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So, If Housing Sales Increase, Will Prices Go UP?

Very good question to ask...If housing sales increase will prices go up?

Eventually, the answer is yes, but for now, the answer is no.  It appears that the increase in housing is occurring because lower priced homes are selling faster than higher priced homes and is reflected in the median house price dropping 5% compared to a year ago.  What does it mean?  It means that it is a good time to buy a home.  Whether you saw Alan Greenspan being interviewed by Charlie Rose or you read about it, he had some good thoughts, some uncomfortable insights as well.

Namely, there really isn't any more monetary policy that can occur to 'improve our situation'.  It is going to take jobs and it is going to take confident consumers returning to the market and consuming stuff.  Until then, this is going to be slow going...and house prices are slow going.

So, until the inventory of lower priced homes and distressed inventory, including foreclosures and short sales, is substantially consumed, the prices are not forecasted to rise.

Michael Hobbs August 19, 2011

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Please Take $20,000 & This Foreclosed Home

Representative Ackerman (D-NY) has indicated that he is going to introduce a bill that would pay homebuyers $20,000 if they purchase a foreclosure.

This would not be the first time in history that the government has provided a direct stimulus to Americans to help out the housing market but it would be the biggest one on recent record.

"This would clear the way for new housing starts, and put millions of Americans back to work. It would incentivize corporations to bring their cash cheaply back into the United States. In addition, the newly emancipated billions would further spur the economy," Ackerman said. "Everybody wins."

The full article is at: http://www.housingwire.com/2011/08/17/new-bill-offers-20000-subsidy-to-foreclosure-buyers

Michael Hobbs August 18, 2011

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Is Decline in Homes Sales Related To Foreclosures?

Photo: Bankforeclosuresale.comAn interesting question was posed today...so I thought it best to share it.  The question asked was, "Is the Decline in Home Sales Related to Foreclosures"?

The easy answer is no.  The more complicated answer is yes and no.

So, NO, the decline in home sales is not due to foreclosures.  The decline in home sales is due to fewer buyers being financially capable of purchasing a property (larger down payments, inability to sell their existing house), fewer buyers being approved for the same type of mortgage they received in the past 5 to 10 years, reduction in the overall percentage of employed citizens in this country as well as a general reduction in wages being earned by those that are on the fringe, as well as dislocation of available/experienced labor in that they are not where the jobs are but cannot afford to be / get there.

So, YES and NO, the decline in home sales is due to foreclosures because the increase in distressed housing stock, of which foreclosures are a part of this housing stock, have pushed up traditional inventory supply.  From the basic economics class, an increase in supply with no corresponding increase in demand will have the result of downward pressure on prices...think about trying to buy tickets to a football game later in a season and how much easier it is to buy those tickets and how much less you will pay as the season goes on and your team's record gets worse and worse...a lot less people want to go to the game and therefore more tickets are available at cheap prices.

Additionally, the quality of the increase in distressed housing stock ranges substantially more so than traditional housing stock, so there is a greater range of properties in inventory which requires a greater range of buyers.  Yet in many cases, buyers are either not very sophisticated and cannot discern the difference or they don't care and in an example using fruit, wish to use the offered price of a bruised apple to reduce the asking price of perfectly good apple...and since in many cases, sellers don't have pricing power, they consent.  Granted there is more on this topic..so, there will be more forthcoming.

In summary, it is a bit of both.

Michael Hobbs August 17, 2011

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So, If Buying Is Cheaper Than Renting, What Are You Waiting For?

buy vs. rent

In July 2011, according to Trulia, a real estate website, buying was cheaper than renting in 74 percent of the country's 50 largest cities. In just 12 percent of the cities, including New York, Seattle and San Francisco, renting was cheaper. In the remaining 14 percent of cities, renting was less expensive but close to the cost of buying.

Granted, we are living in interesting times.  In addition to many areas where home prices are still declining, we are experiencing rock-bottom, near-historically low interest rates.  As an example, 30-year fixed mortgage rates were 4.19% and 15-year fixed mortgage rates averaged 3.43%

What to expect going forward?  More of the same.  Why?  Currently, there is nothing on the horizon that provides any indication of growth or acceleration which would fuel rising prices or inflationary pressures (other than cheap money, aka Alan Greenspan's tenure at the Federal Reserve).

Outlook? Housing prices will continue to look cheap, because they are, yet many buyers are not venturing into the market either because they cannot get approved or they're not confident the market has bottomed out and they don't want to be another casualty.  The stock market has been risky enough, but that will rebound.  The housing market is not the place where would-be buyers want to strap themselves to if there's a prospect they'll become a boat anchor, submerged below a mountain of debt with little prospect of floating again.

In summary, the real estate market is going to experience more divergence in local areas where buyers find the area desirable and are those who can buy and see the benefits of low prices and extremely low financing costs take advantage of this low point in real estate.  In the areas where there is not the same desirability, there is a larger risk of price declines.

Michael Hobbs August 16, 2011

 

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Operation Madhouse: FBI Busts Englewood Mortgage Fraud Ring

For some the news wasn't even news, for others it was vindication that sometimes the good guys do prevail.  No matter what it meant to you, it is a step in the right direction.  On August 2, 2011, the U.S. Department of Justice announced that 14 defendents were charged with mortgage fraud involving Englewood area homes, an economically depressed neighborhood in Chicago where foreclosures and distressed real estate are very common.  No dollar amounts were given, but based on some of the appraisals we reviewed over the past two years from Englewood transactions, buyers would purportedly pay approximately $350,000 for a 2 flat which may or may not have been rehabbed.  The main problem was no property in Englewood was worth $350,000 even if fully rehabbed when you considered that 2 flats in areas surrounding Englewood with similar updates and similar rental income were selling for 1/3 the price.  Needless to say, there was some rampant fraud going on.

The full story is available at: http://www.icapweb.com/upload/Hayes%20indictment.pdf or on the USDOJ website.

Michael Hobbs August 15, 2011

 

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Chicago Foreclosure Investment Highlights For August 1-5, 2011

classroom

Welcome to the newest clients of Cherry Picker Investments.  This Blog is intended to be an informative and insightful snapshot of opportunities and successes which come from real estate investing, specifically foreclosures in Northern Illinois and the Chicago-land area.

Well, as parents and families are preparing to send their little ones (and not so little ones) back to school and off to college, vacation season is wrapping up across many parts of the country. Maybe that is why from areas such as Wicker Park and Lincoln Park and Elmwood Park in the city of Chicago to Niles and Oak Park, there were some opportunities to invest in foreclosures which may make you salivate.

For a number of clients of Cherry Picker Investments, parcels of real estate were acquired at foreclosure auctions in Cook County which are sure to improve their overall profitability.

Cherry Picker Investments has a proprietary database which identifies all distressed properties in the metro Chicago areas, including Cook County, Lake County, Dupage County, Kendall County, Kane County, McHenry County and Will County.  Specifically, because these properties are distressed (notice of foreclosure has been filed), most of them eventually end up at a foreclosure auction.  Due to the huge backlog of foreclosure cases, the immense volume of data to track, as well as the unseemingly never-ending judicial process of foreclosure in Illinois, Cherry Picker Investment clients benefit by sorting through all of the clutter to identify the best real estate that meets their investment criteria to bid on and own.

If these properties had not been purchased at the foreclosure auctions, then the properties would have gone back to the bank / lender and become bank-owned properties.  These properties are not short-sales and they are not deed-in-lieu of foreclosure situations.  Once the property is returned to the bank / lender, then the property typically gets listed by the bank's designated Realtor(s) as an REO / Bank-owned MLS listing.

For those real estate investors who are ready, willing and able to strike while the opportunities are profitable, foreclosure buying is an excellent strategy to employ alongside working with an experienced Realtor for properties they find on the MLS, (such as short sale, bank-owned, and estate sales).  Given the challenging and competitive nature of finding great investment opportunities, and the cumbersome and meticulous process of sorting through so much information, Cherry Picker Investments consistently provides the competitive edge that investors need to be successful in foreclosure buying and investing.

"We are seeing an increase in the number of clients who have more funds to invest, either from pooling money from others or using lines of credits from banks, and this is expanding the geography that clients are willing to target real estate investments," said Bardan Azari, Cherry Picker Investments.

 

Foreclosure Investing Success in Illinois for August 1 to August 5,  2011:

3619 W. 62nd, Marquette Park / Midway area
1224 South Albany, Lawndale
7403 S. Saint Lawrence, Grand Crossing / South Shore
3824 Castle Connor, Richton Park
6259 W. Diversey #1N, Chicago
7042 Keeney, Niles
7610 Grand, Elmwood Park #2D
1249 Wolcott #1, Wicker Park


Happy Profitable Investing!

Michael Hobbs August 14, 2011

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How Much Would You Pay For $30 Billion In Single Family Homes?

houses

As a follow up to the previous post, the current government administration indicates that there is approximately $30,000,000,000 ($30 Billion) in single-family real estate owned (REOs) by Fannie Mae and Freddie Mac which they would like to 'move' to other parties.

"Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability," said Treasury Secretary Timothy Geithner.

In perspective, $30 Billion is a huge sum of money, but considering that the U.S. taxpayers have already footed the bill of $140,000,000,000 ($140 Billion) for Fannie Mae and Freddie Mac losses, it is a start on reducing some of the outflow. Furthermore, that $140 Billion is going to address the distressed housing of your neighbor, your family member, possibly even you. No matter what it is going towards, that $140 Billion is understood to be the amount of funded losses on the $11,000,000,000,000 ($11 Trillion) portfolio of U.S. residential mortgage debt which these GSEs, government-sponsored entities, own or guarantee. Although the numbers are staggering, the losses are accounting for 1.3% of the total mortgage debt.

Michael Hobbs August 12, 2011

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250,000 Homes Held by FHA, Fannie Mae and Freddie Mac

foreclosures

The Federal Housing Finance Authority announced that FHA, Fannie Mae and Freddie Mac have 250,000 homes in their inventory.  Less than 100,000 are listed.  an article in DSnews indicated, "Federal officials believe the most effective tactic to take to reduce taxpayer losses and help alleviate the market’s oversupply of homes is to sell off pools of properties to responsible investors who will employ an REO-to-rental strategy."

While 250,000 is not the bulk of the shadow inventory, it does help keep more distressed real estate from coming back into the market which would have the affect of putting downward pressure on existing housing prices.  Granted, if all shadow inventory become rental...then there would likely be a declining trend in rental prices not increasing trend...but that is probably the lesser of two evils at this point...especially given that there are a lot of evils associated with the housing market decline.

Michael Hobbs August 11, 2011

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