Thursday, November 8, 2007

WANTED: Investors

At the height of the market, new developments had almost entirely shut the door to investors. "We don't want the community to become an apartment complex," they would say with upturned noses. Well, guess what I did yesterday with my bud-ette S.M.? We actually went through some models in her development in Temecula. I haven't done that in a couple of years.

As I mentioned in a past post, if you can believe it, we used to visit housing developments just for fun. Once we became serious investors, that changed. I started picking up the freebie magazines, marking the possibilities, calling the offices, then visiting only when I was sure that I'd be placing a deposit. Remember when most builders were friendly to investors in the early 2000's, then stopped selling to them? Ha! Now they practically put up signs inviting us in--but why would I want to stop and fill the time for a bored agent? They can blame investors all they want for the downturn in the market, but we're the ones they use as needed.

The communities we visited today (from the high $300,000's to the low $500,000's) were almost sold out. I was very surprised until I asked one of the agents if the prices had dropped. She said that they had by $150,000, if you count the incentives that they were offering. She told us that most people are qualifying under 30-year fixed, full doc loans, but that they did have some good stated income loans available, too. She said the stated income loans are with 5% down and 7-year fixed programs. She claimed that the interest rate for that program is around 5.875%. We were told in one community that they are not accepting investors, but the other agent with the same builder said that they are, with special approval because it is the end of the phases. Both had only a handful of homes left to offer.

I have to say, though, the models were less than appealing--especially the ones from 1,700-2,100 square feet. They did have one 2,057 square foot house from a closed phase, with upgrades, for $349,000, which is a good slashed price. Still, the rent on that one would be around $1,795-$1,895 on a good day in the spring (this is Temecula, after all). At 5.875%, PI alone would be $1,962. HOA fees and TI would take your payment to over $2,600, plus PMI, if you opt for the 5% down program. Hmmm, I wonder how deep the discounts will be in December.

As an aside, I was perusing the 92532 (Lake Elsinore) zip code where we own a rental. I couldn't believe that some of the houses, which were selling 18 months ago for $450,000, are now $299,000-$350,000. Out of 123 homes, I'd say that 70-80% were foreclosed or short sales (I didn't actually count, but it seemed that many). I was able to view the pictures of the interior of the homes. I can't understand why people would buy such nice upgrades, furnishings, big screen TV's, upgraded landscaping with Palapa huts, built-in BBQ's, and such when they knew they couldn't afford it. Come on---did they really need the water softener? Maybe they could afford it then with their low, low mortgage payments, but they should have known that it wouldn't last forever. It's just so sad.

It is tempting for me to try to find a way to buy now, but I know very well that this is not the bottom, so I wait and pray that I won't have to sell anything for at least a few more years.