Speculators Find ‘Undiscovered Treasure’ In Idaho
The Idaho Statesman reports on where the speculators went. “For the first time, the average sale price of Ada County houses is more than a quarter-million dollars, real-estate industry data show. You can thank, or blame, job growth and Californians.”
“Yet the boom contains the seeds of a slowdown, real-estate executives say. They say high prices and rising vacancy rates among rental homes are scaring off some investors, while rising interest rates and the increasing difficulty Californians have selling their homes could slow the pace of residential purchases.”
“The average sale price of a home in Ada County reached up 24 percent from the same quarter in 2005. 4,114 new and existing homes sold in Ada and Canyon counties during the first quarter, a 39 percent increase over the same period a year ago.”
“One-fifth of all home loans in the first nine months of 2005 went to investors, according to LoanPerformance. One such investor is Rob Rose, who calls himself a genuine residential real-estate investor, not a speculator who goes into a market with the idea of flipping a property for a quick profit.”
“‘What I found was that Idaho was an undiscovered treasure,’ said Rose, who owns seven investment rental properties in the Boise area.”
“But Tony Drost, owner of a Boise-based firm that handles single-family rentals for investors, said clouds may be forming. Drost said a quarterly survey of 1,237 investor-owned single-family rental homes managed by 51 local property managers found that 11 percent of the units are vacant.”
“The immediate concern is that the owners, having concluded that the Idaho market is slowing, will begin selling hundreds of single-family homes at reduced prices, driving down home values.”
“Rose, the California investor, agrees the investor market is beginning to cool. ‘Most of the money going into Idaho is from California,’ he says. ‘But the California market is slowing big time. People are having a hard time selling, so the investment money going into Idaho is going to slow.’”
“J.J. Suitter, who manages some of Rose’s properties, said price and the number of homes on the market is becoming a factor for investors. ‘Some are losing interest because prices have gone up so much,’ she said. ‘Some are seeing their rentals sit empty for as many as four months.’”
“Suitter said the survey covered only rentals handled by association members and may not truly indicate market conditions. ‘There are thousands of them (investment properties) out there, and nobody really knows how many are sitting empty.’”
Is there any place in this country that hasn’t been wrecked by Californians with more money than sense?
Amend that. With more BORROWED money than sense.
Count Seattle as a heavy casualty of CA equity refugees and CA “investment clubs”. High end apartments are full of CA plates.
Wasn’t CA supposed to slip beneath the waves couple decades back?
Thanks to the reader who sent this in this link.’
What I found was that Idaho was an undiscovered treasure,’ said Rose’
This is one of my favorite things about speculators. They think the local oaffs are too dumb to see the gold just lying on the ground. Have they not considered that there are local landlords and builders that can provide adequate housing? BTW, I have seen many articles reporting massive construction in the area. The price run-ups are just part of the greater fool game.
They must be running out of buildable land in Idaho!
As one of those former CA folks that recently moved here, I think interesting times are ahead. We rented in CA and decided to rent for at least a year here to figure out where we wanted to live. First the place I’m living in is 50 cents on the dollar if I had bought it with 20% down — as long as that continues I have 0 intentions of buying. Secondly, out of the 5 places I considered in Jan/Feb the only one that is off the market is the one I rented! MLS listings are up a ton, and that doesn’t count new construction that isn’t in MLS and a bunch of FSBO properties.
I have heard numbers as high as 40% of SFH purchases last year were investors, most of them being from out of state. Yes Boise is growing, yes its a good place to live. But the economy is currently very dependant on the HELOC toy factor and construction to continue. With cash flow on rents requiring 50% down, I think we all know where this is heading…
http://boise.craigslist.org/apa/156839531.html
Tell me, do any jobs in Boise pay enough to afford this kind of rent?
Yes, but I think 99% of those people end up buying. That’s the kicker. Investors think that there is this large supply of people willing to pay 1300/mth to live in Eagle, when they can live in Boise/Meridian and pay that for a mortgage. Based on what I pay for my place, I’d say that one should be going for 900-1K/month — I live in Eagle and in my neighborhood there are 4-5 places with For Rent signs. There is another handful of properties that are empty and for sale, and there is some that look like they are flippers (remodeling empty houses).
http://saltlakecity.craigslist.org/apa/156824945.html
Kinda like this one for $2000/mo. People who can afford to pay $2000/mo for housing are going to be buying. In addition, the commute to SLC is about 45 minutes. It’s pretty damn hard to rent out a house for more than $1000/mo no matter how big it is in SLC.
The LL is a californicater with an 858 (SD) area code. It must be a house bought with HELOC money.
Coincidence?
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1098393
We need to “spray” the speculators with bug killer chemicals, just like you do to kill locust. These people have to really get burned to stop the infestation.
Speculators do have to get burned to learn a lesson, and I think the Fed is aware of that. For instance, in the Fed minutes from December 1999, Greenspan said not to worry about the tech investors that were only interested in keeping their paper profits. They even laughed at the prospect (it was noted in the transcript) !
HousingB, Too funny! I was just thinking that these speculators are like ants in an ant farm (and the queen is the sub prime mortgage lender). SPRAY AWAY!!
Warren Buffet says bubble, again:
http://money.cnn.com/2006/05/05/news/newsmakers/buffett_050606/index.htm?section=money_latest
On the real estate bubble
Buffett: “What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets. [Buffett singled out Dade and Broward counties in Florida as an area that has experienced a rise in unsold inventory and a stagnation in price.] The day traders of the Internet moved into trading condos, and that kind a speculation can produce a market that can move in a big way. You can get real discontinuities. We’ve had a real bubble to some degree. I would be surprised if there aren’t some significant downward adjustments, especially in the higher end of the housing market.”
On mortgage financing
Munger: “There is a lot of ridiculous credit being extended in the U.S. housing sector.”
Buffett: “Dumb lending always has its consequences. It’s like a disease that doesn’t manifest itself for a few weeks, like an epidemic that doesn’t show up until it’s too late to stop it Any developer will build anything he can borrow against. If you look at the 10Ks that are getting filed [by banks] and compare them just against last year’s 10Ks, and look at their balances of ‘interest accrued but not paid,’ you’ll see some very interesting statistics [implying that many homeowners are no longer able to service their current debt].”
On a commodities bubble
Buffett: “I don’t think there’s a bubble in agricultural commodities like wheat, corn and soybeans. But in metals and oil there’s been a terrific [price] move. It’s like most trends: At the beginning, it’s driven by fundamentals, then speculation takes over. As the old saying goes, what the wise man does in the beginning, fools do in the end. With any asset class that has a big move, first the fundamentals attract speculation, then the speculation becomes dominant.
Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we’re seeing that in commodities and housing…Orgies tend to be wildest toward the end. It’s like being Cinderella at the ball. You know that at midnight everything’s going to turn back to pumpkins & mice. But you look around and say, ‘one more dance,’ and so does everyone else. The party does get to be more fun — and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice.”
My largest holding is Berkshire, by far. It mostly outperforms in down markets, it’s been kinda flat for a few years but is set to do well going forward with all the turmoil we expect. Think vulture fund.
I think that some of the last hot markets in the country - all beneficiaries of the roaming bubble phenomena - are starting to cool. Boise, Salt Lake City, Memphis, Nashville and Albuquerque are still floating along, but they just aren’t as robust as they were. In every case, either the inventory is starting to grow or median prices have cooled (rising much more slowly).
Probably what is happening is that the flippers who descended on these areas aren’t doing as well in their home states. Enthusiasm is dampening.
doesn’t “reversion to the mean” kick in across all markets? those markets that rise highest rise first and fall first?
Nasdaq popped in March 2000 - well before the S&P 500.
“A rising tide lifts all boats. A falling tide sinks all boats.”
Except those who jumped on land.
LA, Miami, Vegas, etc. are leading indicators of the correction that is coming across any/all markets that deviated from historical appreciation levels. All markets will correct in order to revert back to the mean.
Deal or no Deal, land is only good if it has a use to make money, but most die before they find it, someone always owns it, they wont make any more, but no one lives forever, in south florida the babcock ranch was sold as soon as the real owner was dead, greed is always at work, remember its so easy, buy low sell high! dont buy high and blame the seller, storms, fed, or press, Blame yourself for the greed, Common sense RIP
“‘What I found was that Idaho was an undiscovered treasure,’ said Rose, who owns seven investment rental properties in the Boise area.”
Amazing — this guy discovered that ordinary Idahoans were sitting on a pot of gold and didn’t even realize it. A home priced at 1/3 the cost of a similar home in San Francisco? Don’t these idiots know what houses are worth????
The worst part about these investors buying “undiscovered treasures” is the havoc they play on these places where they have no ties to. They come in and buy up properties they think are a steal just because they are priced appropriately for the areas they are in as opposed to the overpriced markets on both costs. They end up screwing up things for the residents who live in these places permanently by over-inflating prices by selling houses back and forth between investors and making it difficult for real residents who can’t afford the crazy prices and who will get screwed if they have to sell when everything tanks.
They have no concept on any kind of economics. These places can’t support these over inflated prices because there aren’t the jobs to support them.
None of them realize that the only thing that allows people to get by in places like Boise etc. is that housing prices are low. Pretty much everything else is priced the same as the rest of the country. Walk into any chain store in the mall and everything is priced the same all over the country.
You have to hope that these locust get caught holding the bag, but in reality a who lot of us are going to get hurt when this whole thing plays out. We’re going to see a whole lot of unemployed people when he house of cards collapses.
Permanently is what it feels like, but it is not permanent. What the speculators fail to realize is that the reason that they aren’t making more land is that over 3 billion years ago, there was this huge speculative buildup, and we’ve been trying to work of that excess ever since.
It’s funny that nobody considers the amount of available land during the time they have on the plane ride to see their investment. They fly over a lot of land, and the amount of land they encompass grows as the distance squared. It’s pretty easy to dissipate even a lot of money. It focuses in a few places, but then spreads out from there, diluting its impact. Why Boise and not Spokane? Why Phoenix and not Albuquerque? Why Texahoma? The answer is, it doesn’t matter. It’s just structure in a cloud. As the day progresses, the cloud changes shape, then disappears.
I’m constantly surprised to hear how wide Californians have cast their speculative nets. They’re diffusing across the states creating mini bubbles everywhere. Massholes have done the same thing in New England, inflating prices in Vermont, New Hampshire, Maine, and Rhode Island (but on a much smaller scale). The scale of speculation makes me think that California is going to be hit especially hard in the years to come.
obviously, the locals don’t understand their market like this san diego couple:
http://www.vishramcorp.com/vishram/html/investment.htm
LOL. That’ must be the “Vish” on the SLC house.
Fool. He should be back home in India where the RE market makes ours look puny.
Reporting from ground zero here in Boise. As the article suggests, the boom continues with about 30,000 permits in the pipeline (according to paper in an article a few months ago). Its curious how housing prices and moving up yet there is not much of a land shortage- there is land everywhere. The city of Boise is looking at permitting development in the empty desert south of Boise- room for thousands of houses.
I’m afraid that cooler heads may not prevail for awhile, so I’m looking at moving to the Dallas area where I won’t have to devote 50% of my income to a mortgage.
Don’t do that, Brandon. Dallas is not Idaho. It’s cheap for a reason. It’s a rotten place to live. You’re used to natural beauty and things to do outdoors. The only thing to do outdoors in Dallas is chase the fleas and roaches.
but i hear the chicks are hot in Dallas!!!
And your wallet needs to be too if you want any of that action.
Yeah, in ID all you need are some sweet skills… Like nunchaku, bowhunting or computer hacking skills..
Another reporting from Boise. Want to point out Idahoans are very independent. As a result, there is a high percentage of homes FSBO (which don’t show-up on MLS). It seems almost 50/50. That’s scary.
ex ca in boise,
Great posts.. from ground levle in Boise. I lived there from 2002-2005 and before the boom rents didn’t cover mtgs..they almost did for the lower priced homes but not even close as you described. these place hsitroically have 2-3 quarters of run-up in prices then stay flat for years.. that’s what I expect there.. there’s simply too much land to support price increases, there.