patrick.net

I think shadow buyers are people who simply can't afford to buy, which is why you are seeing investors buy and not able to sell for profit these days. Happens a lot around here.

There are certain price points people won't go past simply. And it's not like people are dumb, everyone expects interest rates to climb and prices to drop. It's inevitable.

Shadow buyers? Most of the so-called offers do not exist. I know a Realtor who got sick from lying for a living---he told me that. This Realtor specialized in REO's. Some of these REO's were listed and relisted for years as the banks chased the prices down. Initially, they almost always list much higher than the real market is willing to pay. Here is the story. He told me that he would frequently receive telephone calls from buyers who wanted to know what happened to their written offers. He would look in the file and fine NO OFFERS in the case file. One reason is that Realtors are trying to keep the prices and their commissions as high as possible. Another reason is that banks track the performance of the Realtors who get their assignments. If a Realtor starts bringing in offers ( even from buyers agents) lower than asking, or if they want the house to be repaired or painted...spending more money) , they will pull all listings and only use agents that get the highest dollar on sales. I have even seen a bank form used to evaluate these scum suckers. Some banks even require realtors to buy books, videos and pay "training fees" to learn how the bank wants them to sell. Realtors are "fired" if they make low offers or don't cut the mustard with the fraud. Banks blame the Realtors for not getting the prices they want....!

I think shadow buyers are the ones already in their graves...

Roberto, I think that you have a good point. In fact, it is something that I have thought about casually, but never really put into words. The reality is that all of the would-be buyers on here that are renting and saving for houses right now, myself included, are actually enemies. We feel camaraderie because we are irritated with the market and whatnot, but in the end, at least in the SFBA, we are all in direct competition for whatever inventory there is. I bet that at least two people on here have bid against each other for a house, unknowingly. It's sort of funny to me.

Well, here is one example of a sad, little, low end one bedroom that that has 'sold' and re-listed 13 times since 2008, might be what the Beverly Hills guy is talking about.

http://www.redfin.com/CA/Tarzana/18530-Hatteras-St-91356/unit-228/home/4061000?utm_medium=email&utm_source=myredfin&utm_campaign=listings_update

E-man says

Is this observation for San Jose, or the Bay Area? Interesting development indeed.

E-man. Here some examples what’s going on in rental construction alone. 4K new units this year in SJ.
http://www.mercurynews.com/business/ci_21274644/rents-rise-so-does-silicon-valley-apartment-construction?IADID=Search-www.mercurynews.com-www.mercurynews.com
http://www.bizjournals.com/sanjose/blog/socialmadness/2012/07/another-tower-planned-for-downtown-san.html
http://www.santanarow.com/more/about/news/
http://www.bizjournals.com/sanjose/blog/2012/06/e-brokaw-road-earmarked-for-261-new.html
http://www.bizjournals.com/sanjose/morning_call/2012/05/afl-cio-sares-regis-building-689m.html

I'm so tired of people talking trash on a low down payment amount. Let me tell you when my grandparents purchased a house it was parallel to their one person household income. Suck on that for a while. Real Estate has become so over inflated, no one can afford to come up with these down payments. My parents bought a house and as soon as the bank understood what their investments were they strong armed them into putting close to 100k on a 289k house. Give me a freaking break. Anyone who has half a brain can figure out this is an absolute wealth grab for the 1% and the game is rigged. What the heck do you think all this road work is. Research the companies doing the work on the roads, they are privately owned by super uber wealthy families (the 1%). Yeah the working class stiff will get his union pay buy some groceries from Monsanto, pay his utilities to companies headed by CEO's that make in the vicinity of 45mil a year (like winning the lottery every week) but ulimately the 1% will make a fortune off the backs of the tax payers and then stuff it in a Swiss bank accounts. Nothing is being circulated back into the economy. The Banks and this whole scam to hold back inventory in order to bundle it for investors (translation-1%) are part and parcel to our country being hi-jacked. Democracy or Oligarchy???

Well, I have a bug in the works for those trying to sell reo's. The customers that they are hoping for are not there. Jr who is living with mom and dad will inherit their house, and let mom and dad live with them. That way Jr takes over the yard work and upkeep, and mom and dad have a son or daughter to pay them small under the table rent and utilities. Jr will take on more and more responsibilities as he or she pays off student loans and moves up in a career. The american public is short circuting the banks and keeping their depreciating assets in the family never really paying off the mortgage, and treating the house as a revolving debt instrument as they did when the prices were climbing. Basic math, and extended family problem solving. touche banks

Jack1968 says

Democracy or Oligarchy???

Oligarchy? I think we already into this. Democracy now is a fiction in people minds. They go to vote because treat it as religion, don’t really understand what ballot says. So many important decisions are made without asking voters.
When you look what happened with small businesses; pastry shops, butcher shops, nursery, hardware stores, coffee shops, repair shops, family manufactures, it’s all like lesson from history now. Franchising is the only option left. In newest trend in franchising, “owner” does not even have equity, but is called as an “operator” on salary. The next big step is to slowly remove home ownership from hands of middle class.

Darrell In Phoenix says

Jack1968 says

. Real Estate has become so over inflated,

Sit tight. Prices are falling and will continue to fall until they reach early 1990's levels.

Your too generous. Houses will fall right up to the point where even Roberto with his all cash deals will be underwater. His rent will not be enough to cover the taxes and insurance on the piles of junk. Add to it that his tenants will be high stung crackheads that can snap at anytime at the mere sight of the landlord. Collecting the rent money will become a lesson in self preservation each and every month. Then, and only then, will we be truly at a bottom. All the bottom feeding Robertos will find themselves homeless and pennyless. Only then can the real healing begin for this country. ;)

robertoaribas says

Only if I rent to you, halfabrain!

I don't think you will be in the position to choose, at that point. You will be too busy writing essays to your prospective tenants, explaining why they should rent from you and not the other 10,000 desperate landlords.

dunnross says

robertoaribas says

Only if I rent to you, halfabrain!

I don't think you will be in the position to choose, at that point. You will be too busy writing essays to your prospective tenants, explaining why they should rent from you and not the other 10,000 desperate landlords.

As much as I disagree with your stance about the housing market, you can be funny sometimes.

Cheers. :)

robertoaribas says

Only if I rent to you, halfabrain!

I screen my landlords quite extensively. Sorry, you wouldn't make the cut. I only rent from landlords who are not investors and care more about the continued quality of their homes than the positive cash flow. They are out there and do exist, just takes some leg work to find them. Still a lot less leg work than finding a home to buy IMHO.

robertoaribas says

investor90 is off his meds... what a load of made up crap! REO's sell and sell fast once they are listed, you can make up all the fiction you want, but someday, you might want to live in reality!

Not true. I've seen REOs in my area linger for YEARS, being re-listed up to a dozen times. I offered on one that took about 5 months to finally sell--below my offer. I got sick of the listing agent's games and pulled my offer.

Oh. And I live in a "fortress" area.

rufita11 says

robertoaribas says

investor90 is off his meds... what a load of made up crap! REO's sell and sell fast once they are listed, you can make up all the fiction you want, but someday, you might want to live in reality!

Not true. I've seen REOs in my area linger for YEARS, being re-listed up to a dozen times. I offered on one that took about 5 months to finally sell--below my offer. I got sick of the listing agent's games and pulled my offer.

Oh. And I live in a "fortress" area.

San Ramon is considered a fortress?

dublin hillz says

rufita11 says

robertoaribas says

investor90 is off his meds... what a load of made up crap! REO's sell and sell fast once they are listed, you can make up all the fiction you want, but someday, you might want to live in reality!

Not true. I've seen REOs in my area linger for YEARS, being re-listed up to a dozen times. I offered on one that took about 5 months to finally sell--below my offer. I got sick of the listing agent's games and pulled my offer.

Oh. And I live in a "fortress" area.

San Ramon is considered a fortress?

Not the crappy hoods near Dublin, but the ones near Blackhawk.

rufita11 says

Not the crappy hoods near Dublin, but the ones near Blackhawk.

Oh snap.

PockyClipsNow says

Hell if/when mortgage rates hit 2% even some of the perma bear renters will buy if they can do a low down payment.

No they wont, by the MIP and servicing fees, will be $500 a month.
That 2% may well be a 12% mortgage by that day.

I think Jobs and economic security is holding the market back the most.
Well I know it's the single biggest factor.
And not just economic insecurity because of the way the cookie has been crumbling. But because there doesn't seem to be anyone involved with the decision making process, that gives the slightest sliver of hope to anyone other than the upper crust.

I bet if we sent Ben Bernake and Tim Geitner on a 3 month long vacation, where there were unable to make any decisions. The economy would rebound. If people with money had to actually risk their money and put it to work.

Roberto, you bring up a good point in that there is no shortage of buyers either standing on the sidelines waiting or trying to buy but continually getting out-bid (I didn't say "over-bid" on purpose by the way), especially for lower end real estate.

This site has no shortage of cheerleaders that are quick to rip on real estate agents and call them liars (no opposition here). But worse than a lying agent is the cheerleader type who will never be able to buy a house and yet constantly harps on how real estate has another 65% to drop any chance they get and to anyone that will listen.

robertoaribas says

RentingForHalfTheCost says

robertoaribas says

Only if I rent to you, halfabrain!

I screen my landlords quite extensively. Sorry, you wouldn't make the cut. I only rent from landlords who are not investors and care more about the continued quality of their homes than the positive cash flow. They are out there and do exist, just takes some leg work to find them. Still a lot less leg work than finding a home to buy IMHO.

sure you do... sure you do...

you are an utter idiot, and you know it..

I know what an idiot is, that part is true. ;)

Call it Crazy says

.... they don't have two plugged nickels to use as a down payment, no matter what the mortgage rate might be....

And that's a good thing - people who have no choice but to live check to check should not be buying homes.

*grunch*

The reason you don't hear about shadow buyers is because they only come out when prices drop low enough where they are comfortable buying.

Prices would have to drop to around 10% below rental partity to appreciable increase the population of buyers, and even then the overall number is limited to those that can qualify for loans or have cash at the lower price point.

Real estate has proven to me to be a sucker game for fools well-crafted by a few to make a quick buck off many. Get out of their spin cycle and maybe you will start to generate real wealth.

Remember the old saying if you don't see the sucker in the game? The sucker is YOU.

Prices are going up. The unseen hand is guiding the market. The inventory will never hit with volume and drive prices down. Sorry guys.

domara says

Prices are going up. The unseen hand is guiding the market. The inventory will never hit with volume and drive prices down. Sorry guys.

I think you need to lay off whatever you are ingesting dude.

Darrell In Phoenix says

Sorry kiddo but prices are falling in price per square foot irrespective of location.

Worse yet, there are 25 MILLION excess empty housing units in the US today.

I live in a very high-end residential island that is extremely desirable. I see houses on every block foreclosed on and/or For Sale. I could NOT agree with you more, it is the worst I have seen it where I am in my lifetime. In this economy anyone who thinks that prices are rising or sales are increasing are in for a rude awakening if they ever snap out of their delusion.

Reader says

domara says

Prices are going up. The unseen hand is guiding the market. The inventory will never hit with volume and drive prices down. Sorry guys.

I think you need to lay off whatever you are ingesting dude.

Reader

Nah. You should have said. That's some good stuff you're ingesting there. Can I have some? (sarcasm) wouldn't that be funnier? ;)

On the other hand I would like to see it illegal to list, then reduce, reduce, reduce and realise oops this looks like shite I better take down and relist just not to show drops in pricing. It is all desperation.

Gentlemen, you may disagree with me. I had a similar opinion a few months back. I ask you to look at what is happening in California. Prices are going up, supply is contricting and the unseen hand is buying what little supply makes it to the market. This will happen across the US. I believe you will see that prices will go up and the inventory will never come onto the market in any significant volume. You are free to tell me I am wrong in the coming months, if that is the case or write me and discuss real estate if I am right. domara@watson.com

Drop me a line if I am right, I have an ego too and love to gloat a little.

domara says

Prices are going up, supply is contricting and the unseen hand is buying what little supply makes it to the market.

Ok. We know that. Spill the details. Who is manipulating the housing market?

I do not know.

The banks all pulling back on REOs, the hedge funds funded and ready to go would lead me to believe this was concieved in 2011 and implemented in 2012.

domara says

I do not know.

:-) Thanks. I'll agree with that. You're theory is as good as anyone's.

David,

I commented because the majority of contributors were waiting for the onslaught of shadow inventory and lower prices. I think the game has fundementally changed with the banking strategy and with policy from the federal level. Just thought I'd share a new persepctive.

Domara,

And you may be correct! That is why I asked for details.

For the market to linger in this quasi state for this many years certainly means something.

David9 says

For the market to linger in this quasi state for this many years certainly means something.

I have posted this paper before, but here it is again -- since we are talking about another huge price dip which IMO is unlikely.

Why Credit Deflation is more likley than mass inflation

the Federal Reserve’s most likely course of action is to keep the mortgage market, in which most of the losses are concentrated, in a sort of stasis, where losses are acknowledged slowly over time. Such a policy, which might well be called “controlled deflation,” would lead to a prolonged period of
high unemployment and slow growth, as capital was only slowly reallocated to satisfy consumer preferences. Further, the insufficient or barely sufficient creation of new credit to make up for debt paid down, or defaulted on, would cause a low growth in aggregate prices, which might occasionally become
negative. Not until the losses of the housing boom are fully cleared—which might takes years under a policy of controlled deflation—should we expect an inflationary credit expansion and a significant rise in prices.

uomo_senza_nome says

the Federal Reserve’s most likely course of action is to keep the mortgage market, in which most of the losses are concentrated, in a sort of stasis, where losses are acknowledged slowly over time. Such a policy, which might well be called “controlled deflation,” would lead to a prolonged period of
high unemployment and slow growth, as capital was only slowly reallocated to satisfy consumer preferences. Further, the insufficient or barely sufficient creation of new credit to make up for debt paid down, or defaulted on, would cause a low growth in aggregate prices, which might occasionally become
negative. Not until the losses of the housing boom are fully cleared—which might takes years under a policy of controlled deflation—should we expect an inflationary credit expansion and a significant rise in prices.

uomo,

That's exactly the state we're in right now. Very well written and articulated. I can see another 5 years of this going on. I just came back from the bank, and the interest rate for a conforming purchase money loan is 3.375% for a 30-year fixed with no points and $2,500 in closing costs. 2.875% for a 15-year fixed.

Thanks for sharing.

Darrell In Phoenix says

In the meantime, prices continue to fall and inventory is larger than ever.

Why buy now with prices grossly inflated and falling? Buy later after prices crater for 65% less.

I cannot disagree with that. Thanks for the tips.

robertoaribas says

If all those papers prove that housing can't recover given this scenario, care to comment on why prices are increasing in so many markets?

Election year for one. Easy money and relaxing standards for credit are the culprits. Add to it the flight by the Chinese to take money out of the falling Shanghai Stock Exchange and put it outside the country. It has fallen from 6000 to 2000 since the collapse.

http://finance.yahoo.com/echarts?s=000001.SS+Interactive#symbol=000001.ss;range=20051003,20120831;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

Also, I am starting to get the checks again in the mail to extract home equity. Here we go again, as if the consumer wasn't sucked dry enough.

The shadow buyers are out there, they just can't afford to buy until the prices drop more.

robertoaribas says

If all those papers prove that housing can't recover given this scenario, care to comment on why prices are increasing in so many markets?

Roberto - I think you are referring to price increases in phoenix and stating that as a housing recovery. Given it came at the expense of ultra low interest rates, Fed buying mortgage bonds and increasing the monetary base exponentially -- the best you can say is they did not allow the prices to crater.