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Old 03-20-2014, 03:58 PM
 
5,444 posts, read 4,851,362 times
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Quote:
Originally Posted by ELCO5280 View Post
My contention is the banks are artificially lowering the inventory by holding on to a vast majority of their BOP thus artificially inflating prices. Banks know if the released all their bank owned properties at once it would kill the prices. Am I wrong?
I don't think you are wrong, but this is just business as usual. Supply and demand. If demand is high, you don't flood the market with supply. You ease your supply out there until you see the balance between supply and demand.
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Old 03-20-2014, 04:00 PM
 
20,905 posts, read 39,184,055 times
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Also, some hedge funds have bought up TENS of THOUSANDS of foreclosed homes in the past two years, sucking up the supply of homes worth renting. They'll wait for a better time then resell at a nice profit.
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Old 03-20-2014, 04:05 PM
 
5,444 posts, read 4,851,362 times
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Quote:
Originally Posted by Mike from back east View Post
Also, some hedge funds have bought up TENS of THOUSANDS of foreclosed homes in the past two years, sucking up the supply of homes worth renting. They'll wait for a better time then resell at a nice profit.
I also believe that Denver never really got hammered by the housing bubble like other states. Because of this, there never really was a huge drop in pricing to begin with.
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Old 03-20-2014, 07:38 PM
 
Location: The Berk in Denver, CO USA
14,033 posts, read 20,349,383 times
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Default You are

Quote:
Originally Posted by ELCO5280 View Post
My contention is the banks are artificially lowering the inventory by holding on to a vast majority of their BOP thus artificially inflating prices. Banks know if the released all their bank owned properties at once it would kill the prices. Am I wrong?
There is zero evidence of significant REO in greater Denver.
There is almost no inventory.
If you own a property and want to sell, now is the time to put it on the market.
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Old 03-20-2014, 08:04 PM
 
8,317 posts, read 25,852,394 times
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Unlike many, I think we are absolutely in another bubble. One has to remember that the Feds have done everything possible (including wrecking the long-term future of the country) to keep interest rates at practically zero. That has been done so that federal borrowing costs to finance the massive and mushrooming US federal debt don't explode to the point that it collapses the whole economy and renders the US currency worthless in international trade. A temporary side effect of that is to paper over the fact that much of the housing market really isn't affordable at current prices--only rock bottom interest rates make it seem that way.

Meanwhile, savers are getting negative real returns on their savings, inflation is rearing its head (despite the Federal government cooking the books to make it seem not to be so), and many banks would be insolvent under any realistic accounting standards. Eventually, people will figure out (and I suspect a lot of foreign investors will figure it out ahead of Americans) that this all is just another house of cards with no sound foundation. When that happens, we'll see just how big that bubble really is. In places like Denver, I think it will be found to be plenty big, with a huge downside.

The big question is how all of it will play out. I personally think that the Fed will risk hyperinflation to paper over the fundamental unsoundness of the US financial system, so I think a hyperinflationary event, followed by a severe deflationary depression and collapse is a likely eventual outcome (think Weimar Republic in Germany in the early 1930's and how THAT turned out for them). A worst case (and one that could certainly wallop the Colorado economy and real estate market) would be one-two punch where prices for basic things needed for survival--food, fuel, etc. explode in price while real estate, savings, investments, and other assets collapse due to a severe erosion in purchasing power. Those types of economic scenarios are nearly impossible for the typical citizen or small investor to prepare for--in part because investing for a hyperinflationary scenario is nearly an opposite strategy to investing for a deflationary one. Yet, that may be how things play out.

In more stable times, real estate could be a relatively safe and prudent long-term investment. In today's volatile economic environment, the holding costs and illiquidity of real estate makes it pretty risky. I have been analyzing real estate markets for more than 30 years. Right now, I have minimized my personal financial exposure in the real estate markets, nearly totally so in Colorado.
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Old 03-22-2014, 12:14 PM
 
Location: Denver, CO
1,627 posts, read 3,719,043 times
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Yes, "investment" is fine, but how does this affect people looking to buy a place to LIVE?
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Old 03-25-2014, 06:29 AM
 
Location: Rockport Texas from El Paso
2,601 posts, read 7,528,489 times
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Zen makes a good point. If Denver gets too pricey and many might say it already is - it may discourage growth. There are of course cheaper places to live in Colorado.
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Old 03-25-2014, 09:19 PM
 
Location: Denver, CO - Capitol Hill
557 posts, read 668,060 times
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Financial institutions don't "sit" on properties that are marketable and saleable. Why would a financial institution, in the business of getting returns on assets, sit on a non-cash generating asset when the market is at an all time high? They want to flip those suckers as soon as they can, nonetheless in this hot of a market.
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Old 03-28-2014, 09:24 PM
 
Location: C-U metro
1,366 posts, read 2,732,492 times
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Quote:
Originally Posted by JD401 View Post
Financial institutions don't "sit" on properties that are marketable and saleable. Why would a financial institution, in the business of getting returns on assets, sit on a non-cash generating asset when the market is at an all time high? They want to flip those suckers as soon as they can, nonetheless in this hot of a market.
I think this antidotal tale may help. My neighborhood in Tulsa has a former drug house. This is in a well to do area where homes range from 350k for a 2,500 sf house to 2M custom mansion (recent sales all in the past year). The former owner reverse mortgaged it to the hilt, put the house in trust with the kids as trustees and went in a nursing home. Her kids took the money, dumped her onto Medicare, and started up a meth lab in the house. She passed, the kids are in jail and the bank just bought the house at the foreclosure sale at 275k, the value of the note, for a home with all the wire and pipe stripped out, at least one known meth lab and trashed floors, furnaces, ect from junkies. The bank will sit on that house until they realize nobody should pay more than $10 for the house. The plot is worth a chunk of money but the hazardous waste disposal of the meth lab residues and asbestos in the house wipes out the value of the raw land. We don't know when the house will be demolished but it will likely be many years before it is. Banks are foolish with worthless properties like this. They think they can polish a turd and make it work. Truth is, they are just delaying booking the losses.

Take this case and put it in Denver. A housing bust will create a large number of homes with THC residues in them that will sell for less than market to people who don't want the residues. Cigarette smokers homes sell for less than market and pot smoker homes should follow that notion or sell for less than cigarette smokers homes. The banks won't approve the sale, at a loss, because some goober in the home office thinks its worth more. The sellers eventually get tired of or can't support the payments, the bank forecloses and if it sold quickly, would get tagged with a 10-15% loss due to the pot. If they sit for five years, the market and inflation may make it so they have a nominal loss or push sale.
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Old 04-09-2014, 07:01 AM
 
Location: Washington Park, Denver
6,947 posts, read 6,558,057 times
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Quote:
Originally Posted by flyingcat2k View Post
I think this antidotal tale may help. My neighborhood in Tulsa has a former drug house. This is in a well to do area where homes range from 350k for a 2,500 sf house to 2M custom mansion (recent sales all in the past year). The former owner reverse mortgaged it to the hilt, put the house in trust with the kids as trustees and went in a nursing home. Her kids took the money, dumped her onto Medicare, and started up a meth lab in the house. She passed, the kids are in jail and the bank just bought the house at the foreclosure sale at 275k, the value of the note, for a home with all the wire and pipe stripped out, at least one known meth lab and trashed floors, furnaces, ect from junkies. The bank will sit on that house until they realize nobody should pay more than $10 for the house. The plot is worth a chunk of money but the hazardous waste disposal of the meth lab residues and asbestos in the house wipes out the value of the raw land. We don't know when the house will be demolished but it will likely be many years before it is. Banks are foolish with worthless properties like this. They think they can polish a turd and make it work. Truth is, they are just delaying booking the losses.

Take this case and put it in Denver. A housing bust will create a large number of homes with THC residues in them that will sell for less than market to people who don't want the residues. Cigarette smokers homes sell for less than market and pot smoker homes should follow that notion or sell for less than cigarette smokers homes. The banks won't approve the sale, at a loss, because some goober in the home office thinks its worth more. The sellers eventually get tired of or can't support the payments, the bank forecloses and if it sold quickly, would get tagged with a 10-15% loss due to the pot. If they sit for five years, the market and inflation may make it so they have a nominal loss or push sale.
This anecdote is so funny I don't even know where to begin. To think that a situation like this is going to drive the market at all is laughable.

No financial institution is willing to sit on a property for 5 years in the hopes of breaking even. Cash now.

Pot does not have the same environmental hazards as meth.

Pot smoker homes don't smell like cigarette smoker homes.

Last edited by SkyDog77; 04-09-2014 at 07:40 AM..
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