchased for 100K? If your numbers are not anectodal I am curious to see a transaction recording. Afaik the bundles were geographically dispersed throughout the US, and to undertake such a purchase one needs a reliable infrastructure/people to minimize financial loss from the transaction. Since the moment a bundle is purchased buyer is responsible for all the mundane expenses like taxes, insurance, maintenance, payroll, office space, etc. I can not imagine a regular Joe capable of handling such a purchase. As a consumer, if I had funds I am happy to find one off deals 30-50% off through online reo auction sites. If you were looking into such large volume bundle purchases, kudos to you. I can understand your frustration about needing connections…. after all in this connected world even to land an interesting job, one needs insider information considering most of the jobs are never advertised.

[exsdgal]

[quote=CA renter]Yes, many REOs have been made available to Jane and Joe Sixpack, but most of the best deals were reserved for institutional investors with connections. This was a regular complaint heard from other investors — many with deep pockets — during the RE collapse.[/quote]

I can not speculate if the best deals were reserved for institutional investors with connections. I think it will be futile getting upset for having to pay $200 retail for a suit in a place like Nordstrom, when the garment was purchased for $20 from the supplier. IMO one can not contrast a consumer’s buying power to large entities. As a consumer if I want the $20 price I need to hit the ground (with sufficient cache) to identify the supplier or even better the seamstress (possibly in SE Asia). As for investors complaining about lack of deals may be they are groups (with deep pockets) who entered the market late in the cycle.

My earlier comment about bank reo’s was to clarify your statement that folks who were willing to work on foreclosures were excluded from purchasing the best deals. I have come to know some of the more adventurous six-packs who went to court houses, met people, joined lists, bid on auction sites, pooled funds to find their deals. During the crisis I was fortunate to purchase a bank owned move-up house through MLS (ty redfin!). If my purchase were the norm, I am least bit surprised that the lenders were willing to sell their properties in bulk to anyone who would take it off their hands. The property was listed as an as-is fixer w/ no appliances, when we saw the property it was rat infested and during the escrow the maintenance workers stole the heating and a/c unit, and ripped any visible electrical and copper plumbing/fixtures. Oh! I forgot the house was vandalized. From this description one might mistake the property is in a bad neighborhood, only it isn’t!

Any case I have reconciled to buying my suit at retail :-). I believe one can still find RE at discounted price for current market through one of many RE related forums on the web. Happy House Findings!

[exsdgal]

Lot of comments… during the course of the crisis my impression was many folks were not thinking about buying real estate. The reasons could have been lack of funds, lack of time/interest, lack of awareness, bearish attitude on housing, or something else. The turning point in house buying interest occurred, when media started writing about the money made by the hedge funds and serial flippers. During the crisis most of the reports were about how people walked away from their house by mailing their keys.

Even during the bubble years and long before the hedge funds came into picture, bank owned foreclosure homes were available for purchase directly from the bank’s websites (including bofa, chase, citi, jpmorgan, …). One had to just contact the bank representative listed for the property and buy it with finance (if eligible) or for cash. I can not say if all the listings were in desirable areas, but there were good priced properties in familiar zip codes. My observation was in early stages the reo homes listed were in decent shape, however as the years rolled the homes were in dire need of work (missing appliances, ripped walls, stolen copper, etc)

When it comes to real estate majority of the buyers want their realtors to provide guidance. There are some great resourceful realtors who are truly helpful to the buyer, but am afraid most are interested in just getting their slice of the transaction. With the technology and resources available mostly free or for the cost of an email address, Jane and Joe Sixpack can monetize without needing any insider connections.

[exsdgal]

[quote=CA renter]
Absolutely, there is no question that some areas saw more speculative activity than others. But aggregate inventory levels do affect prices of the more stable areas, too. And while many people who buy in the areas you’ve listed have some money, there are still plenty of people who rely on mortgages in order to buy. Interest rates will still affect them as much as they’ll affect people buying lower-priced homes.[/quote]

I strongly believe home prices tend to be localized, and each region attracts buyers looking for a specific basic requirement – schools, beaches, walkability, transportation, etc. Likewise the aggregate inventory affects local house pricing at varying degrees. Speaking specifically about PQ, during the recent downturn the price decline was modest. One of the reasons could be the homes are mostly owner occupied and rarely come up for sale. I presume this scenario will likely continue for another 20 odd years, when the current owners begin to think about retirement.

Past performance is not an indicator…. but I expect prices to remain flat in PQ for the foreseeable future. Again with the lending policies currently in effect, I imagine anyone in the market will make a reasonable downpayment to complete the transaction, and hence avoid significant defaults like in the past.

As a final note, long time ago when considering our house purchase we made a casual remark about having to pay 6 1/2% interest, and one of my in-laws in her sweet Scottish accent commented ‘Dad and I paid 18% as our mortgage’. Suffice to say that was the last we spoke and ended up purchasing a house valued 6x our household income. Interest rates do have an effect, and eventually buyer/seller will prioritize their requirements and adapt. e.g. smaller home, different area, postponing purchase, converting to rental etc.

[exsdgal]

[quote=CA renter]
Irrespective of interest rates? What about if/when the investors get out of the market? That could increase aggregate supply and decrease demand at the same time.[/quote]

Afaik PQ did not have much investor activity relating to SFH during the downturn. There were good pricing on the condo’s and not as many for single family residences. The few that did crop up required a fair amount of slab/foundation repairs.

Just considering one qualification – school district, I think PQ has some unique characteristics. 1) mostly low/zero mello-roos 2) good schools 3) great proximity to different work centers 4) ability to find decent sized lot homes sometimes w/ views 5) year around temperature

Folks who want to be in CV / Del Sur / 4S / Santa Luz will go for such places. If I were in the market for a primary residence in Poway Unified district I would give serious consideration to PQ. Just for a simple reason that a comparable 700-800K PQ lot home will cost 1mil+ in the new developments w/o counting the mello-roos/hoa etal.

[exsdgal]

Frankly a single family house valued 700K+ in PQ does not make a good rental property. Please don’t get me wrong, PQ is a great neighborhood. IMO the deciding factor to sell or hold a primary residence (assuming holding 2 homes at the same time is not an issue) is how comfortable one is in foregoing the $250K/$500K tax exemption. If the goal is to take advantage of the tax exemption, then it is best to sell at the earliest and move on.

Yes there are provisions to utilize the tax exemption at a later date (2 year rule, moving back, etc), and these options come with complicated tax rules.

Good luck with your decision.

[exsdgal]

We rented the old residence when we bought our current house. The carrying cost was low, and rental depreciation was a factor. Following may not apply, generating passive income held a greater value to us than the rate of return from maintaining the property as a rental.

With the usual disclaimer – not an advice – in case you decide to rent your old house… and if the numbers work one can consider pulling equivalent of the ‘tax-free’ money from the old house to purchase a second rental (house/condo?).

Regarding the rental process it is typical to have 30-45 day turn over between tenants, unless the prospective tenant is from out of state and can move immediately. If the cash-flow supports, renting $300-$500 below market also helps in keeping the tenants for > 1 year.

Good luck with your decision.

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