Let the bargain hunting begin. Prices may still be falling, but they're low enough for some investors to buy, sell, and pocket a tidy profit.
By Les Christie, CNNMoney.com staff writer
Last Updated: July 5, 2008: 7:32 AM EDT
NEW YORK (CNNMoney.com) -- Rock-bottom home prices have finally begun to lure vulture real estate investors into the fray.
Sharon Restrepo, a broker in South Florida, where home prices have dropped nearly 27% over the past 12 months, recently bought a three-family home in Cape Coral from a very motivated seller for a mere $65,000. It listed for $195,000.
She can rent the three apartments out for about $1,500 and turn a profit, while she holds on to the property until the market recovers.
"The savvy investors here," she said, "are buying up everything they can."
Even in the Seattle area, where prices are down just 5% year-over-year, small investors like Liberty Capital, a three-man operation, are snapping up cheap properties.
Liberty's portfolio manager Davis Hsu has purchased four homes this year, including a "very clean" 2,700 square foot four bedroom in suburban Federal Way, for about $330,000. He estimated that he bought it at 70 cents on the dollar. He quickly flipped it for a modest profit.
He bought another house for only $80,000, a 55% discount from the market, he figured, and made $60,000 profit when it sold. The other two properties he plans to hold onto for a while, renting them out until the market rebounds.
"You can get good deals on distressed properties," Hsu said, "if you're willing to wait two or three years before you sell them."
Peter Zalewski, founder of Florida-based Condo Vultures, LLC, which specializes in bulk purchases of condo properties, is finding very deep discounts for his clients. In one deal he recently negotiated in Tampa, a developer's lender agreed to sell 149 units for $12 million - a 43% discount to the outstanding $21 million loan.
Buying in bulk
Prices are even cheaper in the Midwest.
There, buyers like Jeff Ball, president of Austin, Texas-base Econohomes, purchase packages of bank-owned homes from lenders and resell them after little if any rehab. He buys five to 50 houses at a time, sight unseen. Often, the homes come with encumbrances, like back taxes, water bills or other liens that can add up to tens of thousands. Still, he comes out ahead.
Econohomes has purchased about 500 of these homes - located primarily in Ohio and Michigan - over the past two years, at an average price of less than $5,000. Ball said he's bought homes in Cleveland and Detroit for as little as $3,000. They sell for an average of $25,000.
His business has been criticized; usually city officials would prefer the homes be renovated before they're resold. But Ball said the money spent doing that would make the business unprofitable; nobody would buy at the prices he would have to charge. They would sit vacant and become havens for squatters, looters and drug dealers.
"The most significant thing is to stabilize the situation," Ball said. "Get people back in the house." The new owners move in and start taking care of the properties, according to Ball. If that starts to happen in large numbers, these communities may spring back to life.
On the sidelines
Despite these bargains, many big investors who buy in bulk have been slow to start shopping, according to Jack McCabe, a Florida real estate consultant. They're after even deeper discounts, and prices are indeed projected to keep falling in the next year - by double digits in parts of California and Florida.
While Sharon Restrepo, the Florida broker, is doing individual deals, she's sitting out the bulk purchases for now.
She was recently given the chance to broker a liquidation sale of 32 new homes in North Cape Coral, priced from $122,000 to $127,000, down from $195,000. But she's not interested.
"They're not cheap enough for my guys - or me," she said.
Jack McCabe says he still sees "a large disconnect between what buyers are willing to pay and what lenders are willing to sell for."
That's even more true in California, according to David Michelson, a partner in California-based developer Three Arch Investors - despite the fact that home prices there are already down 35% in the last 12 months. The company is putting together a $250 million vulture investing fund in anticipation of even further declines, and will buy foreclosed homes in California, Nevada and Arizona.
"The transactions are not happening yet," he said. "There are plenty of people looking, but the lenders are carrying the cash value [of these distressed homes] at two or three times the actual value," said Michelson.
Until banks reduce these prices - and take the write downs that will come with them - buyers like Michelson won't budge.
He figures that the banks will have to start liquidating these properties by the end of the year to get them off their books. And then, he says, the floodgates will open.
Sunday, July 06, 2008
Let the bargain hunting begin. Prices may still be falling, but they're low enough for some investors to buy, sell, and pocket a tidy profit.
Thursday, May 22, 2008
Orange County Real Estate Values are Changing!
Ever wonder what the house up the street just listed, reduced or sold for but don’t feel like calling a realtor or being “the nosey neighbor”?
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Follow your property’s value with private alerts emailed directly to you:
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*You never have to call a real estate agent for general information about the prices of homes in your neighborhood again, ever!
Monday, December 03, 2007
Coastal Orange County Properties with Good Long Term Fundamentals are at a Temporary Discount Caused by Downward Pressure from Properties without Good Fundamentals. NOW AND 2008 MAY BE TIME TO INVEST AGAIN.
The majority of the homes and communities with good fundamentals have seen longer days on the market and price reductions not because they are worth less, but because there has been downward pressure by properties without good fundamentals. Many good properties with excellent long term fundamental value can be bought at significant discounts from sellers who have to or choose to sell in this buyers market.
COASTAL PROPERTIES WITH GOOD FUNDAMENTAL VALUES
In general, as I am sure you are aware because you own property here the desirable areas of Coastal Orange County values are driven largely by two factors.
1. Proximity to the sand – how quickly can one walk to put their feet in the sand?
2. Ocean Views – Can you see smell, or hear the ocean?
If you have both its oceanfront and the sky is the limit on price. These properties can usually only be afforded by people with upper tier wealth. The polarization of wealth has created an interesting real estate dynamic. If you simplify it’s fair to say that the people who own these multimillion dollar properties also own others and are less susceptible to the ebbs and flows of the market. They are vacation homes in Resort areas that will always be desirable; a good place to park money and enjoy.
Some owners upgrade and sell to buy nicer property at a discount, others don’t have to sell in a down market and won’t. Some owners are simply done with the property and some do have to sell. All scenarios create great buying opportunities.
PROPERTIES WITHOUT GOOD FUNDAMENTALS
A few miles inland there are many areas and communities that had values increase significantly in large part of the availability of low interest rate loans and close to no money down. Now these loan products have disappeared. The area is still attracting the same demographic with similar income only now they can’t afford it. The current owner is upside down – you know the rest. Short Sales, Foreclosures, a glut of properties on the market and they are all reducing the price to compete.
Concentrating in large part on these scenarios, the media with broad generalizations of the real estate market and areas of coverage creates massive uncertainty that even affects the psyche causing many buyers to sit on the side lines waiting for the sky to fall. This lack of action creates a buyers market for almost all areas and some good deals all over for those who are aware, particularly in areas with good long term fundamentals.
STOCK MARKET COMPARISON – FINANCIAL SECTOR
Another way to look at it would be to compare it to the current Volatility in the Stock Market, in particular the Financial Sector. While no one really knew what the risks were or still are, confidence was lost and the financial sector plummeted, very similar to how the confidence is lost in the Real Estate Market. The stocks that lost significant value were both stocks that had big exposure to the mess of subprime lending as well as the stocks that were good of good companies like Bank of America, Citi etc… The Stocks of these good companies were beaten up because of lack of the confidence of the sector caused in large part by the companies with bad fundamentals. Creating good long term buys because of it? I think so.
CHOOSING THE RIGHT STRATEGY FOR YOU AND STAYING INFORMED
Proper timing for the best tax advantages, 1031 exchanges, TIC options, adding to your portfolio or diversifying form it is important. Many sophisticated investors are now choosing to upgrade to that type property that was nearly untouchable 4 years ago because the market was so hot.
Whether you are interested in taking advantage of this Buyers market or not is always a good idea to re-evaluate you real estate holdings and your long term strategy for those investments.
I have included a Market Trend graph for your properties city as well as a couple of articles that I thought had some good information.
I believe you deserve to have current and factual information provided to you in a Private manner. Feel free to call me directly. 949-303-8911. Also this information and more can be found on my website at www.LawryRealty.com.
Posted by TOBIAS LAWRY at 11:15 AM
Friday, October 27, 2006
Laguna Beach has some of the best beaches in the area. Many of them you would pass by while driving on the PCH and never know they were there. A great beach to go to if you are only visiting Laguna for a day is Main Beach in the heart of Laguna where you can set up camp and enjoy the town during the day. It is also one of the easiest to get to. The beach is a good stretch of sand giving you plenty of room to go for walks in either direction. There is a boardwalk where local artist set up shop on the weekends. There are several volleyball spots as well two outdoor basketball hoops. Dogs on leashes are welcome, although the hours are limited to morning and night during peak summer. North of Main Beach are a few smaller beaches that you can visit by strolling along the walk way that starts at the North end of Main beach by the Inn at Laguna Beach, also a great place to stay for a casual beach get away. Walk along the pathway to vista over looking Heisler park and Fisherman's Cove. At Heisler park you can compete in lawn bowling and shuffle board, or just relax and cook out at some of the picnic sights. There are also a few short stairways that lead to some pocket coves. Just a bit further north is Shaw's Cove then Cresent Bay.
South of Main Beach there are about a dozen other beaches to enjoy. Most you have to park on the street a access them through a small and often steep set of stairs designed for public access. They will be far less crowded than Main Beach and well worth the hike for a day in the surf and sand. A couple of more beaches you may want to consider are Victoria Beach and Table Rock if you can find it. Another worth worth mentioning is Treasure Island Beach near the Montage. Try to park in the underground parking lot immediately South of the resort, before Aliso Creek Beach. Stroll along the public pathway of the meticulously maintained Montage to finish of a day in the sun, or to begin your evening of fun.
Saturday, October 14, 2006
Salt Creek Beach
Salt Creek beach is a long sandy beach that runs the length of the Monarch Beach community of Dana Point, from the edge of South Laguna to the headlands just before Dana Point Harbor. The Ritz Carlton sits just about in the center and there is a small point with a nice for surfing. I've counted as many as 150 surfers in the water at once on good day. There is a large public park adjacent to the Ritz Carlton where you can have a picnic and enjoy the view. If you walk south to the headland and the tide is low you will be able to enjoy some sea life in the tide pools. The beach also tends to be more quiet there as most people don't stroll that far to sit in the sun. During the right time of year be sure to keep your eye out for migrating whales, and of course the dolphins are always around. No dogs allowed, early enough in the morning it is very quiet and you can get away with it.
Excellent beach, you'll enjoy it.
Other Dana Point Beaches
Schools may be one of the single biggest concerns for families who are moving to an area that will force the kids change schools. South Coastal Orange County has some great schools, with several being National Blue Ribbon and California Distinguished. Below is a link to take you to the Orange county department of education and it's districts. Many of the districts are self explanatory with the name of the city correlating to the district name. One that isn't is Capistrano Unified- serving families residing in the cities of Aliso Viejo, Dana Point, Laguna Niguel, Mission Viejo, Rancho Santa Margarita, San Clemente, and San Juan Capistrano and the unincorporated communities of Coto de Caza, Dove Canyon, Ladera Ranch, Las Flores, and Wagon Wheel.
Orange County Department of Education
Mello Roos is a special tax lien on property that is in addition to property taxes. After Proposition 13 was enacted in 1978, the the Mello Roos Community Facilities Act was established in 1982 to provide financing for public improvements and services when no other source of money is available. Improvements can include streets, sewer, police protection, fire houses, cultural art centers, parks and recreation facilities, schools an basic infrastructure. It is usually tied to a bond that eventually will be paid in full, at which time the annual fee will be established to maintain the improvements. The annual charge is determined not by value of the property but by characteristics of the property; square footage of structure, lot size, use of property etc. This determination will also vary depending on the development the property is located in.
Since the Ability to create Mello Roos wasn't formed until 1982, in Orange County you will generally only find Mello Roos in the newer developments as you move inland. Most of the coastal areas were already developed before that time and it is nearly impossible to get a 2/3 majority vote of residents who live within the proposed boundaries to put a Mello Roos in place now.
more on Mello Roos
There are many great spots to enjoy along the coast for good food and wine. Below are a few that I have been to recently, some more often than others, that I thought were worth noting. Many more to follow.
-located in the St. Regis Resort of Monarch Beach. Design, food and service that teleports you to San Francisco and New York... I could eat here every week. Worth the trip from anywhere, and almost certain to see someone famous... besides Tim Flowers, GM. Table #15 is a great booth in the bar where you can watch the action and be incognito. I recommend #54 if you want to be in the dining room. Funky designer jeans to Armani suits.
-Located in the beach community of San Clemente. Grab a high top table in the bar near the open kitchen and enjoy. They are producing good clean "wine country" food with a focus of California wines.
Husky Boy Burger
-a drive up burger joint on the PCH just North of main beach in North Laguna. Don't skip the onion rings.
802 N Coast Hwy Laguna Beach. 949.497.9605
-Fun & hip with great food in a small space. Just north of the montage on the PCH, you've probably driven by it and never noticed. Go there. Open kitchen with the chef owner behind the range. Microbrew beers- ask about the orange Blossom.
-located in the Montage Resort of Laguna Beach. It has good straight forward food. Perfect for a nice refined lunch meeting / date. Grab a table on the patio overlooking the Pool and Pacific ocean, or one of the more spacious booths toward the back past the cheese bar... Did I say cheese bar. Worth the trip for dinner if only for the Cheese bar. It is an incredible selection of artisan cheese with a Maitre d’Fromage who guides you through the choices and matches them with compotes.
-located on the grounds of the Montage Resort of Laguna Beach. Probably the best located restaurant in Orange County. Located at the edge of the Pacific Ocean with lights that accent the white water crashing on the rocks. Very refined food and service with a dress code (no jeans) that pushes the restaurant toward special occasion for the beach community. Best tables are in the main dining room area, near the glass doors that open up to the sound of the waves.
Purple Feet ~ wine boutique and tasting room
-Dana Point Village. A wine bar that offers 70 wines by the glass and 300 by the bottle. They also have a retail section where you can grab a bottle or two for the road. Good place to stop in and grab a high top table. A glass of wine with some olives, cheese and charcuterie from their Tapas style menu. Not a night cap place, Closes at 10 pm.
OK. I know everyone has their favorite sushi place and this one happens to be mine. You'll see the same people in here week after week. Sushi Bar Seats are a must! Let Hero or Cody take you through some fresh fish. Expect friendly service and the room to get a little, well interesting past 9 on the weekends. Thai Snapper, live shrimp, blue crab hand roll and monkey balls.
Anyone been to the new Beachcombers in Crystal Cove?
Friday, October 13, 2006
At the age of fourteen I began cooking in a coastal town in Maine where I grew up. Starting as a prep cook I couldn’t wait to become Garde Mange, then Sauté to Tournant, Sous Chef to Chef, Chef to owner, then of course you can’t possibly stop at just one restaurant lets build more…. I believe it is at this point when a part of all true chefs can’t wait to become that cook again. After all it is the cook who reeps the highest satisfaction; Sharing. Preparing a dish of ingredients provided by mother nature composed for the sole purpose of sharing a vision, a feeling with the guest that is intended to improve the quality of life if only for a couple of hours. In return the cook is rewarded with the gratification of providing enjoyment, nourishment and hopefully a memory of the feeling long after the plate has been cleared. At that moment there is a feeling deep inside the cook’s soul that is hard to put into words. It’s a feeling that is felt when you truly give.
Recently I helped a family relocate to Orange County, it wasn’t the first time I helped a family relocate, but it was the first time I realized the representation and sharing of information I provide as a Real Estate professional trumps all the sharing I provided in my 18 years as a restaurateur. Helping their family get settled and discover what Orange County has to offer gave me that feeling I had as a cook when the guest took their first bite was front and center.
Moving from another state or just across the street a real estate transaction can be very unfamiliar experience for most people. I had been over estimating the amount of information readily available to people outside of the real estate or lending industry. As real estate professionals in OC we are filled with information that has the potential to provide people with more ways to enjoy "The Good Life". OCORAMA is meant to be a vehicle to share information about Orange County, much like I did as a restaurateur when I found out about a new artisan cheese maker or a wild mushroom forager.
From information on Schools, tax due dates and those mello roos to which restaurants, resorts and wine shops are nearby. Heard about a neg-am loan, good idea or not? How does ocean view or road noise affect property values? What kind of neighborhoods are behind those gates on the PCH.
I encourage everyone to contribute quality information and ask many questions. No reasonable question will go un-answered; after all it’s hardly important which beach is dog friendly- unless you own a dog. If there are any questions that anyone would prefer answered privately, feel free to contact me directly.
Anyone who has been remotely following the real estate market knows there has been a shift with increased inventory, longer days on market and price reductions on many properties. The information that is made available is wide ranged and nearly always on generalizations from National to State, sometimes County or City but very rarely does it target your neighborhood or street. Through all of this information most everyone concern comes down to a very simple questions, how is this affecting my property values. The answer to this question is not as simple as the media surmises.
Whether we are in a buyers, sellers, or neutral market roughly ten percent of the population will be moving this year simply because they have to. They lost a job, relocated, bought a new home before they sold their old one, got a divorce, increase their family size etc. So what is causing the increase in homes for sale? There are many factors that can help cause the shifts we are seeing. I’d like to focus on the fact that much of the additional inventory belongs to people who "don't have to sell".
Why would someone list a home they don't have to sell? They may have believed the bubble was coming and figured they should sell their house at the top of the market, then rent for a while waiting for the market came down so they could buy a similar house for less money. Some are simply second homes while others are investment properties they have owned for a while enjoying acute appreciation. Since the rental rates have not kept up with property values they are now sitting on large sums of equity that is not giving them a competitive return.
Example: Let’s say you own an investment property without debt worth about $1,000,000 and you rent it for 3,000 a month. After paying expenses your net income on the on the property may only be 25,000 per year. That means you are getting a very low return of 2.5% on your money (by the way current CD's are paying up to 6%), and since you feel the huge appreciation for housing is over for a few years you may as well sell the house and invest your money in a higher return.
Properties are generally listed exclusively with a broker for a minimum of 6 months. Since the “don’t have to sells” have it on the market they may as well ride it out to the end when the listing expires. For them there is no reason to lower the price too much, values will certainly go up over the long run, and they can get their price later rather than taking a big hit on it now. We are beginning to see these properties expire and many are in fact not re-listing.
When it comes to the sales price the difference between the people that have to sell and the people that don't is, with increased inventory, the "have to sells" are force to lower their prices below market value to compete with the inventory and motivate a buyer- which is not an easy task right now. In an interesting twist, many people who put their homes on the market with a “don’t have to sell” plan have lowered their comps by forcing their neighbors who have to sell to reduce their price. I have begun to hear owners stating they are taking their home off the market because they don’t like what their neighbor’s house sold for. “We’ll wait ‘til next year and put it back on”
What has exaggerate the situation is the buyers, who never need to buy- they can rent, have gone into a wait and see mode since there has been so much previous talk of the “bubble” and their is plenty of homes to choose from. They are thinking maybe the "have to sells" will reduce it again and they can save a few more bucks. Not necessarily a bad strategy, as long as you are not staying out of the market too long by renting. There are actually some pretty good deals out there right now if you are a buyer and have the patience, and a good professional, to examine the specific areas of choice closely.
The year has also been a time where there was uncertainties pertaining to interest rates and our new Federal Reserve Chief Ben Bernake. Rates rose consistently for the better part of the year and as you know interest rates effect purchasing power which is directly correlated to how much you can get for your home. Some good news for both buyers and sellers is the rates have actually dropped the last 3 months and the consensus on wall street is the Fed is most likely done raising rates for the some time. There has even been some scuttle over the past two weeks that he may lower the rate next year.
Now that the "bubble" has not burst, and the interest rates are not rising, the fact still remains that there is an over supply of homes on the market, and with the buyers in their wait and see mode, a lack of demand. This is still causing some price reductions on the "have to sells", while the “don't have to sells” are holding firm. As the “don’t have to sell” take their properties off the market and some properties get bought the inventory should continue to reduce. In theory this will equal the playing field a bit between the buyers and sellers and increase the volume of transactions as the buyer become engaged.
For property owners looking to sell or not, it comes back to the question I stated above, "how does this affect my property value". To answer this you would have to look at the very specific area that your property is located in. Take into consideration many factors including desirability, total supply, and ocean view or not, which side of the PCH is it on. Proximity to the beach and which beach is it. Adjacent sales histories and when you may plan on selling.
Only one thing is for sure. Time will tell.
Most new home developments generally don't let much information out to the public or independent real estate companies, until the developer is ready to release the property, be it home sites or homes for Sale.
A big reason the developer waits to release the information is pricing. Release the prices early and the market goes up you could leave money on the table; if the market goes down you may be forced to reduce the price and loose initial desirability, or "honeymoon period" which is generally the first 30 days on the market when the buyer will still perceive that they bought the property before anyone else could get to it. Past the 30 day honeymoon period and the buyer tends to wonder why no one else wanted it. The desirability is always greater if someone else wants it as well.
Earlier in the year I visited the City of Dana point to see what type of public information there was. The following is what I found:
With a total of 121.3 acres, 68.5 are designated for 5 public parks with 4 miles of hiking trails, many rest areas and scenic overlooks. The remaining land is approved for 125 residential home sites, a Â“Seaside InnÂ” with up to 90 rooms and a PCH / Recreation Commercial center with ~ 35,000 square feet to include a visitor information center.
Five Public Parks
STRAND VISTA PARK 9.9 acres- adjacent and seaward of existing public parking lot. Links beach access, trails and other parks.
STRAND BEACH PARK 5.2 acres- the beach
HILLTOP PARK 15.1 acres- dramatic views of city harbor and Pacific Ocean
HEADLANDS CONSERVATION PARK 27.9 acres- no development allowed in this area only a perimeter hiking trail.
HARBOR POINT PARK 10.4 acres- designated conservation and recreation.
Three Public Beach access points
NORTH STRAND ACCESS- (improved) with public Funicular, minimum 8 passenger electric cart to take people and beach gear from parking lot to beach and back again.
The City of Dana Point Estimates the parks and beach access to be completed by late to early 2008. Once completed construction can begin on the residential homes.
In July a letter was sent out in July stating that the Strand at Headlands sales team had been hired and will be working under the name of White Sands Realty. I have had the pleasure to meet the team of three, Lynne Karpa, Susan Laird and George Pagano- director of Sales. They are all very helpful, knowledgeable and excited about the project. This letter also stated that that there will be a 9,300 square foot Beach Club for the community. It also mentioned 118 home sites would be sold, not the 125 that had been approved by the city.
Last month a letter was sent out to all those that registered with The Strands. The letter explained that they had 120 Initial deposits to qualify for Phase I and tour the site (you have to place a $10,000 deposit in escrow in order to be considered and get a site tour). Also due to grading delays the Phase I sales date, when they will sell the first 18 home sites, has been moved from September 30th to November 10th due to grading delays. The sales office was scheduled to have opened by now where you can find more information.
Verbally I have been informed the following by The Strand Sales office how the 18 Phase I home sites will be sold. 10,000 get you on the list and a site tour of the three rows closest to Niguel shores. To be in consideration for the homes you must put in escrow either an additional $190,000 for the front row totaling $200,000, or an additional $90,000 for the back two rows totaling $100,000. If you are selected you accept the terms, are locked in with a 3 day right of rescission, then must close within 21 days. The pricing that I was told by the office at White Sand Realty is about $7,000,000 for the front row lots descending in value as you reach the back row at $4,500,000. According to the sales office it will be close to year until the roadways are ready for construction to begin. The Second Phase will be released in another 9 months.
By rumor only I have heard there has been interest by several buyers to purchase two adjacent lots each at 75 ft. X 15ft.ft to a combined total of 150ft. X 150 ft. so they may build one home covering both lots.
Anyone heard anything else??