Blogging Bayport Alameda

May 17, 2013

Spring time for housing

Filed under: Alameda, Public Resources — Lauren Do @ 6:07 am

There was a big headline on the SF Chronicle yesterday about the “red hot” housing market, but it’s behind the Chronicle pay wall, so I’ll just have to imagine what it says.   Do I pay for on-line content?  Sometimes I will, but not for fluffy pieces like that.   Especially when I can read an identical article on BANG for free.

From the BANG piece:

“I’ve been in real estate for 32 years and this is the lowest inventory we have ever had,” said Carolyn Miller, president of the Silicon Valley Association of Realtors. “We’ve had multiple-offer markets before, but it’s just incredible. There are anywhere from three offers up to 20 or 30 offers. It’s just been crazy.”

So remember a while back when I wrote this post about the housing availability in Alameda and how despite the contention of folks that say Alameda doesn’t have a housing shortage because there are lots of homes available according to Zillow we actually have, very few, percentage wise, homes for sale and rent?

Yeah, so back then I summed up the numbers thus:

According to these numbers, of the current housing supply there as of early January, 0.57% of that housing supply available for occupancy. But as of the end of January, 0.27% of that housing supply was available for occupancy. By the end of March. 0.31% of the housing supply was available for occupancy. Of course this is assuming that all the folks that are in the units are relocating to a different city, but as you can see this 0.27-0.57% available of the housing stock doesn’t take in account growth, it’s just stagnant numbers give or take a few people depending on how many people or how little people occupy each housing unit. So I guess if 0.27-0.57% is a lot, then yeah, the need for housing is completely eliminated in Alameda and there is no “housing shortage” I suppose, in Alameda, a housing shortage only exists when there are no houses for sale or rent.

When I wrote this back in March — which apparently is not the Spring — I was told to look at the numbers come spring time to see the virtual flood of homes that would come on the market which would prove that Alameda has no housing shortage.

So, I did.  May is considered Spring right?

051613_rent
051613_sale

Just for comparison sake, I popped it into an infogram for chart-like goodness and to provide some context I start tracking numbers for three other cities as well, San Leandro (because of its proximity) and Walnut Creek and Pleasanton because of the perceived desirability of both those cities.

housing

As we grow closer to the high spring/summer sales season, the inventory drops in Alameda and Alameda actually has lower availability rates than all the other cities.

But honestly, this data is interesting at best but proves nothing about a housing shortage or lack of a housing shortage.   The only thing it does reflect is that Alameda has pretty low inventory right now, which is a good thing for people trying to sell and landlords, but bad for people who are trying to purchase a home or find a place to rent.

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50 Comments

  1. Price cures all

    Comment by dave — May 17, 2013 @ 6:23 am

  2. I wonder if Alameda is seeing what other cities are seeing: empty houses (or short-term rented houses) bought by speculators who are dribbling them out slowly or not at all to boost the prices?

    Comment by Jack Mingo — May 17, 2013 @ 6:44 am

  3. I heard firsthand that a buyer approached the sellers agent and got the sale. Even though it wasn’t the highest offer.

    Comment by buyAlameda — May 17, 2013 @ 7:23 am

  4. The house across the street from me just sold a few weeks ago to a speculator from Canada.

    Comment by Denise Shelton — May 17, 2013 @ 8:50 am

  5. Anyone who doesn’t believe there’s a housing shortage in Alameda isn’t our there trying to purchase or rent a home. Both markets are experiencing the lowest levels of inventory anyone can recall. The rental market is being squeezed even tighter as we see homeowners who opted to be landlords in the short term, take advantage of the recovery and are now selling their homes.

    The good news is we are seeing more homes coming to market and, though still low, our inventory is increasing. However, we anticipate this Seller’s market to continue through the summer while inventory tries to catch up with demand.

    With regards to #3, price alone doesn’t always constitute the highest offer, however, whenever a market gets unbalanced we start to less than professional behavior. Buyers and Sellers are best served by turning to reputable Realtors familiar with the area. We are very lucky here in Alameda to have an abundance of professional and ethical Realtors supporting our community.

    Comment by Anne DeBardeleben — May 17, 2013 @ 8:59 am

  6. A house in my central Alameda neighborhood was listed for $399,000 and sold almost immediately — for $485,000. This is for an 800-sq-ft bungalow!
    And then you have houses like the bright blue one at the corner of Oak & Pacific that’s been for sale for almost three months now. Not sure why no one’s bought it yet.

    Comment by trow125 — May 17, 2013 @ 9:48 am

  7. Alameda is a great place to live. Unfortunately, part of what makes it great is that only 75,000 people live here. As an island, our borders are absolute, our access points limited. Build too many houses, too many places of business, and the system overloads. It then becomes less of a nice place to live.

    If you are a young couple from San Francisco, for instance, wanting to move here to raise a family (as has been the case with countless Alamedans over the years), you are probably finding it difficult to find a place you like that you can afford. Banks are still being very tough with lending.

    On the flip side, if you have lived here for a long time, your kids are in college, you’ve taken a bad hit with the down economy, you or both you and your spouse have experienced a recent period of unemployment and have had to dip into the retirement savings to keep the home you have invested so much in over the years, it becomes critical to you to get as much for that home as possible if you decide you want to sell. Your future depends on it.

    At the time my husband and I moved here in 1985, a similar situation existed. We house hunted for a long time and eventually bought at almost the top of the market at the end of 1988. There was then a downturn period during which our house was worth less than we paid for it. Over the years we have invested in numerous upgrades and maintenance: a kitchen remodel, a new roof, a new foundation, down-to-the-wood paint job, plumbing and wiring upgrades, remodeling a detached spare room, putting in a patio and a deck with a hot tub, among other things. Some of this was paid for by a HELOC. I suspect that our story is pretty typical. We also fall into the group I mentioned in the previous paragraph, again in the same boat as lots of others. Although it is our intention to keep our home until we’re pushing up daisies, we may not be able to.

    Our desire to stay here instead of “cashing in” on the seller’s market brings up another factor that keeps inventory low in Alameda: it is a very desirable place for seniors to live. Unless, nursing home care is required, many Alamedans stay in their homes until they die because it is easy to do so. They do not need to drive on the freeway, there is no snow or bad weather, it’s flat as a pancake making scooters a viable option, etc. When folks die, they leave their homes to their kids and, since it’s also an ideal place for families, the kids move in instead of selling, and on it goes.

    I guess what I’m saying is that a housing shortage is only a problem for those who don’t have a house. Is it selfish to hope things don’t ease up anytime soon or is it just survival? Depends which side of the sidewalk you’re standing.

    Comment by Denise Shelton — May 17, 2013 @ 10:24 am

  8. Denise, Alameda is a great place to live. And that is exactly why low income families deserve to live here and raise their kids here too. Just because one family is wealthier than another, does not mean that the wealthier family has the right to give their kids a better place to grow up or more resources to develop. We should construct more low income housing in Alameda, the more and the denser the better, in order to give low income families a chance to live here and improve their lives. Yes it might result in higher taxes, more traffic, and worse schools, but it is the right thing to do. Will rich Alamedans trying to get to work in the morning really be bothered by an extra 10 minutes of traffic? Is saving that 10 minutes worth denying the right to a good life for thousands of low income families?

    Comment by pauljuarez — May 17, 2013 @ 10:54 am

  9. Traffic is not the only problem encountered with adding high-density housing. The more people who live here, the more services that are required. That means there is a need for tax revenue to support those services. More kids in school means more kids with special needs to be met. There are paraprofessionals employed by the school district today whose entire job is devoted to assisting two or three children. I have a friend working full-time in the district who is assigned to a single child who is severely physically handicapped. It is wonderful that this service is available to parents and I am absolutely in favor of it but there is a limit to how much of it the district can provide. As you have probably heard, our police and fire departments are very well-compensated. At present, we can’t afford the personnel and pension obligations we have. More people require more services. Where will the money come from to provide them?

    I know there is some compensation to the City for building low-income housing but what I don’t know if it would be enough to pay for the challenges building it will bring. Will the increase in sales tax, the bulk of the taxes that most low-income people pay make up for the added cost to the City of accommodating them? I don’t know. I do think you down-play the traffic issue a bit too much. Endless studies on the subject have been done and I think the general consensus is that it is a very real concern. It’s petty to worry that traffic will require you to allow extra time to get to work but not so petty if the traffic prevents you from getting to the ER on time to save your life.

    There is often a knee-jerk reaction among liberals (myself included) to assume that because people are against high-density housing they are racist snobs. Sometimes that may be true but, more often than not, I think people simply push against radical change because they worry about the consequences. They like Alameda the way it is, acknowledge that there is a delicate balance that keeps it a desirable place to live, have seen other places change for the worse (crime, traffic, urban blight) and are protective of their community. There’s nothing wrong with that.

    Comment by Denise Shelton — May 17, 2013 @ 11:19 am

  10. Why yes Lauren – I DO remember your post from March! My comment then still holds water today.

    #5 Anne DeBardeleben’s first sentence says it all. Unless you are in the trenches right now attempting to buy in Alameda, you aren’t fully informed as to available housing in Alameda. It’s even WORSE now than when I did the sell/buy here a year ago. I’d be terrified to attempt an on island move today not having a canvas bag full of disposable cash. Thankfully I fall squarely into #7’s overview of what keeps us here. I’m not leaving until my next life comes calling.

    Comment by Sideline — May 17, 2013 @ 11:30 am

  11. And just because Lauren is dying to hear me say it, “Okay. I was wrong about the lack of housing.”

    Comment by Denise Shelton — May 17, 2013 @ 11:54 am

  12. 8
    “Yes it might result in higher taxes, more traffic, and worse schools, but it is the right thing to do.”

    Yeah, I’m sure everybody here’s in favor of the first three in order to achieve the last. If you knew anything about the history of Alameda, and 1973’s Measure A you’d understand that ‘doing the right thing’ is trumped every time by reality.

    Comment by Jack Richard — May 17, 2013 @ 12:15 pm

  13. The solution is simple, just raise taxes on the middle class and the wealthy. Too many people in Alameda have too much money anyway. We need to redistribute it to those who do not have so much.

    Comment by pauljuarez — May 17, 2013 @ 12:47 pm

  14. Agree with Denise on why I’m not selling. So I’m a little confused about … well, a lot of things … but in this case, what the issue is here. I just sounds to me like “housing shortage” is code for “nothing for the realtors to sell.” Is that it? ‘Cause it looks to me like much of the land surface of Alameda is covered by housing. If not that, then covered by streets for drivers who live in housing, businesses for residents of housing to buy food and other things, and schools and soccer fields for the little buggers that live in the housing. Maybe Ron Cowan will build affordable housing where the Harbor Bay Club is now.

    Comment by Tom Schweich — May 17, 2013 @ 1:18 pm

  15. 13
    Go ahead and raise taxes, nothing’s stopping you.

    Comment by Jack Richard — May 17, 2013 @ 2:05 pm

  16. 13. That’s not working so well at the national level. What makes you think you can pull it off here? And who decides who has “too much money” anyway? Donald Trump was bankrupt at one point. There are people receiving public assistance who manage to buy iPhones and pay for the service. The same laws that protect the rights of citizens to do with their money what they see fit protect rich and poor alike.

    There are inequities in the system everywhere. Can you not afford something because you’ve gotten a tough break or because you’d made bad choices? Probably both. That can be said of people at all income levels. The guy with the fancy car may look rich, but if he’s in debt up to his eyeballs and you don’t have any debt, you’re richer than he is.

    Just because someone owns a business doesn’t mean they aren’t losing their shirt or that they deserve to. When we start judging who has too much and who deserves this or deserves that we run into a lot of problems.

    Whatever system is in place should be fair, and I agree that the current system could be improved on many fronts but it’s never simple or easy and since we live in a democracy, the people have a certain amount of power to decide what changes should be made and they don’t all agree on what they should be. How much should you be willing to sacrifice to help others? How much should the government force you to sacrifice? Jesus said, “If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow me.” If that is true for the investment banker, it’s also true for pizza delivery guy.

    Comment by Denise Shelton — May 17, 2013 @ 3:25 pm

  17. The answer to the housing shortage is to make Alameda such a miserable place to live that more people will want to put their houses up for sale and move away.

    Comment by frank — May 17, 2013 @ 4:59 pm

  18. Neat chart Lauren.

    Even I could do it (practice chart…meaningless)
    http://infogr.am/Comments-by-day-6/

    Comment by Jack Richard — May 17, 2013 @ 5:41 pm

  19. Islander Hotel converted to low income housing at a cost of 20 million (not pesos), including over 8 million in future taxes. Hooray! Hope all you folks in Alameda enjoy your higher taxes and increased crime!

    Comment by jsanders128 — May 17, 2013 @ 11:41 pm

  20. How many homes are Vacant and Bank Owned in Alameda that are not on the market?
    I’ve seen quite a few residences empty of furnishings while perusing the streets of Alameda.
    Tom

    Comment by Tom — May 18, 2013 @ 8:08 am

  21. Alameda’s Bank Owned property is quite low, especially when compared to surrounding areas. More often than not, vacant properties are related to timing of sale and tax decisions for properties that will be inherited versus financial distress.

    Comment by Anne DeBardeleben — May 18, 2013 @ 10:04 am

  22. Traffic is already going to get worse with the new Oak to Ninth highrise development in Oakand. There is aready like 400 or 500 new homes being planned and being build out on different parts of the Island…most of the on the West side with Alameda Landing the the other one off of Central…I think it is like Crown beach…and the one on your way to Nob Hill Foods.

    Comment by joelsf — May 19, 2013 @ 12:47 am

  23. joelsf, all you think about is traffic, etc. Don’t you care at all about the needs of low income families?

    Comment by pauljuarez — May 19, 2013 @ 9:56 am

  24. Do low income families care about the needs of middle income families?

    Comment by Jack Richard — May 19, 2013 @ 10:41 am

  25. Jack so True.

    1.4 Million California Homeowners and their families lost their Homes in Foreclosure.

    Most of these homes all went to Investors and Large Hedge funds that were buying up Blocks of Distressed Mortgages at between 20 -40 % on the Dollar.

    Very few of These houses were made available at these prices from the banks and Freddie Mae and Freddie Mac to new homeowners and small investors.

    The small percentage that were released to brokers and real estate agents were in pocket listings and to say they were handled correctly in many cases is a whole another story.

    It doesn’t hurt to be a huge Obama supporter and have great relationships with Freddie and Fannie. Politics make strange bedfellows when you look at where all the housing inventory is ending up.

    Comment by interesting tomes — May 19, 2013 @ 1:41 pm

  26. Private Equity’s Foreclosures for Rentals Net 8%: Mortgages

    Ken Major climbs the steps of a county courthouse in a San Francisco suburb with $500,000 in cashier’s checks in one hand and a list of addresses in the other. Major is a buyer for Waypoint Real Estate Group LLC, an Oakland-based investment firm that’s scooping up foreclosed homes in California.

    On this December afternoon, he joins a dozen house flippers as an auctioneer starts hawking the latest batch of defaulted properties to hit the market. Major bids on a three-bedroom house in Antioch, and after other buyers counter, he wins at $147,600.

    March 13 (Bloomberg) — Colin Wiel, co-founder of Waypoint Real Estate Group LLC, talks about the rental market for single-family homes in California and technology that allows Waypoint to manage home rentals in a similar way to multi-family apartment units. He spoke on Feb. 9 in San Francisco. This topic will be in the April issue of Bloomberg Markets magazine. (Source: Bloomberg)

    “We got it,” he mutters into a mobile-phone mic dangling from his ear. The house was valued at more than $400,000 in 2006, Bloomberg Markets magazine reports in its April issue.

    Waypoint, a private-equity real-estate fund with $150 million in assets, is pioneering a new approach to making money from the housing crash. Since 2007, investors have been trolling the cratered suburbs stretching from California to Florida (SPCSMIA) for cheap houses to flip. And firms such as PennyMac Mortgage Investment Trust have sought value in subprime-mortgage-backed securities.

    Waypoint, which owns 1,100 houses and is buying five more a day, is betting that converting foreclosures into rentals is a better way to make a profit. Other firms, such as Landsmith LP in San Francisco, are now cropping up and pursuing the same strategy in Arizona, California and Nevada.

    ‘Yields Are Awesome’
    With many suburban homes selling for half their peak values and demand for rentals from prospective tenants climbing, Waypoint was earning an 8 to 9 percent return on its capital as of Dec. 31, according to a quarterly report it sends to clients. That beats the 6.3 percent gain in the BI NA Multifamily REIT (BRFREITC) Index, which tracks the performance of 27 apartment building operators.

    The cost of renting in the U.S. reached an all-time high compared with that of buying a home at the end of last year, indicating it’s a good time for investors to purchase, Deutsche Bank AG (DBK) analysts said in a note today. Should property values rebound, Waypoint may earn at least 20 percent from appreciation in an eventual sale of the houses, says Colin Wiel, who co- founded the firm in 2008 after backing technology startups as an angel investor.

    “I never thought I’d be rolling up single-family homes,” Wiel says. “But the yields are awesome.”

    Wiel and Waypoint co-founder Doug Brien make an unlikely pair of real-estate entrepreneurs. Wiel, 45, is a mechanical engineer who designed braking systems for jetliners at Boeing Co. (BA) in the 1990s. And Brien, 41, is a former placekicker who won a Super Bowl with the San Francisco 49ers in 1995 before earning a postgraduate degree in business at Tulane University in New Orleans.

    $3 Trillion Market
    In starting Waypoint, Wiel and Brien set out to show institutional investors that by using technology they could amass single-family homes the same way Sam Zell’s Equity Group Investments Inc. (EQR) and other real-estate giants gather apartment units in cities from New York to San Francisco.

    The home rental market boasts a total property value of $3 trillion, according to Morgan Stanley (MS) housing analyst Oliver Chang. Yet institutions have long shunned it as too scattered and impractical to be profitable.

    Wiel and Brien are using cloud computing, proprietary algorithms and iPads to create a virtual assembly line for buying, renovating and renting houses on a large scale. They’re also betting that many former homeowners who have jobs but couldn’t afford their mortgages will still want to live in the same communities as renters.

    Acquire And Convert
    “The economics never made sense for a big investor to come into the market, and the technology for managing all that complexity didn’t previously exist,” says Brien, who still possesses the steely stare of a field goal kicker. “The confluence of those two events has provided a window of opportunity for large investors to enter this space.”

    Last year, Columbia University’s $8 billion endowment invested $25 million with Waypoint. In January, GI Partners, a Menlo Park, California-based private-equity firm that manages money for the California Public Employees’ Retirement System and other pension plans, agreed to invest up to $400 million with Waypoint and acquire a minority stake in the firm.

    The same month, Oaktree Capital Management LP, the Los Angeles investment firm co-founded by billionaire Howard Marks, announced a $450 million deal with Santa Ana, California-based Carrington Capital Management LLC to acquire and convert foreclosed single-family homes into rental properties. Carrington already rents out more than 3,000 houses in California and other states.

    Labor Intensive
    Starwood Capital Group LLC is poised to enter the foreclosure-to-rental market, according to an investor familiar with its plans. So, too, is Zell and the real-estate arm of Apollo Investment Management LLC.

    Spokespersons for Zell, Apollo and Starwood declined to comment.

    “Until last year, single-family-home rentals was a mom and pop market,” says Stephen Duffy, an investment banker at Moss- Adams Capital LLC, an Irvine, California-based firm that finances real-estate investments. “Now, it’s grabbed the attention of institutional private equity because foreclosures haven’t cleared and these properties can generate high yields for years.”

    Waypoint and its rivals may eventually spin off pools of single-family home rentals into real estate investment trusts. Still, even the best technology cannot replace the labor- intensive process of acquiring and leasing thousands of houses scattered across scores of zip codes.

    Nascent Market
    Waypoint’s researchers must plumb school desirability ratings, crime statistics and other hyperlocal data to ascertain the income value of each house. Its title agents must often disentangle foreclosures from second mortgages and liens. And leasing representatives have to find qualified renters in communities struggling with high unemployment rates.

    “This is a nascent market, and the model still hasn’t proved out,” says Rick Magnuson, executive managing director of GI Partners, which has $6 billion under management. “But we believe this rental strategy will produce good economic returns for our investors and help arrest the housing market’s slide.”

    The Obama administration is poised to tap the foreclosure- to-rental approach as officials struggle to turn around the housing market. The president’s push to have mortgage providers make loans more affordable for homeowners has done little to stem foreclosures, says Ginna Green, a spokeswoman for the Center for Responsible Lending, a Durham, North Carolina-based consumer advocacy organization.

    Worst Is Over
    There were almost 2 million U.S. foreclosures in 2011, down 31 percent from 2010. As many as 10 million borrowers may default over the next few years if the markets continue to deteriorate, says Laurie Goodman, an analyst at Amherst Securities Group LP in New York. Even though mortgage rates are hovering at a historic low of 3.8 percent, consumers bought only 324,000 new homes last year, the poorest annual performance since 1963.

    On Feb. 9, the U.S. Department of Justice and 49 states agreed to end a probe into abusive mortgage practices at Bank of America Corp., JPMorgan Chase & Co. and three other banks after striking a $25 billion settlement with the companies. The landmark agreement, which will provide debt relief to homeowners, should help rescue many delinquent borrowers and buoy the confidence of would-be homebuyers and lenders that the worst is over, says Ivy Zelman, CEO of Zelman & Associates LLC?, a Cleveland-based research firm.

    Repossessed Homes
    Even so, the settlement may not be large enough to reboot a housing market saddled with $700 billion in underwater mortgages. She says institutional investors eyeing the rental market have the capital to absorb thousands of dwellings and slow the market’s decline.

    Investors are already having an effect: The supplies of homes for sale in Phoenix (SPCSPHXS), Orlando, Florida and other hard-hit markets have fallen more than 60 percent from their post-crash highs as bargain hunters scoop up foreclosures.

    “Investors are aggressive about buying these homes in front of the government program,” Zelman says.

    In August, the Federal Housing Finance Agency asked investors for input on setting up a foreclosure-to-rental program to offload some of the 180,000 repossessed homes held by Fannie Mae and Freddie Mac, the troubled government-sponsored mortgage giants. Barclays Capital, Deutsche Bank AG, Fortress Investment Group LLC (FIG) and Waypoint were among the hundreds of firms that submitted proposals to the FHFA spelling out how investors could participate in such an initiative, according to information obtained by Bloomberg News through a Freedom of Information Act request.

    Investors’ Zeal
    Wiel says the agency may auction pools of properties to investors, perhaps coupled with federally guaranteed financing that lowers their cost of capital significantly. The Resolution Trust Corp. employed a similar policy in the early 1990s to sell off mortgages held by failed savings and loan banks.

    On Feb. 27, the FHFA unveiled a pilot program to sell repossessed houses in Los Angeles, Phoenix, Florida (SPCSMIA) and other hard-hit markets to investors who qualify with the agency. Waypoint submitted an application. “This could be a total game changer for us,” Wiel says.

    It’s striking that Washington is looking to Wall Street for answers after investors’ zeal for subprime mortgages helped foment the housing morass, Green says. She says a boom in rentals may encourage mortgage lenders to foreclose on delinquent homeowners instead of reworking their loans to be more affordable.

    Shoe-Leather World
    Still, she says, leasing defaulted houses does reduce the corrosive impact they have on communities. “Nobody wins when houses are empty,” Green says.

    Wiel and Brien, both graduates of the University of California, Berkeley, met at an angel investing conference Wiel was hosting in San Francisco (SPCSSF) in 2008. They talked about the housing crash and agreed that plunging property values in the Bay Area’s bedroom communities presented an irresistible opportunity. So they set up a company with $1 million of their own money and acquired 26 houses during the next six months.

    From the outset, the duo applied technology to a business rooted in the shoe-leather world of appraisals, home inspections and foreclosure sales on courthouse steps.

    “We asked, ‘How do we systematize and automate everything? How do we scale?’” says Wiel, an upbeat man who’s fond of techie lingo. By 2011, they had hired almost 100 employees and raised more than $90 million from investors in seven funds. It’s midmorning on Dec. 14, and Waypoint’s office in a downtown Oakland high-rise is bustling with activity.

    Most Desirable
    In a warren of cubicles, leasing reps sporting telephone headsets talk with potential renters. A half dozen members of the home-acquisitions team are crammed into a bullpen outfitted with a brass bell that’s rung with gusto every time a new house is bought. Doug Pankey, a longtime appraiser who helps run the team, reviews the foreclosures slated for auction this afternoon on two computer screens.

    Waypoint uses a combination of its own proprietary algorithms and business software from San Francisco-based Salesforce.com Inc. (CRM) to turn potential acquisitions into rentals. Pankey zeroes in on a three-bedroom residence in a middle-class subdivision of Antioch, a San Francisco suburb of 102,000 residents.

    The house appears in the center of a red, pulsing orb on a Waypoint heat map that highlights the town’s most-desirable blocks. The house needs $20,000 in renovation, has no liens and earns a 92 out of 100 on Waypoint’s Geographic Scoring System.

    Home Rescue
    This proprietary program ranks potential acquisitions by factoring in location, proximity to freeways and commuter trains and the home’s historical property-value performance. Pankey watches as the program calculates that with a maximum bid of $150,293, Waypoint can rent the residence for $1,799 a month and earn a 7.7 percent annual return.

    Pankey’s buyer, Ken Major, is looking at the same Antioch house profile on his iPad outside the Contra Costa County courthouse, 27 miles (43 kilometers) away, ready to bid. Waypoint maintains all of its property profiles on an online cloud database so agents in the field and supervisors at headquarters can access and update them in real time.

    A month after buying the house for about $2,700 less than that maximum bid, Waypoint outfitted it with a new kitchen, carpeting and landscaping.

    Family Pictures
    Many of the firm’s conversions don’t go as smoothly. On a warm January morning, James Gordon sets out to visit almost a dozen Waypoint houses that may still be occupied. Gordon, a former mortgage broker, is a home rescue specialist who negotiates with occupants to determine whether they can be converted into renters, paid $1,000 to move out or be evicted.

    About a third of Waypoint’s homes are occupied by the former homeowners themselves, with one out of four staying on as tenants. Waypoint offers to set aside a percentage of any tenant’s rent so that money can later be used toward a home purchase.

    Most of the time, occupants have to leave within 15 days of Waypoint’s purchase because they can’t afford the rent or choose to go. Gordon returns to one residence where a family has refused to move out for six months as they pursue a legal claim that they’re the victims of mortgage fraud. No one’s home, but two brand-new radio-controlled toy cars sit under the Christmas tree and family pictures line the mantle. Gordon sighs. It’s going to take more time before Waypoint earns a return on this property.

    Fiscal Stress
    At another house, a woman refuses to open the door for Gordon. It turns out she’s one of six different tenants renting rooms there. Speaking through the door, Gordon says she may be able to stay on as a Waypoint renter, but she rebuffs him.

    “I’m not trying to be a bad guy, but if you don’t come to an agreement with us, we’ll have to move forward with the eviction process,” Gordon says as he slips his business card under the door.

    For all of the cloud computing, the business of converting foreclosures into rentals is often about dealing with households under enormous fiscal stress. Waypoint employs former financial counselors from nonprofit organizations to help tenants repair their credit and even set up household budgets so they don’t fall behind in their rent.

    As Waypoint triples the number of houses it buys daily and expands in California and possibly Nevada, Arizona and Illinois, it will have to hire dozens of appraisers, leasing agents and other personnel. The firm will have to shoulder these upfront labor costs before its new funds can earn a profit.

    New Industry
    “That pulls a lot of inefficiencies into the strategy and that can be expensive,” says Chris Hentemann, managing partner of 400 Capital Management LLC, a New York-based hedge fund with $350 million in assets that invests in mortgage-backed securities.

    In April, Waypoint launched a fund to reboot foreclosures in Southern California, and in the third quarter, it recorded $324,327 in operating expenses on $23,920 in rental revenue.

    A few days before Christmas, the mood is festive at Waypoint’s holiday party. Wiel and Brien hand out thank-you cards with bonuses as employees pile barbecue, chili verde and brownies onto paper plates. Taking the floor, Wiel says the housing market has only worked through half its backlog of foreclosures and the firm will double its head count as it opens new offices.

    “We are at the birth of a new industry,” he says to applause.

    Worth the Trouble
    Such enthusiasm can be found at many startups anticipating explosive growth. While Waypoint’s strategy is now drawing interest from Wall Street and Washington, Wiel and Brien still must bring order to the inefficient business of turning around foreclosures. And they’ll have to show investors that the endeavor is worth the trouble.

    To contact the reporters on this story: Edward Robinson in San Francisco at

    To contact the editors responsible for this story: Laura Colby in New York at lcolby@bloomberg.net

    Comment by interesting tomes — May 19, 2013 @ 3:50 pm

  27. Distressed Properties
    So far, Blackstone has acquired more than 1,500 houses around Phoenix and Southern California, the people said. It plans to buy in markets with the greatest supply of distressed properties, including Florida, Northern California and Georgia.

    Peter Rose, a spokesman for Blackstone, declined to comment. Treehouse and Riverstone executives didn’t return phone calls seeking comment.

    About 6 million U.S. borrowers will lose their homes in the next five years because of inability to pay their mortgages, creating demand for as many as 4 million new rental households, according to Scott Simon, head of mortgage bonds at Pacific Investment Management Co. (PTTRX) (PTTRX) in Newport Beach, California. Tom Shapiro, chairman of GTIS Partners, estimates a $1 trillion market for single-family rentals. His New York-based real estate investment firm expects to invest $1 billion in the area by 2016.

    Finding Homes
    Capitalizing on the distress requires solving a puzzle: how to buy enough homes and manage the properties in a way that’s economical. Bulk sales of repossessed homes by banks and U.S.- owned Fannie Mae have been relatively rare.

    Buyers have been chosen for the largest group sale, about 2,500 homes repossessed by Fannie Mae, the Federal Housing Finance Agency said today in a statement. Winning bidders for the homes — located in Atlanta, Chicago, Florida, Las Vegas, Los Angeles and Phoenix — won’t be named until after the transactions are completed.

    “We are pleased with the response from the market and look forward to closing transactions in the near future,” Edward J. De Marco, acting director of the FHFA, said in the statement.

    Home seizures are close to a four-year low as lenders are slow to resume processing of foreclosures following a February settlement by the five biggest loan servicers over improper practices, according to Irvine, California-based data firm RealtyTrac Inc.

    20 Houses
    “While a lot of people are talking about it, very few have actually built significant portfolios and even fewer, if any, have achieved significant economies of scale,” said Stephen Coyle, chief investment officer of Cohen & Steers Global Realty Partners, the private-equity fund unit of the New York-based real estate stock investor. “The people who have made the most money at it are the guys who have, like, 20 houses or so.”

    The venture marks Blackstone’s first major foray into the U.S. residential market. The company was the top buyer of commercial real estate in 2010 and 2011, spending about $16.7 billion, according to Real Capital Analytics Inc. in New York. Deals included the $9 billion purchase of more than 500 shopping centers from Centro Properties Group and industrial properties valued at $1 billion from Prologis.

    U.S. commercial-property prices have gained about 26 percent from a post-crash low in January 2010, according to an index compiled by Moody’s Investors Service and Real Capital.

    Smaller Declines
    In the housing market, price declines are easing. The S&P/Case-Shiller index of values in 20 U.S. cities fell 1.9 percent in April from a year earlier, the slowest pace since 2010.

    While mortgage rates are at record lows, rental demand has climbed because many Americans can’t buy homes because of insufficient income or bad credit, or because they prefer the flexibility of renting. Monthly apartment rents in the U.S. have jumped almost 6 percent since the end of 2009, to an average $1,018 in the first quarter, according to Reis

    Comment by interesting tomes — May 19, 2013 @ 4:02 pm

  28. still the land of opportunity, how wonderful. “She says a boom in rentals may encourage mortgage lenders to foreclose on delinquent homeowners instead of reworking their loans to be more affordable. ” ironic.

    Comment by MI — May 19, 2013 @ 4:03 pm

  29. I don’t have much to add to Denise Shelton’s insightful comments. Interesting tomes has a lot to say about the capital end of things but does not sum up things well — it seems that volume and sales and prices are rising after a depressive correction to a bloated market. Waypoint just looks like an example of people who love money doing what they usually do to get it – no surprise there. The problem with the New Reality for housing is that it used to be a bellwether for economic health and now has become an introverted world in which the actual physical commodity has become estranged from the real practical “user ” of the commodity, which has been usurped by speculators driving the market. When you see an 800 sq foot bungalow going for half a million dollars real users should step back and just avoid it during a heated market as that vase is sure going to crack at some point and you do not want to be the hapless fool holding the pieces. Just tell yourself it is not really worth a half million dollars and forget the nonsense mantra “well that’s just what it costs around here.”

    No, it costs that because idiots and speculators pay the price with the difference the speculators will run off laughing at the end. In practical terms, the news just tells me don’t try buying a house around here right now — the short term opportunity has passed.

    As for the low income folks, I moved to alameda when this place was definitely NOT a desirable place to live. Same for the low income folks. They are here because they already lived here and they certainly did not move here because of good schools or whatever nonsense you may claim. There are many families I know who bought their houses thirty-five years ago and can watch what is happening with relative calm after battling through the times that produced Prop 13.

    What happens historically is that greed drives developers who drive up the prices which forces landlords to raise rents which drives out the people to lower cost areas. What moves in consists of people relatively more well-off who do not remember the way things used to be so they accept that the prices are what they are. It is the cycle of boom and bust and it has happened everywhere, not just here, and you do not need fancy graphs to prove this point, just a good memory.

    Comment by owen — May 19, 2013 @ 9:20 pm

  30. Uh, just when was that time you moved to Alameda?

    Comment by Jack Richard — May 19, 2013 @ 9:37 pm

  31. 29

    “Buyers have been chosen for the largest group sale, about 2,500 homes repossessed by Fannie Mae, the Federal Housing Finance Agency said today in a statement. Winning bidders for the homes — located in Atlanta, Chicago, Florida, Las Vegas, Los Angeles and Phoenix — won’t be named until after the transactions are completed.”

    Owen if you are not a Chosen One on many of these Blocks of sales you really can not play the game. There were a lot of block sales .

    Banks , Freddie and Fannie were almost impossible to get in contact with in regards to homes and foreclosures and short sales.

    Very few of These houses were made available at these prices from the banks and Freddie Mae and Freddie Mac to new home buyers and small investors.

    Comment by Interesting tomes — May 19, 2013 @ 10:11 pm

  32. pauljuarez you said in comment 23. joelsf, all you think about is traffic, etc. Don’t you care at all about the needs of low income families? I think most of the West End of Alameda is already low to lower middle class income housing, Alameda Landing is building some more…2 projects came with Bayport…Alameda Point collaborative and the housing around it off main street…Atlantic Apartments and all the apartments along Buena Vista. Summerhouse use to be now they look like they are low/Middle income. There are a lot of old houses which where divided up with I could consider a lot of them as low income. It is actually what you consider low income. Some people just want free housing.

    We don’t have kids but our property taxes provide low income people with schools. Probably 1/3 of Ruby Bridges School if for low income children. There are government programs so it is unfair to say we don’t care or provide for the needs of low income families. There are also the programs as the old wookstock school. The new Boy’s and Girls Club.

    We only have limited income…how much more do you expect us to do. After we pay our mortgage, car payments, buy food, property taxes, and pay other bills it is not like we have a lot of extra.

    Comment by joelsf — May 20, 2013 @ 6:53 am

  33. 32: What you have said is exactly right and people will only stop when the middle class has disappeared. The thinking they have is just like that of Communist China during it’s revolution: that middle class, educated, rich people are evil and their assets must be seized and distributed to the poor and to government workers; the real heros are the low income and those who serve them.

    Alameda will become the same. Our city is being destroyed by all the low income housing that is being built and it is wrecking our schools and infrastructure. Taxes are constantly being raised on the middle class to support a) social programs and free housing for the low income and b) salaries of police, fire, and city workers. What you’ll eventually get is a place where the majority are poor and dependent on the government, and a rich upper class of those who work in government. This is how China was before it’s free market reforms.

    Think about what is going on right now in the West End of Alameda. Alameda has a valuable commute location and once had good schools. This attracted the middle class here looking for jobs and a good place to build their family. Now what do we get? Programs like the Alameda Point Collaborative consume tax dollars and put homeless in Alameda to “retrain” them for jobs. Now think, do homeless people really need to live in a place like Alameda? Couldn’t they live farther away where housing costs are lower and get trained for jobs there? Many hardworking middle class families cannot even afford to live in Alameda, and have to live in Oakland instead and deal with unsafe neighborhoods or have to live farther away in places like Pittsburgh and deal with a dreadful commute.

    It’s becoming clear that the poor and low income are better off and living better than those in the lower middle class who work hard and are trying to improve their lives through honest work, instead of sucking at the government teat.

    Comment by jsanders128 — May 20, 2013 @ 10:51 am

  34. How again is Alameda being destroyed by low-income families? I missed your rationale about how West End schools like the one my children attend have been “wrecked.”

    Comment by Lauren Do — May 20, 2013 @ 11:43 am

  35. Ruby Bridges Elem is barely performing above the state average. People who buy 900k homes should be expecting more out of their local elementary school.
    http://www.greatschools.org/california/alameda/16978-Ruby-Bridges-Elementary-School/?tab=test-scores
    http://www.greatschools.org/california/san-ramon/13755-Quail-Run-Elementary-School/?tab=test-scores

    Comment by jsanders128 — May 20, 2013 @ 12:15 pm

  36. Funny, the further you travel south-east in Alameda the better the schools are. Must be the latitude attitude.
    .
    http://www.greatschools.org/school-district-boundaries-map/?districtId=1&level=e&schoolId=16978&state=CA

    Comment by Jack Richard — May 20, 2013 @ 12:16 pm

  37. Also 68% of students eligible for free or reduced lunch program – I’m really laughing at that one. Our city has that plus 200k per year firefighters…those are all your tax dollars going down the drain.

    Comment by jsanders128 — May 20, 2013 @ 12:17 pm

  38. Lauren, in comment 34: I hope it wasn’t about my comment #32. My comment was met to say there are already a lot of low income programs & housing out there. I don’t know if the schools are “wrecked” or not. I really don’t pay much attention to schools as we don’t have kids. I do wonder where all the new kids will go once the 300 more housing units at Alameda Landing are built. Ruby Bridges already seems to be at capacity.

    Comment by joelsf — May 20, 2013 @ 12:33 pm

  39. In the link for Ruby Bridges (#35), the graph just above this question has a few groups that are below 800, but yet it says all subgroup targets were met.

    Did this school meet all the API goals for student subgroups this year?
    The state goal for the API is 800. All the student subgroups at a school that are below 800 are assigned an API improvement target each year. This school met all student subgroup API targets for 2012

    Comment by alameda — May 20, 2013 @ 12:45 pm

  40. joelsf, I was referring to jsanders comment.

    jsanders: Ruby Bridges serves a lower income population, so what? 68% free and reduced lunch program means that the majority of kids that attend Ruby Bridges meet the income requirements to qualify. I’m not sure what connection those children have with firefighters salaries. It’s a pretty large non-sequitur and an attempt to deflect from providing true rationale for making your pretty abhorrent statements.

    While based on the test scores Ruby Bridges does have a ranking of 6, the ranking that is more meaningful for school quality is that of similar school which compares that school to others schools with similar demographics, Ruby Bridges is an 8:

    But I realize that information is much more nuanced than your position of low income families “wrecking” schools.

    Alameda: Ruby Bridges made all the API goals for the significant subgroups last year, but what they didn’t meet was AYP (Adequate Yearly Progress) for the white subgroup. When the data was drilled down it turned out that because Middle eastern students are classified as “white” some of the English Language Learners with Arabic as their first language had difficulty on the standardized testing. I wrote about that here. And about the scores here.

    Comment by Lauren Do — May 20, 2013 @ 1:24 pm

  41. No Child Left Behind

    If schools are required, under threat of sanction, to raise their proficiency rates annually, it’s fairly clear that they have a much greater incentive to switch to a more liberal interpretation of proficiency.

    If you want to develop a class of high jumpers, after all, you don’t necessarily have to teach every student proper jumping technique. You can just lower the bar.

    This can hardly be what Congress intended. It believed, correctly, that progress is not possible without standards. The truth is, however, that standards are not possible without meaningful systems of measurement, and learning cannot be measured as neatly and easily as the devotees of educational productivity would like. If schools were factories, America would have solved the education problem a century ago.

    I think the Khan Acedemy is working on solving this problem.

    Getting back to interpretation of Proficent and Testing

    Basic: This level represents a limited performance. Students demonstrate a partial and rudimentary understanding of the knowledge and skills measured by this assessment, at this grade, in this content area.
    Far Below / Below Basic: This level represents a serious lack of performance. Students demonstrate little or a flawed understanding of the knowledge and skills measured by this assessment, at this grade, in this content area.

    Math Grades 2-7 58% Grade F

    42% Scored Basic or Below or Far Below

    Class Size of 20 only 8 Failing

    History 8-11 59.3% Grade F

    41% Scored Basic or Below or Far Below

    Class Size of 20 only 8 Failing

    English 2-11 66 % Grade D

    Class Size 20 only 7 Failing

    Science CST 70% Grade C –

    Class size 20 only 6 failing

    Science end of Course 51.7 % Grade F

    48.3 % Scored Basic or Below or Far Below

    If someone has limited performance and demonstrate a partial and rudimentary understanding of the knowledge and skills I would say someone has failed in teaching the subject and the student is failing.

    I know we have some fabulous teachers but looking at the overall results I would say we have a huge problem unless you set the bar so low that rewarding teachers and giving them kudos to teach someone to demonstrate a partial and rudimentary understanding of the knowledge and skills at their age group in that particular field or below is acceptable. How can they go to next level or do we just push them thru system. It just becomes the next teachers problem. We have Mastered it appears.

    Comment by Where is the bar — May 20, 2013 @ 1:27 pm

  42. https://laurendo.wordpress.com/2011/08/17/hey-now-youre-an-all-star/

    Comment by Where is the bar — May 20, 2013 @ 1:32 pm

  43. Right down the street.

    Comment by Jack Richard — May 20, 2013 @ 6:44 pm

  44. A Lawyer, A Apologist, A Pompus AXX , And a Socialist Walks into a Bar,

    The Local Bartender Inquires:

    “What Will it be Mr, City Manager”

    Comment by Where is the bar — May 20, 2013 @ 8:24 pm

  45. That’s what’s known as a renaissance uh person.

    Comment by Jack Richard — May 20, 2013 @ 8:47 pm

  46. If we can keep the renaissance uh person around long enough our Streets and City Buildings and assets will look like the Renaissance era. Maybe that rubenesque era will be revisted.

    Comment by Where is the bar — May 20, 2013 @ 9:03 pm

  47. But Everyone Does Karaoke

    Comment by Where is the bar — May 20, 2013 @ 9:52 pm

  48. Are we sure pauljuarez isn’t a plant from The Onion? I respectfully suggest Mr. Juarez go preach in Piedmont.

    “Too many people in Piedmont have too much money anyway. We need to redistribute it to those who do not have so much…why should low-income families be denied the Piedmont lifestyle?” Just because they can’t afford it?

    I take solace in knowing that the Average home price in SF is now One Million Dollars.

    Comment by vigi — May 21, 2013 @ 9:40 am

  49. 19

    This is right across from Islander

    Community Message
    In the early morning hours of Sunday, May 19, 2013, a fight involving 6-7 adult females broke out inside Scobie’s Bar and eventually spilled out onto city streets. Once outside, 3-4 separate fights erupted involving approximately 20-30 other patrons from the bar. When officers arrived on scene, they were advised of an adult male lying face down in the 2400 block of Central Avenue suffering from multiple non-life threatening stab wounds to his back. An area check for the unknown suspect was conducted with negative results. All of the parties contacted at the scene were extremely intoxicated and the stabbing victim was uncooperative. The investigation is on-going.

    This is the second such incident that has occurred at Scobie’s in the past three months. Additionally, there have been other violent incidents that have occurred at Scobie’s over the past 18 months. Following a stabbing that occurred a few months ago, the Alameda Police Department saturated the area with directed enforcements patrols. Several arrests were made including the arrest of a Scobie’s patron who was found to be in possession of a loaded handgun.

    The directed enforcement patrols had a positive impact as evident by the decrease of incidents over the past several weeks. This weekend’s melee however, is a clear indication that an increased police presence is once again warranted. As a result, the Alameda Police Department will resume its directed enforcement efforts in and around the area of Scobie’s. The status of Scobie’s business and liquor licenses will be reviewed.

    Comment by Islander has Reopened — May 21, 2013 @ 1:28 pm

  50. 49. There is no evidence to suggest that any of those involved in the incident at Scobie’s are residents at the former Islander Lodge. The stabbing victim was uncooperative, so it’s hard to know what was going on. I live nearby and when the Islander was open before, there were much sketchier people living there and we did not have nearly the problems at Scobies that they have been having the past year or so. I honestly don’t think the two are connected.

    Comment by Denise Shelton — May 22, 2013 @ 10:08 am


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