Real Estate Investment

Rising rental costs may drive home sales up

February 24, 2012 By EmmanuelFonte Leave a Comment

Home sales could turn out sunnier than expected this spring based on data coming out of the rental market, according to economists at the Mortgage Bankers Association.

Jay Brinkmann, the trade group’s chief economist, said Thursday that apartment owners have raised their rates, in particular large investment trust Equity Residential ($58.05 0.45%). That’s coupled with fewer people, roughly 60%, who intend to renew a lease, according to a study by Kingsley Associates.

"This means we might see a spring season better than the numbers are predicting," Brinkmann said at the MBA’s mortgage servicing conference in Orlando, Fla. The trade group forecasts 4.39 million single-family homes sold in the second quarter, already an increase from the seasonally adjusted 4.17 million a year earlier.

Many Americans ran to rentals during the worst of the housing crisis, pushing homeownership to a 14-year low, and more tenants elected to stay put.

"The question is not how did (homeownership) fall, but how it got so high in the first place," Brinkmann said.

The MBA adjusted its forecast for mortgage originations in 2012 to just more than $1 trillion with more refinances than initially expected, according to Mike Fratantoni, vice president of economics and research. That’s still below 2011 levels and would be the lowest since 1997.

Fratantoni expects home sales to grow 10% in 2013, though he predicted refinances will drop off considerably as MBA projects interest rates to slowly move off the lowest levels in 40 years.

Positive employment news, including a continued decline in jobless claims, could impact housing soon, but Brinkmann said uncertainty over business taxes in an election year and European debt could keep growth at bay.

"Everything is going to be based overall where the economy goes," Brinkmann said. "This is going to be a slow year. There are a number of headwinds we’re facing in terms of economic growth."

Source: “MBA: Rising Rental Costs May Drive Home Sales Up,” HousingWire (Feb. 23, 2012)

It may be the time for you to consider buying an investment property. Give me a call or email me.

Distressed Sales Undercut Home Prices in 2011, Study Says

February 4, 2012 By EmmanuelFonte Leave a Comment

A report released today says that home prices slid by nearly 5 percent last year, but also indicates that most of the decline was due to distressed sales.

CoreLogic’s December Home Price Index found that home prices fell 4.7 percent in 2011 compared with December 2010, marking the fifth consecutive year of the housing slump. But excluding distressed sales, prices only dropped by 0.9 percent in 2011. The discrepancy between the two figures highlights the foreclosure crisis’ obstructive effect on a market recovery

"Until distressed sales in the market recede, we will see continued downward pressure on prices," said Mark Fleming, chief economist of CoreLogic.

Since the housing bust battered the real estate market in 2007, 8.9 million homes succumbed to foreclosure, according to RealtyTrac

And millions more may share this fate. One expert estimated that, in addition to the 2 million homes already stuck in some state of foreclosure, 1.8 million more will join their ranks in both 2012 and 2013, The Huffington Post reports.

Foreclosure filings dropped dramatically last year, a market movement that would seem to indicate the beginning of a turnaround. But experts say the steep decline was not organic, and instead the result of government crackdowns on banks over alleged foreclosure abuses. The abuses include so-called "robo-signing," a practice where bank employees sign foreclosure documents without adequately reviewing them.

In 2011, distressed sales grew the most in Montana, Vermont, South Dakota, Nebraska and New York, according to the CoreLogic study. It also found that Nevada, Arizona, Florida, Michigan and California are the states that have seen the largest decline in home prices since the peak of the housing boom.

Nevada’s home prices have plunged 60 percent since the peak of the housing market, the report says.

If you are interested in knowing more about the foreclosure process and how to invest in real estate, call me 206-713-3244 or email me.

Filed Under: Blog, real estate financing, Real Estate Investment Tagged With: distressed property, foreclosure

Where Housing Is Headed

December 1, 2011 By EmmanuelFonte Leave a Comment

Click image for interactive graphs

The inventory of unsold homes has declined sharply from one year ago in many markets. While price declines and low mortgage rates have pushed affordability to its best level in the past decade, the prospect of falling prices, more foreclosures, and economic uncertainty continues to hold back demand. — November 2011

Home prices and mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years and is less expensive than renting in a growing number of cities.

The Wall Street Journal’s third-quarter survey of housing-market conditions in 28 of the nation’s largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc. Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4%, are the lowest in six decades.

Read the rest here.

Filed Under: Economy, Real Estate, Real Estate Investment, Real Estate Updates Tagged With: buy vs. own

The World of Distressed Real Estate – Always Changing

November 14, 2011 By EmmanuelFonte Leave a Comment

Foreclosures, Short Sales, REO… The real estate market is full of confusing terms. With so much misinformation surrounding these terms, I want to update you on these distressed property types.

Short Sales have been all the rage lately, with sellers marketing properties at prices well below the rest of the market. Many people believe that short sales offer an opportunity for a good deal on real estate.

A short sale is the sale of a home for a price less than what the owner owes on the mortgage. The sale may close if the lender agrees to a “short” payoff in exchange for release of the bank’s lien on the property — hence the term.

REO stands for Real Estate Owned. It is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction (more on that below). If there are no interested bidders at auction, then the bank will legally repossess the property. Once the bank repossesses the property, it is listed on their books as REO – Real Estate Owned – and is categorized as an asset (non-performing).

As an REO, the bank will go through the process of selling the property on its own. It will remove some of the liens and other expenses on the home and sell it to the public. These can also be deals listed below the rest of the market (often in need of rehab).

Foreclosure is used when a power of sale clause exists in a mortgage or deed of trust in which the borrower pre-authorizes the sale of the property to pay off the balance on a loan in the event of owner’s default. The lender will attempt to sell the property at auction through a trustee, hence the term “Trustee Sale”.

There is typically a three month period between when a property goes into the foreclosure process and when the property is actually sold at a courthouse auction. During this period, the house is referred to as a "Pre-Foreclosure".

Auction buyers are required to have cash in hand on the courthouse steps. Because of this, foreclosures have often been limited to investors who can bring cash to the sale. Now, John L. Scott Foreclosures is making auctions available to home buyers and investors alike, providing the same experience you’ve come to expect from the industry leader, now in the foreclosure realm. There may be an opportunity for you to take advantage of the current market conditions and get a great deal at auction.

If you are interested in knowing more, please contact me at 206-713-3244, or email me.

Filed Under: Real Estate Investment Tagged With: bellevue foreclosure, foreclosure, king county, seattle foreclosure

20% Downpayments Don’t Always Make Cents

November 9, 2011 By EmmanuelFonte Leave a Comment

Despite the “doom and gloom” in today’s headlines, in the current economic climate, homeownership is more affordable than ever, thanks to low interest rates and lower home values. For those buyers who manage to have a 20% (or more) downpayment, they believe this will get them the lowest monthly mortgage payment. However, simply because buyers can afford to put down this amount does not necessarily mean they should.

Those buyers who have saved enough to put 20%—or more—down on the purchase of a home may want to consider another approach—preserving some of their cash for savings, investing or other purposes. It may sound counterintuitive, but with today’s interest rates and the competitive pricing of private mortgage insurance (MI), borrowers can retain some of their money by putting less money down on a home—say only 10%—and still get a low monthly payment.

Real estate professionals have a responsibility to all home buyers to help them evaluate their purchasing power based on existing assets as well as future need. The right counsel can help home buyers leverage their current assets while keeping sufficient reserve for any immediate or future financial needs, not to mention all the trips to the local big box hardware store that seem to come standard for any new homeowner.

As a real estate professional, I guide my home buyers throughout the transaction process. At the very beginning, it is imperative to look at the borrower’s overall financial picture—taking into consideration current cash flow, debt and all future financial obligations.

It is important to think beyond just interest rates and downpayment, as these are not the only keys to securing the lowest possible mortgage payment. By having a general understanding of the current financing options, you can better understand what a buyer can responsibly afford, which, in some instances may be more than they think.

While I am not a financial advisor, by asking these types of questions, I help make sure my buyers better frame conversations with their loan officer.

While in the past the adage was, “The more you borrow, the more you leverage,” in today’s financial times, the scenario is much different. Today, borrowers can leverage private MI to put as little as 5% down on a home and still have a competitive payment. And for those potential buyers who have stayed out of the market over worries of declining property values, they can still purchase a home without funneling all of their available cash into the downpayment. By utilizing this strategy, home buyers are able to leverage their current assets, while still keeping sufficient cash reserve.

So, while putting 20% down on a home doesn’t always make sense (or dollars), buying at a time of high affordability does. And by understanding the current financing options available to buyers, and helping them discuss what those options mean for their downpayment needs or monthly payments,I help point them in the right direction with their loan officer, overcome their investment fears and make the sale, all while helping them achieve their goals.

I’m here to help – 206-713-3244 or email me.

Filed Under: Economy, Real Estate, Real Estate Investment Tagged With: downpayment, financing, real estate financing

Rising Rents Improve Investors’ Returns

October 22, 2011 By EmmanuelFonte Leave a Comment

With rents rising faster than last year, the picture for residential real estate investors is getting even better than it already was as a result of once-in-a-generation prices and low interest rates, according to the founder of a leading Internet platform for investors and real estate professionals.

Greg Rand, CEO of OwnAmerica, downplays concerns over near term price declines and urges investors to take a long view of the opportunities.

“This is a long term investment,” says Rand, who differs with what he calls the “get rich quick” approach to investing. “Rents are a steady return on your investment through the years, leaving you with an attractive asset when prices improve. And they will. The best profits in real estate accrue to long term investors who take a long term view.”

Rents are growing at a 5.17 percent annualized rate compared to a 4.72 percent at this time last year Assuming effective rent grows at the same rate in the next four months as it did in 2010, the full-year total would fall just below the historic highs of 2000 (6.18 percent) and 2005 (5.81 percent), according to a report from Axiometrics Inc., a provider of data and analysis on the apartment market.

With 1.4 million new renters this year, apartment construction can’t keep up with demand. Tenants, especially former homeowners forced from their homes because of the economy, are increasingly turning to single family homes owned by investors, especially in high foreclosure markets like Las Vegas.

During this year, investors have accounted for between 20 and 40 percent of monthly existing home sales, according to surveys of Realtors by Campbell/Inside Mortgage Finance and the National Association of Realtors. Yet, the investor market share may increase even more next year.

A survey by Realtor.com in April found that by a three to one margin, investors plan to be more active in their local markets compared to typical homebuyers in the next 24 months, and 69 percent of investors say it’ll be easier to find properties in the near future.

Most investors are newcomers. Fifty-nine percent (59%) said they’re new to real estate investing, with 33.5 percent considering their first investment purchase and 8.5 percent in the process of buying and selling their first investment property. Another 17 percent said they just completed their first transaction and plan to make more. Only 36.5 percent have experience in more than one property transaction.

Author of “Crash! Boom,” Rand argues that even in the Great Depression, owning real estate was always better than not owning real estate. Holding real estate for the long term has always been a formula for success and most family wealth has been accumulated by purchasing real estate and keeping it in the family for many generations. Real estate plus time usually equals success.

There are 6 million people who went from being owners to being renters, Rand says. “The stars are aligned to make this the best time in modern history to be a landlord,” he wrote in his book.

If you are interested in exploring investment opportunities, call me @ 206-713-3244 or email Emmanuel@EmmanuelFonte.com

Filed Under: Real Estate, Real Estate Investment Tagged With: cash flow, real estate investment, rental market, renting

Good News: Interest Rates Will Remain Low

October 3, 2011 By EmmanuelFonte Leave a Comment

3.5 % Down Payments and Jumbo Loans Available

This is a great time to be looking for a new home. Historically low mortgage interest rates will remain low for the near future. Those low interest rates keep home purchases affordable, which is good news for buyers and sellers. With the August United States’ debt ceiling crisis behind us, many people are starting to become more confident about buying or selling their homes.

Interest Rates
In early August, the Federal Reserve pledged to maintain historical low interest rates for another one to two years. Most likely, when the Fed’s pledge ends, interest rates will have to increase. However, we don’t anticipate a significant increase in interest rates until 2013 or later.

Down Payments
Even though underwriting for home loans has tightened up over the past several years and buyers are now required to put down larger down payments and have higher credit scores, the Federal Housing Administration, or FHA, still offers mortgages with a 3.5 percent down payment.

Expiring High Mortgage Balance Loan Limits
As a result of the 2008 mortgage crisis, loan limits were increased to allow more borrowers to secure conforming loans. On the first of October 2011, these temporary limits expired, and more buyers in higher-priced markets will need jumbo loans that will carry tighter qualifying requirements (i.e. credit scores) and slightly higher interest rates.

Although many banks stopped or significantly tightened lending underwriting for jumbo loan products when the housing crisis hit, they are now back in the market and filling the void created by the expiration of the higher loans balance. That’s good news for buyers needing jumbo loans and sellers of higher-priced properties.

Conclusion
The days of reckless lending and then the market’s pendulum swing to overly conservative lending practices are gone. The good news is that we are now back to sensible underwriting. Even though we have tougher qualifying requirements – larger down payments and higher credit scores – banks still want to provide mortgages, even at historically low interest rates. Call your broker for more information when planning to buy, sell or refinance your home.

If you want to know more, give me a call 206-713-3244 or email me Emmanuel@EmmanuelFonte.com

Filed Under: Economy, Real Estate, Real Estate Investment, Real Estate Updates

9 Reasons to Buy Investment Property Now

August 24, 2011 By EmmanuelFonte Leave a Comment

J. Paul Getty famously said, “Buy when everyone else is selling and hold when everyone else is buying.” Many commercial brokers believe that present market conditions provide an unprecedented buying opportunity to lock in significant real estate investment returns. Despite the opinion of some real estate professionals, however, many investors remain on the fence. While each investor must carefully consider their own financial objectives and risk tolerance before jumping back into the market, we’ve listed a few reasons investors should consider in assessing today’s real estate purchase opportunities:

1031 Exchange Opportunity – Investors with low basis properties may utilize Internal Revenue Code §1031 to defer tax on the sale of one underperforming asset to acquire one or more discounted replacement properties that may enhance cash flow and provide higher long term investment returns.
Attractive Purchase Prices – Many distressed sellers (and some banks) are selling investment properties at deep discounts and accepting offers that are below current replacement costs. Recent reports indicate that lenders are selling foreclosed properties (often referred to as ‘real estate owned’ or “REO” property) at an average discount of 28% below prices being paid for comparable non-distressed properties in the same market.
Historically Low Financing Costs – The Fed’s stimulus efforts, such as QE2 (“Quantitative Easing 2”), have resulted in historically low interest rates, making the cost of debt service exceptionally attractive. Qualified real estate investors can take advantage of today’s low interest rates to bolster cash flow and lock in better long-term investment returns.
Inflation Hedge – With many economists predicting that inflation will increase at some point in the future, hard assets, like investment real estate, can provide a hedge against the declining value of money in an inflationary environment. Additionally, ownership of leased real estate can provide an investor with increased income as rent rates also tend to rise in inflationary periods.
Yield – Financial institutions are paying very low yields on money market accounts and other conservative investments. In contrast, many investment properties are generating returns in the 7-9% range, providing considerably better yields than many other competing investments.
Less Competition – Foreign ownership of U.S. investment real estate is increasing. Foreign investors see U.S. real estate as a solid investment in a stable economy, and the lower value of the dollar has made U.S. real estate an even more attractive bargain. These two trends will increase demand, which will drive up prices on certain types of investment property. By buying now, investors can stay ahead of the competition.
Desirable Product Classes – Some classes of investment property are experiencing considerably more demand than supply. For example, in the multi-family segment, demand for rentals has increased as foreclosures have mounted and there is little new multi-family construction in the pipeline to meet such increased demand. As a result, multi-family rents are increasing and many experts project this trend to accelerate.
Worst Price Declines are Over – Property values nationally have declined by 30% or more since the market peak in 2006. Many economists believe we are at an important pivot point where prices will stabilize and begin to increase (albeit at lower appreciation rates than in the past). If investors wait too long, they may find they are facing competing bids and higher prices to close. Buying before demand picks up in the nearly inevitable recovery locks in today’s bargain prices.
Real Estate is Local – Despite national statistics about real estate prices, most investors are aware that real estate is local and supply/demand and investment returns are determined by local market conditions. Many investors are using 1031 exchanges to exchange out of areas that are not projected to perform well and into areas where the local economy is more robust and investment returns are more favorable.

Financial professionals tell their customers it is almost impossible to"‘time the market" and purchase investments at the very lowest point and later sell these same assets at near market peaks. The concept is fraught with many problems and, as a result, most financial advisors caution customers to not pursue this approach. Despite this advice, investors often wait until it’s too late to purchase and miss opportunities. Does it make sense for you?

Call me 206.713.3244 or email Emmanuel@EmmanuelFonte.com

Filed Under: Economy, Real Estate Investment

Rejoice, landlords! Sorry, tenants

June 30, 2011 By EmmanuelFonte

For some time, there’s been reporting on the trend toward residential leasing as the housing sector continues limping along. Leasing is chic and the stigma around it is slowly fading. People that are fully capable of buying are sitting still or trying out new areas of town while others have no choice and are living in rentals due to foreclosure. Either way, “rent” is no longer a cuss word.

Rental rates have been going up considerably over the last year and it appears it is accelerating, rising at a rate beating most economists’ projections for 2011. A new report released by real estate search site HotPads.com reveals that residential rental listing prices have jumped 6.7% from June 2010 with the fringe listings of studio and five bedroom apartments escalating most rapidly.

HotPads.com says that “this is a telling trend which may indicate a growing demand for rental housing among first time renters and larger families” but we see it more as a supply and demand issue in that studios and very large rental units are less common (low supply) and because rentals of all sizes are in high demand right now, it appears a premium is being set on studios and five bedroom units.

In most cases, the rapid rise in rent has occurred in 2010 rather than a slow increase over the past twelve months. We are seeing consumers flocking to their chosen social networks, flustered that their landlord is screwing them over and are being met with the harsh reality that it isn’t their landlord, it is the entire market. Times have been rough for landlords, is this the time to recoup the losses met since 2008? In some markets, rents have been held down but national trends are allowing an increase as perception of the market is softening.

Rental trends graphed:

Let me know how I can help: emmanuel@emmanuelfonte.com

Filed Under: Blog, Real Estate, Real Estate Investment, Real Estate Updates Tagged With: Real Estate Information, rental market, renting, tenant