Investors With Cash Are Kings in Today’s Market
Some are calling this the best market for investors since real estate tanked in the early 1980s.
Investors, alone and in groups, are negotiating volume deals as they purchase whole subdivisions and bundles of 10 to 50 defaulted loans for pennies on the dollar.
“What we’re seeing today dwarfs [the 1980s] by five or 10 times,” says Bob Leonetti, president of SMI Funding, an Austin, Texas, company that originates and acquires private and conventional mortgages. “There are huge opportunities for investors.”
“People who have cash positions now are going to do very well,” says Central Florida real estate practitioner Mike Norvell of Developers Capital Realty in Leesburg, Fla. “It’s just crazy the prices you can buy for right now for cash.”
Source: Investor’s Business Daily, Kathleen Doler (07/07/08)
Obama, McCain Seek to Fix Housing Problems
Which candidate would do a better job of handling housing prices?
According to a recent AP-Yahoo News poll, 25 percent of those surveyed said Barack Obama and 17 percent thought John McCain. But nearly 30 percent said neither.
Both Obama and McCain envision the Federal Housing Administration providing new, cheaper mortgages to distressed home owners.
Obama wants to create a $10 billion fund to counsel distressed home owners before they slide into foreclosure; help people sell homes they bought but could not afford; and team with state governments, community groups, and lenders to ensure loans can be modified in a timely manner to avoid foreclosure or bankruptcy.
McCain sees a more limited government role. “In some cases, lenders and borrowers alike were caught up in the speculative frenzy that has harmed the housing market,” the Arizona senator said. “It is not the responsibility of the American public to spare them from the consequences of their own bad judgment.”
Although most voters think the next president will have a “great deal” or “some” influence over housing prices, there is unlikely to be a quick fix.
“The odds of that are slim to none,” says Cal Jillson, political science professor at Southern Methodist University. If the next president can make people more optimistic about the future, “the slow rebuilding of confidence will help to increase home values,” he contends.
Source: The Associated Press, Jeannine Aversa (07/06/08)
Office Rents Flatten, Vacancies Creep Up
Rents for U.S. office space have stalled, rising 0.7 percent in the second quarter to $25.16 a square foot, according to real estate research firm Reis.
At an annualized rate, rents are growing just 2.9 percent, a fraction of the 10.6 percent seen last year. The vacancy rate rose slightly, up 0.2 percent to 13 percent, the highest rate in more than a year.
Although the weakening rental rates and rising vacancies are modest compared with the downturn after the dot.com bust, Reis sees the trend as problematic.
With inflation running roughly 1 percent a quarter, rent growth is effectively wiped out. “Landlords are having to concede ground on rents and tenant improvements,” says Sam Chandan, Reis’s chief economist. “The balance is tipping in the favor of tenants in many markets.”
Source: Reuters News, Ilaina Jones (07/03/2008)
Selling a Home in a Hurry Still Possible
While most homes are staying parked on the for-sale market for a longer time these days, occasionally a residential property turns over in 24 to 48 hours. Such transactions elevate the mood of the professional real estate community and its clients, while offering a snapshot of ideal conditions that contributed to the near-immediate sale and that could possibly help move other listings faster, as well.
According to real estate professionals, the key components of a quick turnaround on a home for sale include realistic pricing, a polished and well-staged appearance, the right location, and the interest of a prospective buyer who is compatible with the property.
“It’s definitely a down market, but the special houses sell fast,” says developer Kostas Macos who waited patiently for the owners of a Rittenhouse Square home in Philadelphia to trade up, then seized the opportunity to buy it for himself.
“There will always be properties [that] sell, even in a depressed market,” observes Prudential Fox & Roach’s Mary Genovese Colvin. “In most situations, a 24-to-48-hour sale is a special property. But many times, people in an area have an eye on a particular house.”
Source: Philadelphia Inquirer, Alfred Lubrano and Alan J. Heavens (07/02/08)
3 Areas of Housing Expected to Boom
David Lee, who has managed the $2.5 billion T. Rowe Price Real Estate Fund (TRREX) since it opened in October 1997, says the following areas of the housing market are either doing well now or soon will be.
Mall companies. “There’s good scarcity value in regional malls and not a lot of construction going on in the mall business,” he notes. “Short of going bankrupt, we’re not convinced that all these retailers can close their way to profitability. They’re going to continue to pay rents to have stores in the highly profitable malls.”
Residential apartment communities. “If you can’t buy a home, you have to rent.”
Industrial REITs (or real estate investment trusts). Warehouses are pretty economically sensitive right now, Lee says.
Source: Business Week (07/02/08)
Wave of Subprime Loans Ready to Reset
First American CoreLogic reports that the number of subprime adjustable-rate loans resetting peaked at 7.61 percent of the loans outstanding in June, and more than 300,000 of the mortgages will adjust this summer.
Data from the California research firm covers about 80 percent of the mortgage market. More home owners are facing an increase in the payment on their subprime adjustable-rate mortgages; and borrowers who are unable to refinance due to declining home prices could be pushed into foreclosure, which is already at a record level.
“We may not see the impact in foreclosures until the middle of 2009,” according to Mark Fleming, chief economist for CoreLogic.
Source: Washington Post, Renae Merle (07/01/08)
Mortgage Ruling Could Have Big Impact
The 7th U.S. Circuit Court of Appeals is expected to rule sometime this month on a case that could force the U.S. banking industry to cancel or rescind loans if borrowers prove that their lenders violated a federal lending disclosure law.
The decisions stems from a lawsuit filed by a Wisconsin couple who last year sued their bank and sought class action status. The judge not only agreed to that but also ruled that borrowers could force the bank to rescind their loans as a class remedy.
Should the 7th U.S. Circuit Court of Appeals agree that rescission be a class remedy, banking industry analysts predict “confusion and market disruption” as banks curtail lending further.
“If class treatment is found to be available for rescission … the result all over the country could be massive class suits,” says Christine Scheuneman, a partner at Pillsbury Winthrop Shaw Pittman LLP, which represented Chevy Chase Bank in the initial lawsuit.
Supporters of rescission as a remedy say the banking industry is overstating the results of such a ruling.
Both sides agree that the U.S. Supreme Court will likely decide the case.
Source: Reuters News, Gina Keating (06/30/08)
More Home Owners Can’t Pay Mortgages
Homeowners who are falling behind on their mortgage payments continue to outnumber those who are resolving their difficulties and staying in their homes, according to a report from the trade group, Mortgage Insurance Companies of America.
Some 67,967 homeowners with mortgage insurance fell at least 60 days behind on their mortgages, compared with 40,687 who got back on track, the mortgage insurance group reported. May is the 26th straight month that defaults outnumbered improvements.
Insurers are tightening standards on mortgages they insure to stem further losses. The new requirements contributed to a 48 percent drop in the number of mortgage insurance policies issued to new homeowners during May, the trade group says.
Source: Bloomberg, Erik Holm (06/30/2008
Hard-Won Lessons from a Home Owner
Minneapolis home owner Lucie Amundsen’s husband was transferred north to Duluth, Minn. She stayed behind to sell the house. Here’s what she learned about selling a home in a tough market:
Make the commitment to sell. “This market eats wishy-washy sellers alive. Sellers should be prepared to let go.”
Steer clear of useless feedback. “I should have had the real estate professional who listed my home turn off the electronic feedback feature. He could have passed along any helpful information, while filtering out the more hurtful and pointed comments.”
Be prepared for the long haul. “Because I adore my house, I just assumed other people would, too. “
Respond to the market. “Long before the 40th showing, we should have dropped the price or taken the property off the market.”
Source: Star-Tribune, Lucie B. Amundsen (06/28/2008)
Celebrities Have Money Troubles, Too
The problems faced by entertainer Ed McMahon have been widely publicized, but other well-known people are in similar straits.
Boxer Evander Holyfield lost his $10 million estate in Atlanta in May to foreclosure. Baseball great Jose Canseco’s $2.5 million home in suburban Los Angeles is also in foreclosure, as is the home of former Tennessee Titan football player Adam “Pacman” Jones. Ex-NBA star Latrell Sprewell is in danger of losing his $405,000 Milwaukee home and his yacht has been repossessed.
Actor Dustin Diamond, who played Screech on “Saved by the Bell,” saved his home by selling T-shirts on his Web site and asking fans for money on the Howard Stern Show.
Singer Michael Jackson cut a deal with casino owner Tom Barrack to get out from under loans on Neverland Ranch by appearing in Barrack’s establishments.
Source: Business Week, Chris Palmeri (06/27/08)
