Hey, RE investors. Is it time for "More Good RE News"

[turbo6bar]

I am beginning to see capitulation amongst the banks regarding REOs. I'm seeing steady, but persistent price declines. I made an offer on one POS property that is only worth land value. The bank declined and the broker claims they will only accept a full value offer. This firm attitude is impotent as they've managed two 10% price drops in the past 3 weeks. They seem to believe they can win in a game of chicken?

Also, I'm seeing foreclosure pricing dip significantly. Adjusting for very modest inflation, some fixer-uppers are cheaper today than 10 years ago.

For the record, I am a vulture. I pick up scraps. I am proud of what I do. When long-term investors begin to jump on, you'll know real estate pricing is beginning to reflect fundamental values. Fundamental valuations support a healthy balance of cash flow, equity paydown, tax benefits, and price appreciation. Of course, RE investing is passé, now. It has morphed into horrible subject matter for TV. That's perfect, IMO.
jurgen

[Jim Sims]

Still goin' down; many institutions and individuals will hang on until it is too late and they'll "drown in the suction".

[GDSOB]

It's getting real interesting now. I'm out of the market for another year or two. Gotta get out of Ohio first... and long enough to forget the fond memories of managing over 70 sec 8 tenants!

[asphaltgambler]

I agree, seems to me that some / most institutions are either ignoring the obvious continued market down turn or oblivious to it. Better to take some loss on the short than to hope and hold for the full loaf of bread IMO.

The 'other' mortgage products that are just now starting to implode are the "Alt A's" and "Option ARM's" which are now just starting the first adjustment. If you think the bubble has exploded because of the subprime; just wait another 6 months to a year for these products to land back in the holders lap.

[legion]

When we have the media howling that RE will never be a good investment again (and citing all sorts of reasons that sound good on the surface but fall apart under scrutiny) and the parasitic players (housewife realtors, "flippers", high-school dropout mortgage brokers, etc.) are driven from the market, leaving only the real professionals, then we'll know we're about a month or two past the bottom.

Oh, and I need to get my house in sale-able condition. Time to move up...

[legion]

Originally Posted by asphaltgambler

I agree, seems to me that some / most institutions are either ignoring the obvious continued market down turn or oblivious to it. Better to take some loss on the short than to hope and hold for the full loaf of bread IMO.

And the way the finances of many of the mortgage-issuers are, it's much better to have the cash than the asset they can't move...

[Danimal16]

Originally Posted by asphaltgambler

I agree, seems to me that some / most institutions are either ignoring the obvious continued market down turn or oblivious to it. Better to take some loss on the short than to hope and hold for the full loaf of bread IMO.

The 'other' mortgage products that are just now starting to implode are the "Alt A's" and "Option ARM's" which are now just starting the first adjustment. If you think the bubble has exploded because of the subprime; just wait another 6 months to a year for these products to land back in the holders lap.

That is what I am watching and it seems to be the trend. I have three props, two are still doing well but my Cali prop is a disaster. I have a business decision to make but am waiting. Sometimes risk bites a risk taker. My basic approach is to wait it out and it does look like 09 is going to see some more hurting. So what to do?

For those with more expertese than I have, what is your take on areas of the country that are doing better? I have property in Park City as well as Saint Helens Oregon and they are doing well. What other areas in your opinions are doing ok and should be watched? It seems to me that there are going to be a ton of opportunities out there (if credit eases) in the next 12 to 24 months. I am curious of your thoughts.

[Zeke]

You are dealing with bankers and banker mentality. What did you expect, logic?

[GG Allin]

I sell realestate on the side here in Illinois. The last two deals that I've done have been forclosures. The first one, over the summer was a condo in Chicago. The bank played hard ball. We made a reasonable offer and they would not budge. The last one was a house in Barrington IL. (affluent suburb) on five acres, the bank took our lowball offer no questions. They even threw in a $1000 bonus to each Realtor, due to the fact that we closed quickly and it was a cash deal. That home's two previous sales were $670K in '06 and $281K in 97. My buyer paid less than the guy in 1997.

[legion]

What!?

Are you telling me that RE in Barrington is getting cheaper than in Bloomington!? A shed on five acres, outside of Bloomington, would run $400-$500k right now...

[GG Allin]

Originally Posted by legion

What!?

Are you telling me that RE in Barrington is getting cheaper than in Bloomington!? A shed on five acres, outside of Bloomington, would run $400-$500k right now...

It was a hell of a deal.

[turbo6bar]

Originally Posted by Jim Sims

Still goin' down; many institutions and individuals will hang on until it is too late and they'll "drown in the suction".

I must agree the market will continue to spiral down. Commercial RE is not a place to be dipping toes. However, with regards to residential RE, I believe there is safety when
1) rents easily support debt (cap rates well above 10)
2) purchase price is at or near build cost

Perhaps one should not be gorging out now, but a few nibbles here and there can't be bad.

Originally Posted by GDSOB

and long enough to forget the fond memories of managing over 70 sec 8 tenants!

Seventy Section 8 tenants. Not on my enemies I would wish it.

Originally Posted by Danimal16

For those with more expertese than I have, what is your take on areas of the country that are doing better? I have property in Park City as well as Saint Helens Oregon and they are doing well. What other areas in your opinions are doing ok and should be watched? It seems to me that there are going to be a ton of opportunities out there (if credit eases) in the next 12 to 24 months. I am curious of your thoughts.

Truly hit and miss, and above all: location, location, location. Within each city, you can have the dives and the gems. Deals I never saw for years, much less 2 months ago, are suddenly popping up like fire. Who's to say Tennessee is like any other part of the country for deals? It does seem like Countrywide has been quite aggressive with pricing. They may have inventory issues.

Originally Posted by mbrouder

That home's two previous sales were $670K in '06 and $281K in 97. My buyer paid less than the guy in 1997.

Exactly why I started this thread. The prices on some properties are jaw-dropping. A person with cash and the eye for deals can hit massive home runs. Today, the carpet guy told me of a deal from his sister realtor: house that would appraise for $175k with an asking price of $64k (needs $4-7k in repairs). He, like most other folks, are really cash strapped (too many toys and too little income). I empathize with him, but it's good for me, maybe.

[turbo6bar]

Well, I am always been the type to zig when others zag, but the unemployment numbers and economic outlook for the next 2 years is bleak. I'm gonna cool the jets for a month or two to see where things are heading. I have two rentals vacant right now, so I should get a good read on the market by how quickly/slowly they are filled.

[911Rob]

I like the zig and zag approach; everyone is ziggin and I'm zaggin.

First, you figure out what "everyone" is doing, because usually the solution is to just do the opposite? Go against the flow. Me peeps calls me Mr.PMA; but I've been lurking and watching the masses.

We definately are in a strong correction, but my area hasn't seen a real turn for the worse. BC is probably one of the strongest Provinces in Canada right now, so that helps. Things are worse down East.

So I've got about half my current developed sub-division sold off and built and I want to stimulate some sales activity. I dont want to reduce my prices too drastically as I've worked hard to get the appraised values where they are, and I have recent sales where buyers could be disgruntled that I oversold to them?

So I decided to process a price reduction of about $30,000; which is knocking $10,000 off my lot prices and coming out with this campaign.....


I'll be launching this about the third week of January; but we've already processed it through MLS and our website and have started to receive calls. The bottom line is we're kicking in $20,000 towards the sale with this campaign and we can run it for as long as we want to without reducing the value of our homes. I've got 13 homes left to build, my bottom line goal for the first quarter is to generate 6 sales.

What do you think?

[GDSOB]

Rob, How are you doing this promotion? Are you pre-paying PITI out of proceeds? Does the buyer's lender accept this program, or do they want to see lower price? I typically see the rate buydowns from builders.

[911Rob]

Hey Garth,
Working through the details, but we're planning to provide 12 cheques for the mortgage payments at closing. Not sure what the lenders will have to say?????

My main goal is to generate sales; that starts when the phone actually "rings"

I've got some experts working out the details fyi.

[turbo6bar]

Originally Posted by 911Rob

I'll be launching this about the third week of January; but we've already processed it through MLS and our website and have started to receive calls. The bottom line is we're kicking in $20,000 towards the sale with this campaign and we can run it for as long as we want to without reducing the value of our homes. I've got 13 homes left to build, my bottom line goal for the first quarter is to generate 6 sales.

As long as the lender is OK with it, I see nothing wrong.

BTW, I've read Vancouver is having issues with construction for the upcoming Olympics (financing falling through). This, along with a rapidly weakening commercial real estate sector might present unexpected downside for your area. I have no idea if Vancouver's economy affects you, but I would keep it in mind.

I believe one must be proactive and positive, but at the same time, cautious. regards, jurgen

[aigel]

Not sure where you all live. Good areas in SoCal are holding up surprisingly well. I am thinking about getting back in (owner occupied) but there are no bargains yet: I can live in Upland and San Bernardino for cheap now, but show me the deals i.e. in South Pasadena, Irvine or El Segundo please? Average income in the good areas does not support the current prices. With creative financing gone, prices can only drop more. Another 30% should be possible in the areas holding out by 2010?

George

[look 171]

Originally Posted by aigel

Not sure where you all live. Good areas in SoCal are holding up surprisingly well. I am thinking about getting back in (owner occupied) but there are no bargains yet: I can live in Upland and San Bernardino for cheap now, but show me the deals i.e. in South Pasadena, Irvine or El Segundo please? Average income in the good areas does not support the current prices. With creative financing gone, prices can only drop more. Another 30% should be possible in the areas holding out by 2010?

George

areas like S Pasadena and the near by areas are stilling holding it pricing rather well. Is not what it was 3 years ago, but not too many beat up or REOs arouond. In the poorer section of town, like S bernando, riverside or such, then there are tons. I belive you can buy in Palmdale for 150k.

[HardDrive]

My sister lives in Highland Park, LA just over the border from South Padadena. They bought at the peak, and their home value if off about 20%. But it hasn't really moved down anymore in the past 6 months. Her area is not affluent. Not a lot of homes go on sale in the area because it is mostly established hispanic familys that have been in their houses for decades. I think the whole real estate bubble passed the area by somewhat.

Were only off about 10% from the peak in our area of Seattle (Laurelhurst).