Troubled Metros Getting Worse, Stable Metros Getting Better
July 30th, 2010
May’s Case Shiller report was more positive than April’s, probably due to a last minute rush for the federal tax credit that expired April 30th. 15 of the 20 metro-areas reported showed improvement, while 7 of the metro areas are still reporting negative annual growth rates.
Las Vegas posted a new index low of -56% from its peak in August 2006, effectively canceling any price gains it had posted since 2000. Detroit home prices are now at levels last seen in late 1994. Overall, average home prices across the United States are back to 2003 levels.
At Real Wealth Network, we like to buy low and cash flow or sell high. Now’s the time to get bargains, but where?
Fiserv, Inc. just released its analysis of home price trends based on the Case-Shiller Indexes. The analysis shows U.S. single-family home prices rose an average of 2 percent in the first quarter of 2010 over the year-ago quarter. This marks the first year-over-year national gain since 2006. However, the stronger markets are carrying most of the gains.
The overall increase was driven by strong price increases in San Francisco Bay Area, San Diego and Washington, D.C. The largest gains were in the San Francisco Bay area, where San Jose home values were up 17.2 percent.
Prices were actually lower in 303 of the 384 metro areas compared to the first quarter of last year. Detroit, Las Vegas and many small Florida markets continued to plummet, with double-digit declines. Provo, Salt Lake City and St. George, markets that historically perform well, posted declines of 13.3 percent, 9.9 percent and 17.5 percent, respectively.
This data tells us that even though some areas have had major price declines and are more affordable than ever, the ride downhill might not be over.
The Fiserv Case-Shiller Indexes forecast that average single-family home prices will fall another 4.9 percent over the next 12 months. But remember, there’s no such thing as a national housing market, only local.That’s like quoting a national weather forecast.
Steep home price declines are expected to continue in markets that have been hurt most by the housing crisis. From the first quarter of 2010 through the first quarter of 2011, average home prices in Nevada, Arizona and Florida are projected to decline 11.1 percent, 10.8 percent and 8.8 percent, respectively.
At Real Wealth Network, we’ve been warning investors for years that the former bubble markets are the most troubled and will continue to be for some time. Investors jumping into NV, AZ and FL may have found great deals, but the deals will likely get even better next year and perhaps into 2012. Additionally, with so much distressed property, there’s more vacant homes and more homeowners trying to sell or rent their properties. That’s too much competition for our taste.
California is a former bubble market but seems to be performing well, according to the data. However, we believe the price increases are not all due to appreciation, but rather a higher priced property now in distress. Prime, Alt A and Option Arm loans are now resetting, and there’s a lot more of them than the subprime. More than half of all option ARMS are i CA. While certain pockets of CA will always be in demand, we still recommend using caution before buying to hold rental property. More foreclosures are coming.
So where do we recommend investing?
Dallas and Cleveland showed gains in the first quarter and are expected to continue their upward trends. Kansas City and Indianapolis are expected to stabilize. These linear markets never had a bubble and never had a burst. Homeowners didn’t lose their nest egg or their “ATM” equity lines. Living expenses are affordable, allowing for more dollars to hit the local economy. The local governments are not losing out on property tax revenue that forces layoffs and budget deficits. And most importantly, the cash flow is still better than the risky markets.
What will you do with this information? What’s your next move as an investor? Share your comments below.
Tags: California, Cleveland, Dallas, Detroit, Existing Home Sales, Florida, Indianapolis, Kansas City, Las Vegas, Market Indicators, S&P/Case-Shiller
Posted in The Real Wealth Report | 2 Comments »
Dallas Growth Is All Over The News
June 26th, 2010
At Real Wealth Network, we've been talking about how good the income property in Dallas is for years. Now everyone else is too. Check out all the recent headline news on Texas:
DALLAS (Dallas Morning News) Home starts in North Texas have increased by over 50 percent so far this year, and builders and developers are busy snatching up lots across the area.
NEW YORK (CNNMoney.com) The booming Dallas-Fort Worth metropolitan area added more residents during the past decade than any other city in the United States. According to the latest Census Bureau figures, the population of the sprawling Texas metro area grew by about 1.3 million people, or 25%, between April 1, 2000, and July 1, 2009
TEXAS (USA Today) According to Census population estimates, Texas is still highly regarded, having four of the ten fastest-growing cities in the country among cities with populations greater than 100,000. From 2008 to 2009, 11 of the nation's 25 fastest-growing cities with a population size greater than 100,000 people were in Texas.
Frisco was ranked number one while Austin, Dallas suburbs such as McKinney, Carrollton and Lewisville, and oil centers Odessa and Midland ranked high on the list.
AUSTIN (Austin Business Journal) Texas cities were prominent in a new listing done by Forbes.com on the best cities for young professionals. Dallas ranked sixth and Austin not far behind, ranking tenth. The list was determined by factoring in unemployment rate, average wage, affordability and public company presence.
COLLEGE STATION (Real Estate Center) Texas is coming out of the Great Recession and leading the United States in the current U-shaped economic recovery, according to the Real Estate Center's latest monthly review of the Texas economy.
The state's annual employment growth rate turned positive in May 2010 and posted an annual employment growth rate of 0.2 percent for the period from May 2009 to May 2010. The state's seasonally adjusted unemployment rate rose from 7.5 percent in May 2009 to 8.3 percent in May 2010, while the U.S. rate rose from 9.4 percent to 9.7 percent during that period.
Five Texas industries — education and health services, mining and logging, other services, leisure and hospitality, professional and business services — and the government sector had more jobs in May 2010 than in May 2009. The state's actual unemployment rate in May 2010 was 8 percent.
TEXAS (TradingMarkets.com) Medical Properties Trust Inc. purchased three hospitals in Texas for $74 million. The inpatient rehabilitation hospitals are located in Houston, Dallas and Austin and are operated by and leased to affiliates of Reliant Healthcare Partners.
DALLAS (Dallas Business Journal) An $850 million fund to invest in real estate has been launched by Dallas-based Stratford Co. Although the company did not specify what type of real estate investments they will target, Stratford has invested in the Dallas-Fort Worth, Austin, San Antonio and Houston areas. Stratford's website said their strategy involves acquiring land in developing metro areas with strong growth prospects.
FORT WORTH (Fort Worth Star-Telegram) Prices of existing homes in Texas had a 2.2 percent increase while there was a 1.7 percent increase nationwide.
"In more than half of the 100 markets surveyed by CoreLogic, home prices increased from March 2009. The year-over-year increase is a sign of stability," said Mark Fleming, CoreLogic's chief economist.
PALM CITY, Fla. (Policom Corporation) Houston, Dallas and Austin are among the 20 strongest metropolitan areas in the nation, according to POLICOM Corporation's annual economic strength rankings."The top-rated areas have had rapid, consistent growth in both size and quality for an extended period of time," said William H. Fruth, president of POLICOM.
FORT WORTH (Fort Worth Star-Telegram) For the second year in a row, Texas cities took half of the top ten spots in Newgeography.com's annual ranking of the best cities in the nation in which to find a job. Dallas-Plano-Irving ranked fifth and Fort Worth-Arlington seventh. The rankings are based on three-month rolling averages of monthly employment data from the Bureau of Labor Statistics from November 1999 to January 2010.
DALLAS (Dallas Business Journal) Texas has the 12th-lowest home-care costs and other long-term care services in the country, according to Genworth's 2010 Cost of Care Survey. Annual nursing home private rooms cost, on average, $58,765 in Texas, compared with $75,190 nationally. These rates represent an increase of 3 percent in Texas over the past five years and 5 percent nationally.
DALLAS (Marcus & Millichap) Dallas-Fort Worth's economy will strengthen this year, especially in Class-A buildings, according to the 2010 National Office Report by Marcus & Millichap. While sublease space will be the most significant hurdle for top-tier operators, most of the attractive locations should be absorbed by midsummer, said the real estate investment firm.
Among the most significant aspects from the firm's DFW office research report:
- Dallas is expected to lead the nation in job gains during 2010, expecting as much as a 2.3 percent gain;
- office-using employers are projected to add 16,000 jobs, a 2.1 percent boost;
- development will tick down to 1.6 million sf in 2010;
- rent declines will moderate this year as employment gains traction.
DALLAS (Dallas Morning News) Indicators of recovery in North Texas are beginning to pop up, according to the Federal Reserve Bank of Dallas' latest Beige Book Survey. The residential real estate sector and the retail, staffing, energy and high-tech manufacturing sectors are reporting higher demand for goods and services.
The survey of local professionals reported that housing contracts were improved, and builders said sales in first quarter 2010 were strong. Additionally, apartment demand was described as "meaningfully positive."
Representatives for commercial real estate reported that the market is near the bottom and note a drastic reduction in rental rates on renewals.
Retail sector sales increased, as did the raw materials price for steel.
DALLAS (Dallas Morning News) With more than 9,000 apartment units currently being built, the Dallas-Fort Worth area has more apartments under construction than any other U.S. market. Most of these are in the Allen-McKinney, central Dallas, west Plano and Frisco markets.
Thanks to net apartment leasing of over 6,200 units in first quarter 2010, the high rate of construction may not be a bad thing. Demand in the first quarter was the best in more than two years and compensated for the entire net apartment leasing declines in 2008 and 2009, according to MPF Research.
MPF Research predicts that overall apartment vacancies will decline slightly this year from current levels of less than 12 percent.
INVESTING IN DALLAS? While great deals can be found in Dallas, there are many areas to avoid. It's important to work with a local company that specializes in investment property. Our teams at Real Wealth Network get steep discounts by buying in bulk with cash directly from the bank. The properties are fully rehabbed in like-new condition and rent ready for a turn-key investment. The homes are in areas where the builders are back in business, but we are getting the properties far below the cost to build. This creates instant equity and cash flow for our members.
If you'd like to see some of our better-than new, discounted, cash flowing, turn-key properties in Texas, give us a call or check it out.
What articles have you seen about Dallas?
Tags: Dallas, due diligence, Market Indicators
Posted in Investor Tips | 2 Comments »
Is it a Good Time or a Terrible Time to Buy?
June 5th, 2010
Before buying any property, always ask yourself, "Why am I buying this?" This seems obvious, yet many buyers later regret not asking this simple question.
The best reason to buy property today is for cash flow. There has never been such a perfect combination of low home prices, low interest rates and high rents. It makes a lot of sense today to buy a home if it's cheaper to own it than to rent it. There are many areas in the country where this is possible, and both home owners and investors should take advantage of this rare opportunity to increase cash flow.
However, in high priced markets along the coasts, the opposite is true. It's still cheaper to rent than to buy, which means there may be more price adjustments on the way. Low interest rates have made it possible for people to afford more expensive homes, but what will happen when rates creep up? They have been held artificially low since the Fed started buying mortgage backed securities, but that program is now over. Even a half percent increase in rate can price buyers out of the market.
Take a look at Walnut Creek, California. In 2006, the median home price was $729,000. Today, it's $526,000. The federal tax credit boosted the values up a bit from a low of $510,000 last year at this time, so some buyers think the upward trend will continue. But they may not be considering that the average income in Walnut Creek is $82,000. An affordable mortgage should be only 3 times the annual income, not 6.5. For Walnut Creek to become affordable, the median home price would need to be $246,000. When interest rates rise, but incomes don't, the result is a downward pressure on prices.
Compare these numbers to Dallas, Texas, where some neighborhoods have a $90,000 median income, $135,000 median home price and $1450 median rent.
If you were to rent in Walnut Creek, a $526,000 home would lease for about $2000 per month. That's $1000 less than the mortgage, taxes, insurance and basic home maintenance would have been. Even with tax deductions, you'd still pay less to rent and would not be subjected to the risk of potentially further declines in prices.
However, even if it is more expensive to buy than rent in places like Walnut Creek, it still might make more sense for some people. These buyers may be seeking stability, tax relief, or a chance to renovate to their liking. As long as they plan to stay put for a minimum of 10 years, they could find themselves ahead of the game.
The government is attempting to create inflation to combat deflation. This is done by expanding the money supply. Even if the median home prices dropped another 20% to $420,000 during this deflationary period, it could experience huge gains once inflation kicks in. With just 5% inflation, that home could be worth over $700,000 10 years later.
Leveraged real estate has always been the best hedge against inflation because you can pay your loan back in less valuable dollars. You don't have any more spending power, but at least you've kept up with times. This means you've got to be able to hold on to the property for an extended period of time to reap the rewards.
If you're buying investment property, once again, you must ask yourself, "why?" Income that far exceeds expenses is a great reason. Selling the home for profit after making improvements also works. But buying on speculation, simply hoping that prices will rise again can be a huge mistake – especially if the property has negative cash flow at the get-go.
If you bought the $526,000 home in Walnut Creek as an investment, you'd put $125,000 down and then pay $12,000 in negative cash-flow. In the long run, the prices very well could go up, but then you'd have to add up the cost of lost funds along the way.
Whereas, had you bought in a cash-flow market like Dallas, you could have bought 4 properties with $125,000 down. The cash flow would be $300 per property per month, or $14,400 annually positive cash flow.
One strategy would be to take all that cash flow to pay off the 1st home in 8 years, and the 2nd home 4 years after that. That means in 12 years you'd have $31,200 in annual cash-flow, 2 houses paid off (valued at $300,000 not including inflation) and 2 more houses that could be paid off in 4 more years. (For a total equity position of $600,000 and $48,000 annual income, not including inflation.)
Compare these numbers to the Walnut Creek home that may or may not have inflated to $700,000 in 12 years. Subtract the $140,000 paid to negative cash flow so the real value to you is $560,000, but the loan would still be over $400,000. That's a $160,000 equity position and still a negative cash flow position.
The difference between the high priced markets and the cash flow markets is significant. And all this, just because you asked, "Why?"
Tags: California, Existing Home Sales, Inflation, Market Indicators, Real Estate, Strategic Planning
Posted in Investor Tips | 1 Comment »
Mixed Data This Week – Existing Home Sales Up, Along with Inventories
May 27th, 2010
This month's data showed several dynamics: sales are up, prices are up, but inventory is also up. That means more folks are buying, probably due to the expiring $8000 federal tax credit, while more properties are hitting the market.
Existing home sales were up 7.6% to a seasonally adjusted annual rate of 5.77 million in April from 5.36 million in March, according to data released Monday by the National Association of Realtors.. That was better than the forecasts of 5.62 million, and comes just after a 7% gain in March.
Regionally, the Northeast was the big winner, with a 21.1% rise in sales. The Midwest was next with a 9.9% gain in sales, and 8.6% in the South. However, the West saw a decline of 6.2%.
While more people were buying, more inventory hit the market at the same time. The raw number of homes for sale rose 11.5% to 4.044 million from 3.626 million in March. Supply is up 2.7% from last year at this time. The months supply at current sales pace indicator of inventory rose to 8.4 from 8.1.
Median prices rose 2.1% to $173,100 from $169,600 a month earlier. They're up 4% from the year-ago level of $166,500. But before you celebrate, consider that these price increase are likely due to prime loans defaulting, and thus higher priced homes hitting the distressed seller list.
More conflicting data:
One day after NAR's existing homes sales numbers were released, the S&P/Case-Shiller National Index released its 20-city home price index. In this report, U.S. home prices posted a 2% gain in the first quarter from a year earlier, but were down 3.2% from the end of 2009.
The national data are released quarterly and are on a two month lag, but the monthly numbers showed a similar pattern. The closely watched 20-city home-price index rose 2.3% in March from a year earlier, but was 0.5% lower than February.
Cleveland posted the largest jump in prices from the prior month, while Las Vegas posted the biggest drop. Eight cities — Atlanta, Charlotte, Chicago, Detroit, Las Vegas, New York, Portland and Tampa — posted new index lows.
But, the West Coast has shown some strength. Prices in Los Angeles, San Diego and San Francisco are all up more than 7% from recent lows. San Diego, in particular, has stood out with 11 consecutive months of increasing home prices. Again, this phenomenon is likely due to higher priced homes hitting the distressed-home market.
What to make of all this? The "shadow" inventory seems to be finally hitting the market, albeit slowly. The banks can only hold off the inevitable for so long through trial modifications and delayed auctions. With sub-prime defaults behind us, increased home prices may be an indication of defaults in the higher priced prime mortgage market. California is the best example of that with sales down, but prices up.
As more foreclosures hit the market, there will be downward pressure on prices in the highly distressed markets of CA, FL, NV and AZ. Without the federal tax credit of $8000 to entice buyers, there could also be a decrease in buyers. Areas like Cleveland and Dallas, that experienced minimal overall price declines, will fare the best as fewer prime borrowers will be tempted to walk away from negative equity positions.
Tags: Current Events, Dallas, Existing Home Sales, Housing Starts, Market Indicators, S&P/Case-Shiller
Posted in Investor Tips | No Comments »
Who Is Spending Your Money?
May 19th, 2010
As you probably noticed in last week's ezine, Harry Dent is expecting a major down turn in Dow Jones Industrial Average this Fall. We got to see just how volatile the stock market can be last week. It's astounding how a market can be so over-bought, manipulated and volatile, and yet still manage to rally. The masses are certainly quite trusting in the "Powers That Be."
If you are like me and not so trusting, this is a great time to self-direct your retirement funds and put them into something more stable while the economy shakes out. We have some very clear indicators that housing hasn't bottomed out in the high priced markets. I personally only recommend short term holds in those areas.
But many of the linear markets are holding steady and even moving upward in pricing. In some of these markets, the homes are virtually free. All you pay for is the rehab. I just don't see how prices can go lower than that. In many cases, those homes rent monthly for 2% or more of purchase price. The returns are upwards of 14% and with financing, ROI can be as high as 35%. This is a steady and solid income stream that you won't see from the self-serving "Powers That Be" on Wall Street.
Speaking of which…
Did you find your blood boiling at the news that your taxpayer dollars are going to help bail out Greece? If not, perhaps you weren't aware that 9% of the country's population works for the government (1M out of 11M). These government employees get paid for 14 months of the year instead of 12, retire at age 53 and enjoy a pension of 80% of their salary. It's no wonder they're putting up a fight to keep things the way they are, and the U.S. is happy to enable…
It's obvious that this kind of spending is unsustainable, so why would we reward it? Well, we asked that same question when our leaders bailed out Goldman Sachs, Wall Street, GM, Chrysler, Fannie and Freddie.
The real question is how do we control a run-away government who doesn't listen to the needs of its people and spends taxpayer money on mismanaged companies and foreign countries in the midst of its own major economic crisis? It's almost as if the decisions being made are deliberately meant to destroy us.
The answer: Abolish the Federal Reserve. The Fed is a private corporation run by the heads of the top banking and Wall Street companies. It is not federal, it's not a bank, and it has no reserves. But it does have the power to manipulate our economy to best serve its member's interest.
The founders of the Federal Reserve and the central banking concept are from Europe, thus the decision to bail out their own is not surprising. After all, the Euro was created to compete against the dollar and eventually overthrow it as the world's reserve currency.
Some senators have asked for an audit of the Federal Reserve, but so far it has come back as "impossible" and harmful to the security of the United States. No surprise, since most of Washington has been bought by these guys too. The Federal Reserve gives politicians the ability to create dollars for anything they need to stay in office. It's been happening since the Fed was formed in 1913. Who ends up paying for all the created money? We do, through inflation.
What can we do? First, protect yourself by getting your money out of dollars. Second, get the facts and then expose the truth to the struggling middle class, before it's too late.
United, we are strong! Unaware, we are bulldozed.
Tags: Current Events, dollars decline, federal reserve, Market Indicators
Posted in Investor Tips | 1 Comment »
Is the US on the Same Path as Greece?
May 11th, 2010
The news of Greece's debt crisis hit the financial markets hard last week. The Euro lost 16% of its value in just 4 months. There is great concern that Portugal, Spain and Italy will follow suit. Is the U.S. on the same path? Our leaders continue to spend hundreds of billions of dollars they don't have. Helicopter Ben is living up to his famous speech that money falling out of the sky would only help the economy. Easy for him – it simply comes out of a computer now. And the solution our leaders have found to pay off our debt is to devalue the dollar to devalue the debt. What about your dollars? Get them into something besides paper. Housing is and always has been one of the best hedges against inflation. How about a solid brick home near jobs in the strongest economy in the U.S.?
Here's to Protecting Your Wealth.
FINANCING
The number of markets on most lender's declining markets list is declining! We area getting closer to recovery in many U.S. markets, and some are well on their way back up. Dallas had a 5% increase in average home price this year from last! But remember: when an economy recovers, interest rates go up. The window of opportunity to buy cheap homes with cheap interest rates is closing. Our international friends cannot believe we can lock in such low interest rates for 30 years. They only have adjustables. Sometimes we just don't know how lucky we are.
THE MARKET
Good news from PMI's research and underwriting department. 356 of the United States' 384 MSA's (Metropolitan Statistical Area) had a declining Risk Score. In addition, the number of MSAs in the riskiest category (90 – 100) fell by 26.4% during the fourth quarter, while those in the least risky (0 – 10) shot up by 79%. And the number of MSA's that have better than even odds of higher housing prices in the next two years increased 26.5% to 186 from 147 in the prior quarter. Most MSA's in CA, FL, NV and AZ remain at highest risk for future declines in value, according to PMI. Cleveland and Memphis were listed as lowest risk of future declines. PMI is a mortgage insurance company based in Walnut Creek, CA.
Tags: Current Events, dollars decline, Financing, Inflation, Interest Rates, Market Indicators
Posted in The Real Wealth Report | No Comments »
Kathy Fettke on the Korelin Economics Report Radio Show
April 26th, 2010
We think you'll enjoy Kathy's perspectives on the recent real estate numbers from her interview on the Korelin Economics Report.
Listen here
The Korelin Economics Report is "the original radio program dealing exclusively with asset based investing." Regulatory consultant Al Korelin and former Portland, Oregon TV news anchor Mike Hartfield launched The Korelin-Hartfield Report in 1990. In 2001, the program began to focus on asset-based investing and macroeconomics. Through the tech, credit and housing bubbles, the program has sought out informed, often opposing viewpoints for listeners, and focused on investment fundamentals. The syndicated radio show is available to 2.7 million radio listeners each week.
Here is the interview with Kathy's perspective on the recently released numbers on U.S. real estate.
Tags: Current Events, Existing Home Sales, Housing Starts, Market Indicators
Posted in Investor Tips | No Comments »
The Financial Markets Are Buzzing
April 23rd, 2010
The financial markets are buzzing this morning after the Commerce Department’s report of a 26.9% surge in new homes sales in March. 411,000 new homes went into contract in March, compared to 324,000 in February. This was the biggest increase since April 1963, and far above the 325,000 average forecast.
But before construction workers get out of the unemployment line to pop the champagne cork, let’s take a closer look at the data.
The number of homes for sale that are under construction fell to a record low of 100,000. That’s because builders have dramatically cut back on production of new homes, since they are still saddled with unsold inventory. That means the upsurge in new home sales is not necessarily coming from new construction, but rather highly discounted builder inventory. What fueled sales in March was low prices combined with good weather, artificially low interest rates and pressure to get into contract by April 30th to get the $8000 tax.
Standing builder inventory is taking a record 14.4 months to sell it after completion — reflecting how difficult it is for builders to compete with foreclosure pricing. Median prices fell 3.4% to $214,000 from $221,600 a month earlier. On a year-over-year basis, prices were up 4.3%.
Since there is really no such thing as a “national” real estate market, let’s take a look at the regions. Sales surged 35.7% in the Northeast and 43.5% in the South. They gained 4.3% in the Midwest and 5.7% in the West.
The former “bubble” markets in the West like AZ, CA, NV and FL are still reeling from defaults. California foreclosure sales in March 2010 increased 92.3 percent over March 2009. The government is pushing to find a way to keep people in their homes with foreclosure moratoriums, modification programs, even lease backs. However, without principal reductions, homeowners with significant negative equity may still be tempted to walk away from the debt in what’s known as a “strategic default.”
Parts of the mid-west are struggling with employment and migration losses. Whereas, the South is experience job creation and population growth.
So the bottom line: discounted housing is still hot, whether it’s builder inventory or resale homes. Just 12% of homes sold for more than $400,000. Affordability is the keyword of the day.
Tags: Current Events, Existing Home Sales, Housing Starts, Market Indicators
Posted in The Real Wealth Report | No Comments »
Housing Starts Surge to Over 18%
April 23rd, 2010
Tune into NPR today for my national interview on the state of the real estate market. You can find a summary of this interview in the market section below. We were very surprised to hear that housing starts and building permits surged to over 18% in the South in March, according to the NAHB (National Association of Housing Builders.) This is in contrast to a dip in the West of 2.1% in housing starts and 6.7% in permits.
Our recorded teleseminar this week with our Texas affiliate verified that construction is back in full force in the Lone Star State. This is not a huge surprise since we know Dallas has the highest job creation and population growth in the country. Our Dallas team is coming out to CA next week to give an update on the state of the economy in Texas, and the affect that rising home prices and increased builder activity will have on investors. We hope to see you there at one of these highly informative events.
Financing
Now that the Fed has ended its $1.25 trillion buying program of mortgage backed securities, we do expect rates to creep back up. The window of opportunity to increase cash flow by buying discounted properties and locking in low interest rates on 30 year fixed loans is shrinking. Our lenders in Birmingham, Indianapolis and Dallas can finance up to 10 properties! Get a free quote from one of our preferred lenders.
The Market
Existing Homes Sales Up 6.8% in U.S. The federal tax credit for home-buyers did what it was supposed to do. Existing-homes sales of single-family homes and condos across the US rose 6.8% in March, according to NAR (National Association of Realtors). That's 16.1% higher than last year at this time. Why the jump? The combination of low interest rates, low home prices, and the $8000 tax credit has made it cheaper to own than to rent in many parts of the country. Existing home-buyers could get a $6500 credit. FHA loans only require a 3% down payment in some cases, high debt-to-income ratios, and low credit scores are accepted. You could say FHA is "the new subprime." While the March increase of existing homes sales is positive news, things could change this summer. Home buyers have just one more week to take advantage of the tax credit. They must have an executed purchase contract by April 30 and close by June 30. Also keep in mind that interest rates have been held artificially low due to the Fed buying mortgage-backed securities. That $1.3 Trillion stimulus ended in April so rates are expected to increase. Higher interest rates and no tax credit will affect the regions of the country where affordability is still out of line. However, in areas where the average mortgage is still less than or the same as rent, buyers will be encouraged to take advantage of historically low home prices. What's interesting in NAR's March data is that median homes prices rose only 0.4% and inventories of unsold homes increased 1.5%, in spite of the government stimulus packages. This means we're not out of the woods yet in certain areas of the country.
Homebuyer Tax Credit Coming to an End
Buyers who want to take advantage of the homebuyer tax credit (along with today's low mortgage rates and great prices) only have til the end of this month to sign a contract – April 30 — and need to close by June 30.
New $10,000 California Tax Credit California buyers can take advantage of a new $10,000 tax credit for purchases that close after May 1, 2010. That could be 2 tax credits for folks who buy between May 1 and June 30! Great timing for our new Oakland Hills 10-home project.  http://www.ftb.ca.gov/forms/2009/09_3528.pdf
If you are looking to get into contract this week. we would love to refer you to a great agent in your area. Let us know here.
Tags: federal reserve, FHA, Financing, Housing Starts, Interest Rates, Market Indicators, Tax Credit
Posted in The Real Wealth Report | 1 Comment »
Don't Be Fooled by the Housing Data
April 20th, 2010
The traditional way of analyzing the health of the real estate market is no longer accurate. You have to be able to read between the lines.
Just because existing inventory sales are up, that doesn’t mean we’ve necessarily hit the bottom and are bouncing back up. In some areas of the country, this may be true. But it is important to keep in mind that a healthy economy shouldn’t need a massive government stimulus to stay afloat.
Don’t be fooled by data. Whether you’re buying your first home or an investment property, you’ve got to first ask yourself, “Why am I buying?”
If you are buying for appreciation, you may need a good dose of reality. After trillions of dollars have been spent on artificially low interest rates and government “we’ll-pay-you-to-buy bribery,” home prices are barely inching up.
Instead, it’s time to go back to basics and buy for the traditional reasons of pride of ownership, interest rate deductions, leverage, stability and monthly cash-flow. If you do this, you will become a part of the greatest wealth transfer in history.
To Your Wealth,
Kathy and the Real Wealth Team
Tags: Market Indicators, Why Real Estate?
Posted in Investor Tips | 1 Comment »
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