Category Archives: Real Estate

Housing Inventory May Be Low in 2015

January 6, 2015 jd

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Despite recent increases, new-home inventories remain near all-time lows and are unlikely to return to their highs any time soon, according to a new analysis by John Burns Real Estate Consulting.

The rise in single-family inventory levels over the last few months bring them back only to 2012 levels. What’s more, the supply of condos continues to be at record lows, with fewer new high-rise developments and condo conversions occurring now than in the mid-2000s, John Burns Consulting says.

From 1984 to 2014, there was an average of 9,900 units on the market. The current inventory is 72 percent below the average of the last 30 years and 79 percent below the average since 1971, Pete Reeb, senior vice president at John Burns Consulting, notes in a recent article for the firm.

Why are new-home inventory levels so low, and why will supply not likely reach the previous highs? John Burns offers the following reasons:

Decrease in available lots. Los Angeles, Orange County, and San Diego, for example, have less land for large-scale new-home developments than five years ago. Fewer master-planned communities will lead to less supply.
Fewer overall projects. With fewer projects, there are fewer units coming on to the market. Actively selling community counts are far lower today than 10 or 20 years ago, Reeb notes.
Lower unit counts. The average total number of units in a project has significantly decreased in the last three decades. For example, in San Diego County, project sizes have dropped from a median size of around 125 units per project in the 1980s to 59 units today. “With fewer units per project, there are less total units to bring to market,” Reeb says.
Tight construction financing. Lenders now often require builders to have 50 percent to 100 percent of units under contract before releasing funds for the next phase. That has greatly reduced the potential for overbuilding, Reeb says.

Source: “How Much Is Too Much,” John Burns Real Estate Consulting/Building Market Intelligence (Jan. 5, 2015)

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Real Estate

New App Attempts to Match Roommates

November 25, 2014 jd

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A new mobile app is trying to link housemates together, stealing some cues from how dating websites make connections. MatchPad attempts to pair renters based on their projected compatibility.

Read more: 5 Million Households Lost to Roomie Trend

The site matches based on budget for rent, location preferences, and lifestyle choices. It asks users to rate themselves in areas such as how extroverted, detail-oriented, and controlling they are, in addition to their overall cleanliness. It then ranks potential roommates for the person using a compatibility scale of “great” to “OK.” Users can connect via private messages with potential roommates to investigate further for compatibility.

So far, more than 3,000 users have created accounts on the website since it launched in September, beginning with the New York City market. The app will be available on Android and iOS platforms in January.

MatchPad has a special section designated for real estate professionals, offering qualified leads based on location and budget.

But can a roommate-compatibility app work? Some companies—such as the dating site OKCupid—have tested this idea in the past, but the idea failed to gain traction.

“That is partly because when selecting someone to live with, even more than when picking someone to date, users tend to be choosy,” a New York Times article notes. “After all, a bad first date lasts a couple of hours; a bad roommate pairing could last a year.”

Source: “Helping Felix Avoid Oscar,” The New York Times (Nov. 20, 2014)

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Real Estate

Five Real Estate Predictions for 2015

November 19, 2014 jd

Photo courtesy of http://colossalplanet.com/strange-funny-houses/

Expect the home-purchase market to strengthen along with the economy in 2015, according to Freddie Mac‘s U.S. Economic and Housing Market Outlook for November.

“The good news for 2015 is that the U.S. economy appears well-poised to sustain about a 3 percent growth rate in 2015 — only the second year in the past decade with growth at that pace or better,” says Frank Nothaft, Freddie Mac’s chief economist. “Governmental fiscal drag has turned into fiscal stimulus; lower energy costs support consumer spending and business investment; further easing of credit conditions for business and real estate lending support commerce and development; and consumers are more upbeat and businesses are more confident, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better-paying jobs, providing the financial wherewithal to support household formations and housing activity.”

Freddie Mac economists have made the following projections in housing for the new year:

Mortgage rates: Interest rates will likely be on the rise next year. In recent weeks, the 30-year fixed-rate mortgage has dipped below 4 percent. But by next year, Freddie projects mortgage rates to average 4.6 percent and inch up to 5 percent by the end of the year.
Home prices: By the time 2014 wraps up, home appreciation will likely have slowed to 4.5 percent this year from 9.3 percent last year. Appreciation is expected to drop further to an average 3 percent in 2015. “Continued house-price appreciation and rising mortgage rates will dampen affordability for home buyers,” according to Freddie economists. “Historically speaking, that’s moving from ‘very high’ levels of affordability to ‘high’ levels of affordability.”
Housing starts: Homebuilding is expected to ramp up in the new year, projected to rise by 20 percent from this year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.
Single-family originations: Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancings are expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.
Multi-family mortgage originations: Mortgage originations for the multi-family sector have surged about 60 percent between 2011 and 2014. Increases are expected to continue in 2015, projected to rise about 14 percent.

Source: Freddie Mac

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Real Estate

Vant to Invest In Count Dracula’s Home

October 27, 2014 jd

Credit: TopTenRealEstateDeals.com

Got quirky buyers looking for a unique home? How about investing in one of the most popular horror stories of all time?

Bran Castle is nestled in the heart of the mountains in Romania (formerly Transylvania). Carved out of the rock, Bran was home to queens, kings, and knights.

According to legend, Bran Castle was also home the notorious monster, Count Dracula. The property supposedly inspired Bram Stoker to write the celebrated novel about the blood-sucking monster in 1897. Truth be told, the actual residence of Vlad Tepes or “Vlad the Impaler” is a couple of miles from Bran, and in ruins. However, over half a million visitors a year come to see this horror home associated with a vicious and vindictive ruler who was said to have put his enemies on sharpened spikes as a message to others.

The current owners have painstakingly restored the castle and are looking to sell the former customs house associated with the vicious ruler to a private buyer who is willing to invest in it as a major tourist attraction. It’s on the market now for forty-seven million pounds ($78 million USD).

Source: “2014 Haunted Homes You Can Buy,” TopTenRealEstateDeals.com (October 2014).

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Real Estate

Dramatic Easing of Mortgage Standards

October 23, 2014 jd

Federal Housing Finance Agency Director Mel Watt on Monday announced plans to expand home buyers’ access to mortgages by loosening up lending standards.

During the Mortgage Bankers Association‘s annual conference, Watt said FHFA will release guidelines “in the coming weeks” to allow increased lending to borrowers with down payments as low as 3 percent. FHFA, which regulates Fannie Mae and Freddie Mac, also will help lenders who sell loans to the mortgage giants by easing standards on borrowers who don’t have perfect credit profiles. The move is expected to help open up the credit box to first-time buyers, self-employed borrowers, borrowers who have had recent job switches, and borrowers who faced financial hardship during the recession.

Watt said on Monday that Fannie and Freddie would not force repurchases from lenders of mortgages that are later found to have minor flaws in them, as long as borrowers have kept up with their mortgage payments for 36 months. Watt also said that lenders wouldn’t be forced to buy back bad loans if flaws were later discovered in the reporting of borrowers’ finances, debt loads, and down payments — as long as the borrowers would have qualified for the loans had the information been accurate.

“Minor, immaterial loan defects should not automatically trigger a repurchase request,” says David Stevens, CEO of the Mortgage Bankers Association. “As a result, lenders will be more confident in offering mortgages to qualified borrowers.”

FHFA said it will clarify to lenders when it will force buy-back loans that were issued based on inaccurate information. FHFA acknowledges that it failed to provide lenders with enough clarity in the past. That caused lenders to get cautious with lending after facing a flood of high-dollar settlements from loans they issued that later turned sour.

“We know that this issue has contributed to lenders imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less than perfect credit scores or with less conventional financial situations,” Watt said. Addressing such issues are “critical to ensuring that there is liquidity in the housing-finance market and to providing access to credit for borrowers.”

Source: “Regulator Unveils Plan to Spur Lending by Fannie, Freddie,” Los Angeles Times (Oct. 20, 2014) and “Fannie-Freddie Clarify Buyback Rules in Bid to Ease Credit,” Bloomberg (Oct. 20, 2014)

Fannie, Freddie to accept lower down payment mortgages

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Real Estate

Leroy Schecter’s Florida Home Sells for $28 Million

July 23, 2014 jd

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After several years on the market, the Indian Creek Village, Fla., home of steel magnate Leroy Schecter has sold for $28 million.

Listing agent Nelson Gonzalez of EWM Realty International said the sale closed Monday for $28 million. He declined to identify the buyer.

The home was first listed in 2008 for $32 million. The price has changed several times, with the home going on and off the market, at one point going up to $45 million. It was last listed at $35 million, Mr. Gonzalez said.

The 21,746-square-foot home, built in 2000, has seven bedrooms and 11 full and three half bathrooms, Mr. Gonzalez said. According to public records, Mr. Schecter bought it in 2006. Located in a gated village on an island near Miami Beach, the nearly two-acre property has some 200 feet of waterfront on Biscayne Bay. The house has a theater, a library, a billiards room, a gym and a seven-car garage. An outdoor infinity pool has a cabana house with two full bathrooms.

Source: Wall Street Journal

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Real Estate

Interest Rates May Rise Sooner Than Expected

July 16, 2014 jd

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Federal Reserve Chairwoman Janet Yellen said that the Fed may need to raise interest rates sooner than expected, but it all will hinge on the labor market.

“If the labor market continues to improve more quickly than anticipated by the Federal Open Market Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned,” Yellen testified to the Senate Banking Committee on Tuesday. On the other hand, “if economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated.”

Interest Rates and Housing

Why Low Rates Aren’t Always Good for Housing

Fed Chair Sounds Cautionary Note on Housing

Currently, the majority of Fed officials expect the central bank to begin raising interest rates about a year from now. The Fed’s benchmark short-term rate has stayed near zero since December 2008, which has helped to keep interest rates near historical lows.

Recently, the unemployment rate has fallen rapidly, reaching 6.1 percent in June. But wage growth has remained weak, Yellen noted.

Also, Yellen said, the housing market remains sluggish, which she said could slow the economic recovery.

“The housing sector has shown little recent progress,” Yellen testified to the Senate. “While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing. The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.”

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Real Estate

‘Zombies’ Make Up 21% of Foreclosures

June 30, 2014 jd

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Zombie foreclosures are still haunting the housing market, representing one in every five foreclosures nationally, according to RealtyTrac, a housing data firm. “Zombie foreclosure” is a term coined to describe properties where the foreclosure process has been started and the home owner vacates, but the foreclosure has never been completed. As such, the distressed home owners who vacate eventually find they still own the home, and are often unaware they are still responsible for it.

Find out how the Consumer Financial Protection Bureau is targeting zombie foreclosures.

The vacated properties can become eyesores in neighborhoods and drive down nearby property values. They also take a big chunk out of local government revenue in the form of unpaid property taxes. RealtyTrac estimates that more than $400 million in property tax revenue is likely delinquent due to zombie foreclosures. Still, the zombie foreclosure rate has shown some improvement, falling 7 percent compared to the first quarter of this year and dropping 16 percent from year-ago levels.

Florida has the highest number of zombie foreclosures, accounting for more than one-third of all zombie foreclosures nationwide. New York, New Jersey, Illinois, and Ohio also have some of the highest numbers of zombie foreclosures across the country.

“Most of these states have seen an increase in new foreclosure activity over the past year, creating a more fertile breeding ground for zombie foreclosures,” says Daren Blomquist, vice president at RealtyTrac.

Some states, such as Florida and Illinois, are looking to combat zombie foreclosures by weighing legislation that could help “fast track” foreclosures and move the abandoned properties through the system more quickly, RealtyTrac reports. New York is also considering legislation that would make lenders responsible for the upkeep of zombie foreclosures. Some local governments—such as in Cleveland and Detroit—also are creating land banks that would include zombie foreclosures, allowing city officials to rehab properties or demolish them.

Where Zombie Foreclosures Are Highest

On a metro level, the seven markets with the highest number of zombie foreclosures, according to RealtyTrac’s second quarter report, are:

New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa.
Miami-Fort Lauderdale-Pompano Beach, Fla.
Chicago-Naperville-Joliet, Ill.-Ind.-Wis.
Tampa-St. Petersburg-Clearwater, Fla.
Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
Orlando-Kissimmee, Fla.
Jacksonville, Fla.

Meanwhile, California posted the largest drop in zombie foreclosures, down 57 percent in the past year. Other states posting large decreases are Arizona, Nevada, and Washington.

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Existing-Home Sales up 4.9%

June 23, 2014 jd

Existing-home sales rose strongly in May, with all four regions of the country experiencing sales gains on the previous month, according to the National Association of REALTORS®. The association also noted that inventory gains continued to help moderate price growth.

Total existing-home sales (comprised of completed transactions on single-family homes, townhomes, condominiums and co-ops) rose 4.9 percent to a seasonally adjusted annual rate of 4.89 million in May from an upwardly-revised 4.66 million in April. This was the highest monthly rise since August 2011, but existing home sales remain 5 percent below year-ago levels.

Lawrence Yun, NAR chief economist, said current sales activity is rebounding after the lackluster first quarter. “Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year,” he said. “Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates.”

Inventory and average sales price also increased in May. Inventory climbed 2.2 percent, and the median existing-home price for all housing types in May was 5.1 percent higher than year-ago levels, at $213,400.

“Rising inventory bodes well for slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market. Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run,” Yun said.

Earlier this month, NAR reported new home construction activity is currently insufficient in most of the U.S., and some states could face persistent housing shortages and affordability issues unless housing starts increase to match up with local job creation.

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Buying a Home? Don’t Forget This Expense, Private Mortgage Insurance

June 9, 2014 jd

Sixty-five percent of home owners with private mortgage insurance say that the additional cost of PMI prompted them to pay a higher monthly mortgage payment than they had originally expected, according to a new survey released by TD Bank of more than 2,000 Americans who purchased a home in the past 10 years.

“PMI has had a definitive impact on many home buyers – including making them rethink or delay the purchase of a home in light of not being able to meet monthly mortgage payments,” says Michael Copley, executive vice president of retail lending at TD Bank.

Borrowers are required to get PMI if the loan exceeds 80 percent of the home’s value. The insurance protects the lender in case the borrower defaults on their loan.

Many buyers say that PMI has an impact on their home purchasing decisions. For example, 35 percent of people who purchased a home in the past two years said that PMI influenced their decision of which house to buy. Also, 53 percent reported facing a negative impact due to the additional cost of PMI. About 40 percent of those surveyed said that having to pay PMI forced them to curtail small and daily purchases or larger household purchases.

The survey showed that PMI is fairly common: 37 percent of those who purchased a home in the past 10 years said they were required to have PMI, and 43 percent in the past two years. Forty-five percent of home owners aged 18 to 34 years old have PMI; 37 percent of home buyers aged 35 to 54 have it; and 23 percent of people older than 55 had required mortgage insurance on their loans over the past decade, the TD Bank study found.

On average, home owners reported that PMI cost about $100 extra a month, according to the study.

Source: TD Bank and “Most Homebuyers Don’t See This Cost Coming,”” Credit.com (June 2, 2014)

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Where Zombie Foreclosures Are Highest