Meet your new neighbors

From the WSJ:

Investors Pile Into Housing, This Time as Landlords

U.S. housing recoveries almost always have been ignited by rising demand from families and individuals looking for a place to live. This recovery is different. Investors—including some big Wall Street players—are leading the way, say industry executives and analysts. Their role is noteworthy given that flippers and speculators were blamed for helping to inflate the housing bubble of the past decade.

Today’s investors are mostly buying with the intention of holding on to the homes and renting them out. As they pile into the housing market, they have set off a chain reaction that has stabilized prices and changed market psychology, industry executives and analysts say. Fear of buying homes when prices are dropping has been replaced by the fear of missing out on cheap homes.

“Whether they knew it or not, investors helped set a floor. They warmed up the market, and it brought buyers back,” said Lanny Baker, chief executive of real-estate brokerage ZipRealty.

Investors have always played a role in the housing market, but their presence was often small. Currently, cash buyers—largely investors—make up about 32% of sales nationally, according to the National Association of Realtors. In Southern California, a favorite target for investors, absentee buyers accounted for 31.4% of purchases last month, up from an average of less than 17% between 2000 and 2010, according to DataQuick MDA, a real-estate research firm.

The rush of investors into the housing market follows a long push by federal policy makers to foster the American dream of homeownership that unraveled for some people in the housing crash. The homeownership rate fell to around 65% last year from 69% in 2005. “We’re clearly at the beginning of a rental boom,” says Christopher Thornberg of Beacon Economics. “We all saw there had to be a shift towards renting single-family units that owners could no longer afford. Investors played a critical role in that transformation.”

Around 12% of all U.S. households—more than 14 million people—rented a single-family home in 2011, up from 9% in 2004, according to the most recent U.S. Census figures. Three-fifths of people who lost their homes to foreclosure in the past five years ended up renting a house, said Ms. Zelman.

Not everyone believes that the current level of investor activity is healthy. Some worry that investors will eventually flee the housing market if values erode again or if the expense of maintaining a large number of homes becomes onerous. “Are they going to continue to maintain them? Or are they going to dump them into the single-family market?” said Mr. Thornberg of Beacon Economics.

Some investors have a notorious history in the housing market. During California’s housing bust in the late 1980s and early 1990s, the federal government sold hundreds of homes in California’s San Bernardino and Riverside counties, about an hour east of Los Angeles. Some homes weren’t maintained, turning entire neighborhoods into shabby rental communities.

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58 Responses to Meet your new neighbors

  1. Any questions?

    “Currently, cash buyers—largely investors—make up about 32% of sales nationally, according to the National Association of Realtors.”

  2. grim says:

    2 – Is this a Florida, Arizona, Nevada trend, or is this happening locally as well?

  3. reinvestor101 says:

    It’s about damn time that someone recognized real estate investors for the good we do and it’s about damn time for the market to turn the hell around too. The stinking real estate terrorists and cheapskates have lost big. If you didn’t buy this damn market a year ago, it’s too damn late. Now you stinking naysayers have to sit with your damn noses pressed up against the window looking at people like me making damn money again. ABOUT THE ONLY THING THAT CAN RUIN THIS IS THAT DAMN LIBERAL IN THE WHITE HOUSE AND HIS UNDERHANDED ATTEMPT TO TAKE MY DAMN GUNS AWAY. For me, my damn guns are as precious as my damn real estate deeds; the only way you’ll take them is from my cold dead hands.

  4. reinvestor101 says:

    And another thing…did you see Indiana give those dirtbags from Temple a beatdown yesterday? The Hoosiers will not be denied this year.

  5. Anon E. Moose says:

    The new American Way — sncking on the government teat.

  6. anon (the good one) says:

    last tread re:generational issues.

    “The Republican Party is experiencing an existential crisis, born of its own misguided incongruity with modern American culture and its insistence on choosing intransigence in a dynamic age of fundamental change. Instead of turning away from obsolescence, it is charging headlong into it, becoming more strident and pushing away more voters whom it could otherwise win.”

    The G.O.P.’s Bachmann Problem
    Last Updated: Mar. 22, 10:09 PM ET

    The current intramural squabbling on the right is just too delicious for words. At least for nice words.

    Senator John McCain called the far-right darlings Senator Rand Paul, Senator Ted Cruz and Representative Justin Amash “wacko birds” earlier this month. (McCain later apologized for that burst of honesty and candor.)

    Ann Coulter used her Conservative Political Action Conference speech to take a shot at New Jersey’s governor, Chris Christie, who was not invited to speak this year. Coulter quipped: “Even CPAC had to cut back on its speakers this year, by about 300 pounds.” What a lovely woman.

    Also at CPAC, the half-term ex-governor of Alaska, Sarah Palin, took a whack at Karl Rove, challenging him to run for office himself. “Buck up or stay in the truck,” she said with her usual Shakespearean eloquence. Rove shot back that if he were to run and win, he’d at least finish his term. Ouch.
    Donald Trump took to Twitter recently to call the conservative blogger Michelle Malkin a “dummy” who was “born stupid.” It’s hard to know whom to side with when two bullies battle.
    But all this name-calling, as fun as it is to watch, is just a sideshow. The main show is the underlying agitation.

  7. Mike says:

    Good Morning New Jersey

  8. Ottoman says:

    Coulter quipped: “Even CPAC had to cut back on its speakers this year, by about 300 pounds.” What a lovely woman.

    It’s certainly kind and generous of Coulter to suggest that Chris Christie is only 300 pounds. Though what evidence is there that Ann Coulter is a woman?

  9. charlie says:

    I would not go between Coulter’s tights even if you pay me…..

  10. nwnj says:

    #9 If you think Coulter lacks femininity, then you must not make it over to the MSNBC freak show too often. What a mixed up bunch.

  11. Painhrtz - Doc Daneeka says:

    My favorite talking head has to be Gretchen Carlson desperately trying to hold on to her youth with both hands whilst shoe horning herself into dresses made for a woman half her age. With each parting of her lips reaffirming that beauty queens mouths are not connected to a brain with higher functions. then again the trolls on MSNBC could be gorgeous but you would never see them as such because they are so ugly and twisted on the inside.

    In fact I hate them all

  12. Phoenix says:

    Norah O’Donnell from CBS is my favorite. I just find her pleasant to look at.

  13. Juice Box says:

    FARK – now I hear there were 4 offers instead of just mine.

  14. Juice Box says:

    30 showings and 4 offers in the first weekend for this house.

    My should be the strongest.

  15. Phoenix says:

    Must be a nice place. Now the fun begins.

  16. Juice Box says:

    Yeah, Appraisals should be interesting. Comps are all over the place.

  17. grim says:

    My experience over the last 6 months is this: It’s got to be massively overpriced, stinking pile of crap, to not appraise.

    Take it for what it’s worth. First words out of every appraisers mouth are still, “Fax me a copy of the contract.” And in 9 of every 10 contracts, the appraised price will be within a few hundred dollars of the contract price.

    Don’t shoot the messenger, just some anecdotes. We’re not a big shop by any means, so maybe I’m just not seeing it, but the last time there was any real chatter about appraisal failure, it was last summer.

    Maybe 30yr can chime in with his perspective.

  18. grim says:

    Good piece from AEI slamming the NAR for jabbering about appraisal issues:

    Realty, Unreality: Are low appraisal values a problem in housing?

    To get the facts, Realty, Unreality turned to data published by FNC, Inc., which tracks a large dataset of recently completed purchase-mortgage appraisals. FNC looked at single-family home and condominium purchase-mortgage appraisals completed between January and June 2012 and found:[3]

    1. While appraised value can differ quite substantially from contract price, 29% of pre-closing sales transactions appraise at exactly the contract price.

    2. Fifty-nine percent appraise at above the contract price, with 23% appraising at more than 3% above the contract price.

    3. Twelve percent appraise at below contract price, with 3% appraising at less than 3% below the contract price.

    4. A majority of those appraising at below the sales price were low by more than 5%, while 0.7% were low by less than 1%.

    FNC concluded that while “market-based appraisals have often been criticized for failing to support potential mortgage transactions—especially if the adjustments result in a lower appraised value than the contract price, our analysis reveals appraiser due diligence in the process of developing a market value opinion on the underlying collateral. Meanwhile, we find [88%] of appraisals provide a valuation that supports the contract price. As shown below, the evidence does not support the claim that low appraisal valuation has prevented contract closings.”

  19. 30 year realtor says:

    Appraisals…No problems so far but I am not optimistic on several of my new transactions appraising. Buyers are reaching in certain price ranges and the data doesn’t appear to support numbers high enough to have them appraise. On the other hand banks are very bullish on the real estate market and this could cause appraisers to just meet the contract price as Grim stated. We shall see.

  20. yome says:

    338 Million powerball ticket sold in Passaic

  21. 30 year realtor says:

    Have a listing in Paramus right now that was purchased just about a year ago and is now for sale again. List price is almost exactly 5% above price paid in 4/12. More than 30 showings in 2 weeks on the market. Two offers currently in play. After several counter offers the 2 offers are almost identical at 97% of the price paid in 4/12.

    Should this property be worth the same as was paid a year ago? More? Less? Interested in the opinion of those who comment here.

  22. Juice Box says:

    I am expecting it to appraise perhaps $25k less than my offer. However I don’t think I can look at another overpriced stinking pile of time warp rotting crap where grandma spent her final days again. This one is a gem, completely remodeled interior/exterior with updated landscaping and sprinklers etc. Needs some paint and perhaps change some tile my wife does not like. The extra few $$ to close this will be worth it if I have to go there.

  23. Juice Box says:

    re # 23 – The inflation game tea leaves now say it should go higher. The fact is Bernake said he will buy and hold forever, ever last stinking pile of rubble MBS the FED bought. I may not like living in a socialist state but only a fool chooses deflation forever in the money printing game.

  24. Lincoln78 says:

    Question for you all:

    I’m in the market to buy in Hoboken & went to a couple of open houses this weekend. At one, my girlfriend had made nice with a realtor that “showed” us the apartment. We had found the apartment on realtor/zillow, but she met us there to (i guess) hold our hand and tell us nice things (and potentially make 3%).

    After we saw the place, I told her that as a buyer, I wasn’t looking to use a buying side agent as (1) I can find places for sale myself using internet sources and (2) I can comp the place myself using the said available info (a broker in Hoboken lists weekly sales online). The realtor was taken aback and started telling me about her “exclusive listings” and the “fiduciary responsibilities” a buying agent provides.

    NET: My plan is to approach selling agents directly with offers, telling them that out of the 6% fee, the 3% sell side would stay intact while I would be OK with giving the selling agent an add’l 1% for them to dual represent to essentially handle the paperwork. That gives 2% back to the sellers. I get a lower price, agent gets more commission and sellers get more $. My best friend is a lawyer who volunteered to review all the docs with me. Seems like a win-win-win.

    As a first time buyer, am I setting myself up for trouble? Am I missing something? What should I be aware of?

    Thanks for your collective help…

  25. Juice Box says:

    re # 26 – Lincoln78 – which way do you think prices are going in Hoboken? I know someone who sold a place for nearly 500k more than they paid about 3 years ago.

  26. grim says:

    26 – Simple answer? Try it and let us know how it goes.

    Complex Answer. Good luck, but how this will play out is that the listing office will also be representing you, and your offer is going to be distilled down to a lower offer price as you have no authority to attempt to renegotiate the contract already in force between seller and agency. Seller will still be paying full commission against your lower asking price offer.

    If you want to really cause a stir. Have you attorney write up an offer (not review whatever you come up with), and send it certified mail to the seller directly. Have her include the additional contractual provisions regarding commission changes stated in terms of seller actions, “Seller will renegotiate commission with listing brokerage… blah blah”. While this doesn’t improve the chances of the sale, it will certainly cause all sorts of fun fireworks at the listing brokerage.

  27. Ottoman says:

    26 – Lincoln, I bet you’ll be hard pressed to find an agent that works in one of the name brand agencies who would have the permission from their broker to go down to 3-4%. They’d likely rather cut you loose, especially since it seems like good places are actually selling this year.

    The better strategy may be to low ball the extra 1-2% and let the agent and the seller negotiate the commission down to 5.5 or 5 or 4.5 to get the deal done, if the seller balks at going that low. If they come back to you for more money, then you tell them you’re bringing in an agent for the commission split.

    All the stuff about fiduciary responsibility and exclusives is BS. You can never trust that an agent isn’t sharing proprietary info with either side unless you’re with them 24/7. So you need to keep your mouth shut regardless of who she’s representing. Plus if she’s got exclusives so does every other agency out there.

  28. Statler Waldorf says:

    US elections have been split 50/50 for decades:

    There is no “crisis” for either party.

  29. anon (the good one) says:

    partie$ always do well. country, not so much

    “There is no “crisis” for either party.”

  30. fka 2010 Buyer says:

    I was surprised by the appraisal on the REO I just purchased. It sold in the summer of 2006 (new construction) at a highly inflated price. After being foreclosed and sitting for approximately 2 years, the bank started marketing it for about 70% of the price it sold for in 2006. In talking to the listing agent, there were multiple buyers who put in bids at asking price on the property but wanted some minor concessions ($5k) from the bank. The bank refused to budge on anything and they walked away. Should also note that the house wasn’t properly marketed “as is”. I put a bid about $30k less than asking price and they accepted. Anyway, get the appraisal, and the guy comes in at exactly $1k over of offer.

  31. chicagofinance says:

    Another client whacked by corporate MF’ers…….at least this guy has mad IT skillz……still it makes me sick watching good people get poleaxed because some coldblooded douchebag has no problem doing so. This company is red hot too. It is not as if there was a difficult decision to be made. Just as% rape…..

  32. wickedorange says:

    RE 23

    What’s up with the trying to sell within 8 months of buying?

  33. 30 year realtor says:

    wickedorange – the property I mentioned in #23 is now in attorney review for the same price it was purchased for 4/2/12 after just 16 days on market.

  34. Fast Eddie says:

    If banks needed restructuring and were unable, then euro zone officials would turn to shareholders, bondholders and uninsured depositors to contribute to a bank rescue.

    I can’t believe that there’s not mass rioting and the market is not in flames right now.

  35. freedy says:

    Sadly , just plain stupid and don’t care or they think,oh,ok it will be alright .


  36. grim says:

    Y’all have bailout on the brain, because this:

    If banks needed restructuring and were unable, then euro zone officials would turn to shareholders, bondholders and uninsured depositors to contribute to a bank rescue.

    Is completely sensible and rational to me. First, equityholders are wiped out, next, bondholders are wiped out, next uninsured deposits are wiped out, finally, depositors are wiped out (should no deposit insurance exist). Should equity and debt holders wish to be part of a restructure instead of an outright bankruptcy, they would vote towards that. Perhaps a restructure improves chance of some return of investment.

    The part of the situation that is not normal/rational, is the expectation for the government to bail out a failing company. Laiki and BoC are not national banks, they are public companies.

  37. joyce says:


    I think Fast Eddie was being facetious since that person’s statement is completely in line with bankruptcy procedure PRIOR to the last few years. As for causing markets to drop… they’ve only been rising with the constant printing and expectation for that to contine unabated, so if that were to stop, perhaps the markets would fall.
    (I know I conflated domestic/international a little bit… but the overall theme is what I was going for)

  38. Juice Box says:

    re # 38 – Grim we are way past rational and way way past criminal. Laiki Bank was nationalized this time last year and their Parliament approved it as well as the European regulators. Their employes had rounds of austerity and a bridge loan from Russian of 2.5 Billion. I think they have 8,000 employees too so it was a bit of a jobs program for that small island.

    They were way in over their head in the investment bank side of the business, perhaps a bit of a piggy bank for those investors in Greece and other places that borrowed from them. I would not be surprised if those loans were similar to the ones being doled out in China like candy.

  39. Juice Box says:

    re #33 -“Another client whacked by corporate MF’ers”

    Lots of carnage on Wall St too of late.

  40. The Original NJ ExPat says:

    Maybe I’m wrong, I think she was implying that they have the same number of speakers, but the total weight of them is 300 lbs less, so maybe a 150 lb. speaker replacing a 450 lb. Christie nets a 300 lb savings? That’s probably the engineer in me. If I can make the numbers work to even enjoy a joke more, I’ll do it.

    Ottoman says:
    March 25, 2013 at 8:37 am

    Coulter quipped: “Even CPAC had to cut back on its speakers this year, by about 300 pounds.” What a lovely woman.

    It’s certainly kind and generous of Coulter to suggest that Chris Christie is only 300 pounds. Though what evidence is there that Ann Coulter is a woman?

  41. Libtard in Union says:

    “The Republican Party is experiencing an existential crisis, born of its own misguided incongruity with modern American culture and its insistence on choosing intransigence in a dynamic age of fundamental change.”


  42. Libtard in Union says:

    “As a first time buyer, am I setting myself up for trouble? Am I missing something? What should I be aware of?”

    For just 1.5%, I could provide you with an answer.

  43. Anon E. Moose says:

    Lib [43];

    PSYOPS. Resistance is futile.

  44. Painhrtz - Doc Daneeka says:

    Lib translation bow down to chairman O bitches suck it!

  45. Bystander says:


    Carnage? Have you not read Grim and 30 yr realtor? Apparently homes are hot again. The recently unemployed are parlaying their situation into better jobs so time to buy, buy, buy. Everything is fine. Disclosure: I was part of the Nov 2012 carnage now working contract work.

  46. lincoln 78-

    Good to see that you’re still an asshole.

  47. A nice, concise explanation of the current housing Ponzi:

    “The Federal government and Federal Reserve are trying to inflate another housing bubble to save the “too big to fail” banks from a richly deserved day of reckoning.

    If we want to understand why the U.S. government is doing its best to inflate another housing bubble, we must start with the Devil’s Pact partnership of the government and the “too big to fail” banks. Simply put, the TBTF banks would not exist without the Federal Reserve and Federal government bailouts, subsidies and protection from transparent marked-to-market pricing of the banks’ collateral and risk.

    The basis if this partnership is simple: the banks’ enormous profits and financial power have enabled them to capture the regulatory machinery of the government (the Central State) and the political machinery controlled by its elected officials.”

  48. Anon E. Moose says:

    Clot [49];

    Don’t fight the Fed.

  49. Bystander says:


    One day the fed might lose control and those words will not apply. No govt. or private cabal can sustain the unsustainable. One more bubble should do it. We are almost there.

  50. grim says:

    51 – The new Lords Prayer?

    Please Lord, just one more bubble. I promise not to piss it all away this time.

  51. yome says:

    Remember this famous 100 year CS graph of home values? I guess it is in the 150 now. Everyone got that projection wrong

  52. grim says:

    February Case Shiller out tomorrow morning, so I guess we’ll find out.

  53. Juice Box says:

    You guys trying hard to freak me out or something? I am buying as the bottom is in. All hail the magical wizard of o oz with the “enter” key which prints untold billions weekly. My risk is manageable now, there is no more downside as the bidder (FED) has no risk to consider, buy and hold forever. All hail King Bernake.

  54. The Original NJ ExPat says:

    [53] Reminds me of a 25 year chart of Micron Technology stock (MU). LOL.

  55. The Original NJ ExPat says:

    LOL. Fount this comment on Ritholtz’s site. It is just so recognizably stupid when you hear it from outside of your area:

    “As I am sure you know, comparing San Francisco market to the other markets is not advisable because San Francisco is a special market for two main reasons:

    1) small amount of land available; there is no perimeter of land outside the main buildup. Nearly 100% of the 7 by 7 mile city is already built upon. This is true for most of the Bay Area, from Oakland and Marin down to San Jose. It is the “outer edge” of the expansion outside of the Bay Area, places like Stockton, Santa Rosa, and Gilroy where the new house construction was occurring over the last 10-15 years.

    2) the beauty of region makes it a mecca for the very wealthy, which bid up prices; the wealthy are also more insulated from economic downturns than the lower 99% of the population who earn less than $100,000.”

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