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Is the Housing Recovery a Farce?

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Brecht Palombo

Foreclosure Specialist from Portsmouth, New Hampshire

Feb 08 '13, 08:02 AM
1 vote


There’s so much good news in the real estate market today you’d think there was gold bullion falling from the heavens.

Read my new article "Is the Housing Recovery a Farce?" to see exactly why YOU should be a bit suspicious or confused too...

http://www.distressedpro.com/blog/housing-recovery-farce/



Will Barnard Moderator Donor

Real Estate Investor from Santa Clarita, California

Feb 08 '13, 08:12 AM
4 votes


This is exactly what The Norris Group has been saying for the last 6 months or so and the writing is on the wall for another bubble burst in a few years. Crazy, well, seems history loves to repeat itself and gree in government along with wall steet will crash the market yet another time.

Smells like more opportunity for us wise investors!



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Albert Hasson

Paradise Valley, Arizona

Feb 08 '13, 08:43 AM


I think the assumption in this article is that a new bubble is forming and when it bursts there will be a repeat of what we have experienced the last 5 years. Problem with that theory is the current batch of investors have paid cash or financed with significant cash down payment so the dynamics of any "bursting bubble" would be different and certainly much less severe than the last time. In my local Phoenix market avg. sales price per sq. ft is $110, up from a low of around $76 but far from the peak of $180. Investors have left my market to pursue opportunities elsewhere leaving mostly organic home buyers who have stepped in and picked up the slack. I expect our rate of rise in prices to slow down which I think is healthy.
There may be another bubble forming but doubt the "bursting" phase will be a catastrophic jolt to our economy like last time.



Tom Juhn

Highland, Indiana

Feb 08 '13, 08:46 AM


Albert,

Your theory would stand but the new crop of subprime and people using their houses like piggybanks more than outnumbers investors.



Chris Feltus

Residential Real Estate Agent from Fort Worth , Texas

Feb 08 '13, 09:00 AM
1 vote


@Brecht Palombo
Great topic for discussion Brecht.

I think a lot of people subscribe to the notion the housing market may be recovering right now. The problem is we don’t have an organic recovery. Many hedge funds such as Black Stone, Colony Capital etc. are coming in and buying SFR properties in the tens of thousands. With interest rates being kept artificially low by the Fed and cheap money its only fueling their speculation. The critical mistake they are making is you cannot effectively MANAGE properties in a excel spreadsheet. In my opinion, these hedge funds will lose their shirts in 5+ years, and many of the properties they picked up will come back on the market as distressed assets. However, this time many of these assets won’t be held by the government, but instead by private equity firms.

Housing Bubble 2.0, Real Estate is the opportunity.

There was a great video posted about this on yahoo that’s worth a watch on this precise topic.

http://finance.yahoo.com/blogs/daily-ticker/housing-bubble-2-0-david-stockman-133026817.html



Karen Margrave Moderator

Developer from Orange County, California

Feb 08 '13, 09:18 AM


This article I found through Builderonline ties into your thread.

http://www.businessinsider.com/two-very-different-us-housing-markets-2013-2

Here in Orange County, 8 builders are starting development on 11 different subdivisions, which will have over 900 homes once completed.

As they say "all real estate is local"



Medium_tmg2Karen Margrave, The Margrave Group
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.themargravegroup.com
Licensed Brokers & General Contractors R.E. Developers (Parlay Investments). Orange County CA


Joseph M

Real Estate Investor from Los Angeles, California

Feb 08 '13, 09:33 AM


Very interesting articles. I hadn't heard too much about the difference in the foreclosure processes before ...but it seems to make sense. Courts are notorious for taking forever to get things done.

I do think there will be more protections in place because many properties have been bought with cash..but I also heard that home equity loans will be making a big come back...what's to stop people from taking money out of their primary residences and investing in properties at the top of the market or to buy a second home?...

Also when you factor in that many funds are buying huge amounts of homes..what happens when one of them pulls an Lehman brothers type situation?

It would just take one of the big players to fall in order to destroy a market or several markets.



Chris Clothier Donor

Real Estate Investor from memphis, Tennessee

Feb 08 '13, 09:49 AM


Originally posted by Karen M.:

As they say "all real estate is local"

Spot on. For anyone to talk about a RE recovery on a national level, they are talking from an agenda or talking points. Some parts of the country never suffered a housing correction and have continued to go up in value. As far as the Hedge Funds being a part of the next housing crisis, they are not buying enough property on a national level to effect the housing market. BUT...@Joseph M made a point about what happens if a hedge fund goes under and to his point, that could have a very localized effect on that market, but not on a national level.

Chris F. - thought you made a great point and it is correct about some markets where you see HF's buying in large quantities. I think Phoenix and many FL. markets are in that boat. The HF's artificially changed the market and it will be interesting to watch those markets over the next few years.



Medium_new_mi_logoChris Clothier, Memphis Invest, GP
Telephone: 901-212-9647
Website: http://www.memphisinvest.com
www.MemphisInvest.com 1(877)-773-9998 Chris D Clothier


Albert Hasson

Paradise Valley, Arizona

Feb 08 '13, 11:03 AM


I think the fear of hedge funds is overblown. They were buying heavily in the Phoenix market in the second half of 2012 but have now moved on to areas where there is more available inventory. The Blackstone group, one of the largest hedge funds, bought just over 3000 homes in AZ during that period. This accounts for only .22% (one fifth of one percent) of the homes in the two counties where they bought. This represents about a week and a half of supply at our current sales rate. These homes for the most part are occupied by long term tenants. Even if they put all of their houses on the market on the same day it would barely be noticable in our market.



Huggy Baird

Lakewood, Ohio

Feb 08 '13, 12:22 PM
1 vote


Originally posted by Albert Hasson:
The Blackstone group, one of the largest hedge funds, bought just over 3000 homes in AZ during that period. This accounts for only .22% (one fifth of one percent) of the homes in the two counties where they bought.

Realize about 3.6% of homes sell per year (the other 96% are held by the owner). That means one hedge fund (Blackstone) bought 6.1% of the homes in those two counties.

In addition, other hedge funds (not just Blackstone) are investing. Plus there is a flurry of new real estate investors entering the market. BP will likely see a lot of lift in terms of web-traffic and the veterans here on BP will see downward pressure on their earnings

I'm not saying this is a tsunami and everyone should run for higher ground... but this is a significant shift in market dynamics. "Bubble" may be a strong word, but dismissing these phenomenons is equally imprudent



John Mireles

Landlord from San Diego, California

Feb 08 '13, 12:36 PM
2 votes


Will Real Estate go bust in the future? Probably. A lot people on this forum probably weren't around to remember the real estate crash of 1990 and the whole S&L debacle. It only took 17 years for a repeat performance of greater magnitude. In a few years, people will forget all about the last crash. Optimism and the battle cry of "property values only go up" will return.

The lesson to learn is that you have to spot the trends in advance. Be careful about leveraging your assets otherwise when the crash hits, you're out of business. When the numbers don't pencil out, it's time to stop investing, sit on your cash and wait until it's time to buy again.

I don't think we'll see any sort of correction, absent some calamitous event, in the near term. The market is just getting legs. It's got awhile to go before it breaks into a full gallop - and the eventual trip and fall.



Chris Clothier Donor

Real Estate Investor from memphis, Tennessee

Feb 08 '13, 12:36 PM


Good point @Huggy Baird on the Hedge Funds. I think it is prudent to at a minimum be aware of what is happening in your market. If you are a strong company or have strong business practices as an individual investor, you are going to find success in any market at any time regardless of outside pressures. That does not mean however to not be aware and always planning for what is happening within the market. And - DON:T PAY ATTENTION TO THE NATIONAL NEWS STORY!! IT DOES NOT MATTER...

All that matters is what is happening three feet outside your front door in your own market. That is what matters.



Medium_new_mi_logoChris Clothier, Memphis Invest, GP
Telephone: 901-212-9647
Website: http://www.memphisinvest.com
www.MemphisInvest.com 1(877)-773-9998 Chris D Clothier


Will Barnard Moderator Donor

Real Estate Investor from Santa Clarita, California

Feb 08 '13, 01:38 PM
2 votes


Realize about 3.6% of homes sell per year (the other 96% are held by the owner). That means one hedge fund (Blackstone) bought 6.1% of the homes in those two counties.

In addition, other hedge funds (not just Blackstone) are investing. Plus there is a flurry of new real estate investors entering the market.

Great point. Take the other 3 major hedge fund players repeating that process and I bet you are well into 20% of the market. All that placed for sale on one day would be catastrophic for that specific area.

DON:T PAY ATTENTION TO THE NATIONAL NEWS STORY!! IT DOES NOT MATTER...
It does not matter completely, but to an extent, it does. Media has a way of spinning things and as another bubble becomes ready to burst, the economic downfall from it will spread across the Nation, hitting the specific markets the hardest.



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Craig Kucera

Alexandria, Virginia

Feb 08 '13, 01:58 PM


I agree with many of your points; however, I think most of the hedge funds are not buying to flip anytime soon but rather to hold as rental investments for 7-10 years given that the arbitrage between the cost of ownership/financing costs and rents is so appealing in many markets. In fact, several funds are buying to convert to rentals on a more perpetual basis and are structuring (or currently structured) as REITs to avoid corporate taxes. So that inventory is likely off the market for the foreseeable future given the positive rent dynamic.



Chris Clothier Donor

Real Estate Investor from memphis, Tennessee

Feb 08 '13, 03:22 PM


[quote=

DON:T PAY ATTENTION TO THE NATIONAL NEWS STORY!! IT DOES NOT MATTER...
It does not matter completely, but to an extent, it does. Media has a way of spinning things and as another bubble becomes ready to burst, the economic downfall from it will spread across the Nation, hitting the specific markets the hardest.

you are right - the media has so much influence. I think that is why I put it in capital letters. investors have to stay very focused locally or it can become scary. But, you are right, things have a way of playing out exactly as they are talked about. The self fulfilling ...



Medium_new_mi_logoChris Clothier, Memphis Invest, GP
Telephone: 901-212-9647
Website: http://www.memphisinvest.com
www.MemphisInvest.com 1(877)-773-9998 Chris D Clothier


Darrell Simon

Baltimore, Maryland

Feb 09 '13, 09:21 AM


One man's bubble and bust is another man's economic cycle. The fundamentals are often forgotten when the need arises to analyze a trend in the short to medium term. Real Estate does not actually have a national market.....Banks do. Easy to forget this



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