Interested in people's thoughts on the recent price rises (10.9% year on year on Case-Schiller) and the declining foreclosure inventory (1.5m down to 1.1) in the US. Looks like steady recovery in progress. Figures summarised here on our blog with links.
Sam
Confirms what we are experiencing on the ground Sam. More bids are needed to be put in to get the same results. Hedge Funds are bidding 20K over listings prices in some markets and am noticing more people at auctions and more out of town people inspecting properties. Now that the trend is our friend, lending is easing, investors will now start piling back in to the market and drive prices higher. This year will be another good year for people who have already bought and there is still some opportunity left if one is sitting on the sidelines
That all might be about to turn around. The so called smart money is moving out RE and stocks. I get the distinct impression there will be an exodus shortly as hedgies try and take some profit. It'll be interesting to see if they sell down or sell out.
Too much empty stock waiting for tenants. Time to grab the capital gain and sell to the next mug.
Freckle
The hedge funds are currently buying commercial property and large apartment complexes between 2 and 50 million dollars. They believe that the market has bottomed in many cases they are paying full price.
Nigel Kibel | Property Know How
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Carrington One of the first hedge funds to enter the sfr market is now exiting
thenreasons they site is :
1. Returns never matched proforma's
2. Property management (headaches). They did not have management in house
3. Price increases
4. Rehab over runs and much higher maintenance and vacancy factors than were predicted
jayhinrichs wrote:Carrington One of the first hedge funds to enter the sfr market is now exitingthenreasons they site is :
1. Returns never matched proforma's
2. Property management (headaches). They did not have management in house
3. Price increases
4. Rehab over runs and much higher maintenance and vacancy factors than were predicted
Yep. I seem to remember us discussing the likelihood of these problems for Hedge's some time ago.
They drove demand up and subsequently prices. I expect the reverse to be true. To me the US market is more akin to a speculators market than an investor's market.
S&P's getting smashed around today. I sense a turning point in the not too distant future. The high water market states may be a barometer of what to expect. States like FL and TX that have benefited from an exodus from poor performing states may see that continue or possibly accelerate. If however their economies start to struggle I think it could be all on for young and old.
Nigel Kibel wrote:FreckleThe hedge funds are currently buying commercial property and large apartment complexes between 2 and 50 million dollars. They believe that the market has bottomed in many cases they are paying full price.
And your take on that is??
That they at least believe that the market has bottomed. Now that can create some opportunities at the lower end of the market. It will be interesting to watch the market over the next 6 months. In Texas they are reporting the strongest demand for sales in 10-15 years. Now this may not be healthy because the market did not fall after the GFC and is now booming. What is driven up artificially can come down.
Nigel Kibel | Property Know How
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I'm finding Texas has gone crazy at the moment, especially Dallas. There is very little inventory.
Texas & Georgia surely becoming tight.
Interesting point Jay and Freckle make about the Hedge Funds underestimating vacancies, maintenance and property management headaches.
I have seen a couple of management companies crumble as a consequence of funds pushing too many properties on their books and they were severely under staffed.
Sure, every mgmt company wants more business, but at those larger scales they need to really be prepared and ready for it.
I was always worried about these large firms raising huge sums of money to then go and purchase thousands of homes in a short amount of time. Most are now bidding $20,000+ over listing price. Right now listing price is quite irrelevant..
Maybe quality control will come back and bite them.
Surely the current conditions are not sustainable.
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