Thursday, September 25, 2008

Distressed Homes Bringing Investors Back Into Market

From The International Herald Tribune:
For a growing number of investors, the spate of home foreclosures across the United States — a result of the mortgage crisis and drop in real estate values — is creating extraordinary buying opportunities for distressed properties, not to mention a flood of how-to books, seminars and infomercials on finding the right deals.

"You'll probably never see anything like this in your lifetime again," said Gene Hacker, a broker for Century 21 Allstars in Brea, California, which specializes in bank-repossessed homes, or what are known in industry lingo as REO's, or real estate owned.

"With the rental market as strong as it is, and prices as low as they've been," he said, "this is as good as it gets." Indeed, Hacker has managed to profit nicely by sifting through the detritus. In the last three years, he has acquired three dozen or so foreclosed homes at discounted prices, mostly in North Carolina and Texas, which he has since resold or rented out. And he has seen a budding interest among clients looking to do the same.

For them and others, there is no shortage of inventory. During August, for example, one in every 416 households, representing 303,879 homes, received a foreclosure filing (which could cover anything from a default notice to actual repossession of a house). That was a 27 percent jump from August 2007, according to a recent report from RealtyTrac, which follows home foreclosures.

"We are, by almost anybody's estimation, at the highest level of foreclosure activity this country has ever seen," said Rick Sharga, a senior vice president of RealtyTrac, which is based in Irvine, California. He cited a recent report by the Center for American Progress, a research institute in Washington, estimating that nearly 0.6 percent of all housing units in the United States are bank-owned, the same ratio as in 1930, during the Great Depression. (Though not a panacea, the government bailout of Fannie Mae and Freddie Mac, announced this month, could help to slow the rise in foreclosures.)

With many stock portfolios in the doldrums, many investors have been turning their attention toward the widening foreclosure real estate market as an investment alternative. Distressed properties can typically be bought at discounts of 20 to 30 percent or more from their peak prices, according to market experts. Homes in stable areas where there was appreciation in the past can be especially good investments.

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