By Chris Pummer
RISMEDIA, June 12, 2009-(MCT)-In the Sacramento Delta suburbs east of San Francisco - where home prices soared and fell as viciously as anywhere in the country - a housing market rebound is feverishly under way.
A 1,600-square foot rancher listed for $179,000 - after last selling for $425,000 in 2004 - drew multiple offers last month with a high of $210,000 in cash. The topper: The property was a “short sale” whose owner needs lender approval to sell for less than the mortgage owed-and which buyers wouldn’t touch just three months ago.
“My phone was ringing off the hook, my voice mail was on overload and people were coming into the office receptionist saying they couldn’t reach me,” said Christy Howard, a Coldwell Banker Coon and McCreary agent who listed the Antioch house. “Everyone was waiting for the bottom, and the problem is they waited to long, because the bottom has already come and gone.”
Spurred by markdowns up to 80% from market highs, first-time buyers and investors both American and foreign descended en masse in the last three months on San Francisco’s hardest-hit hinterlands as Wall Street and the economic climate improved. They’re picking clean the Delta region’s banked-owned inventory as soon as properties hit the market and are engaged in unprecedented bidding wars even on short sales.
The panicked buying - fueled by buyers’ fear they’ll miss out on fire-sale prices - belies the doom-and-gloom evoked by recent reports of rising mortgage delinquency rates and foreclosure activity. It is one of several overlooked signs the U.S. housing-market turnaround has started in the nation’s hardest-hit markets, which is critical to driving an overall recovery:
- After spending most of the 1990s in the $250,000 range, the median-priced home that was sold in the seven-county San Francisco area rose to a staggering $850,000 by its May 2007 peak. It since fell to a low of $399,000 in February - a 53% drop in just 21 months - before posting its first monthly gain in March, albeit a 1% uptick. The median is expected to continue rising at a healthy clip in months ahead since it’s now at the level of nine years ago, before the bubble began inflating.
- California’s statewide inventory of unsold homes - based on the number on the market divided by the present monthly sales rate - stood at a 15.2 months supply in February, 2008. That figure was down to 5.8 months in March, near the historic average.
- At roughly 22,000 units, Las Vegas’ inventory is not far off its recent record high. Yet total sales closed in March showed flourishing demand, the fourth best on record. That monthly record - set during the height of the boom - is expected to be broken this summer.
“Things have been looking up but it’s going unnoticed,” says Forrest Barbee, a board member with the Greater Las Vegas Association of Realtors and a broker for Prudential American Group Realtors. “It’s just going to take the data a little longer to catch up with reality.” Listen to one analyst’s thoughts about housing having hit bottom.
Adds Rick Sharga, senior vice president of RealtyTrac, which compiles home sales and foreclosure data: “We’ve overshot the market in places like Las Vegas and Arizona in terms of fair value and buyers are bidding prices up again on many properties. The challenge is going to be whether there is enough financing to eat up the inventory that’s yet to come.”
The specter of rising foreclosures - born now of the recession rather than just overleveraged subprime borrowers - is the wild card in future health of the U.S. housing market and the economy by extension. Read about the difficulty borrowers are having with mortgage modifications.
The number of U.S. homeowners behind on payments or in foreclosure shattered the record in the first quarter, the Mortgage Bankers Association reported last week. Nearly one in eight mortgage holders were either delinquent or in the foreclosure process - and prime mortgages in trouble for the first time outnumbered subprime loans on a percentage basis. Read more on the record jump in foreclosures in the first quarter.
Yet the number of pending sales of existing U.S. homes took a surprising upswing in April, rising 6.7% in the biggest monthly gain in more than seven years, the National Association of Realtors reported Tuesday. That increase lags the 9.2% jump in October 2001, but that spike owed to buyers temporarily putting off home shopping following 9/11. See the latest data on pending home sales.
And in an overlooked report that belies the first-quarter delinquency numbers, defaults on privately insured mortgages - where borrowers are more than 60 days behind - fell 3% in April and were down 24% from a record 106,482 in February, the trade group Mortgage Insurance Companies of America reported Friday.
Most important for gauging the strength of the nationwide market is how conditions are improving in the most-depressed regional markets.
With those markets now stabilizing, banks are no longer anxious to dump real-estate owned properties, as houses in their foreclosure portfolios are called, fearing they’ll get appreciably less three months from now for their foreclosed properties.
As a result, they’ll be more judicious about the pace at which they release foreclosures onto the market. The new goal: To maximize the value of supplies in hand rather than unload it helter-skelter and torpedo the housing market like they did while they were shell-shocked by the devastation they’d wrought.
With the banks themselves now somewhat more stable, they’ll also be less likely to want to part with their “toxic assets” knowing the most-scorched, still-serviceable mortgages will be the most valuable on a credit-risk markup once the economy recovers. In fact, the price stabilization in the most-depressed U.S. markets will allow a clearer valuation of the toxic assets we now all hold by virtue of bank bailouts - a modicum of certainty that will hasten the overall recovery.
Homeowners in most of America know by their own property’s value that the spike in U.S. median home values was driven in considerable measure by soaring prices and volume in major markets, especially in California, Florida, Nevada and Arizona. By virtue of their climates and economic-growth rates, those four states have been on the extremes of the U.S. boom-and-bust housing cycle since the 1950s.
You can’t discount how critical an upturn in those states will be, considering they account for 46% of foreclosures nationwide. If foreclosures there are more quickly consumed as they’re starting to be now - fueled in part by foreign buyers who recognize their value - we’ll all reap a return on our bailout money a lot faster.
“The banks are getting smarter and realizing that if they don’t sell it in a short sale, they lose more money going the foreclosure route,” Barbee said.
Adds Sharga: “The banks will be very particular and thoughtful about how they’ll release new foreclosures, because they know now how flooding the market will have a disastrous effect.”
That, and if the chastened lenders would just swallow crow and pony up for rights to an encouraging Beatles song to play on their delinquent-payers’ hold line: “We can work it out.”
Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Friday, June 12, 2009
Thursday, June 11, 2009
FHA Tax Credit Monetization Helps Home Buyers With Upfront Costs
RISMEDIA, June 11, 2009-First-time home buyers who would otherwise qualify for the $8,000 tax credit, but don’t have the money for a down payment or closing fees, may now be able to get a loan to help cover those upfront costs.
The U.S. Department of Housing and Urban Development (HUD) announced on May 29 that the Federal Housing Administration (FHA) will allow state housing finance agencies to provide second mortgages “monetizing” the tax credit so that borrowers can use the funds toward their down payments and closing costs for the purchase of homes with FHA-insured mortgage loans.
“This is great news for thousands of families who want to take advantage of today’s low interest rates, competitive prices, great selection and the federal tax credit that is only available until Nov. 30, but could not save enough money for a down payment and closing costs,” said National Association of Home Builders Chairman Joe Robson, a home builder from Tulsa, Okla.
HUD also announced that FHA-approved lenders may purchase the tax credit from the home buyer in advance, so that the home buyer can use the funds for closing costs or to make a down payment in addition to the 3.5% minimum. Home buyers who go directly to FHA-approved lenders will still need to come up with the 3.5% minimum down payment that is required for an FHA-insured loan.
Home buyers previously would be able to use the funds from the tax credit only after filing their federal tax returns and had to come up with the pre-purchase costs on their own.
NAHB estimates that 40,000 more homes will be purchased due to the new FHA monetization program, in addition to the 160,000 sales already expected as a result of the tax credit.
The National Council of State Housing Agencies has a list of states offering first time home buyer tax credit loan programs on their website, www.ncsha.org.
For information on the $8,000 first-time home buyer tax credit, go to www.federalhousingtaxcredit.com.
The U.S. Department of Housing and Urban Development (HUD) announced on May 29 that the Federal Housing Administration (FHA) will allow state housing finance agencies to provide second mortgages “monetizing” the tax credit so that borrowers can use the funds toward their down payments and closing costs for the purchase of homes with FHA-insured mortgage loans.
“This is great news for thousands of families who want to take advantage of today’s low interest rates, competitive prices, great selection and the federal tax credit that is only available until Nov. 30, but could not save enough money for a down payment and closing costs,” said National Association of Home Builders Chairman Joe Robson, a home builder from Tulsa, Okla.
HUD also announced that FHA-approved lenders may purchase the tax credit from the home buyer in advance, so that the home buyer can use the funds for closing costs or to make a down payment in addition to the 3.5% minimum. Home buyers who go directly to FHA-approved lenders will still need to come up with the 3.5% minimum down payment that is required for an FHA-insured loan.
Home buyers previously would be able to use the funds from the tax credit only after filing their federal tax returns and had to come up with the pre-purchase costs on their own.
NAHB estimates that 40,000 more homes will be purchased due to the new FHA monetization program, in addition to the 160,000 sales already expected as a result of the tax credit.
The National Council of State Housing Agencies has a list of states offering first time home buyer tax credit loan programs on their website, www.ncsha.org.
For information on the $8,000 first-time home buyer tax credit, go to www.federalhousingtaxcredit.com.
Wednesday, May 20, 2009
Housing Affordability Surges to Highest Level in 18 Years
RISMEDIA, May 20, 2009-Nationwide housing affordability jumped 10 percentage points during the first quarter of 2009 to its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). The HOI showed that 72.5% of all new and existing homes sold in the first quarter of 2009 were affordable to families earning the national median income of $64,000, up from 62.4% during the previous quarter and up from 53.8% during the first quarter of 2008.
“Underlying the increase in affordability are lower home prices and record low interest rates. Combined with the $8,000 federal tax credit for first-time home buyers, consumers are beginning to return to the marketplace,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.
Indianapolis was the most affordable major housing market in the country during the first quarter. Almost 95% of all homes sold were affordable to households earning the area’s median family income of $68,100. Indianapolis has now topped the affordability list 15 consecutive quarters.
Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Akron, Ohio; Grand Rapids-Wyoming, Mich.; and Syracuse, N.Y.
Several smaller housing markets posted even higher affordability scores than Indianapolis, with Sandusky, Ohio outscoring all others. There, almost 98% of homes sold during the first quarter of 2009 were affordable to median-income earners. Other small housing markets ahead of Indianapolis on the affordability scale included Monroe in Michigan and Mansfield, Springfield and Canton-Massillon in Ohio.
New York-White Plains-Wayne, N.Y.-N.J., where just over 21% of all homes sold during the period were affordable to those earning the median income of $64,800, was once again the nation’s least affordable major housing market in the first quarter. Though affordability jumped 7 percentage points for the quarter, this was the New York metro area’s fourth consecutive appearance at the bottom of the list. Other major metros near the bottom of the chart included San Francisco; Los Angeles-Long Beach-Glendale, Calif.; Nassau-Suffolk, N.Y.; and Honolulu.
Among smaller metro areas, Ocean City, N.J. was the least affordable market, along with San Luis Obispo-Paso Robles, Calif.; Flagstaff, Ariz.; Hanford-Corcoran, Calif.; and Santa Cruz-Watsonville, Calif., respectively.
For more information, visit www.nahb.org.
“Underlying the increase in affordability are lower home prices and record low interest rates. Combined with the $8,000 federal tax credit for first-time home buyers, consumers are beginning to return to the marketplace,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.
Indianapolis was the most affordable major housing market in the country during the first quarter. Almost 95% of all homes sold were affordable to households earning the area’s median family income of $68,100. Indianapolis has now topped the affordability list 15 consecutive quarters.
Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Akron, Ohio; Grand Rapids-Wyoming, Mich.; and Syracuse, N.Y.
Several smaller housing markets posted even higher affordability scores than Indianapolis, with Sandusky, Ohio outscoring all others. There, almost 98% of homes sold during the first quarter of 2009 were affordable to median-income earners. Other small housing markets ahead of Indianapolis on the affordability scale included Monroe in Michigan and Mansfield, Springfield and Canton-Massillon in Ohio.
New York-White Plains-Wayne, N.Y.-N.J., where just over 21% of all homes sold during the period were affordable to those earning the median income of $64,800, was once again the nation’s least affordable major housing market in the first quarter. Though affordability jumped 7 percentage points for the quarter, this was the New York metro area’s fourth consecutive appearance at the bottom of the list. Other major metros near the bottom of the chart included San Francisco; Los Angeles-Long Beach-Glendale, Calif.; Nassau-Suffolk, N.Y.; and Honolulu.
Among smaller metro areas, Ocean City, N.J. was the least affordable market, along with San Luis Obispo-Paso Robles, Calif.; Flagstaff, Ariz.; Hanford-Corcoran, Calif.; and Santa Cruz-Watsonville, Calif., respectively.
For more information, visit www.nahb.org.
Monday, May 18, 2009
Housing Affordability and Low Interest Rates Entice Buyers to Return to the Market
RISMEDIA, May 18, 2009-Historically high housing affordability and low mortgage interest rates, combined with buyer opportunities in the distressed sales market, have increased home sales in many areas of the country. “There has never been a better time to buy,” said National Association of Realtors Chief Economist Lawrence Yun, who presented NAR’s economic outlook at the Economic Issues and Residential Real Estate Business Trends Forum that took place during the Realtors Midyear Legislative Meetings & Trade Expo that took place in Washington, D.C. last week. Yun commented on a convergence of favorable buying conditions while emphasizing how important it is for home buyers to stay within their budgets. “Housing affordability is at an all-time high, mortgage rates are historically low, and interest rates are the lowest they’ve been since the days of Eisenhower,” said Yun.
During a national real estate summit held in D.C. last week, Shaun Donovan, U.S. Secretary of the Department of Housing and Urban Development, announced that the Federal Housing Administration is going to permit its lenders to allow qualified home buyers to use the $8,000 tax credit as a downpayment. “Now that buyers will be able to use the $8,000 tax credit as a downpayment, we should see additional buyers enter the market,” said Yun.
While he doesn’t anticipate an immediate pickup in the coming months, Yun believes early summer will be a critical indicator of how home buyers are responding to the $8,000 tax credit. “The home buying process takes time,” said Yun. “This summer will gauge the success of the first-time home buyer tax credit.”
Evidence of recovery is already demonstrated in California, where home sales are rising much faster than anticipated; some areas in the state are seeing a 70% to 80% increase in sales. Yun attributes this surge to buyers who may have been sitting on the fence but are now taking advantage of the great opportunities for fear of being left out of current deals in the market.
According to Yun, many first-time buyers are attracted to deeply discounted and distressed home prices. Nationally, about half of all recent transactions have been distressed sales. Fifteen to 20% have been short sales and 30% to 35% have been foreclosures. Yun says while these statistics are unfortunate, the situation, along with current home buying incentives, has created an impressive window of opportunity for potential home buyers.
“The stimulus and falling inventory levels will help stabilize prices,” said Yun. “My projection is home sales will be 10 to 20 percent higher the second half of this year than last year and we will come out of this recession in 2010.”
For more information, visit www.realtor.org.
During a national real estate summit held in D.C. last week, Shaun Donovan, U.S. Secretary of the Department of Housing and Urban Development, announced that the Federal Housing Administration is going to permit its lenders to allow qualified home buyers to use the $8,000 tax credit as a downpayment. “Now that buyers will be able to use the $8,000 tax credit as a downpayment, we should see additional buyers enter the market,” said Yun.
While he doesn’t anticipate an immediate pickup in the coming months, Yun believes early summer will be a critical indicator of how home buyers are responding to the $8,000 tax credit. “The home buying process takes time,” said Yun. “This summer will gauge the success of the first-time home buyer tax credit.”
Evidence of recovery is already demonstrated in California, where home sales are rising much faster than anticipated; some areas in the state are seeing a 70% to 80% increase in sales. Yun attributes this surge to buyers who may have been sitting on the fence but are now taking advantage of the great opportunities for fear of being left out of current deals in the market.
According to Yun, many first-time buyers are attracted to deeply discounted and distressed home prices. Nationally, about half of all recent transactions have been distressed sales. Fifteen to 20% have been short sales and 30% to 35% have been foreclosures. Yun says while these statistics are unfortunate, the situation, along with current home buying incentives, has created an impressive window of opportunity for potential home buyers.
“The stimulus and falling inventory levels will help stabilize prices,” said Yun. “My projection is home sales will be 10 to 20 percent higher the second half of this year than last year and we will come out of this recession in 2010.”
For more information, visit www.realtor.org.
Wednesday, May 6, 2009
Condo.com to Host First Online Condo Auction
RISMEDIA, May 6, 2009-Condo.com, one of the world’s largest condominium marketplaces, announced that it has partnered with Elad National Properties, Cornerstone Marketing and Auction Management Solutions to auction 40 condominium units at The Enclave at Briarcliff in Atlanta Georgia. The auction will be held on May 16th, 2009 and live bids can be placed online or in person with reserves marked 30% below the previous asking price.
“We are very excited to be able to offer this amazing opportunity to buyers from around the world” said Richard Swerdlow, CEO of Condo.com. “We are committed to making the best deals available to everyone who visits Condo.com. Allowing users to bid on these condo units from the comfort of their home, in real-time online, insures that buyers located anywhere with an Internet connection can take advantage of this event.”
For more information, visit www.condo.com.
“We are very excited to be able to offer this amazing opportunity to buyers from around the world” said Richard Swerdlow, CEO of Condo.com. “We are committed to making the best deals available to everyone who visits Condo.com. Allowing users to bid on these condo units from the comfort of their home, in real-time online, insures that buyers located anywhere with an Internet connection can take advantage of this event.”
For more information, visit www.condo.com.
Condo.com to Host First Online Condo Auction
RISMEDIA, May 6, 2009-Condo.com, one of the world’s largest condominium marketplaces, announced that it has partnered with Elad National Properties, Cornerstone Marketing and Auction Management Solutions to auction 40 condominium units at The Enclave at Briarcliff in Atlanta Georgia. The auction will be held on May 16th, 2009 and live bids can be placed online or in person with reserves marked 30% below the previous asking price.
“We are very excited to be able to offer this amazing opportunity to buyers from around the world” said Richard Swerdlow, CEO of Condo.com. “We are committed to making the best deals available to everyone who visits Condo.com. Allowing users to bid on these condo units from the comfort of their home, in real-time online, insures that buyers located anywhere with an Internet connection can take advantage of this event.”
For more information, visit www.condo.com.
“We are very excited to be able to offer this amazing opportunity to buyers from around the world” said Richard Swerdlow, CEO of Condo.com. “We are committed to making the best deals available to everyone who visits Condo.com. Allowing users to bid on these condo units from the comfort of their home, in real-time online, insures that buyers located anywhere with an Internet connection can take advantage of this event.”
For more information, visit www.condo.com.
Tuesday, May 5, 2009
Upward Bound - Housing Affordability Conditions Cause for Rise in Pending Home Sales
RISMEDIA, May 5, 2009-Pending home sales rose with many first-time buyers taking advantage of historically good housing affordability conditions, according to the National Association of Realtors®. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, increased 3.2% to 84.6 from a level of 82.0 in February, and is 1.1% higher than March 2008 when it was 83.7. Lawrence Yun, NAR chief economist, said it should take a few months for the market to gain momentum. ”This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a downpayment,” he said. “We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around.”
NAR’s Housing Affordability Index (HAI) remained near record highs. The affordability index was 166.7 in March - down from an upwardly revised record of 174.4 in February due to higher home prices in March. The index remains 30.8 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.
The Pending Home Sales Index in the South rose 8.5% to 93.2 in March and is 7.7% above a year ago. In the West the index increased 3.9% to 93.1 and is 1.7% higher than March 2008. The index in the Northeast fell 5.7% to 59.5 in March and is 24.1% below a year ago. In the Midwest the index slipped 1.0% to 82.3 but is 8.2% higher than March 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the increase in buying power is quite remarkable. “Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment,” he said. “For buyers who’ve been on the sidelines and have good jobs, the market has never looked more favorable. Homeownership has always offered immediate benefits and long-term value, but the advantages in today’s market are unique.”
A median-income family, earning $61,100, could afford a home costing $291,600 in March with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of that amount. The affordable price was notably higher than the median existing single-family home price in March, which was $174,900.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
For more information, visit www.realtor.org.
NAR’s Housing Affordability Index (HAI) remained near record highs. The affordability index was 166.7 in March - down from an upwardly revised record of 174.4 in February due to higher home prices in March. The index remains 30.8 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.
The Pending Home Sales Index in the South rose 8.5% to 93.2 in March and is 7.7% above a year ago. In the West the index increased 3.9% to 93.1 and is 1.7% higher than March 2008. The index in the Northeast fell 5.7% to 59.5 in March and is 24.1% below a year ago. In the Midwest the index slipped 1.0% to 82.3 but is 8.2% higher than March 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the increase in buying power is quite remarkable. “Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment,” he said. “For buyers who’ve been on the sidelines and have good jobs, the market has never looked more favorable. Homeownership has always offered immediate benefits and long-term value, but the advantages in today’s market are unique.”
A median-income family, earning $61,100, could afford a home costing $291,600 in March with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of that amount. The affordable price was notably higher than the median existing single-family home price in March, which was $174,900.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
For more information, visit www.realtor.org.
Friday, May 1, 2009
HUD Sees Signs of Stabilization
The housing market is looking healthier, but U.S. Housing and Urban Development Secretary Shaun Donovan said Wednesday that it is too early to tell if the recovery has taken hold.
"We do have some early signs, I think, that the market is stabilizing. Since January, what we've seen is both prices and sales volumes moving up and down around a relatively stable number," Donovan said
Donovan said he was optimistic that President Obama’s policies are bolstering the market.
"I think in particular when you get below the national level what you see is that in markets like California that were the hardest hit, that is where the signs (of recovery) are the strongest," he said.
"We do have some early signs, I think, that the market is stabilizing. Since January, what we've seen is both prices and sales volumes moving up and down around a relatively stable number," Donovan said
Donovan said he was optimistic that President Obama’s policies are bolstering the market.
"I think in particular when you get below the national level what you see is that in markets like California that were the hardest hit, that is where the signs (of recovery) are the strongest," he said.
Tuesday, April 28, 2009
Finding Bottom: Where the Market Will Turn Around
By George W. Mantor Print Article
RISMEDIA, April 28, 2009-The end is near. When exactly, is hard to predict. It is also hard to predict what that end will look like. However, it is hard to escape the sense that some things will change forever. But what? Will law and order, if you can call this that, descend into chaos? Will nations withdraw from the global economy and seek self-sufficiency and protectionism? Will complex monetary systems that allow insider manipulation be replaced by barter? Will Brad and Angelina ever tie the knot? These are the great questions of our time.
Now, I bring up Brad and Angie, not to name drop or be forever connected to them on the Internet, but because whenever I see a picture of them, and you can’t not, I always imagine an infant wailing in the background. In fact, everywhere I go I’m tripping over strollers, dodging toddlers, and trying to escape the ear piercing shrieks of a full-on baby boom. It turns out 2007 was a year on par with the fifties, which illustrates an important point…life goes on.
From Bristol Palin to Nadya Suleman, there are a lot of women of child bearing age. According to the US Census Bureau, “…the Nation’s population is projected to increase to 392 million by 2050 — more than a 50 percent increase from the 1990 population size.”
And, what do growing families need? Take Nadya Suleman for example, she’s unemployed, but when her brood swelled to fourteen, she went out and bought a bigger house.
The population growth of the United States will, as it frequently has in the past, snap up all surplus housing that currently exists in growing regions. When that happens, prices will rise and builders will have sufficient incentive to return to the market in some, but not all regions. But first, selling prices must rise to the level that returns the cost of construction and a profit worthy of taking the risk.
America has a lot of problems to solve and only time will tell if we made the right choices. And, while some of us are totally paralyzed waiting for the next dispatch of really bad news, others must get on with their plans. The summer buying season is fast approaching and buyers continue to wrestle with uncertainty.
It’s no secret that qualified potential buyers are sitting on the sidelines waiting for some indication that real estate prices are at, or near, their bottom. While increasing sales prices are an obvious sign, buyers who have a strong desire for a wide selection at the best possible prices will need to act before that occurs.
For many potential buyers, it isn’t so much about getting the lowest possible price as it is feeling secure that they made a wise investment. If they plan to stay for 10 years, it matters less what happens in the next two years to sales prices than it does where they spend those two years. There are real and tangible benefits to owning where one lives. One we keep overlooking is satisfaction. I love my home, and I love owning it and doing what I want with it.
Even so, most potential buyers will need some assurances that things won’t fall much further. And, their will be signs. In the fall of 2005, with inventory low and prices at an all time high, I advised listeners of my radio program that if they intended to cash out, now was the time. I told them that we were short of houses and they could get top dollar with a quick sale. While I did not say that we had reached the absolute summit of sales prices, I knew we were close.
In finding bottom, here are some things to consider:
1. Local employment
One of the factors affecting the selling price of real estate is local employment.
At first, all the talk of the housing crisis was about over-leveraged consumers. But, we have now moved to a more critical phase. If you do not have a job and you have little to no savings, you can’t make a mortgage payment, period.
Nor do I believe that housing brought down the economy. It’s the other way around. Housing is benign. People buy houses, start families, and trade up when they are employed. And, because jobs are disappearing so fast, even those untouched by job losses are fearful they could be next.
What brought down the economy was fraud. Massive waves of, as yet not fully disclosed, fraud did this to us. ENRON, WorldCom, AIG, Tyco, Halliburton, Arthur Anderson, Madoff, the legal fraud perpetrated by greedy CEOs; fraud by their accounting firms, loan fraud by sophisticated organized crime from both in and outside the country, fraud by elected and appointed officials, and a bunch of garden variety fraud by small timers brought down the economy. It was a whole sale looting. They got a lot of our money and they burned through our prosperity like drunken whores, and now we are forced to bail them out. But, this too shall pass.
When the job trend reverses, when we begin to create a few hundred thousand jobs over a few months, an enormous pent up demand will return to a limited selection of good housing stock. At the moment, one in seven of the nation’s houses is vacant. Many are in various stages of disrepair, functionally obsolete, or located in the wrong place.
Unemployment filings will likely continue to fluctuate for a while and are sometimes more indicative of changing industry dynamics than the actual employment health of a local community. If your region is anticipating stimulus funds or has modern growth industries that will be developing jobs of the future, your employment picture should start to improve.
Local communities’ recovery time will vary, reflecting employment conditions. Some will never recover at all. Apparently, there is no bottom in Detroit where reports have surfaced of homes selling for as little as a dollar. But, Detroit has been in decline for decades. In the 70’s, so many Detroiters moved to Windsor, Ontario that there was a common bumper sticker which read, “Will the last person leaving Detroit please turn out the lights.”
Detroit has been losing jobs for a very long time, and the recent woes of the American automobile industry do not bode well for the future. But, in other places, where contemporary industry is growing, like Seattle-Tacoma or the Silicon Valley, the bottom is closer.
2. Return to historical baseline of sales
To understand the market dynamic, it is important to understand “normal” for your community. Every month, a finite number of residential real estate transactions occur. In a down market, the number might be as few as half the number of sales during a boom market. But over time, it tends to average out.
Determine a monthly baseline of sales for your community. Obtain a history of sales activity for the past ten years. This will give you a measure that includes sufficient market ups and downs.
In a recovering market, there will be a return to the historical baseline of monthly sales activity.
3. Reduction of available inventory
Just as there are historical baselines for sales activities, there are also similar baselines of available property offered through builders, the MLS, and occasionally, private sellers. Simply tracking the number of listings through the MLS will give you a clear picture of the direction of inventory.
Knowing the baseline of sales activity, you can determine how many months of available inventory are currently in the local market. If inventory is shrinking, the bottom is near.
4. Relationship to cost of new construction
In many communities, sales prices are actually below replacement cost. And, that in itself suggests the bottom is near. If builders cannot recoup their costs and make a profit commensurate with the risk, they will cease building until sales prices begin to rise. Recognizing that prices are actually starting to rise and that resale inventory is shrinking, pent-up demand will pour back into the market and here we go again. Remember, all the people not buying these days will combine with normal baseline demand and overwhelm the market.
5. Hidden price stabilization
Recent reports of sales prices often seem to assert that these sales prices are representative of the value of housing in general. First, that’s just what sold that month. Since distressed properties make up much of the market, it stands to reason that those prices would reflect smaller square footage and a discount equivalent to the cost of rehabilitation.
Some homes are more desirable than others. What about those homes with extra features or those located in good school districts? Are their prices holding? If so, your community may be on its way to recovery.
For potential buyers, finding bottom is less important than knowing that it is near. While it is impossible, given our unprecedented circumstances, for anyone to say for certain when prices will begin to rise in each community, the buyer who knows the signs of recovery will already be settled into the opportunity of a lifetime. In growing communities, housing must and will return to the cost of replacement or new construction.
George W. Mantor is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts. During a career that has spanned more than three decades, he has amassed experience in new home and resale residential real estate, resort marketing, and commercial and investment property. He is currently the founder and president of The Associates Financial Group, a real estate consulting firm. Mantor can be reached at GWMantor@aol.com.
RISMEDIA, April 28, 2009-The end is near. When exactly, is hard to predict. It is also hard to predict what that end will look like. However, it is hard to escape the sense that some things will change forever. But what? Will law and order, if you can call this that, descend into chaos? Will nations withdraw from the global economy and seek self-sufficiency and protectionism? Will complex monetary systems that allow insider manipulation be replaced by barter? Will Brad and Angelina ever tie the knot? These are the great questions of our time.
Now, I bring up Brad and Angie, not to name drop or be forever connected to them on the Internet, but because whenever I see a picture of them, and you can’t not, I always imagine an infant wailing in the background. In fact, everywhere I go I’m tripping over strollers, dodging toddlers, and trying to escape the ear piercing shrieks of a full-on baby boom. It turns out 2007 was a year on par with the fifties, which illustrates an important point…life goes on.
From Bristol Palin to Nadya Suleman, there are a lot of women of child bearing age. According to the US Census Bureau, “…the Nation’s population is projected to increase to 392 million by 2050 — more than a 50 percent increase from the 1990 population size.”
And, what do growing families need? Take Nadya Suleman for example, she’s unemployed, but when her brood swelled to fourteen, she went out and bought a bigger house.
The population growth of the United States will, as it frequently has in the past, snap up all surplus housing that currently exists in growing regions. When that happens, prices will rise and builders will have sufficient incentive to return to the market in some, but not all regions. But first, selling prices must rise to the level that returns the cost of construction and a profit worthy of taking the risk.
America has a lot of problems to solve and only time will tell if we made the right choices. And, while some of us are totally paralyzed waiting for the next dispatch of really bad news, others must get on with their plans. The summer buying season is fast approaching and buyers continue to wrestle with uncertainty.
It’s no secret that qualified potential buyers are sitting on the sidelines waiting for some indication that real estate prices are at, or near, their bottom. While increasing sales prices are an obvious sign, buyers who have a strong desire for a wide selection at the best possible prices will need to act before that occurs.
For many potential buyers, it isn’t so much about getting the lowest possible price as it is feeling secure that they made a wise investment. If they plan to stay for 10 years, it matters less what happens in the next two years to sales prices than it does where they spend those two years. There are real and tangible benefits to owning where one lives. One we keep overlooking is satisfaction. I love my home, and I love owning it and doing what I want with it.
Even so, most potential buyers will need some assurances that things won’t fall much further. And, their will be signs. In the fall of 2005, with inventory low and prices at an all time high, I advised listeners of my radio program that if they intended to cash out, now was the time. I told them that we were short of houses and they could get top dollar with a quick sale. While I did not say that we had reached the absolute summit of sales prices, I knew we were close.
In finding bottom, here are some things to consider:
1. Local employment
One of the factors affecting the selling price of real estate is local employment.
At first, all the talk of the housing crisis was about over-leveraged consumers. But, we have now moved to a more critical phase. If you do not have a job and you have little to no savings, you can’t make a mortgage payment, period.
Nor do I believe that housing brought down the economy. It’s the other way around. Housing is benign. People buy houses, start families, and trade up when they are employed. And, because jobs are disappearing so fast, even those untouched by job losses are fearful they could be next.
What brought down the economy was fraud. Massive waves of, as yet not fully disclosed, fraud did this to us. ENRON, WorldCom, AIG, Tyco, Halliburton, Arthur Anderson, Madoff, the legal fraud perpetrated by greedy CEOs; fraud by their accounting firms, loan fraud by sophisticated organized crime from both in and outside the country, fraud by elected and appointed officials, and a bunch of garden variety fraud by small timers brought down the economy. It was a whole sale looting. They got a lot of our money and they burned through our prosperity like drunken whores, and now we are forced to bail them out. But, this too shall pass.
When the job trend reverses, when we begin to create a few hundred thousand jobs over a few months, an enormous pent up demand will return to a limited selection of good housing stock. At the moment, one in seven of the nation’s houses is vacant. Many are in various stages of disrepair, functionally obsolete, or located in the wrong place.
Unemployment filings will likely continue to fluctuate for a while and are sometimes more indicative of changing industry dynamics than the actual employment health of a local community. If your region is anticipating stimulus funds or has modern growth industries that will be developing jobs of the future, your employment picture should start to improve.
Local communities’ recovery time will vary, reflecting employment conditions. Some will never recover at all. Apparently, there is no bottom in Detroit where reports have surfaced of homes selling for as little as a dollar. But, Detroit has been in decline for decades. In the 70’s, so many Detroiters moved to Windsor, Ontario that there was a common bumper sticker which read, “Will the last person leaving Detroit please turn out the lights.”
Detroit has been losing jobs for a very long time, and the recent woes of the American automobile industry do not bode well for the future. But, in other places, where contemporary industry is growing, like Seattle-Tacoma or the Silicon Valley, the bottom is closer.
2. Return to historical baseline of sales
To understand the market dynamic, it is important to understand “normal” for your community. Every month, a finite number of residential real estate transactions occur. In a down market, the number might be as few as half the number of sales during a boom market. But over time, it tends to average out.
Determine a monthly baseline of sales for your community. Obtain a history of sales activity for the past ten years. This will give you a measure that includes sufficient market ups and downs.
In a recovering market, there will be a return to the historical baseline of monthly sales activity.
3. Reduction of available inventory
Just as there are historical baselines for sales activities, there are also similar baselines of available property offered through builders, the MLS, and occasionally, private sellers. Simply tracking the number of listings through the MLS will give you a clear picture of the direction of inventory.
Knowing the baseline of sales activity, you can determine how many months of available inventory are currently in the local market. If inventory is shrinking, the bottom is near.
4. Relationship to cost of new construction
In many communities, sales prices are actually below replacement cost. And, that in itself suggests the bottom is near. If builders cannot recoup their costs and make a profit commensurate with the risk, they will cease building until sales prices begin to rise. Recognizing that prices are actually starting to rise and that resale inventory is shrinking, pent-up demand will pour back into the market and here we go again. Remember, all the people not buying these days will combine with normal baseline demand and overwhelm the market.
5. Hidden price stabilization
Recent reports of sales prices often seem to assert that these sales prices are representative of the value of housing in general. First, that’s just what sold that month. Since distressed properties make up much of the market, it stands to reason that those prices would reflect smaller square footage and a discount equivalent to the cost of rehabilitation.
Some homes are more desirable than others. What about those homes with extra features or those located in good school districts? Are their prices holding? If so, your community may be on its way to recovery.
For potential buyers, finding bottom is less important than knowing that it is near. While it is impossible, given our unprecedented circumstances, for anyone to say for certain when prices will begin to rise in each community, the buyer who knows the signs of recovery will already be settled into the opportunity of a lifetime. In growing communities, housing must and will return to the cost of replacement or new construction.
George W. Mantor is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts. During a career that has spanned more than three decades, he has amassed experience in new home and resale residential real estate, resort marketing, and commercial and investment property. He is currently the founder and president of The Associates Financial Group, a real estate consulting firm. Mantor can be reached at GWMantor@aol.com.
Monday, April 27, 2009
10 Steps to Building Wealth by Investing in Real Estate in Any Economy
RISMEDIA, April 27, 2009-There’s no question that America is in a tight spot. Every day seems to bring a new wave of recession-related bad news. But stop panicking for a second, tune out the negative chatter, and listen closely. The recent financial and housing crises have actually led to some serious opportunities for level-headed investors who want to get rich the right way rather than get rich quickly.
“The grand irony is that the financial and housing collapses actually create a favorable environment for real estate investing,” says Tyson, coauthor along with Griswold of Real Estate Investing For Dummies®, 2nd Edition. “Interest rates are down, property values are depressed in many parts of the country, and real estate is still a great long-term investment. That hasn’t changed. “It’s not for everyone, but if you’re in the right place financially and can afford to invest in real estate, there are plenty of opportunities out there,” he adds.
“Our core advice is as true today as it was before the recession,” says Tyson. “The fact is, there’s a right way and a wrong way to invest in real estate. The wrong way led to the recent real estate crisis. The right way can lead to great financial gains for long-term investors.”
Here, excerpted from Real Estate Investing For Dummies, are 10 methods for pursuing a real estate fortune the get-rich-right way:
1. Save, save, save. All real estate investors need a nest egg. That means even as you develop additional sources of income, you should hold steady on or preferably even cut current expenses in order to build up your savings. Even if you can find properties where the seller provides all the financing, you can’t escape certain out-of-pocket expenses or the opportunity cost of lost income as you expend your time and energy tracking down properties and performing due diligence.
2. Get your credit sparkling clean. The best opportunities and the most options are available to the real estate investors who have both cash and good credit. Sellers and lenders aren’t going to provide financing to a buyer with a poor credit history. Because the purchase of real estate virtually always necessitates the borrowing of funds, make sure that your credit report is as accurate and as favorable as possible.
3. Buy property in the path of progress. It’s usually a good idea to buy in areas that will continue to improve through new investment and economic activity. After you locate the best cities or neighborhoods, look for two types of underachieving real estate assets: Income properties that are tired and worn and have deferred maintenance, or those that are physically sound but poorly managed.
4. Buy the right property at the best price possible. Sounds like a no-brainer, especially in the current environment, right? Unfortunately, it’s often easier said than done. To be successful, you’ll have to follow certain guidelines. Get-rich-right investors rarely buy new or fully renovated properties unless they’re in the path of progress or a prime location. Why? Because the value-added or appreciation has already been taken by the current owner.
5. Don’t fall into the do-it-yourself trap if the “time” factor doesn’t make sense. Yes, doing the work yourself may be cheaper if you know what you’re doing. But it makes no sense to have a rental property off the market for three weeks while you spend evenings and weekends painting in a misguided attempt to save the $1,000 that a contractor would charge for painting that would take two days.
6. Keep abreast of market rents. One of the biggest challenges for most rental property owners is determining the proper rent to charge tenants for newly renovated rental units. But finding the right rental rate simply requires some homework and research. The best indications of the market value of your renovated property can be found through a market survey of comparable properties.
7. Recover renovation dollars through refinancing. A key element of the get-rich-right strategy is to keep your capital working and use leverage reasonably while maintaining sufficient equity to weather the ups and downs of local real estate cycles. Acquiring and renovating your rental property required cash, but you also have increased the income, which has created additional value. You can now use this increased value to refinance the property to cover your initial costs. While you should avoid borrowing too much and overleveraging your investments, you also don’t want to be too conservative and underestimate your cash needs. Borrow extra money or have an untapped line of credit available to allow for reserves.
8. Reposition property with better tenants. One of the best ways to increase the income and value of your newly renovated real estate investment is to reposition the property with new, more financially qualified tenants. Look to upgrade your tenants by marketing to a new target tenant profile and re-leasing the property. After all, the current tenants may be the reason that the previous owner sold the property.
9. Refinance or sell and defer again. Notwithstanding the decline in property values in most areas in the late-2000s, long-term rental property owners find that they have a considerable amount of equity tied up in their property because of the appreciation that has occurred over the decades throughout much of the country. Having some equity in the property is good and keeps you from faltering should the local real estate economics take a hit, but too much equity just sitting in a property lowers your overall returns.
10. Consolidate holdings into larger properties. Most long-term real estate investors find that they reach the point where their management responsibilities and duties no longer conform to the lifestyle that they can afford. They decide to simplify their lives and hire professional property managers to deal with tenants, turnover, toilets, and trash. But finding and paying for a qualified property manager for a diversified portfolio of small rental properties isn’t easy or cost-effective.
“In our experience, successful real estate investors tend to be savvy, hard working, conscientious individuals who enthusiastically perform comprehensive due diligence before buying a property,” says Tyson. “They don’t reinvent the wheel with each deal, because they know their market niche, personal skills, and available resources. They have a vision and use their tried-and-true game plan for each property. “If you develop these skills, you can uncover unique properties with value-added potential that are often missed by others,” he concludes. “So, take advantage of today’s buyer’s market, and get started now.”
About the Authors:
Eric Tyson, MBA, is one of the nation’s best-selling personal finance book authors and has penned five national bestsellers. His work has been featured and quoted in hundreds of local and national publications and media outlets. He was also a featured speaker at a White House conference on retirement planning.
Robert S. Griswold, MSBA, is a successful real estate investor and hands-on property manager with a large portfolio of residential and commercial rental properties who uses print and broadcast journalism to bring his many years of experience to his readers, listeners, and viewers.
“The grand irony is that the financial and housing collapses actually create a favorable environment for real estate investing,” says Tyson, coauthor along with Griswold of Real Estate Investing For Dummies®, 2nd Edition. “Interest rates are down, property values are depressed in many parts of the country, and real estate is still a great long-term investment. That hasn’t changed. “It’s not for everyone, but if you’re in the right place financially and can afford to invest in real estate, there are plenty of opportunities out there,” he adds.
“Our core advice is as true today as it was before the recession,” says Tyson. “The fact is, there’s a right way and a wrong way to invest in real estate. The wrong way led to the recent real estate crisis. The right way can lead to great financial gains for long-term investors.”
Here, excerpted from Real Estate Investing For Dummies, are 10 methods for pursuing a real estate fortune the get-rich-right way:
1. Save, save, save. All real estate investors need a nest egg. That means even as you develop additional sources of income, you should hold steady on or preferably even cut current expenses in order to build up your savings. Even if you can find properties where the seller provides all the financing, you can’t escape certain out-of-pocket expenses or the opportunity cost of lost income as you expend your time and energy tracking down properties and performing due diligence.
2. Get your credit sparkling clean. The best opportunities and the most options are available to the real estate investors who have both cash and good credit. Sellers and lenders aren’t going to provide financing to a buyer with a poor credit history. Because the purchase of real estate virtually always necessitates the borrowing of funds, make sure that your credit report is as accurate and as favorable as possible.
3. Buy property in the path of progress. It’s usually a good idea to buy in areas that will continue to improve through new investment and economic activity. After you locate the best cities or neighborhoods, look for two types of underachieving real estate assets: Income properties that are tired and worn and have deferred maintenance, or those that are physically sound but poorly managed.
4. Buy the right property at the best price possible. Sounds like a no-brainer, especially in the current environment, right? Unfortunately, it’s often easier said than done. To be successful, you’ll have to follow certain guidelines. Get-rich-right investors rarely buy new or fully renovated properties unless they’re in the path of progress or a prime location. Why? Because the value-added or appreciation has already been taken by the current owner.
5. Don’t fall into the do-it-yourself trap if the “time” factor doesn’t make sense. Yes, doing the work yourself may be cheaper if you know what you’re doing. But it makes no sense to have a rental property off the market for three weeks while you spend evenings and weekends painting in a misguided attempt to save the $1,000 that a contractor would charge for painting that would take two days.
6. Keep abreast of market rents. One of the biggest challenges for most rental property owners is determining the proper rent to charge tenants for newly renovated rental units. But finding the right rental rate simply requires some homework and research. The best indications of the market value of your renovated property can be found through a market survey of comparable properties.
7. Recover renovation dollars through refinancing. A key element of the get-rich-right strategy is to keep your capital working and use leverage reasonably while maintaining sufficient equity to weather the ups and downs of local real estate cycles. Acquiring and renovating your rental property required cash, but you also have increased the income, which has created additional value. You can now use this increased value to refinance the property to cover your initial costs. While you should avoid borrowing too much and overleveraging your investments, you also don’t want to be too conservative and underestimate your cash needs. Borrow extra money or have an untapped line of credit available to allow for reserves.
8. Reposition property with better tenants. One of the best ways to increase the income and value of your newly renovated real estate investment is to reposition the property with new, more financially qualified tenants. Look to upgrade your tenants by marketing to a new target tenant profile and re-leasing the property. After all, the current tenants may be the reason that the previous owner sold the property.
9. Refinance or sell and defer again. Notwithstanding the decline in property values in most areas in the late-2000s, long-term rental property owners find that they have a considerable amount of equity tied up in their property because of the appreciation that has occurred over the decades throughout much of the country. Having some equity in the property is good and keeps you from faltering should the local real estate economics take a hit, but too much equity just sitting in a property lowers your overall returns.
10. Consolidate holdings into larger properties. Most long-term real estate investors find that they reach the point where their management responsibilities and duties no longer conform to the lifestyle that they can afford. They decide to simplify their lives and hire professional property managers to deal with tenants, turnover, toilets, and trash. But finding and paying for a qualified property manager for a diversified portfolio of small rental properties isn’t easy or cost-effective.
“In our experience, successful real estate investors tend to be savvy, hard working, conscientious individuals who enthusiastically perform comprehensive due diligence before buying a property,” says Tyson. “They don’t reinvent the wheel with each deal, because they know their market niche, personal skills, and available resources. They have a vision and use their tried-and-true game plan for each property. “If you develop these skills, you can uncover unique properties with value-added potential that are often missed by others,” he concludes. “So, take advantage of today’s buyer’s market, and get started now.”
About the Authors:
Eric Tyson, MBA, is one of the nation’s best-selling personal finance book authors and has penned five national bestsellers. His work has been featured and quoted in hundreds of local and national publications and media outlets. He was also a featured speaker at a White House conference on retirement planning.
Robert S. Griswold, MSBA, is a successful real estate investor and hands-on property manager with a large portfolio of residential and commercial rental properties who uses print and broadcast journalism to bring his many years of experience to his readers, listeners, and viewers.
Wednesday, April 22, 2009
Are Banks Withholding Foreclosed Homes to Prop Sales?
By Leslie Berkman Print Article
RISMEDIA, April 22, 2009-(MCT)-Lenders for months have been holding back a high volume of homes in the foreclosure pipeline that could further depress home values if they are released at once into the market, industry experts say. The artificially created shortage of foreclosed homes for sale comes when there is a strong resurgence of home buying, with consumers finding, often to their surprise, that they must make multiple offers to compete for a diminished supply of bargain homes. Meanwhile, financial institutions have been encouraged by federal and state lawmakers to slow the foreclosure process to provide more time to work with borrowers on mortgage modifications in an effort to reduce foreclosures.
Scott Anderson, vice president and senior economist with Wells Fargo, said also by withholding a portion of foreclosed properties from the market, lenders may deliberately be preventing home prices from falling as fast as they otherwise would.
A tally by one company that closely monitors foreclosures showed only about a third of repossessed houses are being actively marketed. If this “phantom supply” of bank-owned houses is put up for sale at once, Anderson said, it would probably prompt another steep plunge in property values.
“The danger is this could be devastating for the banks’ balance sheets and for anyone else trying to sell a house or refinance their mortgage,” he said.
The banks “would be crazy to flood the market and cause prices to sink. Their own assets would be worth more if they brought the foreclosures in slowly,” said John Husing, a Redlands-based economist.
Husing has predicted Inland Southern California home prices will stop falling in the next couple of months because of shrinking inventory and growing buyer demand.
Sean O’Toole, founder and chief executive of ForeclosureRadar, a California information Web site, said mortgage servicers have told him “They want to be careful about putting out too many properties at one time because they believe supply and demand are affecting prices.”
The median price of an Inland house has dropped 43 percent in San Bernardino County and 39 percent in Riverside County in the past year, but the rate has slowed in recent months.
Statistics confirm that banks are keeping foreclosed houses off the market much longer than usual, said Rick Sharga, senior vice president of RealtyTrac, a company that monitors foreclosure trends nationally.
Sharga said RealtyTrac studied the 234,716 bank-owned California homes in its database as of the end of November and discovered that only 34 percent were advertised through the state’s dozens of multiple listing services, which is how bank-owned properties are normally marketed.
“We were frankly stunned by that,” Sharga said. Usually repossessed houses are processed, fixed up and listed for sale within 30 days, he said.
While the gradual release of foreclosed properties helps to prop up prices, it also could prolong the real estate recession, Anderson said.
Other objectives the banks may have, Sharga said, include deferring accounting losses they would have to show once foreclosed properties are sold at depressed prices. Or they may be waiting to see if the federal government will offer them more money for their defaulted mortgages than they could get by selling foreclosed houses on the open market.
Foreclosure Hiatus
Also, the foreclosure process has been interrupted repeatedly by federal and state moratoriums designed to encourage lenders to modify loans to help financially stressed homeowners keep their homes.
Two large government-controlled lenders, Fannie Mae and Freddie Mac, in November imposed holiday suspensions of foreclosure-related evictions that were repeatedly extended until March 31.
At the request of Congress, JP Morgan, Morgan Stanley, Wells Fargo, and Bank of America also agreed to suspend foreclosures of owner-occupied homes until the Obama Administration crafted a mortgage modification strategy. In California, legislation took effect in September that requires lenders to give borrowers 30 days notice before taking the first step toward foreclosure. And starting this summer, loan servicers in the state must delay for 90 days the foreclosure of owner-occupied homes or have a comprehensive loan modification program.
As the moratoriums expire, the number of foreclosures is expected to spike.
Meanwhile a surge of first-time home buyers and investors, attracted by low prices and mortgage rates and government tax incentives, are competing for a diminishing number of homes for sale.
Buyers are snapping up foreclosed houses, many of which receive multiple offers, faster than they can be replaced by new foreclosures.
“Sales are much higher than last year, but we are running out of houses to sell,” said Kim Kershaw, sales manager of the Corona office of Prudential California Realty and an agent who sells real-estate-owned (reo) property.
Buying Season
According to the Multi-Regional Multiple Listing Service on Tuesday, there were about 21,000 homes for sale in its territory, which includes the San Gabriel Valley, South Bay and Riverside and San Bernardino counties, with the exception of Victor Valley and the Coachella Valley.
The listing service said that is about half of the 40,000 active listings it had a year ago and the lowest number since March 2006, when the listing service did not include South Bay.
Of the 5,600 existing homes that sold in the multiple listing service’s region last month, about 3,000 were either bank-owned or sold for less than their mortgages, underscoring the key role of foreclosures in today’s housing market.
“At the rate they are dishing out these repos (repossessed houses) it will be years before they all sell,” said Kershaw, who claims that the banks are missing out on a great opportunity to clear out their foreclosures. “It is spring and we are in the big buying season. This is probably not the time to choke the market with no inventory. It is like not having iPods at Christmastime,” she said.
Copyright © 2009, The Press-Enterprise, Riverside, Calif.
Distributed by McClatchy-Tribune Information Services.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
RISMEDIA, April 22, 2009-(MCT)-Lenders for months have been holding back a high volume of homes in the foreclosure pipeline that could further depress home values if they are released at once into the market, industry experts say. The artificially created shortage of foreclosed homes for sale comes when there is a strong resurgence of home buying, with consumers finding, often to their surprise, that they must make multiple offers to compete for a diminished supply of bargain homes. Meanwhile, financial institutions have been encouraged by federal and state lawmakers to slow the foreclosure process to provide more time to work with borrowers on mortgage modifications in an effort to reduce foreclosures.
Scott Anderson, vice president and senior economist with Wells Fargo, said also by withholding a portion of foreclosed properties from the market, lenders may deliberately be preventing home prices from falling as fast as they otherwise would.
A tally by one company that closely monitors foreclosures showed only about a third of repossessed houses are being actively marketed. If this “phantom supply” of bank-owned houses is put up for sale at once, Anderson said, it would probably prompt another steep plunge in property values.
“The danger is this could be devastating for the banks’ balance sheets and for anyone else trying to sell a house or refinance their mortgage,” he said.
The banks “would be crazy to flood the market and cause prices to sink. Their own assets would be worth more if they brought the foreclosures in slowly,” said John Husing, a Redlands-based economist.
Husing has predicted Inland Southern California home prices will stop falling in the next couple of months because of shrinking inventory and growing buyer demand.
Sean O’Toole, founder and chief executive of ForeclosureRadar, a California information Web site, said mortgage servicers have told him “They want to be careful about putting out too many properties at one time because they believe supply and demand are affecting prices.”
The median price of an Inland house has dropped 43 percent in San Bernardino County and 39 percent in Riverside County in the past year, but the rate has slowed in recent months.
Statistics confirm that banks are keeping foreclosed houses off the market much longer than usual, said Rick Sharga, senior vice president of RealtyTrac, a company that monitors foreclosure trends nationally.
Sharga said RealtyTrac studied the 234,716 bank-owned California homes in its database as of the end of November and discovered that only 34 percent were advertised through the state’s dozens of multiple listing services, which is how bank-owned properties are normally marketed.
“We were frankly stunned by that,” Sharga said. Usually repossessed houses are processed, fixed up and listed for sale within 30 days, he said.
While the gradual release of foreclosed properties helps to prop up prices, it also could prolong the real estate recession, Anderson said.
Other objectives the banks may have, Sharga said, include deferring accounting losses they would have to show once foreclosed properties are sold at depressed prices. Or they may be waiting to see if the federal government will offer them more money for their defaulted mortgages than they could get by selling foreclosed houses on the open market.
Foreclosure Hiatus
Also, the foreclosure process has been interrupted repeatedly by federal and state moratoriums designed to encourage lenders to modify loans to help financially stressed homeowners keep their homes.
Two large government-controlled lenders, Fannie Mae and Freddie Mac, in November imposed holiday suspensions of foreclosure-related evictions that were repeatedly extended until March 31.
At the request of Congress, JP Morgan, Morgan Stanley, Wells Fargo, and Bank of America also agreed to suspend foreclosures of owner-occupied homes until the Obama Administration crafted a mortgage modification strategy. In California, legislation took effect in September that requires lenders to give borrowers 30 days notice before taking the first step toward foreclosure. And starting this summer, loan servicers in the state must delay for 90 days the foreclosure of owner-occupied homes or have a comprehensive loan modification program.
As the moratoriums expire, the number of foreclosures is expected to spike.
Meanwhile a surge of first-time home buyers and investors, attracted by low prices and mortgage rates and government tax incentives, are competing for a diminishing number of homes for sale.
Buyers are snapping up foreclosed houses, many of which receive multiple offers, faster than they can be replaced by new foreclosures.
“Sales are much higher than last year, but we are running out of houses to sell,” said Kim Kershaw, sales manager of the Corona office of Prudential California Realty and an agent who sells real-estate-owned (reo) property.
Buying Season
According to the Multi-Regional Multiple Listing Service on Tuesday, there were about 21,000 homes for sale in its territory, which includes the San Gabriel Valley, South Bay and Riverside and San Bernardino counties, with the exception of Victor Valley and the Coachella Valley.
The listing service said that is about half of the 40,000 active listings it had a year ago and the lowest number since March 2006, when the listing service did not include South Bay.
Of the 5,600 existing homes that sold in the multiple listing service’s region last month, about 3,000 were either bank-owned or sold for less than their mortgages, underscoring the key role of foreclosures in today’s housing market.
“At the rate they are dishing out these repos (repossessed houses) it will be years before they all sell,” said Kershaw, who claims that the banks are missing out on a great opportunity to clear out their foreclosures. “It is spring and we are in the big buying season. This is probably not the time to choke the market with no inventory. It is like not having iPods at Christmastime,” she said.
Copyright © 2009, The Press-Enterprise, Riverside, Calif.
Distributed by McClatchy-Tribune Information Services.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
Saturday, April 18, 2009
Homebuyers Give Government Stimulus Plans Lukewarm Reception
RISMEDIA, April 18, 2009-The Obama administration’s $8,000 tax credit for first-time homebuyers is motivating them to make a purchase this year, according to recent survey results from ZipRealty.com. The survey of active ZipRealty website users reveals that 62% of prospective first-time homebuyers are now more likely to buy in 2009. However, government plans provide little incentive for other buyers or for sellers, and confidence in the housing market overall remained largely unchanged since before the election, according to survey results.
“This survey indicates that the originally proposed $15,000 tax credit may have had greater impact on the economy overall,” said ZipRealty Chief Home Hunter Leslie Tyler. “A significant number of newly registered ZipRealty.com users felt uninformed about any of the Obama administration’s housing proposals, providing a great opportunity for agents nationwide to educate new buyers about the programs and resources at their disposal. Getting these first-time buyers into the market is crucial to economic recovery.”
Further survey results include:
-While 62% of first-time buyers were motivated by the $8,000 tax credit, 10% of first-time buyer respondents said they didn’t know enough about the program for it to influence them.
-Of the first-time buyers not motivated by the $8,000 tax credit, 29% said they believe the credit is not enough money to make a difference; 28% didn’t think they would qualify because of income or other restrictions; and 24% think home prices will decline more. The remainder cited mortgage and employment concerns.
-More than half of survey respondents (51% of potential buyers and 59% of potential sellers) indicated that the government’s housing stimulus plans have no effect on their home buying or selling plans this year. Forty-one percent of buyers and 31% of sellers said the government’s actions made them more likely to buy or sell this year.
Economic Impact-Twenty percent of all respondents said they did not know enough about the administration’s plans to form an opinion on the overall economic impact, while another 20% said the plans would not have much economic impact.
-Most respondents said they believed that struggling homeowners would benefit the most from the administration’s plan at 39%, versus just 15% of respondents who said buyers would benefit the most.
Market Confidence-More than half (55%) of buyers and 42% of sellers indicated their confidence in the housing market has not changed since before the election.
-Confidence has tipped more positively for sellers than buyers, with 28% of sellers now more confident about prices increasing, compared to before the election.
“This survey indicates that the originally proposed $15,000 tax credit may have had greater impact on the economy overall,” said ZipRealty Chief Home Hunter Leslie Tyler. “A significant number of newly registered ZipRealty.com users felt uninformed about any of the Obama administration’s housing proposals, providing a great opportunity for agents nationwide to educate new buyers about the programs and resources at their disposal. Getting these first-time buyers into the market is crucial to economic recovery.”
Further survey results include:
-While 62% of first-time buyers were motivated by the $8,000 tax credit, 10% of first-time buyer respondents said they didn’t know enough about the program for it to influence them.
-Of the first-time buyers not motivated by the $8,000 tax credit, 29% said they believe the credit is not enough money to make a difference; 28% didn’t think they would qualify because of income or other restrictions; and 24% think home prices will decline more. The remainder cited mortgage and employment concerns.
-More than half of survey respondents (51% of potential buyers and 59% of potential sellers) indicated that the government’s housing stimulus plans have no effect on their home buying or selling plans this year. Forty-one percent of buyers and 31% of sellers said the government’s actions made them more likely to buy or sell this year.
Economic Impact-Twenty percent of all respondents said they did not know enough about the administration’s plans to form an opinion on the overall economic impact, while another 20% said the plans would not have much economic impact.
-Most respondents said they believed that struggling homeowners would benefit the most from the administration’s plan at 39%, versus just 15% of respondents who said buyers would benefit the most.
Market Confidence-More than half (55%) of buyers and 42% of sellers indicated their confidence in the housing market has not changed since before the election.
-Confidence has tipped more positively for sellers than buyers, with 28% of sellers now more confident about prices increasing, compared to before the election.
Monday, April 13, 2009
With Affordability Up, Home Buyers Return to the Market
RISMEDIA, April 11, 2009-Thanks to record low mortgage rates and declining home prices, 55 million families - or half of all U.S. households - can afford today’s $200,000 median-priced new home, according to figures released by the National Association of Home Builders (NAHB). “That’s an increase of 17 million households from conditions just two years ago and the best housing affordability number we have seen in years,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “We are now seeing the first signs that buyers are returning to the marketplace.”
Based on data from the U.S. Census Bureau comparing home prices, mortgage rates and minimum income needed to purchase a median-priced home in February 2007 and February 2009, a typical family today can purchase a house with $20,000 less in household income and save nearly $500 per month on their principal, interest, taxes and insurance. The number of households that can afford to purchase a home today is 55.4 million, compared with 38.4 million two years ago, according to figures compiled by NAHB.
“With affordability up dramatically, reports from our builders in the field indicate that foot traffic in new homes is on the rise and consumer interest is increasing with each passing day. These are encouraging signs that the housing market may be finally reaching a bottom,” said Robson.
Entering the crucial spring home buying season, there are other signs that buyers are starting to return to the market.
Single-family permits were up 11% in February 2009, new and existing home sales also posted gains and the huge inventory backlog is being slowly whittled down. In a survey for Century 21 Real Estate last month among prospective first-time home buyers who indicated they were likely to purchase a home in the next two years, a majority - 78% - said that now is a good time to buy a home. Of those responding to the online poll, 68% said that now is a better time to buy than six months ago.
Another sign that consumers are considering jumping back into the housing market is the growing interest in the $8,000 first-time home buyer tax credit included in the recently enacted economic stimulus package. During February and March 2009, 1.5 million visitors logged on to NAHB’s consumer website, www.federalhousingtaxcredit.com, to learn more about the tax credit. Further, a new survey commissioned by Move, Inc. found that nearly 20% of those who plan to purchase a home this year are doing so to take advantage of the tax credit, which expires at the end of November.
“With home values in many markets at the lowest level since 2003, an $8,000 tax credit available to first-time home buyers, fixed-rate mortgages under 5%, and an outstanding selection of homes to choose from, buyers are starting to recognize that this has the makings for a one-time opportunity to break into the market,” said Robson.
Housing is a critical component of the U.S. economy, accounting for about 15 cents of every dollar spent in this country, so any upturn in the housing market should be viewed as good news for the overall economy, said Robson.
Construction of an additional 500,000 single-family homes - the difference between today’s anemic construction rate and one that would move closer to meeting the underlying demand for housing - would generate 734,000 jobs and $35 billion in wages in the construction industry and another 790,000 jobs and $37.7 billion wages in manufacturing, trade, and service sector jobs, he noted.
Additionally, another half-million housing starts would bolster the tax base for government, generating $45 billion in federal, state and local tax revenues. And the benefits go well beyond the completion of each home. Within the first year after buying a home, those half million households will spend about $2.5 billion more on appliances, furnishings and property alterations.
“Clearly, housing will be central to any economic recovery we experience in the months ahead,” said Robson.
Based on data from the U.S. Census Bureau comparing home prices, mortgage rates and minimum income needed to purchase a median-priced home in February 2007 and February 2009, a typical family today can purchase a house with $20,000 less in household income and save nearly $500 per month on their principal, interest, taxes and insurance. The number of households that can afford to purchase a home today is 55.4 million, compared with 38.4 million two years ago, according to figures compiled by NAHB.
“With affordability up dramatically, reports from our builders in the field indicate that foot traffic in new homes is on the rise and consumer interest is increasing with each passing day. These are encouraging signs that the housing market may be finally reaching a bottom,” said Robson.
Entering the crucial spring home buying season, there are other signs that buyers are starting to return to the market.
Single-family permits were up 11% in February 2009, new and existing home sales also posted gains and the huge inventory backlog is being slowly whittled down. In a survey for Century 21 Real Estate last month among prospective first-time home buyers who indicated they were likely to purchase a home in the next two years, a majority - 78% - said that now is a good time to buy a home. Of those responding to the online poll, 68% said that now is a better time to buy than six months ago.
Another sign that consumers are considering jumping back into the housing market is the growing interest in the $8,000 first-time home buyer tax credit included in the recently enacted economic stimulus package. During February and March 2009, 1.5 million visitors logged on to NAHB’s consumer website, www.federalhousingtaxcredit.com, to learn more about the tax credit. Further, a new survey commissioned by Move, Inc. found that nearly 20% of those who plan to purchase a home this year are doing so to take advantage of the tax credit, which expires at the end of November.
“With home values in many markets at the lowest level since 2003, an $8,000 tax credit available to first-time home buyers, fixed-rate mortgages under 5%, and an outstanding selection of homes to choose from, buyers are starting to recognize that this has the makings for a one-time opportunity to break into the market,” said Robson.
Housing is a critical component of the U.S. economy, accounting for about 15 cents of every dollar spent in this country, so any upturn in the housing market should be viewed as good news for the overall economy, said Robson.
Construction of an additional 500,000 single-family homes - the difference between today’s anemic construction rate and one that would move closer to meeting the underlying demand for housing - would generate 734,000 jobs and $35 billion in wages in the construction industry and another 790,000 jobs and $37.7 billion wages in manufacturing, trade, and service sector jobs, he noted.
Additionally, another half-million housing starts would bolster the tax base for government, generating $45 billion in federal, state and local tax revenues. And the benefits go well beyond the completion of each home. Within the first year after buying a home, those half million households will spend about $2.5 billion more on appliances, furnishings and property alterations.
“Clearly, housing will be central to any economic recovery we experience in the months ahead,” said Robson.
Thursday, March 26, 2009
Light at the End of the Tunnel? U.S. Home Prices Rise for First time in 12 Months
RISMEDIA, March 25, 2009-U.S. home prices rose for the first time in 12 months, showing an increase of 1.7% on a seasonally-adjusted basis from December to January, according to the Federal Housing Finance Agency’s (FHFA) monthly House Price Index. December’s previously reported 0.1% increase was revised to a 0.2% decline, and for the 12 months ending in January, U.S. prices fell 6.3%, and the U.S. index is 9.6% below its April 2007 peak.
The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
For the nine Census Divisions, seasonally-adjusted monthly price changes from December to January ranged from -0.9% in the Pacific Division to +3.9% in the East North Central Division.
Month-to-month changes in the geographic mix of sales activity explain most of the unexpected rise in prices in January. The January home sales reflected in the FHFA data disproportionately occurred in areas with the strongest markets.
While it is difficult to perfectly control for changing geographic mix in estimating house price indexes, the data suggest that if one were to remove those effects, the change in home prices in January, while still positive, would have been far less dramatic.
It also should be noted that sales volumes, in absolute terms, were relatively low in the month. Accordingly, the estimation imprecision associated with the January estimate is relatively large and subsequent revisions to the monthly figure could be significant.
The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
For the nine Census Divisions, seasonally-adjusted monthly price changes from December to January ranged from -0.9% in the Pacific Division to +3.9% in the East North Central Division.
Month-to-month changes in the geographic mix of sales activity explain most of the unexpected rise in prices in January. The January home sales reflected in the FHFA data disproportionately occurred in areas with the strongest markets.
While it is difficult to perfectly control for changing geographic mix in estimating house price indexes, the data suggest that if one were to remove those effects, the change in home prices in January, while still positive, would have been far less dramatic.
It also should be noted that sales volumes, in absolute terms, were relatively low in the month. Accordingly, the estimation imprecision associated with the January estimate is relatively large and subsequent revisions to the monthly figure could be significant.
Sunday, March 15, 2009
Pricing Disagreement: What Is a Home Worth?
Homebuyers and the real estate professionals they choose to sell their homes don't always agree over what the property is worth, and many buyers think both of them are setting prices too high, according to a survey by HomeGain.com Inc.
The survey found that 63 percent of home owners believe the price their practitioner recommended is too low. About 45 percent of sellers think prices should be 20 percent to 30 percent higher, while 14 percent believe their home should be priced a whopping 30 percent higher.
Meanwhile, 21 percent of home buyers say the homes they are considering are overpriced by up to 10 percent; 32 percent say prices are 10 percent to 20 percent too high; and 6 percent say homes are more than 21 percent over priced. Only 18 percent believe homes are priced fairly.
“Home owners know that prices have fallen, but that somehow doesn’t apply to them because they have ‘upgraded vinyl’” or something, Pamela Frey-Primiani of Keller Williams Realty in Sicklerville, N.J., says. “Sellers have got to be realistic in their expectations. An overpriced home in these times does nothing — no showings, no offers, just whining from sellers that it’s all someone else’s fault that the home hasn’t sold.”
Source: HomeGain.com Inc. (03/05/2009)
The survey found that 63 percent of home owners believe the price their practitioner recommended is too low. About 45 percent of sellers think prices should be 20 percent to 30 percent higher, while 14 percent believe their home should be priced a whopping 30 percent higher.
Meanwhile, 21 percent of home buyers say the homes they are considering are overpriced by up to 10 percent; 32 percent say prices are 10 percent to 20 percent too high; and 6 percent say homes are more than 21 percent over priced. Only 18 percent believe homes are priced fairly.
“Home owners know that prices have fallen, but that somehow doesn’t apply to them because they have ‘upgraded vinyl’” or something, Pamela Frey-Primiani of Keller Williams Realty in Sicklerville, N.J., says. “Sellers have got to be realistic in their expectations. An overpriced home in these times does nothing — no showings, no offers, just whining from sellers that it’s all someone else’s fault that the home hasn’t sold.”
Source: HomeGain.com Inc. (03/05/2009)
Friday, March 6, 2009
Freddie Mac Launches Rental Initiative
Freddie Mac is launching a rental initiative, which will give former owners and tenants of foreclosed property the opportunity to lease their recently foreclosed properties month to month.
The REO rental initiative will be managed by HomeSteps, Freddie Mac’s national real estate unit, and implemented through several national property management firms. Freddie Mac has about 8,500 properties in various stages of foreclosure.
Freddie Mac also will continue to suspend evictions through March 31 to ensure that former owners and occupants have an opportunity to explore new options available to them.
To qualify for a lease, the tenant or former owner must occupy the property and show they have adequate income to pay the monthly rental amount established by the property management company based on market rents for the area. Occupants must agree to allow HomeSteps to show the home to potential buyers during the lease period.
Source: Freddie Mac (03/05/2009)
The REO rental initiative will be managed by HomeSteps, Freddie Mac’s national real estate unit, and implemented through several national property management firms. Freddie Mac has about 8,500 properties in various stages of foreclosure.
Freddie Mac also will continue to suspend evictions through March 31 to ensure that former owners and occupants have an opportunity to explore new options available to them.
To qualify for a lease, the tenant or former owner must occupy the property and show they have adequate income to pay the monthly rental amount established by the property management company based on market rents for the area. Occupants must agree to allow HomeSteps to show the home to potential buyers during the lease period.
Source: Freddie Mac (03/05/2009)
Is Now the Best Time to Invest in Apartments?
Industry experts say consider investing in a duplex, triplex or small apartment building.
"Smaller units are typically older ... and during a downturn people prefer lower-quality properties with fewer amenities," says Hessam Nadji, managing director of research at real estate brokerage Marcus & Millichap.
Nadji also pointed out that young people are the most likely tenants in these older units and that segment of the population is growing. The baby boom peaked in the 1950s and those boomers’ children, born in the 1980s, are just going out on their own. While they have one of the highest unemployment rates now – 12 percent – they will likely be the first hired when the economy improves, says Reis Research Director Victor Calanog.
Reis identifies San Diego and Sacramento as areas expecting strong growth, as well as San Antonio, Texas, and Fairfield County, Conn., a suburb of New York City.
Nadji urged investors to buy now while prices are down. "There is a good chance that if an investor waits for a recovery to materialize, they'll see prices go up again," Nadji says.
Source: Investor’s Business Daily, Amy Reeves (02/26/2009)
"Smaller units are typically older ... and during a downturn people prefer lower-quality properties with fewer amenities," says Hessam Nadji, managing director of research at real estate brokerage Marcus & Millichap.
Nadji also pointed out that young people are the most likely tenants in these older units and that segment of the population is growing. The baby boom peaked in the 1950s and those boomers’ children, born in the 1980s, are just going out on their own. While they have one of the highest unemployment rates now – 12 percent – they will likely be the first hired when the economy improves, says Reis Research Director Victor Calanog.
Reis identifies San Diego and Sacramento as areas expecting strong growth, as well as San Antonio, Texas, and Fairfield County, Conn., a suburb of New York City.
Nadji urged investors to buy now while prices are down. "There is a good chance that if an investor waits for a recovery to materialize, they'll see prices go up again," Nadji says.
Source: Investor’s Business Daily, Amy Reeves (02/26/2009)
Experts Weigh Rent-to-Buy Pros and Cons
The weak housing market has prompted some home sellers to offer rent-to-buy agreements to prospective buyers.
These buyers pay an up-front fee of approximately 1 percent of the sales price for the option to buy, and all the payments they make during the rental period go toward the principal.
Most rent-to-buy agreements last for two to five years; and if the occupants decide not to go through with the purchase, they lose the option fee plus the rental payments. Those that agree to purchase the home at the price specified when the agreement was signed also lose money if property prices have since fallen.
Moreover, buyers who make late rental payments often find that these do not count toward the home purchase. According to Arizona State University finance professor Anthony Sanders, "A good rule of thumb [is to] separate the rental decision from the purchase decision."
Source: Forbes 03/02/09
Copyright 2009 INFORMATION, INC.
These buyers pay an up-front fee of approximately 1 percent of the sales price for the option to buy, and all the payments they make during the rental period go toward the principal.
Most rent-to-buy agreements last for two to five years; and if the occupants decide not to go through with the purchase, they lose the option fee plus the rental payments. Those that agree to purchase the home at the price specified when the agreement was signed also lose money if property prices have since fallen.
Moreover, buyers who make late rental payments often find that these do not count toward the home purchase. According to Arizona State University finance professor Anthony Sanders, "A good rule of thumb [is to] separate the rental decision from the purchase decision."
Source: Forbes 03/02/09
Copyright 2009 INFORMATION, INC.
6 Tips for Home Owners Who Turn Into Landlords
Home owners who decide to rent out their properties have to stop thinking of themselves as home owners and instead consider themselves as running a small business, experts say.
Thinking like a businessperson means focusing on the monthly cost of maintenance, mortgage and taxes, as well as being aware of landlord-tenant regulations and avoiding liabilities.
Here are key issues to consider:
Set a fair rent. Setting the right price will make it more likely that a landlord will be able to keep the place rented.
Understand landlord-tenant rules. Running afoul of landlord-tenant regulations and rules regarding security deposits can be costly.
Screen applicants. Eliminating potential tenants who can’t pay or who won’t take care of the property is very important.
Lay out the rules in a lease. Widely available sample leases can help. If you have questions, ask an attorney.
Consider a property manager. Despite the expense, turning the job over to experts can help a landlord come out ahead.
Talk to the condo association. If the property is a condominium, be prepared to deal with a host of regulations.
Source: The Washington Post, Renae Merle (02/28/2009)
Thinking like a businessperson means focusing on the monthly cost of maintenance, mortgage and taxes, as well as being aware of landlord-tenant regulations and avoiding liabilities.
Here are key issues to consider:
Set a fair rent. Setting the right price will make it more likely that a landlord will be able to keep the place rented.
Understand landlord-tenant rules. Running afoul of landlord-tenant regulations and rules regarding security deposits can be costly.
Screen applicants. Eliminating potential tenants who can’t pay or who won’t take care of the property is very important.
Lay out the rules in a lease. Widely available sample leases can help. If you have questions, ask an attorney.
Consider a property manager. Despite the expense, turning the job over to experts can help a landlord come out ahead.
Talk to the condo association. If the property is a condominium, be prepared to deal with a host of regulations.
Source: The Washington Post, Renae Merle (02/28/2009)
Real Estate Pitfalls and How to Avoid Them
• Not pricing your home correctly — Everyone wants top dollar for their home, but a home priced right will sell more quickly. A real estate professional knows the market and how much your home is really worth.
• Falling in love at first sight — You can’t tell if a home is the right fit by merely driving by. An agent will be able to tell you the advantages and disadvantages of purchasing a particular home.
• Not having an objective eye when selling — Your house is your home, and it’s filled with wonderful memories, making it hard to see objectively. Your agent is a dispassionate party who will see your home in ways you won’t.
• Looking for a home without pre-approval — Many homeowners won’t even talk to a buyer who isn’t pre-approved. A real estate expert can help you get started right.
• Letting emotions guide decisions — Whether you’re buying or selling, emotions can get the best of you, especially when it comes to negotiations. An agent is trained to keep it professional.
• Falling in love at first sight — You can’t tell if a home is the right fit by merely driving by. An agent will be able to tell you the advantages and disadvantages of purchasing a particular home.
• Not having an objective eye when selling — Your house is your home, and it’s filled with wonderful memories, making it hard to see objectively. Your agent is a dispassionate party who will see your home in ways you won’t.
• Looking for a home without pre-approval — Many homeowners won’t even talk to a buyer who isn’t pre-approved. A real estate expert can help you get started right.
• Letting emotions guide decisions — Whether you’re buying or selling, emotions can get the best of you, especially when it comes to negotiations. An agent is trained to keep it professional.
Subscribe to:
Posts (Atom)
Posts
