Vulture real estate investors swoop in - Jul. 2, 2008

Vulture real estate investors swoop in - Jul. 2, 2008: "Jack McCabe says he still sees 'a large disconnect between what buyers are willing to pay and what lenders are willing to sell for.'
That's even more true in California, according to David Michelson, a partner in California-based developer Three Arch Investors - despite the fact that home prices there are already down 35% in the last 12 months. The company is putting together a $250 million vulture investing fund in anticipation of even further declines, and will buy foreclosed homes in California, Nevada and Arizona.

'The transactions are not happening yet,' he said. 'There are plenty of people looking, but the lenders are carrying the cash value [of these distressed homes] at two or three times the actual value,' said Michelson.

Until banks reduce these prices - and take the write downs that will come with them - buyers like Michelson won't budge.

He figures that the banks will have to start liquidating these properties by the end of the year to get them off their books. And then, he says, the floodgates will open."

This is in contrast to the cases earlier in the article, where investers are scooping up property in other areas where banks and sellers are getting real. But in California, it's different. Could it be that - in a state where half a million dollars wouldn't buy much more than a condo or an inland starter home - the banks are too heavily burdened by California defaults to dare admit just how badly they've been burned?