Research show's we've over-corrected!

An interesting article in the Press about a new investment group buying up homes in the IE. They feel prices have over-corrected and they plan to buy, rent for a few years and sell. Of course they are picking up stuff for cash at the trustee sale. I would agree if you have cash and can purchase at the trustee sale then yes, you are paying less than the actual market value. But has the market value over-corrected? I don't think so. All the numbers I look at are saying the fundamental ratios are very close to long term trend values when looking at income or rental ratios.

TwinRock Partners is headed by two managing partners: Mike Meyer, an Orange County real estate accountant who has advised the likes of Irvine Co. owner Donald Bren, and Alex Philips, a seasoned real estate acquisition and investment analyst.

Meyer and Philips said their research shows that the Inland Empire's home prices have "overcorrected," making this a smart time for investors to buy foreclosed houses and hold them as rentals in anticipation that values will rebound substantially in the next five to seven years.

So far TwinRock has purchased 22 homes in Moreno Valley, Riverside, Corona, Rialto, San Bernardino, Highland, Murrieta, Wildomar and Temecula, and the company has plans to buy several hundred more, said Meyer.

Earlier this year, TwinRock put together a $6 million fund to enable the company to buy about 40 Inland homes and it is getting ready to raise another $15 million, Philips said. The firm's investment model primarily calls for buying houses with cash at trustee auctions conducted each weekday at Inland courthouses, he said.

Money to buy the houses is coming from sophisticated investors with knowledge of real estate including homebuilders, land developers, bankers, lawyers, accountants and wealth managers, he said.

Bruce Norris, who heads The Norris Group, a Riverside-based real estate investment company, said most houses sold at trustee auctions are purchased by investors who intend to quickly sell them at a profit that is greater than the return they could expect from buying houses and holding them as rentals before reselling them.

Still, Norris agreed that currently "it makes sense to buy because the houses are priced below their replacement cost." He said TwinRock "will make money, I'm sure."