Five Real Estate Trends to Watch for

If the housing market were human, it would look like just wrestled a few alligators, after running an obstacle course through a snake pit.  

The market is beaten and bruised, but still trying to emerge from the recession, which is why Greg Rand, a 20-year real estate veteran and author of Crash Boom (www.crashboom.com) from Career Press, wants people to know about five new trends that could help them beat the housing blues.

“One of the key elements of a free market is chaos,” Rand says. “Chaos is how the markets figure out how to move forward. The important thing to realize in the midst of all these people talking about ‘the housing market’ is that the market isn’t some nameless, faceless thing that lumbers around aimlessly as if it has a life of its own. The market is made up of buyers and sellers. People, just like you and me, are trying to figure out how to buy low and sell high. It doesn’t matter if you’re a homeowner or an investor. The secret to making sure your real estate doesn’t turn into a money pit is to watch the trends so you can predict where the prices will rise and where they won’t.”

Rand’s five trends to watch include:

• Short-Term Pain – Show me a market where home prices are back to 2002 levels, and I will show you a market that is overcorrecting.

• Overdevelopment – One of the reasons the market is overcorrecting is overdevelopment and speculation, as is the case in Florida. Another reason is that the job base has eroded, like in Detroit. Isolated, explainable, short term distress is the secret. Find your Florida.

• Jobs, Jobs, Jobs – Track employment trends to see where companies are moving, and you will see a harbinger for long term housing demand.

• Lifestyle – Nothing drives migration patterns long term more that the pursuit of happiness. Look at climate (the Carolinas), leisure trends (Colorado) and cost of living (Texas) for triggers on where the market may shift.

• Responsible Government – Look at the state government. Does the state and city in question reward or punish risk-takers? Are you likely to suffer if you succeed there? If so, find somewhere that appreciates entrepreneurs. There’s nothing worse than putting your money on the table, only to have it redistributed.

“It comes down to the idea that no matter how the markets change, no matter which way the winds shift, people will always need a place to live,” Rand adds.

“That’s been true of America since the first log cabin. If you plug into that concept, and leave fear in a box on the shelf, you can be ahead of the curve and ride the wave of the trends that matter.”

Related articles

• Time to be bullish US Home Builders? (part 2) (tradingfloor.com)
• Foreigners: American Dream is very much alive (finance.fortune.cnn.com)
• Home Values: Where Have They Overcorrected (and Where Do They Have Further to Fall)? (pinkbananaworld.com)

California home sales slowed from June to July

SAN FRANCISCO—A real estate tracking firm is reporting that sales of California homes slowed last month.San Diego-based DataQuick said Tuesday that nearly 35,000 new and resale houses and condos were sold statewide in July. That represents an 11 percent decline from June and 1.4 percent decrease from July 2010.

DataQuick says the median California home price in July was $252,000, down 0.4 percent from June and 6 percent from July last year.

The median price peaked in early 2007 at $484,000 and hit bottom in April 2009 at $221,000.
The firm says more than half of resale home sales last month were foreclosures or short sales, when a lender allows the owner to sell for less than what is owed on the mortgage.

Related articles

• California Home Sales Decline From Previous Month, Year, C.A.R. Reports (prweb.com)
• Calif. June home sales down 11 percent from 2010 (seattlepi.com)
• Calif. June home sales down 11 percent from 2010 (seattletimes.nwsource.com)

Raising the Debt Ceiling: How Will It Effect Real Estate?

The effects of politicking in Washington led to some historic events for our country. Unfortunately, our most recent events have all been rather negative, to say the least. So, we are once again hearing that mortgage interest rates are at all-time, historic lows. I would not want to give our Washington elites too much credit for being the reason for these low rates. But the truth of the matter, is that due to our debt issues, our financial system must continue to make money as affordable as possible to those borrowing. This will help improve the velocity of money and hopefully spark more interest in Real Estate purchases.

Why are rates so low, and how long will it last? If we take a look at the 10-year bond, we can see that it is tremendously low. This particular indicator represents a beacon, so-to-speak, for how banks will adjust interest rates, particularly the 30-year fixed loan product. Things might change pretty soon, however. So, I am putting out the warning to everyone out there seeking to buy a new home or refinance - DO IT NOW!

Inflation is a general increase of prices and a decrease in the purchasing value of money. Our politicking led us to this crisis, and the only choice is to have Ben’s Print Factory (Federal Reserve) print more money. Lots of it!

Pumping more money into the system decreases its value. More than ever, our dollar will begin to fare poorly against other currencies. What does this mean for mortgages?

Very simply, we are going to have to pay higher interest rates for borrowed money in the near future. This means that we go from the perfect storm in Real Estate (low prices/low interest rates), to the difficult, downward spiral of our economy. As we know, it’s tough for the younger crowd to get into real estate after witnessing the massacre of the last five years. But the reality is, home ownership is a positive thing.

Related articles

• Lower prices bring inflation respite to GCC (noorislamicbank.wordpress.com)
• Interest rate outlook lurches up, again (propellresearch.wordpress.com)

California Foreclosures Plummet to 4-Year Low

The number of California homes that went into foreclosure fell to a four-year low last quarter, the result of a more stable housing market as well as policy changes in the mortgage servicing industry, a real estate information service reported.

A total of 56,633 Notices of Default (NoDs) were recorded at county recorders offices during the April-to-June period. That was down 17.0% from 68,239 for the prior quarter, and down 19.2% from 70,051 in second-quarter 2010, according to San Diego-based DataQuick.

Last quarter's activity was the lowest for any quarter since 53,493 NoDs were recorded in the second quarter of 2007. It was well below half the record 135,431 default notices recorded in the first quarter of 2009.

"A lot of theories are being floated as to why the numbers are down. Bank policy changes. Legal challenges. Politics. Holding back temporarily so as not to flood the market. The fact of the matter is that no one really knows, outside of lending and servicing industry insiders. One thing is certain: Homeowner distress spreads fastest when home price declines are steepest. And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us," said John Walsh, DataQuick president.

The statewide median sales price was $250,000 in the second quarter this year, down 7.4% from $260,000 a year earlier. In first-quarter 2009, when foreclosure activity peaked, the $227,000 median was down 39.5% from $375,000 a year earlier. The latter decline reflected not only steep home-price depreciation but very weak high-end sales amid robust sales of low-cost inland foreclosures.

Most of the loans going into default today are from the 2005-2007 period: the median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for more than two years, indicating that weak underwriting standards peaked then.

Most of the loans made in 2006 are owned and/or serviced by institutions other than those that made the loans.

Related articles

• Foreclosure activity slowed in first half of 2011 (seattlepi.com)
• Homeownership is down and it needs to increase (hsh.com)
• U.S. Mortgage Foreclosures Fall From Record as Employment Gains (businessweek.com)

SOCAL Housing Market Improves Slightly

The Southern California housing market showed some signs of stabilizing last month with sales popping up more than average from May to June, a real estate data firm reported Tuesday.

Sales rose 11.6% from May, driven by first-time buyers and investors scouring the market for bargains. A total of 20,532 newly built and previously owned homes sold in the region last month, according to DataQuick of San Diego. That tally was nevertheless a 14.0% decline from the same period a year ago, the last month that buyers could close on their home purchases and qualify for the popular federal tax credit.

The median sales price for the region was $285,000, a 1.8% increase from May though still down 5.0% from June 2010. The median, the point at which half the homes sold for more and half for less, was 15.4% above the most recent bottom of $247,000 hit in the throes of the financial crisis in April 2009.

“The housing market remains dysfunctional and lopsided, just somewhat less so than it was a few months or a year ago,” DataQuick President John Walsh said. "The market mix indicates that a lot of potential buyers are either stuck, for lack of equity, or spooked and are waiting things out.”

Sales of so-called distressed properties -- those whose owners are in some state of default -- made up more than half of the Southland resale market last month. Roughly one out of three homes resold was a foreclosure, while almost one in five was a short sale, in which the mortgage holder accepts a sale price that is less than the oustanding debt on the property.

Related articles

• SoCal rent hikes trail U.S. average (lansner.ocregister.com)
• Avoid Short Sale Problems in San Diego | San Diego Avoid Short Sale Problems (ladyyalda.wordpress.com)
• Largest O.C. homes have smallest price cuts (lansner.ocregister.com)

Technology Leads a Rebound in U.S. Office Rents as Occupancies Increase

Image via CrunchBase

Amazon.com Inc. (AMZN) drew attention from landlords in March when it leased most of a 36-story downtown Seattle tower built during the recession, a sign that technology job growth would help lift U.S. office rents and occupancies.

“The reduction of big blocks of space is always the first indicator of recovery,” said Patrick Callahan, chief executive officer of Urban Renaissance Group, a Seattle-based commercial real estate developer and investor that manages about 2 million square feet (186,000 square meters) of properties.

The U.S. office market gained 3.7 million square feet of net occupied space in the three months through June, the third straight quarterly increase, Reis Inc. (REIS) said today. Vacancies fell or were unchanged in nine of the 10 largest office markets, and declined in more than half of the 79 metropolitan areas surveyed, the New York-based property-research firm said.
Demand for space from technology companies is leading a rebound in U.S. office rents. Groupon Inc., the Chicago-based coupon-website operator, in June signed a lease for a 40,000- square-foot building in Palo Alto, California, to house its growing Silicon Valley product and engineering staff. The building, at 3101 Park Blvd., is more than triple the size of Groupon’s current space in the city, said Julie Mossler, a spokeswoman for the company.

Rising demand in large U.S. cities is helping increase effective rents, or what tenants pay after such landlord concessions as rent-free months. Effective rents rose in six of the top 10 markets last quarter, Reis said. San Francisco climbed the most, gaining 6 percent from a year earlier, according to the firm.

‘Tremendous Strength’
“Northern California in the last six months has shown tremendous strength,” said Frank Cohen, a senior managing director in real estate for Blackstone Group LP (BX), whose Equity Office unit has stakes in 19 million square feet of office space in the San Francisco Bay area and Silicon Valley.

Demand from technology companies helped drive asking rents in San Francisco up to $40.06 a square foot in the second quarter, a 19 percent increase from a year earlier and the biggest advance in four years, according to Jones Lang LaSalle Inc. (JLL) Net absorption totaled almost 1.3 million square feet in the 12 months ended June 30, making San Francisco the nation’s top-performing office market, the Chicago-based broker said.

New York, Boston and San Jose, California, also were among the top 10 markets in effective rent growth in the second quarter, Reis said. Demand from financial services and media companies drove the gains in New York, while technology and life-sciences tenants buoyed the Boston area, Cohen said. Technology demand also is strong in Austin, Texas, he said.

Increase in Rents
“In markets that have had the most growth, we’ve seen blocks of space dwindle and we are seeing strong increases in rent,” Cohen said in a telephone interview from New York. In midtown Manhattan, Equity Office has boosted gross rents by as much as 30 percent since the beginning of last year, he said.

New space coming onto the market prevented a decline in the national office vacancy rate, which was unchanged from the first quarter at 17.5 percent, Reis said. A year ago, the rate was 17.4 percent. A total of 1.8 million square feet of new space became available, the lowest since Reis began publishing quarterly data in 1999.
Financial services, insurance and real estate companies are the largest users of office space, accounting for almost 22 percent of the U.S. total, according to CoStar Group Inc. (CSGP) Services companies, including technology, are second, at 14 percent, according to the Washington-based research company.

‘Turning Point’
“Concessions are down and rents are up,” said Ada Healey, vice president of real estate at Seattle-based Vulcan Inc., billionaire Paul Allen’s investment and development company. Amazon.com’s lease at Schnitzer West LLC’s 1918 Eighth Ave., in Seattle’s Denny Triangle neighborhood, “was clearly a turning point” in the city’s office market, Healey said.

Employers in the U.S. probably expanded payrolls by 100,000 workers last month after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due July 8. The jobless rate held at 9.1 percent.

“The jobs we’re getting are in office-using industries,” said Asieh Mansour, head of Americas research for Los Angeles- based CB Richard Ellis Group Inc. (CBG), the largest commercial property services company. “The trend in leasing is up.”

Related articles

• Spotlight on REITs: Equity Office Properties (moneymanager.com)
• Tech jobs near all-time highs, fuel office-space boom (sfgate.com)

Pending real estate sales rise in May

Image by Getty Images via @daylife

After an April dip, pending home sales rose sharply in May, for the first annual increase in over a year, according to a report from the National Association of Realtors.

NAR's Pending Home Sales Index rose 8.2 percent month-to-month and 13.4 percent year-over-year in May, to 88.8. An index score of 100 is the average level of contract activity in 2001, the first year that index data was collected. May saw the first year-over-year index increase since April 2010, NAR said.

The index, which tracks homes under contract, is a leading indicator, and the latest data suggest home sales will jump in June and July.
"Absorption of inventory is the key to price improvement," said Lawrence Yun, NAR's chief economist.

He cautioned, however, that "the job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country."

Pending sales jumped in all regions last month. The Midwest saw the biggest year-over-year increase, 17.2 percent, and the second-biggest month-to-month increase, 10.5 percent, to 82.8.

In the South, the index rose 14.6 percent year-over-year and 4.1 percent month-to-month, to 95. The West saw the biggest month-to-month increase, 12.9 percent, and a 13.5 percent year-over-year increase, to 100.6.

The Northeast was the only region that did not experience double-digit increases. Pending sales in the region rose 4.4 percent year-over-year and 7.3 percent month-to-month, to 69.2.

Related articles

• Pending Home Sales Up 8.2% In May (thenewspundit.com)
• Spring buying pushed pending home sales up 8 percent in May (oregonlive.com)
• Existing-home sales up in March (kimhoard.wordpress.com)