Archive for May, 2013

Foreclosures, Short Sales Decline in Q1

05/30/2013 BY: ESTHER CHO 

Over the last year, sales for distressed properties showed steep declines amid a backdrop of slower foreclosure activity and rising prices, according RealtyTrac’s foreclosure and short sale report.

During the first three months of this year, 190,121 properties that were in some stage of foreclosure or bank-owned were sold. The first quarter total represents a quarterly and yearly decrease of 18 percent and 22 percent, respectively.

At the same time, the share of foreclosure-related sales represented 21 percent of all sales in Q1, down from 25 percent a year ago. At its peak in Q1 2009, foreclosure-related sales accounted for 45 percent of all sales. According to RealtyTrac, Georgia led as the state with the largest share of foreclosure-related sales in Q1, at 35 percent.

In addition, the share of properties that were not in foreclosure but sold as a short sale fell to 15 percent, down 10 percent from Q4 2012 and down 35 percent from a year ago. However, in Rhode Island, Connecticut, and Massachusetts, the share of non-foreclosure short sales ranged between 40 and 44 percent.

“We expected foreclosure-related sales to be lower given the downward trend in new foreclosure activity nationwide over the past two and a half years, but the decrease in non-foreclosure short sales was a bit of surprise given the 11 million homeowners nationwide still underwater,” said Daren Blomquist, VP at RealtyTrac.

Though, in some markets, Blomquist explained rising home prices could be the reason for the slowdown in short sales.

“Underwater homeowners may be willing to stick it out a few more months or even years in the hope that they will be able to walk away with money at the closing table and without a hit to their credit rating, and for lenders a failed short sale may no longer translate into bigger losses down the road given that average prices of bank-owned homes are rising – at a faster pace than non-distressed home prices in many markets,” he added.

In the first quarter, the average price for properties in foreclosure rose 3 percent from the year before to $167,095. Compared to the previous quarter, the price is 1 percent lower. Meanwhile, short sales sold for an average price of $178,392, up 5 percent Q1 2012, but down 4 percent from Q4 2012.

While the average price of a foreclosure-related sale experienced more subtle changes on a national level, RealtyTrac found certain markets saw dramatic annual price gains. In San Jose, the average price of foreclosure-related sales surged 30 percent compared to a year ago. Other markets where foreclosure sales prices climbed included Dayton, Ohio, (+27 percent), Phoenix (+26 percent), Las Vegas (+23 percent), and Sacramento (+21 percent).


Flippers Ride Housing Wave

In California, Homes Bought and Resold Quickly Reach Highest Levels Since 2005.


[image]David McNew for The Wall Street Journal

Real-estate investor Robert Ganem, shown in a Ladera Ranch, Calif., home, said he flipped 20 houses last year, double the previous year.

LADERA RANCH, Calif.—Rising home prices have fueled the return of a practice that some blamed for inflating the bubble: house flipping.

In California, the number of homes sold in recent months that had been flipped—or bought and resold within six months—has reached the highest levels since late 2005, according to PropertyRadar, a real-estate data firm. About 6,000 homes have been flipped in the state this year through April, or more than 5% of all homes sold statewide.

While flipping is re-emerging nationwide, brokers say it is happening most in California, where home prices have risen sharply over the past year. Six of the 10 largest price gains in major U.S. cities over the past year have been in California, according to Zillow. In April, home values rose by 25% from a year earlier in San Jose, San Francisco and Sacramento, and by 18% in Los Angeles.

“When prices rise, this trade works. It’s not anything more sophisticated than that,” said Christopher Thornberg, an economist with Beacon Economics in Los Angeles. Prices are shooting up due to the short supply of homes for sale, which partly reflects the reluctance of homeowners to list homes at prices down sharply from their peak.

Between 2003 and 2006, investors helped to inflate the bubble by buying multiple houses and condominiums, many of them newly built, and then quickly reselling them at higher prices. No-money-down loans fueled many of those purchases. When prices began to fall, investors unloaded properties at big discounts or walked away from them, accelerating the downturn.

The industry is split over whether the current flipping activity could lead to potential problems. Jed Kolko, chief economist and a vice president at Trulia Inc., an online real-estate site, says the current activity isn’t indicative of a bubble. “A bubble is when prices are rising fast from high levels,” he said. “We’re not there now.”


Today’s flippers are stronger financially. Flipping homes requires lots of cash because banks aren’t making loans to investors who don’t have large down payments. While some investors have bought many homes that can be rented out, it usually isn’t feasible financially to rent out more expensive properties.

Another big difference: Many investors are buying and fixing up neglected homes, including foreclosures, that ordinary buyers might not have the cash or the patience to tackle. For their part, flippers say they are doing the market a service and are buying homes overlooked by others, either because they need repairs or because they aren’t widely marketed. But some real-estate agents are raising concerns that investors are taking advantage of tight supplies.

Competition for homes “is reaching bubble proportions, and I’m very wary of it,” said Rich Worcester, a real-estate agent in San Diego who flipped about 25 homes last year for himself and clients. Mr. Worcester is representing a colleague who paid $675,000 last month for a foreclosed three-bedroom home in San Gabriel, a Los Angeles suburb. After installing new appliances, relandscaping and staging the empty house with furnishings, it hit the market for $867,000 earlier this month. Mr. Worcester said it hasn’t yet received any offers, and he conceded he may cut the price.

Investors generally make all-cash payments, which gives them an extra advantage over buyers who must complete a lengthy mortgage-approval and home-appraisal process.

Robert Ganem beat out four other offers this year when he paid $600,000 for a short sale—in which a home is sold for less than the amount owed on its mortgage—in Ladera Ranch, in southern Orange County. He made cosmetic renovations—fresh paint, new hardwood floors and kitchen tiles—before selling it a few weeks later for $755,000.

“A year ago, I couldn’t give them away. I was definitely swimming against the current,” said Mr. Ganem, who said he flipped 20 houses last year, double the previous year. Before he became a full-time real-estate investor, Mr. Ganem worked as a mortgage broker in Los Angeles. Flippers get a “bad rap” in the public eye, he said. “Most buyers want a home that’s move-in ready. We come in and make repairs that a bank or an underwater owner is not going to do.”

Meanwhile, the growing competition from investors is unwelcome news for ordinary buyers. After waiting years for prices to hit bottom, “buyers are jumping in before prices bounce so high they can’t afford it,” said Christine Donovan, a real-estate agent in Costa Mesa, Calif.

Parviz Goshtasby, who moved to Southern California three years ago, is finding few homes available to entry-level buyers in Newport Beach, where starter homes can begin at $800,000. “I slowly realized that I can’t compete with these investors,” said Dr. Goshtasby, a plastic surgeon.

After three unsuccessful offers, he agreed to pay $1.6 million for a home in January after the seller agreed to finance a 10% second-lien mortgage, but the deal fell through when the seller later got cold feet. Two weeks ago, he offered to pay the $1.2 million asking price on another home that ended up selling to a cash buyer.

Here is an interesting article that should be of interest to everyone?

Is the Dollar Dying? Why US Currency Is in Danger?  02/14/13 12:49 PM ET

Getty Images

The U.S dollar is shrinking as a percentage of the world’s currency supply, raising concerns that the greenback is about to see its long run as the world’s premier denomination come to an end.

When compared to its peers, the dollar has drifted to a 15-year low, according to the International Monetary Fund, indicating that more countries are willing to use other currencies to do business.

While the American currency still reigns supreme — it constitutes $3.72 trillion, or 62 percent, of the $6 trillion in allocated foreign exchange holdings by the world’s central banks — the Japanese yen, Swiss franc and what the IMF classifies as “other currencies” such as the Chinese yuan are gaining.

“Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown,” Dick Bove, vice president of equity research at Rafferty Capital Markets, said in a note. “But it will be, and this defrocking may occur in as short a period as five to 10 years.”

Bove uses several metrics to make his point, focusing on the dollar as a percentage of total world money supply.That total has plunged from nearly 90 percent in 1952 to closer to 15 percent now. He also notes that the Chinese yuan, the yen and the euro each have a greater share of that total.

“To the degree that China succeeds in increasing its market share of the world’s currency market, the United States is the loser,” Bove said. “For years, I have been arguing that the move of the Chinese makes perfect sense from their point-of-view but no sense for the Americans.”


Hedge funds are making billions betting against the Japanese yen. Greg Zuckerman, author of “The Greatest Trade Ever,” offers insight.

For a country with a budget deficit in excess of $1 trillion a year, the consequences of losing standing as the world’s reserve currency would be dire.

“If the dollar loses status as the world’s most reliable currency the United States will lose the right to print money to pay its debt. It will be forced to pay this debt,” Bove said. “The ratings agencies are already arguing that the government’s debt may be too highly rated. Plus, the United States Congress, in both its houses, as well as the president are demonstrating a total lack of fiscal credibility.”

Bove is not the only one sounding the reserve currency alarm, though the issue has fallen off the front pages as hopes for a sustained U.S. recovery have taken hold and the stock market has surged to near-record highs.

But the looming battle over budget sequestration in Washington could revive long-standing fears of fiscal stability.

“If (dollars) no longer offer the safety that investors have come to expect, they will not function as the stable collateral required by bank funding markets,” Barry Eichengreen, a professor at the University of California, Berkley, warned in a Financial Times commentary late last year. “They will not be regarded as an attractive form in which to hold international reserves. And they will not be seen as a convenient vehicle for merchandise transactions.”

To be sure, the markets at this point are not acting like the dollar is in severe trouble. The greenback has maintained its position as a general safe haven in times of trouble.

“Longer term, of course, countries are going to diversify away from the dollar if they can. There are more favorable investment opportunities out there if you can catch yield,” said Christopher Vecchio, currency analyst at DailyFX, a trading firm. “Despite the increase in risk to the U.S. dollar and Treasury, investors still feel safest at home.”

But the Federal Reserve’s successive quantitative easing programs, which have created $3 trillion in new greenbacks, continue to spur worry over the dollar’s status.

“The No. 1 security issue we have as a nation is the preservation of the U.S. dollar as the world’s reserve currency,” said Michael Pento, president of Pento Portfolio Strategies. “It’s a thousand times more important than a nuclear bomb being tested by North Korea. It’s a thousand times more important that we keep the dollar as the world’s reserve currency, and yet we are doing everything to abuse that status.”

The dollar’s seemingly precarious status is why Pento remains bullish on gold and believes the dollar’s demise as the premier reserve currency could end even sooner than Bove predicts — perhaps by 2015.

“Five to 10 years — that would be an outlier,” he said. “I would say 2015, 2016, that would be the time when it becomes a particularly salient issue. When we’re spending 30 to 50 percent of our revenue on debt service payments, we enter into a bond market crisis. The dollar starts to drop along with bond prices. That would set off the whole thing.”

Here are some tools that Real Estate Investors might find useful.  What app’s do you use?  Is there a Real Estate App you wish you could find?  Please Share your experience with these and other Real Estate Apps you have tried.

 Property Fixer

Property FixerProperty Fixer is for the flipper who wants to quickly analyze the potential profit in a house they intend to fix up and flip to a retailer buyer.

It allows you to input the address, a photo, size of the property, description, expenses including holding costs, improvement expenses, etc.  From the data you input, it calculates your profit margin and return on investment.

>>Get the App

 Property Evaluator

Property Evaluation App

Input the property information such as address, projected rents, expenses, financing information, improvement costs, and the app will calculate every imaginable financial metric.

It will give you a full “buy and hold” projection along with detailed purchase analysis for a single property or for an entire portfolio of properties.  The reports can be emailed or printed. If you are a “buy and hold” investor, check out this app.

>>Get the App

  Sign My Pad

This is good if you make a lot of offers every week and are keeping track of paperwork that has to be printed, signed, scanned, and emailed can be a real hassle.

If you want to eliminate paper, check out this app. It’s a PDF app that allows the user to open a PDF file, sign it, save it, and send it without ever needing to print it, scan it, or fax it.

It’s a big time saver and will save you tons of paper each week.

>>Get the App

  The Landlord AppThe Landlord App

If you’re managing your own rental properties and keeping track of everything on paper, you’ll like this app because it puts all the information right onto your smartphone or tablet.

It allows you to keep track of tenants who have not paid their rent, upload postings direct to Craigslist, and track your portfolio financial performance a whole lot more.

If you’re a landlord who is on the go, check out this app because it may help you organize everything, go paperless, and have everything right on your smart phone or tablet for easy convenience.

>>Get the App

I hope these help – please post your comments and feedback and start a conversation on useful app’s for Real Estate Investors!

A Lender’s Perspective: Pre-Construction Suggested Items for Project Management – A Few Things To Consider.

For those that are Fixing and Flipping or Buying and Holding, I thought I would post some suggested tips when managing your own project.  This is from my construction control management experience and while most rehabbers, builders, developers and investors know a lot of these suggested steps, my posting is just meant as a helpful guide-line reminder, to assist you in your successful completion of future projects.  Let me know what you think and if you have any questions, please leave them here or email me directly at Wishing you luck and success with all of your projects. 

Pre-Construction Suggested Items for Project Management

1. Building Permit requirements

2. Additional Insured requirements – (general & subcontractors)

3. Project Plan Set availability, if any

4. Quality control is the contractor’s responsibility to adhere to specifications

5. Subcontractor’s contact information list for lien waiver tracking

6. Progress payment (Draw) submittal requirements

a. Spreadsheet format with requested line item levels of completion

b. Lien waiver releases

c. Invoices for stored materials, services, etc

d. Design changes that may impacts costs

e. Contingency line item impacts

f. Progress Schedule changes

g. Copy of building permit cards

h. Inspection dates within 48 hours of request

i. It’s safe to assume that “If it’s not seen, it’s not going to be funded”

7. Discussion of project schedule, date of agreed work completion

8. Who has authority to approve project changes?