We could use some good old-fashioned market clearing – maybe this is a start?
JimG brought it up, and our friend Effective Demand has charted the increase in Bank of America foreclosure activity for Southern California – recently their number of auctions has spiked:
More auctions, more short sales, more REOs, let’s GO!
Freddie Mac also announced today:
McLean, VA – Freddie Mac (NYSE:FRE) and New Vista today announced plans to auction hundreds of HomeSteps® REO homes to individual homebuyers in Las Vegas on April 24, 2010 and in California’s Inland Empire on April 25, 2010 in support of the federal Neighborhood Stabilization Program (NSP) and to help more first time homebuyers and owner occupants purchase these homes. HomeSteps is the real estate sales unit of Freddie Mac and markets a nationwide selection of Freddie Mac-owned homes.
Under the 2009 Neighborhood Stabilization Program, homebuyers are eligible for closing costs and down payment assistance when they buy foreclosed or abandoned homes in designated communities that were hit hard by the housing downturn. This federal assistance combined with the federal tax credit will provide the buyer with significant financial advantage in purchasing HomeSteps homes.
“Freddie Mac’s first-time homebuyer auctions in Las Vegas and in California’s Inland Empire builds on our long-standing effort to use our REO inventory to foster new opportunities for new homeowners and shows another way Freddie Mac is working to achieve the Obama Administration’s goals of stabilizing and reviving impacted communities,” said Ingrid Beckles, Senior Vice President, Default Asset Management at Freddie Mac.
“Together with today’s low mortgage rates, these April auctions will enable Las Vegas and Inland Empire families to take advantage of the unique convergence of opportunities that make HomeSteps homes exceptionally attractive values,” said Chris Bowden, vice president of HomeSteps. “Working with New Vista underscores Freddie Mac’s commitment to manage its REO inventory in a way that helps stabilize communities, fosters homeownership opportunities, and responsibly safeguards tax dollars.”
“Owner-occupants are the key to revitalizing and strengthening neighborhoods that have been hard hit by the economy,” said Jim Park, CEO of New Vista. “Working with Freddie Mac, New Vista has created a one day homebuyer event that gives first time and owner occupant buyers an exclusive opportunity to purchase HomeSteps homes. These unique events will help turn hundreds of foreclosed properties into homes for many deserving families.”
New Vista will hold open houses on April 10 and April 17 – 18 in Las Vegas and the Inland Empire so interested buyers can tour the HomeSteps homes before the April 24 and 25 auctions. Potential buyers can also find property descriptions at auction.com/.
At that time, all we knew was that the opening bid was $513,000. Bank of America went on to list it for $524,900 on behalf of the seller, and we had four offers right away. The highest offeree was a Vegas guy who owned not one, but two private planes, but he objected to the bank’s demand to waive his appraisal contingency. So we waved bye-bye to his $575,000 offer, and took buyer #2, a single guy who owns a number of properties (double-digit) who plans to live there for the time being.
Congratulations to pemeliza, with the closest guess of $550,000!
Honorable mention goes to Billy Atwater for guessing $552,500, and predicting that it’ll close in late spring! The list of guesses are posted in the comment section.
A pair of Padres tickets and a t-shirt for each of you!
With the release of our latest audit for San Diego, we get the most up to date look at the apartment rental market in San Diego. The report reveals a truth that has been true for some time – it is pretty hard to find a better place to own apartments than in San Diego
With over 117,000 units included in the survey, our apartment vacancy rate sits at 4.75%. That would be a desirable rate to have in the best of times, let alone in the face of broad domestic economic adversity. The national vacancy rate is at an all time high of 8%, but that doesn’t even begin to approach the vacancy factors seen in some of the more damaged rental markets.
Our neighbor to the north, the 800 pound gorilla of the apartment world, had vacancy rates nearly a point and a half higher than ours. San Francisco, was over ¾ of a point behind us in vacancy. The only two other major apartment markets in the country competing with us in terms of vacancy are Washington D.C with a 5.9% vacancy rate and New York at 3%. New York will always enjoy the kind of supply / demand ratio to maintain these kind of figures, and the District, of course, operates under virtual economic immunity when a Democratic administration is in office.
During the height of the last decade, many of the Sunbelt markets were seen as darlings for major investment and these markets are in shambles right now. Orlando, Dallas, Las Vegas, Charlotte and Phoenix all have double digit vacancy rates.
The best part of the deal for San Diego apartment owners, is they have been able to keep low vacancy with very little rent concessions. Rents are off 2% from their peak but are 20% higher than they were in March 2005.
Occupancies and rents are only part of the picture though, the other side is the market for buying and selling these projects. The combination of strong operating metrics for apartments in San Diego, weakened cap rates from 2-3 years ago, severely obtunded credit markets and a media proclaimed impending commercial real estate collapse, have resulted in no one selling who doesn’t have to. Since rents are relatively unchanged, NOIs are relatively unchanged and even with 75% LTV financing, these properties do not cash flow much differently than they did 2 years ago. That means very little distressed selling. The majority of distressed apartment sales in San Diego are actually failed conversions.
A search of Loopnet for San Diego apartment projects with at least 10 units that have been listed for sale this year turns up 38 listings. Of these 38, 5 or 13% of them are asking prices at lower than 5 ¼ cap rate and thus are really not doing much more than fishing, that leaves 33 projects for sale. Of the 33, nearly all are “C” properties, at best. Looking for institutional grade apartment projects in San Diego? Better pack a lunch. Further complicating the issue is the fact that there are hardly any market rate apartment projects under construction.
So for those who were fortunate enough to get in the driver’s seat in the San Diego apartment market, their cup overfloweth… for the rest, remember that patience is a virtue.
