Anecdotal Foreclosure Observation

S

SacRenter_IHB

New member
In the past few weeks I've noticed some interesting foreclosure activity in my target areas (in Sacramento). What I've seen is that houses that were on the market as short sales last spring are coming back onto the market as foreclosures. These are houses that were listed as short sales a year ago, they sold sometime in late spring/early summer, and they are now coming back onto the market as bank owned. These houses are priced at least 20-30% below the other homes on the market.



One house we looked at was a short sale for $375K and is now back on the market as a bank owned property for $200K. People are in a frenzy over these properties. Current homeowners are calling us (and other renting friends) and telling us to BUY-BUY-BUY. Our renting friends are frantically trying to put together offers and visit these properties before they sell. Everyone is bemoaning the fact that they don't have money to invest for flipping.



As an outsider to the California Real Estate culture I am fascinated by this frenzy. First thought - if these are the houses that were short sales a year ago they were the first wave for my target neighborhoods. How many other houses are months away from being in the EXACT same situation as these? I've been watching these neighborhoods - there are dozens of short sales that have been listed in the past year. Second thought - if these houses sell for even 10% over their listing price they still set a comp that is significantly lower than the current comps. Aren't they going to bring down the comps for all of the houses in the neighborhood?



It seems like people believe these homes are anomalies. People seem to think their neighborhood is immune because they didn't have the early foreclosures that other neighborhoods had. They don't see these foreclosures as indicative of what's to come. Again - it's the frenzy that fascinates me most. People who I <u>know</u> are underwater on their own homes are saying that they wish they had extra money to invest in these "bargains". While as a renter I'm running numbers in my head thinking that even at 200K I could rent that house for less than a mortgage payment.



This is purely anecdotal, I know. But this culture really fascinates me!
 
I know two people that have mentioned to me they are thinking of using their equity line to "take advantage" of the low prices and buy a second house and use one of them for rental.
 
The memory of rapid housing appreciation is still fresh in people's minds. However, in 2 to 3 years (years of constant house depreciation) the "good 'ole days" will be a distant memory and the foolish/reckless specuvestor will be onto another diversion.
 
It baffles me that people still don't appear to understand the fundamentals of this bubble. Even when they themselves are underwater!



I'm guessing there will be a small spike in sales in the next few months while people gobble up those early "bargains." From what I can see there is a limited pool of buyers with the downpayment and/or credit to buy now.



I think that the few who can buy are going to snatch up these "early bargains." Then when those sales are the new neighborhood comps no one is going to be buying. Which means, of course, that prices will have to go even lower to pique the interest of buyers and we still have at least 12 months of homes that languished as short sales (or fell out of escrow) in addition to the inventory that has slowly been building up.



IMHO my target areas are not only no where near the bottom they haven't even built up the momentum to be racing to the bottom. We'll see a little burst of sales then in 6 months the carnage will begin.
 
[quote author="SacRenter" date=1207780282]thinking that even at 200K I could rent that house for less than a mortgage payment. quote]



I know people with real money and they wouldn't dream of buying until they could get a positive return from renting.



These people you know will never have money because they just don't really get it. Still operating on the old herd mentality. Amazing, but you can't protect people from themselves.
 
There are many people who either don't know how to use the internet really well or who don't have jobs that are conducive to getting much time to research things (i.e., teachers who are on thier feet all day). Unfortunately, the general media just doesn't provide any information as to how to calculate/determine fundamentals (NPR maybe...). Although I believe that people should take more responsibility for thier finances I also am really bothered by the lack of honesty in the prime time media.



On another note - I have been trying to find information about the Fresno housing market - Sacrenter - have any good websites you know about???
 
ha ha! not moving there - trying to figure out what to do with a house that is there - family owned.



Fresno has become so smoggy - it is sad - there is definetely some beauty in the fig trees and grape vineyards and the warm valley summer nights!
 
[quote author="SacRenter" date=1207813795]It baffles me that people still don't appear to understand the fundamentals of this bubble. Even when they themselves are underwater!



I'm guessing there will be a small spike in sales in the next few months while people gobble up those early "bargains." From what I can see there is a limited pool of buyers with the downpayment and/or credit to buy now.



I think that the few who can buy are going to snatch up these "early bargains." Then when those sales are the new neighborhood comps no one is going to be buying. Which means, of course, that prices will have to go even lower to pique the interest of buyers and we still have at least 12 months of homes that languished as short sales (or fell out of escrow) in addition to the inventory that has slowly been building up.



IMHO my target areas are not only no where near the bottom they haven't even built up the momentum to be racing to the bottom. We'll see a little burst of sales then in 6 months the carnage will begin.</blockquote>


When these "bargains" keep appearing month after month in large numbers, these people will start to realize they are not bargains, they are the market.



I understand your fascination with the beliefs and attitudes of these buyers. You are witnessing the remnants of kool-aid intoxication. The DTs will not be pleasant.
 
<blockquote>Of these homes that are listed for $200K, what could you reasonably rent one for today? </blockquote>


Less than $1,000.



Homes comparable to the one we're renting now are listing for around $450,000 and selling for around $400,000. We're paying $1600 a month to rent it. Our neighborhood is a planned community with HOA's and strict CCR's. There isn't alot of diversity in the houses so the comps give a really good indication of the value of the house.
 
Miami: was talking to some clients who were looking for some real deals,

and have money. Can't find any, even tho the Case-Shiller index has

Miami down 20%.



I think Miami has another 20% to go. Not counting the condos that they

are STILL building. They will be down, what? 60%? 70%? 80%?



And of course, lenders are not lending.



I suggested to my builder buddy that he look at comps and then reduce

his asking price to 5% below them, as suggested by others at this board.

He didn't want to listen before, but now he is. One of the houses is free

and clear, and he has offered to take back financing with a good down

payment. No takers. We are talking about an over 3000 square foot

house with cofferred ceilings, and build to withstand 160 mile an hour winds,

'way over code requirements.



Went to recorders office to file a death certificate in

the public records. Nobody there, except a foreclosure type, filing, I

suppose. lis pendens notices. I got waited on in 15 seconds.



Palm Bay--Brevard County. Got one of those inserts in the local fish

wrapper selling houses. Prices everywhere really down, but expecially

Palm Bay. You can buy a fixer upper for 70-80 grand.



Prices really down lots of other Brevard County locations too, but Palm

Bay, which was booming (falsely, I guess) a year or 2 ago, has really

sunk.
 
[quote author="lawyerliz" date=1207951287]Oh, and what's above McMansion?</blockquote>


I vote for "Skilled Nursing Facility"
 
Actually it should be:



Assisted Living



then.. Skilled Nursing Facility



followed by the ultimate.... Voice from beyond the Grave
 
[quote author="SacRenter" date=1207949847]<blockquote>Of these homes that are listed for $200K, what could you reasonably rent one for today? </blockquote>


Less than $1,000.



Homes comparable to the one we're renting now are listing for around $450,000 and selling for around $400,000. We're paying $1600 a month to rent it. Our neighborhood is a planned community with HOA's and strict CCR's. There isn't alot of diversity in the houses so the comps give a really good indication of the value of the house.</blockquote>


Based on the GRM of 160, that means your house selling for $400,000 now has a rental value of $250,000 which means the market still has a ways to go to correct itself. We also anticipate that prices will fall a little below rental equivalent at the bottom before correcting.
 
<blockquote>On another note - I have been trying to find information about the Fresno housing market - Sacrenter - have any good websites you know about???

</blockquote>


The main Sacramento housing blog has links to a few Central CA blogs that may include Fresno. But I've never looked at them (Fresno is in Central CA, right? I'm an idiot about what lies between Sacramento and Orange County.)



Here is the link: http://www.sacramentolanding.blogspot.com/



Unfortunately IHB has ruined me for most other blogs. I've yet to find another blog that feeds my addiction to kool aid voyeurism the way IHB does. This stuff is better than reality tv, I tell ya!
 
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