That’s about it, at least until the market has processed fully the continuing changes wrought by the bubble, the collapse and the nascent recovery. And that’s not going to happen for a while yet, judging by news from other quarters.
Word out of Northern California, courtesy of Reuters with a hat tip to the incomparable Katie Cosner, is a large hedge fund is looking to sell off its portfolio of foreclosed homes … values are up and the fund managers see a profitable exit.
Over the past week I’ve been working on mailing lists of out-of-town investors who own multiple properties here in the Valley. My lists target only those who purchased in 2003 or earlier and, excluding Pinal County (Queen Creek, San Tan Valley and Maricopa) there’s a decent number of homes in play – by no means a majority of the market or even what could be considered a large percentage, but enough to cause some ripples in a given neighborhood or city if everyone decided to get out of Dodge.
As long as the bargain hunters remain in the market, the risk remains for the market to fall off again if the market gets flooded. Frankly, this is a much more realistic concern than the so-called shadow inventory (which, incidentally, appears to be shrinking without ever coming to market.)
Now, don’t get me wrong … none of this is to suggest that real estate investors are a bad thing in any given market (real estate speculators are another story.) In the Phoenix market, it was the investors who were (and still are) buying when no one else was able to, who were taking thrashed houses and putting them back on the market for buyers to purchase with financing that otherwise may have been impossible to obtain based on condition.
But there is an underlying stability when there are large portfolios held by groups who purchased solely based on the low prices because, inevitably, they are going to search for an exit at some time in the future.
When there are 7,200 homes on the market, as there were in July, it’s not an issue at all. Frankly, even at the 10,108 detached homes we’re seeing now, it’s not that big of an issue (though the timing would be terrible, as it looks like we’re heading into what used to be a typical slower autumn.)
If there already are 12,000 homes for sale (which we easily could see by year’s end) or 15,000, which would signal a more balanced market, then the issues could begin.
Bottom line … if you’re purchasing for yourself, do it, especially if you’re in one of the areas where it’s cheaper to buy than rent.
If you’re investing … maybe a conversation’s in order, just to make sure the market is what you think it is. Timeframes matter on investments, a lesson forgotten in 2005.