Watchhttp://truth-out.org/news/item/13883-why-the-housing-recovery-is-inequitable
The financial crisis of 2008 was terrible for homeowners saddled with heavy mortgage payments, especially the millions of low-income, first-time buyers who were tempted to buy in with deceptive loans during the height of the housing bubble. About 4 million foreclosures have been completed since the financial crisis of 2008, according to CoreLogic, a data provider to the real estate industry. Since 2006, when subprime loans first began to default in large numbers, there have been 9.
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Tarzana, CA
How convenient ! An existing pool/market of recently foreclosed upon renters for these recently foreclosed homes !
http://www.waypointhomes.com/
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David9 says
That's the big "secret" bub...landlords are enjoying a once-in-a-lifetime barrel of desperate fish thanks to the housing bubble.
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Scottsdale, AZ
robertoaribas's website
cash investors (many of which later refinance anyways) have been around 30% of the phoenix buyers for the past year. At no point have normal home buyers not been the majority, and this city got hit as hard as any.
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robertoaribas says
Well, I wouldn't buy-'n'-hold in a what is pretty clearly a market rally. I think to buy as a landlord is okay. Sell side or rent side is where I'd want to be - not shopping for a primary, unless I planned on dying there.
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Sunnyvale, CA
The key to the rental investor is to be "local" in the right area. That is why robertoaribas wins.
Else you have to invest in the right area with the right property manager. That is difficult as you can fail by being in the wrong area or by having the wrong property manager.
The greater Phoenix area has a lot of bad property managers.
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The problem with this is that all cash offers trump mortgage offers.
Sellers know all cash will close quickly and it won't fall out. That has value, typically 3-5%.
Not only does the investment class (people with a lot of cash) have the advantage of picking off auction foreclosure properties, they can also out compete standard buyers in the MLS marketplace.
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Every home is beige with white trim.
They all have the same pergo floors, black budget appliances, cheap cabinets and laminate counters.
I give each home about 5 years before it wears like a cardboard suit.
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donjumpsuit says
Most buyers aren't aware of things like that. It's really a shame, when people choose to be ignorant when it comes to life changing expenses.
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Oh not to mention Made in China drywall.
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Redwood City, CA
varmint says
The thing is, for cash investors to make the numbers work, they offer 20% under full market value for a place. But in todays market, FMV works, so cash investors are offering at or above FMV because the numbers work for them. To make matters worse, they can offer OVER FMV, at which point typical consumers can't offer any more, because the mortgage won't be accepted by the banks.
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pkennedy says
The Investers are exchanging their funny money for REAL property. The days of double the PITI are probably gone but they can still rent out and make a better return than most other investments, if they can stomach being a landlord.
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I wonder what this countrys housing stock will look like in ten years. Another decade of aging for the cheap materials and shoddy craftsmanship that has become the norm over the past decade plus. With all these renters being the same financial miscreants that got rubed during the bubble, and factor in the glorious track record of The American Investors proclivity to putting in the long term hard work that it takes to maintain a rental property.
Let's just hope the government churns out some serious job programs to get some people working, and that the economy can regain some kind of momentum, lest the dire nature of our situation plays our on the housing stock in slow motion
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Los Angeles, CA
JodyChunder says
Jody, we feel LA is pretty lackluster as far as places to die, so we are close to giving up the hunt and just keep renting. Our downpayment money will pay cash on a nice rental property in Claremont, though ;)
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errc says
Not going to happen. If you're over the age of 29 and unemployed, you'll never work again in the US, unless you're cooking meth, hustling worthless investments to pensioners in boiler rooms or flipping properties.
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Mountain View, CA
Don't forget escort/ stripper if you're female.
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Right. In a few years they'll be gobbling schlongs for Ramen packets, too.
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APOCALYPSEFUCK is Shostakovich says
Well, you can always run for congress!!
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Mountain View, CA
APOCALYPSEFUCK is Shostakovich says
No flavor packs though. They have to swallow to get the flavor packs!
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Las Vegas, NV
bgamall4's website
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robertoaribas says
But the 30 percent are affecting the price, paying cash, in some cases breaking the comps on purpose. The rest are 3.5 percent down people. You cannot have a stable housing market with few 20 percent down mortgages.
The powers that be by screwing the consumer agency to protect borrowers already have easy money in the works to push this up farther, according to Mike Whitney on this board. But it all depends on how confident people think the next bubble, which is starting now in Phoenix, can last.
50 percent of buyers in Las Vegas are cash. And these are mainly investment banks and private equity firms from Wall Street. They are screwing American renters one more time. It is never ending, and they were shown the way by the Square Mile, in the UK.
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Scottsdale, AZ
robertoaribas's website
Well, it may be a different market forever. But underwearman who has argued ad nasuem against buying homes, contradicts the hell out of himself in the above post:
underwaterman says
You can't have it both ways: prices will fall, it is too risky to buy, but the corporations investing are screwing everyone and will make all the money! PICK ONE!!!
You can't however, simply say, "the market is different now, so different = bad and it's a bad time to invest." You have to examine the difference compared to past markets, and see if the change is positive or negative for prices.
Now, let's do a little thought experiment: Let's assume that say 10% of the domestic housing stock ends up in large institutional hands. What would that do?
1. It reduces the active normal market supply by 10%. Normal people buy and sell on life changes, and often at some terrible times. These homes are not going to play by the normal rules. They aren't going to sell into a low price market, EVER, because, like me, they have the financial strength to hold on for decades. So the entire myth of "what if the investors all sell at once..." is complete bs. If the market is weak, I and they will simply continue on renting them.
2. There is a big difference between judicial and trust deed states. The foreclosure backlog in trust deed states is plummeting, while it is still quite bloated in judicial states, such as NY, NJ, FLA. Why does this matter? We are getting a "one size fits all" policy on the crisis: Low interest rates, mortgage refinances for underwater owners etc, which are all very powerfully positive for real estate prices; These policies will likely continue long after their need in AZ, and CA, in order to mitigate the home issues in the big judicial states.
3. Underwater owners who pay less than rent. In AZ, a home could be $100K underwater, and still have a mortgage lower than rent. That owner has a powerful incentive to never sell, if they need to move, they can rent the home and make a profit. This further restricts supply, and is positive for prices in the upcoming years.
4. Boomerang buyers. Each year that passes, foreclosed on prior owners move out of credit jail, and their credit improves. I am renting to a couple that make $250K a year, had perfect credit up till they let their home which was $300k underwater go to foreclosure. They will have no trouble buying as soon as they come out of credit jail.
So, for these reasons, believe we are more likely than not to have moderately rising prices in Phoenix (and likely California) for several years to come.
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pkennedy says
It depends on their expected ROI. CD rates are less than inflation so pretty much any rent above taxes/insurance/maintenance is a win.
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Baltimore, MD
Does this mean that there are investment opportunities in WayPoint, Silver Bay Realty Trust, and other similar companies? The other ones in the article seem to be privately held.
Silver Bay Realty Trust
http://www.nasdaq.com/symbol/sby
Seems to have just gone public, and so it hasn't has and dividends yet.
I don't think Waypoint has gone public.
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Baltimore, MD
Found another one:
2 Brand New REITs That Have Strong Dividend Potential
http://seekingalpha.com/article/1109741-2-brand-new-reits-that-have-strong-dividend-potential?source=yahoo
That and I would think that this would be like having a huge apartment complex, where every apartment is different, and spread out over a large area, making it more difficult to maintain.
Or like already existing ticker symbol BX
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63 male
Las Vegas, NV
bgamall4's website
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robertoaribas says
Robert, the issue is that it is now a gamble, a crapshoot. Prices may go up, they may go down, but they are not based upon fundamental demand. http://www.businessinsider.com/naufal-sanaullah-guide-to-the-us-economy-in-2013-2013-1 and the comments.
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Scottsdale, AZ
robertoaribas's website
bgamall4 says
they always were a gamble. People just didn't know it before. Saying "oh today's market is different, so you just shouldn't buy" is a cop out... the market is always different than it used to be. We've had 2 wold wars, major inflation, a depression, a cold war, an energy crisis... the future will always change, if your theory is to wait to leave it to beaver like life before you buy again, good luck to you!
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robertoaribas says
You forgot the plague! You forgot the Black Plague!
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Scottsdale, AZ
robertoaribas's website
The Professor says
and nobody expects the Spanish inquisition!
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Tarzana, CA
bgamall4 says
Wow. That slideshow was 'interesting'. I didn't read every word, but a repeating theme is 'all bets on housing'.
"This is a vital tailwind in an economy with almost 11 million underwater mortgages around 20% of the total."
"The rise in housing prices..."
"The efficacy of monetary policy is linked to house price performance."
"We believe the housing recovery allows for two important novel dynamics that we forecast."
"The housing market recovery should continue driving residential investment growth higher" (Notice the word 'investment'?)
"A pickup in the residential real estate market would be a boon for property tax revenues..."
Bottom line, with all due respect the APOCALYPSEFUCK guy is correct, it's not about jobs, exploring Mars, the environment, or curing cancer. It's all about house flipping !!