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'Ugly Houses' are looking good

By STEVE COOK, Real Estate Economy Watch   |   July 25, 2012 at 9:55 AM
Homevestors, Inc., the Dallas-based franchisor known for a caveman character and the slogan “We Buy Ugly Houses” has a steady supply of 2500 damaged properties a year rolling into its franchises in 93 markets in 36 states.

Because it doesn’t rely on distress sales for its supply but buys directly from consumers, the company has not felt the pain of shrinking REO inventories or homeowners who want to sell by are frozen out of the market by negative equity.

On the flip side, it’s benefiting from fast-growing demand for its rehabbed move-in ready properties driven by first-time buyers who are realizing the time has come to buy. Some 60 percent of the properties that the company’s franchises rehab at an average cost of 20 to 25 percent of value is sold on the retail market to owner-occupants.

The balance of its rehabbed homes is sold to individual investors buying properties to rent out at rising rental rates, largely to families displaced by foreclosures.

The company is riding a wave of soaring demand for non-distressed, entry level homes.

The latest HousingPulse Survey showed time on market for non-distressed listings fell sharply in June to 11.7 weeks, a drop of a full week from the May reading of 12.7 weeks and the lowest in over two years.

Increased competition for the limited inventory of non-distressed property listings helped push the average home sales-to-listing price ratio to 95.6 percent in June, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.

“We don’t have to compete for REOs. We have a steady supply of houses from consumers who want to sell now, generally 30 to 40 year old houses in older, middle class neighborhoods. Sales are strong and we’re seeing more and more multiple bid situations over the last 60 days,” said Homevestors Co-president David Hicks.

Hicks said 2012 could turn out to be the twent-year-old company’s biggest year. Sales are going at a couple of hundred a month and targeted for 2500 this year. But they are up 30 percent over last year and might even hit 3000 this year.

He expects the good times to continue and points to the numbers of potential franchisors who are lining up to join.
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