patrick.net

dodgerfanjohn says

The issue has to do with the culture of the people who own those investment properties.

Thank you for the insight, I appreciate it.

I can't prove it, but recently I came across this website, most of the rental properties are in condo complexes. The investors have set up their own website to rent their court house step auction buys!

http://sfvalleyrentals.idxco.com/i/15451/Tarzana_Rentals

But hey, it's a free service.

Going back to the admittedly stretched commuting analogy: how would we deal with 25% of cars out of gas on the road? Normally, in a rational world, we would push all the cars to the side and clear a few open lanes to traffic. Instead, we declare that the cars are not to be moved under any circumstances, that the owners are entitled to leave their cars in the middle of the road despite their failure to put gas in their tanks, and that it would immoral for the rest of us to clear the lanes.

So, this is why it takes a generation to recover from a real estate collapse. We have to build entirely new roads to circumvent all of the existing roads clogged with unmovable derelict houses. In many respects, we are starting afresh. The move-up buyer of 10 years from now, is the starting home buyer of today.

By lowering interest rates, the FED is tilting all the roads and hoping that the constant gravity of cheap money will start the flow of real estate traffic moving again. This could work, but it carries the risk of having to quickly tilt the road the other way if inflation takes root. This would spell disaster for not only the the cars racing down the hill into the stopped traffic ahead dealing with the sudden change in grade, but also for the housing market suddenly confronted with steep increases in borrowing costs.

One of the best analogies describing the current housing market I've read on the site recently.

robertoaribas says

1. Many underwater owners are moving up.

No they're not. That's actually one part of the market that has nearly disappeared.
http://articles.latimes.com/2011/aug/01/business/la-fi-move-up-20110801

robertoaribas says

dodgerfanjohn says

Simply put, they will keep them empty rather than rent them below a certain point(

said no housing investor ever.... Please, think before you write! vacancy is the most hated thing to an investor ever.

I agree with that! Which is why the situation is so bizarre to me.

dodgerfanjohn says

Of note, where I live in DTLA there is currently construction and new units opening. And those new places had NO problem renting their places at current market rents(1800-1900/mo for similiar places as those below). Whats curious though is that new people did not fill these units. Rather it was people escaping ridiculous rent increases at other buildings(as much as $500/mo). Whats even more curious is those places that people fled from are now advertising units at the same rates they were depressed at when I moved to DTLA 2 years ago. Very very odd how that works.......

IMO, people buying/bought in DTLA weren't looking for rental cashflow properties. They were speculating that DTLA revitalization, LA Live, and the possibility of Farmer's Field being built would increase property prices in DTLA.

Horrible idea for investing if you ask me, but great for renters.

The only buyers left are first-timer buyers, or investors, and they are both competing for the last remaining stock of sub-$500,000 homes on the market in SoCal. All the high end stuff just sits and sits.

A small treasure trove of more 'Ghost Inventory' articles.

http://mhanson.com/archives/991

http://www.lvrj.com/business/concern-over-ghost-inventory-called-threat-to-housing-recovery-177022641.html

"We didn't invite Bank of America, Wells Fargo and Chase because we keep hearing the same rhetoric that they're sitting on zero ghost inventory," Shelton said Thursday. "Banks realize they need to manage the release back into the market for stability in the short term."