Equity Funds Pull Back On Home Buying In Southwest Florida (Tamiami: short sales, real estate market)

[wondermint2]

Equity funds pull back on home buying in Southwest Florida | HeraldTribune.com

[TamiamiTrailBlues]

The bubble is about to burst again.

[bbronston]

Originally Posted by TamiamiTrailBlues

The bubble is about to burst again.

BUBBLE?

[Sunshine Rules]

I wouldn't count on another real estate bust anytime soon, at least not in the Sarasota area, as this market is different from the previous boom/bust in the early 2000's.

For one thing, a significant number of buyers over the past few years have been paying cash for properties. Back 10 years ago a majority of the buyers were using creative financing -- 100% financing, 103% financing, 100% investor financing to name the more popular ones. (And don't get me started on what I think of banks loaning investors 100% - 105% of the purchase price.....)

Current buyers that are getting financing are having to put $$$ down in order to obtain a mortgage. I've seen many convention loan buyers putting down 10 - 20% or more. Granted, there are FHA buyers still putting down just 3.5%, but their numbers are small as stronger buyers (cash, conventional) are typically being selected over FHA buyers by sellers, that is, IF the sellers are even willing to consider FHA buyers at all.

With the exception of a handful of communities that meet the Fannie/Freddie guidelines or certain REO listings offering financing, all other condo sales in our area have been cash buyers.

So a majority of the property owners who have purchased in our market over the past few years are not going to be walking away from their properties as owners did 10 years ago that didn't have any skin in the game, so to speak.


I study the statistics from a number of reputable market tracking companies, read the "experts" opinions on interpretation of the stats and their predictions for the future of the SW FL market. Some are expecting prices to drop somewhat as the big investors stop buying in our area, others expect prices to keep trending up (although at a slower pace than we experienced in the past year) due to lack of inventory in many price ranges, still others expect prices to trend up more slowly but be impacted 5 - 7 years out when the big institutional buyers may start selling off some of their inventories of homes. Still others expect prices to stall out in some price ranges, keep trending up in others. So the "experts" are all over the map on future trends of the area real estate market.


I had heard several weeks ago from a very reliable source that is very familiar with the Blackstone purchases that they are now concentrating their buying in other parts of FL, including central FL, and looking at other markets in other states as well.

I've also heard that local "fix and flip" investors are having more difficulties finding properties in our area that they can fix and flip and still meet their required margins of profit due to the lower inventories. So many of them are sitting on the sidelines, hoping the banks will bring more REO listings to the market in the near future.


I think many buyers will be happy to see the big investment institutions leaving our area as these big investors have been snapping up properties that otherwise would have gone to buyers looking to owner occupy, whether full time or seasonal.

[Cardiff by the Sea]

^^
Tried to give rep points, but got the message I have to spread the love around. But thanks for your insights.

[wondermint2]

I noticed rental prices in the area have been increasing at a fast pace also. I wish the big rental price increases would subside also.

I read something in the article about some new flood insurance law likely to keep area rents high -

[wondermint2]

They were talking about the Blackstone situation on the Phil's Gang Radio Show today.

He says Blackstone and the others can't make enough profit with their current business model because their houses are over-inflated in value.

He says Blackstone intends to rip-off investors by creating securities for their rental properties and offering them to the public. They'll have a fancy prospectus and brochure, get their pal Warren Buffett & Moody's to give the securities a 'AAA' rating. He say's investors will flock to it.. But underneath the surface it will turn out to be a bad investment.

[TamiamiTrailBlues]

Originally Posted by bbronston

BUBBLE?

What I meant was the investors who are artificially raising the home prices are about to get stung.

Sent from my Samsung Galaxy Note 2 on ATT LTE

[Enigma777]

Originally Posted by TamiamiTrailBlues

What I meant was the investors who are artificially raising the home prices are about to get stung.

I thought the intention of the investors is to hang onto the homes for at least a few years while prices increase, and then they will flood the market with sales at the right time. There are plenty of people moving to Florida and this should continue as an increasing amount of boomers continue to retire. The kind of fraudulent flipping, subprime mortgages and creative borrowing is not in practice any longer, so another crash is most likely not in the offing. Prices will simply not increase at the same level as during the boom, but at the same slower pace that they have for years. When the foreclosures and short sales are exhausted, there will no longer be "deals", and people will have to pay for the value of the property.

[Cardiff by the Sea]

My understanding is that the equity funds are not able to rent them at a rental rate that covers their holding costs. They probably thought the rent would cover their carrying cost (i.e. pay the mortgage or give them money to share with their investors while they waited for the price increase). Rents in Florida are rather low compared to the cost of real estate. But their geniuses paid too much and put themselves in a negative cash flow situation. Having discovered themselves in a hole, they wisely decided to stop digging.

The bubble may come sooner for those who invested in REITs. I would not expect the overall market to crash, but it probably wont appreciate like it has been recently.