Announcement

Where to buy now?

Some of the markets that had gone down significantly have registered great price improvements, especially between Q1 2012 to Q3 2013. Phoenix led the pack followed closely by Las Vegas and many California cities. Florida has provided steady appreciation but did not go crazy (most likely due to the slow judicial foreclosure process which modulates home supply into the market and helps avoid spikes).

It is important to bear in mind though, that even in Phoenix and Las Vegas the prices, even after appreciation, are still low. In most cases, the prices reflect just a small premium to construction costs and are certainly very far from the peak (although that is a somewhat nebulous standard). This would be the time to remember that real estate is a classic investment, especially when powered by a 30-year fixed-rate loan.

It is now almost a consensus that interest rates will rise (most say significantly) in the next few years. Needless to say, anyone who has the ability to qualify for a good low-interest-rate 30-year fixed rate loan should get one! These are 100% inflation-proof. In fact, once you have these loans inflation becomes your “best friend” by eroding the loan since the loan is not inflation-adjusted.

Florida still supplies a steady diet of below-construction-cost homes. That would be a place to explore purchasing. However, the power of getting a fixed low rate becomes such that as long as you buy in a decent market with decent demographics, it is not bad to “get moving” and do it. 

New homes by builders are still not that popular among investors but in some markets, they are not that much above the used-home fray AND they provide a certain peace of mind related to their very newness, warranties and so on. Many builders help out with the loan in some way (buy down the rate for example) so that may add to the attractiveness.

All in all 2014 should be a year to be active and purchase, especially if a 30-year loan can be had.
Should you go for a somewhat lower rate on a 15-year loan? I believe the 30-year loan provides important extra flexibility. You can always choose to pay a 30-year loan in 15 (or 14 or any other number you choose), but you cannot go the other way. You also retain the flexibility to revert back to the 30-year amortization schedule if cash flow becomes tight.

Happy buying!

Two Mini Real Estate Investment Expos in Seattle, Wednesday February 5th & Thursday 6th!

We are excited! ICG Real Estate Investments (International Capital Group) are going up to Seattle to put on a mini-version of our quarterly Real Estate 1-Day Expo that is usually held near SFO in South San Francisco. As most of you know, we have been doing these expos for 20 years and there is always so much information. I personally return home more knowledgeable every time, as everything in real estate and real estate investing changes weekly, if not daily it seems. I am putting information about his event in a blog, as I want to share it with many new people as possible, and I know I will be connecting with many new folks on LinkedIn as well.

I have not spoken in the area for about six years, and it is going to be great to re-connect with so many that I used to connect with on a continual basis. Building relationships is what we are about and the excitement is mounting! It will be like a family reunion. (Hopefully, that is a pleasant thought to most of you!) Based on demand we are looking forward to two evenings, which will allow folks to attend twice or pick a day that works best for their schedule.

These two evenings will not be easily forgotten, and we are available to talk before or after and even during the events, as well as meeting over the phone, well after the event. The Mini Real Estate Expo (s) is a great way to start out the new year with hard-hitting information you can use to be a better investor. This action-packed event will be held from 6-9:30 pm on two nights, Wednesday, February 5th and Thursday, February 6th. This way, busy Seattleites have two options to work the event into their schedule. Many of you requested that I have the event in two different locations for added convenience, so we have provided that. You can also come to both nights if you desire!

Patricia Wangsness and Adiel Gorel will be the expert presenters, and you will hear from expert loan sources and learn from market teams across the country that will be flying in to tell you about the hottest markets and the proven methods to use for success. Here is a taste of what you can expect:

  • How to identify the best markets for investments
  • How to invest when you are “too busy to invest” (step-by-step)
  • Learn how your properties can be rented and managed well from afar
  • Pay for your children’s college education using real estate (or for your own education)
  • Secure a powerful retirement using real estate
  • How to benefit from recession prices in 2014, and where to do it
  • Learn how to acquire loans you did not know you could get
  • How to benefit from special market situations few people know about and how to use it to your advantage
  • There are ways to successfully own multiple properties and manage them–we will show you how

There will be extensive Q & A time. There will also be teams there in person to meet with you one-on-one; they will also be speaking about the hottest markets in the U.S.

This will be one of the premier networking events in 2014 so far!

Date and location of the mini expos:

Click here to register! If you have any questions prior to the event, please call Adiel Gorel at (800) 324-3983 or (415) 927-7504.

Any additional questions about the venues or if you have trouble on the day of the event, please call our public relations pro, Lynette Hoy on her cell (415) 694-3004 or at her office in the Seattle area (206) 455-9366. Lynette will be at both events, so please call her cell phone between 4-9: 30 pm on those nights if you need assistance.

Look forward to seeing you there. I can’t wait!

5 Things to Watch in Housing in 2014

In an article in the Wall Street Journal by Nick Timiraos on January 7, 2014 an attempt at predicting various scenarios for housing at large in the U.S. for the year is made. Of course, the 5 points are general. I personally believe (and am actually seeing) that markets that are still reflecting post-recession pricing (like Florida) and where houses can easily be bought under bare construction costs AND the future demographics are promising – should show a far more bullish trend this year versus other markets. Here is what
Mr. Timiraos says:
“For housing, it was a tale of two halves in 2013. During the first half, unusually low supplies of homes and low rates spurred bidding wars, pushing prices up sharply. During the second half, the frenzy cooled amid a sudden spike in interest rates. While more markets are now reporting increases in inventory, the number of homes for sale remains quite low.”
 
The bull case for 2014 goes something like this: those low inventories will support rising prices. Below-average levels of household formation, the argument goes, must ultimately pick up, boosting construction. Mortgage rates, while higher, are still historically low. Credit standards will stop getting tighter and might loosen as home prices rise. Finally, mortgage delinquencies are dropping. While some states still have elevated foreclosure inventories, the worst of the distressed-housing problem is in the rear-view mirror.
 
The bear case, meanwhile, says that the recovery is a mirage built on the back of the Federal Reserve’s stimulus that has done little more than inflate asset values, including home prices. Record low-interest rates, the argument goes, unleashed demand from both borrowers and all-cash investors seeking returns on something—anything—with a decent return. These investors built large rental-home companies that remain untested at scale. How can first-time buyers take the baton from investors at a time when prices are up almost 20% in two years and when interest rates are rising? 
Other problems loom: Mortgage rates could jump, choking off housing demand and curbing new construction that remains mired at 50-year lows. Investors could unload their homes if the rental-home thing doesn’t pan out. And don’t look for much help from mortgage lenders that face a cocktail of new regulations, which could keep credit standards stiff.
So which view will carry the year? Here are five wild cards to watch this year:
(WSJ: 7 Jan 2014 By Nick Timiraos)

1.  WILL INVENTORY RISE?

Prices have risen largely because of shortages of homes for sale. While there is growing evidence that inventories hit bottom last year and that some markets are moving back in favor of buyers, the number of homes for sale remains relatively tight still. Foreclosure-related listings have plunged, and traditional buyers haven’t flocked to list homes—at least not yet. New construction, meanwhile, won’t be back to normal historical levels for years. The consensus view is that price growth continues at a somewhat slower pace, but that consensus view could be wrong—for the third year in a row—if there aren’t more homes for sale.

2.  WHERE IS THE HOME-CONSTRUCTION RECOVERY?

While home prices have recovered strongly, new construction activity hasn’t. Part of this may have to do with the fact that home prices are still too low to justify construction, particularly given land, labor, and materials costs. For smaller builders, credit may also be harder to come by. Some economists say new-home demand could remain muted because many move-up buyers don’t have enough equity to “trade up” to that new home. Key issues to watch here: What happens to household formation, and do builders begin to throttle back price gains in favor of selling more homes in 2014?

 

3.  WHAT HAPPENS TO MORTGAGE CREDIT?

Lenders could begin to ease certain “overlays”—or additional credit and documentation checks—that have been imposed over the past few years. Mortgage insurance companies are getting more comfortable insuring loans with down payments of just 5%. So don’t be surprised if, at the margins, it gets a little easier to get a mortgage—especially if you have lots of money in the bank.

Even if it gets easier to get a loan—by no means a given—borrowing costs and fees could rise. Banks also face new mortgage regulations that could keep most of them cautious. Borrowers with more volatile or harder-to-document incomes, including the self-employed or those who make a lot of money on commissions, bonuses, or tips, could continue to face tough sledding.

Bloomberg News

 

4. WHAT WILL INVESTORS DO WITH THEIR HOMES?

A handful of institutional investors have purchased tens of thousands of homes that are being rented out. These homes tend to be concentrated in a few of the regions that have been hardest-hit by foreclosures over the past five years. Investor purchases played key roles in stabilizing prices, especially because investors were wolfing up homes at a time when supplies were already dwindling. A key question now is what happens after the initial rush to invest subsides. More lenders and investors are extending debt financing to some of these property owners, which should help boost returns. Can owners perfect the expense management associated with maintaining and leasing tens of thousands of individual homes?
Can owners perfect the expense management associated with maintaining and leasing tens of thousands of individual homes?

 

5.  WHEN DOES HOUSING HIT A TIPPING POINT ON AFFORDABILITY?

Rising home prices are a double-edged sword, especially in pricier coastal markets such as San Francisco and Los Angeles. On the one hand, rising prices are giving many homeowners equity in their homes again—an extremely positive development to the extent it means these borrowers are less at risk of foreclosure.

But price inflation is making housing less affordable. This will be a bigger problem if cash buyers retreat from the market in 2014 and/or if interest rates rise in a meaningful way. Consider: In Los Angeles, prices have jumped by nearly 30% in the past two years, to a median of $448,900 in the third quarter. Assuming a 20% down payment, the monthly payment of principal and interest on the median-priced home has jumped from $1,255 in the third quarter of 2011 to $1,823 in 2013—a 45% increase.

Appreciation Rates Grind to a Halt

As you may have seen in the media lately, most of the best-appreciating markets have seen a significant slow-down in the appreciation rate. Even more accurately, I get news from our teams in the field that this is the case. You can see it in some of the fastest appreciating markets like Phoenix, and even in Las Vegas (despite the upwards pull of the inventory-suffocating SB321 which came into effect on 10/1/2013 and is a very strong pull on home prices).
Many other fast-appreciating markets are also leveling off. California markets and even some Florida markets have eased up some in the past couple of months. One obvious reason is seasonal – this is traditionally the slowest period of any year. However the rising interest rates have been keeping some would-be buyers at bay, and the prices themselves, having become higher – have put other buyers off. Some investors are starting to feel that they missed the boat in places like Phoenix due to the 70% gain it displayed in the past two years.
Well even in Phoenix, after a 70% gain in prices and now on a “respite” from appreciation, the prices are not that much above construction costs. Builders are still struggling to beat the prices of existing homes, and the intrinsic value is excellent. The same holds true in Las Vegas. Florida was already an excellent value (recall we discussed the judicial foreclosure process in FL slowing down market absorption of foreclosed homes, thus damping supply shortages somewhat) and now is poised to produce even better deals. It is not hard to buy a FL property in Jacksonville or Orlando/Tampa for substantially less than construction costs.
For investors, there is good news in what is happening. Our limited “window of opportunity” seems to be extending more. It is an excellent time to pounce on attractive Single Family Homes. We will discuss this and lots of other relevant and important new market data at our 1-Day Expo THIS SATURDAY! We invite you to attend (free for you and associates if you mention this blog – just email us at info@icgre.com)We will also have an OBAMACARE expert to guide us through the maze, and outstanding expert speakers in addition to lenders, and market teams straight from the trenches. 
Looking forward to seeing you there!

Don’t Forget to Get a Fixed Rate Loan!

I encounter many investors still tempted to get some flavor of an adjustable loan when using their available investment loans. There are extremely low-interest rates being offered on many shades of variable interest loans such as 1/1, 5/30 and so on. 
Given that there is a virtual consensus among economists that we are headed to a high inflation period, it would not be the wisest move. When inflation is looming the need for fixed rate loans becomes even greater than it usually is. Fixed-rates are still very low, not far from the lowest rates in over 50 years. At this point, and before inflation rears its ugly head, it is definitely the time to lock in a rate forever. 
Once you have locked in your 30-year fixed rate loan, inflation actually becomes your ally. It erodes the real monetary value of your loan, which never changes with inflation because it’s, well… FIXED! In a way, the very process of inflation will hasten the real-life pay down of your loan balance. 
Many of you are eligible for a lot more investment loans than you might think. We will talk about this in detail, and also share strategies to increase the number of investment loans you can get at our incredible Real Estate 1 Day Expo on Saturday, December 7, 2013, near San Francisco Airport. More details can be found on our website www.icgre.com.  We have been producing these events for over 20 years, and we always have the most useful experts to assist you.  
This time there will also be a discussion of the new Affordable Care Act (Obamacare) and strategies on what to do, credit enhancement and repair (to be able to get all these loans), and an amazing lawyer battling the banks in court to share his insights and wisdom. In addition, market teams from the most relevant markets in the US will be there. Looking forward to seeing you!

New Lifeline for Home Buyers by FHA (WSJ Reports)

In an article written recently in the Wall Street Journal, by Nick Timiraos–it is reported that (wisely), the FHA has shortened the waiting period for FHA loan availability for people who have been foreclosed upon. Since the FHA loans, at 3.5% down with extremely attractive 30-year fixed rate loans is a major vehicle driving buyers to market (especially in affordable markets such as the ones we are in), shortening the waiting period and making it easier for buyers to jump in will help values and demand, in my opinion. This will further increase the values in our target markets. The entire article is below.

New Lifeline for Home Buyers (by Nick Timiraos, WSJ 9/3/2013)

FHA Cuts Waiting Period to 1 Year for Buyers Who Earlier Faced Foreclosure

The Obama administration wants to create a mortgage market that is more forgiving to borrowers who lost their homes due to the recession, an effort that could widen the pool of potential homeowners. A

recent rule change lets certain borrowers who have gone through a foreclosure, bankruptcy or other adverse event—but who have repaired their credit—become eligible to receive a new mortgage backed by the Federal Housing Administration after waiting as little as one year. Previously, they had to wait at least
three years before they could qualify for a new government-backed loan.

To be eligible for the new FHA loans, borrowers must show that their foreclosure or bankruptcy was caused by a job loss or reduction in income that was beyond their control. Borrowers also must prove their incomes
have had a “full recovery” and complete housing counseling before getting a new mortgage.

The Obama administration wants to create a mortgage market that is more forgiving to borrowers who lost
their homes due to the recession — an effort that could widen the pool of potential homeowners. Nick Timiraos reports on the News Hub.  Real-estate companies in bubble hot spots like Las Vegas and Phoenix already have stepped up marketing campaigns to attract these so-called “boomerang” buyers whose finances have improved after a foreclosure.
But it isn’t clear if banks will be eager to offer loans with the new terms at a time when they are facing a wave of lawsuits and investigations related to other government-backed loans. The FHA already offers

among the most flexible lending standards today, requiring down payments of just 3.5%. “It’s difficult to see how lenders would even consider doing mortgages with higher risk in the current environment,” said David Stevens, the chief executive of the Mortgage Bankers Association, who served as the FHA’s commissioner from 2009 to 2011. Lenders aren’t going to expand credit “while you’re suing them and threatening them over minor errors.”

The policy change reflects broader concerns among administration officials and federal regulators that the mortgage-credit pendulum has swung too far to the restrictive side from the days of lax lending rules that fueled the bubble. Some economists say too-strict credit standards are shutting out some creditworthy borrowers and holding back economic growth. Low participation in the recovery by young buyers “absolutely is a problem, and I’m not exactly an ‘easy credit’ guy,” said Thomas Lawler, a housing economist in Leesburg, Va.

The new rules, which expire in three years, also apply to former homeowners who completed a short sale, where a bank approves the sale for less than the amount owed. That could help potential buyers like Candy Alvarado, who sold a condominium in Norwalk, Calif., for $108,000 three years ago, leaving her bank with a $168,000 loss. The 31-year-old schoolteacher, who used a no-money-down mortgage, said it didn’t make sense to keep the condo after home values dropped and her work hours were cut during the recession. Ms. Alvarado and her husband began looking for a home for around $400,000 in April and they are pre-approved for an FHA-backed loan. “We’ve been saving, and we want to make sure we have a home where we can build equity,” she said.
Shaun Donovan, the secretary for the Department of Housing and Urban Development, which runs the FHA, played down potential criticism that the agency might invite a return to risky lending practices. “What we are talking about is getting back to responsible, plain-vanilla lending,” he said in an interview. “We believe these are low-risk loans that can be made safely.” In the four years ended last September, some 3.9 million
homes had been lost to foreclosure. About 1 million borrowers who went through foreclosure during the crisis have already waited the required three years to be eligible for an FHA-backed mortgage, and by early next year that number could rise to 1.5 million, according to estimates from Moody’s Analytics.
While the new rules could help some buyers, many former homeowners will need more time to repair their credit, said Aviva Lomeli, a real-estate agent with Redfin, who represents Ms. Alvarado. “You don’t necessarily start recovering one day after you finish a short sale,” she said.
The administration’s broader push to ease lending is running up against other hurdles. The government—through mortgage-finance firms Fannie Mae, Freddie Mac or federal agencies—has guaranteed as many as nine in 10 new loans in recent years. But over the past four years, banks have had to buy back tens of billions of defaulted loans as Fannie, Freddie and the FHA faced mounting losses. Because of uncertainties about these “put-backs,” lenders have imposed more-conservative standards than
what the federal entities require.
The FHA says it has a separate effort under way to provide greater clarity about when banks could face put-backs, following on the work of the regulator for Fannie and Freddie last year. Lenders say those changes haven’t been specific enough to change their lending posture. In speeches this year, officials at the Federal Reserve have raised concerns that tight lending standards could make it harder for younger borrowers, who tend to have lower credit scores, to obtain mortgages.
The Fed’s quarterly surveys of senior loan officers have found that while banks have indicated a growing willingness to extend credit to borrowers with high credit scores, about 30% of lenders in April reported that they were less likely than a year earlier to extend FHA-backed loans to borrowers with lower credit scores.
Still, not all lenders believe tight credit is the problem. Logan Mohtashami, a mortgage broker in Irvine, Calif., argues that weak income growth is a bigger problem. “Getting a loan done is a lot more
work, but if you have the financial goods, you get the loan,” he said. But Mr. Mohtashami said he isn’t concerned that the FHA rule changes invites a return to bubble-era excesses. “This can’t be
compared to subprime. The problem back then was that nobody was verifying anything,” he said. “This still requires people to qualify for the loan, verify the job, verify the assets.”
Write to Nick Timiraos at nick.timiraos@wsj.com
1 5 6 7