Imagine Tony Montana from Scarface as a real estate investor: “This town is like a great big … piñata - just waiting to get … busted,” he would roar.
Standard & Poor’s/Case-Shiller home price index released yesterday and reported in The Los Angeles Times shows February prices in L.A. down nearly 20% from the same time a year ago. “There is no sign of a bottom in the numbers,” the chairman of Standard & Poor’s index committee said.
The nationwide vacancy rate is the highest since the U.S. Census Bureau first started keeping track back in 1956. A record 18.6 million homes across the country, almost 3% of the total, sat empty in the first quarter of 2008 (Bloomberg.com). That’s a million more than a year ago. The Bureau claims only 2.3 million of them are for sale, but you have to wonder how many are not on the market because the owners know they don’t have a snowball’s chance in the San Fernando Valley of getting the prices they dream of.
Bank foreclosures have doubled and are accelerating (CNNMoney.com), adding to the record-setting numbers of vacant homes – candies in the piñata – while buyers are busy swinging and battering the piñata, waiting for it to split wide open. When it gets whacked enough, sometime in the next two or three years, the sweets will begin spilling out and buyers will scramble like mad children to gather the spoils.
The part of the piñata, of course, is being played by homeowners and sellers, this year and the next and probably the next. The scenario is as predictable as the climax of any birthday piñata party, but no less enjoyable for being inevitable - if you’re a buyer.
With inventory growing and prices plunging, investors like Tony, and ordinary family home buyers like the rest of us, are watching the piñata swell and sweeten, and taking our turn swinging the stick.