Monday, April 02, 2012

Investor Home Buying Increases, Could This Be the Answer to the Real Estate Mess and Falling Prices?

1. NY Times -- "With home prices down more than a third from their peak and the market swamped with foreclosures, large investors are salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants. 

Investors believe the rental income can deliver returns well above those offered by Treasury securities or stock dividends. At the same time, economists say, they could help areas hardest hit by the housing crash reach a bottom of the market

The big investors are wooed by what they see as a vast opportunity. There are close to 650,000 foreclosed properties sitting on the books of lenders, according to RealtyTrac, a data provider. An additional 710,000 are in the foreclosure process, and according to the Mortgage Bankers Association, about 3.25 million borrowers are delinquent on their loans and in danger of losing their homes.

With so many families displaced from their homes by foreclosure, rental demand is rising. Others who might previously have bought are now unable to qualify for loans. The homeownership rate has dropped from a peak of 69.2 percent in 2004 to 66 percent at the end of 2011, according to census data."

Economists say that these investors could help stabilize home prices. “If you have a lot of foreclosures in one community you will improve everybody’s home values if you take them off the market,” said Diane Swonk, the chief economist at Mesirow Financial. “If those homes are renovated and even rented, it is a lot better than having them stand empty.”

Related story on bulk purchases in Miami.....

2. DQ News --  "Miami-area home sales rose last month to the highest level for a February in five years.  In February, 7,690 new and resale houses and condos closed escrow in the metro area encompassing Miami-Dade, Palm Beach and Broward counties. That was up 2.0 percent from the prior month and up 4.5 percent from a year earlier. 

In the resale condo category last month, Miami-Dade County saw a dramatic gain in its median sale price. The resale condo median surged to $150,000, up 18.0 percent from January and up 42.9 percent from a year earlier. But there's a catch: About half of that annual increase can be explained by a bulk purchase of 181 condo units by a limited partnership in February at a single luxury hotel-condo project in Miami Beach (all of the transactions were recorded on the same day). 

Another bulk purchase in February saw a limited liability company buy 38 existing condo units in Miami, paying a median $158,700 per unit."

16 Comments:

At 4/02/2012 4:09 PM, Blogger Benjamin said...

Absolutely this is part of the answer. Investors are not only buying houses, they are forming investment pools to buy houses.

You can buy a house and rent it out at much higher than monthly mortgage payment. You are cash-flow positive from Day One, and wait until the market recovers before selling.

 
At 4/02/2012 6:39 PM, Blogger Paul said...

The bust here in Phoenix is long over.

 
At 4/03/2012 9:30 AM, Blogger Ed R said...

Even with these investors buying, home sales are still less than 50% of what they were in 2005-05-06.

And, of course, these sales are just transfers of existing assets. New home production (real economic output) remains in the tank.

 
At 4/03/2012 9:43 AM, Blogger bart said...

Phoenix Case Shiller:

http://www.nowandfutures.com/images/case_shiller_city01.png



As far as "investor home buying", it's not only mostly for the rich but it wouldn't surprise me at all to find that the prices obtained are well below market via taxpayer "sponsorship".

 
At 4/03/2012 11:04 AM, Blogger Paul said...

Bart,

Not sure what you mean. I've bought and sold several homes here in Phx in the past few years. Never took a penny from taxpayers, and no idea how I could.

 
At 4/03/2012 1:03 PM, Blogger Ron H. said...

Bart: "As far as "investor home buying", it's not only mostly for the rich but it wouldn't surprise me at all to find that the prices obtained are well below market via taxpayer "sponsorship"."

I don't know who you mean by "the rich", but it's a market for those with cash, or excellent credit. If saving and maintaining good credit defines the rich, then yes, it's mostly for the rich.

Perhaps you can explain exactly how a buyer of a foreclosure sale can get taxpayer assistance, because I would love to take advantage of such help.

Investors buying homes to rent are meeting a demand for rental housing, which is strong in places like Phoenix. As the supply of rentals increases, rental prices will fall. The invisible hand at work.

Those investors are our friends.

 
At 4/03/2012 1:58 PM, Blogger bart said...

Paul: Not sure what you mean. I've bought and sold several homes here in Phx in the past few years. Never took a penny from taxpayers, and no idea how I could.

Sorry, didn't mean to imply that.

The chart was just to show that Phoenix prices are barely off their bottom.

 
At 4/03/2012 2:04 PM, Blogger bart said...

Bart: "As far as "investor home buying", it's not only mostly for the rich but it wouldn't surprise me at all to find that the prices obtained are well below market via taxpayer "sponsorship"."

Ron: I don't know who you mean by "the rich", but it's a market for those with cash, or excellent credit. If saving and maintaining good credit defines the rich, then yes, it's mostly for the rich.

Perhaps you can explain exactly how a buyer of a foreclosure sale can get taxpayer assistance, because I would love to take advantage of such help.

Investors buying homes to rent are meeting a demand for rental housing, which is strong in places like Phoenix. As the supply of rentals increases, rental prices will fall. The invisible hand at work.


I have no issue with individual investors doing foreclosures on court house steps in a open market.

As Dr. Perry noted though, it's large investors, hedge fund types, "1%ers' etc. buying in bulk. If you do your homework on the prices being paid, you'll find that they're way under 'market price' for foreclosures - and that means taxpayer subsidized in my book. And I strongly disagree with it, in concept and in particulars.

 
At 4/03/2012 2:10 PM, Blogger Paul said...

Ron H,


"Perhaps you can explain exactly how a buyer of a foreclosure sale can get taxpayer assistance, because I would love to take advantage of such help."

Me too. I am maxxed out right now and would love some of Obama's stash to buy into a particular piece of real estate I have my eye on.

 
At 4/03/2012 4:29 PM, Blogger Ron H. said...

Bart,

"As Dr. Perry noted though, it's large investors, hedge fund types, "1%ers' etc. buying in bulk. If you do your homework on the prices being paid, you'll find that they're way under 'market price' for foreclosures - and that means taxpayer subsidized in my book. And I strongly disagree with it, in concept and in particulars."

I don't see how any taxpayer money is involved.

A forclosed property is owned by a lender, and they can do whatever they want with it. I imagine they want to sell it for as much as possible, to cover their loss.

Like in any other market, buyers who make offers on a large number of properties in one sale, is likely to get a better price per property than a buyer making an offer on one house.

Keep in mind that a lender's business is lending, not dealing in real estate, so the sooner that unwanted inventory is gone, the sooner their balance sheet will look good, so I think the bargain prices are accounted for.

What would you do if you were selling things you didn't want and someone offered to take them all off your hands at a lowball price? Keep in mind the costs of multiple sales as opposed to a single large sale.

I'm not sure why you have a problem with groups of people who form themselves into "large investors", or "hedge fund types" buying in bulk at lowball prices.

Maybe I should lower my opinion of those evil 1%ers. :)

 
At 4/03/2012 4:35 PM, Blogger Ron H. said...

Paul.

"Me too. I am maxxed out right now and would love some of Obama's stash to buy into a particular piece of real estate I have my eye on."

This is off topic, but I have this burning desire to know if this woman is, or ever was, a staunch supporter of Obama's plan to "spread the wealth".

 
At 4/03/2012 5:16 PM, Blogger Paul said...

Bart,

"..you'll find that they're way under 'market price' for foreclosures - and that means taxpayer subsidized in my book. And I strongly disagree with it, in concept and in particulars."

Not trying to bust your chops, but do you have any links for that? I did several foreclosures and yes, they were under market value because they needed to be painted, fixed, etc. Then I turned around and sold the home for market value. That's how it works for everyone.

Are you factoring all that in?

 
At 4/03/2012 5:20 PM, Blogger Paul said...

Ron H,

I don't know about her, but I'm sure Obama's brother who lives in a box in Kenya on $20 a yr was all for it. Naturally, he probably assumed Obama meant him when the Prez routinely scolds the nation that we are all our "..brother's keeper."

I'd love to know what he thinks about his big brother after 3 years of this routine.

 
At 4/03/2012 6:43 PM, Blogger Ron H. said...

"I'd love to know what he thinks about his big brother after 3 years of this routine."

Yeah, I'm surprised someone doesn't interview him for a great story.

Of course, if we make too much noise, we could find it's OUR wealth being spread to brother-in-box.

 
At 4/04/2012 10:12 AM, Blogger bart said...

I don't see how any taxpayer money is involved.

A foreclosed property is owned by a lender, and they can do whatever they want with it. I imagine they want to sell it for as much as possible, to cover their loss.

Like in any other market, buyers who make offers on a large number of properties in one sale, is likely to get a better price per property than a buyer making an offer on one house.



I'm referring to Fannie, Freddie, GSE housing. That's the taxpayer connection, including an implied Fed and MBS and bankster fraud connections.

Governments seldom act like individuals - it's not their money.

The bulk discount concept does apply of course, but the ones I've seen are 30-40% below real market... and the data came from a trusted but non public source. Best I can say is wait a while until a few more have gone through and the data becomes public.




Maybe I should lower my opinion of those evil 1%ers. :)

Take two rimshots and call me in the morning. :-)

 
At 4/04/2012 7:15 PM, Blogger Ron H. said...

Bart,

"I'm referring to Fannie, Freddie, GSE housing. That's the taxpayer connection, including an implied Fed and MBS and bankster fraud connections."

Well, that kind of fraud just kind of goes without saying, and I had assumed most of the taxpayer losses were sunk costs.

"Best I can say is wait a while until a few more have gone through and the data becomes public."

Looking forward to it.

 

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