A story with great examples of golf courses being closed across the country, and many being turned into real estate developments.
From the nytimes.com:
BOCA RATON, Fla. — Weeds, crabgrass and fallen palm fronds cover the wildly overgrown greens of what was once the Mizner Trail Golf Club, its decrepit state emblematic of the fate of hundreds of golf courses around the country, many of them derisively known as “rabbit patches” or “goat farms.”
A short drive away, however, perspiring construction workers in yellow vests swarmed on a recent afternoon over the emerging structure of a 150,000-square-foot activities center, part of a $50 million renovation of the 44-year-old Boca West Country Club, home to some 6,000 residents, where fairways are newly planted and houses sell for as much as $5 million.
With the winter golf season beginning in Florida — the nation’s leader in golf courses with more than 1,000 — the extremes of failure and success point to a nationwide upheaval in the sport. It was booming when players like Tiger Woods reigned, but has since been roiled by changing tastes and economics, an aging population of players, and the vagaries of the millennial generation’s evolving pastimes.
There are about four million fewer players in the United States than there were a decade ago, according to the National Golf Foundation. Almost 650 18-hole golf courses have closed since 2006, the group says. In 2013 alone, 158 golf courses closed and just 14 opened, the eighth consecutive year that closures outpaced openings. Between 130 and 160 courses are closing every 12 months, a trend that the foundation predicts will continue “for the next few years.”
Dozens of private and public golf courses here in South Florida, and hundreds around the country, are in transition. Some courses have sought bankruptcy protection, while others have slipped into foreclosure. Many are under construction, with single-family homes and condominiums going up on land once dotted only with pin flags, sand traps and water hazards. Others have gone to seed as they await resolution of legal and zoning disputes.
For those wondering if there will ever be any more bank-owned properties for sale, here is the list of 38 houses between La Jolla and Carlsbad that are owned by lenders, or 3rd parties who purchased them at the trustee sale:
A few are listed for sale, and others are still waiting for occupants to vacate or lawsuits to be settled. This Bressi Ranch home was foreclosed in April, 2014, and just hit the open market last week at what most would consider to be pretty close to retail price:
The former owners had worked the system – they had been in default since 2008, and endured four different trustee-sale dates before finally giving up the ship. In the meantime, the lender probably did everything they could to modify the loans?
I don’t think anybody has to worry about getting foreclosed unless they have significant equity.
The auction included an outrageous set of conditions, which many thought would drive down the price to compensate. They included:
The 5% buyer’s premium tacked onto the highest bid.
No showings.
Tenant-occupied, and buyer was responsible for evicting.
Cash only.
No buyer’s agent commission paid.
Not in the MLS.
5% deposit required upon winning.
Reserve price.
They conducted the auction online, which gave participants the convenience of bidding from their couch at home. It should have allowed bidders the chance to double-check the comps as the auction wore on – because every time a new bid was made, they extended the ending by 1-2 minutes.
Those checking the comps would have seen that in the heat of the frenzy last year, three of this identical model sold for $638,000, $653,000 and $679,000. Then in October this sale with nice view closed for $705,500, which was the highest price since May, 2007:
The bank foreclosed in 2011, and nobody wanted it then for $459,088. The opening bid this week was $325,000, and once the auction started the initial bid increment was $25,000.
Most of our readers guessed it would sell in the $400,000s, which would be an adequate buffer to evict and remodel.
Look what happened today:
AND IT DIDN’T HIT THE RESERVE PRICE!!!!!!
Somebody was willing to pay almost $200,000 more than the bank didn’t get in 2011, and that wasn’t enough to reach the reserve price? Hopefully the bank will come to their senses and reconsider before that bidder changes their mind. Counting the 5% buyer’s premium, the highest bid was $678,038!
Our closest and winning guess was $568,050, and submitted by blucore – congratulations!
The MLS shows that 11% of the 1Q14 residential sales in SD County were REO and short sales, and this article shows 7.1% flips (hat tip to SD Squatter):
Realty Trac, the nation’s leading source for comprehensive housing data, today released its Q1 2014 U.S. Home Flipping Report, which shows 3.7 percent of all U.S. single family home sales were flips — where a home is purchased and subsequently sold again within six months — in the first quarter of 2014, down from 4.1 percent in the fourth quarter of 2013 and down from 6.5 percent in the first quarter of 2013.
Among metro areas with a population of at least 1 million and at least 25 single family homes flipped in the first quarter, those with the highest share of flips in the first quarter were New York (10.2 percent), Jacksonville, Fla., (10.0 percent), San Diego (7.1 percent), Las Vegas (6.7 percent) and Miami (5.9 percent).
Eighty-two percent of all properties flipped in the first quarter were sold to owner-occupants; 18 percent to buyers with a different mailing address than the property. Forty-three percent of all properties flipped in the first quarter were all-cash sales to the new buyer.
Wondering how it all got started at Bubbleinfo TV? The first video was from March, 2007 – just click the link below to start at the oldest, and if you make it through all 1,600+ youtubes, you will have experienced the real estate bust-to-boom in living color:
Institutional investors entered the housing market at a rapid pace this past year, but their level of purchasing activity is relatively small compared to the overall market.
For instance, Blackstone Group is expected to be the largest institutional purchaser in 2013, committing to 15,000 properties.
However, when compared to the 600,000 individual investor purchases in 2012, it’s clear that institutional investors are still the underdogs in the market, according to CoreLogic’s market pulse report.
To come to this conclusion, CoreLogic created a list of 16 markets that include the top five markets for REO declines, the top 10 markets ranked by the total of REOs and the top REO markets identified as attractive by investors.
San Diego had the highest increase in 4Q12 REO prices of the cities that don’t have a rising share of institutional investors. Go Mom and Pop!
It’s widely agreed that foreclosures and REO properties devastate nearby home values and impede the housing recovery. But we don’t hear similar complaints about short sales. How do the two categories compare where housing prices and a healthy real estate market are concerned?
Here’s my take on their differences:
– Seller motivation issues. Properties listed as short sales are often occupied by home owners who aren’t concerned with getting top dollar. Instead, their motivation may be to extend their “free rent” program or get out of their financial obligation to pay off a mortgage. Consequently, they often don’t fix up their house to sell it and may be less than cooperative about showings. On the other hand, REO listings are vacant properties and have a lockbox for easy access.
– Delays. Short sales require that home owners submit their financials to the bank every month—and if they don’t, the sale stalls. The delays and uncertainties make these listings very difficult to sell. In contrast, it takes a week or so to get a REO listing into escrow, with deals closing in about 30 to 45 days, whereas short-sale approvals these days take 30 to 60 days. To be fair, this is an improvement over a few years ago when it could take six to 12 months or more to hear from a lender.
– Pricing. Short-sale agents often price their listings aggressively low to compensate for the difficulty in selling. They hope that a lower price will draw buyers interested in a bargain. REO listings, on the other hand, are appraised by neutral third parties and priced for retail sale by the asset managers, who have a fiduciary duty to their investors to maximize return. So-called “bank deals” are largely a myth—asset managers don’t determine retail value and then knock off 10 percent or more. And if they do inadvertently price a property too low, their selling strategy enables every buyer to make an offer within the first few days. When that happens, the sales price can be bid up to retail—or even higher.
– Buyer preference. Buyers shy away from short sales because of their uncertain, murky reputations. Because of lower demand, they sell for a lower price. But there is a high demand for REOs because bank-owned properties enjoy the reputation that they are underpriced, even though they have been selling well for years.
– Fraud potential. Short sales are fertile ground for fraud. These properties, priced to sell by the listing agents, are sometimes shopped around exclusively to a small group of buyers already known by those agents. Deals that are made “prior to listing input,” and sold at an untested price without open-market exposure, are unethical in my view—and if district attorneys were to investigate, those transactions might appear fraudulent. Now, those listing agents might claim that if the bank approves the sale, then who cares? However, the NATIONAL ASSOCIATION OF REALTORS®’ Code of Ethics states that NAR members are to treat all parties honestly. It is not honest to send your short-sale package to the lender for approval and claim that you exposed the property to the open market if you haven’t actually done that. By comparison, REO asset managers insist on open-market exposure to ensure the best possible sales price.
As an industry, we should acknowledge that REOs offer a better way to sell homes and improve the housing market than short sales—for consumers and practitioners. Vacating houses, sprucing them up, putting a lockbox on them, and exposing them to the open market for a period of time is how you can sell distressed properties for the best price.
Jim Klinge has been selling homes since 1984 and is broker-owner of Klinge Realty, a company of eight agents with headquarters in Carlsbad, Calif. He and his renegade blog, bubbleinfo.com, have been featured on ABC News Nightline, CNBC TV, and Reason.tv, as well as in The Wall Street Journal, Businessweek, Grant’s Interest Rate Observer, and the Los Angeles Times.
National home prices lost ground with declines of 1% over the past year, but REO demand — fueled by enthusiastic investors — showed price gains, Clear Capital said in its April home data index report.
Investor demand could be a driving force behind increasing prices for REO properties, as measured on a median price per square foot, which is increasing at a much faster pace than non-REO sales.
Over the last year, REO-only prices have jumped a healthy 5.5%, while fair market sales prices dropped 2.9%.
The portion of national REO sales relative to total sales continued its creep in April, marking the third straight month of quarterly growth — without the typical price decline seen when REO saturation rises. Saturation was at 27.9% in April, up from 25.3% in December.
The sensitive balance between REO supply and demand will help determine how market prices react to shifts in REO saturation, Clear Capital said. If REO-to-rental investment activity increases, it likely will provide the lift needed to support price increases.
“Home prices continue to show relative strength in April with virtually no change over the short term and tapering losses over the longer term,” said Alex Villacorta, director of research and analytics at Clear Capital.
“Should investor interest continue to drive the expansion of REO-to-rental programs over the next several months, there could be a significant impact on the market overall in terms of providing a rising floor to home values,” he said.
Clear Capital’s index looks at rolling quarters. The index compares the most recent four months to the previous three months.
The firm said quarter-over-quarter results were notable only in how little change was seen, with numbers very similar with the price changes reported last month.
Hat tip to daytrip for sending this along, from thewsj.com:
The Obama administration is examining ways to pull foreclosed properties off the market and rent them to help stabilize the housing market, according to people familiar with the matter.
While the plans may not advance beyond the concept phase, they are under serious consideration by senior administration officials because rents are rising even as home prices in many hard-hit markets continue to fall due to high foreclosure levels.
Trimming the glut of unsold foreclosed homes on the market is “worth looking at,” said Federal Reserve Chairman Ben Bernanke in testimony to Congress last week.
Nationally, home prices in May were 7.4% lower than a year earlier, but after excluding distressed sales, prices fell just 0.4%, according to CoreLogic Inc. Foreclosures and other distressed sales now account for about 30% of homes sold each month and sales from government-related entities make up about one third of that number.
“Adding more stock simply increases that overhang. If that can be avoided, it should be,” says Jared Bernstein, an economist who left the White House in April and is now a senior fellow at the Center on Budget and Policy Priorities, a liberal think tank in Washington. Because rents are firming up, “this idea could have some legs,” he said.
Renting out homes could cover the costs of holding the properties until they can be resold once markets stabilize, potentially turning a profit for mortgage titans Fannie Mae and Freddie Mac or the Department of Housing and Urban Development, which handles foreclosures on loans backed by the Federal Housing Administration.
But scattered-site rental programs could require the government to become a national landlord, an area where the mortgage firms have little experience. They also pose accounting challenges that could produce big upfront losses.
One proposal winning support among some federal officials would sell thousands of foreclosed federal properties to private investors who agree to rent them. Investors would rehab homes, run the leasing process, and contract with national property management firms to handle day-to-day tenant demands.
The government could keep a stake in the venture, modeled on loss-share transactions by the Federal Deposit Insurance Corp. Officials have received interest from around a half-dozen private investors, according to people familiar with the matter.
HUD owned about 69,000 homes at the end of April and sold 11,000 homes in that month. Fannie and Freddie held another 218,000 at the end of March.
Analysts at Credit Suisse estimate that reducing Fannie and Freddie’s foreclosed-property sales to around 30,000 each month, from the current rate of 50,000, would cut total distressed sales by one third and avoid a further 3% to 5% decline in home prices.
By flushing foreclosed properties onto markets with few traditional buyers, Fannie and Freddie are “undermining their own recovery,” says John Burns, the head of a homebuilding consulting firm in Irvine, Calif., who backs the public-private rental approach.
