Dr. Housing Bubble 07/24/14

[Crewleader]

The drought of young California home buyers: Unaffordable housing reigns supreme as first time home buyers squeezed out of market. Of 7,000,000 completed foreclosures since 2005, 1 million occurred in California.

It is safe to say that the momentum of 2013 has fizzled out in the housing market. Sales are down and prices are reaching a plateau. Part of this has come from the slowdown of investors purchasing homes in the state. An interesting end of the year study by the California Association of Realtors (CAR) found that 82 percent of investors that bought in 2013 had the intention of turning the home into a rental. The other 18 percent were giving the old flipper lottery a try. This helps to explain why inventory continues to remain lowbecause in more typical markets, a person selling the home would usually also buy another home in the ragtime favorite trend of property laddering your way into a bigger home. In other words, two transactions with one move. Today, you have many investors buying foreclosures from banks with a one and done deal (buy the home from bank and then put it on the market for rent). Yet from contacts in the housing industry, the lack of first time home buyers is dramatic. In 2013 the argument was that pent up demand for young buyers was going to give housing another dramatic run higher. In reality, 2013 gave us a massive run from investors and with them slowly pulling back, the market is already entering into a tipping point. Flippers buy for appreciation so what happens when prices stagnant or turn lower which is typical in these boom and bust cycles? In reality, first time buyers are absent because they can’t afford to buy in California.

First time buyers pushed out

http://www.doctorhousingbubble.com/young-california-home-buyers-drought-total-california-foreclosure-count/

[Auggie]

1. Just had our S.F. Bay home appraised ...

I have nothing to compare it to from a year ago except neighborhood comps, but I suspect it must have risen in value by $75,000.

BTW, the median home price in San Francisco is now slightly over $1,000,000. It's nuts.

[Crewleader]

2. You're in a beautiful area Auggie

San Francisco is so expensive indeed.

Nice meeting you.

[dixiegrrrrl]

3. About that buying to turn into rentals.

HUGE deal of late. Dozens of very high end hedge funds have been investing in rental schemes, paying cash for homes, above asking price, which is why normal buyers cannot compete.
Then, turning the homes into rentals, hundreds of them, and THEN selling the rental payments as securities....just like mortgage bonds were sold.
Rental income is thus packaged up and sold as income producing bonds to pension funds, other buyers.

However.....occupancy rates are falling in those rentals. Poor hedge funds cannot figure out why.
Duh....