Speculators Not Interested In Purchasing Anything Else
The Idaho Statesman has this update on speculation. “Out-of-state investors have driven Treasure Valley single-family home sales to record levels. Soon they could be the market’s undoing, some local housing-industry leaders say. Since 2004, California investors have poured millions into homes here. Their plan: rent out the properties until prices were high enough to resell the homes at a profit.”
“There are no definitive statistics indicating exactly how many area homes are owned by investors, according to the Idaho Home Mortgage Association. But Ada County Assessor Bob McQuade offers a clue.”
“A home not occupied by the owner is ineligible for the state’s property-tax exemption, he said. Statistics compiled by McQuade’s office show that 28 percent of 128,388 homes in Ada County, or 35,948 single-family units, did not qualify for the homeowner’s exemption this year. That’s up from 22 percent, or 25,375 out of 115,345 homes, in 2004. That’s an increase of more than 10,500 ineligible homes in two years, more than 40 percent.”
“‘All we can do is assume then that a large portion, maybe in excess of 90 or 95 percent, of the non-occupied residential properties are investor-owned,, McQuade said.”
“George Tallabas, a veteran real-estate agent in Nampa, said, ‘We had people from California coming here, buying up entire blocks of homes, and writing checks for $2 million or $3 million.’ That’s not happening any more, he said.”
“Tallabas said: ‘We had some very brash investors come in here thinking that it (the boom) would last for another five years. They scare me now, because they could begin dumping all those homes.’”
“Higher home prices, rising interest rates and stagnant wage growth are making it difficult for investors to get the rents needed to cover their loans, housing-industry leaders say. And that could cause thousands of single-family homes to be dumped on the market, lowering housing prices and undermining a building boom that has been propping up the Treasure Valley economy.”
“‘Those things have all the makings to cause investors to sell out and take their money someplace else,’ said Don Hubble, owner of one of the first builders in the Valley to stop selling to investors.”
“A recent survey of 1,237 investor-owned single-family rental homes managed by 51 local members of the National Association of Residential Property Managers found that that 11 percent of the units were vacant.”
“The signs of a national slowdown are adding to local concerns. The National Association of Realtors this week predicted that U.S. housing sales will be off 7 percent this year. ‘I attended a recent real estate class where one of the instructors said there are currently 35,000 single-family homes for sale in Phoenix,’ Tallabas said. ‘And a third of those are owned by Californians.’”
“For investors who have been bankrolling their investments in Idaho by selling homes in other states, a slowing U.S. market is creating problems that are already affecting Idaho, said Rob Rose, a California investor with multiple properties in the area. ‘All the people that I’m associated with that purchased (investment housing) in Idaho are doing well with their investments, although, none of us are interested in purchasing anything else at this time,’ Rose said.”
‘With home prices up 27.50 percent statewide last year alone, and the median price of a home now about $222,000 in Ada County, the area is not going to lure as much outside investment capital. The result: “Investor interest is slowing,” Drost said.’
This is the part where locals are going to rush out and give these speculators huge profits for seeing how undervalued Idaho homes were.
George Tallabas, a veteran real-estate agent in Nampa, said, ‘We had people from California coming here, buying up entire blocks of homes, and writing checks for $2 million or $3 million.’ That’s not happening any more, he said.”
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Every speculative mania - tulips, real estate, etc.. - was driven by one thing - CHEAP EASY CREDIT!
But didn’t they write checks, or am I missing something here?
Stuff is sitting. Lots of FSBO (prob 40-50% in my neighborhood now) and building is still going on like crazy. Its obvious that certain neighborhoods got hit by speculators because the number of listings is huge. Other neighborhoods don’t seem as impacted. Its like the dotcom bubble of yesteryear. Someone published a stock (re: subdivision) on a message board and everyone called their broker.
Now the speculators just screwed it up for the locals in Boise . If someone was really buying a retirement home there it wouldn’t be so bad ,but these hit and run flippers create false demand .
I wonder how many vacant houses there are in the United States now ? What a waste .So many first time buyers could of got in had it not been for the flipper greed .
All I can say is maybe the first time buyers will get a break in 2 to 5 years from now when the markets tank .That would be justice for the people that got pushed out by the flipper/investors .
In 5 years, justice will be served when the locals only need to spend 1/2 of the 1995 prices for those homes.
“All I can say is maybe the first time buyers will get a break in 2 to 5 years from now when the markets tank .That would be justice for the people that got pushed out by the flipper/investors.”
But perhaps not, because I think many of those speculating in Boise now think that they will sell to a California retiree 3 to 5 years from now, not a Boise native. We’ll see if that works out.
I wish there were a way to consolidate FSBO numbers, so we could have a better picture of inventory. for that matter, I’d think the FSBO Web sites, including Craigslist, would be well served to aggregate some sort of “shadow MLS” for listings that are not already on an MLS / Realtor.com — it probably would bring them a lot more “lookers.”
There is substantial evidence that Californians are extremely dumb.
Greedy, extremely greedy. There is a world of difference between avarice and stupidity although the two go hand in hand more often than not.
Hey, not all of us are. I just sold my house in Livermore (SF Bay Area) and am renting until things calm down here. I wasn’t trying to turn a profit…it was just that we had outgrown our 3/1, but couldn’t afford to buy up in this insane market. Some of us out here still think a home is a place to live in and not part of our investment portfolio.
I have a friend who has been trying to convince me to “get into the (real estate) game” for the past couple of years. Now he’s trying to figure out how he’s going to make his mortgage payments when his Option ARMs start to reset. So some Californians are, but lets face it, there are idiots all over this country.
I would say that there is substantial evidence that RE speculators are extremely greedy, or extremely dumb, or in some cases, both.
Every state has its greedy and its idiots The difference is, in California they can make enough money to go muck with the rest of the economy.
California is also home to quite a few lending agencies. Since Flippers tended to go towards that business (or does having that business “breed flippers?”), there are a disproportionate number in California.
I love living in Cali, but quite frankly if home prices do not drop enough in the next two to three years… I’m out of here.
Don’t worry, for the next decade, there won’t be much money leaving this state!
Maybe a few people will leave(with money, I expect the net population to grow).
Neil
Actually working and middle-class natives (myself soon to be included) are leaving CA in droves. The only thing keeping the population stats from showing negative already is the flood of illeg— er, undocumented “guest workers”.
here in kingman the ca investors are not to dumb, they call their rentals owner occupied to get lower propery taxes and interest rates on their loans.
Northern VA May numbers are out…. yoy declines persist !!
http://www.nvar.com/market/marketstats/may06/index.html
Those numbers look horrendous. 30% to almost 50% YOY declines in the biggest counties for single family homes and condos … listings off the charts again and prices starting to stagnate. Ugh.
Actually, prices starting to drop dramatically. In between those May 05 and May 06 price points, there’s a peak. The May 05 price point was on the way up the peak and May 06 is on the other side of the peak, heading down. What I expect to see through the summer and fall reports is the 05 price points to continue to climb while the 06 price points fall.
Inventory has tripled in Loudoun County for sfh and has gone up almost 500% for condos. Yet a NVAR survey just published claims that only 1% of survey respondents say they bought for investment purposes!
What numbers are you looking at? For example, the median price in Fairfax went from $519,000 in 2005 to $547,500 in 2006. That’s not exactly a “30% to almost 50% YOY decline”.
I’m commenting on Loudoun County prices, which did decline, and I believe Mike was commenting on sales volume.
I saw in the celeb blurbs that Carole King is selling her ranch in Idaho, or trying to anyway. She’s apparently not leaving the state, just looking for 19million for her property. Maybe she’s looking for some of the last high-end Cali investors to fund her golden years before they all stop coming…
Random, I know, but I thought I’d mention it….cheers all!
19 mill? Crazy! Her place is about 15 mins from my parents house. Its a pretty mountain area, but nothing special like Sun Valley, Vail, or Jackson Hole. That price is beyond nuts.
Maybe she’s going to rent for awhile.
Even the specuvestors are confused by the Boise market:
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1172177
That’s a funny thread. I like the post on the two precon flips. Like its money in the bank. The problem is there are agents up here that are flat out lieing about the state of affairs. Plus they control all the data. I was talking with my wife about why people seem to think this is a safer investment than the stock market. Makes absolutly no sense to me. Highly leveraged, highly illiquid with little or no data about the investment. Sounds more like a hedge fund. With stocks you push the button and your out, just like that.
One significant difference between the stock market and the RE market. When the stock goes down, you can sell it with a phone call. But real estate is inherently illiquid. Doesn’t seem so when the market is hot but clearly is when the market is in a slump. Some houses on the market today will still be for sale 2-3 years from now.
Waaaay to funny! The posters don’t sound like they have 2 IQ points to rub together!
Interesting that most of them seem to post photos of themselves or their alter-egos. Sort of, look at me –I’m so cute /clever ‘ pick an adjective - seems almost as important as the business at hand..
Here’s another good thread from the site, featuring Robert Campbell:
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1074749
This weekend I’m going to try drive through the new neighborhoods and see whats going on with for sale and for rent signs.
I was suprised this article came out- that’s two this week on the local housing market. The paper has new owners, so they may be more critical of what’s going on in the local market, especially wages remaining flat. The local RE cheerleaders habe been touting job growth, but never mention wages cannot support these prices.
I wonder if its because the property tax assesments came this week for Ada County. It went up a ton! I can imagine that people are upset at that.
People are pretty upset with the higher appraised values. People who have not sold are being penalized for the price run-up in the form of much higher taxes. I’m glad I’m renting right now.
If you do drive around this week end, take note of houses under construction. I drove around in Fort Myers, FL recently and saw construction site after construction site where no work was currently underway. No crews, no equipment, etc. One way to determine activity is to note the presence or absence of a port a potty.
Brandon, and Ex-Ca,
Appreciate your on-site obersvations of Boise..
Please keep us updated.. My guess is the market will corrode there. It was overpriced when I left in 04..not sure what Calis’ were thinking..
It cannot sustain here. The RE cheerleaders talk about job growth, but its all RE, construction, service, retail, etc. While I have no hard data, I say that most of the job growth is related to the bubble and easy money. The core companies in town have not done much:
Micron: plugging along with no major growth
HP: recently downsized
Albertsons: sold to Supervalu with a few thousands jobs with an uncertain future
Simplot: no growth
DirecTV: $10 call center jobs
T Mobile: more call center jobs
Citibank: even more call center jobs
A home not occupied by the owner is ineligible for the state’s property-tax exemption, he said. Statistics compiled by McQuade’s office show that 28 percent of 128,388 homes in Ada County, or 35,948 single-family units, did not qualify for the homeowner’s exemption this year. That’s up from 22 percent, or 25,375 out of 115,345 homes, in 2004. That’s an increase of more than 10,500 ineligible homes in two years, more than 40 percent.”
Rent until you can sell at a profit is it? I wonder how many smaller speculators took out dummy addresses to qualify for the state tax exemption? The total ratio of “investment properties” is potentially over 30% of total.
Here is Boston instead of buying whole blocks of single family homes most “mom and pop” speculators buy up triple decker homes. And then cut them up for condo’s. Gosh, this bubble is unwinding so fast! It’s like all of a sudden I am reading and hearing more bubble talk in the media. Or is it just me thinking this?
“Or is it just me thinking this?”
It’s not just you. However, it is about time for this thing to unravel and I’d guess that less than half of the regular posters here are surprised at the velocity. Not trying to be smug — it’s just that the bust is tracking fairly well with the average of predictions previously made here, IMO.
Personally the mere idea of “investment housing” makes me retch. I sincerely hope that every single person who bought a house with the sole idea of making money loses their ass.
For an economy to be strong investment needs to be made in businesses and education because these things can actually return increased value. But instead we have tens of millions of fools “investing” in static depreciating assets.
Most people have neither common sense nor intelligence. Their actions are driven by wishful thinking, greed and a herd mentality.
Brandon, If what you are saying about inventories is true.. that’ll do in the prices.. One person on SDCIA has not had any bites on his homes in months.. The ones touting it have vested interest there.. some are just trying to live the Am. Dream, but somethings that ruins it for others.. Someone who bought in Boise for 150 suddenyl see his hous ei worth 210 or whatever.. thats a huge jump in taxes for folks wanting to settle there.. I se troubl on the horizon.
All the people that I’m associated with that purchased (investment housing) in Idaho are doing well with their investments, although, none of us are interested in purchasing anything else at this time,’ Rose said
LOL. Of course they’re doing well, those paper profits look great. Good luck trying to sell and cash out.
“A home not occupied by the owner is ineligible for the state’s property-tax exemption, he said. Statistics compiled by McQuade’s office show that 28 percent of 128,388 homes in Ada County, or 35,948 single-family units, did not qualify for the homeowner’s exemption this year. That’s up from 22 percent, or 25,375 out of 115,345 homes, in 2004. That’s an increase of more than 10,500 ineligible homes in two years, more than 40 percent.”
Let’s see if I have this right…An increas of 13043 total units of which 10,500 did not qualify for the exemption. So 81% of the increase in total housing units basically went to ‘investors’. (I know there were older units bought for investment etc. but over all) Sounds bubblicious to me.
Just a thought.. It’s very possible maybe even probable that I’ll be able to buy there pre-04 prices in a few years.. More homes built than people need.. people unlodaing.. supply and demand will turn on it’s head…
Ex-Ca, Brandon.. thoughts? I’m assuming thats’ why you are on the sidelines waiting.
No guarantees, but with 30,000 lots in the regulatory pipeline, pricing is may cool off- at least I’m hoping so. We’ll see what happens when the investors begin to unload their holdings.
“Just a thought.. It’s very possible maybe even probable that I’ll be able to buy there pre-04 prices in a few years..”
With the speed the bubble pop is accelerating at and the media getting on board and things deteriorating in the stock market, I’d say we will be at pre 04 prices before the end of 06.
” just got back from Boise … I’m building 2 houses to flip now - they have both appreciated 20k+ .. by the time they are complete in August they should be up 30K each .. These houses are 235K and 257K ..
Building up there is going crazy …
Jay Berman
Premiere Investment Group, LLC”
No coment needed.
Dog pile on Jay. Sorry, couldn ‘t resist a comment.
Nice acronym: PIG LLC.
Unfortunately for speculators, employment growth and income growth aren’t going crazy as well…
Have you considered the selling costs with your flips?
Some people have spoke of quality issues in new construction in various part of the USA. I have seen lots of construction happenning in Santa Monica and the westsid of Los Angeles where the contractors are using poor quality fiber board lumber as sidings for the things they are building. So people buying or considering buying might want to do some research into the quality of the materials being used in some of these new constructions.
I’m with you there. You should see the crap they’re building in WeHo. I had a carpenter over to our building to do some work one time — it was built in 1929 — and he made me promise I’d never, ever live in a building built in the past ten years. As far as he’s concerned, they’re all going to be falling apart within the next decade.
I think the construction quality issue is more about the labor and less about the materials. (I think you mean chipboard rather than actual fibreboard, right?)
The main issue is getting the waterproofing and sealing right. Although plywood will last longer if it gets wet, it will still rot out before too long if water gets in. Builders get away with a lot of bad work in dry climates, because it frequently takes a long time for enough water to get in to do the damage.
As I see it, the main problem is a shortage of properly trained and supervised construction workers due to the construction boom, coupled with chiseling on the part of the contractors and builders. Good quality lumber is expensive, but good quality workers and foremen are expensive *and* difficult to find.
Unfortunately, it’s not easy to see problems after something is built. If you have the opportunity to watch something being built and know what to look for, you can gain some advantage. But as bubblewatcher points out, there are other ways, such as consulting an expert that can recommend “vintages” that are better than others. For example, I would not buy anything that was slapped together in the early 1970’s construction boom without some serious investigation. I would also stay away from anything built in a tract operation unless I could determine that it was built right.
Does anyone know if McCain’s house has been reduced anymore. If he thinks he’s going to the White House, he’s in for a rude awakening. He sold us down the river with his AMnesty vote. I guess I should put this post on one of the AZ blogs.