What do I know?

Just came across an article in print:

INVESTORS STORM HOUSING MARKET
Absentee, cash buyers pounce on deals

http://sacramento.bizjournals.com/sacramento/stories/2010/05...

Thank you to the French for helping keep home prices afloat?

Some excerpts:

"Investors are pouring back into the Sacramento market and now account for more than 25% of homebuyers."

"This time, it's France. French investors seeking San Francisco real estate found the prices too expensive and so headed east to Sacramento."

"Absentee buyers made up 27% of all buyers in March. Cash buyers made up 31% of home sales."

WOW!!! (Cash buyers - not young, locals, I will tell you that much! I think the absentee investors go with the cash payments. I was just griping about all the virtually non-existent down payments of friends buying right now).

"Prices relative to rents are looking attractive to a lot of people."

"Small-scale investors are also on the rise." They talk about someone who works at Target and is buying an investment home for $130k and expecting to rent it out for $1300/month. Oh yeah - sounds familiar. I presume these are not the cash buying type. I know a lot of BROKE people trying to strike it rich with these type purchases. $130k does not buy much worthwhile around here - I'll tell you that.

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I personally think it's a lot more of history repeating itself. Investors went crazy in Sacramento the last decade. This depressed rents. I mentioned the other day I Was surprised by the rent fetched by our next door neighbor (just got new tenants). Maybe rents are holding strong, and prices are bottoming out. I don't know how terribly sustainable it all is. We had a huge problem of way too many investment homes, just a few years back. A LOT of vacant homes, since they just flooded the rental market.

That said, I have said all along, Sacramento will never go back to the little town $100k-median priced homes. It's a REALLY nice place to live and the secret is out! As long as LA and SF still have insane home prices (& they do), we won't sink into despair or anything. Some of these investors may be smart. But, the frenzy of it all feels very remniscent of the bubble, all the same. Leaves me skeptical. Though I am relieved some people actually have some REAL skin in the game.

See what I mean? The real estate is in the toilet, but the frenzy is insane.

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Another quote: "Home values have plunged as much as 40% from the peak."

Yes true, but they also spiked at 200% appreciation in a few short years, before the "plunge." Are prices rock bottom? I suppose as long as people believe they are... My house is still worth what it was in 2001. I remember people at the time we bought our house, freaking out about the "unsustainable peak prices." Fast forward a decade later, as far as I am concerned nothing has changed, and now it's the "deal of a century."

Human nature is pretty interesting to watch.