What was supposed to be a boon for home buyers, especially first time home buyers, has fallen flat. Many folks out there trying to buy houses are being squeezed out of the housing market by cash laden investors. Even those bidding more than asking price are not getting called back.
The investors are paying cash and buying ‘as is’ at discount prices. No regular buyer who needs financing and inspections can compete with the cash-rich investors. Investors are also back to flipping houses. The buy-fix up- resell cycle has begun again.
The down side for those of us who aren’t even trying to buy a house is that those foreclosures will now become rental property. It is no secret that neighborhoods with a disproportionate number of rental properties goes downhill much faster than where homes are owned by the occupants.
According to the Washington Post:
“There are bidding wars out there. It’s like the 2005 market but at discount prices,” said Stella Barbour, a real estate agent at Jobin Realty in Northern Virginia. “I put in offers for my clients only to find there are already multiple offers. They always choose the one that’s all cash.”
Some of these cash-only investors use their own money to buy properties, while others borrow it at high interest rates from other private sources.
Chris “CC” Cormack, an investor, said she used her own money to beat out four other offers and buy a townhouse in Ashburn this year. The home, a foreclosure, was listed for $214,500, and she got it for $220,000. Cormack fixed it up and sold it a few months later for a sizable profit.
“It had been under contract twice before, and both of those loans fell apart,” said Cormack, who is also a real estate agent. “By the time I came along with all-cash offer, the bank said, ‘I’ll take it.’ They did not want to take a chance on the deal falling apart again.”
Many of the real estate practices are happening right here in Prince William County:
Investors have reemerged with brute force in the Washington region’s real estate market over the past few months, triggering bidding wars in some neighborhoods teeming with foreclosed properties and hindering traditional home buyers such as Melissa Diggins.
Diggins and her fiance, George Mills, made a dozen offers on houses in Prince William County but lost more than half of them to investors making all-cash offers.
Frustrated, they gave up their search for a new home, convinced that they could not compete.
“We thought to ourselves: ‘Enough is enough,’ ” said Diggins, a graphic designer. “We’d sometimes offer more than the asking price and we wouldn’t even get a call back. It was crazy.”
A year or so ago we heard several commentators singing the praises of the Prince William County Real Estate market. They spoke of how things were snapping back and how new families were moving in, returning the neighborhoods to the pastoral scenes before the ‘illegals’ came to town. In the first place, many of the foreclosures were not illegal immigrants or even Latino families. They were families who simply had bitten off more than they could chew. This new situation truly reminds us of being careful what we wish for. Homeowner occupancy is generally always superior to a neighborhood of rental units when it comes to homeowner upkeep and the general conditions of the community. One can expect both cities to be undergoing the same real estate situation.
Governor Elect Bob McDonnell will be sworn in as Virginia’s 71st governor on Saturday, January 16, 2010 at the State Capitol Building. Click here for a