Prospective homebuyer Jessica Duarte, right, looks through a kitchen with her agent, Vangie Arambulo, on Monday at a condo in Rancho Bernardo. (Photo by Jamie Scott Lytle - Staff Photographer)
HOUSING: Traditional buyers frustrated by blistering competition from investors
Traditional homebuyers frustrated by blistering competition from investors
Story By ERIC WOLFF - ewolff@nctimes.com | Posted: Tuesday, October 27, 2009 8:55 pm
Jessica Duarte has made offers on 12 homes in Rancho Bernardo and Escondido, and been rejected every time.
Jackie Kim recently landed a place, but not before she saw 177 houses this spring and summer, all over North County.
Mitchell Davis made offers on 15 of the 30 Oceanside homes he saw in October, and got no takers.
Three years into the deepest housing recession in local history, middle class buyers like Duarte, Davis and Kim thought prices were finally low enough that they could afford to buy a home. Instead, they're struggling to compete with investors.
"It's the cash offers," Davis said. "We'll bid $30,000 over asking price, and they (sellers) go with a lower cash offer."
Davis is 31, married, has a 6-week-old baby, and has been a renter all his adult life. He's pre-approved for a loan, has good credit, and a good job installing drinking water systems.
With San Diego County housing prices 38 percent off their peak, according to a report from the California Association Realtors, and several different government incentive plans available to him, Davis decided to buy a house.
But houses and condos priced in the $150,000 to $300,000 range where Davis is looking are being gobbled up by buyers almost as fast as they can be brought to market. Real estate agents use phrases such as "feeding frenzy," "craze" and "mad house" to describe what's going on in certain price ranges.
"I'm in escrow right now with a client on a condo that was priced a smidge under $200,000," said Kris Berg, a real estate agent with San Diego Castles Realty in San Diego. "We got 21 offers on that one. He was 20 percent over list price and actually did not get it."
Agents like Berg say demand for houses in the lower price range has been driving an increase in home prices. A report from CAR released Monday shows that the median price for a San Diego County single-family home rose 1.9 percent in September to $386,050. In Riverside and San Bernardino counties, the median sale price rose to $172,421, a 3.2 percent increase since August.
"I think that we've had such a limited amount of inventory," said Diane Conaway, a real estate agent with RE/MAX United in Escondido.
At September's pace of sales, there was a three-month supply of houses priced under $300,000 in California, compared with 5.7 months in September 2008, the CAR report said. That's the lowest inventory of any of the pricing tiers in the report. In North San Diego County, the supply was 2.5 months.
The problem is that new homebuyers aren't the only ones in the market. Investors smell a bargain, and they're bidding on houses with all-cash offers.
Kim spent her summer looking at homes before finally winning a bid. She is 37 and a writer who occasionally freelances for the North County Times. Her bid may have been accepted because the house needs a lot of work.
"The one we ended up with has not had a remodeling done since the 1970s," she said. "It needs mold remediation, asbestos remediation. The windows are leaking."
Daniel Scott, head of the Faith Based Federal Credit Union in Oceanside, worked with Davis in his attempts to get a home. He said he's tired of watching cash buyers keep deserving buyers out of homes.
"It angers me," Scott said. "A lot of these are the very same investors; they were some of the very same folks who benefited financially from the subprime market."
No real estate investors returned the North County Times' calls for comment.
Real estate agents say cash buyers are more attractive to sellers because cash makes for a quicker, more certain transaction. The provider of a loan typically wants an appraisal of a property before it will approve the mortgage.
The appraisal delays the closing date, and it can also lower the sale price. If the appraiser values the house at less than the offer, then either the buyer must make up the difference or the seller has to settle for less.
But there may be a backlash against investors.
Duarte is 27 and has good credit, but after she lost out on her ninth bid, her parents volunteered to pay for a house in cash, which she would then buy back from them with a loan. But recently she said she's lost three cash bids to buyers with loans insured by the Federal Housing Administration, exactly the sort of bids she had been submitting earlier in the fall.
"So, yeah, I'm frustrated," Duarte said. "Next time I might have my parents make a cash offer, and I'll make an FHA offer. But the rules keep changing."
Posted in Business on Tuesday, October 27, 2009 8:55 pm Updated: 9:00 pm. | Tags: Top, Nct, Business, Local,
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