Archive for the ‘Real Estate’ category

It’s Not Over Till It’s Over

November 14th, 2011

We would like to think that the housing crisis is past and now all we have to do is wait for prices to rebound. Unfortunately foreclosures are still happening at higher-than-normal rates all over the country. That is putting pressure on the big mortgage funds. For example, according to MoneyNews.com;

 

Fannie Mae, the biggest source of money for U.S. home loans, on Tuesday said it needed a further $7.8 billion in federal aid to stay afloat as a shaky housing market widened its third-quarter loss to $5.1 billion.

 

Fannie Mae also attributed the deeper cash drain to losses on derivatives that are used to hedge the firm’s exposure to swings in interest rates and expenses related to home loans made prior to the 2008 financial collapse. In the year-earlier quarter it had a loss of » Read more: It’s Not Over Till It’s Over

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Posted in Economics, Real Estate

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A Good Time to Buy Rental Property?

September 8th, 2011

Is this a good time to buy rental property? The real estate market seems uncertain still, to say the least, yet often the turning points are not noticed until long after the fact. So could this be the best time to become a landlord? Consider the following report from CNN.com:

“There is, however, one bright spot: the rental market, where demand is up and rents are rising. That’s partly because those foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.”

If rents are rising and houses are cheap, you can do well investing in rental property–even if prices fall further. The report went on to say:

“Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in » Read more: A Good Time to Buy Rental Property?

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Upside Down Mortgage?

September 6th, 2011

Should you sell your home if you have an upside down mortgage? Being upside down means you owe more than the house is worth. Should you sell or wait it out until you have paid down the loan and/or the value has risen to the point where you have some equity? Each case is a matter of individual circumstances, but there is an important reason to sell soon if you are considering selling at all.

Normally, when you sell a house on a short sale (the lender approves a sale for less than is owed and writes off the difference), or you “give back” the home to the lender and have the balanced owed forgiven, you have to pay taxes on the amount that the lender forgives. For example, let’s say you own a house in hard-hit Fort Lauderdale, Florida, and you owe $280,000 on it. If the bank approves a short sale of $180,000, you will be taxed on the $100,000 you didn’t have to pay.

At the moment though, the law allows » Read more: Upside Down Mortgage?

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Mortgage Backed Securities Misrepresented

September 3rd, 2011

It is perhaps not a surprise to anyone at this point that during the real estate boom mortgage backed securities were misrepresented as safer than they were and valued too highly as a result.

Flickr photo by LifeSupercharger

Big Bank

But the government is finally planning to make someone pay for the deceit, according to an article on CNN.com:

“The Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae, is getting ready to sue Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and Deutsche Bank (DB) among others, according to the reports.”

The banks being sued all declined to comment when CNN contacted them. As for what this says about the future of the mortgage mess, the article also said;

“The suits, which are expected to be filed in the coming days, stem from subpoenas the finance agency issued to banks a year ago,” wrote Deutsche Bank analysts Jim Reid and Colin Tan, in a note to investors. “It seems that there is little end in sight for the sector as far as negative » Read more: Mortgage Backed Securities Misrepresented

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Make Money With Comerical Real Estate

August 31st, 2011

I have always been a bit afraid of trying to make money with commercial real estate. On the one hand, it is a more logical process, with the motivations of sellers, buyers and renters all pretty clear and easy to understand–unlike selling to multi-motivation home buyers or renting apartments to people who have all sorts of different requirements. But on the other hand, the commercial market is less certain in a key way: demand. People always have to live somewhere, so it will be rare for a town to suddenly only need half as many residential rental units. But when tough economic times come, commercial rental demand can easily drop in half.

Consider that a warning, but it also suggests an opportunity. You see, if enough people see the risk as I do, the returns on commercial real estate should be potentially higher to compensate for that. With that in mind I want to introduce a short excerpt from an article I just found on KCComericalOnline.com, titled Making Money With Commercial Real Estate:

“If an investor purchased a building for $1,000,000, paid cash for the property and received $100,000 in cash flow he would have » Read more: Make Money With Comerical Real Estate

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Mortgage Default Less Common Among Poor?

August 25th, 2011

Where is the bigger part of the mortgage default problem? It isn’t with the lower-middle class and less-affluent buyers of Clayton Homes.

Flickr photo by Mark Crawley

Mobile Home

In early 2011 Warren Buffet pointed out that those who bought from Clayton Homes, a company owned by his Berkshire Hathaway and which sells mobile homes, default at a dramatically lower rate than most conventional house buyers. This is despite the fact that mobile home buyers typically much lower incomes, less job stability and lower credit scores. The default rate on these homes is less than 2% to this point, compared with 10% to 25% for new home buyers, depending on the time frame looked at or the area of the country.

Buffet explains that although times are especially tough for those with lower income, those who buy homes from Clayton are truly motivated to keep their houses, in part because they have paid a decent down payment. He adds that “generally they borrowed sensible amounts in relation to their income.” It makes sense to find a way to make those payments when they are no more than the rent that will replace them if the home is lost. » Read more: Mortgage Default Less Common Among Poor?

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Posted in Economics, Real Estate

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Are Home Appraisals Honest?

August 23rd, 2011

By Steve Gillman

Yesterday’s post looked at how inflated home appraisals and other corruptions of the real estate market were in part responsible for the housing bubble that began to deflate in 2006.

Flickr photo by Andrew Bain

Foreclosure Appraisal

You might think that the more problematic practices have largely changed, and perhaps the blatantly criminal ones have become less common. But there seems to be some institutionalized ideas about appraisal in particular, which are so well established that neither lenders nor appraisers see the danger in them.

In 2009 we both bought a house and sold one. We offered 10% less than the asking price when we purchased our current home. Lo and behold the appraisal came in within a few hundred dollars of our offering price. At the time I thought nothing of it, figuring it simply confirmed our estimate of the current market value. A few months later we sold our previous home for 11% more than we had paid–not bad for buying at the top of the bubble and selling three years later. Interestingly the appraisal for the new buyer came in within » Read more: Are Home Appraisals Honest?

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The Housing Bubble – What Caused It

August 22nd, 2011

The answer to what caused the housing bubble will not be found in some one government policy or banking philosophy. There are multiple causes, as there are for most things in life. One of those causes was the corruption of the appraisal process, which was looked at in the book Panic, by Michael Lewis.

Flickr Photo by James Thompson

Housing Bubble

Lewis reprints an article from the Wall Street Journal by John Hechinger, which was originally published on December 13, 2002, and looked at the housing bubble. That it was a bubble was obvious to Hechinger, even though the rest of the press and financial world seemed to think the rises in real estate values were sustainable. Both were right in a way, since it did take four more years of quickly rising prices to complete the bubble and set us up for the worst real estate crash in eighty years.

Some of the tricks that were already being used in 2002 to prop up the market, included inflated appraisals and questionable ways to help people out with down payments. Appraisers were either being paid extra to lie about the value of homes, or they were simply pressured to make sure that there appraised value came in at a level that made a loan possible. Much of this was very subtle. A bank or loan broker might not apply overt pressure, but if the appraisal didn’t come in where they wanted it, they didn’t call that appraiser again – and word got around that you better “play ball” if you » Read more: The Housing Bubble – What Caused It

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Jumbo Reverse Mortgages

August 22nd, 2011

Guest Post

What are jumbo reverse mortgages and their availability?

The jumbo reverse mortgages which are also known as the proprietary reverse mortgages are those loans which are offered by the lending institutions so as to enable home owners who have homes of high value to have larger amounts of the home equity than what is in general available through the different kinds of government loans and reverse mortgages. Just as the name suggests jumbo is a loan of huge amount and thus jumbo reverse mortgages are those reverse mortgages which are available for huge amounts. But while taking out a reverse mortgage it is always better to use a jumbo reverse mortgage calculator so that you are not required to opt for refinance on this mortgage.

The availability of jumbo reverse mortgages

As a result of the credit crunch; which affected not only the US but also the whole world; the availability of the jumbo reverse mortgages has » Read more: Jumbo Reverse Mortgages

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Three Ways to Find Cheap Homes

August 10th, 2011

By Steve Gillman

There are many little tricks to finding cheap homes, but they generally fall into three broad strategies. These are to look in places where real estate costs less, look for the least costly types of houses, and look at the true ongoing costs associated with owning any particular home. Let’s look at these one at a time.

Cheap Towns and Cities

At the moment there are many places where real estate values have dropped fast and hard. Many people are probably not aware that you can buy nice condos–and even some houses–for under $50,000 in several cities in Florida, for example, or in Myrtle Beach, South Carolina or Tucson, Arizona. Of course it is easier to find an inexpensive home if you » Read more: Three Ways to Find Cheap Homes

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Posted in Real Estate, Save Money

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