I believe the reason you are seeing a large number of investors is due the investment returns. Not real estate investment returns but certificates of deposit returns. When the bank pays you less than 1% interest rate per year you start looking for better returns. Unfortunately, real estate is an investment not an capital preserving savings account.
Investors Swarm Housing, Raising Concerns
The number of homes sold to investors more than doubled last year, as rising rents and low-priced distressed properties fueled demand. Investors, half of them using no mortgage, bought 1.23 million homes in 2011, a 65 percent jump from 2010, according to the National Association of Realtors. Half of the homes purchased were distressed properties, that is, foreclosures or short sales (when the bank allows the home to be sold for less than the value of the mortgage).
“Rising rental income easily beat cash sitting in banks as an added inducement,” says NAR’s chief economist Lawrence Yun. “In addition, 41 percent of investment buyers purchased more than one property.”
Half of investment buyers said they purchased primarily to generate rental income, according to the Realtors’ report. 34 percent wanted to diversify their investments, as 2011 saw a volatile stock market due to the debt crisis at home and overseas.
While nearly half of investment buyers said they were likely to purchase another property within two years, housing and mortgage analyst Mark Hanson calls them a “thin cohort” and worries that they add ever more volatility to the current housing recovery.
“They are fickle and volatile. They will go away on the slightest of conditions changes. They also won’t chase prices higher or buy new homes from builders. Lastly, without the heavy flow of distressed supply, there is no U.S. housing market recovery. Distressed sales ARE the market,” says Hanson.
Foreclosure supply is still running high, with 65,000 completed foreclosures in February of this year, according to a just-released report from CoreLogic. 862,000 foreclosures were completed in the twelve months ending in February. While there are still 1.4 million homes in the foreclosures process, all of these numbers are coming down, albeit very slowly, and sales of bank-owned properties (REO) are speeding up.
Even the Realtors are concerned, like Hanson, that new programs by the government and banks to sell foreclosed properties in bulk discounts to large-scale investors, will cut off a robust individual sales market for smaller investors.
“Small-time investors are helping the market heal, since REO inventory is not lingering for an extended period,” says Yun, clearly looking out for his Realtor constituents. “Any government program to sell REO inventory in bulk to large institutional companies should be limited to small geographic areas.”
Fullerton Overview
| Median home price is $369,000. Based on a rental parity value of $525,000, this market is under valued. |
| Monthly payment affordability has been improving over the last 3 month(s). Momentum suggests unchanging affordability. |
| Resale prices on a $/SF basis increased to $237/SF to $240/SF. |
| Resale prices have been weak for 12 month(s). Price momentum suggests weak prices over the next three months. |
| Median rental rates increased $0 last month from $$2,216 to $$2,216. |
| Rents have been slowly rising for 3 month(s). Price momentum suggests unchanging rents over the next three months. |
| Market rating = 4 |
Proprietary OC Housing News home purchase analysis 
1758 BERKSHIRE Dr Fullerton, CA 92833
$470,000 …….. Asking Price
$610,000 ………. Purchase Price
12/14/2004 ………. Purchase Date
($140,000) ………. Gross Gain (Loss)
($48,800) ………… Commissions and Costs at 8%
============================================
($188,800) ………. Net Gain (Loss)
============================================
-23.0% ………. Gross Percent Change
-31.0% ………. Net Percent Change
-3.5% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$470,000 …….. Asking Price
$16,450 ………… 3.5% Down FHA Financing
4.03% …………. Mortgage Interest Rate
30 ……………… Number of Years
$453,550 …….. Mortgage
$122,727 ………. Income Requirement
$2,173 ………… Monthly Mortgage Payment
$407 ………… Property Tax at 1.04%
………… Mello Roos & Special Taxes
$118 ………… Homeowners Insurance at 0.3%
$472 ………… Private Mortgage Insurance
………… Homeowners Association Fees
============================================
$3,170 ………. Monthly Cash Outlays
($338) ………. Tax Savings
($650) ………. Equity Hidden in Payment
$23 ………….. Lost Income to Down Payment
$138 ………….. Maintenance and Replacement Reserves
============================================
$2,343 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,200 ………… Furnishing and Move In at 1% + $1,500
$6,200 ………… Closing Costs at 1% + $1,500
$4,536 ………… Interest Points
$16,450 ………… Down Payment
============================================
$33,386 ………. Total Cash Costs
$35,900 ………. Emergency Cash Reserves
============================================
$69,286 ………. Total Savings Needed
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599……
sales@ochousingnews.com…..
We're sorry, but it seems that we're having some problems loading MLS # C12038288 from our database. Please check back soon.
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$465,000 621 SANDLEWOOD Ave |
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$583,900 3028 East WALKING BEAM Pl |
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For more news, market analysis and property profiles, please see the OC Housing News.
Freddie Mac Reports 30-Year Fixed-Rate Teetered Back Below 4%
The 30-year fixed-rate mortgage positioned itself back below 4 percent this week as economic indicators point to a weaker housing market and economy, according to Freddie Mac’s Primary Mortgage Market Survey.
“The S&P/Case Shiller 20-City Composite home price index slid in January to its lowest reading since December 2002,” said Frank Nothaft, VP and chief economist for Freddie Mac. “In addition, new home sales declined 0.5 percent in February, below the market consensus of an increase, and pending existing home sales also declined for the month.”
Last week, the 30-year fixed-rate averaged 4.08 percent, above 4 percent for the first time since October 2011. This week ending March 29, the 30-year averaged 3.99 percent (0.7 point), barely below the 4 percent mark. The 30-year is still below last year’s average at this time, when it was 4.86 percent.
The 15-year fixed rate mortgage slipped to 3.23 percent (0.8 point). Last week, it averaged 3.30 percent and 4.09 percent a year ago at this time.
The 5-year ARM lowered to 2.90 percent (0.8 point) this week, compared to last week’s average of 2.96 percent, and still lower than last year’s 3.70 percent.
The 1-year ARM also dipped down, averaging at 2.78 percent (0.6 point ). Last week, it averaged 2.84 percent, and last at this time it was 3.26 percent.
Bankrate also reported a drop in rates, with the 30-year fixed-rate down to 4.23 percent compared to 4.29 percent last week. Bankrate conducts a national weekly mortgage survey using data provided by the top 10 banks and thrifts in the top 10 markets.
The average 15-year fixed mortgage rate dropped to 3.44 percent and averaged 3.48 percent last week. The 5-year ARM also moved lower, averaging at 3.14 percent. Last week, it averaged 3.24 percent.
According to a release from Bankrate, renewed concerns about the effect of higher gasoline prices on the U.S. economy as well as slower growth in China contributed to the lower rates this week.
The consumer finance company also noted that the last time mortgage rates were above 6 percent was Nov. 2008, which means that a $200,000 loan with a 30-year fixed rate at 6.33 percent would have a monthly payment of $1,241.86, compared to a $981.54 month payment with the average rate of 4.23 percent.
Las Vegas Home Sales up Sharply
The number of homes sold in the Las Vegas area rose last month to the highest level for a February in six years, with new-home transactions at a four-year high and resale activity the strongest since 2005. The median price paid for a home in the region edged up slightly from January, while the median’s year-over-year decline was the smallest in a year, a real estate information service reported.
In February, 4,240 new and resale houses and condos closed escrow in the Las Vegas-Paradise metro area (Clark County). That was up 5.0 percent from January and up 8.9 percent from February 2011, according to San Diego-based DataQuick. The firm tracks real estate trends nationally via public property records.
An increase in sales between January and February is normal. On average, sales have risen 5.6 percent between those two months since 1994, when DataQuick’s complete Las Vegas region statistics begin. The sales tally for this February got a boost from the leap year, which added one extra business day to the month.
In February, 3,744 homes resold (excludes newly built homes), up 5.1 percent year-over-year. It was the 14th consecutive month in which resales have posted an annual gain, and marked the highest number of February resales since 3,875 sold in February 2005.
February’s 496 sales of newly-built homes represented a 51.2 percent year-over-year increase. It was the highest new-home total for a February since 2008, when 911 new homes closed escrow. The average number of new homes sold in the month of February since 1994 is 1,351. New-home sales have risen year-over-year for eight consecutive months.
Total February sales were 11.5 percent higher than the average number of homes sold in that month since 1994, while resale activity was 52.7 percent above average for a February.
Continuing a months-long trend, February sales were strongest in the lower price ranges. The number of transactions below $100,000 rose 18.9 percent compared with a year earlier and represented 42.8 percent of all deals, compared with 39.2 percent of all sales in February 2011. The number of February 2012 sales below $200,000 rose 11.2 percent year-over-year. February sales above $300,000 rose 1.1 percent compared with a year ago, while sales above $500,000 rose 4.4 percent.