WI…

So OZ average citizen will not drive 90 minutes one way in bumper to bumper traffic to OWN a home that they can buy for half of what it cost in the inner city…. Like we do here in the US and has created the Metro areas????

Excuse my I pad typing

You could get away with building 10 houses in the middle of no where in Texas where you have virtually no zoning laws

HF  minimum investment is 1,000,,000.00  so kind of seperates the mens from the boys.

when I said super funds above I mean our version  IRA 401k etc.

there is trillions sitting in these funds here in the US… And the soup de jour is what to do with these funds OTHER than the market.

IE flow into these bargin basement RE investments.

Agree with Emma…. My TWH model works if my rent goes down by 50%,,, I make no money but my investor continues to get paid.

below that then I deed the house to the investor and they end up where Emma is talking about.

JLH

Frekle,

When demand is high in the US prices tend to stay or rise…. when demand falls off price decline or stay stable.

In OZ if demand dies what does the market do…

Your market is already very hi based on affordablity factors vis a vi average wage to average purchase price… I see your market on a parrallel with the best SF Bay Area markets… Very high for the best locations… And only 1 time in my 35 years did I ever see the SF property ( the city) and the penninsula devalue in price quickly and substantially,

And that was 1989 to 1992 ish… The first war in Iraq and the Earthquake that flattened a few free ways and bridges..It happened thankfully right before the A's and Giants world series game otherwise there would have been thousands more deaths.

Any way point in fact… Some of the only real estate to basically not crater during all this in the last 4 years has been SF to Silicon valley… It flattened  and some price compression…. 1.2 mil 3 and 2's 1500 sq ft  that you guy anywhere else in the country for 150k or less… they may have fallen 10%… But that was it….. In 1989 we had especially on the high end and i mean 3 to 10 million dollar homes they devalued by 50% or better.. then stayed there until 97ish with the real start of .com and doubled in 4 years crashed a little with Dot. then went up from 2001 to 2008 another 10 to 50% depending….

The only way this market is kept in the lofty position is the new money… Apple in cupertino,,,, Google and Facebook , in palo alto menlo park etc…. So you had many cash in their stock options so they could put 500k down on a 1.2 house… in cupertino..

Seems to me… If you have land in OZ to build and build at will… price's would not be where they are at… In the Bay Area new construction is simply tearing down the old house and building new,,, subdivisions are non exsistant… So builders pay 500 to 1 million or more for tear down houses.  I know I bought one in the peak of 87 for 735k.. tore down the house paid 350k for a new nice 2600 sq ft home… that was worth probably 1.5 in the day.. now well over 2.5  prime palo alto.

Freckle wrote:

I think this particular problem is symptomatic of the whole housing/property market in the US but not the real problem at the moment. What I see happening is an oversupply of hot money distorting the market. (International vultures picking over the carcass of the US RE market) National and global economic fundamentals do not support the recovering RE market hypothesis. In fact quite the contrary. I see small positives as negatives because they don't jive with the economic narrative. In other words they're abberations in the market that mislead investors. What PI's should be looking at is the ability of renters to stay in the market and from what I'm seeing that is becoming more challenging. That suggest that rental pressure is likely to be down for some time. I don't see any real opportunity for rental yields to rise in the short to medium term certainly nothing that could keep pace with rising property prices. If hot money pushes up prices then it squeezes yields. Upward price pressure from hot money is not sustainable in my opinion. When we hit the wall again I expect to see this whole RE market collapse thing start a new lap but it's going to be even messier I'm thinking. From where I'm sitting the US RE market is moving more towards a speculative (gamblers) market rather than an investment market. Emma I'd luv to meet you one day but I think I'd throw a rod trying to keep up Luv your posts LOL

frekle,

I would have agreed with you a year ago… now every buddy and his hedge fund is jumping in the market.. the Off shore investor is having to re group…Between,, Colony Capital and Treehouse… two funds I have talked with personally there is over 2 billion dollars ear marked for SFR's..

Now treehouse they want a different asset class they want properties from 100k up in the Atlanta market and I  do not think there are many Ozzies fishing in that pond… different yield tolarances and we all know were the Ozzie tolarance is at its at the highest most riskiest part of the market by and large because of the dubious advertising and thinking inner city ghetto 30% returns are normal and peice of cake.

now… the jury is still out on these hedge funds they are tooling up and they will spend their funds.. they have to to earn their income…. They could be the next wave of properties to sell.

These are not A quality multi family commerical developments that they are used to.. and are much eaiser to manage.. these are one little business all in its self… Just like our company we have a seperate P and L and balance sheet for each property… with an apartment complex that would  be one report… So each property by and large will preform completly different..The hedge funds will get massivly abused by property managers thinking they have daddy war bucks to charge for their services.

Next thing you know hedge funds don't like this any more and start dumping their portfolios.. not a foreclosure but same effect.

Take a hedge fund that bought 1000 plus homes in Atl that wishs to exit in 12 months or 18 months and what does that do to the market….

If you think about it Frekle we cannot have a repeat of what happend in 08 its just not possible… Now right there that statement your thinking I am crazy.. but I submit to you.

its a completly different playing field… You have investors buying at the bottom of the market instead of the over inflated top
80% or better of these homes are being bought for Cash… No possible to lose your home to foreclosure with no bank loan.
And that is not really going to change soon,, other than in very small pockets.. and or Vendor financing which requires large downs.

majority of foreclosrues on non owner occ.. investorss actually Took CASH OUT when they purchased not only no money down they got non taxable cash proceeds… it was common in the day to buy 4 at once get 8K a house cash out walk from the closing with 32k non tax able in your pocket and own 4 rentals…

Now being the smart frugile US investor of course the 32k the banks were thinking would go to help with reserves.. well they went to buy cars boats and trips… So when the world collapes these people by the millions defaulted.. Not only that they had no clue as to how hard property management was in the US… and they got sold by the Mid 2000 US spuriker that pitched these deals the exact same way the Aussie spruiker pitches them… " which is to grossly understate the actually cost of running these properties"  Just like what I see in the Aussie sites laughable and incredibly misleading information regarding vacancy and maintenance…. So you had what was suppose to be a cash out slightly positive geared transaction soon turn into a cash out ( spent the money on anything but the property) went negative geared times 4 and the investor just did not have the funds to keep the mortgages current…. Our banks were freaking idots the way they underwrote those loans.

then on the Owner occ side you had the everyone needs a home act… ( community reinvestment) Clinton legislation. Read hey banks if you want federal money your going to Loan in all neighborhoods not just the ones you know your going to get repaid.. Your going to have loan programs for those with bad credit and barely working and barely understand what they are signing.

And you call these subprime you can charge more for them because we agree the risk is much greater but your going into the hood and your going to lend there and your going to have to prove this… So now you have banks making loans to all these folks that really should just rent their entire life.. And these folks tend to be our AA residences and hispanic…. There are some economist that blame the blacks and Mexican loans for this whole debacle.

So fast forward to today.

NO subprime.

No cash out non owner occ.

No banks forced to loan in the hood

What we have is

Must have good credit to buy a home

investors have to have experince and or cash… very few US investors can get non owner occ loans they happen but its far tougher than it used to be.

institutional investors jumping into the space and will end up buying a million or more of these homes all for cash

And of course our lovable Ozzie paying cash as well as Canadians dominating AZ… Germans GB dominating Florida and other markets that the GB spruikers sell like Rochester and Detroit ( really were ever they can make the big buck )

So for all those reasons above,,, the rhetoric that the US will or is going to implode again in the same manner or worse than 08 I personally beleive just will not happen…

The only thing that can derail and Frekle your dead on on this one,, and in markets we have certainly already seen that is when you end up with far more rentals than demand… And if your investing side by side with a US investor that is tickled pink with 5 to 6% return and Oz investor wants 15 to 20% the US investor will just dump his rent… Oz investor will panic and have to follow suit.

And then if renters just decide to stop paying rent by the millions… then heck we are all going to be boat people flooding to OZ…

Emma,

The key difference with the current market in Vegas and Pheniox is that it is not being dominated by OZ thinking investors. The new investors that are moving in are not thinking they need to make 12% or better otherwise its a poor investment.

they are happy with brake even to 8%… some probably heaven forbid would be happy to be slightly negative Geared ( just love that expression)…

Its like the light switch flipped back to 04… those markets are rising and there is room for the flipper to make short term gains.. Just do not be stuck holding the bag.

JLH

This was one of the big moral discussions I would have at cocktail parties,,, OH your buying foreclosures from these poor folks losing their home.

I would point out… And this is when foreclosures were processed much quicker than today

1. Average person who loses a home has not made a payment in 18 months.

2. The owner has gotten call after call letter after letter and has just put their head in the sand.

granted sub prime lenders and pick a payment and variable rate loans took their toll.. However so many US borrowers just did not care they were not sophisticated enough to even comprehend what happens when the mortgage readjusts… Its really embarrassing for us as a country.

Then you have the non owner occ. foreclosures that make up almost half the foreclosure market,,, Landlord just rips the rents and keeps collecting until tenant leaves or house is sold and tenant is noticed to leave.

Because most of the non owner occs are in tenant areas the tenants understand what the white notice posted on the front door means and they will usually start looking for some place else.

JLH