Does Stock Shift Signal Permanent Change on the Housing Horizon?

After a record 10-day high close of the stock market, major indexes finally dropped at close on Friday, March 15 as investors took profits from a two-week blockbuster rally.
According to USA Today Money, “In the 4 p.m. ET close of trading Friday, the Dow Jones industrial average and S&P 500 had lost 0.2% each. The Nasdaq composite index ended down 0.3%.”

Even so, investor optimism about the economy pushed Asian stock markets higher Friday after Wall Street logged more gains and the U.S. job market showed further signs of strengthening. In Europe, the Stoxx 600 Europe index rose slightly to sit around the 298.90 level. Zacks.com reported similar evidences of worldwide consumer confidence, “Benchmarks added on gains yesterday riding on upbeat investor sentiment following a bunch of encouraging economic numbers.”

Richard Leong of Yahoo News concurs, “There is mounting evidence of an improving U.S. economy.” Leong attributed the uptick in attitudes to job growth: “As the U.S. jobs picture brightens despite tax increases and government spending cuts, some analysts remain upbeat about the longer-term prospects for stocks.”

Even more optimistic is pundit Erik Folgate of MoneyCrashers.com: “We really are in a time of huge economic growth, and it doesn’t seem like there is that much room to worry. The growth is a steady growth, and it’s not based on unproven profits like the dot com boom promised.”

Folgate has a point. After all; the last time stocks closed at highs for 10 days in a row was in 1996. So what, if anything, does all of this mean for real estate investors?

• A bullish trend in the stock market often begins before the general economy shows clear signs of recovery.
• People who have money in their pockets and healthy stock portfolios feel better about injecting money into the economy.
• When it comes to selling properties, confident consumers are less inclined to hang onto assets to maximize profits.  So this leads to better deals.

If you’ve been waiting for signs of economic improvement to enter the property investment game, now is the perfect time to act…before financial pundits start recommending real estate investment diversification en masse. Here are five great reasons that you should consider investing in real estate:

1. Cash Flow The most obvious benefit to investing in real estate is income generation from rental income less expenses.
2. Appreciation One of the perks of property investment is the increase in the value of the property over time, let alone when improvements are made.
3. Tax Incentives Depreciation, business expense deductions, and investing tax-free with self-directed IRAs are just a few of the ways investors benefit from buying property. We are not tax experts. So please consult with your accountant to find out what types of discounts and/or credits you may qualify for if you choose to buy income property.
4. Leverage Investing in real estate provides benefits that cannot be attained any other way. Admittedly, real estate is a high-cost investment. But it requires far less out-of-pocket expense than most other investment opportunities. For example, when you purchase stocks, you have to ante up $200,000-plus in order to buy $200,000 worth of stock. On the other hand, when you purchase real estate, a $200,000 investment may require only 20% of the total property value (in this case, $40,000). Of course the details depend on your credit history, etc.
5. Inflation Resistance Inflation resistance is part and parcel for real estate, since the monthly mortgage payment is fixed. So while prices for goods and services rise, monthly mortgage payments do not. You can actually benefit from inflation as a property investor because you will have the freedom to raise rents, which will improve your bottom line.

To wisely invest in this current economic climate, hire a professional property management company that can help you seamlessly navigate home-buying, rehabilitation, renovation and rental. Whatever property management firm you choose, verify personnel are experienced in locating ideal tenants who pay on time, take care of your investment and leave your property in great condition. The right property manager will also be able to find you additional properties, handle new purchases, direct rehab, manage repairs, keep you well informed and handle all communications with your tenants. At Mesa Property Management, we do all of this and more…taking the pain out of property management.

High Desert Real Estate Market Commentary

In the most recent issue of the Bradco High Desert Report, which covers real estate news concerning the northern portion of San Bernardino County and the Inland Empire, Joseph Bradco’s team focuses on economic issues affecting the cities of Adelanto, Barstow, Hesperia, Victorville, and the town of Apple Valley.

Bradco’s team admits that the immediate condition and short-term projections for real estate across the country are disappointing. The good news is that real estate investments are more accurately weighed and measured over a period of years. So, in that respect, the High Desert of California remains one of the most promising of all real estate markets in the country.

Most pundits agree the recent recession was considerably deeper in terms of percentage points than the one that affected Southern California after June 1990. Sadly, the recovery from the most recent recession is a good deal more anemic than was the previous recovery, suggesting happy times for real estate properties (except for those who know how to profit from adversity) are still in the distant future.

Charts and research prepared by Dr. Alfred J. Gobar, chairman of Alfred Gobar Associates, and included in the report, are intended to help decision makers make choices over the next 3-10 years instead of right away. After all, most gainful investments are made over time instead of in the pursuit of hasty profits.

To those interested in residential property investments, Gobar advises: “Those interested in the High Desert real estate market, should have patience in order to identify attractive real estate market opportunities,” adding, “despite modest new construction, approximately 140,000 new units have been added or are in the pipeline to be added to the total housing stock in Southern California.”

Gobar’s piece also highlights a significant increase in employment trends for California, which he says have recently outperformed the general trends for the U.S. overall. Since employment levels directly affects housing, Gobar included statistics in his report about the High Desert in particular, noting that, at the peak of activity, more than 8,000 units a year were being authorized by permit in the area. The current figure hovers more closely at just 350 units, which indicates we are hardly out of the economic woods.

So how can real estate investors generate rental income in the High Desert circa 2012? One of the important factors revealed in this month’s Bradco Report is the fact that much of the recent real estate activity has been of a qualitative nature—purchase of distressed assets that lend themselves to be reworked for enhanced value.

Since much of the real estate activity observed recently has been of a qualitative nature—purchase of distressed assets that lend themselves to be reworked for enhanced value, there remains a reliable way to turn a profit in the Inland Empire, provided you are willing to purchase, renovate and rent distressed homes to qualified tenants.

The days of scooping up homes at bottom dollar and waiting for time to pass to drive up price seem to be behind us. But the good news is that steps can be taken by industrious investors who are not afraid of adding value to the properties they purchase.

To take advantage of the current market, work with a reputable property management firm, which provides a full range of services for investors, covering everything from investment analysis to purchase, property rehab to marketing and tenant placement to ongoing property management. At Mesa Property Management, we take the pain out of property management, offering technology-based solutions for collection, repairs and payments that provide maximum return on investment. For more information, call 760-713-6690 or email info@mesaproperties.net.

If You Buy a Short-Sale Property, Get Ready to Wait

 

This article from MarketWatch does a good job summarizing the hurdles that prospective investors face when trying to buy a home via short-sale. The most frustrating of the five is having to wait, sometimes a LONG time, without getting any feedback as to the status of the offer. To see the entire article, click here.

By Amy Hoak, MarketWatch

 

CHICAGO (MarketWatch) — Those searching for the best housing bargains on the market might consider buying a short-sale property. But there’s an important qualification for buyers interested in going this route: They need plenty of patience.

 

In a short sale, a homeowner’s lender agrees to accept less than is owed on the mortgage for the property. It’s a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.

 

Higher home prices ahead

Sales of new and existing homes are picking up month over month, and prices may soon follow. But the crosscurrent is whether unemployment will continue to rise, says USC real-estate economist Delores Conway. Stacey Delo reports.

 

“Over the past three to six months, the servicers have really become aware that short sales are the best way to reduce their losses… when a modification is not an option,” said Travis Hamel Olsen, president of National Short Sale Center, a company that facilitates short sales nationwide on behalf of homeowners and real estate agents. The short-sale option also is less damaging to a seller’s credit than a foreclosure, he said.

 

A short sale can also be attractive to a home buyer since the lender will often accept bids on the property that can be 10% or more below the market value, determined by the prices of comparable, nearby properties, Olsen said.

 

Although the mortgage balance is probably greater than the price a seller could expect in a traditional sale, the lender may be willing to take less than it’s owed in a short sale if it can avoid the further expenses of foreclosing and taking over the property. The savings, however, often come at the expense of a home buyer’s time.

 

“Short sales should be called long sales,” said Leslie Tyler, vice president of marketing for ZipRealty. “In some cases, it could take months for a buyer to hear back from a lender.”

 

For Kristine and John Williams the savings seem to be worth the wait.

 

Kristine Williams says they’ve found “the perfect house” in Brentwood, Calif., although the process is taking longer than they originally thought. The couple waited four months for an answer from the bank, and then had to revise their bid lower as the market continued to sour.

 

Their current bid is $550,000, on a home that was appraised at about $1 million three years ago. They’re hopeful the current bid will be successful, but realize it could be months before they find out if the offer is accepted.

 

“In general, it takes a minimum of two months to get a response from the bank whether they will accept or counter your offer,” said Rob Jenson, CEO of The Jenson Group, a Las Vegas-based real-estate firm. “That process could take longer.”

 

Are the savings worth it to you? Consider these five caveats before shopping for a short sale:

 

1. You’ll wait in the dark

 

Perhaps just as frustrating as the wait time is the fact that you likely won’t be privy to details as the deal is progressing. That could mean going months without an update.

 

Banks are “ramping up their capability for short sales,” said Dennis Green, general manager of ForeclosurePoint.com. But it hasn’t made the process much easier.

 

“Where our buyers have been the most frustrated is the lack of status or information,” Tyler said. Saying “we want an answer by this Friday or we’re going walk… doesn’t make a difference,” Jenson said.

 

There are reasons for the wait: A lender could be considering multiple offers. If the seller had both a first and second mortgage, that could also make the process more complicated. The Williamses ran into both scenarios, slowing their process down — and that’s not unusual. The homeowner also has to prove their financial hardship to the lender.

For the rest of this article, as it appears in MarketWatch, click here.