who's really buying all the houses?

[rodeosweetheart]

The other reason investors are buying the foreclosed houses with cash is that they are the only ones with cash to buy them. The ones we have tried to get a mortgage on (3 now) have all fallen apart because they will not lend on houses with the kinds of problems these houses often have, such as structural issues, wet basements, can't pass the well and septic. So you have to pay cash, and accept them as is.

So they are too expensive for regular buyers who want to live in them, who need mortgages. There are many houses sitting out there or going to investors because they are too expensive for cash, but in too poor condition for a mortgage.

And mortgage lenders have become MUCH pickier than they used to be about the house conditions--seriously, we looked at one house for 125k that had sold with a mortgage 4 years ago for 250k, foreclosed on, would no longer qualify for regular financing because of the condition of the house. So there is a sea change in what the banks will lend on these days.

[pinkytoe]

As for being fair, if you were a seller and someone (anyone) came to you with a full price, cash offer what would you do?

It would never be just about money for me unless I was in dire straits. The intangibles of place can't be bought. As I have put much love and time into my house, I would want someone who would treat it similarly. Someone who would be at home in our special neighborhood. I have seen online pleas from young couples locally looking for a house who don't even get a chance - I would like to have them in my hood where they can raise their kids and stay. I don't think very highly of investor groups buying houses, renovating and then doubling the price which in turn causes our RE taxes to go up, either. If they aren't buying to renovate, those same investors are buying older, small homes so they can use them as rentals in this high rent city - homes at a more affordable price that ought to be available to young or retired people.

[ctg492]

I am in Michigan not the best place or the worst for real estate. Our small sub has about 24 homes. In the last two months 4 homes took accepted offers the first weekend, only one seemed low and those people want to be gone to their Florida home. It was as if the market was on fire. We have been here 3 1/2 years and are 11 th in seniority. This neighborhood only had one forclosed home and that was three years ago.
Now, our property up north in rural area that was hit badly, we just got the check from the sale. 1/3 of what we paid cash for the property. So that was bad. We bid on a couple homes last year, cash offers and we're out bid on all. These were strictly investment homes and the other bidders were investors also, since they were non mortgageable. Now do I think we could sell for what we paid for our home 3 1/2 years ago? Nope, but I feel today it would sell for what would be fair today, there are buyers now.

[rose]

Article in New York Times today about investment firms spending billions over the last year buying homes in depressed markets. Wonder where this rise in housing prices will end up.

http://dealbook.nytimes.com/2013/06/...street-buyers/

"Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing."

[lac]

I must live in the wrong place. Houses in our neighborhood are turning into rentals (by owner or rental company) so our property values are falling. Houses that do sell are only selling for their original purchase price 20 years ago.

[Lainey]

Sobering facts from the colorlines website article posted by redfox:
"But as investors make money hand over fist, many others are frozen out. First time homeownership in the U.S. has fallen by 25 percent.

Driven by the foreclosure crisis, homeownership for blacks and Latinos has cratered, leading to the lowest level of wealth on record for these two communities. Housing is the single largest asset for African Americans and Latinos. As The Christian Science Monitor notes, the homeownership gap between whites and blacks is the largest in over fifty years. And as a recent Alliance for a Just Society report detailed, there are now more than 13 million homes underwater and headed toward foreclosure; they are clumped disproportionately in zip codes with majority people of color.

The irony of this foreclosure crisis, which was caused by Wall Street’s irresponsible behavior, is that it created the massive supply in homes that those very same financial institutions are now profiting from at a record pace. Having profited first from millions of risky mortgages and eventually taken away the homes that underwrote them, institutional investors are now purchasing those same foreclosed houses at rock bottom prices."

I also blame the HGTV housing flip TV shows which whip people into a frenzy about the monies to be made from investing in and flipping real estate. How does the average new potential homebuyer have a chance?

[SteveinMN]

The colorlines article is an interesting exercise in how to use statistics to tell a story regardless of the actual story.

First, the bit about the 1.6-million-dollar studio is spurious. Someone shopping for "affordable housing" -- even in New York City -- does not have a 1.6-million dollar home on their radar. So it exists. So do million-dollar cars. It doesn't have any bearing on the real market except for royally skewing averages (which is why medians are much better statistical measures).

Second, some of the numbers they bandy about seem to serve their cause -- until you look for what's missing. The Morgan Stanley guy who is "amassing a billion dollars to purchase up to 10,000 homes" does sound elitist -- until you do the math and come up with an average purchase price per home around $100,000. That, frankly, does not buy you much house in most of the U.S. And there's no word on what will be spent to fix up these places (they're not all move-in ready) and to resell them or rent them out. Similarly, the allegation that all of these sales are being closed at above-market prices and in cash is factually unsupported in the article and ... well, as I see it, it's good that these houses are being purchased because the alternative is letting them rot in place. That serves no one.

The article also ignores completely a tradeup market which, pre-Recession, was full of homeowners of all colors and economic classes selling their homes to buy new more-expensive homes. When even upper-middle-class white people are underwater on their mortgages, trading up just isn't going to happen. The loss of that market is quite significant in the scheme of overall real-estate sales. The article also fails to discuss that many people, seeing that owning a home is not a guaranteed investment as it was pre-Recession and given today's mobile workforce, have decided that renting makes more sense. In fact, the artlcle almost presents renting as a bad thing, as if only poor people do it.

I'm not saying that "Wall Street" (however the colorlines folks define that) didn't have a hand in the burst of the housing bubble. Lenders did get creative in how the debt was marketed and the risk "shared". I'm not saying lenders have done an exemplary job of handling the fallout of that crisis; clearly things could have been done both more humanely and more pragmatically.

But home buyers did their bit, too, with many people purchasing even a bit more home than they could afford with the hopes of growing into the mortgage as the market went up and up and the economy did well -- until it didn't. Individual homebuyers speculated, buying houses in the boondocks and hoping suburbia would reach them Real Soon Now; they got badly burned when the price of gasoline went to $4.00+/gallon and prospective homebuyers started adding the costs of their commutes to the mortgage. Lots of people treated their houses as piggy banks with second mortgages and LoCs financing fancy cars and expensive vacations and other luxuries, all the while remaining a couple of paychecks away from disaster.

There's more than enough blame to go around here. I think the colorlines article is an interesting read, but what it does not say is at least as important as what it does try to say.

[Gregg]

+1 Steve, well said.

[Gregg]

It would never be just about money for me unless I was in dire straits. The intangibles of place can't be bought. As I have put much love and time into my house, I would want someone who would treat it similarly.

Its a lovely idea on the surface and I'm happy for you that you are in a position to feel that way, but I'm not sure it is a reflection of the larger reality. When people are moving it often has a lot to do with jobs. Most of them don't make enough at their job to be able to afford two houses so they need to sell one so they can buy another. Since they've usually identified the second home it is critical to sell the first asap. Holding out for the "right" buyer is also a form of forced gentrification. Not necessarily in any kind of evil way, but it is still limiting the market by creating conditions that exclude certain buyers. In most cases that isn't sustainable.

[pinkytoe]

Its a lovely idea on the surface

Yes, I have a problem with having too many lovely ideas.