May 7, 2013

It’s Go Time In California

The Press Enterprise reports from California. “Drawn by the prospect of high profit margins on rents and re-sales of homes, hedge funds, Wall Street investors and flippers are muscling out home-grown shoppers in Inland Southern California. The dynamic has gotten so pronounced, Realtors admit they’re getting edgy about the run-up in price. Al von Entress, an agent in Murrieta, said buyer interest has been so strong in southwest Riverside County he’s been collecting multiple offers on properties — some well above list prices — within a matter of hours. Weeks ago, he listed a two-bedroom, two-bath house in Menifee Lakes at $215,000, where comparable homes had been selling for $170,000. The client, Charity Willard, was prepared to rent out the home if it didn’t sell before she moved out of state for a job transfer.”

“‘At the time, I thought it would be on the market for two or three months,’ Willard said. ‘Before we had the first showing, I had two offers, sight-unseen.’”

“The 1,300-square-foot home nabbed 18 offers within five days, three of which were all-cash. The buyers paid $35,000 over asking price, von Entress said. Willard said she is thrilled about the $250,000 sale and somewhat rattled by better-than-expected gains. Going in, the Air Force auditor said her only goal was to pay off the mortgage. ‘I feel like this is a mini-bubble, where things are spiking up at the moment,’ she said. ‘People want homes so bad they’re throwing everything they have at it to get in while they can.’”

“‘Cash buyers have the advantage,’ particularly on homes in the low-price range, von Entress agreed, and some are wielding it to make investments that bring up assessed values in their own neighborhoods. That’s exactly how the sale played out in Menifee Lakes, von Entress said. Willard’s buyers were local investors with property in the area. ‘They viewed the sale as a way to drive up comps,’ he said.”

The Ventura County Star. “A luxury home Realtor with Coldwell Banker at Hollywood Beach in Oxnard, Ariel Palmieri said her clients agree the market has bottomed out and prices are on the way up as inventory deteriorates. ‘Many buyers are saying it’s now or never,’ she said. ‘If I don’t buy this home on the sand for $2.5 million now, I won’t ever be able to.’”

“The buyers Palmieri sees shopping for beach properties in Ventura County are coming from Los Angeles, Pasadena, the San Fernando Valley, Santa Clarita and other areas south of Los Angeles. ‘It’s go time for these people,’ she said.”

The Bakersfield Californian. “Chase Hosley is a mid-level grocery store manager who said his father taught him that renting is ‘just throwing the money away.’ Now 21 years old and renting an apartment in Bakersfield, Hosley began looking a few months ago for a home to buy in Oleander or southwest Bakersfield. But the first property he ‘fell in love with’ was bought by someone else almost immediately. The next four or five homes that came up — all listed at between $100,000 and $150,000 — had already drawn cash offers by the time he called to ask about them. ‘Everything I looked at, it was like that,’ said Hosley.”

“His luck may have taken a better turn: He recently entered escrow on a three-bedroom, 1,200-square-foot Myrtle Street home after bidding $136,500, or $1,500 above the asking price.”

“A single-family home listed for sale at $85,000 to $90,000 can often be ‘flipped’ and resold for about $130,000, Bakersfield Realtor Jonathan Weinmann said. Investors willing to leave their money in the market for a longer period often shoot for a property priced at about $120,000, then rent it out at $1,100 or $1,200 a month, Weinmann said. One result of this tighter supply, Weinmann said, is that the ideal properties to buy and hold onto are mostly gone. ‘It’s not to say (investor demand) has gone away, by any means,’ he said. ‘But (the competition) is … ferocious at certain price ranges.’”

“Bakersfield home flipper Miguel Soltero, backed by what he calls a ‘closely knit’ group of friends, family and business acquaintances — owned about 60 Bakersfield properties as of March. That made them, as a group, one of Kern’s top 10 homeowners. Soltero said the group’s guiding strategy is not to rent out these properties but fix them up and sell them at a profit. It’s less capital-intensive than buying and holding, he said, and more profitable, too.”

“‘We have enough rentals to know that, at the end of the day, it hasn’t been that lucrative for us,’ said Soltero. ‘We make more money buying, rehab’ing and selling.’”

The Signal. “Effective June 3, when a home purchase is insured by the Federal Housing Administration – FHA – buyers will no longer be able to drop their mortgage insurance once the balance drops to 78 percent of the value of the home. Credit requirements are much more stringent with conventional loans, but, so many home buyers still need the FHA loans, said Connor MacIvor with RE/MAX. ‘Currently, over 70 percent of our buyers are FHA,’ MacIvor said.”

“Dwight Hawkins, with Realty Executives said the upfront loan fee home buyers pay for an FHA-back loan is jumping as well from 0.1 to 1.35 percent. After adding up all the fees to buy, and own, a home – loan fees, mortgage insurance, impound account, closing costs, principle, interest, taxes, insurance and, in most cases, a homeowners association fee – the home buyer has a lot of costs added on when buying a home, said Dwight Hawkins, with Realty Executives. ‘I believe the administration has said that they want more people to buy homes and are looking to ease up on qualifications again,’ Hawkins said. ‘Go figure!’”

The Union Tribune. “Want to buy a new home in San Diego County? You may have to wait in line. Demand for housing has become so intense that major builders are requiring prospective clients to sign up on lists for a chance to buy a home. ‘The problem is being created by the absence of inventory in the resale market,’ said San Diego economist Alan Nevin. ‘That’s creating a panic mentality.’”

“Some homebuilders, taking note of increased demand, have been boosting prices after each phase. Nevin fears these supply-demand dynamics could fuel a dangerous rise in home prices, which have accelerated due to a sizable share of investment and cash buyers creating more competition in the overall market. Single-family home prices have risen 14 percent from a year ago while condo values have gone up by 21 percent, said Nevin, citing a recent per-square-footage analysis from the Greater San Diego Association of Realtors.”

“Industry experts said today’s price gains are an indicator of a recovering real estate market, not another housing bubble. ‘We’re raising prices again, which we think is important for buyer confidence,’ said Matt Sauls, a spokesman for Pardee Homes”

“‘That’s an outrageous increase even though (homeowners) love to see their home values go up. But it will become another debacle like what we had,’ said Nevin, referring to the lead-up to the housing crisis.”

The Sacramento News & Review. “The cash-for-homes trend exploded in 2008 and streaked to a 10-year high in December 2012, when cash buyers accounted for nearly 40 percent of Sacramento County’s home sales, according to the Sacramento Association of Realtors. Since then, these buyers, most of whom are investors looking to rent or flip purchases, have continued to rule the market, accounting for 39.5 percent and 36.4 percent of all home sales in February and March, respectively.”

“Ross Hendrickx lives in a home in Del Paso Heights that’s currently worth less than he paid for it. He’s not in danger of losing it, but he is waiting for the market to rebound to where he’s no longer underwater and might be able to sell it for close to what he put down. As a Roseville-based title officer who deals with short-sale and foreclosure properties, Hendrickx sees a lot of clients who are worse off. They’re just barely treading water and hoping the banks will agree to short sales. But because the market is climbing and values are up, it’s more likely these banks will just foreclose, he says. ‘They gamble, and they get foreclosed on anyway,’ Hendrickx said.”

“Tom Pool, spokesman for the California Department of Real Estate thinks there’s enough pent-up demand that when the shadow inventory is released, there still won’t be enough to accommodate interested homebuyers. The bubble may flutter, but it won’t bust. But no one knows for sure. While rising home prices can’t come fast or furious enough for the foreclosure-endangered, there is a risk that prices, if spiking too rapidly, could arrest the market before it has time to heal. Prices are already growing too rich for investors, real-estate agent Harold J. Frink reminded. ‘If this clip keeps up, it could price first-timers out of the market,’ he added.”

“A lifelong renter, Chris Raynes missed out on the first housing-bubble blockbuster that dropped six years ago. His mother, who now lives with him after losing her home to the banks, did not. But Raynes has a front-row seat for what may end up being the soul-sucking sequel. And like most sequels, it’s all about maximum commerce and shock-and-awe thrills. He started bidding last spring when he felt home prices couldn’t drop any lower. The Bay Area native would prefer to stay here in the floodplain capital, but knows he can’t be picky. Not in this ruthless climate.”

“‘I’m 43 years old, and I’m finally trying to get my feet wet,’ he told SN&R. ‘I’m fortunate I wasn’t ready [to buy a home when the bubble popped]. But now I’m ready, and so is everyone else.’”

Bits Bucket for May 7, 2013

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