Real Estate Journal Online

In Boston, real estate brokers are looking forward to Spring – and not just because of the warming temperatures and blooming flowers. Citing an improved economy and fear of rising interest rates, area brokers are reporting that “more prospective homeowners are scouring listings and trolling open houses” in hopes of getting a good deal on the “right property” before the perfect buyers’ market expires[1]. However, it’s not all easy. “There is a lot of pent-up demand for the right properties,” explains one broker, pointing out that what the market really needs is an “ample supply of well-priced and attractive homes for sale.”

In order to have a truly productive market, buyers need to feel that housing is “genuinely cheap” explains economist David Semmens. Semmens predicted the country’s ongoing housing slump more than a year ago, and cites March’s drop in consumer confidence as a warning sign that housing prices could go even lower than they already are[2]. However, in the Boston area, home prices have remained “relatively stable,” which could encourage would-be homeowners to buy in an attempt to lock in low interest rates and enjoy projected appreciation in the area. For example, median home prices in Cambridge have risen 10 percent over 2009, making homes in this part of Massachusetts extremely attractive to new homeowners despite many analysts’ predictions that nationwide, the housing crisis is likely to continue.

Do you think that it is possible to say whether or not local housing markets will improve in the spring? How are you currently selecting your investment properties?

Thank you for being part of REJournalOnline’s Investor Academy!

Let us know how you are picking your investments in the space below.

---

[1] http://www.boston.com/realestate/news/articles/2011/04/03/brokers_expect_competitive_spring_market/

[2] http://www.investmentnews.com/article/20110403/REG/304039986

Among the many things that Republican congressmen and women have thrown on the chopping block in their efforts to bring down the national budget and get a handle on the national debt is the Obama administration’s much-maligned Home Affordable Modification Program (HAMP). The program was intended to help “as many as three to four million financially struggling homeowners avoid foreclosure by modifying loans,”[1] but in reality the program has led to only 521,630 permanent loan modifications, with many of these “permanent” modifications lapsing back into default[2]. Despite all this, however, U.S. Treasury Secretary Timothy Geithner came out swinging today in HAMP’s defense, saying that ending the program would “cause a huge amount of damage” and “I would recommend against it”[3].

Geithner also recently warned against “scaling back the federal role [in the housing market] too far”[4]. He claimed that it would make housing more costly and leave taxpayers “on the hook” for losses while handcuffing policymakers, adding that “you would leave the [U.S. government] with a more limited set of tools to protect the economy and innocent victims in the face of the next severe recession,” he said.

It sounds like Geithner does not have any real plans to exit this down economy. He’s already planning for the next disaster. Do you think that this is a good way to approach the housing market in general and the role of the federal government in the housing market in particular?

Thank you for being part of REJournalOnline’s Investor Academy.

Let us know what you think of Secretary Geithner’s comments below.

---

[1] https://www.hmpadmin.com/portal/programs/hamp.jsp

[2] http://www.politico.com/news/stories/0211/50130.html

[3] http://www.reuters.com/article/2011/03/01/usa-housing-geithner-hamp-idUSWEN874220110301

[4] http://www.washingtonpost.com/wp-dyn/content/article/2011/03/01/AR2011030103946.html

According to the National Quarterly Housing Survey, only 64 percent – slightly less than 2/3 – of Americans think that “owning their own home is a safe investment.” That is down from 70 percent at the beginning of 2010 and from 83 percent in 2003[1]. And while home sales rose in January 2011 for the third straight month, the median home price hit its lowest point since April 2002. What does this mean for homeownership as “The American Dream?” It could mean that that particular concept has run its course.

There are disagreements on the part of experts about whether or not this is a bad thing. Some point out that a shift in perception of homeownership will cause rents to rise and could lead to an adoption of the “common-sense, rational concepts disregarded during the housing bubble years”[2]. Furthermore, as renting becomes more acceptable, it could lead to a prevalence of more desirable rental options in which favorable locations, “multi-modal transportation options,” pleasing layouts that feel more like homes and “higher levels of aesthetic and construction quality” dominate the market and make both renting and ownership of rental units a pleasant and profitable experience.

Doug Duncan, Fannie Mae’s chief economist, believes that this change in perspective is going to lead to “the demand side increase [being] in the rental market, not the housing [purchase] market.” And some experts believe that since high rental vacancies have “weighed on the core consumer price index” that a new focus on rental properties and multifamily housing could help the economy as a whole. Do you think that it is necessarily a bad thing – in the grand scheme of things – if owning your own home is no longer considered part of “The American Dream?”

Thank you for reading REJournalOnline’s Commercial Real Estate Letter.

Describe your perception of “The American Dream” below.

---

[1] http://www.huffingtonpost.com/2011/02/28/buying-a-home_n_829138.html

[2] http://www.washingtonpost.com/wp-dyn/content/article/2011/02/25/AR2011022500045.html

While “hardest hit” areas like Phoenix and Las Vegas still dominate media coverage of the housing market doldrums, around the country markets previously considered to be “stable” despite the crash are starting to cave. This “new wave of distress” is probably not surprising to residents of these areas who may have been experiencing low prices, high foreclosure inventories and difficulties selling for some time, but many “outside” analysts who believed that “economically diversified cities” would emerge relatively unscathed are finding themselves to be painfully incorrect[1]. According to a report from the New York Times, last year Seattle home prices declined more than those in Las Vegas, and Atlanta home prices declined more than Phoenix.

“Bubble markets” like Phoenix and Vegas may have fallen harder and faster overall because “builders and banks ran wild.” However, they may be slowing just in time for other markets that appeared to be more stable to start catching up. According to calculations by Zillow, Seattle home prices, for example, could fall as much as an additional 10 percent in the coming year. Government tax credits may actually have prolonged the pain because they artificially stimulated markets and made a recovery appear to be imminent when, in fact, the markets were simply not ready to recover yet. “We went into 2010 feeling gangbusters, thanks to Uncle Sam,” explained Zillow’s chief economist Stan Humphries. “We ended it feeling penniless, with home values tanking.” According to a report by Zillow earlier in the month, 34 percent of Seattle homeowners were underwater on their mortgages at the end of 2010[2].

With mortgage application volumes falling[3] and government-controlled Fannie Mae and Freddie Mac being phased out in the coming months, 2011 looks to be a year of uncertainty for the housing market for many areas instead of the beginning of a recovery. Many experts and real estate investors are adjusting to this change by placing heavier emphasis on a property’s current income potential (e.g. how much rent it brings in each month or how much cash it will generate in short order when it is resold) rather than on its appreciation potential, since no one knows what the future will bring in that regard. How have you adjusted your investing strategies to the new housing market in America?

Thank you for being part of REJournalOnline’s Investor Academy!

Your comments and questions are welcomed below.

---

[1] http://www.nytimes.com/2011/02/14/business/economy/14dip.html?src=busln

[2] http://www.kirotv.com/news/26795616/detail.html

[3] http://www.bloomberg.com/news/2011-02-09/mortgage-applications-in-u-s-fell-last-week-as-costs-rose.html

According to the Chairman of the Board of the Miami Association of Realtors (MAR), there is nothing like an unusually harsh winter season to send South Florida’s home sales soaring[1]. “There is solid demand for local properties…as we see increased interest from U.S. buyers looking for moderate weather and an exciting lifestyle,” Jack Levine said of Miami’s climbing home sales. In the fourth quarter of 2010 sales of homes and condominiums together increased 29 percent compared to a year prior, giving Miami 10 consecutive quarters of increasing sales. Wintery weather throughout the country in January likely gave the Miami market even more excitement, and Levine believes that international buyers will also continue to be active in the market thanks to “increased affordability enhanced by the weak U.S. dollar and world-class ambiance and amenities.”

However, while sales are up, prices are down. According to Zillow, now is an even better time to buy in Miami than a year ago, as prices in December 2010 were actually 7 percent lower in the area than they were the same month in 2009[2]. However, realtors’ associations have their traditional high hopes, with the MAR’s Residential President, Ralph DeMartino, observing that “as excessive distressed inventory is absorbed in Miami, we expect home prices to strengthen”[3]. The inventory in the area has decreased 9.5 percent from the third quarter of 2010, which is a pretty significant drop given that it had fallen less than 2 percent in the quarters prior. Based on these numbers, it should come as no surprise if you hear “Let it snow, let it snow, let it snow,” being caroled in Miami ‘til May.

Would you make a buying decision based on weather?

Are you investing in South Florida?

Thank you for being part of REJournalOnline’s Investor Academy!

Please leave comments and questions below.

---

[1] http://www.realestatechannel.com/us-markets/residential-real-estate-1/miami-home-sales-miami-condo-sales-miami-association-of-realtors-southeast-florida-multiple-listing-service-miami-home-foreclosures-winter-weather-3877.php

[2] http://finance.fortune.cnn.com/2011/02/10/miami-cuts-the-weather-a-break/

[3] http://www.prweb.com/releases/miami/real-estate/prweb8128925.htm

According to an article in the Florida Bar Journal, the Florida Bar Association considers it an attorney’s responsibility to notify judges of potential foreclosure fraud when working on foreclosure cases – even if the property has already been foreclosed upon and even been sold at auction[1]. The types of fraud particularly noted are “robo-signed affidavits and forged notary stamps.” Given that in the 1.2 million foreclosures filed in Florida since the beginning of 2007, “tens of thousands of forged signatures, backdated documents and other problem paperwork” have been detected already, this new mandate could further add to the massive foreclosure backlog threatening the engulf the state’s housing market.

Ultimately, however, lawyers must try to do the right and best thing in unprecedented circumstances, then wait for the judge to react, say Florida attorneys. “There has never been a problem like this before,” explains Margery Golant, who teaches a foreclosure course for the Bar and is based in Boca Raton. Cynthia Booth, one of the Bar’s ethics attorneys, emphasizes that “You try to cause the least amount of harm as possible to the client” when reporting fraud, but added that if fraud is suspected, the lawyer’s “duty to the court supercedes…duty to the client.” This means that even if the lawyer is working with the lender, he or she still must report suspected “fraudclosure” to a judge in a private hearing.

As yet, Bar officials have not determined what the results of the fraud notification should or could be. They say it is “unclear what judges will do about fraud in a finished foreclosure,” but that it is likely proceedings will stop in pending cases so that an investigation can be conducted[2]. This sounds a lot like lawyers trying – albeit belatedly – to “do the right thing.” However, it also turns lawyers directly against their clients in some cases. Do you think that this new Florida Bar policy is appropriate?

Thank you for being part of REJournalOnline’s Investor Academy!

Please leave comments and questions below.

---

[1] http://www.tcpalm.com/news/2011/feb/01/florida-bar-says-foreclosure-lawyers-must-report/

[2] http://www.miamiherald.com/2011/02/02/2046181/fla-bar-says-foreclosure-fraud.html

In Closter, New Jersey, the small town was set to auction off a local mall at a tax lien auction in an effort to “recoup hundreds of thousands of dollars in back taxes from…owners.” And investors were at the ready, eager to bid on the commercial property. Now, however, the entire process is stalled thanks to a last-minute bankruptcy filing by the property’s owners which effectively prevented the sale from moving forward[1].

In this case, bidders were lucky. The bankruptcy filing happened before the sale rather than immediately after. When the owner of a property saddled with delinquent property taxes files bankruptcy, the taxes are still owed. And, as a city attorney pointed out in this instance, “Those taxes have to be paid one way or another anyway.” However, a bankruptcy filing can stall your ability as the owner of a tax lien or tax deed to collect on that lien or even beginning the “countdown” process in which you must engage before a foreclosure takes place.

In the city of Closter’s case, if the taxes remain unpaid for too long, it will actually impact the city’s budget. For tax lien investors, interference with a scheduled timeline for collection or foreclosure can not only impact personal and investing budgets but also delay profits that may be important to other aspects of the business. While you can never be 100 percent sure about how a property owner will opt to deal with their delinquencies, it is important to factor in that any tax lien in which you invest could suffer a delay should that owner file bankruptcy. Being aware of this potential pitfall will help you plan your tax lien investing strategies.

We love to hear from you! Please leave comments and questions below.

This is the first in a series of educational articles. If you have questions about tax lien or tax deed investing that you would like answered, please ask them in the comments area below.

---

[1] http://www.northjersey.com/realestate/113124309_Closter__seeking_to_recoup_back_tax.html

What’s happening to the housing market right now is very reminiscent of what economist Milton Friedman once said, “The government solution to a problem is usually as bad as the problem.” At least that’s what a key government panel thinks. The Obama administration is now in hot water for allegedly failing in most housing-related issues.

The Congressional Oversight Panel, which is an independent and non-partisan commission conceived by the Congress, has been heatedly criticizing the government for its apparent inefficient handling of the foreclosure prevention program and the recent foreclosure fraud. To this, Treasury Department’s housing rescue chief Phyllis Caldwell – the administration’s representative – has refused to provide answers to the basic questions.

The housing market – and with that the economy in general – is facing a possible double dip as prices head south and the Federal Housing Finance Agency predicting a return of June 30, 2010 prices by 2013. Since a change in trend does not seem to be in the horizon, the Obama administration has been getting negative feedback on its attempts to make things better.

Read the rest of this entry »

The housing market is so down in the dumps, it has managed to distort the economic grounding of a whole state: California was ranked third highest in the nation when it comes to jobless rate. But looking closely at the California economy, one will notice how most of its unemployment problems are rooted in real estate. If only the market is faring better, then California would not be in the top three jobless states.

According to a report released by the Center for the Continuing Study of the California Economy, California’s jobless rate in August was at 12.4%. This is the third highest in the United States. At numbers one and two are Nevada at 14.4% and Michigan at 13.1%.

When the Center for the Continuing Study of the California Economy looked at the job losses, it found out that the primary reason behind the job losses is an above-average concentration of jobs connected to the housing market. Whereas the whole country declined only by 25% in construction spending, California dipped by 60% during the recession. The same trend was seen in the construction workforce: there was only 25% loss nationwide but 33% for the state of California. There were also disproportionate high job losses for other real estate related jobs like furniture outlets and mortgage brokerages.

Read the rest of this entry »

Economist Patrick Newport of HIS Global Insight said the housing market numbers are surely going to get better. However, he also said that the current numbers are so down getting better will not suffice in helping the still shaky economic recovery. And it seems that other analysts and economists agree with him.

The housing market has been a major driving force when the economy took a recent nosedive. It has also been big contributing factor in the economic growth in the late 2009 to early months of 2010. Nowadays, though, the housing market has taken such a bad turn that it no longer is significant enough to pull up (or maybe even down) the nation’s economy.

A recent report from the National Association of Realtors shows that though previously-owned homes improved by 7.6% in August, the number is still a disappointing result from what the analysts were expecting after the 27% slump in July. Even home prices gave a disappointing result: 0.5% decline for July. A bit of good news turned up with a report saying builders marked a 10.5% rise in new homes started for the month of August, a figure that’s higher than expected.

Read the rest of this entry »