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Real Estate Investors Out To Sell; Buyers Who Fueled Boom Now Face Saturated Market
Remember the investors who swarmed the local residential real estate market, buying up lower-priced new homes just a few years ago?
Well, they're back -- only now they're in selling mode.
Their property snatching created an inflated, fast-paced market in 2004 and 2005, with houses sometimes selling above asking price within hours of being listed.
Today's exodus is contributing to yard after yard of forsale signs that linger like last spring's weeds.
The number of existing single-family homes on the market is double what it was a year ago and greater than it has been since 2000.
That was the last year inventory surpassed 4,000, as it has again in recent months, according to statistics from the Albuquerque Metropolitan Board of Realtors.
The higher inventory has slowed the rise of home values. The median sales price in February was $189,800, compared with a median price of $188,000 for all of 2006 and $165,000 for 2005.
By some estimates, investor activity this year will add as many as 500 houses to the metro area's market, which had 4,141 homes listed in February, according to AMBR. That's up from 2,145 in the same month last year.
"Normally, we'd see two or three for-sale signs in a neighborhood (of ours). Now you can see six to eight," said Joe LaMendola, Centex Homes' vice president for sales and marketing. "We've always had resales as competition, but not to this extent.
"We find ourselves having to discount a little bit more to meet what the resales are asking."
Builders beware
Many builders adopted zeroinvestor policies, or at least made it more difficult for them to buy (requiring large, nonrefundable deposits) during the investor buying frenzy.
KB Home New Mexico public relations director Elisabeth Monaghan says her company was fortunate to screen most investors out and isn't seeing an uptick in homeowner sales in its communities.
But many builders didn't implement new requirements until after the investor-purchase trend was under way -- and too late to prevent those who had already bought homes.
Of course, there's no banner in any front yard screaming FSBI -- For Sale By Investor -- but there are some telltale signs.
Emptiness is one.
"Look for how many homes are empty. There's lots of them," LaMendola says. "We don't have that many people transferring out of Albuquerque to have that many houses empty."
Then there are the tax records.
"When we see a whole bunch of (for-sale) signs on one street and run the ownership (through county records), very frequently we'll find that almost the whole street will be owned by California investors," said Kate Southard, owner of Kate Southard Real Estate.
"I know that's what's happening because the tax bills are being mailed to out-of-state owners."
Finally, the investor sellout trend has begun in places like Phoenix and Las Vegas. Albuquerque followed them on the first leg, so it's likely the Duke City would do so now.
Rush of '04-05
What happened two and three years ago is that California investors brought their play money into town and "bought up a ton of homes," said Rick Bressan, a broker with Land Advisors Organization in Albuquerque.
They probably made up about 10 percent to 15 percent of the buyers, he said.
"Let's say a third of them sell. That's a big chunk of this market. They will generate as many sales as a medium builder in this town -- 500 to 600," in 2007, Bressan estimates.
But he says investor activity is next to impossible to track. His information comes from the buzz of national builders, such as Centex and D R Horton.
The new-home builders "have a double whammy," he says. "They're losing a sale and picking up a competitor."
So why would investors choose to sell now?
Southard says she believes it's part of a cycle: Investors buy a place and rent it out for a year after hunting for a tenant for a few months. Fourteen months from the date of purchase, the lease expires and the renter vacates, leaving the owner with the next few months of mortgage payments and a home that needs maintenance.
"Landlords start re-evaluating their position," Southard said. "This is where people decide, you know, this is just not for me."
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