Sellers…It’s Time to LIST,LIST,LIST! Drive the Prices UP UP UP!
Demand for distressed properties is driving up prices for the first time in two years as investors from Blackstone Group LP (BX) to Colony Capital LLC chase shrinking inventory.
The average sales price on homes in the process of foreclosure or already owned by banks rose 7 percent in the second quarter from a year earlier, the biggest annual increase since 2006, RealtyTrac Inc. reported today. The number of those deals dropped 22 percent, the most since 2010, the Irvine, California-based data provider said in a statement.
The average sales price on foreclosure related properties rose 7 in the second quarter compared with a year earlier. Photographer: David Calvert/Bloomberg
Aug. 28 (Bloomberg) — Economists Robert Shiller and Karl Case, co-creators of the S&P/Case-Shiller index of property values in 20 U.S. cities, talk about the housing market and Federal Reserve monetary policy. The S&P/Case-Shiller index increased 0.5 percent in June from a year earlier, the first gain since September 2010. Shiller and Case speak with Tom Keene and Ken Prewitt on Bloomberg Radio’s “Surveillance.” (Source: Bloomberg)
“There’s virtually no supply in a lot of markets right now,” Michael Krein, president of the National REO Brokers Association said in a telephone interview. “What we’re finding nationally is that 50 percent of all purchasers are investors because they can outbid the owner occupant buyers. Investors are bidding up anywhere from 5 to 25 percent over the list prices.”
Investors are taking advantage of home prices that are about 31 percent below the 2006 peak and growing demand forrentals from people with damaged credit, limited savings or lack of confidence in owning a house. Firms including Blackstone, Colony and Oaktree Capital Group LLC (OAK)plan to spend about $8 billion buying single-family homes to rent, according to company statements and interviews.
Investment in rentals, most of which is coming from small groups rather than Wall Street funds, is filling vacant homes and improving rundown properties while spurring demand for construction jobs, said Tom Shapiro, chairman of GTIS Partners, a New York-based investment fund that plans to spend $1 billion in the next five years on rental housing.
“The housing market is turning around,” Shapiro said. “Maybe the silver bullet for housing is the single-family-for- rent, because it’s underpinning the market. It’s sopping up the excess.”
Government-controlled mortgage guarantors Fannie Mae and Freddie Mac have been slow to unload foreclosed homes, also known as real estate owned or REOs, through bulk sales. That has limited the number of properties available for private-equity firms, hedge funds and pension systems to purchase.
Krein said he receives about 20 phone calls a week from large investors and hedge funds interested in Nevada properties.
“There’s almost no product left to buy right now,” he said. “A couple of years ago you might have had four or five major players that would bid on non-performing loans and REO pools. Now there are probably 50 or 60 that can bid on these.”
Compounding the shortage is fewer bank-owned homes coming to market as lenders comply with terms of a $25 billion February settlement with state and federal regulators to resolve allegations with the five-largest home lenders over faulty practices. In the first quarter, foreclosure filings in the U.S. fell to the lowest level since 2007, RealtyTrac said in April.
Banks increasingly approve transactions for less than the amount owed on the mortgage, known as a short sale, or modify loans for borrowers struggling to keep up payments, including by reducing the principle owed.
The gap between short sale prices and prices obtained by banks selling seized properties narrowed to the smallest in almost five years, RealtyTrac said today.
“The shift we’ve been seeing in the last few quarters that continued in the second quarter is short sales are catching up with bank-owned sales,” said Daren Blomquist, a RealtyTrac spokesman.
The five largest U.S. mortgage servicers say they have provided about $10.6 billion in relief to borrowers under terms of the settlement, according to a court-appointed monitor.
Most of that aid, $8.7 billion, came in the form of short sales, the Office of Mortgage Settlement Oversight said yesterday in a progress report on implementation of the accord. Lenders including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) also forgave $749.4 million in mortgage debt, according to the report.
Bank of America Corp. (BAC), the second-largest U.S. lender by assets, had $5.8 billion in short sales completed as of Aug. 21, $596 million in first-lien loan modifications finished and $1.7 billion in forgiveness on home-equity lines of credit, according to Dan Frahm, a spokesman for the Charlotte, North Carolina- based company.
The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, last week adjusted its guidelines for short sales to expedite the process and permit the transactions for borrowers who are up to date on mortgage payments if they demonstrate a “hardship,” according to an Aug. 21 statement. The guidelines take effect on Nov. 1.
Homes in default or scheduled for auction, often sold through short sales, went for an average price of $185,062 in the second quarter, a 5 percent increase from the previous three months and 1 percent decline from a year earlier, according to RealtyTrac.
“We had a very high inventory of short sales over the last 18 months,” said Curtis Darragh, a principal broker at Poughkeepsie, New York-based Legacy Land & Homes LLC. “There are fewer foreclosures on the market than there were and there’s a lot more competition.”
In the past month, one or two foreclosed properties with prices below the market value have come for sale and each saw five or more offers, Darragh said.
The S&P/Case-Shiller index of home prices in 20 U.S. cities rose 0.5 percent in June, the first year-over-year increase since a tax credit boosted sales in 2010, according to an Aug. 28 report.
Thirteen of the 20 cities in the index showed a year-over- year gain, led by a 14 percent increase in Phoenix. Atlanta had the biggest year-over-year drop, with prices falling 12 percent.
Investor demand for foreclosed homes in Phoenix and Los Angeles has driven up prices to the point that it’s no longer economical to buy them as rentals, said Shapiro of GTIS Partners. In Atlanta, there are still a lot of opportunities, he said, adding that he finished a home shopping visit to the Georgia city yesterday. A typical deal there involves buying a house for $72,000, about half the sale price of 10 years ago, and renting the property for $1,250, he said.
“We’ll buy 50 houses in Atlanta this month,” he said. “We’re taking the sniper approach, picking off individual houses in the market.”
Here is a great article from California Association of Realtor’s. It states that Los Angeles Homebuilders are becoming more confident in the housing recovery, The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday rose two points this month to 37, up from 35 in July. That’s the highest reading since March 2007, Home Depot reports high sales in home improvement area, Buyer’s that were “on the fence” say they are ready to move to make that offer, and economist say from April til June there are 73,000 new jobs.
Renee Baccaro Realtor DRE License #
(562) 972 9886
To read the entire article: http://www.sfgate.com/news/article/US-homebuilder-confidence-at-5-year-high-in-August-3789883.php
DAILY REAL ESTATE NEWS | THURSDAY, AUGUST 02, 2012
A new study shows that in more than three-fourths of 200 metro areas in the U.S., home owners would “break even” financially by owning a home after three years or less than if they opted to rent instead.
The recent study by Zillow factors in home ownership costs — including down payments, closing costs, mortgage payments, property taxes, utilities, and maintenance costs — and compares it to the costs of renting. The study supports other recent findings that show with rents are on the rise nationwide that home ownership is becoming increasingly affordable with record low mortgage rates and falling home values.
“Historic levels of affordability make buying a home a better decision than ever, especially considering rents have risen more than 5 percent over the past year,” says Stan Humphries, Zillow’s chief economist.
Zillow found that even in some markets, such as Miami, a person buying a home would only have to stay in that home for about 1.6 years for it to prove better than renting one there, due to the rising costs of renting in the city. Tampa, Fla., and Memphis, Tenn., also were found to be some of the top cities where owning a home trumps renting by the most, according to Zillow.
Meanwhile, San Jose, Calif., home owners have the longest time until they reach a “break even” point on their homes. Home owners there would have to wait 8.3 years before their home purchase would trump renting, according to the Zillow study.
Source: “Buying Beats Renting in Most Cities,” CNNMoney (Aug. 2, 2012)
The monthly index identifies metro areas that have seen housing permits, employment, and housing prices rise for at least six consecutive months.
Seventy-three metro areas from June’s list remained on the July “Improving Housing Market” list while 11 new markets were added this month. Some of the markets added that NAHB highlighted in a press release included Prescott, Ariz.; Springfield, Mass.; St. Cloud, Minn.; and Houston.
“The modest increase in the July IMI is encouraging because it indicates that individual housing markets continue to regain their footing despite some recent reports of weakening in the broader economy,” says NAHB Chief Economist David Crowe. “This is evidence that the housing recovery is slowly but surely taking root, one market at a time.”
To view a complete list of the 84 metro areas on the July “Improving Housing Market,” visit www.nahb.org/imi.
I had to bring you this article today. I have read about rent increases several times in the past year. Remember we are in the last few months of an election year…so I was skeptical. Now that the data has come out stating that rents have jump up to an all time high, well I believe it. Great information.
American Renters Getting Squeezed
With rising demand for rentals, landlords are increasing their rents and some cities are even posting double-digit percentage rental increases annually. Apartment rents have risen at their highest rate since 2007, with costs soaring over the last three quarters, according to the research firm Reis Inc.
Landlords feel they can charge more since vacancies have reached at a 10-year low at the same time that demand has surged. Asking rents have jumped nationally to $1,091 during the second quarter, the largest increase since the third quarter of 2007, Reis reports. The average effective rent is $1,041 for the second quarter, increasing 1.3 percent over the previous quarter.
“The improvement in rents is pretty pervasive,” says Ryan Severino, a Reis senior economist. “Even in places like Providence and Knoxville, which you don’t think of as hotbeds for apartment activity, landlords felt the market was strong enough to raise rents on their tenants.”
New York remains the market with the lowest number of vacancies and also the priciest place to rent by far. The monthly rent there averages $2,935, which is more than $1,000 higher than the second-priciest place to rent in the U.S., San Francisco.
Many finance experts recommend budgeting no more than 30 percent of household income to pay for housing costs. Yet nearly 40 percent of Americans are now paying more than a third, according to a U.S. Census Bureau survey. In New York, one-third of households spend more than half their pay on rent.
“We have falling incomes, rising rents, and nothing but substantial upward pressure on those rents,” says Chris Herbert, director of Harvard University’s Joint Center for Housing Studies. “And nothing in the cards suggests it will turn around anytime soon.”
Read the entire article link below:
Source: “Americans Squeezed by Higher Rents, Tight Credit,” Reuters News (July 5, 2012) and “U.S. Apartment Rents Rise at Highest Rate Since ’07,” Reuters News (July 5, 2012)