Like ’em or not, the market needs these investors to clear the housing ongoing housing glut.
From the article a Sacramento Bee article today – “Real estate scavengers flip foreclosed homes in Sacramento area”:
“Eighty percent of these homes will be flipped within a year. Typically, they will fetch about $30,000 – or 20 percent – more than the flipper paid.”
Why REO investors are good for the market:
- They signal inflection points in the housing market.
- FHA loans require only a 3.5% down payment – that’s $8750 on a $250k home (the current median ask price in Sacramento) – and a difference of $21,250 in cash investment to make the house marketable/livable. First-time home-buyers don’t have that kind of savings laying around.
- The $30,000 investment includes material, labor, and holding costs, and not all flips are quick. Investors absorb significant risk and holding costs, taking up to a year or more between purchase and resale:
- Conforming loan limits are dropping later this year. While this makes less of a difference in Sacramento, more expensive California markets (i.e. San Diego, San Jose, and Los Angeles) will require investors to grease the skids to move bank inventory from balance sheets and back to home owners.