August 3, 2009
When The Fundamentals Make Sense (But Please Not Before)
"[Oakland's McKinley Partners] is emblematic of a major force currently propelling the real estate market: investors and speculators snapping up foreclosed homes. Along with first-time buyers, they are a primary source of increased sales volume."
First Published: August 3, 2009 9:30 AM
Comments from "Plugged In" Readers
-- It's finding that inventory is limited because lenders are sitting on foreclosures. "Banks own 530 homes in this ZIP code (Pittsburg's 94565) but there are only 15 on the market,"
Can anyone out there verify that this 515 home "shadow" inventory is anything close to the real number?
Posted by: OneEyedMan at August 3, 2009 10:05 AM
This won't end well...
Posted by: Toady at August 3, 2009 10:26 AM
If you think about it, if a bank can borrow from the Fed @ ~0%, then it is very easy to keep an ocean of non-performing loans from creating a stinky smell.
When the cost of $ goes up, then the spread between the 0% yield on the bad debt and the cost of the debt to the bank will start to drive losses.
The bank can "camp out" on the bad debt at zero cost now, vs selling the property and taking the loss. Which do you think is worse for the bank CEO's bonus?
Posted by: Jeff at August 3, 2009 10:53 AM
not a bad idea/RE investment plan(taking advantage of the times), but still harder than it looks.
1- smart idea to pass over new developments, due to defaults happening concurrently. but the older hoods, where homes are selling for ~ $100k are lower mid class- not solid mid class (for the most part, i strongly suspect.) therefore there may be less of an upside (unless gentrification potential exists, but usually not in these middling, has been locations...the solid mid class money usually is seeking newer/bigger/better.)
2- it may still be hard to get reliable renters in these areas, espeically ones that won't wear and taer it to death in the 5-7 year proposed holding period.
3- even with a refi at 50% after the foreclosure sale, you are percentwise out of pocket alot of cash (think doing this for 10-20 homes.)
4- this is not casual. lotsa bank leg work,lotsa renovation, lotsa maintenance of so-so tenants. you better love hanging out in pittsburg, antioch, etc.
personally i still think that keeping good quality rentals in the city will pay off bigger in the mid term. when things do turn around the appreciation, especially for smaller 2-6 bldgs that are TIC/condo quality, will be solid. not sure the same can be said of middling housing in pittsburg, antioch, etc.
Posted by: 45yo hipster at August 3, 2009 3:49 PM