December 24, 2012

Speculators Overdoing A Spending Spree

The Los Angeles Times reports from California. “The California housing recovery boomed forward in November, with home prices reaching levels high enough to trigger questions about whether speculators are overdoing a spending spree. The run-up in prices caught the attention of Dean Baker, co-director of the Center for Economic Policy and Research in Washington, who regarded the trend as ’serious grounds for concern that these markets are being driven by speculation. While some speculators buying up homes at a bottom can be positive, the sort of price rises that you are seeing there may be excessive,’ Baker said in an email to The Times. ‘The speculators likely have pushed prices above where the market would put them in some markets,’ he said.”

“Ed Leamer, director of the UCLA Anderson Forecast of the economy, had a more sanguine take on the trend than Baker. ‘I am inclined to think that what he calls speculators know more about the market than he does,’ Leamer said. ‘It’s a good thing for professionals to be putting a floor under home prices.’”

The Ventura County Star. “One of the world’s largest private-equity firms is making a $34 million bet on residential real estate in Ventura County, buying up homes at a pace of nearly one a day for the past three months. Ventura County is one of 10 markets nationwide in which Invitation Homes, an arm of the New York-based Blackstone Group. Invitation Homes, through a corporation called THR California, has purchased 101 homes in the county since Aug. 3, with the frequency picking up in September and peaking with 26 transactions in the first 17 days of December.”

“The homes it has targeted in Ventura County are all modestly sized, post-foreclosure properties. County records show it has paid an average of price of $336,670. THR pays cash for the homes, and company officials say it typically pays a 10 percent to 15 premium to acquire targeted properties. Because investors are purchasing many distressed properties before they come to market, said Thousand Oaks agent Brian Graver, those properties are not being factored into sales prices considered by real estate appraisers. As a result, ‘houses are being appraised at higher levels.’”

“For those who maintain the traditional American dream of homeownership, however, institutional investors such as Invitation Homes are making that dream very difficult to realize, said Graver, the Thousand Oaks realty agent. ‘For homes under $500,000, it’s incredible how many buyers there are,’ he said.”

“Representing a seller, B.J. Ward, a Ventura County Realtor, recently closed a sale with THR after the company made a cash offer on an Oxnard home $11,000 higher than the asking price. There were about 12 offers on the home — half were investors, the other half were families or couples hoping to move into the house, Ward said. ‘They’re sending in offers that no one else can compete with,’ Ward said.”

“Brandie Gaines and her husband, Fred competed directly against THR on the sixth house they put a bid on in Oxnard. The bids were the same — $385,000 — but THR offered cash. After months without success, the Gaineses took Ward’s advice and started increasing their starting bids over the listed price to make their offers more competitive. The couple’s luck finally turned with the eighth house they had bid on since August. After making an initial offer slightly higher than the list price, Gaines and her husband increased their offer by $17,000 over the asking price.”

“‘It wasn’t my No. 1 location, but it had some other things that made it worth it,’ Gaines said. ‘It didn’t matter where it was; we were ready to go to battle for it.’”

The Orange County Register. “In Orange County and Southern California, Chinese and other Asian buyers – many paying all cash – have snatched up properties as investments, as vacation or retirement homes or as a residence for children studying at local schools or universities, local agents say. Local agents specialized in working with foreign buyers say they see strong interest among affluent shoppers in China, Taiwan, India and other Asian countries.”

“‘I think they’ll keep coming as long as the Chinese government allows them to wire the money out because people there have so much money,’ said Cayenne Kuang, broker and owner of Spectrum Realty in Irvine.”

“About 20 percent of the buyers at Irvine’s Lambert Ranch development – which caters to Asian buyers – are from abroad, said Joan Marcus-Colvin, senior VP at the New Home Co. Luxury home agent Rex McKown said foreign shoppers account for 80 percent of the viewings, up from 20 percent eight months ago. Jacqueline Thompson, also of Surterre, says Chinese make up about half of the buyers at home showings. ‘I think the Chinese realized the urgency to buy up homes in the U.S. because they see that prices will increase,’ Thompson said.”

“A Tustin couple says their house was foreclosed last month and sold to an investor while the pair was in the process of seeking a loan modification – just one month after major U.S. banks were to stop the practice known as ‘dual tracking.’ Wells Fargo foreclosed on the home owned by Keith and Susan Robishaw on Nov. 28. The couple are still living in the house and fighting to rescind the foreclosure, though they have received an eviction notice.”

“The Robishaws have lived in their Tustin home for 15 years. The couple took out several loans since they purchased the home in 1997 for $255,000 and got a mortgage for $242,250. Public records show that between 2003 and 2005, they refinanced their mortgage twice – once for $356,250 and the second time for $434,000 – and took out two home equity lines of credit. The Robishaws said they used the money to buy cars, make repairs and pay taxes, as well as remodel the house.”

“Then the recession hit. Keith Robishaw was laid off in April 2009 and remained out of work for 21/2 years. The couple made their final monthly payment of $2,992 in March 2010. ‘This is the only home we’ve ever bought,’ said Susan Robishaw, while sitting at her kitchen table beside a stack of paperwork documenting her efforts to keep the four-bedroom house. ‘We planned on living here for the rest of our lives.’”

The Glendale News Press. “The number of foreclosed homes that sold in the Glendale region plummeted in November to only a handful, according to the latest real estate figures. Four bank-owned properties sold last month, a dramatic decline from 23 in November 2011, according to statistics compiled by Realtor Keith Sorem with Keller Williams in Glendale. In the La Crescenta-Montrose area, only one bank-owned property sold in November, compared to six the same month last year.”

“Broker Hamlet Nersesian, who owns Armex Realty in Glendale, said the drop in bank-owned properties for sale is a mystery. ‘I don’t know why the banks aren’t putting those properties on the open market to sell,’ said Nersesian, a board member for the Glendale Assn. of Realtors.”

The North County Times. “The San Diego Association of Realtors pinpointed one of the factors in the market upswing — falling inventory of homes for sale. San Diego State University economist Michael Lea said the decline of distressed property as a market factor bodes well for other housing to be bought and sold. ‘All signals are pretty favorable for next year to continue the recent pace,’ Lea said.”

“Richard Wyllie, a Chula Vista real estate agent, said there are only 1.3 months of inventory available in the East Lake area, partly because bank-foreclosed properties have declined. But conventional listings of nondistressed properties are rising. He said of the 29 properties for sale, about 19 are standard homes that did not go through foreclosure. ‘I just don’t know why all of sudden,’ he said. ‘The market hasn’t gone up that much, but it’s enough for some people to see a little bit of profit in the sale.’”

The Friday Flyer. “Well, the train has left the station. The longer you wait now, the further away that train will get and the harder it will be to catch. That was the prevailing sentiment expressed by many at the National Association of Realtors’ recently concluded annual fall meetings in Orlando. Housing affordability is at an all-time high while interest rates and inventory are at an all-time low. That train is picking up speed and people who don’t catch it today will have an increasingly difficult time in future years as both prices and interest rates inevitably tick up.”

“A shortage of homes for sale will continue across the country, California in particular. Rising prices means fewer homeowners underwater and fewer distressed sales, but prices will not rise fast enough to incent many homeowners with equity positions to sell immediately as they wait for increased profit margins. Builders are also stepping up but in a limited way.”

“Lawrence Yun , chief economist of the National Association of Realtors® said that four years from now there will be an even greater disparity in wealth distribution. ‘People who purchased homes at low prices in the past couple years, including many investors, can expect healthy growth in home equity over the next four years, while renters who were unable to get into the market will be in a weaker position because they are unable to accumulate wealth,’ he said. ‘Not only will renters miss out on the price gains, but they’ll also face rents rising at faster rates.’”

From CBS Los Angeles. “California has one of the highest foreclosure rates in the nation but overall filings in November reached a low not seen in six years, according to Realty Trac. However, short sales reportedly increased 31 percent in the Inland Empire in the third quarter of the year. Darren Bloomquist, of Reality Trac said that having short sales on the rise while foreclosures are down indicates the real estate market is still distressed.”

“Bank of America has reduced its foreclosure filings by 59 percent, said Bloomquist, adding that the Inland Empire has the third highest foreclosure rate in the country, only lower than two areas in Florida. Dan Tovar, a long-time Riverside realtor and Bloomquist agree there’s pressure on banks to prevent foreclosures.”

“‘For us realtors, we’re super excited,’ said Tovar. ‘The sales price goes up, guess what, our commission goes up, too.’”

Bits Bucket for December 24, 2012

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