Housing Markets: When do Buyers Come Back

Of course no one has the answer, but generally when assets bust after an extended boom, certain things must take place for the perception to shift. In real estate, the first caveat is that everything is local. Even Greenspan said that since there is no national real estate market, real estate cannot go down everywheres at the same time

Well....it did! Housing has just had its first national decline in price.

Some general rules about busts

1.The markets that didnt participate will be the safest and may even increase as people see safety and reasonable prices in those markets.

2. Markets that participated the most in the boom, generally feel the most pain when the correction comes.

3. When people see this kind of large loss taking place, they will freeze and not buy unless they have to. So, even when things have stabilized we have to wait for peoples perceptions to change

4. Journalism has a lot to do with perception. Headlines will ride things up/down and emphasize the trend. When the headlines are no longer doom and gloom and begin to cautiously express a little hope, then the turn around is coming.

What Will it Take?

1. Time

2. reform of the mortgage markets in the same ways that the S&L crises reformed banking

3. Lower Prices

4. A shift in the perception that real estate is is probably a good bargain

5. Cheap money or low stable housing prices

6. A strong job market. The few markets still holding up are Portland and Seattle and I do think that is due to the strong job growth of the new 2.0 surge in Internet business's like active rain.

Thanks for Reading

Howard Bell for yourpropertypath.com

Buying and Managing a Vacation Home

Buying a Share in a Vacation Home When You Can't Go It Alone

By Jennifer Openshaw From MarketWatch

Advantages of shared ownership. It isn't hard to see the advantages.

* Affordability. As an example, a one-fourth share in a four-bedroom Tahoe view home goes for $299,000, obviously far less than you'd pay outright. See sample listing on Dreamslice.com.

* Shared costs. Taxes, maintenance, insurance, snow removal, financing costs. The agency manages these things so you don't have to.

* Deeded ownership. As with all fractionals, you own something that can be bought, sold, borrowed against, or transferred to your heirs.

* Business relationship. No arguing with your in-laws about whether your mounted deer trophy can go over the fireplace, or whether they paid their share of the snow-removal costs.

* Flexibility. You can sell whenever you want, or you can buy out your common tenants as time goes by. Shared ownership can be a great way to get your foot in the door.

* Expanded possibilities. If you've got more to spend, consider owning more than one share in different homes in different places. You can get more than one vacation home experience for less than the price of one.

Naturally, there are downsides. Like other fractional developments, you can't decorate as you please. You can store some stuff, but not as much as if you owned outright. Shared ownership doesn't usually offer the country-club style amenities you might get with some fractional arrangements. And everything you do to the place -- or in it -- is governed by some kind of agreement.

Wall Street Journal

Imagine having a serious structural problem, like 40 gallons of water under pressure leaking and no ones home for hours or even days. I wrote an article I wanted to share. The entire article is located at Your Property Path

Do you need it

Absolutely. I have a friend with a second home in Idaho. They have a beautiful home on a small ranch that is for Christmas and summers. Its a short hop from northern California and its a beautiful state with inexpensive land values. They got a lot of land, great views and space for a very affordable price....at least to us Californians!

After being away from the ranch for most of the winter, the family arrived only to find that there had been a leak in the kitchen which had dripped for many months. Well, you can imagine the damage. The leak had wended its way from the P trap below the kitchen sink to flood the lino floors. It then slowly worked its way into the hallway and the floor boards of the first bathroom. The damage was extensive.

The Cure

Get a property manager. There are companies that offer management for vacation homes. They do manage a little differently, because they are vacant for long periods and therefore they must be visited. Property management firms in rural or vacation areas have services designed to deal with the vacation homes special needs. In addition to all the general property management needs all properties require
1. Find one that will visit the property bi weekly
2. Be sure they will visit before and after all major storms to be sure the house is shuttered and that any damage can be assessed and taken care of immediately.
3. Repairs: Be sure to have a cap on all repairs. Any major expenses should be approved and you should be sent receipts for any work done above the allowed amount. Try to keep the amount that does not need your approval below $750.00
3.Vacation Home Rentals: Vacation home property managers will manage holiday or off season rentals by the week or weekend. Some are set up to book rentals for you. You can expect some kind of revenue share or flat fee service, but it may be worth it.
4.Be sure they will provide cleaning services and schedule maintenance

Thanks For Reading

Howard Bell for yourpropertypath.com

Are We All Landlords Now?

Central banks inject billions more in cash

Central banks in Europe, Asia and the U.S. injected billions of dollars into banking systems Friday, moving to further boost liquidity in markets suffering the ripple effect of the subprime-credit crisis and saying they stood willing to provide more cash.
The European Central Bank said it had provided 61 billion euros ($84 billion) to banks in a three-day tender offer, and the U.S. Federal Reserve carried out two three-day repurchase agreements totalling $35 billion, while the Bank of Canada injected C$ 1.68 billion ($1.78 billion).
In Asia, the Bank of Japan supplied 1 trillion yen ($8.48 billion) after a rise in the overnight call rate. And The Reserve Bank of Australia added A$4.95 billion ($4.17 billion).

marketwatch.com

In Credit Crisis, Large Mortgages Grow Costly

When an investment banker set out to buy a $1.5 million home on Long Island last month, his mortgage broker quoted an interest rate of 8 percent. Three days later, when the buyer said he would take the loan, the mortgage banker had bad news: the new rate was 13 percent.

The investment banker’s problem was that he was taking out a so-called jumbo mortgage — a loan greater than the $417,000 mortgage that can be sold to the federally chartered enterprises, Freddie Mac and Fannie Mae. The market for large mortgages has suddenly dried up.

NY Times

Lets consider the management of a vacation home, now that the credit crunch makes it a difficult to sell. Owners will be seeing themselves as landlords and that is a very different role. Your Property Path has a ton of articles on property management, if your new to the game then this is a good stop.

How to Manage a Vacation Home

Do you need it
Absolutely. I have a friend with a second home in Idaho. They have a beautiful home on a small ranch that is for Christmas and summers. Its a short hop from northern California and its a beautiful state with inexpensive land values.
After being away from the ranch for most of the winter, the family arrived only to find that there had been a leak in the kitchen which had dripped for many months. Well, you can imagine the damage. The leak had wended its way from the P trap below the kitchen sink to flood the lino floors. It then slowly worked its way into the hallway and the floor boards of the first bathroom. The damage was extensive.

The Damage

First the lino had begun to lift up and the floor boards below were wet and molding. The lino had to be removed and the floor boards had to dry. Then a mold cleaner was professionally applied by a local company to be sure the family wasnt exposed.

Then the floor boards in the hallway had to be replaced because they were thoroughly wet and moldy. They would no longer lay flat and simply had to be pulled up and new boards laid down.

The entire house had a wet damp smell that would not go away. A wonderful family experience was ruined because they did not have anyone watching the home during their long periods of absence

The Cure

Get a property manager. There are companies that offer management for vacation homes. They do manage a little differently, because they are vacant for long periods and therefore they must be visited. Property management firms in rural or vacation areas have services designed to deal with the vacation homes special needs. In addition to all the general property management needs all properties require.

Howard Bell for yourpropertypath.com

Managing Property Until the Turn Around

Some Hard-Hit Cities See Signs Of a Housing Market Turnaround

By James R. Hagerty and Ruth Simon

The latest trends offer some hope for an eventual recovery in a U.S. housing market that generally has been cooling since mid-2005. Even so, many economists and industry executives say that recovery will be very gradual and won't start before 2008 at the earliest. That's partly because more-stringent lending policies are keeping many potential buyers on the sidelines, while others are holding off in hopes of prices heading even lower. Meanwhile, there is still a glut of homes on the market in much of the country, especially in Florida and parts of Arizona, Nevada and California. (See chart.)

Home sales and prices generally should bottom out around mid-2008, says Mark Zandi, chief economist at Moody's Economy.com, a research firm in West Chester, Pa. "The market will not revive quickly, however," he says. "It won't be until the turn of the decade before housing activity returns to more normal conditions."

Well, things are not looking up. In fact many are thinking it will be better by 2010! Given this dismal news it seems that many will be landlords like it or not. Well, if its time to focus on management then where do we begin.
Lets start with professional property management. As always there is a lot of choice, but how do you get to the short list? Well, here are some tips:
If you have a large portfolio of properties or a large multi-family income property you can attract a variety of companies because many are paid as a percentage of rental income. If you have a single family home or a smaller rental property its just not that attractive to many companies because they won't see much income from it and you may not get the attention you deserve. You may find better service from a smaller property management firm.

Wall Street Journal

Property Managers: How Do You Find Them?

Check with the standard sources such as referrals. You can also ask:

• Local Real Estate Agencies - They may have a local property manager they often recommend to or perhaps one of the agents also manages property.

• Check with your local Property Management Association or apartment association for a list of local firms

• In rural areas the State Apartment Association may be a good resource for a firm near you.

What Do You Look for In a Management Firm?

• Valid Brokers License: In may states a brokers license is required to operate a property management company. You can check to with the local dept of real estate to validate it and see if it has ever been revoked or suspended.
  

• Management Fees: Property Management fees are generally a percentage of rental income. Fees can vary from company to company and you should shop around. Expect fees of 5% or more as a percentage of rental income. If you own a single family home or a duplex that has a low rental income number, you may get quoted a flat rate. Get more tips
  

It seems to us that f you cant get your price now, that successful property management is what will help you navigate this storm until time get better.

When the housing rebound comes

When the housing rebound comes
How will you know?

Because housing markets are intensely local, it won't do much good to check national figures. Instead, stay alert to leading indicators of recovery in your local market, such as: Inventory is declining.

In markets with fewer than 6.5 months of inventory, homes tend to be appreciating faster than inflation, says Mark Dotzour, chief economist at the Real Estate Center at Texas A&M; above 6.5, prices are lagging inflation.

1. Houses are selling faster than they used to
Generally, if the average house is selling in less than a month, it's a seller's market. By 90 days it may be a buyer's ball game.
2. Realtors are feeling better
3. Sellers are acting less desperate
All this should give you a hint, says Sacramento broker Elizabeth Weintraub. "If you're seeing no decrease in FOR SALE signs, balloons and banners and OPEN HOUSE signs, and the SOLD signs aren't popping up right away, that's pretty much telling you it's still a buyer's market."

CNN

NAR, always the optimist is banking on the classic business cycle. Lawrence Yun, NAR Senior Economist simple makes the case that inventory will bring prices down and the slowing market will cause declining rates eventually. According to Yun, “Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008,” Yun said. “Local conditions vary considerably, but with historically low mortgage interest rates this summer and sustained job gains, it could be a good time for first-time buyers with a long-term view to test the housing waters.” We have our fingers crossed, but we know that the trend must play itself out and its hard to predict

The 30-year fixed-rate mortgage is estimated to average 6.7 percent during the second half of this year, and fluctuate around 6.6 percent in 2008.

If you wanted to use these numbers to get a feel for a local market, there are some good resources available.

1. NAR has a quarterly report on Metropolitan Area Existing-Home Prices and State Existing-Home Sales
its comprehensive and you have to trust the source. It would be interesting to test some of the rule of thumb guidelines out forth by the CNN article.
2. Property Shark is a real estate site with extensive data
3. Your Property Path has a good list of real estate blogs

Its your property

Tenant Screening Insurance & Mortgages

Home owners Experience increased risks

We have noticed an increase in the risk of ownership due to a pull back by property and Casualty insurers. Following are some recent articles that point to the problem and with the weather becoming increasingly uncertain we can expect to see more of this. Its only logical that this may begin to affect buying habits in the future.

Homeowners Brace for Disaster Against Potential Property Losses
By M.P. McQueen

As natural disasters threaten to drive up property losses in many parts of the country, insurers increasingly are requiring homeowners to better protect their houses as a condition of staying insured.

These moves reflect efforts by the insurance industry, including Allstate Corp. and State Farm Insurance Cos., to place more responsibility on homeowners to reduce the risk of loss when disasters occur. In many Western states, where wildfires are a growing menace, some homeowners are being required to clear brush over large areas around their houses, or even to install a new fire-resistant roof. In hurricane prone areas of Eastern and Gulf states, some insurers are requiring that certain properties have storm-resistant window shutters in order to be insured.
David Wessman, 47, says he got notice from his insurer a couple of years ago that the company would drop him unless he replaced the wood-shingle roof on his home in Northern California with a fire-resistant one, a job he figures would have cost about $12,000. "We had just spent several thousand dollars to treat the roof [with fire retardant], and they refused to accept it," says Mr. Wessman, a computer-game designer. Mr. Wessman instead found coverage with another insurer.

Meanwhile, in hurricane-prone areas in the East, some insurers are requiring that houses be equipped to withstand heavy winds. The Florida legislature recently passed a bill requiring many homes valued at $750,000 or more to have permanent storm shutters within two years as a condition of receiving a policy from Citizens Property Insurance Corp., the state-run insurer that covers a majority of homes in Florida. The bill is awaiting the governor's signature. And Privilege Underwriters Inc., a new insurer that covers high-end homes in the state, says it refuses to accept any property that isn't built to 2001 state building codes for high-wind resistance.

Wall Street Journal

RECENT DEVELOPMENTS

Hurricane and Windstorm Deductibles

* The South Carolina Wind and Hail Underwriting Association was expanded on March 30, 2007 and again on June 1. The orders, from the department of insurance, expand the coastal territories already covered by the wind pool in four out of the five counties and added coverage on three islands. The department ordered the expansions after considering the results of the Coastal Property Insurance Data Call, a report which found that “essential property insurance is not available on a reasonable basis through normal channels for all consumers within the seacoast area.” The insurance department also conducted a review of information from insurance companies and found that insurers are either not including wind coverage in the policies they write in wind-pool areas, which is permitted, or are increasing deductibles.

* On May 30, 2007 the Governor of Connecticut signed Public Act 77 which prohibits an insurer from not issuing or renewing a homeowners policy solely because the homeowner has not installed storm shutters to mitigate damage from hurricanes and severe storms. It also requires an insurer to offer a premium discount to homeowners who install shutters or impact-resistant glass. These provisions go into effect on January 1, 2008


* Florida Legislation: The governor of Florida signed legislation (SB 1980) in May 2006 which stipulates that starting July 1, 2008 Citizens, the state-run insurer of last resort, will no longer cover homes with a combined structure and contents replacement value of more than $1 million. In these cases, homeowners will have to apply for coverage from either the voluntary private market or the surplus lines market. Citizens coverage will only be available if an applicant can prove that coverage is unavailable elsewhere and then only for a limit of three years. Vacation or second homes were also eliminated, but this provision was rescinded in January 2007. The law also encourages homeowners to invest in hurricane-mitigation measures, such as hurricane shutters. Homeowners will be able to request inspections at no charge to get recommendations about how to reduce their home’s vulnerability to hurricane damage. Grants will be available for retrofitting; depending on the insured value of the structure and the homeowner’s income, some grants will have a matching funds feature. Owners of mobile homes and manufactured housing will also be eligible for grant money.

* Legislation passed in January 2007 requires insurers to give policyholders the option of declining windstorm coverage, if the homeowner provides a handwritten statement saying that he or she does not want the coverage and if a mortgage or lien holder provides a document of approval, confirming that there is no mortgage or lien on the home.

Insurance Information Institute

How is This Affecting the Homeowner?

Besides the highest risk areas no longer getting automatic insurance coverage from the large companies we all know and have dealt with over the years, there is a void that is being taken up by questionable insurers usually state run. These lenders of last resort are aggregating the risk in order to keep home covered. After all, could you sell your home if it was uninsurable? What lender would lend for a purchase for a home that was unprotected. Could an owner borrow to remodel?

The damages done by hurricane in Florida caused the state to apply a 3 billion dollar charge to its state policy holders. In other words, everyones premiums went up. The reason is the state associations charged with providing insurance to homeowners when there is no private market left, really dont have the money for a major disaster.

No one really believes that the California Earthquake Insurance Association could cover a major quake the size of the 1906 quake. They simply dont have that much in the till. Still, Cities and states have a big stake in making sure that their constituents have coverage. Real estate is a huge part of the economy if you consider property taxes, commodities used in remodel, sales tax generated by home sales, industry employment and more. All of this would go away if there was no coverage at all. Ownership would just be too risky.

The Lenders of Last Resort

These state created lenders of last resort offer premiums at affordable rates and are often the only option left as the private markets retreat form high risk areas, leaving only the state to protect their constituency. The result is that the states have taken on a financial responsibility that is not fully funded if a big disaster where to take place. These associations have actually created a pool of high risk potential cost. Ultimately, of course, it will be up to the state and the Federal Government to step up. According to the the Wall Street Journal, the cost of flood insurance in the 16 hurricane prone states has grown from 200 billion to 600 billion in just five years.

Your Property Path

Tenant Screening Insurance & Mortgages

Tenant Screening Software: Managing Risk

Identity theft, Free Loaders, Collections, Small claims court and worse. Whats an owner to do. If you think about it, tenant screening is all about risk management. What is worse than a long term relationship with a deadbeat or a constant annoyance.

The credit report goes a long way towards trying to measure the reliability of potential resident. The FICO score is comprised of over a hundred variables to help you measure the behavior of a human being. There are more tools available for the owner/manager to help keep the problem people out of your life.

We wanted to follow up on the last blog entry with some automated tools being used by some landlords.
Tenant screening software comes in two varieties...

1. Rules Based Software: It is an interactive approach requiring the owner/manager to set the criteria they want to use to screen potentials. Each applicant must pass these criteria.
The variables that are commonly used are often similar to the major criteria seen in a credit report, FICO scores use over one hundred criteria but some of the most critical ratios are:

• Rent to Income
• Debt to Income
• Late Payments
• Insufficient funds or bounced checks
• Evictions and much more, criteria is added by the owner/manager

2. Statistical Based Software: Statistical software trys to predict tenant behavior. It uses statistical scoring models based on the actual behavior of hundreds of thousands of tenant behavior. This is an attempt to quantify human behavior and to reliably predict the future behavior of a potential tenant in the future.

The statistical approach maintains a data base of tenants and the factual data regarding the tenancy. It attempts to find tenant behavioral patterns by mining the data and using the common factors to predict the behavior of an applicant.
Tenants that are late pays or dont pay rent seem to have patterns of behavior that are in the public records.

Tenant Screening Insurance & Mortgages