Thoughts on recent Fresno Bee Article

I recently read the article titled “Cities face hurdle to buy foreclosed homes” by Sanford Nax (http://www.fresnobee.com/business/story/1700707.html ). It is a very thought provoking piece full of facts and solid reporting. But as an investor in Fresno real estate and given my chosen framework of a blog I thought I would share a couple of thoughts the article sparked.

From my read the article had two main points. The first being it took the city a lot longer than other cities to get the program in place. While it is easy to say it would have been better months ago (without question) I can only imagine the waste that may have happened. Speed is generally a trade off for quality so I will assume the city chose to insure our money was not wasted.

As for their second point I am little confused. It seems the city is frustrated that they can not buy cheap foreclosures because investors are beating them out. The article basically says the city can not over pay but individual investors can. As an investor I take exception to this theme because wasn’t one of the original goals of buying foreclosures to put a floor under the market? Well good news the market has already done that and now the market is building a solid base from which we can grow out of over the next couple of years (maybe 5 years).

If the city is having trouble competing for the older homes that investors like me are buying (The older 3/1 or 2/1 that offers options) then they might want to focus on an under served area that would provide a ton of future value for the city. In Fresno you still have a fair amount of 1Bd / 1Bth homes around 600 sq ft. Now I know some investors like these types of homes but I can tell you it is a very small list. So maybe the city should turn to buying very small homes on 6,000 sq ft lots. They could create very simple 3/1’s that would be more valuable to the city as years go buy with increased tax revenue. Plus the contractors working with the city could employee more people full time as they add 700-900 sq ft of living space verse simply polishing a junkie house.

As the article indicates one of the stated objectives of the city funds is to produce available low income housing for owner occupants, which is very admirable. However, I do have a growing concern for the average renter in the low income areas. I am seeing a larger number of small multi families come on the market. If this trend continues and banks continue to vacate these properties we may have a real shortage of safe and secure rentals. Perhaps some funds could be pushed in this direction. You could still sell the duplex or fourplex to an owner occupant if you had too (not ideal).

In the end the low end of the market has seen a lot of interest from owner occupants, who very likely will get a 10% discount on the house via tax credit, investors as the properties will cash flow and now the city programs are kicking in dollars. It is no wonder we are all having trouble locking up deals because we are all competing for the same finite listings.

Good Investing