March 31, 2014

Investors Begin To Offload Their Portfolios

The Desert Sun reports from California. “Canadians comprise the bulk of foreign buyers in the desert. They typically buy homes during March to May. In 2013 during that period, 375, or 98 percent, of 381 publicly recorded sales had a mailing address from Canada, according to DataQuick. But HK Lane agents Laurie and Tim Briggs have noticed a switch. In the first quarter of 2013, 58 percent of their business came from Canadians, they said. During the same quarter this year, that dropped to 27 percent.”

“Last January, Ed Whinnery and his wife bought a second home in Sun City Palm Desert. The dry desert heat was the perfect escape from the rain of Nanoose Bay, a small town in Canada. Canadian currency was stronger in 2013. Within three weeks that winter, Whinnery and Beckett closed all-cash on a $265,000 home. Whinnery hopes his home will be worth more in a few years. He estimates it’s now worth about $330,000. ‘The exchange is not a big issue,’ Whinnery said. ‘If you can turn around the house, your return on your money here is probably outweighs the exchange you have to pay.’”

The Union Tribune. “Q: Is rising inventory a sign that the housing market is slowing? Murtaza Baxamusa, directs planning and development for the Family Housing Corporation, of the San Diego Building Trades in Mission Valley: ‘No. San Diego has recently experienced the lowest home inventory in three years. Therefore an uptick in inventory is a sign of recovery. Some of the homes appear to be on the market for a longer time because sellers’ expectations for those product types were high. Prices were rising too rapidly last year with cash investors precipitating bidding wars for fewer homes.’”

“Bill Davidson, president of Davidson Communities: ‘Yes. As people begin to feel better about increasing housing prices and overall economy in San Diego County, homeowners have begun to realize the equity in their homes. We see a surge in existing homes coming into the market giving families the opportunity to move up or move down as needed to establish a household affordability equilibrium. In addition, we have seen the residential investor begin to offload some of their portfolios to realize gains.’”

The Los Angeles Times. “This time last year, investment firms raced to buy dozens of single-family homes in neighborhoods from Fontana to South Los Angeles to lease them out. The flood of cash helped spark a steep rise in prices, drawing criticism for pushing families out of the market. But now the firms themselves have all but stopped buying in Southern California. Among the 20 firms buying the most California real estate since January 2012, purchases are down more than 70% compared with last year in each of the last four months, according to DataQuick.”

“‘Prices have gotten to the stage where we cannot buy a house, renovate it, rent it and still make a reasonable return,’ said Peter Rose, a spokesman for Blackstone. ‘There was a moment in time where it made sense. Eventually we’ll exit, whether it’s an IPO or selling them off. But that’s years down the road.’”

The Orange County Register. “Some economists worry that not enough young people are leaving the nest. Whether it’s because of student loans, credit card debt, a foreclosure hangover or a need to save for a mortgage, ‘household formation’ has yet to get anywhere near pre-recession levels. At a time when investors are buying fewer homes, the slow pace of household formation means fewer first-time buyers taking up that slack.”

“Burdened by $85,000 in college debt, attorney Bobby Waltman lives with his mom and grandmother in a three-bedroom house in Huntington Beach, Calif. Now, he’s counting the days until his finances are sound enough to afford a home of his own. ‘I’ve had this plan to move out for a while, and it just keeps getting postponed,’ said Waltman, who works for a Newport Beach, Calif., personal injury firm. ‘I’m working at a really good firm and I’m still living at home, and I figure it’s time I move on. (But) it’s hard to take on a mortgage with law school debt.’”

“A National Association of Home Builders study released last month found that the share of 25- to 34-year-olds living with their parents increased to 19 percent in 2012, from around 12 percent in 1990 through 2005. Those ‘older young adults’ usually account for about half of first-time home buyers, the NAHB said. Waltman said many of his friends still live with their parents, too. ‘When many of your friends are living at home, it’s hard to rationalize moving out,’ he said. ‘I love to travel. I love eating good food. I love to go to concerts and to go out. It’s just easier to do the things I love when I’m not spending money on rent.’ Besides, he added, ‘Mom’s cooking is still the best.’”

The Press Enterprise. “When Donell and Kimberly Davis applied for a mortgage modification on their Eastvale home with Ocwen Financial Corp., they counted on it being a slam dunk. Never late on a payment, the couple with solid work histories and high credit scores spent 30 hours over a two-month stretch to bring payments down on the $520,000 home that saw its equity fall to about $325,000 in the Great Recession before they were told: Modification, denied.”

“‘We still can’t figure it,’ said Donell Davis. ‘When we started the process, they told us everything looked good. I was told I was a good candidate. Now, I feel like I was led along.’”

“Chris Wyatt, left the mortgage and banking industry in 2010 after 21 years in the business to consult on mortgage-related cases. By Wyatt’s calculations, roughly 122,000 of the 185,000 consumers who went through foreclosure by Ocwen during that time will be deemed eligible by the settlement administrator to receive some of the $125 million allocated for relief. Wyatt said the company would need only to modify 3,600 loans in its portfolio to meet the $268 million threshold set for California. ‘That’s not what I would call widespread help for homeowners,’ Wyatt said. ‘Try to get your money, but don’t hold your breath.’”

The Santa Cruz Sentinel. “After a succession of billion-dollar storms, in 2012 Congress took action to fix the Federal Emergency Management Agency’s deficit-laden National Flood Insurance Program, passing a new law that eventually would charge homeowners based on the true risk of flooding in their neighborhoods. Across the county, 1,139 households were looking at 18 percent annual policy increase, while another 531 policies were set to rise 25 percent annually, according to figures compiled by the Associated Press. Hardest hit are the low-lying areas of Capitola Village, where 71 percent of flood policies are facing increases.”

“Lorraine Stucki lives a good six blocks back from a far bend in Salsipuedes Creek, a swift but small tributary of the Pajaro River that hardly seems threatening but can turn unruly in rainy seasons. Now 82 years old, Stucki and many neighbors are facing the prospect of steep increases in their flood insurance premiums, despite a bill signed into law last week by President Obama to ease the burden facing homeowners.”

“There are several ‘For Sale’ signs up in Stucki’s neighborhood, a fact of life in an area populated by seniors. ‘What will eventually happen is these properties will not be salable. Who can sell a home under that?’ Stucki said. ‘I certainly wouldn’t want to try to buy a house in a floodplain anywhere in Watsonville right now.’”

Bits Bucket for March 31, 2014

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