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BA real estate market becomes speculative once again.

By REpro following x   2012 May 26, 9:02am 7,292 views   21 comments   watch   nsfw   quote     share    


This house was purchased for $192/sqft and the very next day after closing listed for $245/sqft.
http://www.redfin.com/CA/Gilroy/915-Sorrento-Ct-95020/home/1020099

#housing

1   BayArea   ignore (1)   2012 May 26, 12:03pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

So you show us one example of someone trying to flip a house and your conclusion is that the BA real estate market is becoming speculative again?

3   bmwman91   ignore (1)   2012 May 26, 3:13pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

I think that most of us are observing that it is getting pretty speculative. Any figures out there telling what percentage of BA RE transactions are by investors?

4   REpro   ignore (0)   2012 May 26, 3:22pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

"Last month absentee buyers – mostly investors – purchased 23.7 percent of all Bay Area homes sold, down from 24.2 percent the prior month and up from 21.1 percent a year ago. Absentee buyers paid a median $270,500 last month, up from $250,000 the month before and $257,000 a year ago."

"Buyers who appear to have paid all cash – meaning no evidence of a corresponding purchase loan was found in the public record – accounted for 28.8 percent of sales in April. That was down from 29.4 percent in March, and up from 27.4 percent a year ago. The monthly average going back to 1988 is 12.4 percent. Cash buyers paid a median $270,000 in April, up from $250,000 the prior month and $262,000 a year earlier."

per DQnews

05/17/12

5   bmwman91   ignore (1)   2012 May 26, 3:41pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Thanks.

So 1 in 4 RE transactions are by investors right now in this area. Something about that doesn't quite seem...sustainable. We'll see I guess. Maybe I'll get priced out forever & be forced to line the pockets of these guys for the rest of my life.

Actually, by nature of renting, I guess I can pack up & leave if it gets to be too nutty.

6   REpro   ignore (0)   2012 May 26, 4:00pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Interesting, cash buyers exceed absentee buyers only by about 5%, presuming that investors pay cash for the purchases. Cash investment in real estate with current prices in the area leave very small percentage of return in case when property is rented out, which gives assumption that all those purchases were bought for flipping purposes in mind in a very short time.

7   bmwman91   ignore (1)   2012 May 26, 5:26pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

I casually look on Redfin at houses in the "reasonably" priced parts of SJ & the East Bay these days. Sooooooo many of the listings I see are cases of, "sold for $XXX,XXX on some date. Listed for sale at $XXX,XXX+200,000 about 3 months later. GRANITE COUNTERTOPS, NEW GRASS! BUNUS RM, MST SEE!" It is sort of annoying. God only knows what awful issues they painted over for the next owner to discover a couple of years down the road.

8   APOCALYPSEFUCKisShostikovitch   ignore (41)   2012 May 26, 7:42pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Just as likely, the Realtor® saw an old lady coughing up blood in the drive way, pulled over and told her what a 'great price' she could get her for the property for medical expenses and bought it herself though a straw to flip. We'll be reading about it in a police blotter sometime soon, no doubt.

9   GraooGra   ignore (0)   2012 May 27, 1:33am   ↑ like (0)   ↓ dislike (0)   quote   flag        

All these hedge investors, institutional investors, foreign investors, rich investors, all-cash investors, bulk investors would be finished and gone. They would put their money somwhere else to work if the interest rate goes up a little bit. Just keep watching T-Bond rate. I hope government cannot repurchase their own obligations any longer and keep the rates artificially low for such a long time. They are saying until 2014 but I hope they don't have that much influence over bonds any more. Finally it has to go up.

10   REpro   ignore (0)   2012 May 27, 1:44am   ↑ like (0)   ↓ dislike (0)   quote   flag        

bmwman91 says

I casually look on Redfin at houses in the "reasonably" priced parts of SJ & the East Bay these days. Sooooooo many of the listings I see are cases of, "sold for $XXX,XXX on some date. Listed for sale at $XXX,XXX+200,000 about 3 months later. GRANITE COUNTERTOPS, NEW GRASS! BUNUS RM, MST SEE!" It is sort of annoying. God only knows what awful issues they painted over for the next owner to discover a couple of years down the road.

If someone put $XXX and labor to revitalize house, I understand that. It is good for community. However, if nothing like this happen, that pure speculation.

11   bmwman91   ignore (1)   2012 May 27, 3:27am   ↑ like (0)   ↓ dislike (0)   quote   flag        

REpro says

If someone put $XXX and labor to revitalize house, I understand that. It is good for community. However, if nothing like this happen, that pure speculation.

I agree to some extent. SOMEONE needs to go through and clean up properties that weren't cared for if owners don't have the balls to do it themselves. So, a flipper that actually addresses structural issues and gets the house brought up to code (structural, electrical and plumbing) are generally good. The flips that I have gone to see personally are basically lipstick on a pig, and asking about permit status is "up to me to check with the county." These are speculators that put maybe $50k of stuff in over a month or two and then want $200k+ in return. Many of them are literally just fresh paint and new or shampooed carpet with some sod out back, which probably cost them less than $15k (including labor). THOSE flips are no helpful as they only disguise all of the other issues stemming from owner neglect.

At the same time though, half of the blame here can go to stupid buyers. BUYER BEWARE! If someone has literally no clue about what to look for, they get what they deserve if they don't hire an independent inspector. I basically grew up in a residential construction site, so maybe I am abnormal in that respect. The LAST thing I give a shit about is silly cosmetic stuff like carpet & paint. I'm digging around under sinks, knocking on the floor around the toilet & I usually wear thin sandals to feel-out unevenness in the subfloor in areas where water is (water is the enemy lol). My results have been less than thrilling in the flips that I have been through so far. Lipstick on a pig, man.

I wouldn't mind buying a fixer in an area that I like at a discount. Sadly, the flippers are all over those like stink on shit because they know that there are a lot MORE people that want to overpay for fresh paint. Fixers are all "investment opportunities" now. I am fine with waiting this out though. It seems largely unsustainable with everyone jumping on that bandwagon. Once the herd gets moving, the only people that will be left making money are the early adopters.

12   dunnross   ignore (6)   2012 May 27, 4:19am   ↑ like (0)   ↓ dislike (0)   quote   flag        

E-man says

The last group of speculators had nothing to lose compared to this one, which has a lot to lose.

And "lose" they will!

13   REpro   ignore (0)   2012 May 27, 4:28am   ↑ like (0)   ↓ dislike (0)   quote   flag        

bmwman91 says

At the same time though, half of the blame here can go to stupid buyers. BUYER BEWARE!

I do initial careful inspection by myself as well. If I go to the old house with “lipstick on a pig” (I like it), I’m leaving immediately. Once (actually not only once), I saw a house foreclosed by Wells Fargo in process of painting and carpet change (standard procedure for WF). Painter was applying high gloss paint on a barely hold black wall eaten completely by molds. Disgusting.
The sad part, those houses receives offers 100% or better to asking price.

14   toothfairy   ignore (1)   2012 May 27, 4:31am   ↑ like (0)   ↓ dislike (0)   quote   flag        

good deals are becoming harder to get these days so if you do win one it's expected that you are compensated for your effort.

The last house I lost out on I could see the buyer turning around and selling for $20k more without much of a problem.

15   inflection point   ignore (0)   2012 May 27, 9:58am   ↑ like (0)   ↓ dislike (0)   quote   flag        

From my perspective you lose even if you win. Following the herd is not a good idea, that is unless you are a preditor.

16   freak80   ignore (4)   2012 May 27, 4:16pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Why speculate with Real Estate when other speculations (like stocks) are far more liquid? And there are no Realtors or property taxes.

Sheesh. Whatever happened to actual investment rather than speculation?

17   GraooGra   ignore (0)   2012 May 28, 12:28am   ↑ like (0)   ↓ dislike (0)   quote   flag        

E-man says

You want a 30% discount of fair market value? Go to the courthouse steps, but you may end up buying a property with warts and encumbrances. The cash doesn't even have to be your cash.

"There are now 2 diff. types of investors.
1. The old school that bought cheap enough where they could fix and re-sell at a profit - at least 20%. After all, a broker makes 6% on a sale w. no risk whatsoever.
2. There are now hedge fund type investment groups what will pay close to retail (90%+) and since they aren't using their own money, don't really care. They are promising investors a 4% return while they hold/rent the property for 5 years and then the plan is to sell once properties have recovered in price. As the NYTimes said - this plan is really out there and unproven.

So, to set opening bids, set the bid at 80% of retail. What will happen is you will get multiple people looking/bidding on the property and it will run up from there. If you set the starting bid too high, they may not look at it.

We old timers have to sit back and wait until these groups move on."

http://www.foreclosureradar.com/buyers-and-investors/buying-auction/what-do-you-look-investor-buying-auction-sales-roieviction

18   toothfairy   ignore (1)   2012 May 28, 3:59am   ↑ like (0)   ↓ dislike (0)   quote   flag        

There's another group coming into play soon and that is anyone who lost their home via foreclosure or short sale especially strategic defaulters. As soon as these folks get word that housing prices are going up they'll be tripping over each other to get back into another house.

19   realitycheck   ignore (0)   2012 May 28, 4:30am   ↑ like (1)   ↓ dislike (0)   quote   flag        

That tells Housing hasn't bottomed yet. Mark my words: It will bottom when speculators give up!

20   REpro   ignore (0)   2012 May 28, 5:33am   ↑ like (0)   ↓ dislike (0)   quote   flag        

toothfairy says

There's another group coming into play soon and that is anyone who lost their home via foreclosure or short sale especially strategic defaulters. As soon as these folks get word that housing prices are going up they'll be tripping over each other to get back into another house.

They are entering now. One of my tenants just got into purchasing contract. He sold his house short two years ago.

21   bubblesitter   ignore (0)   2012 May 28, 5:53am   ↑ like (1)   ↓ dislike (0)   quote   flag        

realitycheck says

It will bottom when speculators give up!

It has already started - I am seeing quite a few not so low-end properties coming up of redfin at lower then 2009/2010 bought price.


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