'The Gig Is Up' For 'Retreating'Speculators: WSJ
The Wall Street Journal reports that speculators are 'retreating' from the housing market. "Individuals are pulling back from buying homes and condos as an investment, in a move that could accelerate the cooling of the housing market. In Las Vegas, Miami, Phoenix, San Diego and Washington, D.C., fewer people are competing to buy properties as an investment, real-estate brokers and housing analysts say. With the pace of price appreciation slowing, some investors who were betting on quick profits are instead being squeezed."
"The apparent pullback by investors is recent and is just beginning to show up in national data. As speculators withdraw from the market in San Diego, for instance, the number of investors buying property has fallen by nearly half, estimates Russ Valone."
"In the Phoenix area, as many as 30% of properties for sale are currently owned by investors, says Jay Butler. Six months ago, most investors were buying rather than selling, he says. The shift has helped to drive up inventories of homes for sale in the Phoenix area, which climbed to 22,340 in October from 8,600 in April."
"Another concern is that investors will be quicker to sell if prices soften, accentuating any downturn. Even if investors don't all rush for the exits at once, more investor-owned properties are likely to return to the market over the next few years. In part, that's because many investors have bought preconstruction properties that won't be ready for occupancy for another year or two."
"Sandra Geary (took) California investors on out-of-state home-buying expeditions to Arizona, Idaho, Nevada and Oregon and bought more than 30 rental properties for her own portfolio. But in recent months, her investor sales have fallen more than 75%. 'Now that the market is slowing down, it's scaring investors away,' she says. 'I'm telling people who want to buy new construction to flip it that the gig is up,' says Frank Borges LLosa, a real-estate agent in Arlington, Va."
"Some investors also are backing out of preconstruction properties they bought. In San Diego, cancellation rates for new condominium units climbed 47% in the third quarter over the second, in part because a growing number of investors are getting cold feet."
"Cancellation rates for condo units are also rising in many other markets, including Florida and metropolitan Washington. 'It's largely because of investors' pulling back, says NAHB staff vice president for research Gopal Ahluwalia. 'A whole lot of condo units are sitting empty.'"
"Robert Cayouette has put down deposits on 10 homes under construction in Florida, figuring he'd quickly flip them and make a profit of about $30,000 apiece. The first of those purchases, a three-bedroom home in Port St. Lucie, is expected to close this month. But Mr. Cayouette has learned he'll be lucky if the house fetches $285,000, or $10,000 less than his original purchase price. 'I wouldn't be able to flip it if I wanted to,' says Mr. Cayouette."
"With home prices growing faster than rental rates, investors who decide to rent out their properties rather than sell them often can't make enough to cover mortgage payments, taxes and other costs. Arash Yazdi decided to rent out his $465,000 townhouse in Merrifield, Va., this fall after a deal to sell the home fell through. He figures he's losing about $1,000 a month."
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