July 23, 2015

More Viewing Real Estate As A Golden Ticket

A report from CNBC. “Last decade’s housing bubble is becoming a distant memory. Mortgage rates are near historic lows, interest-only loans are back and everyone loves real estate as an investment again. More than 1 in 4 Americans (27 percent) said real estate was the best investment for money they would not need for at least a decade, according to a new Bankrate.com survey of 1,000 investors. It is the first time real estate has taken the top spot in the three years Bankrate has been conducting the survey. Cash was investors’ favorite in 2013 and 2014. ‘It begs the questions if more Americans are once again viewing real estate as a golden ticket,’ said Greg McBride, chief financial analyst for Bankrate.”

“Financial advisors say many clients are catching the real estate bug again. ‘Just last week, a high-tech corporate boomer client with no experience in renovating and selling real estate told us he wanted to go into flipping a property with his friend, who does this for a living,’ said Jon Ulin, certified financial planner in Boca Raton, Florida. His client wanted to liquidate 25 percent of his IRA to invest in the project and told Ulin it would ‘diversify’ his portfolio.”

“But investors with good credit can borrow to buy real estate, which can enhance returns — or magnify losses, depending on the market. ‘The singular and best reason to own real estate as an investment is to use leverage,’ said Stephen Lovell, a certified financial planner in Walnut Creek, California. ‘Without it, your return on investment tends to be about 2 percent to 3 percent.’”

From Realty Check. “The Mortgage Bankers Association is predicting purchase loan volume to rise to $801 billion in 2015, an upward revision from the $730 billion forecast last month and the $638 billion originated in 2014. The bankers association is also pointing to a slightly looser grip on underwriting. Some lenders are starting to bring new products, like interest-only loans back to the market. Freddie Mac recently loosened restrictions in several areas of its mortgage underwriting, including how it factors student loan debt into the debt-to-income calculation.”

“‘That’s a big deal, given that the reason often cited for millennials not buying in bigger numbers is student loan debt, so if less of those payments have to be counted against them, then more millennials will qualify to purchase a home,’ said Craig Strent, CEO of Maryland-based Apex Home Loans.”

WMUR in New Hampshire. “WMUR employee Rick Michlik and his wife are first-time homebuyers who put bids on four houses this spring. ‘By the time we got to that fourth one, the amount of competition (was intense),’ Michlik said. ‘The house was listed and within the first two days, we’re talking at that point six to seven to eight offers.’ Irene Vincent of Hearthside Realty has 28 years of real estate experience and she said the market has been moving quickly. ‘We’re looking at about 17 or 18 listings, and 15 of those went under agreement definitely within a seven-day period of time,’ she said. ‘Fifty percent of our inventory went under agreement within 48 hours.’”

KVUE in Texas. “The Austin Board of Realtors (ABoR) released June home sale numbers, showing the median-priced house is $272,250; an increase of 8 percent compared to June 2014. The average price for a single-family home is $333,866. ‘It’s definitely higher than average; higher than you would typically want to see in a normal market,’ said Aaron Farmer, president-elect for ABoR.”

“‘The competition among buyers is very tough,’ said Priyank Gupta, who purchased a home in Austin’s Circle C area in June. Gupta said he started looking in March. He and his wife bid on eight houses, but couldn’t get one. ‘We actually overbid on some houses which was still not good enough for the sellers,’ Gupta said. ‘There were times when the house would come on the market and be off the market within 24 hours.’”

The Sun Sentinel in Florida. “Michael Citron, an agent selling in Broward and Palm Beach counties, said most of his clients want homes priced from $200,000 to $400,000. Buyers are waiting with phones in hand for email updates on the newest listings, and bidding wars are common for many properties, Citron said. ‘They’re breaking down the doors to get into these homes,’ he said. ‘Homes in good-school-district areas are flying like the wind.’”

“Ken Johnson, a real estate economist at Florida Atlantic University, isn’t worried about the market collapsing as it did nearly a decade ago. But he cautioned prospective buyers not to get caught up in the recent hype, saying they should be willing to walk away from a property if it’s not a good deal. ‘I absolutely think you should observe these (June) numbers with extreme caution,’ he said. ‘People think, ‘I better buy today before prices get too high.’ That’s not a reason to be buying.’”

The Press Democrat in California. “Does Sonoma County really have the tightest housing market in the United States, based on how quickly buyers are snapping up homes? That’s what the Wall Street Journal reported on Monday, using data supplied by Realtor.com. But local real estate agents said the results, apparently based upon the company’s online listings, differ markedly from data supplied by the region’s multiple listing service.”

“Some contend the current market isn’t as heated as in 2013, when the median price jumped 23 percent in one year. The June median price was 11 percent higher than a year earlier. Realtor.com was unabl to provide a response to inquiries about its methodology. But its website suggested the data for the Santa Rosa metro area was based on 497 listings, out of a total of 1.8 million listings across its database. In comparison, said Rick Laws, vice president in Santa Rosa for Pacific Union International, the region’s multiple listing service reported a much larger sample, a total of 1,436 properties that were listed for sale in Sonoma County in June.”

“He acknowledged there isn’t an easy way to answer such questions but still found the Realtor.com results ‘hard to believe.’”

The Bozeman Daily Chronicle in Montana. “A glossy sign, erected at the side of a Mendenhall Street parking lot in downtown Bozeman, announces progress. Breaking ground in August, it proclaims, is the next in a steady drumbeat of major construction projects coming to the city’s core: the ‘5 West’ development, a five-story, mixed-use building slated to provide retail, office and residential space on the site of what is now Opportunity Bank.”

“But the 5 West sign, complete with its architectural rendering and ‘Live | Work | Play’ slogan, has been marred by an anonymous dissenter. Added to its contents — if it hasn’t yet been cleaned up — is an asterisk, and a message scrawled in black marker: ‘Trust fund not included.’”

“The 5 West project is set to include condos tentatively priced from about $285,000 to $750,000, on par at the lower end with much of the Bozeman real estate market. For comparison, figures from the Gallatin Association of Realtors put the city’s median single-family home price at $369,000 and rising. One of the downtown area’s key planning documents, its 2009 Downtown Bozeman Improvement Plan points to three ‘key urban residential markets’ for Bozeman’s core — singles and young couples in their 20s and 30s, ‘downsizing’ baby boomers and, of perhaps most note to trust fund alarmists, buyers seeking second or vacation homes.”

“Referencing a University of Montana study, it notes that the latter group tends to be ‘relatively wealthy,’ with average annual incomes around $100,000. In contrast, according to the Bureau of Labor Statistics for the last three months of 2014, the average Gallatin County worker makes $760 a week, equivalent to $39,520 a year. Additionally, wages in some major Bozeman sectors are considerably lower than the overall average. The retail trade industry, which employed 17 percent of Gallatin County workers in October, averaged an annual wage of $29,600. Accommodation and food service workers, 15 percent of the workforce, were paid even less — $17,472 on average.”

“Entering the $39,520 income figure into a realtor.com home affordability calculator (and assuming a 20-year mortgage, 4.2 percent interest rate and $30,000 down payment) provides a $144,900 purchasing power estimate for the county-average individual wage earner — more than $100,000 less than the minimum price for a 5 West unit. And, for a single-income household able to put away 10 percent of its income, saving up to that $30,000 down payment would take seven-and-a-half years.”

Bits Bucket for July 23, 2015

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