There is a clamoring for “deals”.
Over the last twelve weeks there have been 785 trustee sales where a bidder purchased the property, rather than it go “back-to-bene”.
There were probably a few of the 785 that were bought by an owner-user, but we can probably guess that more than 700 were bought to flip:
Trustee-Sale Results, last 12 weeks:
| Week | 3rd Pty | Back-to-Bene | Total |
| 6/29-7/3 | |||
| 7/6-7/10 | |||
| 7/13-7/17 | |||
| 7/20-7/24 | |||
| 7/27-7/31 | |||
| 8/3-8/7 | |||
| 8/10-8/14 | |||
| 8/17-8/21 | |||
| 8/24-8/28 | |||
| 8/31-9/4 | |||
| 9/7-9/11 | |||
| 9/14-9/18 | |||
| 12 weeks |
A whopping 23% of the trustee sales over the last 12 weeks resulted in a 3rd party buy.
The chances of “stealing one” must be greatly diminished by the increased competition between bidders. Will the banks/servicers take notice, and trustee sales become a primary liquidation spot? They should unload more at the court house steps with that much action – we’ll keep an eye out!
I Hope they Flip them Fast..
Get a load of this for all the Cali housing bulls
Moody’s predicts California housing to not Reach the Peak 2006 pricing till at least 2023
http://www.marketwatch.com/story/home-prices-wont-regain-peak-this-decade-moodys-2009-09-18
I just refuse to believe the flipping business will continue to be profitable. I may just be hard-headed, but I think people should wise up to this. I will never buy a flip, just on principle. I’m not letting someone get the better of me just because they paid all cash for it 2 months ago.
I’m very afraid, though, that people with their 3% down FHA loans will continue to throw money at anything a lender says they can afford. I wonder what percentage of people buying a flip actually know they’re buying one. How many buyers bother to research comps, sales history, previous sales, etc.? I get the feeling either they don’t bother or don’t care.
Did anyone else read on cnbc today about record-setting unemployment?
http://www.cnbc.com/id/32913856
“Moody’s predicts California housing to not Reach the Peak 2006 pricing till at least 2023″
And the article continues to say:
” Florida and California will be among the last to recover and “will only regain their pre-bust peak in the early 2030s, well after the nation does.”
The 30s ?! Does that imply another leg down ?
End user buyers couldn’t compete with flippers on the way up. Now they can’t compete with them on the way down.
No matter what they do, end user buys end up paying a middle man mark up.
The new American business model: insert yourself between a buyer and a seller and collect a skim.
“Did anyone else read on cnbc today about record-setting unemployment?”
Here’s more on California specific jobless stats and the housing picture: (from NY Times article excerpts).
Unemployment in California at 12%, Highest in Nearly 70 Years
By JENNIFER STEINHAUER
Published: September 18, 2009
LOS ANGELES — California’s unemployment rate in August hit its highest point in nearly 70 years, starkly underscoring how the nation’s incipient economic recovery continues to elude millions of Americans looking for work.
While California has convulsed under the same blows as the rest of the country over the last two years, its exposure to both the foreclosure crisis and the slowdown in construction — an industry that has fueled growth in much of the state over the last decade — has been outsized.
Total building levels in California have fallen from $63 billion in 2005 to $23 billion this year; home building this year is less than a quarter of what it was in 2005, according to the Center for Continuing Study of the California Economy. Roughly 500,000 of the state’s job losses have been in construction, finance, real estate and ancillary industries related to construction, which has left thousands searching for work.
“We were at the epicenter of the housing bubble and we are at the epicenter of the fallout,” said Stephen Levy, senior economist and director of the center. “The reason we are doing worse in California than other states is construction.”
While California has enjoyed some signs of a comeback in recent months, unemployment, which is often the last economic indicator to turn around in a protracted recession, is expected to remain high in the state in the near future. For example, a recent study by the University of California in Los Angeles predicted that while the state will enjoy 2 percent quarterly growth in 2010, the unemployment rate would remain above 10 percent.
Such numbers have caused deep pain to a state overly reliant on personal income taxes to balance its budget. The stock market crash, which greatly reduced personal wealth in the state, and job losses related to the housing bust combined to smash that revenue line.
So where is all the money coming from to buy these properties?
It just seems odd that normal people can’t get a loan without 30+ days of hardship. But those hooked up have access to money and lots of it on demand.
I’m sure some are paying with their own funds but it seems odd to me that cash investors would be willing to take on all this risk. And especially in a downward trending economy.
If Moody’s is right, is this a dead cat bounce?
I don’t know, but if you don’t even have 8k to put down, you shouldn’t be buying a $300k home, period.
These people have learned nothing about planning for a rainy day.
How many of these new buyers will be living paycheck to paycheck and how many will have to default to screw up the market again?
Wash, rinse and repeat. Will flipper-mania EVER end?
I’m also wondering were all the money is coming from to buy these properties.
@Blur,
How many people pay MSRP for a new car or pretty darn close? How many people go into a dealership after completing due diligence on their decision? Most people don’t know (or don’t care?) they can get special invoice or invoice-plus pricing for a car through Costco/Credit Union/Auto Insurance etc? How many walk in to the car dealership and ‘try to steal one’, but only get torn a new one in the process?
I just wanna say that if Moody’s says so, then it must be true, and timely- thank goodness SOMEONE is on the ball. http://www.nytimes.com/2009/03/16/opinion/16partnoy.html
I’m sure some are paying with their own funds but it seems odd to me that cash investors would be willing to take on all this risk. And especially in a downward trending economy.
shadash | September 18th, 2009 at 5:24 pm
———————–
From what I’m hearing, much of this cash is coming from hard-money lenders and investment groups (including foreign investors, and the strong possibility of sovereign funds).
I picked up a place at the trustee sale a couple of weeks ago. I would say 80% or more of the people you see there are working for someone else.(read flipping investment group) You should see all the people consulting their boss on the other end of the phone. I am seriously thinking of bringing a cell phone jamming device to the next auction I attend. Watch the hilarity ensue.
I believe the majority of “average” buyers do not buy at the trustee sale because they want the “perfect” house that meets all their criteria. Since you can’t really predict what will be offered on any particular day, you could wind up waiting months for your dream house to go to sale, and then it might go for total debt.
I helped a regular buyer in Virginia buy a “dream” house at the trustee sale. He had been watching it for at least 6 months – the owner had gone through bankruptcy. He toured the house when it was listed for sale, and kept going back to get updates from the owner. 1.6m 1st+2nd mortgages, opening bid was $942k. He was the only bidder, so got it for 1 dollar more. Not a screaming deal (none of the flippers were interested) but saved probably 10% over retail. He is a college professor, so it’s not like this was a small purchase for him. He was just able to get the money from personal savings and family, felt that the discount was worth it, and was patient and persistent enough to wait. I was very happy for him.
The problem I see for the one-time owner-user buying at auction on the court house steps is having to take on the eviction process against a former owner-in-residence who refuses to leave and is determined to fight. Also, there’s a risk the former owner-resident will get angry and destroy the house.
Flip this with Green Grass!
Jim, as you get onto 78 East right off the 5 look on the right side. Some company has their sign placed right along the lagoon.
PAINT YOUR GRASS GREEN!
Almst crashed my car when I saw it!
Xx
That would be ILLEGAL and plain stupid to write on a blog where your IP can be traced.
Many people remember how the Japanese ruled the world in business in the eighties.
It was announce this week that price for Japanese real estate fell for the 18 years in a row. The past three years real estate has gone up in the major cites. But they fell in the few major cites this year.
How many years well the United States go down in Real Estate prices.
Also, during the boom years in Japan/ Six major cities really took off and the rest of Japan also went up in prices but not as fast. Just like California, Arizona, Las Vegas and Florida really went up in price and the rest of the United States followed but at a lower pace.
XX,
Jamming cell phones is illegal, but damned if that wouldn’t be funny! 🙂
Jim,
What is the discount the flipper investment groups are getting at auction compared to the full retail MLS price?
How much margin is there to make the flip work?
As I mentioned to you in email previously, I am considering investing in the Phoenix RE market through a flipper bidding group.
There are flippers buying at trustee sales who are looking to make $50,000, which is peanuts if you ask me.
You better have $100,000 in mind if you’re conservative, because a few bad comps around you, or unexpected repairs, can make $50,000 disappear in a few weeks.
There is a lot of talk of auction lately. I just heard two different people talking about doing this yesterday. One can ask the parents for the $$$ and then get a loan to repay. The other was looking into paying an investor to buy it for them.
IRE said,”I believe the majority of “average” buyers do not buy at the trustee sale because they want the “perfect” house that meets all their criteria.”
When you live in a planned community like SEH, Carmel Valley or 4S Ranch, there are very few floor plans. You can figure out the floor plan you want fairly easily. You can use google maps or just drive by and check it out.
Househippie said,
“The problem I see for the one-time owner-user buying at auction on the court house steps is having to take on the eviction process against a former owner-in-residence who refuses to leave and is determined to fight.”
You don’t have to deal with that these days. You can just drive by and walk around the house to figure out if it is vacant or not. The fried lawn is usually a good indicator. There are enough vacant homes out there that you can simply cross off the list the houses that have tenants. With all the foreclosure moratoriums, some people got sick of the free rent and actually wanted to move on with their lives. Go figure?
Thanks Jim.
That $50k profit, what would be the average purchase price and therefore the percent discount of retail price?
Thanks again.
I’d guess that the avg. sales price of flippers at trustee sales is $300,000, and I’d call it 100% of retail. They fix them up to gain the additional value, and why the $50,000 profit is so skinny.
Ok, thanks for the info Jim. I appreciate it.