patrick.net

sa,

As far as "I" could tell? I'm not sure if the video off of Mish's was Victorville but the homes getting the ax were in the middle of NO where. In fact, other than sand, the only feature at all.

Personally, I think they're a liability for all involved. Locals included. I will say that *astrid among others predicted this as early as 2006. Of course then, half jokingly. We argued that at some point, providing b-a-s-i-c services would become totally impractical!

How will people of limited means commute? Where will they work? Even at a reduced rate, how can that make that remote locale viable? But it was a lot easier to determine their fate back then.

More OT: I discovered that listing data varies across MLS access providers. Specifically, I see that ZipRealty shows much fewer listings than Mlslistings or Redfin do.

As an example, use Milpitas, no filtering except Class 1-2 only. The number of listings that appears are

110 Ziprealty
150 Redfin
158 Mlslistings

Does anyone know what the differences are?

DinOR,

>>Personally, I think they’re a liability for all involved. Locals included.

I bet the locals hate cheap housing. On that same note, let us just burn down some of those foreclosures in Menlo Park. That will learn'em !!

Seriously DinOR, do you not see how obscene this is? If they are in the M-O-N, why not market them as vacation homes, then? I'll take one.

Bap33,

It *may* be that the local mls can mark some of the listings as do-not-disseminate.

But still it is weird that ziprealty adheres, but redfin and mlslistimgs.com do not. Does it make any sense?

From CR:

>>On the night of April 27, for instance, the president invited to the White House some of his administration's sharpest critics on the economy, including New York Times columnist Paul Krugman and Columbia University economist Joseph Stiglitz. Over a roast-beef dinner, Obama listened and questioned while Krugman and Stiglitz, both Nobel Prize winners, pushed for more aggressive government intervention in the banking system.

Right on, Obama is a person that will listen to a variety of views. Next: Alan Greenspan and Milton Friedman (or is he dead?)

Another one from CalculatedRisk:

>>Banks that want to return Troubled Asset Relief Program funds will have to demonstrate their ability to wean themselves off ... a guarantee of debt issuance offered by the Federal Deposit Insurance Corp. ...

Again, a good move by Obama. Those banks that have been complaining about "not being allowed to return the money" have hereby been exposed as cheats. The banks wanted to return the money, and replace it with money they borrowed with the help of an FDIC government guarantee !! Talk about being disingenous. Phew.

TOB,

"not allowed to touch"

Perhaps we should point out that this is not Obama preventing you or anyone from withdrawing.

It is rather the mutual fund company that has invested in illiquid (read: overvalued) commercial real-estate, and that does not have cash to pay out without selling huge chunks of the investment at big losses.

TOB,

I don't think so. They haven;t even started talking about CMBS yet (Commercial mortgage backed securities, as opposed to Residential MBS).

In any case, 100s of B of dollars is nowhere near enough to cover the problem.

Oh... that was only added to make it more freaking dramatic. Anyone that owns a CREIT knows that. Would it make anyone feel better if you weren't able to access it in your CASH account!? Sheesh.

Ahem, over the years many here and elsewhere have bemoaned the loss of Defined Benefit Plans. Want to talk about "illiquid"!? One of the Plans I was involved in, long before even the Tech Wreck, had access only granted ( once ) a year. As I'd -just- missed the Liquidity Window I had to wait about 15 months just to transfer the damn thing. Not 'liquidate', t-r-a-n-s-f-e-r.

We had absolutely no choice in terms of 'what' we were invested in, 'how' it was invested nor the right to make -any- changes! We were paid less than our counterparts elsewhere in the industry and we were told "the company PAYS for your retirement benefits!" What a joke.

I am hereby permanently shutting down all 401k's, IRA's and Qualified plans! Period. End of discussion.

DinOR.

That's crazy bad. I think the worst limitation I have seen was being allowed to re-balance the funds in the 401k only once per quarter.

Of course they only had something like 5-6 funds to choose from...

Thomhall,

Some buyers have spring fever, some sellers are underpricing the listing for the effect, The latter has been clearly documented for SF on socketside.com last month.

Price the listing 100k under the competition an bidders will go hog wild, Sometimes.

Evidently, this town has enough funds to get creative with the problem of foreclosures.
Desperate Households
What do you do with a house that won't sell... Paint the lawn.

I posted my diatribe against bulldozing homes also on CR. Here's a response.

>>Real "green" and "eco-friendly". Why not donate it to habitat for humanity, salvation army, hell, even ACORN for all I care?

Here's what I think : They need to tear them down, or else all the business school students would be out of their one-weekend Habitat For Humanity jobs(*), building houses for the poor.

(*) AKA: PR-and-insincerity-101

justme,

After utterly slamming the idea of Dozing homes yesterday, some folks at Ben's have had a change of heart. There's some sober realities I think we all need to face. Particularly the remote nature of this extreme edge of the rolling bubble?

Had these homes been in the heart of the city, I'd be protesting in front of the bulldozer my DAMN self! What are you doing!? People might actually be able to live there!

Some of these developments were so far flung, their sole support was cheap gas. When that evaporated, so did these.

EBGuy Says:
May 4th, 2009 at 3:33 pm
"Malcolm,
Just curious, does the LLC rely on a property management firm to take care of the day to day operations for the rentals? Also, are you buying “in bulk” from the bank, bidding on foreclosures or picking up “listed” REOs from the MLS?"

Sorry, I don't check the blog as often as I used to.
No, we're not that big yet, we are just buying one at a time. The broker that I make loans through does buy in bulk from banks, but honestly, my LLC is getting way better deals, mainly because we aren't buying in California. We are self managing with our own employee(s) who also happen to do a lot of our rennovation work. We have found that the area is lacking in good property management although we have used their services.

I don't agree with the type of logic that says "Must raze foreclosed developments that are more than X miles away from a city of population > Y".

But just to go with it for a moment:: Victorville is a city or hamlet of 107,721 people. I think that is big enough that something useful could be made of the houses.

What if someone forecloses on their vacation home development in Lake Tahoe?
Raze it? Too far from Reno?

But seriously, DinOR, I'm not saying all this to quarrel with you or anyone else. I just find it sickening to see all the resources, materials, labor and energy go to complete waste. And the logic makes very little sense to me. Peace.

FormerAptBroker Says:
May 5th, 2009 at 6:36 am
Malcolm Says:
> We’ve already picked up four houses and would love
> a credit line to buy four more. We’re getting unheard
> of cap rates.
What do you consider an “unheard” of cap rate?

30%

"How do you calculate your NOI (my quick and dirty is to use gross annual income – mkt. vacancy - $3,000 – Actual property taxes)?"

I use actual, but until I have a full year I can only project gross, minus taxes, and insurance. I also take out $100 per month for maint, although technically since they are houses our lease calls for the tenant to be responsible for maint and upkeep but you know how that goes.

"Are you using private money loans (I have heard that it is close to impossible to get bank loans today for investment home purchases)?"

So far we are totally self-funded. Basically my LLC is a fund where investors have an equity stake in relation to the total. The ROI is high enough that moving forward it makes more sense to get debt financing as opposed to equity financing because then the spread is additional income to the existing members. Where other investors are having trouble like you say, is that banks won't lend on the market value of a distressed home so investors have to pay cash until they get a loan on the finished property. We've taken the other approach, which is to self fund, build up a portfolio. We can sell when times are better or we can borrow against the portfolio to acquire more houses. Being a cash buyer is the way to get a great deal in depressed parts of the country. I don't want to brag but this fourth house that we are closing on will cost a total of $20,000 including the work to fix it, and will rent for $800 per month.

HeadSet Says:
May 5th, 2009 at 2:18 pm
"Some states have laws about how much REO a bank can have. Does California have a waiver on that? I thought that if a bank has too many forclosures on the books, the REO laws would force them to sell in the current market, with no option to wait it out."

I'm not sure that it is state law, I thought it was something to do with reserve requirements. In any case, there is a mechanism that limits the numbers like you say. That's my understanding of why banks are bundling foreclosures and selling them. I have been approached to participate in such a purchase but I'm unimpressed when the price is basically 67 cents on the dollar. Still too much.

Malcolm.

Are you doing local San Diego County properties or farther away?

RealEstate Joe Says:

> The story this morning on KCBS about banks bulldozing
> new house construction in Victorville due to foreclosures,
> a non-existing buying market and the local government
> racking up fines, is awful.

Why do you have a problem of a bank bulldozing an unfinished home that has been vandalized?

> There should be some communication and negotiation
> with local government and lenders in the area to come
> up with a workable solution that benefits the community
> rather than resorting to destruction of assets.

They did not destroy “assets” they destroyed “liabilities”. If someone puts an unfinished Honda in front of your house and crack addicts move in to the car slashing the seats and thrashing it you can either pay $50K to finish and repair it so you can sell it for $25K (while paying to keep it insured and registered) or you can tow it to the scrap yard for $200. What would you do?

The homes were near finished, as apparent from the MSNBC video.

Actually even for the far flung houses, there can be other innovative ways to retain value.

For example, the banks can offer the house for anybody to live in for free, as long as they promise to pay the property tax and set aside an annual maintenance fee in a trust. Of course they need to sign a bunch of documents taking over all future liabilities from the banks, while the banks retain their equity stake in the house.

Bulldozing the houses is basically writing off the house off 100%. Letting someone else live in it for free, ridding of all ongoing property tax and maintenance and legal cost, is the same as writing it off almost 100%, except that there may be a slight chance of getting some money back in the more distant future.

The government can also help by offering the builders tax writeoff for the above-mentioned program as if the houses were bulldozed. At least from the local city's perspective, somebody will be making property tax payment.

EBGuy,

is this house in the east bay fortress?
http://sfbay.craigslist.org/eby/reb/1154141442.html

good deal?

>>is this house in the east bay fortress?

I'd say so, but it is also very near ground zero of the Berkeley Hills 1989 fire. Caveat emptor. There is a reason this house is new.

Sorry, I meant to say 1991 fire. 1989 was another disaster ;-)

is this house in the east bay fortress?
No. Like justme said, Caveat Emptor. And notice the Oakland address in the RedFin listing. A Berkley mailman will deliver your packages, but guess where the kids go to school. The only thing left standing in Oakland is the Rockridge area, which is still impregnable, even on the foreclosure maps.

... And now things really start to get ugly. The sellers PUT DOWN 20% and are about to lose that and then some (credit rating still intact, though). Don't worry, we get to participate too, as IndyMac owns their first and second mortgages.

EBGuy,

Seriously, not fortress? What about Piedmont district of Oakland on the other side of HW24? Don't they have their "own" schools?

justme Says:
May 6th, 2009 at 11:45 am
Malcolm.
Are you doing local San Diego County properties or farther away?

Out of state. No deals like that exist here.

hi, just found this blog and wonder can you help me out. I am interested in buying real estate in the US when the market bottoms out. As I only have European experience I don't have a clue as to what the regulations/ taxes are. Is there a handbook out there that could help me? Would really appreciate some good references re newspapers/magazines that are good at monitoring each city. Thinking of San Fran and Atlanta. Any ideas?

What about Piedmont district of Oakland on the other side of HW24? Don’t they have their “own” schools?
Piedmont is actually a separate city, not a district in Oakland. And yes, they are part of Fortress East Bay (but starting to show some foreclosure 'cracks').

EBGuy,

so which is more of a fortress, Piedmont or Berkeley? Btw, thanks for educating us on the fortress geography of EB. Is MSJ considered a fortress?

Geraldine,

highly discouraged if you don't know which geographical area you are looking into, unlike the better parts of Europe, US real estate is extremely localised, from tax law, property law, to geographical differences.

In Europe, the distinction between a good area and a bad area is very clear. The posh arrondissements in Paris are decidedly far away from the bad ones, and in London you need to cross the river to visit the seedy zones . Here in the Bay Area, for example, bad area and posh area could be a few streets across. I myself am still trying to grasp the dividing line of "good" and "bad". When we talk about bad area, it is completely unlivable by European standards (and rent uncollectable). Good areas could be losing only 5-10% of the value while the bad areas are already 60% off.

So you really need to start with a very clear geographical focus first.

so which is more of a fortress, Piedmont or Berkeley?
Berkeley is a much larger municipality than Piedmont and has residents from a much wider socioeconomic spectrum (and I'm not just talking about the students). For instance, in SW Berkeley, foreclosures (NODs, NOTS, bank owned) outnumber resales 3 to 1. Definitely not Fortress.

Then again, it's a toss up between the Elmwood/Claremont district in Berkeley (Census block 4238) and Piedmont as to which is more of a Fortress. At this point I'd give the edge to Berkeley...

Geraldine,

You must be kidding. Don't do it, unless you have a close relative or dear friend who's a long time resident in the location you're going to buy. But if that were true, I suspect you would not be asking here.

It's anyone's guess about "bottom". We won't know about the "bottom" till a very long time after it's not a bottom any more. But I'd be more concerned about being an absentee investor or absentee landlord or even absentee property owner. All kinds of bad liabilities and stuff can happen to you.

For the one thinking of buying in Atlanta--please be aware that outlying areas can also be called "Atlanta," but a home there might not be particularly rentable. That is, people would not be looking to rent in those areas. Much of the real estate in Atlanta is subject to the arbitrary rules of neighborhood associations, so you might run into some trouble renting a house you own or even painting the front door red. Also, Atlanta is still deep South in some ways, and neighborhoods tend to be divided up by skin color moreso than in other parts of the country. That could be a factor in attempting to rent your investment property. Buying investment property in the Atlanta market could be complex for someone who does not live there and know the area.

EBGuy,

it's funny that you show me that article on racial homogeny in Claremont.

To be frank, well-to-do Asians (at least for Chinese), when selecting their home turf, particularly seek out districts full of white, and if full of Jews, even better. An area full of Asian is actually considered "undesirable", because it is usually considered dirty and low class (how Cupertino and MSJ escaped such stigma is actually a miracle). But, when Cupertino is compared to Saratoga and Palo Alto, the latter two are deemed more desirable because they are more white. Upper or middle upper class Chinese sneer at places like Milpitas, or Montery Park in LA, because they are too "filthy", while they drive to eat there very frequently. You will notice that the posh Asian neighborhoods are actually NOT full of good Asian restaurants (neither Cupertino or MSJ are known for great Asian restaurant choices), because the elite Asians want to keep it that way, they don't want all the Asian rif rafs to end up in their backyard.

There is a Jewish center opening in Palo Alto/ Mountain View border, and the condos next to it is immediately considered a great selling point because Chinese parents want their kids to go to school with Jewish kids whom they believe to be smarter than everyone else.

I have also heard from a well-educated, first generation Mexican legal immigrant who told me the last neighborhood he wants to live in is a Mexican neighborhood because it is more "dangerous" and the residents there are of "low quality" (in his words).

It's funny looking at employment numbers. It's as if like, they can decide almost any number at will. They decided to put 226K new small business created in April vs 114K in march. Want to beat Wall ST estimates, Just put in a higher number for business creation.

"I don’t want to brag but this fourth house that we are closing on will cost a total of $20,000 including the work to fix it, and will rent for $800 per month."

I heard the same line on a Carleton Sheets infomercial last night...