March 13, 2014

Investors Are Ready To Cash In

The Los Angeles Times reports from California. “Home prices in a dozen Southern California ZIP Codes have passed their peaks during the housing bubble, according to DataQuick. In Arcadia’s 91007 ZIP Code, the median sale price for a previously owned house reached $1.33 million last quarter — 30.5% higher than its peak in 2007. In the city’s 91006 ZIP Code, prices are 23.7% higher. In the San Gabriel Valley, an influx of Chinese buyers has shifted the market into overdrive, real estate agents say. ‘It’s crazy,’ said Pamela Rose, a San Gabriel Valley real estate agent. ‘We are experiencing a lot of overseas money.’”

“Despite steep prices, experts don’t see a bubble forming in these areas. ‘There are important, fundamental reasons that prices moved up,’ said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate.”

The LA Downtown News. “The surge of investment in Downtown in the last couple years has reminded many people of the pre-recession era. Then, as now, big-budget housing and other projects are announced seemingly weekly. Once again, construction cranes speckle the sky. Most compelling is that global developers will sometimes back big projects that others shy away from. ‘Asian investors seem to be patient investors these days, with an affinity for land and a longer-term thought process,’ observed Eric Sussman, a real estate expert at UCLA’s Ziman Center for Real Estate. ”

‘The demand isn’t just because of the merits of local property, either. Foreign buyers are often looking to diversify their real estate assets, moving away from their home countries as overseas capital markets grow hotter. ‘Take some Chinese investors, for example,’ Sussman said. ‘I used to hear that the growth rate in China was preferable, but now people are seeing the market there as being overheated, as a bubble. They’re looking elsewhere now.’”

The Daily Press. “Shear Realty owner/broker Caroll Yule told the crowd at the Victor Valley Chamber of Commerce event that land sales are picking up. ‘The phones are ringing again. We’re feeling good. We’re even selling dirt,’ Yule said. ‘We haven’t sold a (vacant) lot in six years and now we’re selling them like they’re going out of style.’”

“Yule said at current prices — February’s median price for a singlefamily home in the High Desert was $155,000, a drop of $10,000 from January — home builders can’t make a profit on new construction. ‘Some are building anyway,’ she said.”

“Southern California home prices held steady last month while sales tumbled to a six-year low, further evidence that the market has stalled after a torrid rebound. Sales continued to fall even though buyers have more homes to choose from. In the Inland Empire, which includes San Bernardino and Riverside counties, listings rose 30.5% compared with January 2013.”

“Continuing slow sales could indicate buyers are turning away from higher prices and mortgage interest rates, said DataQuick President John Walsh. ‘The drop in housing affordability is enough to nudge some out of the market,’ Walsh said in a statement. ‘Other would-be buyers have no doubt called ‘time out’ while reevaluating their housing priorities, or watching for signs the market has overshot a sustainable price level.’”

The Union Tribune. “San Diego County’s housing market picked up a little steam in February, but not enough to reverse a trend of declining sales and lower appreciation. ‘Interest rates are eking up, wages are stagnant, and the cost to run a household keeps going up,’ said Mark Goldman, a loan officer and real estate lecturer at San Diego State University. ‘I kind of see this malaise continuing for quite some time.’”

“Goldman said inventory has increased somewhat, reducing upward pressure on prices, and the fix-and-flip strategy is no longer such a great investment. ‘Investors who are purchasing today, with the expectations that values are going to spike, I think in most cases are going to be disappointed,’ Goldman said.”

The Orange County Register. “Perhaps it’s a nervous tic left from the ugly housing collapse, but considering the remarkable Orange County rebound, I’m perplexed as to why a mild midwinter cooling has heightened anxiety among numerous real estate pros. Some of the supposed worry spots in the latest Orange County Housing Report by market watcher Steve Thomas don’t concern me at all.”

“A 67 percent increase in Orange County inventory for sale also isn’t a huge concern to me. It’s actually to be expected when home supply a year ago was essentially nil. And a growing supply can actually lure shoppers back to the game.”

“What does worry me some about our move toward more ‘normal’ homebuying conditions is this: Orange County homes on the market, as of Feb. 27, were 5,403 – up 2,166 in a year. Vacant homes on the Orange County market, typically a marker for sales by a third-party owner or a motivated seller, were 29 percent of all listings this month versus 14 percent a year ago. What could explain the year’s roughly 1,000-residence jump in vacant homes for sale?”

“Don’t blame the lenders. About half of the surge in the supply of Orange County homes for sale is linked to vacant homes not tied to lending issues. Add that up, and it’s a clear sign that investors, many of whom bought Orange County homes at a deeply discounted prices in recent years, are ready to cash in.”

“Sellers were getting away with pricing homes above recent comparable sales, Thomas says. ‘But buyers no longer want to pay more than what’s fair.’ Thomas adds that this surge in investor listings is more evidence that last year’s jump in prices was a bit overdone, ‘and says that there’s not a lot of appreciation left.’”

Bits Bucket for March 13, 2014

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