Real Estate News and Trends

Recent Relevant Realestate articles 

Homebuilder stocks point to no "bust" for housing market

Kenneth L. Fisher of Forbes.com wrote that the 24% increase in homebuilder stock prices over the last six months as well as the shrinking inventories point to no more slow down but actually an increase in the housing market.

Forget Ocean Front

I had a real estate professor in school who expected one and only one answer for the question: what makes real estate so valuable? The Answer: The DIRT!

He is absolutely right, but now there is a new twist on the game.... not water front real estate, but underwater real estate. I am not particularly sure about how all the legalities work out with this, but I imagine that any buildings must be within the country's water rights area. Only time will tell how this will work out, since I'm sure environmentalists will have a huge problem with this, but business will love the additional work, developers will love the additional profits, municipalities will love the additional taxes. As for how the market will respond, I can only venture a guess that places like this will be great vacation destinations (think Disneyworld's Under the Sea exhibit all around you), possibly a limited market for second homes for those who want a neat vacation destination (limited due to desire to live under water, and financial ability, I'd imagine there are some expensive transportation issues as well), but for primary residences... I'd think the commute would not be worth it.

Condo Branding

Most likely this is only a big city phenomena, because of supply and demand reasons.

Supply side: the ability to differentiate in a saturated market of condo development is limited; leaving us to brand the condos. Each condo comes designed by a big name in fashion/architecture.

Demand side: once a designer configures the living area, not everyone will like the space (just like we all do not like the same clothes or art). In a big city this branding is not a problem since you have a larger population, increasing your chances that you will find people who like the way the condo is designed; In fact, this branding will be strongly attractive to the people who like the design b/c they will be able to move directly in to a living space they already are comfortable with (plus, we all know the pull of big name brands). For those who don't like the design... move on to the next building, maybe you'll like that one better. And if you don't like that building too, well I'm sure there is still a condo out there with 4 white walls.

Home buyer profiles

Although married couples still make up the majority of purchases (61%), single women now purchase 22% of all houses. Single men make up only 7% of the group. Part of this is due to the growth of single women as a group, women have gained financial independence and are having increasingly higher paying jobs, and non-traditional mortgages have opened up doors for all.

National Foreclosure Rates Up

It looks like many individuals are facing foreclosure trouble as their Adjustable Rate Mortgages (ARMs) move upwards. As the monthly costs increase, the number of foreclosures increase as well. This number of foreclosures has two implications:
1) Investors can try to pick up some properties on the cheap;
2) If a particular area has an abundance of foreclosures you can count on it being the result of multiple factors. Not only are ARM rates increasing, but many of these areas are having job troubles (i.e the rust belt) so people have bigger bills but are making less money... foreclosure city. Some other places, like Washington, DC. have actually seen decreases in foreclosures pointing to the stability of the price points established (that's what having the federal government and tons of high paying jobs in the area will do).

Lower Volumes, Same Prices

The author explains where all those housing statistics we hear come from. He breaks down those numbers and explains that the real bust is in sales volume, not prices or property values.

"Sales volumes in the frothiest markets have tanked. But the statistical fact remains: Median prices in 70 percent of the nation's metropolitan areas are still growing, and they are likely to continue to do so."

He explains that the volume has declined while the prices have remained the same because so many sellers are simply holding on to their prices and waiting for the market to pick back up a little.

So as long as you can sit tight with your property for a while, you can still do well while you sell.

Latest Home Prices (Nov 2006)

The Rust Belt and Florida led the way with price declines. Many areas actually continued to see price increases from minor increases to as much as 25%. Check the list to find your location, but remember that these are aggregate numbers for a locale.

Most and Least Expensive College Towns

Interesting timing considering the last article I reviewed (below) was about becoming a landlord in a college town. If you are considering a move to a college town you should take a quick look at this article and see what aspects you should investigate: cost of living, cultural events, sports, etc.

Become a landlord in a college town?

This article is interesting in that it does address important investment factors such as demand (figuring out the university-provided-housing to student ratio, and forecasted enrollment) but the article only has one word of caution: watch out for fickle enrollment. I think the possible swings in enrollment are one of your least worries.

Others which loom larger are:
1) College tenants are unique since they may demand less quality or maintenance, but they do generally cause more damage. Trust me...
2) Universities are pushing for reforms in off-campus housing, increasing landlord responsibility, liability, and cost.
3) Generally these areas have already priced in the current rents into the value so it would be hard to make a value play. If you think you can do a tear down and put in a higher structure with more student density, good luck, b/c the citizens in college towns have the NIMBY theory (not in my back yard) and the zoning laws to back it up.

If you can find a good investment in an existing college area, congrats, but I do not believe this it the next big area of investment.

Buy-Leaseback Plan shows promise

Creative new way to buy land from struggling companies and lease it back. The only problem is that now there is a CNN article on this method and you can guarantee the number of people interested in this method of purchasing real estate has increased the competition.

OFHEO chief economist sees continued gains

Here is an article which finally addresses what the statistics are actually saying.
"In an interview with Fortune, OFHEO chief economist Patrick Lawler seemed to take a different tack. 'The big theme is that prices are still going up in most of the country,'he says. 'Housing is different from stocks. We wouldn't expect huge drops.'"

That's right, prices are still going up, just not at the substantial rates as before. Read the article for more details.

Second-quarter home prices for 151 markets

Everywhere but the Midwest sees gains
Just look through the list to see the home price gains in your area. The article complains, "It was the second consecutive quarter in which home prices failed to repeat the gains of an average of more than 10 percent annually from 2002 through 2005." Again, the numbers point to the same conclusion, people are not getting the over 10% gains, but the home values are still generally rising. If your biggest complaint about your house is that it's only appreciating at 5% and you have a 6% mortgage, try complaining to your parents who can tell you about 1% appreciation and mortgage rates triple today's.

Foreclosures Spike in August

As 5/1 ARMs are being adjusted, as much as 2%, many homeowners are now realizing that the same exotic mortages which got them into their house, is now forcing them out. ARMs are not inherently evil, but the right kind of investor must use them. If you intend to hold a property for a short period, these can be a great way to minimize your holding costs. If you plan to stay in a home longer, then you may use these loans to get into the house and then refinance once you are capable; if you can't refinance you have three options: 1]Be able to pay the new adjusted rates, 2]Sell, 3]Foreclosure.

On the flip side, some investors may see this as a good time to start picking up some property. However, I do not know how these homes are selling compared to actual value, time will tell. 10 years ago you could pick up a house from foreclosure at a fraction of the actual value, but in the past 5 years, many of the foreclosed homes were actually bidded up above value at auctions.

Household income gains

A good measure of housing affordability can be based on the average income of an area. This article updates us with new statistics on average income in certain metropolitan areas. Hopefully the gains in income will translate into more able buyers and therefore a sustained real estate market.

Ain't no distance far enough, to keep me from my 2nd home

Article is on the increase in second home purchases. Many people who found themselves equity rich, cashed out and purchased second homes. One difference between now and a few years ago is that most second homes were drivable beach/mountain/resort homes. Now, with cheaper airfare, the second homes get further and further.

Even the Fed doesn't see a bubble burst.

I agree that MOST areas will not see a collapse in real estate prices. We will not continue to see the rapid price gains of 20-30% in a year, but more reasonable increases are ahead. Remember, much of real estate value is based on job growth... although we have national numbers to track this data, job markets are a local phenomenon. Research the job growth in your specific area!

NYC's Office Rents Climb

New York City continues to see rents climb... and at the same time, vacancy rates are declining. In the article Joseph Harbert, CEO of Cushman & Wakefield NY Metro Region, said, "There are some exciting things happening out there, particularly if you're a landlord."
He really went out on a limb there. How about ONLY if you're a landlord (or his agent)... if you are a renter, I doubt you are cheering the rising rents. In fact, some tenants are escaping the rising rents and heading outwards.

Real Estate links to help you research markets across the country 

Housing Affordability across the US

Interactive graphic on Housing Affordability (percentage of income necessary to purchase a typical home) across over 400 markets in the US.

New York Real Estate Data

MillerSamuel.com provides tons of data on the NY real estate market. Check out their charts or do a search through their data. Not complicated to use and can be very beneficial if you are shopping in NY. Also has articles on their interpretations of the NY market.

Bureau of Economic Analysis

Remember the fundamentals - increasing business presence, increasing wages, increasing population all contribute to increasing real estate demands.

ActiveRain

An online resource for real estate agents. Their thoughts can be useful as you look around your market.

Area Real Estate Articles 

My opinions on these articles are directly below each link.

"Manhattan housing market shows weakness" by cnnmoney.com

Interesting article because the title and most of the facts and figures conflict. The author spends the first half hilighting numbers that point to anything but a slowdown (increased median home prices for instance). The author then cites a few NY market critics who point to the $/square foot, which has not changed much despite the median price increase. This means that although people are spending more, they are buying more home too (makes sense). What does not make sense is the author's take that this is weakness?! Have we been so spoiled by recent market craziness that when buyers look at a house prior to purchasing it, ask for a home inspection, or (gasp) even want to not buy the first available home... we consider it a weak market? THIS IS NORMAL. My guess is that many of the authors of articles such as this are aware that a "housing market is rising" story does not get as much play these days as a "housing market is going to hell in a handbasket" story. My suggestion as always, read all the articles you can, but then never take the figures the author uses at face value. Do your homework please!

Study says Las Vegas looks to "Cool Down", not "Burst"

This article supports the theory that Las Vegas real estate is not looking to "burst" but rather cool down. I believe the author is a bit biased considering the article was written for the Southern Nevada Home Builders Association. He claims that although builders have received many cancelations of new home orders, this is very typical for the business. I believe that many of these cancelations are due to investor/purchasers pulling out of the market. This can affect the market in several ways:

1) Some investors hold their current properties, using them as rentals. Although their canceled orders will decrease demand, the fact they are not in a position where they must sell will stop these investors from trying to sell their properties at the same time. This will allow prices to come to adjusted market levels without a burst.

2) Some investors have overstretched themselves, and not only have they canceled orders, but they must now also sell their current properties. The new glut of homes on the market will increase supply at the same time of the decreased demand... this means a much quicker price drop in this area.

3) Some of these canceled orders will help the market slow to a simmer, as opposed to going cool. The canceled orders will hurt the big construction companies, but as a real estate owner in this area, you will be benefited by the slowed growth to new housing. As long as the job market in Las Vegas continues to improve, a new house slow down will help current home sales settle to the market price (and this price very well may continue to rise, albeit at a a slower pace).

In reality, what happens in Vegas will be a mix of all three of these outcomes. Read the article and weigh it appropriately as you make your decision to invest. As always, doing your homework is necessary!

Home Cancelations and the Market - The Las Vegas Counterpoint

This article provides the other vantage of the above "Study says Las Vegas looks to 'Cool Down', not 'Burst'."

Real Estate-Speeder Analogy 

This analogy is for figurative purposes only, of course we do not support speeding in any way. Always obey the law.

"Sharp home price pullback"?

---

A relevant analogy that I have come up with:
Every week you commute to work.
The speed limit on your commute is 65mph.
Last week, you drove in at 100mph.
This week, you are driving at 75mph.

What do you think about this week?
A] I used to drive at 100mph, why am I driving so slowly now?!
B] 75mph is not as good as 100mph, but I am still getting ahead.
-----

Why this analogy you ask? Well, if you read the CNN article I have linked above, you will see. The article states we are in the sharpest home price pullback since 1975 (quarter to quarter results).

The funniest thing is that the article actually says, "Of the seven states that saw more than 80 percent appreciation over the 2001-2005 period," read the report, "only Rhode Island's appreciation rate has increased over the last year. The remaining markets experienced rapid decelerations."

What is dumbfounding to me is that the author attempts to confuse the readers here. "Only Rhode Island's appreciation rate has increased over the last year." Yes, going from a 20% yearly gain to a 10% yearly gain is similar to decelerating from 100mph to 75mph, but you are still doing well!.

The article continues by giving the following example: "Florida prices, which spiked nearly 113 percent over the past five years, rose JUST 2.51 percent."

It is funny that we have become so real estate spoiled to think that a 2.51% gain in one quarter warrants a "JUST" to quantify the gain. 2.51% for one quarter is great. No, you aren't going to get a 30% return on the year, but you are shooting for over a 10% return in one year! That is as good as the S&P returns, plus you get to live in that house, and there are tax benefits to owning a home.

Moral of my story: it isn't the real estate apocalypse yet. 75mph ain't bad and neither is a 10% gain.