Real Estate Insanity…working off the excess inventory?
by Tom aka Rusty Rustbelt Real Estate Insanity So my son and me are thinking about buying a intercoastal waterfront homes in Ohio and fixing it up this summer. He would live in half and we would rent the other side. Given the number of foreclosures this should be an easy deal, right? Wrong. The realtors tell me no one will finance the properties, not even the banks that own them. Why? It seems many of the banks did not get around to assigning “asset managers” for a year or two, which means the water pipes froze in the winter, burst in the spring and destroyed the interior of the properties. Even when asset managers were promptly assigned, many were incompetent and/or corrupt. So there are many thousands of properties with reasonable looking exteriors but with ruined interiors. Even with sweat equity labor the fix up costs will be very high. This will eventually be fixed with bulldozers.
It has seemed to me a least for a long time that all of this talk about a huge ‘shadow inventory’ keeping down the construction industry is something like a troll under the bridge. Banks in the end proved to be incompetent regarding their own field of expertise. Why in the world would we assume that they have been good at home maintainance? And anyone who has ever tried to keep a vacation home in working order when not there understands that the damn things just fall apart when left unattended. It seems to me that the ‘shadow inventory’ is all about keeping the assets on their books, not about the actual stock of real estate that is going to make into the market place.
It has seemed to me a least for a long time that all of this talk about a huge ‘shadow inventory’ keeping down the construction industry is something like a troll under the bridge. Banks in the end proved to be incompetent regarding their own field of expertise. Why in the world would we assume that they have been good at home maintainance? And anyone who has ever tried to keep a vacation home in working order when not there understands that the damn things just fall apart when left unattended. It seems to me that the ‘shadow inventory’ is all about keeping the assets on their books, not about the actual stock of real estate that is going to make into the market place.
Rusty
welcome to the All New U S of A. actual competence is so old fashioned… the way to make money is to lend it and securitize the loans, don’t you know. no need even to misdirect the customers, since the guys selling the loans don’t understand them either.
as for the customers, aka home buyers, well don’t expect too much actual competence there either. they all went to school where they spent a lot of time on computers.
No, there is still plenty of excess inventory, and much of it is ready to sell (some is still occupied). The lack of a plan and the lack of competence is quite disturbing though.
Another barrier:
http://www.dispatch.com/content/stories/local/2012/04/29/investors-fight-appraisals-on-rental-homes.html
It might be that the banks that have managed the properties and also debt, are just institutionally stupid, with people wo don’t care, making bad decisions. Or maybe they did it on purpose, because they made money and they outsourced all risks. One day, Diogenes parked his car in a city parking lot, and stupidly left three quarters visible from the outside. A vandal broke a car window to get the 75 cents, but at a cost to Diogenes of $160. This behavior is consistent with criminality, and Diogenes suggests, not consistent with professional behavior of any kind. It is not incompetence at this level, it is deliberate criminal activity.
As a Real Estate agent with http://www.manhattan-condos-for-sale.com/ in New York City, in my professional view the only reason the banks are still sitting on all the properties they own, is because of two reasons having to do with money, of course. The first reason is the banks have been given the Government’s blessing in the form of bailouts, so there is no incentive to let them go so fast. The other is simple, as soon as the Fed raises interest rates, watch as the banks flood the market by selling their properties. The reason for this is obvious, higher rates on 30 fixed rate mortgages makes it a sensible decision for the banks to not sell right now.
As a Chicago Condo Listing Agent, ( top5% club), i believe that the lenders are not very good
property managers, and very slow to relaize that it only takes a few seasons of non occupancy to really hurt the value of their assets. Asset preservation was never their business
and they proved it by letting a lot of their properties get in bad shape physically rather quickly.
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