Why Rent Appreciation Will Stall In 2016 (Full Rent Projections By Market)

We are coming into a political season which will be dominated by pageantry and media pandering. Amidst this chaos, rent appreciation is finally projected to cool down in 2016, giving renters a much-needed break from what seemed to be never-ending price increases. But is that good or bad news for Real Estate Investors….

 

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(http://www.housingwire.com/articles/36098-good-news-renters-rents-to-finally-flatten-in-2016)

 

The new rent appreciation report from online real estate listing service, Zillow, does caution that although prices will level off over the next 12 months, rents will remain unaffordable in many of the major markets across the U.S., especially on the West Coast.

According to Zillow, rent appreciation will slow to an annual rate of 1.1% by December 2016, with the national Zillow rent index at the end of 2016 projected to be $1,396, compared to $1,381 in December 2015.

However, a price slowdown isn’t enough to turnaround some of the outrageous costs of rent on the West Coast. Renters in San Francisco and Los Angeles can still expect to spend 40% of their income on a rental payment, Zillow said.

shutterstock_283731104“Hot markets are still going to be hot in 2016, but rents won’t rise as quickly as they have been,” said Zillow Chief Economist Svenja Gudell.

“The slowdown in rental appreciation will provide some relief for renters who’ve been seeing their rents rise dramatically every single year for the past few years. However, the situation remains tough on the ground: rents are still rising and renters are struggling to keep up,” continued Gudell.

Outside of the West Coast, places like Washington D.C. and Atlanta are only projected to increase 0.5%.

Here is full list for exactly what to expect in various markets.

Zillow

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4 Ways To Get “IN” with REO Brokers (the best source for distressed property)

One of the major sources for acquiring bank-owned properties is REO (Real Estate Owned) Brokers. These real estate agents are commissioned by the bank to sell the bank’s foreclosed properties. They work with one or more asset manager(s) to rid the bank of its toxic assets. Developing relationships with these people is essential to your acquisition process. 

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REO Brokers: Your New Best Friends

The easiest way to find REO Brokers is to do a search in your city’s multiple listing service for bank-owned properties. Most MLS programs will allow you to search using “Foreclosure” as a criteria. Find the foreclosure listing and the agent’s info will be on the listing.

If, however, you are not a Realtor and don’t have access to the MLS, there are other ways to track these valuable assets down. Begin by checking out www.zillow.com and www.Realtor.com. Most Realtors will publish their listings to these websites to gain maximum expo- sure. In addition to checking out these sites, drive the areas in which you’re interested in buying. Look for properties that appear to be abandoned.

 

You’ll find yard signs with Realtor names and phone numbers. Many times the yard sign will also include the word “FOREcLOSURE” so you know for sure the property is bank owned.

How to get “in” with an REO Broker

shutterstock_131118848Now that you’ve located a handful of REO Brokers, it’s time to make contact. While it’s true these guys are busy, it’s also true that they need to make a sale. Once they understand you’re the one to help make that sale happen, you will be viewed less as a pest and more like a legitimate buyer. Understand they deal with “buyers” who blow smoke all day long without ever having any in- tention of closing. You will need to prove your worth to warrant them spending any time on you.

In an ideal world, you’d like to be the first buyer they call when they’ve got a new listing. To do this, you’ll need to make it worth their time. Here are some tips:

  • Offer double commissions. If you have a real estate license, forego taking any commission on the foreclosure you’re intending to purchase. You can say something like this when you send the offer: “You’ll notice that I’ve left the selling agent information blank on this offer. I’d like to offer you both sides of the commission.” Even if you don’t have your license, you can still make sure they get both sides of the commission by asking them to repre- sent you as the buyer.
  • Do everything in your power to make things as easy on them as possible! This can be as simple as getting documents signed and back to them in a timely manner. Remember, your goal is to have them remember you fondly after this transaction.
  • A thank you note or gift never hurt anyone. A simple thank you note is al- ways appreciated, and if you’d like to be remembered even more, why not send a gift? In the past I’ve sent REO Brokers out to dinner on my dime or gifted them with Apple’s newest toy (for instance, an iPod Shuffle).
  • Lastly, purchase multiple properties. This one will take time, but it’s the best way to be remembered. Show them that you can deliver and they will begin to bring you deals. But, remember, waste their time and you’re done.

    (ADD FOR MLS DOMINATION)

     

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Existing Home Sales Up 14.7% (…and why that shouldn’t scare you)

Sales of previously-owned homes surged 14.7% in December in the largest monthly increase the National Association of Realtors has ever recorded, the trade group said Friday. Thanks to the robust finish, 2015 ended with 5.26 million existing-home sales, the highest figure since 2006, when annual sales were 6.48 million.

http://www.forbes.com/sites/erincarlyle/2016/01/22/december-existing-home-sales-roar-back-by-14-7-2015-ends-with-highest-sales-since-2006/?ss=real-estate#62830f0b6522

 

Completed transactions of existing-homes (single-family homes, townhomes, condominiums and co-ops) rose to an annual, seasonally adjusted rate of 5.46 million in December, up from November’s pace of 4.76 million, NAR said. Compared to one year earlier, December’s sales pace was up by 7.7%. The trade group attributed December’s jump in part to new mortgage rules that delayed November closings until the end of the year.

“While the carryover of November’s delayed transactions into December contributed greatly to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015,” said Lawrence Yun, NAR’s chief economist. “Additionally, the prospect of higher mortgage rates in coming months and warm November and December weather allowed more homes to close before the end of the year.”

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Prices continue to rise amid a sustained lack of inventory. At the end of December, the supply of available housing for sale fell 12.3% to 1.79 million existing-homes, a 3.9-month supply at the current sales pace. That’s down from 5.1 months in November and the lowest since January 2005 (3.6 months). Economists generally consider a six-month supply a healthy market.

http://www.forbes.com/sites/erincarlyle/2016/01/22/december-existing-home-sales-roar-back-by-14-7-2015-ends-with-highest-sales-since-2006/?ss=real-estate#62830f0b6522

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Cash Sales Just Made A Huge Jump, and You Won’t Believe Why

The jump in cash sales is likely a knee-jerk reaction to the new documentation and disclosure rules for mortgages that took effect in October, making it even more difficult for buyers using financing to compete with cash buyers in the already competitive housing market.

 

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http://www.realtytrac.com/news/home-prices-and-sales/november-2015-u-s-cash-sales-report/

 

RealtyTrac November home sales data derived from publicly recorded sales deeds shows the share of cash sales jumped to 38.1 percent of U.S. single family home and condo sales during the month — up from 29.8 percent in October and up from 30.9 percent a year ago to the highest level since March 2013, when 38.8 percent of all sales were all-cash. The 23 percent year-over-year increase in share of cash sales nationwide followed 29 consecutive months of annual declines in the share of all-cash home sales.

“The jump in cash sales is likely a knee-jerk reaction to the new documentation and disclosure rules for mortgages that took effect in October, making it even more difficult for buyers using financing to compete with cash buyers in the already competitive housing market,” said Daren Blomquist, vice president at RealtyTrac. “Global economic instability may also be driving more foreign cash buyers back to the relative safety of U.S. real estate.”

Major metro areas (population of at least 1 million) with the biggest annual jumps in share of cash sales were San Francisco (up 89 percent), San Jose (up 74 percent), Columbus, Ohio (up 73 percent), Milwaukee (up 71 percent), Providence (up 59 percent), and Portland (up 53 percent).

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“Many factors have increased the use of cash in the marketplace. including continued activity of institutional investors, large equity buyers seeking negotiation advantage in a low available inventory market, as well as an increase in immigrant purchasers whose culture prohibits use of debt instruments in making purchases,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “As we approach 2016, available market inventory is predicted to be much of the same. As interest rates continue to rise, and new government regulations create added hurdles for some consumers to qualify for mortgage financing, predictions are for cash sales to account for more than one-third of the closed residential transaction volume for much of 2016 across the Ohio markets.”

“Given that we saw spikes in cash sales at the state, as well as national level, we can assume that this was not a geographically isolated incident and that there were more fungible reasons for it,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where 31.9 percent of all home sales in November were cash sales, up 38 percent from a year ago. “We tend to see seasonal spikes in all-cash home sales in the winter months but this jump was somewhat exaggerated. I believe that we can attribute this to the remarkably tight housing market in Seattle. Buyers that have the ability to pay cash understand that they are in an enviable negotiating position when offers are being reviewed.”

Major metro areas with the highest share of cash sales in November were Miami (59.7 percent), New Orleans (54.8 percent), Oklahoma City (51.4 percent), Tampa (50.6 percent), and Orlando (49.9 percent).

“One reason for the cash sales are we a world destination for flight/security money,” said Mike Pappas, CEO and president of Keyes Company, covering the South Florida market. “We have strong Central and South American interest in creating a safe haven for their families. The new mortgage rules do make it more difficult for these individuals to qualify for a conventional mortgage as their income source is not in the U.S.”

“We did experience tighter inventory than last November and December, which can cause an increase in multiple offers, which certainly can contribute to a higher number of cash transactions,” said Greg Smith managing broker with RE/MAX Alliance, covering the Greeleymarket in Colorado.  “It will be interesting to see how Q1 2016 plays out. After visiting with our other brokers, it seems more sellers are holding off to place their homes on the market for spring 2016.”

http://www.realtytrac.com/news/home-prices-and-sales/november-2015-u-s-cash-sales-report/

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Top 10 Cities For First-Time Homebuyers in 2016 (New Infographic)

While there are outrageous places, like San Francisco, where the typical millennial can only afford to buy 135 square feet of housing, this is definitely not a universal price across the country. There are attractive and affordable places in America that are more feasible for first-time homebuyers, as seen in this handy infographic.

Screen Shot 2015-11-12 at 11.38.55 AM( http://www.housingwire.com/articles/35979-here-are-the-top-10-cities-for-first-time-homebuyers-this-year)

 

The national correspondent loan company analyzed its database of over 70,000 loan applications, and paired their findings with city data to identify 10 attractive cities that are affordable to first-time homebuyers. Factors like low unemployment rate and national accolades were taken into consideration.

Check out this handy infographic from our friends at The Money Source. Here are the top ten cities that it came up with.

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5 Reasons We Are NOT Heading Into A Housing Meltdown

When it comes to investing in the stock market, you may lose your shirt, but you probably won’t lose your home. In fact, when the equity market gets rough, real estate tends to be a life raft for investors seeking safety. 

Screen Shot 2015-11-12 at 11.38.55 AM(http://www.marketwatch.com/story/5-reasons-a-2009-style-real-estate-meltdown-is-unlikely-now-2015-08-25)

“Real estate is Americans’ preferred investment for money that they won’t need for at least 10 years and that hasn’t changed,” said Greg McBride, chief financial analyst with New York-based Bankrate.com. “Nervous investors always look to real estate rather than shy away from it in times of volatility.”

While stocks around the globe are off to a rough start in 2016, it doesn’t necessarily mean déjà vu all over again, at least when it comes to a repeat of the real estate tumble that began in 2007 but accelerated sharply following the 2008 rout of the equities market, when home prices in late 2011 were down more than 20% from their peak in spring of 2007.

Here’s why you shouldn’t be panicking if you’re looking to buy or sell a home:

Interest rates should stay low

With the latest bout of declining equities, the pace of further Federal Reserve rate increases is likely to slow, according to Kevin Finkel, senior vice president of Resource America Inc. REXI, +0.33%  , a real-estate investment trust in Philadelphia. “It would take a lot more than the volatility we’re seeing now for them to get knocked off the current course of raising rates, but will they slow down [coming rate hikes]? Probably.”

The Federal Reserve raised interest rates a quarter point last month, the first time since 2006, but minutes from the Dec. 15 to Dec. 16 meeting showed that not all of the bankers were completely on board with the initial rate hike, despite the unanimous vote, because of concerns over inflation being less than expected.

The Fed isn’t “chomping to follow up last month’s rate hike as early as this month, or possibly even in March unless the economy, and possibly inflation, shows more spunk than shown recently,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

shutterstock_136265849While the refinancing boom has slowed, that’s only because the majority of Americans who could refinance to a fixed rate have already done so, so the impact of “rate-shock” when short-term adjustable rate mortgages (ARMs) readjust will be minor compared with what happened between 2007 and 2012, when many Americans could no longer afford their new housing payments and defaulted.

Currently, despite an increase in bank repossessions rising almost 60% in November 2015 compared with a year earlier, the percentage of loans in foreclosure nationally is the lowest level since 2007, according to the Mortgage Bankers Association. Foreclosures reached a peak of 4.6% in 2011 at the height of the real estate bust.

“The recent rise in bank repossessions represents banks flushing out old distress rather than new distress being pushed into the pipeline,” said Daren Blomquist, vice president of Irvine, Calif.- based RealtyTrac, a real-estate research company.

There’s less risk of a new mortgage bubble

Unlike the 2005 to 2012 mortgage meltdown, when so-called liar loans and exploding ARMs flooded the market, the subsequent pullback in credit may have been overly tight, but it does mean in 2016 there are fewer real estate bubbles waiting to pop. While it’s true there are markets that have seen incredibly inflated real-estate values such as San Francisco and New York, it’s not fueled by unsustainably loose credit standards.

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“The changes that have taken place over the past five to seven years have built a more stable foundation” in the mortgage industry, said Michael McPartland, a managing director and head of investment finance for North America at Citigroup’s C, -0.01%   private bank. “There just aren’t a lot of the exotic products like interest-only [loans] and super-high loan-to-value [mortgages],” he said. “If things slow down, there will be a contraction, but not a pop.”

McPartland says it may be harder for borrowers to afford a 20% down payment and monthly interest payments that are principal and interest, instead of just interest-only, but the flip side is increased home equity (the national average is 30% equity), so home buyers are less likely to leave the keys on the counter and walk away if things go bad. Foreclosure starts in July of just over 45,000 were the lowest level since November 2005, nearly a 10-year low, according to RealtyTrac.

Foreclosure starts in November 2015 of just over 36,000 were the lowest level since December of 2005, near a 10-year low, according to a Dec. 10 report from real estate data firm RealtyTrac. “What we can expect is for foreclosures to continue falling as banks clear through their backlog of inventory,” Matthew Gardner, chief economist at Windermere Real Estate in Seattle, told RealtyTrac last month.

Help for first-time home buyers

Last year, the Federal Housing Administration began reducing mortgage insurance premiums on loans by an average of $900 a year, in an effort to nudge first-time home buyers and millennial borrowers who might not have much cash for a down payment to finally enter the housing market. The effort appears to have worked, with FHA loans jumping to 23% of all financed purchases in the second quarter of 2015, up from 19% a year earlier, according to RealtyTrac data. The FHA and other federal moves to increase credit, along with a strengthening economy, may just help boost the market for new mortgages in 2016 as much as 10% over last year despite the increase in interest rates, Mike Fratantoni, the chief economist for the Mortgage Bankers Association, said in December.

shutterstock_248104621Those other federal moves include Fannie Mae and Freddie Mac making lower down payment loan options available to more borrowers. In 2014, the agencies began to buy loans with just a 3% down payment, or 97% loan-to-value ratio. Fannie Mae also announced in 2015 that it would allow income from a non-borrower household members to be considered as part of a loan applicant’s debt-to-income ratio. That could help some borrowers, who might have family members on Social Security or disability living with them, or a renter in a basement apartment, to boost their income levels and help them qualify for a loan.

Lower oil prices

At the end of 2008, gasoline prices, which had risen to a record $4 a gallon nationwide that summer, had crashed to under $2 a gallon. In that case, the cheap gas (and diesel) wasn’t a good thing, as the worldwide economy was shuddering to a halt.

While China’s economy is still contracting, the U.S. economy isn’t, so the lowest gas prices since 2009, with the national average now under $2 a gallon, are likely to help the housing market.

“The continuing drop in gas prices is freeing up valuable disposable income,” says Resource America’s Finkel, which can help Americans absorb higher rent payments, or move up to a more expensive property.

Job growth

While jobs typically are a lagging indicator of an economic downturn, the U.S. has had a slow but steady rate of job creation for the past five years. Even with weakness seen during the summer, job gains in 2015 will top 2.5 million, making it the second-best calendar year for U.S. job growth in this millennium, after last year’s 3.1 million. The last time more jobs were created in a two-year period was at the height of the dot-com boom, in 1998-1999.

shutterstock_124303804“The economy continues to create jobs, and the quality of jobs being created has improved as the economic recovery has progressed, with professional and business services leading the way,” said Bankrate’s McBride. “This is indicative of an economic recovery that is sustainable.” And while in this economy, wages have been slow to recover, and it’s been a challenge to get long-term unemployed Americans who no longer count in the official jobless statistics to return to the job market, the job growth has been good enough to boost the housing sector and lure millennial borrowers off the fence.

“If wage growth materializes in a broader way, this will be the catalyst for many existing homeowners to put their homes on the market and finally look for the move-up buy, boosting housing and alleviating the inventory shortage,” McBride said.

(http://www.marketwatch.com/story/5-reasons-a-2009-style-real-estate-meltdown-is-unlikely-now-2015-08-25)

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The Fed Move Doesn’t Matter To Mortgage Rates (Here’s why….)

Mortgage rates follow the yields on mortgage-backed securities. These bonds track the yield on the U.S. 10-year Treasury. The bond market is still sorting itself out right now, and yields could end up higher or lower by the end of the week.

 

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The Federal Reserve did it — raised the target federal funds rate a quarter point, its first boost in nearly a decade. That does not, however, mean that the average rate on the 30-year fixed mortgage will be a quarter point higher when we all wake up on Thursday. That’s not how mortgage rates work.

Mortgage rates follow the yields on mortgage-backed securities. These bonds track the yield on the U.S. 10-year Treasury. The bond market is still sorting itself out right now, and yields could end up higher or lower by the end of the week.

The bigger deal for mortgage rates is not the Fed’s headline move, but five paragraphs lower in its statement:

“The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way.”

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When U.S. financial markets crashed in 2008, the Federal Reserve began buying billions of dollars worth of agency mortgage-backed securities (loans backed by Fannie Mae, Freddie Mac and Ginnie Mae). As part of the so-called “taper” in 2013, it gradually stopped using new money to buy MBS but continued to reinvest money it made from the bonds it had into more, newer bonds.

“In other words, all the income they receive from all that MBS they bought is going right back into buying more MBS,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “Over the past few cycles, that’s been $24-$26 billion a month — a staggering amount that accounts for nearly every newly originated MBS.”

At some point, the Fed will have to stop that and let the private market back into mortgage land, but so far that hasn’t happened. Mortgage finance reform is basically on the back-burner until we get a new president and a new Congress. As long as the Fed is the mortgage market’s sugar daddy, rates won’t move much higher.

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Blackstone Is Officially The Largest Owner Of Real Estate In The World

The biggest private equity firm on Wall Street has seen amazing growth in its real estate division, which has expanded from a $17.7 billion business when Steve Schwarzman took his company public to one that today manages nearly $100 billion worth of property. 

 

Screen Shot 2015-11-12 at 11.38.55 AM(http://www.businessinsider.com/blackstone-is-largest-owner-of-real-estate-2015-11)

 

Steve Schwarzman is America’s landlord, and he’s not afraid to acknowledge it.

 

“We’re now, we believe, the largest owner of real estate in the world,” he told Business Insider in an interview at his company’s Park Avenue headquarters in midtown Manhattan.

“We have a performance record that is… pretty much in a league of our own, we’ve compounded [returns of] around 18% after fees. We’ve had almost no losses of any type.”

‘League of our own’

Time and again, Blackstone has taken on real estate deals — even in down markets — and turned them into winners. Since 2009, according to Blackstone’s website, the firm has put more than $50 billion to use and earlier this year closed a real estate fund worth nearly $16 billion. That fund is separate to the firm’s private equity investing.

After undertaking one of the biggest private equity deals ever, a buyout of Sam Zell’s Equity Office Properties, Blackstone has today sold off most of the assets from the $36 billion deal. It is also in the process of exiting Hilton Worldwide Holdings, the high-end hotel chain Blackstone bought in 2007 at the height of the real estate bubble and salvaged during the financial crisis.

It wasn’t always this way.

Stephen A. Schwarzman, Chairman and Chief Executive Officer of The Blackstone Group, looks on during an interview with Maria Bartiromo, on her Fox Business Network show;

Thomson ReutersSchwarzman, Chairman and CEO of The Blackstone Group, looks on during an interview with Bartiromo, on her Fox Business Network show; “Opening Bell with Maria Bartiromo” in New York

“We started [Blackstone] in 1985,” Schwarzman pointed out speaking with Business Insider. “We made our first real estate investment in 1992; we raised our first fund in 1993. That was eight years after the firm started. Eight years is an endless amount of time when you start a business from nothing.”

More recent transactions include its $6 billion buy of Strategic Hotels, Blackstone’s investment in the building formerly known as the Sears Tower and a $3 billion deal to buy property funds from CalPERS, the largest US pension.

As Blackstone continues its push to expand — with goals to double the size of its assets under management — expect the property business to be a cornerstone of Schwarzman’s legacy.

http://www.businessinsider.com/blackstone-is-largest-owner-of-real-estate-2015-11

 

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