Investors should look at this business model! According to the Wall Street Journal April 4, 2011, Beazer homes a national production BUILDER, has created a buy and lease division. Focusing on properties in Arizona built from 2004-2010, Beazer will purchase and hold as rental property with plans to sell once the housing market fully recovers.
Investors, if you are considering whether to build new and sell, buy existing properties fix up and flip, buy and rent without improvements or buy and hold – this new Beazer business model should provide plenty of clues as to what is profitable in the marketplace today.
Bad reports Mean One Thing – Bad Government Policy
Stunning NATIONAL home market reports this week include some eye-opening stats. The national vacant home rate is 13% according to CNN Money.
At the beginning of the week, it was reported that overall home prices are near the recession low point and, then, the government subsequently reported in January there was significant drop in the number of new homes sold.
Robert Shiller, the Yale economist and co-founder of the S&P/Case-Shiller home price indexes, also dropped this bomb: "There's a substantial risk of home prices falling another 15%, 20% or 25%," he said. "Even after the bubble burst, the ratio of income to home prices is still way too high," he said.
Lawrence Yun, the National Association of Realtors' chief economist stated, "People should base their decision on affordability, lifestyle choices and home preferences, not on investment."(Reading between the lines, we could be in for more national downward price adjustments).
Remember, as the nation goes, Texas does not generally follow! Texas and the Midwest, will probably not experience price plunges at all, but other markets, such as Seattle, Portland and inland California, could still fall substantially.
Despite the gloom, many Americans remain confident about home buying. A survey released Monday by Fannie Mae revealed that 65% of people believe it's a good time to purchase, with 78% expecting prices will rise or remain the same over the next 12 months.
“There's also been an upswing in the number of high-end homes -- those costing more than $750,000 -- being sold,” according to Yun. “The wealthy buyers of these properties have lots of choices of where to place their money and many are investing in real estate. The smart money is making their move," said Yun.
So you have to ask yourself why the national housing market is still underperforming despite all of the governmental hysteria and legislation?
Bottom line: the new “Big Brother”regulation is making it harder to get a loan, harder to buy a home and the artificial propping up/ $85.9 billion dollar bailout of Fannie Mae and Freddie Mac are not working. Fannie Mae and Freddie Mac should be slowly privatized and the market should be allowed to correct itself.
WHAT YOU NEED TO KNOW ABOUT THE LUXURY REAL ESTATE MARKET
Nationwide, economists are predicting a “double dip” for housing in 2011 and many wealthy buyers are willing to wait for better deals, believing that prices still may fall even lower.
There is a psychological factor involving the “shadow inventory” of luxury real estate. Those individuals who own these luxury homes have not been realistic about how much prices have fallen, and instead of working a lower offer, they have preferred, instead, to wait until the “right’” buyer comes along.
During the recession, the fact is that the luxury market avoided the inevitable consequences of lower prices longer and will continue to correct later. High value neighborhoods have tended to avoid a large group of distress sales which tend to push home values downward.Today, there is an availability of upcoming luxury foreclosures that may still be in the so-called shadow inventory that will not sell again for months or even years.
Another factor is financing.Jumbo mortgages (those with loan limits starting at $417,000 for Fannie Mae and Freddie Mac) cost more because they are financed privately. The typicaljumbo loan borrower currently pays a premium of approximately 60 basis points more than a conforming 30-year fixed mortgage. This is the smallest spread since mid-2007. (In 2008, the spread reached 190 basis points).
Economic factors such as impending inflation, squashed job growth and continued poor unemployment stats all factor into the wealthy buyer’s decision to wait before buying an expensive piece of real estate.
However, not all is gloomy at the upper price brackets. Potential luxury home buyers dodged a big bullet when Washington agreed to extend the tax cut last month, not to mention keeping the mortgage interest deduction.
Bottom line: Affluent real estate purchasers are revaluating where to invest. Sellersof higher value properties need to take a long hard look at statistics before listing your home. Price valuation is the key. The individual selling their luxury property today needs to price just ahead of the market in order to generate offers.
Today is the day to make sure your home is winter-proof. Here are some simple steps you can take TODAY in order to keep winter weather from causing bigger problems for you over the next few days.
Keep in mind that ERCOT has clandestinely instructed utility providers to implement “rollling” power outages to reduce loads on the system. You may be without power for several hours one day or every day this week.
Because it’s been more than 20 years since the weather has been forecasted to be this cold for this length of time……the freezing temperatures may be severe enough to require preventative measures to protect your plumbing systems. When the forecalls for extended hours of freezing temperatures, covering the pipes around your home is essential. If you can't find foam insulation you may use other items such as newspaper, towels or even cut up an old Styrofoam cooler or container and make a protective box for your exposed outdoor pipes/faucets. Anything that is NOT waterproof and that is exposed to precipitation may not work as well, and it looks like we will be getting some rain on Thursday. Of course, you can wrap a layer of plastic over the non-waterproof insulating material.
Remember to remove hoses and put them in a garage – leftover water in the hose can freeze and travel up the hose back into the pipes. Cover the faucets and keep the air out of the hose bibs. Do not forget to cover the pipes in the attic because it can get cold enough to freeze there as well.
For those of you with a swimming pool, simply keeping the pump running is not enough – have your valves set so that you have water flowing through all of the pipes.
If you have an underground sprinkler system, the buried pipes will not freeze. However, be sure to turn the system off so no water is sent through the pipes.
Watering plants one last time and forgoing mowing the lawn this week are all good ideas to protect grass and plants. Cover your plants that are not likely to survive the colder weather.
And remember, pick up the pets' water bowls and do not leave the furry family members outside – they are not used to the temps any more than you are!
BIG NEWS: One of the largest FHA-approved lenders has loosened the requirements of their controversial "overlay" requirements on FICO scores (lender overlays are qualification requirements that can be more stringent than FHA's own requirements). The largest originator of FHA insured mortgages, Wells Fargo, has publicly confirmed that they will now lend to applicants with 580 FICOs and 3.5 percent down payments. It is predicted that other lenders will follow suit in order to attract buyers whose credit scores have fallen during the recession.
Previously, Wells Fargo was looking for a minimum FICO score of 620 for the 3.5 % down payment loan product. Sadly with the downturn in the economy and unemployment numbers, it has been reported that more than 30% of American borrowers have credit scores below 620.
Wells Fargo has gone further with their newly revised policy. There are products available all the way down to deep subprime 500 that have very strict underwriting guidelines in order to weed out unqualified applicants. For example, borrowers with scores from 500 to 579 will need a 10 percent down payment from their personal resources. They will not be able to use gift money from relatives, friends or a charitable down payment assistance program to meet the 10 percent upfront equity test.
Home buyers with scores of 580-599 will need 5 percent down payments, and will be prohibited from supplementing their own cash with gifts. Borrowers with FICOs above 600 will qualify for 3.5 percent down payment FHA deals, but will be allowed to use gift money.
Contributions from home sellers to defray buyers' closing or loan origination costs will be limited to 3 percent. Debt-to-income ratios will be strict as well with 31 percent for monthly housing-related expenses, and 43 percent for total household debt service. The expanded program will only be available through Wells' retail lending channel, not through third-party brokers or correspondent lenders.
Bottom line: The loan regulation pendulum is showing evidence of swinging back to the borrower’s favor.
Interesting news! Trulia.com reports that as a result of their nationwide study, in 72% of the cities in the United States it is cheaper to BUY a home than it is to RENT.
Houston ranks #17 in the “VERY MUCH CHEAPER TO BUY THAN RENT” category. Given the benefit to your credit, the build- up of equity and investment potential, not to mention the current mortgage interest deduction…it just adds up – the benefits of buying outweigh renting.
There are other intangible reasons to buy as well: it’s an opportunity to put down roots, establish stability for you and your family, dollars spent remodeling may add to your investment’s potential return… and , of course, it’s yours!
For those of you who suffer from a little “commitment phobia” or are just unable to decide WHERE to live – now is a good time to CHANGE HOW YOU THINK. Begin by calling me.
It’s the new year and we have new surveys. What will the home of the future look like? Are you thinking Jetsons? Attention builders and remodelers, because the winds of change are in the air.
Based on responses to a recent survey by the National Association of Home Builders (NAHB), here are some ways in which builders can expect homes to change by as early as 2015:
·Single-family homes will get smaller - the average NEW home size will be roughly 2,150 sf.
·Homes will have more “green” features and more technology features
·Homes will have more outdoor living features, such as kitchens and fireplaces
·Living rooms will merge with other spaces in the homeand/or vanish to save on square footage or become a parlor/retreat/library/study or music room
·Also downsizing are the entry foyer and dining room
·Features “very likely” to be included in a new home in 2015 include a kitchen-living room combo (“great room”), walk-in closet in master bedroom, laundry room and two-car garage.
·“Unlikely” features that have gone by the wayside are three or more bathrooms, mudroom, unheated porch, dining room, skylights, three-car garage, four or more bedrooms, media room and two master bedroom suites.
·Homebuyers are “somewhat likely” to want universal design features such as stepless entries, three-foot-wide doorways and four-foot-wide hallways, stepless showers that have seating, non-slip floor surfaces and grab bars in bathrooms.
·People seem likely to lavish more attention on the kitchen, ensuring that room will retain its status as the home’s social center. Features such as double sinks, recessed lighting, table space for eating and breakfast bars. Also cited as “somewhat likely” to want a central island, walk-in pantry, recycling center and desk/computer area.
Looks like the trend of the McMansion is shrinking while our American waistlines will be increasing with all of the time spent in our kitchens.
Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®
