You keep hearing about the fury of activity in lower-end areas like Oceanside, here’s a video of the REO that hit the MLS a week ago at 4773 Sequoia.
It had been assigned to me in September, but it took six months to get the tenant out. He was an active-duty Marine who said he’d take the cash-for-keys, then changed his mind and chose the full eviction instead. The appraisal got kicked around for a couple of months, and well, here we are.
This will be a case where the delay probably helped the cause, because currently there is such a shortage of decent homes under $200,000 that buyers are swarming.
This is a video compilation of four clips, the first two are intros to tie together what you’ve seen in the past to this property, and the last clip is another new listing in the same neighborhood:
The new Webbie videocam doesn’t do that well in these smaller houses, but now I know.
Getting lots of offers is all about getting the price right.
The low-end of the market is crowded b/c a lot of the ‘middle class’ just moved into the low-end.
1. stock market meltdown
2. any home equity not cashed in on by early 2007 is gone
3. no prospects for wage growth
Jim-
(reposted from an older thread cause I think it’ll never get seen again)
[Regarding lots of cash offers, esp in Carlsbad] What I’d like to know is: what is normal?
Things seem to have been SO skewed for the last ~10 years that nobody knows what is a normal, sustainable rate.
Since you have been through a few booms and busts, do you think that having 78% of all Carlsbad purchases => 20% down is normal? And 42% of all purchases being => 30% down?
One other question, and the answer will always be anecdotal, is whats the most common ‘place’ the cash is coming from? Are most of these 30%+ downs coming from inheritance/parents? Move up buyers (who purchased +5yrs ago)? Move down buyers? I’m very curious to what you’ve seen and what the most common source of cash is.
Yeah I’m curious where all this cash is coming from too?Must be old money cause most people are broke and 50k in credit card debt.People who lost access to the housing atm are now screwing the credit card companies.
What happened to the buy a house and get rich people?I guess they listened to thier crappy realtor and lost thier @ss.Now I am reading that people just bought at the wrong time?Haven’t we heard this one before?
Jim you are a savior to people.Keep be an honest man.
If ‘normal’ is the times when we have had the less-frenzied environments, I’d point to 1984-1986, and 1995-1997 periods for examples.
My experience was that FHA/VA loans made up 1/3 to 1/2 of the market, back when the loan limits fit the prices of homes.
I don’t think I saw a single FHA/VA loan from 2001-2006, they didn’t go high enough.
Four out of five buyers using at least 20% down is a healthy sign, and I doubt it’s ever been that high over the last 25 years. But I never checked until now.
Where does the big dough come from? I don’t ask my own clients, it’s none of my business. But my guess is that inheritances are playing a big role because of the way buyers are throwing it around. People who work their tail off to earn every penny are more conservative.
But I think there are plenty of people who sold at the top, and will be buying multiple properties over the next few years as they find the best deals. Reader and good friend lgs has bought three in the last year, and has a fourth in escrow now, and he’s using dough gained from selling all his investment properties at the top. Three of four are condos under $100,000.
JtR,
I have a question in regard to some of your earlier statements on realtor’s who take overpriced listings. You mentioned that some might be doing this so that they can hopefully still have the client if/when they decide to get realistic on price, and they’re also able to keep their name out there.
I’m wondering about your thoughts on a scenario I was contemplating. What if these realtors are more interested in representing buyers (or even realistic sellers/REOs)? What if they take these higher priced listings just to make the other listings look like a good deal in comparison? That could have an impact on some of the bidding frenzy going on out there. I doubt this is a major factor by any stretch, but it was simply a thought I had, and I was just wondering about your sense of it.
Funny?
http://dilbert.com/strips/comic/2009-06-26/
Ronald,
Thanks for sharing the dilbert comic.
I still don’t get the refrigerator thing here in California. Ovens, dishwashers, waves… everything’s there but the fridge, both on rentals and sales (except on high-end built-ins, of course). Weird.
I chose the wrong day to wear white clothes and eat a choc ice on a stick.
Don’t know what it means, but I should add apropos your note about my activity: even buying under $100k, you run out of cash quick when you can’t finance anything! I don’t know where all the cash is coming from either–how many people were in my position, to sell a bunch of properties at the top and go to ground with the cash until now?
But here’s what I’m finding: no one wants to make a loan on the rental properties under $100k, unless you’re willing to do 60% LTV and, despite whatever they advertise, bear closing costs in the range of 5% of the property value.
My experience with BofA on the most recent attempt was that they approved my cash-out refinance at a 70% LTV at 5.75%. Everything was legit: I told them it was a rental prop, gave them leases, full doc–and the doc, by the way, was incredible compared to anything pre-bust. I have various partnerships and business interests and I had to supply them tax returns and doc on everything–perhaps 100 pages in tax records.
After 4 months of delay because they were ‘swamped’ I finally received a letter that said they’d be happy to make the loan but my initial approval no longer held because I was in an area with noted and expected declines in propery values. They would do 60% LTV, and they adjusted the value down 20% to boot. My original approval, for a $80k loan ended up as an offer to close with a $55k loan and $4200 in closing costs. I said no, so it’s another property I own all cash.
All I can say is that I wouldn’t be doing it myself if I wasn’t buying everything for 8%+ cap rates and am getting a good enough cash on cash return not to sweat it too much. But with zero leverage, how many people are out there walking around with $200, $300, $500k cash to be scooping up one, let alone multiple properties–even on the “low end.”
Time will tell, but at this point I have to wonder if inflation will be my only friend. Apparently banks are not.
One note, however, is that I did apply for a loan on the most recent property I got through AIMLoan.com and it seems to be going well–I think they’ll get the loan done exactly as indicated online when I applied, which will be a nice deal and perhaps a good option going forward.
The point is: there better be lots of cash out there, because regardless of the public line, banks are not making loans–even on terms that are rational, sustainable, etc.–for many properties that would be smart investments.
Great info, lgs.