Wednesday, May 27, 2009

A Real Estate Flurry?

As pictured above, foreclosure auctions nationwide are still jam-packed. That ain't anything near what a *bottom* looks like!

Here's Mr. Mortgage from a couple of weeks ago commenting on the recent flurry of distressed real estate SALES in California and the misplaced *optimism* therefrom.

Food for thought on housing: 50% of buyers in the bubble states are first timers buying at the low end of the market, vacating a rental. The majority of the remaining buyers are investors tripping all over themselves trying to get a deal — just like they have done all the way down — in hopes of renting the property to the very same renters (first time buyers) buying the low end properties. DOH!

In other words, the speculators' plans of leasing their speculations for yield are being undermined by a sinking pool of applicants. And why the heck wouldn't someone buy at the low-end instead of renting? They can put nothing (3%) down, have the note underwritten by taxpayers via FHA, and then just walk away, skin intact, if need be.

My real estate buddy in Naples, FL tells me that he has had a few very wealthy guys (centi-millionaires) from up North come down looking to buy foreclosures - 5, 10, or more at a time. They tell him that they don't want to have anything at all to do with the *investment*; that they are looking for someone else to find renters and *manage* the units for them.

Now, do these fellas sound like sophisticated investors to y'all?

To me, neither.

Make no mistake, these new players just represent another set of soon-to-be-disappointed *knife catchers*. [The first group was contractors.]

While the speculators gobbling up *bank owned property* these days may be theoretically considered *strong hands* because they are mostly paying *cash*, this by no means suggests a bottom in real estate is anywhere close. In fact, it's hardly relevant as their strength is offset by the weakness of today's FHA buyers.

Nobody really cares how many shares of IBM traded today - price is all that matters.

And nobody really cares about how much of a loss people buying IBM today can bear either.

See also:

Fannie Mae Reincarnated - It's Called FHA

Knife-Catching In Cape Coral, Florida

The Gov't Throws Knives....And Morons Try To Catch 'Em

Our Speculator Takes His Loss


Anonymous said...

Check out this survey done by Manpower for Q2 2009. Historically, this quarter is a good quarter for companies to hire new workers but not this year...


Anonymous said...

I don't follow your reasoning.
Sales are starting to pickup, yes?

Granted, FHA terms are still loose, but tighter than (e.g.) last year?
And all of those [moronic] banks (BofA step forward please) have raised their standards significantly.

You don't see strength in that, ok. What would you see as a sign of strength in the housing market?


CaptiousNut said...

Don't misunderstand, I do see *strength* right now. It's just not sustainable; and only sucking in more suckers at high prices.

The only things that could keep houses at their present inflated levels....would be massive income tax cuts AND entitlement *reform*.

Personally, I'm not betting on either of those things happening.