August 10, 2014

Investors Are Trying To Recoup Their Money

It’s Friday desk clearing time for this blogger. “Shadow inventory. Mention the name in real estate circles, and you can almost feel the chill. And in many cases it typically causes reported data on housing inventory to understate the actual number of inventory in the market. ‘There is definitely a false sense of numbers in Cobb and throughout the country (about the extent of shadow inventory),’ said Judson Adamson, president and CEO of Atlanta Communities Real Estate Brokerage. ‘(There has been) irresponsibility in reporting the stats. The impact of institutional investors, both locally and nationally, is the single main reason the market has rebounded.’”

“‘Until a certain percentage of these renters turn into buyers, they (investor groups) will have a captive audience,’ Adamson said. ‘It would not be surprising to see a flood of investor-owned listings once a more lucrative opportunity presents itself. When something better comes along, they will start to liquidate. When the first one starts, the rest will follow.’”

“Experts say the median rental price for a single-family home in the Valley is up significantly over last year. ‘Be ready for some sticker shock,’ said Brenda Ryan, the designated broker for Arizona Premier Realty. Part of the reason the inventory is so low is because investors are now trying to recoup their money from buying up foreclosed properties when the housing market crashed. ‘During that time they had rental properties and now they’re selling because the market has improved,’ she said.”

“A wave of potential defaults on home equity lines of credit could start arriving in the next few years. Economists said that the threat is particularly pronounced in California, especially more affordable inland areas. A year before the housing meltdown, Richard Peterson took out a $167,000 credit line on his Huntington Beach condo. As of July 2016, his payment will rise to more than $1,100 a month from the $400 he is paying to cover just the interest. ‘They were just giving money out. It paid off my car and everything. We both now live on a fixed income and will not be able to make the payments,’ he said of himself and his girlfriend.”

“Shelly Burley considers herself something of an accidental landlord. She and her husband are now busy decorating their new home in suburban Baltimore. It is four times the size of the downtown row house in which they used to live, but which they now rent out. The Burleys owe about $30,000 more on the downtown home’s mortgage than the home is currently worth. ‘I bought in the height of the market in 2006,’ Burley said. ‘It really wasn’t worth it to take that $30,000 hit, when we could get someone to rent the property, have them pay down the mortgage and get to a place where we could either get out for the same price or eventually maybe make a profit off of it, if we rent long enough.’”

“Portland has seen African-American families forced out of North and Northeast Portland for decades as housing prices there have risen and neighborhoods undergo gentrification. Helen Murray, 77, and her husband, Nelson, 82, face foreclosure on their 1925 bungalow. The Murrays say they fell into debt over the years and in 2007 refinanced their house, taking out $310,000 to pay the debts and to live on the money. The loan allowed the Murrays to make extremely low payments of $1,138 a month on their mortgage for the first year. After that, the payments would grow by as much as 7.5 percent a year.”

“The overall result for the Murrays was a skyrocketing mortgage payment they could not keep up with: It’s now $2,183 a month. And the original $310,000 principal has ballooned to $335,449. ‘It’s a bad idea to have that type of thing,’ Nelson says of the mortgage. ‘There should be a warning.’”

“The left continues to push Mel Watt to do principal mods on loans held by Fannie Mae. Not sure it is going to happen, as it would undoubtedly trigger a wave of strategic defaults. Interesting that the couple mentioned in the article said they refinanced into a loan with ‘abusive’ terms. A Fannie Mae loan was abusive? Or was this part of the American Dream Commitment, where Fannie partnered with the big subprime players like Countrywide, Irwin, Doral, etc. and agreed to buy their loans for their own balance sheet. Anyway, it looks like Mel Watt is giving the affordable housing advocates the Heisman and running out the clock on principal mods.”

“Panic selling is expected to sweep Britain as homeowners try to cash in on record high house prices before the market starts to cool, new data finds. ‘In London [in particular], the trend of selling up from more central zones to get better value and more space in suburban or commuterbelt locations will also continue. Many recognise the significant arbitrage opportunity that now exists and want to maximise this opportunity to cash in,’ said Adam Challis, head of residential research at the property group JLL.”

“Housing prices in Tehran soared beginning in 2012. According to political analyst, Mohammad Ali Shabani, ‘real estate became the best way to protect your money.’ In one of the most exclusive neighborhoods in northern Tehran, this swanky home has sat empty without a buyer — half the other units in the six-floor block are empty, too. So are tens of thousands of other apartments throughout Tehran, all for sale but sitting vacant without buyers. ‘Right now we have a lot of apartments that are not sold and sitting empty because of high prices,’ says real estate agent Bahar Khalili.”

“One seller who had to face the new market reality was 43-year-old Janice Tan, who put her five-room Jurong West flat on the market in March. A deal was closed last month — but only after she and her husband lowered their price for the unit, which had previously been valued at SG$500,000 (US$401,052). ‘We actually went much lower, by about 8 percent,’ said the human resources executive. Given the current market, they believe they had little choice, she added. And that is precisely what property experts have been urging: for sellers to be more realistic in their expectations.”

“China’s weakening property market took its toll on the nation’s service sector, as a private gauge of service activity sank to a nine-year low. The Purchasing Managers Index for the service sector fell to 50 in July from 53.1 in June, the lowest reading since November 2005 when the survey began. Liu Xuezhi, a researcher with Bank of Communications Ltd, agreed that the sagging property market was the chief reason behind the weakening PMI data. ‘Exacerbated by lower credit support from the banks, China’s property market began a serious correction in the second quarter. Now, the impact on many related businesses has started to become apparent,’ he said.”

“Zillow released data that showed the age of a typical first-time home buyer is on the rise and is expected to continue that trend in the coming years. Zillow Chief Economist Stan Humphries said that it is dangerous to assume millennials don’t want to buy at all and cited Zillow data that showed some renters do want to buy soon.”

“But here’s why many of us won’t. I’m that 32-year-old non-homeowner they’re talking about. I rent a lovely house and have no intention of buying a house anytime soon. Here are a few good reasons: My husband bought a condo before we were married. We’ve been trying to get rid of it for more than three years. It’s been an insane back-and-forth with no promise of resolution. Why would I ever sign up for the possibility of that again?”

“Also – college loans. Almost everyone I know who is my age has huge college loan debt. That’s not something the generation before us had to deal with, but it’s not something to be dismissed as ‘just another reason millennials don’t buy houses.’ Aside from watching our friends – and in my case, my husband – deal with the fallout from the housing crisis, college loans are the No. 1 reason my friends and I aren’t buying houses. In some cases, college loan payments can be as much as a mortgage payments.”

“It’s why we haven’t put as much away for retirement as our parents had at our age and it’s why we don’t buy houses. I pay more per month toward my loan than I do in rent. And when the houses around me are selling for $500,000 to $1 million, I’ll just keep renting, thank you. As if I had a choice.”

Bits Bucket for August 10, 2014

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