5 Hot Trends in Real Estate Development
Giffels-Webster Engineers, a civil engineering firm in suburban Detroit, identifies five top trends in real estate and development. The trends are:
Green building and design. Increased pressure on communities and businesses to promote environmentally sound designs has led developers to incorporate green elements into their projects. A plan to develop a parcel of land for retail might include green roofs, rain gardens, or gutter water retention and irrigation systems. LEED-certified environmental experts soon will become “must-have” team members as demand for energy efficient, healthy spaces grows stronger.
Assisted living centers. Assisted living developments are on the rise due to higher life expectancies and the influx of aging baby boomers. By helping seniors lead independent lives in noninstitutionalized environments, these projects are designed to incorporate nature trails, community dining, exercise facilities, music rooms, libraries, salons, and game rooms. Opportunities exist to work with both private developers and public government-funded projects.
Hospital expansions, education campus additions. The hospital and education expansion trend is fueled by institutional projects being funded privately though corporate gifts and individual endowments. These “recession-proof” resources mean even during economic downturns, the market segment moves forward with plentiful building and capital improvement projects.
Mixed-use developments. Mixed-use developments are growing popular today because they reduce risk. Retail and residential can adjoin each other, and it’s common to see large, national retailers combined with smaller, boutique-type stores, as well as housing varying by size, budget, and amenities. With this approach, the developer’s investment is spread across the spectrum so it remains viable even if one segment does not perform as expected.
Urban revitalization. To attract and keep people in their communities, municipalities and townships are working to make their downtowns, retail hubs, and central business districts more inviting and accessible. Streetscape improvements, including attractive landscaping, decorative streetlights, brick sidewalk pavers, and strategically planned parking areas, are examples of how municipalities are proactively transforming their space to appeal to potential and current residents.
— REALTOR® Magazine Online
Banks Woo Borrowers Who Have Good Credit
Banks have plenty of money available for borrowers with great credit and a desire for a conventional fixed rate mortgage, says James Chessen, chief economist for the American Bankers Association.
To attract these customers, lenders are offering fee waivers, competitive interest rates, and a willingness to negotiate.
Banks like conventional borrowers because they tend to be the kind of customers that will take advantage of other products from the lender, including savings accounts, credit cards, and checking accounts. “We find that someone who has a mortgage with us will have about five products in addition to the mortgage,” says Terry Francisco, a spokesman for Bank of America Corp.
To attract this kind of business, Bank of America is offering “No Fee Mortgage Plus,” saving consumers about $3,000 in closing costs, which the bank covers.
Deals like this one make it important for borrowers with good credit to shop around, experts advise.
Source: The Wall Street Journal, Julian Mincer (09/06/07)
Congress Ready to Tackle Subprime Lending
Congress returned from vacation this week ready to propose a variety of mortgage borrower protection legislation.
On Wednesday, Sen. Christopher Dodd of Connecticut, chairman of the Senate Banking Committee and a candidate for the Democratic presidential nomination, announced plans for a bill that aims to curtail predatory lending by prohibiting prepayment penalties on subprime loans, making it illegal for lenders to write subprime mortgages for prime borrowers, and banning yield-spread premiums on subprime mortgages.
Democrats on the House Financial Services Committee – Chairman Barney Frank of Massachusetts and North Carolina Reps. Melvin Watt and Brad Miller – plan to introduce a bill that is likely to mirror Dodd’s in most respects, but they want to address another issue as well. Their version will propose making secondary buyers of mortgage debt legally liable for the underlying loans.
Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents national lenders, says that additional liability would increase interest rates by an average of 1.5 to 2 percentage points.
Getting this or any anti-predatory lending legislation passed isn’t a slam-dunk because, in general, Republicans aren’t supportive. “The one thing we shouldn’t do is rush out and change a market that is working and working well, and brought home ownership to historic highs,” says Republican Rep. Spencer Bachus, the ranking member of the House Finance Committee.
Source: The Wall Street Journal, James R. Hagerty, Kara Scannell and Sarah Lueck (09/06/07)
Tips for Borrowers Shopping for a Loan
Home buyers in today’s tight mortgage market need better everything to qualify for a mortgage with the best terms.
Here’s what it takes to impress a lender:
1. Better credit. To get the same interest rate as just a month ago, borrowers need a credit score that’s about 50 points higher, says Clay Edwards, a mortgage consultant and real estate specialist with the Fireside Mortgage network. Edwards says he’s seen plenty of lenders reject an application for a $600,000 loan when the borrower’s credit score was about 785.
2. Down payment. The market has all but evaporated for 100 percent financing. Most loans have at least 10 percent down, and lenders prefer 20 percent down.
3. The right lender. Using a high tech broker who can electronically distribute the borrower’s application broadly can up the odds.
4. Income verification. Borrowers who can verify income can expect a long wait for a decision. Self-employed individuals can still get financing with verification, but may pay rates 1/2 to 1 percent higher.
5. Patience. Buyers should gather all the paperwork, look for backup, and then realize that they just have to wait.
Source: Dow Jones Business News (09/03/07)
10 Tips for Buying a Fixer-Upper
Buying a basically sound house and updating the cosmetics is a profitable thing to do in almost any market. But be careful what you buy or it may end up costing you later on.
Here are 10 things to consider when selecting a fixer-upper:
1. Purchase homes that are at least 30 percent below the market value of comparable nearby homes.
2. Choose a location with a low crime rate, good schools, and quiet streets. There isn’t anything you can do to cure a poor location.
3. Choose a house with three or four bedrooms. Smaller homes are unlikely to have enough buyer appeal.
4. Avoid homes that need major unprofitable repairs, include wiring, major plumbing, foundation repairs, major kitchen and bathroom renovation, room additions, and/or a new room. Spending money on these basics doesn’t add value. Buyers expect them.
5. Find a home that needs profitable cosmetic improvements like fresh paint inside and out, new light fixtures, new carpets and flooring, and fresh landscaping.
6. Look for affordable, low down-payment financing, such as taking over an existing mortgage, lease with option to buy, seller carry-back financing, or a combination.
7. Avoid obtaining new bank financing until the fix-up work is completed and the home’s market value has increased.
8. Don’t buy a fixer-upper that is more than 60 minutes from your current residence because it is important to visit everyday while the renovation work is being done.
9. Make sure that the seller or tenants will vacate immediately upon transfer of title.
10. Look for sellers who are motivated to sell and who want to make the sale happen.
Source: Inman News, Robert J. Bruss (09/01/07)
