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Jazzman
ParticipantAre you comparing apples with apples. Urban areas with metropolitan centers? I doubt it.
Participant[quote=Essbee]Just curious about how accurate the estimates of shadow inventory really are, and where the info comes from…
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Wildly inaccurate. Nobody seems to agree on a definition of the shadow inventory let alone where the numbers come from. However, no smoke without fire, and for as long as naysayers fan the flames, industry henchmen will douse the glowing embers. In the mean time, the truth will quietly slide off into the distance.ParticipantYou’d expect gas prices may be influencing buyers as well,
Participant[quote=bearishgurl]Username, if you think you will be able to purchase “equity” from a “distressed” home-debtor (whether in foreclosure or not), think again. Even if the home-debtor DOES have equity, there are many pitfalls to this type of transaction, namely a few pesky “legalities,” including the ability of the home-debtor to claim YOU took advantage of him/her and legally recover title to their property.
You would do well to study these types of transactions carefully before “knocking on doors” and attempting to “jump in with both feet.”
Since you are asking these questions here in the manner you are asking them in, it is apparent that you have a lot of “studying” to do. Instead of listening to fast-talkers on infomercials selling books and CDs, I would suggest you begin your “studies” by taking RE Principles and then RE Law at your local community college.[/quote]
This is a huge assumption! What happened to innocent until proven guilty? A guy comes along and asks a perfectly legitimate question and is jumped upon. Maybe he’s doing some research for a paper, or is just curious. And so what if he’s looking for opportunities. Good for him/her. Why is the free market great when it serves it’s masters and evil when it doesn’t. To use your own expression, you can’t have it both ways. Anyway, it looks like he’s been chased out of town. Pity so many threads end up this way. 🙁
ParticipantBearishgirl, I actually prefer the Investopedia definition. Sellers who are postponing the sale of their homes are homes being withheld from the market, and are therefore lurking in the shadows. It doesn’t matter whether they have a choice of not. That has nothing to do with it. Lenders have a choice with REOs and they choose to withhold properties.
With regard to buyers not having it both ways, as Brian points out, it cuts both ways. Sellers can’t expect homes to hold values in a declining market. There are those who wish to punish the market for it’s excesses, but equally some segments (higher end/coastal) have remained comparatively immune.
The battle line is still drawn between the minority group “we-did-everything-right”, and Humpty Dumpty who’s been propped up on top of his poorly resurrected wall.
ParticipantBearishgirl, everyone has their own definition. Here’s one courtesy of Investopedia:
A term that refers to real estate properties that are either in foreclosure and have not yet been sold or homes that owners are delaying putting on the market until prices improve. Shadow inventory can create uncertainty about the best time to sell (for owners) and when a local market can expect full recovery. Also, shadow inventory typically causes reported data on housing inventory to understate the actual number of inventory in the market.
Corelogic defines it as homes seriously delinquent, in foreclosure and owned by lenders.
Standard and Poor claims it is all delinquent homes, not just REOs.
This obviously doesn’t help with determining any kind of precision in numbers, and it probably follows the more complex the definition, the more wild the variances in guesstimates.
The OP may be better served with defining his/her own goal in conducting the research, and then zeroing in on data that is most relevant to it.
ParticipantUsername, you have asked the million dollar question. There is no clear definition of the shadow inventory, which might partly explain why it has been labeled a myth. I think your best bet would be to research current listings, and go back over several years. Estimates of the shadow inventory are wildly different …anything from 3-10 million, and it really will depend on what you include in that number. I like to think of it as any home that would ordinarily be on the market, but is not due to the housing bubble and the ensuing economic downturn. If you just include those homes which lenders are said to be hording, you are on a hiding to nothing. While their number may be large, the important thing is how many appear as listings at any given moment. Any home that has received a Notice of Default can potentially add to the number, and you can check that at http://www.foreclosureradar.com/ However, how many sellers have decided to forestall putting their homes on the market is unknown. One thing that is certain, is that inventory levels are low which a source of frustration for everyone. Some argue this will affect prices upwardly, but I think that is wishful thinking on behalf of the industry. Just as likely, is a flat to declining market due to buyers disgruntled with lack of quality homes to choose from.
ParticipantThis is being discussed here
and here http://forums.redfin.com/t5/Los-Angeles/Is-there-a-shortage-of-houses-on-the-market/td-p/303807
It is a major problem in my view. In fact, it is so dire my wife and I took the decision a while back to leave California, which we are doing at the end of this month. I believe the problem is the shadow inventory which manifests itself in different forms. The best definition I’ve heard for it is all homes that would ordinarily be on the market. So not just REO’s, but those which are waiting for a recovery, maybe the move-up segment, and any other reason you would expect to see homes being listed but aren’t due to the economic situation, and housing market woes. It has characterized the market for some time, and is a common complaint not just among buyers, but also Realtors. It is an important message that I feel strongly needs to be out there. Good on you for bringing it up. Maybe someone is listening.
ParticipantPhoenix and Las Vegas have seen much bigger corrections. One of my properties is in Las Vegas, and was bought through a Redfin Partner (Remax) who had a property management company in their office, so the transition was smooth. Bear in mind vacancy rates, which will be higher, but if you find a good property it will rent. The returns are acceptable. The only place I found comparable returns was Rialto. I couldn’t find anything in Riverside. Remember, it’s not just returns, but finding an established, reputable property manager. Let that lead your search. Geographical distance is not a problem with modern communications.
You need to go out there and vet the agents, and see properties. Go armed with questions which will give you peace of mind on trust issues. I can give you some pointers. Most common surprise is costs are usually higher than you wish for. Anticipate 50% of income paid away on costs. I know of no property managers in SB (anyone…sdr, SDR?), but Realtors may recommend someone. Many advertise on craigslist.
With turn key operations, you pay a premium in the sense that you are buying flips, but that’s the peace of mind, and no hassle you are paying for. You buy a rehabbed property together with a tenant already in place.
The first step is to educate yourself thoroughly on the housing market, and being a landlord. Books, blogs, forums and talking to other investors. Biggerpockets is a starting place. Give yourself six months to do this. Good luck!
ParticipantIf you are going to use a property manager, then why limit your search to local where homes are generally more expensive in relation to rents. I currently have six rentals scattered thousands of miles apart, and have been a landlord for 25 years. It’s all about the numbers, and rule number one is never believe them at first glance. Second, finding a reputable property manager is key, so you might want to start there. There’s a few operations out there that sell turn key, fully managed, already rented former REOs, with acceptable returns. If you manage the property yourself be comfortable with the demographic, even if it means a smaller return, and keep your property close to where you live.
ParticipantYou know I think they make these announcements just to taunt people. I honestly think that most people listen to this kind of hype in the same way they would the late Bill Mays. A mixture of admiration for sheer audacity, and utter boredom with prehistoric marketing.
ParticipantHave you checked out Redfin. They “share” their commission with you, and have recently changed their fee structure. Can’t remember what they base it on now, but I don’t believe is it contract price anymore. However, their incentive is not based on the fee, but a cost saving encouraging you to do the leg work. It’s a good model, but not for those who want the spoon fed, traditional broker service. They actively encourage transparency in the market, by making data freely available in a digestible format which is laudable. They are the future of Real Estate in my view.
ParticipantYou’ve got to hand it to Paul for tenacity, but he doesn’t strike me as being much more than an adjunct to the political process; padding out the numbers, and providing light relief from the mundane mainstream. He’s probably a nice guy, but has a worrying youth cult-like following that seems mesmerized by his quirky dogmatism. I couldn’t figure out why Sasha Baron Cohen set him up in a gay trap. Visually Hollywood might cast him as Mephistopheles. Is that unkind? I don’t know. Good luck to him. Any swipe at the status quo is healthy.
ParticipantSo you are a cash buyer looking for good returns with some long term appreciation, and a retirement home? Cap rates in California are generally lower than many other parts of the country due to higher home values. Investors in the past relied on appreciating values, but the prognosis for that does not look good over the short to medium term. Managing rentals is a headache so if you want passive income you need to look for reputable property managers first, and decide on the demographic you feel comfortable with. That will determine your investment type, risk and returns. A simple rule of thumb is you want $1 in rent for every $100 invested. So you should be looking to achieve rental income of $5000 per month on your $500k invested. Then expect to pay away 50% of gross income on expenses. Single family homes in the $100k price range can just about achieve this but you will not find many in San Diego. Even multi units will be a challenge, unless you look in south central LA, Rialto, or places like Modesto. Single tenant triple net commercial RE offers good hassle free returns, but they come with a bigger price tag. Not sure the land suggestions above are serious.
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