Companies go home-shopping around Metro area

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Companies go home-shopping around Metro area

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Vino Wong
September 4, 2012--Lawrenceville--First time bidder, Bounneth Choummanivong (CQ) of Lawrenceville, looks at a list of foreclosed properties that are up for bidding at the front entrance of Gwinnett Justice and Administration Center Tuesday. VINO WONG / VWONG@AJC.COM

Metro Atlanta’s depressed home prices are drawing the interest of a new type of buyer - companies that buy houses in volume.

Such companies have snapped up foreclosures and short sales in the last few months from Gwinnett to Clayton counties, as well homes listed conventionally by realtors. And they say they plan to spend hundreds of millions on homes in the next two years.

Most are renting the homes - sometimes to the former owners. Others are buying and waiting for prices to increase before re-selling the houses.

It’s a new twist on house-flipping, which usually involves a single entrepreneur. The company purchases have helped push up metro Atlanta’s battered home prices, sopped up foreclosures that depress prices and sales, and created jobs at companies that buy, renovate, maintain and manage the houses.

The downsides are an uptick in prices and competition for home buyers, along with concern that large-scale absentee owners will not take good care of homes.

“Some are acquiring houses from foreclosure and leaving them vacant for a purely speculative investment,” said John O’Callahan, the president of Atlanta Neighborhood Development Partnership.

The nonprofit organization works in community stabilization and helps people of low to moderate income buy homes.

“It’s not a smart business model and is horrible for the community,” O’Callahan said.

But he praised companies like Sylvan Road and Waypoint Homes, which are buying metro Atlanta properties with plans to improve them and move families in as renters.

Sylvan Road, headquartered here, plans to buy $300 million of houses here in the next two years. That will bring an industrial scale to the $3 trillion single-family U.S. home rental business, about 80 percent of which has been owned by small local investors.

America is moving toward a “rentership society,” said Sylvan Road co-founder Oliver Chang, and single family homes represent “one of the most compelling investment opportunities across all asset classes.”

“We want to put $1 billion to work buying and renovating homes across the country,” said Chang, a former head of Morgan Stanley’s U.S. housing strategy.

Chang said Sylvan Road specializes in foreclosures and it spends an average of $40,000 per house in repairs and improvements.

Waypoint Homes, of California, has an Atlanta office and similar strategy. Its managers plan to buy $1 billion worth of U.S. homes for long-term rental.

“We will buy 12 homes [in metro Atlanta] this month and and 17 next month and will continue to ramp up…We hope to get to a place where we are buying 100 a month,” company director Doug Brien said.

Other investor-buyers active in metro Atlanta include Landsmith-Precise of California and Michigan, which wants to buy $20 million worth of houses; Atlanta-based Ashford Capital Partners with another $20 million in planned purchases and California’s Colony Capital, which wants to buy more than $1 billion in homes nationally. Colony had 10 workers among the 80 or so people bidding for foreclosures last Tuesday on Gwinnett County’s courthouse steps.

Investors backing the companies range from hedge funds to real estate investment trusts and wealthy individuals.

The competition is helping boost prices, which have been rebounding with a more stable market since late winter. The average foreclosure sale price in metro Atlanta rose between January and June by more than 9 percent from a median of $91,657 to $100,220, according to real-estate and data firm RealtyTrac.

The median sale price for all homes in the region was $145,000 in August, up more than 16 percent from $124,500 in August 2011, according to Coldwell Banker Residential Brokerage.

Local observers say most homes bought by investors cost less than $200,000.

The effect of investors stepping in the last few months has been noticed by shoppers and real-estate agents, who have seen prices rise with interest from multiple bidders.

Verna Jones of Atlanta has been trying to buy a house since January without luck.

“I have been looking and been bidding. For example, I found house last month. I bid and it went into multiple offers,” Jones said. She lost the bid, not the first time that happened.

“It’s just more competition for the homeowner,” she said.

For homeowners looking to sell, however, the companies broaden the market.

Home ownership levels, which peaked over 69 percent in 2004, have dropped to about 64 percent. That would put an estimated 3 million former owners in the rental market.

Also, about 5.5 million owners are 90 days or more delinquent on mortgages or in foreclosure, according to Keefe, Bruyette & Woods, the international financial services company. If just half of those lose a home, it would put millions more in the rental market.

In metro Atlanta, 6,426 foreclosure notices were mailed out in August alone, according to Kennesaw real-estate services firm Equity Depot.

Providing rental homes is a necessity in this environment when so many have lost homes to foreclosure, Brien of Waypoint Homes said.

“Investors have to come in and buy homes and provide homes for people who are locked out of ownership,” he said. “They have families, kids, pets. Moving into an apartment is not an option for them.”

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