Timely, Accurate Pre Foreclosure Data

Predictions of the death of the California residential real estate market may have been premature. While the market has a long way to go, August real estate figures show August sales surging. This sharp uptick in California real estate numbers shows that – while some properties are once again beginning to move – opportunity still exists for investors to capitalize on golden buying opportunities.

Before we explain the numbers, it’s important to tell you what the numbers mean. First, the following number isn’t the actual number of properties that closed escrow in the month. Instead, the figure represents the tally of how many properties (single family homes, condos, etc.) that would close over a rolling 12 month period assuming the current pace of sales is extended to a full year, factoring in seasonal adjustments. Based on these figures, August saw 497,390 units close, compared with 457,930 in July, an improvement of 8.6% over July’s numbers. (For purposes of comparison, there were just 451,520 units at this point in 2010, an improvement of 10.2% year-over-year.)

Perhaps more telling for the California statewide real estate picture, the average sales price rose to $297,060 — an increase of $3,000 from July. This figure is still well below the average sales price a year ago, which was about $320,860. While statewide real estate prices may be showing signs of stabilizing, prices in the Los Angeles metro area seem to still be dropping — falling an average of $4,180 to $275,100 from $279,280 in July. This is modestly lower than the $290,490 a year ago.

So what do these numbers tell us? In short, these numbers speak loudly to the fact that California’s real estate market is still in harm’s way. While the market is no longer in free fall, the market is miles away from health.

Investors in the financial position to capitalize on California’s weak housing market stand to gain the most — if they act quickly. New Notices of Default are filed every month as a new batch of homeowners begin experiencing difficulty making mortgage payments. Information is power, which is why thousands of investors turn to Default Research to give them accurate, up-to-date Notice of Default filing information.

How does this help an investor hoping to purchase pre-default properties? There’s a brief, fleeting moment in time — that short window between when a homeowner initially breaches the terms of their mortgage agreement and when the default actually occurs — when an investor stands the best chance of purchasing a property with favorable pricing. Once that window closes, the stakes (and property pricing) are higher — much higher.

To learn more about how Default Research could become an integral part of your investing strategy, visit www.defaultresearch.com.

While construction of single family properties is on the decline, the pace of new construction of multi-family units, primarily apartment buildings and townhouses, has picked up dramatically. In February, 2011, the number of multifamily construction projects was up 78% over January’s number, on pace for 183,000 units.

To put that 183,000 figure into perspective, in 2009 there were only 97,300 multifamily apartment units built. In the 52 years of U.S. Census Bureau’s tracking of this data, the highest this figure has been was in 1972, when 906,200 multifamily apartment units were built.

Reason for the Increase

There are many reasons for the increase in multifamily building starts, but the biggest reasons are:

• Spread between rental rates and mortgage prices and rents – Right now, apartment rent is considered by many to be more affordable than purchasing. Even with ultra-low interest rates, many would-be homebuyers are opting to pay rent – currently averaging about $700 monthly – instead of taking on mortgage payments (that brings other ownership costs such as property taxes, and other costs)
• Falling prices of residential real estate – Because residential real estate property values have declined by an average of 27% since 2006, many potential buyers are renting until property values stabilize more. Uncertainty seems to rule the current housing market, so until potential buyers have more confidence that the market will improve, they’ll forego making purchases to prevent further erosion on the value of property they purchase
• Foreclosure crisis – As many as 1.5 million homeowners annually are expected to lose their homes to foreclosure with the next three or four years. Because so many people will be entering the rental market, the multifamily industry is responding by ramping up construction to increase the supply of available apartments

Cost Can Be A Challenge for Developers

As new apartment building development projects begin, developers are well-aware of the cost. The Consumer Price Index (CPI) for building materials is 4.9%, compared with 0.4% for office buildings. Because the office building CPI most closely follows that of more upscale multifamily real estate, many developers are opting to invest much more heavily in developments that will command higher rents. If CPI figures continue to increase, many building contractors will eventually pass those increased costs onto developers.

Many Contractors Helping Keep Construction Costs Down

While the wholesale cost of construction materials relied upon by contractors to build is rising dramatically, contractors are reluctant to pass along those increased costs. The severe economic downturn impacted contractors’ income – according to the Census Bureau, new apartment construction fell to a 50-year low in 2009. Because competition for construction projects remains fierce, many contractors are absorbing the increased costs. When construction projects (and wholesale costs) increase, at some point contractors will reach a tipping point where they will be forced to pass along the increased costs.

People Renting Now; How Long will it Last?

Right now, many Americans have made the conscious decision to rent because monthly rental payments are more affordable than buying. Developers are well-aware of the mindset of renters. They know that if real estate prices continue to drop, it’s just a matter of time before the dynamic changes, and more renters begin buying real estate again. When that happens, multifamily real estate investor run the risk of having too many available units for then-current demand, which could potentially drive rents down.

The latest release of the Housing Scorecard, the Obama administration’s analysis of the current housing market, was released recently. The Housing Scorecard confirms what many already suspect – that while the market has a long way to go before it returns to health, the market is improving, and housing is still affordable.

Housing Affordability

Near-record low mortgage rates have prompted more than 9.5 million homeowners to refinance. The savings realized by those refinancing – estimated at $18.1 billion – has resulted in reduced payments for millions. Coupled with still-low real estate prices, Americans purchasing real estate are able to capitalize on comparatively affordable property.

In a Nutshell, Housing Market “Fragile”

Housing affordability doesn’t mean the housing market has entered a period of prolonged stability. While the number of existing homes sold in January increased on a month-over-month basis, this number is still well below the sales figures seen throughout much of 2010. With foreclosures and delinquencies trending downward, administration officials are optimistic that the worst of the crisis has passed.

“In the face of the deepest economic recession and housing crisis in decades, the Obama Administration has taken unprecedented action to promote stability in the market – keeping millions of families in their homes and helping millions more to save money by refinancing. But the data clearly show that the market remains extremely fragile,” said HUD Assistant Secretary Raphael Bostic.

“While we cannot stop every foreclosure, we know that many responsible homeowners are still fighting to make ends meet. Through the broad range of programs this administration has put in place, we can help reach those homeowners as early as possible.”

Administration Efforts May be Paying Off

The Obama administration has implemented a variety of federal programs to try to help more Americans keep their homes:

• HAMP trial modifications – 1.5 million (April 2009-January 31, 2011)
• FHA loss mitigation/early delinquency intervention – 730,000 (April 2009-January 31, 2011)
• HOPE Now proprietary modifications – 2 million (April 2009-January 31, 2011)

To date, the total number of mortgage rescue agreements entered into between homeowners and lenders is 1.8 million – twice as many as foreclosures completed between April 2009 and January 31, 2011. What is unclear is how many foreclosures would have been completed had it not been for the “Robo Signing” controversy that rocked the mortgage industry last year.

The current real estate market remains unsettled, and low interest rates are helping those refinancing or purchasing real estate to save considerable money; government programs are helping those facing foreclosure to remain in their homes. The market will recover, but it will take time.

The biggest economic downturn since the Great Depression caused millions of Americans to clamp down on spending and carefully consider whether expenses were necessary before spending money. Americans now seem to believe that their jobs, their homes and their prospects for the future have improved enough to open their wallets and begin spending again.

Employment Outlook Improving

Millions of people lost jobs, faced reductions in hours worked or otherwise saw their income decline; fear for the future permeated the thought processes of many people. The falling national unemployment rate – now less than 9% — provides psychological evidence that things really are improving, and that people are beginning to see evidence of the improved economy with their own eyes.

49% of Americans surveyed in the Bloomberg Consumer Comfort Index view the nation’s economy positively – more than at any point in the last year. While the number is lower than many might like, it lends credibility to the idea that consumer confidence is building, and may very well lead to increased consumer spending as people begin making purchases that were delayed because of economic pessimism.

Approximately 70% of the U.S. economy comes from consumer spending, so as confidence increases, the natural result of spending will be increased demand for things like cars, computers and clothes to electronics, health club memberships and electronic gadgets. This increased demand will flood the economy with cash – money that can be spent on hiring new workers and firing up the long-dormant engine that is American business.

Data Show Fuel Prices Pressuring Spending; Confidence

While Americans are increasingly optimistic about their prospects for financial success, one glaring factor is weighing down consumer confidence: high gasoline prices. With tension in the Middle East at its highest point in recent memory, oil prices have caused a dramatic spike in gasoline prices. As prices increase, dollars that could potentially be spent on consumer purchases are diverted to pay for gas, which reduces the amount of money people have for other purchases. Many economists fear that high fuel prices could put a damper on consumer spending and result in another round of reduced spending.

Americans Cautiously Optimistic – Depending on Who You Are

People are generally more optimistic about their prospects for financial success, but some of that optimism depends upon where you sit in the economic food chain. While the national unemployment rate has dropped below the psychologically important 9% rate, millions are still out of work. Long-term unemployed tend to view their prospects for economic success more pessimistically than those who are working.

In addition, new applications for unemployment insurance are dropping; down to 391,000 from 413,000 the week before. There seems to be a direct correlation between first-time unemployment applications and the Comfort Index: About 72% of the time, the index shows improved consumer confidence in weeks when unemployment applications drop.

With Consumer Confidence, Income Matters

Consumer confidence and income seem to go hand-in-hand. People earning less than $15,000 per year were generally pessimistic about the economy, with a reported confidence reading of -68.6, although it is an improvement over the -76.6 reading a week ago.

People earning more than $100,000 per year are much more confident about the economy as a whole, with a Comfort Index reading of -0.3, up from -4.6 a week ago.

What It All Means

While the numbers are broken down based on income, gender and other factors, the overall Comfort Index tells a striking story: Only 27% feel that now is a good time to make needed purchases, up from 25% a week ago. 15% believe the economy is in good shape.

The numbers show that Americans have a much-improved view of the economy; however, the numbers also reveal that millions of Americans are taking a wait-and-see approach to the future. Time will tell how much the economy – and the economic outlook of Americans – improves in the coming weeks.

Two categories of homeowners are opening their collective wallets and spending money on repairs and renovations – those who have gotten great deals on foreclosure properties and long-term homeowners who have opted to fix the home they have instead of purchasing a different one. As the economic recovery picks up steam, this trend is expected to accelerate.

Foreclosure Buyers

Foreclosure properties represent a great opportunity to save money on real estate, although many foreclosures need sometimes-extensive repairs. Depending on the property, repairs could range from simple cosmetic changes to full-gut renovation projects.

The promise of huge savings on the cost of real estate has prompted millions of residential buyers – people looking for a great deal on a primary residence and real estate investors wanting to get their hands on cost-effective properties – to take on the responsibility for returning these types of properties to livable condition.

Fixing Up Existing Homes

Other homeowners are opting to repair their existing homes – fully remodeling properties to meet their needs. Again, the types of repairs made vary widely from property to property. Some homeowners will make simple cosmetic repairs while others will extensively remodel, sometimes to the point that before and after photos bear little resemblance to one another.

If space is an issue, many homeowners aren’t afraid to add a room to their existing home or to convert unusable space to living quarters. Adding walls, knocking down walls or otherwise modifying the existing look is being done with increasing regularity – all with an eye toward saving money.

Reasons for This Trend

This increasingly popular trend is occurring for a multitude of reasons:

• Homeowners like their homes – In some cases, homeowners really like their homes. With some modification, existing homes can continue to meet their needs for the foreseeable future. Instead of radically altering the landscape of their lives, many homeowners find it preferable to simply change their existing home to suit their needs instead of searching for another.
• Credit remains tight – Credit markets remain out of reach for millions of Americans, particularly if the recent economic downturn resulted in job loss or income reduction. Because lenders are still very picky about employment and credit issues, some homeowners find it easier (or more affordable) to make repairs to their existing home instead of seeking new financing for another property.
• Low home values – Another casualty of the recent housing crunch are home values. Because declines in property values erased trillions of dollars in home equity, many homeowners no longer have access to home equity loans or lines of credit. Many home improvements/modifications can be made by do-it-yourselfers – at a fraction of the cost of hiring contractors, and can often be done on an all-cash basis.

How Repairs and Modifications Are Being Made

There are basically two ways homeowners are making repairs/modifications to their existing homes: they’re hiring contractors to do the work for them or they’re doing it themselves:

• Do-it-Yourselfers aren’t afraid to swing a hammer on the weekend and take advantage of the opportunity to save a substantial amount of money on home repairs and improvements. Not everyone is qualified to make repairs, but others have family members or friends who will take on these home improvement projects.
• Hiring contractors – When making your own repairs or modifications is too scary or you lack the expertise, it’s best to bring in a pro. The recent economic downturn has dramatically increased the level of competition for a dwindling pool of available work. As a result, homeowners are able to reap the financial savings and can get more done – for less – than at any point in recent memory.

Regardless of how repairs are being made, the end result is the same. Remodeling is surging – and this trend will continue for the foreseeable future. The last time remodeling slowed down to this extent was in the 1960s. The future looks increasingly bright for anyone qualified to remodel or otherwise make home repairs

With home foreclosures around the country up the last few years, there are a lot of people who are suffering, and losing their homes. But there are also some who are gaining, especially those who handle the paperwork involved in a foreclosure. Lender Processing Services (LPS) is one of those companies that have been reaping the benefits of foreclosed homes.

LPS, a Jacksonville-based company, employs around 2,500 people and is a subsidiary of Docx LLC, located in Alpharetta, Ga. The company took an area of their business that used to be much less lucrative, handling foreclosure documentation, and has seen some hefty gains thanks to the current economic downturn. So much so that this area of the business has moved to the forefront and has become the biggest area of the company, raking in almost half of the company’s $1.2 billion in revenue just for the first half of the year.

In recent news LPS has had a class action lawsuit filed against it because of the alleged wrongdoings and mishandling of foreclosure paperwork. The company works with law firms that are suing the homeowners who have mortgages that are behind. Docx LLC is being investigated by the U.S. Attorney General’s Office, in regard to allegations that they engaged in falsifying foreclosure proceeding documents.

Upon hearing of the Docx allegations, LPS has announced that they have taken actions to correct any problems. The lawsuit against LPS, which is separate, has been filed in the U.S. Bankruptcy Court, and alleges that the company was taking part in a fee-splitting deal with law offices, when it came to foreclosure and bankruptcy cases.

Since these issues have been in the news, LPS’ stock has been falling and some experts believe that the company will be facing significant liability issues because of the problems with the foreclosure documentation. The company’s stock recently reached its lowest point since April 2009.

Across the country, there is a trend in home prices stabilizing. This comes as good news for both buyers and sellers. Right now, it also seems like it is also an ideal time for people to purchase a home. And it is, if you can actually qualify. Following the mortgage meltdown, the stakes have changed, when it comes to getting a mortgage approval. Today, only those with good credit are getting the green light.

Many people would like to purchase a home right now, especially with the prices being so appealing. But what they find when they go to apply for a mortgage is that their credit score just doesn’t cut it anymore. In fact, Zillow Mortgage Marketplace has reported that around a third of all the people who are in the buyer’s market don’t actually qualify for a mortgage because of their credit score.

Today, those with a credit score of 620 or less do not even qualify for a mortgage. In comparison, those with a score of 740 and up will qualify for the best mortgage loans available. So, if you are somewhere in between, you may qualify for a loan, but will pay a higher interest rate.

The good news is that your credit score is not a sealed deal or a lost cause. It can always be improved with a little bit of effort. To raise your credit score, you just need to do things like pay your bills on time each month, and limit the number of account applications you are applying for.

Additionally, there is another issue that lowers credit scores that people may not even deserve. Many people have errors on their credit reports that they are not even aware of. Because of this, it is important to review your credit report yearly and send the agency a written dispute regarding any errors you find.

If you are trying to work with people who are stressed out about selling their home, it can really put a strain on the process. And, in this tough economic time, there are plenty of reasons for homeowners to be stressed out about selling their home.

No matter what the reason for the stressed out sellers, there are some ways you can handle the situation for a more successful outcome. For starters, give these tips a try:

• Back it up. If you are going to suggest to the seller that their house is worth less than what they are wanting to get for it, you will need to do some homework and provide the backup to prove it. Sit down armed with the latest comparables and reports that will show them where your proposed price is coming from.
• Be compassionate. This is a tough time in the market, as you may know. But having some compassion and showing some empathy for their situation can go a long way toward helping them feel more relaxed about the process. Sometimes just listening to them and showing you care can make a world of difference.
• Discuss alternatives. Gently ask them about the alternative situations that may arise if they do not sell. Will their home go to foreclosure? If you can help them to see that getting less for their home is still better than the alternative, then they will be more likely to embrace the lowering of the home price.
• Get a second opinion. If you can get another opinion in helping to determine the home’s current value, it can be quite helpful. A great way to do this is have the seller get a home inspection, so that the condition of the home can be assessed and taken into consideration. Sellers can often avoid lowering their home price if they make necessary repairs that would otherwise bring the value down.

This is a tough time for sellers. Just recognizing that letting them know you understand it can help in the long run. Taking these measures can also help keep you from being stressed out while working with such clients.

Back in the 1990s, the commercial real estate market was hit hard. There was too much overbuilding and it left many unoccupied office spaces sitting without anyone to call them home. Fast forward to today and we are in a similar atmosphere. Only this time it is not so much from overbuilding as it is from the lack of demand for office spaces.

With so many people across the country out of work and businesses struggling to keep their doors open, many people are simply not looking to rent an office or opt for a larger one. Instead, they are making do with what they have, even finding creative ways to get more people to work in a smaller space, in order to save the risks associated with opting for the larger office space. At least until things begin to stabilize for the commercial real estate market. And recent signs point to the fact that there is some hope in this area.

The recent office rental records indicate that it is beginning to stabilize. While the recovery is expected to be slow, any signs of a recover are welcoming for most commercial real estate owners.

With declining rents and rising vacancies, many commercial buildings have joined the ranks of those “underwater” homeowners in owing more on their property than what it is now worth. Additionally, many have seen their property go into default, be foreclosed or lost to bankruptcy.

While many areas are seeing small signs of stabilization, some areas that also had a lot of home foreclosures, such as Las Vegas, Phoenix and San Diego, are still seeing their commercial office rents continue to fall.

As things in the business sector stabilize, large buildings are bought or occupied. Recently, the John Hancock Tower in Boston was purchased for $930 million and the Securities and Exchange Commission rented a 900,000 square foot building near the National Mall, for $44.90 per square foot.

Just a couple of years ago, those businesses that wanted to set up a temporary shop were pretty much left scraping the bottom of the barrel. They got the leftovers in malls and shopping centers, simply because permanent businesses took up the prime locations. But tough economic times have changed the commercial real estate market, when it comes to getting a great location, even though you may only want it for a short time.

Rather than signing lengthy and expensive contracts for occupying a great mall storefront, many businesses are finding that they can get that same high-traffic space without making a long-term commitment to be located there. A good example of this is seasonal, such as Halloween and Christmas, shops that open up and only stick around for a couple of months each year.

A few of years ago, a Halloween shop that wanted to open up for two months during the busy season would be left with those places that most businesses weren’t exactly in line for. Today, that Halloween costume store can get their hands on a short-team lease, and on a prime location.

While many commercial property owners have for years let seasonal shops open up and sign short-term lease, others are now finding they can get the same deals. Those small businesses that would like to test the market, without signing a lease for a year or two, are finding it easier to do so. Many businesses are taking advantage of this in order to test the market and see if their business can even make a go of it in this tough economy.

The dynamics of commercial property rentals has shifted as the economy has done the same. The good news is that with so many businesses closing up, this could be a win-win situation because property owners are filling spaces, while consumers are finding more places to shop.