Saturday

Housing ....How Bad?

Housing....How Bad

Some observations:


Robert Shiller; "The annual declines in the deposits are a good indicator of the dire straits of the U.S, Residential Real Estate Markets". Mr. Shiller creates a table of the twenty cities he follows to create his indices. The index was negative for the March, 27, 2007 report following gains of 14-15% for the same cities in January 2006. The full report can be accessed here.
Mr. Shiller is the Chief Economist at MacroMarkets LLC

Conrad Dequadros; "Right now we see tremendous. volatility in the housing market and a lot of that has to do with the fact that we had unusual weather patterns..I think volatility is related to the weather and it is difficult to come to a clear assessment on the housing market right now.. our feeling is that we are near the bottom. You can this view news videos at Your Property Path
A Senior Economist at Bear Stearns

Ben Bernake; "The uncertainties about the outlook have increased somewhat in recent weeks,'' Bernanke told Congress. ``The correction in the housing market could turn out to be more severe than we currently expect. We could yet see greater spillover from the weakness in housing to employment and consumer spending than has occurred thus far."
Federal Reserve Board Chairman

Frank Nothaft; "Recent data releases sent conflicting signals about the direction of the housing market," "The rise in existing home sales in February to a 6.69 million unit pace, the highest level since last April, offered some hope of firming in housing demand. In contrast, February's new home sales fell unexpectedly to 848,000 units, the slowest pace since June 2000, suggesting that more time will be needed before a housing recovery takes place."
Freddie Mac vice president and chief economist

David Lereah; “Underlying trends point to a housing recovery in 2007, but it will take a couple months for us to get a better handle on it. Existing-home sales are expected to slowly improve from what appears to be the cyclical low last fall, but we think there will be some additional pain in the new home market, which hopefully will start to rise later in the year.”
National Association of Realtors and chief economist

Well we got uncertainty and that is the take from these professionals,so what do we do with this? In the investment world, uncertainty breeds a wait and see attitude. we will go from "gotta have it" to "maybe not right now"....

What does it mean?

Sales will slow, prices will drop and mortgage rates will come down in response to slowing demand....it could get worse when the ARM's reset and foreclosures put more supply on the market, pushing prices further down. But, the jury is out or at least of different opinions as to whether we have anything other than a cyclical slowdown.

Mortgage rates have declined and prices are beginning to drop. There is a point in which this combination creates buyers. Our guess is that when people go into a wait and see then others follow and the time line extends.

For example the article on
Your Property Path indicates that The 15-year FRM this week averaged 5.86 percent down from last weeks 5.90 percent. A year ago, the 15-year FRM averaged 6.00 percent.

According to housingtracker blog most but not all markets and even then not a great deal. The largest price drop was in San Jose California at 7.3% followed by Santa Cruz California by 5%.

What to do?


Try not to listen too much to all the talking heads. They are in the business of publishing or promoting. No one can see the direction yet. Its clear its changed and it requires caution not panic.

Well, What if you Own Now

Managing the costs are always important in bad markets. Besides, generally, when sales are slumping rentals are raging.

MANAGEMENT TIP: During the screening process we suggest that you educate all new tenants about the need for renters insurance. Many small fires such as grease fires or other damages that fall below the deductible of your home owners can be covered by a good renters insurance policy paid for by the tenant. So a renters insurance policy can effectively remove all or most of your deductible...
Its good for the tenant too because that tenant does not go out of pocket for the damage done. Relationships remain good, the tenant's insurance has payed the landlords bill and the home owners insurance company does not have to be notified keeping premiums down.
All it requires it a good education program on why renters is good for the tenant. Get a good brochure from your insurance agent and couple that with some good articles on renters insurance and make that part of your rental packet along for your new tenants.
We know of one story where the tenant put out a cigarette on a wooden deck and caused a million in damages. The home owners did pay the landlord and then the insurance company went after the tenant for payment since they were negligent. A process called subrogation. Luckily, our smoking tenant happened to have a large renters insurance policy and now the two companies are duking it out without him.

Its Your Property

Sunday

Sunday March 25 2007

See what is happening to Mortgages and to the Insurance industry and how this affects your property.

INSURANCE: Katrina
According to the Insurance Institute: "One year after Hurricane Katrina, nearly 95 percent of homeowners insurance claims have been settled in Louisiana and Mississippi, insurance companies have paid billions in storm damage claims and the vast majority of homeowners in both states say they are satisfied with their insurance company." Homeowners insurers ultimately will pay more than one million homeowners claims totaling $16.4 billion from Hurricane Katrina. We wonder if people were really happy since much of this was "settled".

New Orleans might be the first city lost to global warming...We have to change how we use energy and the materials we use. We have an article listing more than 21 ways to save energy
that can help reduce energy use and save you some money too.

Speaking of saving money, the government has a lot of programs to help make homes more energy efficient. Federal, State and utilities all have energy rebate programs and tax incentives for home energy upgrades...if you have never looked here then its a must....the savings are real.

Its Your Property





Saturday

Your Property


Saturday, March 24, 2007

MARKETS AND INSIGHTS

MORTGAGE:

Current Rates

30 Year ARM

6.16

15 Year ARM

5.90

5 Year ARM

5.91

1 Year ARM

5.40

Whats Up With the Sub Prime Market

Well its anybodys guess really, but this part of the totla mortgage market makes up about 20%
of the whole and its in trouble. We read that about twenty large sub prime lenders are going under or are in serious trouble. The big question is how is this going to affect the other 80%.
The good news is that interest rates appear to remain steady, the last thing the Govt wants is to make this worse. A stock market crash doesnt affect the world the way a real estate crash does partly because a real estate crash hurts the banking system....and that can throw us into a recession or worse.

Accordingly "Senator Dodd, chairman of the Senate Banking Committee, plans to introduce legislation to protect homeowners from foreclosure and to crack down on predatory lenders who pushed high-risk loans on unsuspecting borrowers. Clinton is pushing for a federally mandated "foreclosure timeout" that would give homeowners more time to catch up on their payments, and she wants to curtail the prepayment penalties that make it hard for troubled borrowers to refinance". read more here

What can you do to keep your costs down now?

Always look to have brokers compete for prices. If you are in the market for a re-Finance or a new mortgage get some bids from reputable companies and have agents compete for your business. These products have a lot of negotiating room and you can save.

This week we will focus on ARM’s because the interest rate increases are increasing monthly payments for lots of people. Many of the 3 and 5 year ARM’s will reset to market rates and that will certainly cause some pain.

Learn more about adjustable mortgages and how they work. There is a good article that will help explain how they work and why they are good in certain interest rate environmentsand risky in others.

INSURANCE:

These are the fixed costs that you have some control over. Variable costs such as vacancies and new roofs you weren’t counting on can be contained by keeping a close eye on your fixed costs. Insurance products are very competitive and you can save on monthly premiums by having insurance agents compete. Get some competitive bids, they are free to you and should be part of your periodic search to keep more of your money.

Your Property Path has a good article on how to lower insurance premiums. For example, did you know that i f you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department and your insurance may be cheaper. Much more on this site…

REAL ESTATE:

Real estate housing markets are always difficult to talk about in a general way…Its always local. Sales are off 10-15% and some of the big mover markets such as San Diego Las Vegas and South Florida are feeling the correction. Although there are doom and gloom bloggers and its important to listen to them to so as to get some balance, its not, at this point, more than a correction except in some markets.

The National Association of Realtors research shows that the worst may be over. Please, having seen a few cycles now…nobody really knows the future…but this looks hopeful to us. Look at the pdf on the NAR site...its not that bad.

SO NOW YOU OWN IT..

This week we will look at those of you who own and have a vacancy. This is one of those variables you have little control over. What you can do is keep your fixed costs down is to have competitively priced insurance and mortgage carry costs.

You have no control over when a tenant moves and leaves you with less income with unchanged fixed costs, BUT you can control how long its going to remain vacant.

When the apartment is vacant, it’s the perfect opportunity to bring it up to snuff. Consider this an investment, for example: Curb Appeal for rent is a very important part of how to rent faster and at the higher rental dollar. Paint if it needs it...cheap way to make a unit bright and appealing. Use light colors to make rooms look more spacious. Leave lights on in each room, and leave blinds open to make rooms look brighter and large r.

Of course, a unit that is professionally marketed will reach the right audience and rent faster at less advertising costs. I magine who or what segment of the rental market would be interested in your space. Consider the profile of the people you are trying to reach and then advertise in the places where they would be likely to look for a rental unit. We have a wonderful article full of advertising tips and tricks.