Are we headed for another bubble?

Prices are really jumping because of the shortage of homes available and the big hedge fund dummies buying up everything. However, i am concerned. This is not a natural progression. Usually prices increase when income increases. This is not why prices are increasing. Income has not increased in Ca and the job market still stinks.

According to the law of supply and demand, when you have more demand than supply, you get a jump. House prices are going up because there are too many people chasing too few properties. Foreclosures are down. and  the cash buyers are paying whatever  causing our inventory to be really puny.  Sales are up 9% from july and 14.2 since last august in socal

The California  board of realtors is pushing to stop a sale of foreclosed houses from fannie mae and freddie  mac to hedge funds who will turn them into rentals. This will further squeeze the market. We don’t need it. Now we surely don’t need this latest govt plan which is to have the fed buy large groups of toxic loans from the banks. These are the loans that caused all the problems in the first place. What are they going to do with these loans? My guess is that they will sell them to the same hedge funds. What will the hedge funds do? Keep in mind this is not ownership of the homes,they become the lenders. Will they sell them? Will they modify and keep them? Will they modify and sell with owner financing? That would be good.- nah- they are too stupid to do that.

Folks, we are setting up the next boom and bust cycle right here. Large funds will control a good portion of the housing market . What happens when they want to sell? It’s not like a few sellers selling-IT’S A BUNCH !!.

What do you guys think about this?

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Are we headed for another bubble? — 20 Comments

  1. Phyllis,

    I am concerned too, my buyers are being outbid everyday. We have to nearly overbid on anything reasonable for retail buyers right now.
    As for the wholesale buyers, they are having difficulty penciling out the deal at the moment. How things change in a few months is really remarkable. We’ll see what happens, but my wife and I are considering adding onto our home, selling it for the tax free gains and find a lease option to sit and wait this craziness out, or get ready for the commercial bust.

  2. It’s going to further kill the market but…from the looks of it, it’s the next big wave for the hedge funds and REIT’s. The main reason they are trying to buy up all of these properties and rent them is because of the next big cluster f*@%k by wall street. Which is “Next Big Thing? Foreclosed Rental-Backed Securities” Here are a couple of links that I think you need to read..and get out to the club members…Several large investment banking firms, including Citigroup Inc., Wells Fargo & Co. and Jefferies Group Inc., are exploring the possibility of securitization.


    Read more on Next Big Thing? Foreclosed Rental-Backed Securities
    Important: Do You Support Pres. Obama’s Re-Election? Vote Here Now!

    • unbelievable. i read the article and commented. If only they would leave everything alone. Just the fact that interest rates and prices are low was enough to cause a buying frenzy from dumb investors. That is enough to bring the market back. We dont’ need any govt help.

  3. Been in R.E. since 1980. I don’t see prices going up in the areas I watch: No. Long Beach, Huntington Beach, and Tustin.

    The foreclosed homes should be released slowly so owner occupyers and small investors can take advantage of the low prices. But no bank should be allowed to offer any loans with no money down!! That’s what caused the problem. As soon as the market crashed, 75% of the investors who got loans with $0-down, walked away. Then 50% of the properties sold from 2005 – 2008 went into foreclosure which caused all the other properties to lose 50%-75% of their value.

    • Pat,

      You paint with a broad brush, but unfortunately, it is not accurate. No money down loans did not cause “the problem.” It was mostly the result of low qualifications in order to get loans and the hyped up demand from wall street falsely created.

      This current trend is quite troublesome and is again manipulating the markets. These companies are buying above market values to create a “reasonable” return for their investors. There are few other avenues for investors to get any reasonable returns, since the government has been greatly manipulating the markets (fiscal/monetary policies/QE’s) over the past few years.

      Maybe this is one of the avenues of inflation that is coming home to roost.

  4. A Government agency the CA. Board of Realtors is working to STOP the bulk sale of properties to hedge funds so that “another” Government agency (feds) can buy them and then sell the to Hedge funds. Am I understanding this correctly? They are as stupid as the banks.

    Now the rental market will be flooded and rents will probably drop, and/or we’ll have entire neighborhoods such as the Inland Empire that will go un improved and turn to slums.

    By the way, after the Hedge guys have bought all they want, the artificial demand will dissolve since the California economy is still generally in the toilet, no jobs, no “normal” people able to qualify for loans and prices in general still un-affordable causing housing prices to drop again. There is your second bubble.

    What does this mean to investors? I think this too shall pass.

  5. Hedge funds are buying with little regard to true “Value” and mainly buying because of the cash flows (rental income) the property (asset) produces or its Cap Rate.

    My concern is the overall health of the economy. If it falters and / or we enter into another recessionary downtown, then foreclosures will pick up, more inventory will have to get released and rents and the quality of tenant will soften.
    Round and round she goes, but WHO wants to be looking for the Empty Chair (pun intended) when the music stops?

    Michael Morrongiello
    Sunvest Home Solutions

  6. Couldn’t agree more. We are looking for quick flips, planning to sell our place if we can owner finance another property in our neighborhood, fix it while we live there and sell it asap. Just keep the money moving is the name of the game, stack cash, prepare. We are waiting for the next downturn to cash in.

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  8. This is the precise blog for anyone who needs to seek out out about this topic. You notice a lot its virtually arduous to argue with you (not that I really would need…HaHa). You positively put a new spin on a topic thats been written about for years. Nice stuff, just great!

  9. I am really impressed that you dare to say; We don’t need any government support. Imo, you look like the perfect realtor to me. Unfortunately you don’t work in region in which i am interested to buy.

    I am very concerned about what is happening, it’s still to early to say; We will face another crash. But this can not be called a healthy housing market.
    At first instance, i thought this was finally the real recovery, but if you look at the facts, you can say that this has the potential for a very bad ending.

    • It’s really getting better. Housing is leading the economy forward. Because of the housing up tern, jobs are improving. This is causing income to increase and bringing the whole economy up. things are looking up,

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