Real estate multiples
Mood of the Market
By Tara-Nicholle Nelson, Monday, July 27, 2009.
Flickr photo by sburke2478.Editor's note: Meet Tara-Nicholle Nelson at the upcoming Real Estate Connect conference in San Francisco, which runs from Aug. 5-7, 2009. She will be available to meet with conference attendees from 12:30 p.m. to 1:30 p.m. on Thursday, Aug. 6, in the Palace Hotel's Ralston Room. Click here to send Tara-Nicholle a message.
Pop culture seems riddled with "multiples." Interestingly enough, they tend to reflect a hybrid of good stuff and bad stuff.
For example, you'd think that multiple personalities are bad. Unless, that is, you're watching Showtime's series, "The United States of Tara," in which case (I must say with admitted bias from the fact that the protagonist is my namesake) they make for tragic yet enthralling entertainment.
And, multiple births are good, right? I mean, births are good in general, so you'd think that more would be better. But the media madness surrounding every 9-1-1 call made by a member of "Octomom's" Jolie-esque brood and the latest on the Jon-and-Kate debacle? Bad.
I'm not "being random," as my son would say. My minor obsession with all things multiple (and my sense that they represent a mashup of good and evil) can be traced to the real estate market. In my area right now, at the entry level price points, multiple offers are back -- and they're bad. And good.
Last week, I posted to Twitter: "Writing the 5 millionth offer this week. Listed today -- already eight offers.Wrote offers on homes with 20, 22, 30 and 35 offers this week!"
This was no exaggeration. It was also not a fluke of a week -- in the last couple of days, I've seen another 30-offer listing and a bunch in the seven- to 15-offer range. The level of buyer activity has gone from zero to 1,395 in the blink of an eye.
(And I've asked around -- my colleagues in other markets are seeing the same multiple-offer phenomenon, although perhaps not to quite the same extremes.)
In fact, my average buyer is now competing against more offers than my 2005-06 buyers did at the very peak of the seller's market. Of course, there are a number of other factors that mark major differences between now and then, not the least of which is that prices are about 40 percent lower than they were then.
So, what's behind this buying frenzy? Many buyers, of course, are trying to cash in on the $8,000 first-time homebuyer credit that's currently set to expire on Dec. 1.
I'd like to think that the multiple-offer mania means the whole market is fixed now -- nothing to see here, go on about your business. Whether or not that's the case certainly remains to be seen, but I can say with extensive anecdotal evidence that both traffic and prices are on a major upswing. ...CONTINUED
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Submitted by Alexis Eldorrado on July 27, 2009 - 12:13pm.
In the Chicago real estate market we are also seeing the large upswing in multiple offers especially for properties that are either being short saled, foreclosed, and now even FDIC owned.
As Tara-Nicholle so accurately states, these types of properties produce multiple financial personalities with, as always, cash offers, no mortgage contingencies, and fast closes always being the cream that rise to the top. Interestingly enough, this is true in any market and any economy. Cash is king still holds true.
However, for the properties that are not perfect for these investors, the buyers that are patient are the ones who win. It may take looking with your real estate practitioner at 40 properties, but once you find the one you want, be patient to wait for response from the Seller or their lender. It is worthwhile.
These are historical times and with patience, trust, and persistence, the first-time buyers can purchase and ensure themselves great investments.
The upside of the economy is that an entire new generation of buyers that would have been locked out of the real estate market due to ever escalating appreciation now has an opportunity to buy and to buy cheap! As my father use to always say, "Make hay while the sun shines!"
Alexis Eldorrado
Managing Broker
Eldorrado Chicago Real Estate LLC
150 N. Michigan Avenue, Suite 2800
Chicago, IL 60601
773-588-7777
Alexis@Eldorrado.com
www.Eldorrado.com
Submitted by Jon Astaris on August 2, 2009 - 4:47pm.
First-time buyers ready to bump prices sky-high except for qualifying ratios and appraisers.
Agents happily writing 20-25 offers per property.
Ecstasy all around.
Could irrational exuberance be far?
Back on earth, multiple offers are a sign of a super-strong sellers' market with prices exploding to the upside regardless of appraisers and banks, for the following obvious reason: the cash investors, who now scoop up one in five REO's, would buy one in two or better, then turn around and sell to the "ecstatic" cashless first timer, taking the profit in short term paper, a return to the late 70's early 80's.
But informed cash investors are worried about the tsunami, the millions of foreclosed homes about to slam into the fruited shore over the next few years.
Also, all the activity occurs at the bottom of the market, without the usual bump up the value spectrum. That is because the sellers, the banks, aren't about to buy bigger homes. Higher priced homes are still rather dead in the water, even if they're REO's and despite recent signs of activity at the $500 to $1MM level.
The other factor in the creation of this ecstatic buyer syndrome (EBS) is the deliberate gradual release of these REO's. The banks have nothing to lose, the entire financial and political mechanism is now totally in their lap.
The Feds are praying (what else is left?) that somehow prices will bounce back towards their 2006 peak...they still in good conscience hope to unload trillions of dollars worth of grossly overvalued assets at or near face value, and if EBS spreads, who knows?
They have also done away with the Mark to Market rule, which means that the real value of things is now irrelevant.
The unintended consequence of suspending the rule is that the banks are no longer threatened by their REO portfolios. They can play the game without a clock for now.
BUT: the pile of junk won't go anywhere, it looms large and ominous over the road ahead, and all the government has done to date is push the day of reckoning a bit further away.
Submitted by Tim Ryan on August 2, 2009 - 6:43pm.
Foreclosures go fast in Naples Florida with normally 4-5 offers on the property. However foreclosures sell even with 2 offers being very competitive. It's quite interesting that buyer agents have to react very swift on any decent foreclosure in the area, because it's not the matter of offers, the banks just sell them quickly.
Tim Ryan-Amerivest Realty
http://www.naplesguru.com
http://www.enaplesrealestate.com
Submitted by Sal Antsipenka on August 2, 2009 - 6:50pm.
I am doing aggressive international real estate marketing in Europe and get great results away from foreclosures and short sales unless they start at $250,000 and up. The secret is to reach out to status buyers who are not just grabbing some cheap property, but are looking to buy a home according to their lifestyle at a good price.
Sal Antsipenka
VIP Realty, Inc
Naples, Florida
http://www.naplesrealestateseller.com
International RealEstate Buyer Leads
http://www.realestatefair.net