Today’s Real Estate News
Today’s Real Estate News
A few items that I wanted to talk about. The first is the latest pending home sales index for November 2008 released by the National Association of Realtors (NAR), which is a good indicator of what to expect in the housing market in the next couple months. Next, the fact that mortgages rates are at near 50 year lows. With such low rates, investors should be taking advantage and buying property now. The third item is pending legislation that would affect the bankruptcy code and consumer mortgages. Lenders and industry experts are debating whether the legislation would be beneficial or not right now.
NAR PENDING HOME SALES NOVEMBER 2008
According to the National Association of Realtors, the national pending home sales index (“PHSI”) report for home sales under contract in November 2008 fell 4.0 percent to 82.3 from a downwardly revised reading of 85.7 in October 2008, and is 5.3 percent below November 2007 pending contracts which were 86.9. Regionally, in the Northeast, the PHSI dropped 7.2 percent to 63.2 in November and is 14.6 percent below a year ago. In the Midwest the index fell 6.7 percent to 74.2 and is 10.1 percent below November 2007. In the South, the index declined 2.2 percent to 85.3 in November and is 12.7 percent below a year ago. In the West, the index was down 2.4 percent to 101.2, but the good news is it remains 19.3 percent higher than November 2007. The NAR reported that the current index is the lowest since the series began in 2001. Much of this is as a result of the economy and job losses as well as the record number of foreclosures and short sales. The index is usually a good measure of what is going on in the real estate market as pending home sales typically close 30 -60 days after signing.
Lawrence Yun, the NAR’s chief economist said “…December’s housing market activity could be comparably lower due to ongoing problems in the economy, so a real estate-focused stimulus plan is urgently needed.” … With a proper real-estate focused stimulus measure, home sales could rise more than expected, by more than 10 percent to 5.5 million in 2009, and easily begin to stabilize home prices in many parts of the country. Stable home prices will, in turn, lessen foreclosure pressures and lay the foundations for a solid economic recovery as the nation’s 75 million homeowners regain confidence….” December’s number will be released on January 26, 2009.
In my opinion, many of those sales have been falling out of escrow because they were not qualified and serious buyers to begin with. The short sale process is frustrating to the average buyer because lenders are taking too long to approve them, and the buyers decide to walk away so as a result many homes under contract in short sales are not closing. The other reason is the lenders are not approving the short sale offers and some are counter offering at high prices that are way above market. The average buyer does not know how to negotiate the right way with the lender and even if they have a realtor, unless the realtor specializes in short sales, they are at a disadvantage also.
Investors on the other hand are taking advantage of the discounted prices and are buying pre-foreclosure and short sale properties because there are so many good investment opportunities right now, especially in Florida. Since I have been negotiating real estate deals for a very long time, I have been able to pass on my negotiating talents to students that I coach and mentor. If you follow my simple short sale and pre-foreclosure negotiating techniques, you will be able to negotiate the deal you want with any lender.
The NAR and other real estate industry experts have voiced their opinions that the government needs to pass some legislation that would speed up the short sale process helping to move some of the inventory and preventing more foreclosures and home sale declines. I agree that something needs to be done soon. I wouldn’t be surprised if we see some legislation on the horizon soon with new guidelines. Currently, it takes approximately 60 days to get an answer from the lender, and many times the lenders don’t approve the short sale offer, which delays it even further by having to make counter offers or the buyers just walk away and finding another deal leaving the distressed homeowner at square one.
An important negotiating tactic to keep in mind when you are negotiating with a distressed homeowner in a short sale is to tell them that you will close on the deal, and you are willing to wait for their lender’s approval. Since you already did your due diligence before you made your offer, and you have decided that the property is the right investment for you, there is no reason for you to back out of the deal if the numbers make sense. However, sometimes they don’t and you have to know when to walk away. That’s what makes a successful investor- being able to recognize a good deal and passing on the bad ones. You don’t want to make a mistake that will cost you money for years ahead. I teach my students how to avoid costly mistakes and benefit from my years of investing experiences.
Mortgage Rates at Near 50 Year Lows
With near 50 year lows in mortgage rates, now is the best time for buyers/investors to take advantage of the many opportunities out there to purchase discounted properties. Yes credit is tight, but with the government’ stimulus packages and recent legislation passed and pending, it should not be a problem for savvy investors to find financing. If you have cash, all the better.
Changes in Bankruptcy that Will Affect Homeowners
The other item that I thought was worth mentioning is the current legislation that the government is working with on together with the Bankruptcy Coalition of the Financial Services Roundtable, a group comprised of Citigroup, JP Morgan Chase, Well Fargo, Bank of America and other leading banks and lenders which would allow bankruptcy judges to adjust mortgages for at-risk borrowers. Although Citigroup initially opposed the plan, they have agreed to supports measure to help homeowners stay in their homes. There are a few other proposed rules and guideless as well for homeowners. Only existing mortgages will be eligible; homeowners will have to certify they tried to contact their mortgage holder lenders regarding loan modifications before filing for bankruptcy; and only major violations of the Truth in Lending Act will cause lenders to forfeit their claims in a bankruptcy. Those who support the legislation believe this will streamline some of the complicated bankruptcy rules and help homeowners.
If you live in Florida or other homestead states, and you have filed a homestead on your primary residence, the homestead laws protect your primary home from being foreclosed upon in most circumstances anyway. For more information on the bankruptcy laws, you should consult a bankruptcy attorney.
Opponents of the legislation include The American Bankers Association who have expressed their opinion that the proposal to give bankruptcy judges broader authority to modify mortgage terms could end up making home loans more expensive and less available.
In 2008, there were an estimated 1 million personal bankruptcy filings. Out of those approximately 580,000 had mortgage debt, and there are approximately 50 million residential mortgages currently outstanding in the U.S., which total more than $10 trillion of debt according to consumer research firm SMR Research Corp.
As you can see the numbers are staggering. With so many homeowners being displaced and having to either sell their homes or losing their homes, there is a huge need for rental properties. You as the investor can help fill that need by buying discounted properties and renting them or leasing them with an option to purchase. This is especially a smart investment strategy right now in areas like Florida, which have been hard hit by declining home prices and the economy.
Other industry sources say that the legislation will most likely affect mortgages that are packaged into bonds, which are about half of all outstanding home loans. Mortgages that are already held on bank balance sheets will most likely be renegotiated prior to bankruptcy according to industry sources.
The legislation is still to be debated so stay tuned.
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