My membership sitre, GaryNorth.com, has forums. Subscribers report on many things they have seen or have done. This caught my attention. It was posted on April 2.
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We just returned from the Phoenix area, where we have kids living.
My wife wanted to buy a small (cheap) condo to spend time w/ the grand-kids, and saw numerous listings in the $30k-35k on “Realtor.com.”
What we found was INCREDIBLE.
“Investors” are bidding on everything in sight, or not in sight, actually, since 90% of bids are CASH Offers, sight UNSEEN.
Many property listing we were given came out at 9am, and by noon had 15-30 cash offers at 20%-30% OVER the listing price, and no more offers were being accepted.
The “investors” (some of whom have bought 50-100 houses as investment groups) plan to rent the properties for 5 years or so, then kick the renters out and flip the houses for 100% profits minimum. Many cash-buyers are Canadians coming down because prices are “dirt cheap” in the US right now (their words).
The ONE place my wife and I liked, and would have considered living, was a small 1000sqft 2br townhouse (built in 1990, and still having all original 1990 appliances and interior) in good physical shape, but looking VERY tired, was listed at $75k, and on which we (reluctantly) bid $97k, but on which we were out-bid.
I don’t know if this is a “flash-in-the-pan” but banks are not releasing properties onto the market, and are retaining them at much higher prices on their books, and in two weeks of looking at maybe 30 properties, only ONE was a conventional sale by owner, with the rest being Short Sales. Not ONE was a foreclosure by a bank.
I’d say that 70% of sales are specified as cash-only, and offers contingent upon a property “appraising” (financed) are rejected even if the buyer says he will increase the “down” so as to make the sale go through.
Most offers with ANY conditions are not accepted, though by law, the bidder has 10 days to inspect the property after bid acceptance.
Houses that WERE being sold at auction on courthouse steps only months ago, are now back on the market after a quick-flip (new paint/carpet) at DOUBLE the auction price, with the winning bids being 20-20% above the asking prices, meaning $30k condos being listed at $59k, and actually selling at $75k or so.
I don’t know if current prices will hold, but researching them, we found many houses/condos (900-1000sqft) that sold in the mid 1990s for $75k appreciated to $200k by 2006/2007, and are now selling for about $100K again. Most of these would take $10-25k in upgrading to be considered “nice” and ready for habitation.
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Things can change in a real estate market very fast. It looks as though Phoenix’s bargains are being scooped up. But that’s because banks are still refusing to release inventory (REO properties).
It’s not just Phoenix. Riverside, California, another collapsed housing market, also has investors ready to buy. Fannie Mae and Freddy Mac are selling houses on a trial basis. But they do not allow would-be buyers to see the inside of the homes. So, the buyers are mostly groups, not individual owners. Historically, these people have not been good managers of single-family houses.
It’s a rigged market. Rigged markets save money on information costs. The quality of information falls. So does the quality of management.