The Bottom of the Housing Market

For the past two weeks I have given close friends the advantage of the knowledge of when the housing market would hit bottom.  They have  used the information to their advantage.

Investors have used the information to capitalize on adding rental properties to their portfolio. With housing inventories high, sellers giving away equity and mortgage rates at historic lows our investors have begun getting into the mood to purchase.

First time home buyers have also seen this as the best opportunity of their lifetimes to get into home owner ship.  We have some that took advantage of the soon to be history down payment assistance and the $7,500 interest free government loan in addition to the great buys and great mortgage rates to get into that first home.

These purchasing by smart investors and first time homebuyers are starting to chip away at the high inventory levels on new and resale homes.  These actions are the sign of the last of the decline in the home market.

I have called the Bottom of the Housing Market to be November 4.  We don’t know how long we will skid along the bottom but we are almost there and be ready for a steady but slow rise over the next few years.

Yes, if you haven’t you guessed it, that is presidential election day and no matter who wins, the media and the world will all be talking about the happy days ahead.  Any change will turn the media from the naysayers they have been to painting the rosy picture of change.

Now get out there and buy a house to help this economy and remember you have bought at the bottom of the market.

Boy, I’m Glad I Invested in Real Estate

So the Dow and the S&P tumbled nearly 5% in one day.  AIG, Lehman, Merrill, Washington Mutual, all names we grew up with and at some time we invested in, are slowly slipping away as their stock values drop and investors run from them.

Granted I have lost money on a few of my real estate purchases but nowhere so much so quickly as the stock market fell yesterday, and that is he same market that all the investing gurus tell you to get into. That is the same market that the investing gurus told us to get into for the last 15 months since real estate wasn’t safe.

Well let me tell you, my 401k is down to a 201k having lost over 10% since the beginning of the year.  I’ll tell me where is not safe to invest now, its stocks.

Ill take real estate any day.  The rental properties perform each month with the tenant paying the rent even though the values may have stayed steady or dropped a few percentage points.  Atlanta homes have held their value well over the past year and a half.

Boy, I’m glad my bulk of investments are in the safety of real estate. I was able to sleep last night knowing that in the morning the tenants will still be there and paying their rent.

So for all you that tossed all night, think about what the guru said to run from and forget about what they told you to buy.  When all is said and done and the stocks are worth nothing, if you had real estate you would still have the house and land to perform.

Mortgage Rates Fall

With the recent government ‘takeover’ as some call it, of Fannie and Freddie there is a renewed assurance that the secondary mortgage market will continue to function and all outstanding loans will continue to be insured.  This relief has led to a immediate and significant drop in long term mortgage rates for well qualified buyers.

If you have been standing on the sidelines waiting for a sign to jump into investing in the real estate market this is the sign. Investor loans for well qualified buyers are down to as little as 6% on a 30 year fixes loan according to one lender.  There has never been a better time to invest in real estate for passive income, so get going.

Home Inventory Inches Up - No Surprise

I was looking for some statistics on the market and found this informative article from National Association of REALTORS.

As a member, I find that they have several resources and statistics that are helpful when positioning a home for sale or when working with a buyer use to help negotiate the best price for our buyer clients.

Existing-Home Sales Down, Inventory Inches Up

Lawrence Yun, NAR chief economist, says first-time home buyers are critical to the health of the housing market. “About four in 10 homes are purchased by first-time buyers, which frees existing owners to trade up,” Yun says. “With many potential first-time home buyers on the sidelines, a first-time buyer tax credit would have a significant positive impact on both housing and the economy.

Combined with permanent increases to mortgage loan limits and enhancing the FHA loan program, the housing stimulus package working its way through Congress would go a long way toward helping consumers and boosting the overall economy.”

The national median existing-home price for all housing types was $215,100 in June, down 6.1 percent from a year ago when the median was $229,000.

Yun says there is a downward distortion in the price data. “With short sales and foreclosures accounting for approximately one-third of transactions, it’s hard to make an apples-to-apples comparison with a year ago when they were only a minor portion of the market,” he said.

Despite the overall sales decline, unpublished snapshot data shows existing-home sales rising significantly from a year ago in Bakersfield, Calif.; Fort Myers, Fla.; and Las Vegas.

“Sales are now beginning to pick up in Orlando, Fla., Phoenix, and Oakland, Calif.,” Yun sys. “Interestingly, sales fell in Atlanta, Houston, and Kansas City, Mo., despite affordable home prices and solid local employment conditions.”

Mortgage Rates Rise

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.32 percent in June from 6.04 percent in May; the rate was 6.66 percent in June 2007.

Single-family home sales declined 3.2 percent to a seasonally adjusted annual rate of 4.27 million in June from 4.41 million in May, and are 14.8 percent below the 5.01 million-unit pace in June 2007. The median existing single-family home price was $213,800 in June, which is down 6.7 percent from a year ago.

Existing condominium and co-op sales rose 1.7 percent to a seasonally adjusted annual rate of 590,000 units in June from 580,000 in May, but are 19.7 percent below the 735,000-unit level a year ago. The median existing condo price4 was $224,200 in June, which is 2.2 percent lower than June 2007.

Sales Up in the West

West: Regionally, existing-home sales in the West rose 1.0 percent in June to a pace of 1.03 million but are 6.4 percent lower than a year ago. The median price in the West was $288,400, which is 17.2 percent below June 2007.

South: In the South, existing-home sales fell 3.1 percent to an annual rate of 1.85 million in June, and are 18.1 percent below June 2007. The median price in the South was $185,300, down 2.4 percent from a year ago.

Midwest: Existing-home sales in the Midwest declined 3.4 percent to an annual pace of 1.12 million in June, and are 17.6 percent below a year ago. The median price in the Midwest was $175,300, up 2.8 percent from June 2007.

Northeast: In the Northeast, existing-home sales fell 6.6 percent to an annual rate of 850,000 in June, and are 15.8 percent below June 2007. The median price in the Northeast was $256,700, down 12.6 percent from June 2007.

Reprinted from REALTOR® Magazine [July, 2008] with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.

Good News for Atlanta

WOW! It is so great to hear some good news! I found this article and thought you might enjoy it as well. Sorry, I don’t remember exactly where I saw it.

Keep Investing,

Mark

Atlanta Real Estate Market Thrives

Despite a general slowdown of the national economy, commercial construction remains strong in Atlanta. Total construction costs for commercial and multifamily projects permitted last year in Atlanta rose by more than 50% over 2006 figures.

One component of commercial construction is especially booming in Atlanta. The construction of new hotels is proceeding at a pace not seen in Atlanta since the run up to the Olympics. Driven by a growing hospitality sector and an increasing market for luxury condominium residences, 10 hotels are either under construction or in a pre-development phase in the city of Atlanta, including two W Hotels and the first Baccarat Hotel in the continental U.S.

The Hilton Garden Inn opened to guests in March just across from Centennial Olympic Park. Buckhead welcomed a new ultra-luxury hotel, the Mansion on Peachtree, in May. Condominiums at the Mansion on Peachtree start at the $3 million mark.

The commercial real estate market is also benefiting from a growing demand for office space in Atlanta’s urban core. According to the CoStar Group, net absorption for the city’s central business district has been positive for four quarters in a row, outpacing the performance of the suburban markets, which have declined since the fourth quarter of 2007. This has put the overall vacancy rate for the central business district within 0.4% of the suburban markets. More than 4 million square feet of office space is currently under construction in the city of Atlanta to help meet this rising demand.

Allen Plaza is one example of new development taking place in Atlanta. At its completion, Allen Plaza will include more than two million square feet of Class A office space. Two office towers have already been occupied: 55 Allen Plaza, anchored by Ernst and Young’s Atlanta office, and 30 Allen Plaza, the new headquarters for Southern Company. Additional projects at Allen Plaza include two hotels, a 450-unit Post Properties residential tower and upscale retail and restaurant space.

Home Inspector License Law

I thought you might find this information interesting!

Mark Lackey
The REi Team - www.TheREiTeam.com

Governor Vetoes Home Inspector License Bill

On May 14, 2008, Governor Sonny Perdue vetoed HB 1217, which would have required home inspectors in Georgia to be licensed by the state. The bill received bipartisan support in both chambers of the General Assembly. The Senate adopted the measure by a 44-0 vote, and the House voted 137-15 in favor. HB 1217 was supported by the Georgia Association of REALTORS® and by many of the various trade associations for home inspectors.

The governor released the following statement regarding his veto of the bill:
“House Bill 1217 provides a regime to license Georgia’s home inspectors. I am cognizant and respectful of the fact that the advocates for the legislation chose to use and were approved by the Georgia Occupational Regulation Review Council (GORRC).

I have come to believe that GORRC review should be the initial threshold for the creation of a new licensing board. I am also aware that the private sector provides several, voluntary professional organizations to achieve the goals of the legislation. It is my preference that the market – not the State – regulate as many of our industries as possible. Thus, in order to not supplant the good work of the free market with taxpayer funds, I veto House Bill 1217.”

Read opinions about the governor’s veto:
Athens Banner-Herald (5/22/08)

The Good The Bad and the Opportunity

The latest news in home prices put out by the National Association of Realtors for Atlanta has the median home price at $175,500. The good news is that is a 0.9% change above the price a year ago. The US as a whole was down -1.5%.

The latest news on foreclosures shows no end in sight. July filings were up according to Realty Trac, the online marketer of foreclosure properties. Georgia filings were up 75% to 12,602. The bad news is that the Georgia average was one for every 299 housholds, the nations second highest rating.

Looks like the buying opportunities out there are continuing to improve for the savey investor. The deals will keep getting better for those with good credit or cash. Dont miss out on the buying chances across the next 12 months.

Piquing your Interest in Interest Only Loans for Investment Properties

Interest only loans are much the rave and a rapidly growing segment of mortgage industry. Introduced in the last few years they have grown in popularity. The intent of the loan was to provide flexibility for someone like a sales person who gets a big bonus at the end of the year that could plunk down a large principal payment with that bonus. Another application is for those with the discipline to make periodic principal payments.

During the years of rapid real estate appreciation, speculators sought these interest only loans because of the attractiveness of the payments. They were able to buy more than they could qualify for on a 30 year mortgage with the dreams of selling quickly for a profit. They maximized the purchase with minimum carrying costs.

Home buyers that purchased intending to live in the house used this loan program to buy a bigger house. When you couple the slowdown in appreciation in many residential markets with the non payment of principal, you have a prescription for danger.

Smart investors use the interest loan program to minimize their payments and keep their debt to income ratios low. They also are the ones that put back all the positive monthly cash flow into the property with principal payments equal to the cash flow. These investors are reaping the intended benefit of the interest only product.

The investors who pay additional principal payments are paying off the loan faster than with a conventional 30 year fixed mortgage where the principal repayment portion slowly grows and the interest is reduced even if the amount of the payment is constant. By paying down the principal on an interest only loan it results in a reduction in the interest payment amount due each month.

Imagine a payment getting smaller and smaller until it disappears. You end up with a decreasing payment due each month you pay the additional principal.

As investors ourselves, we only apply for interest only loan products, and we practice the principal pay down on all our interest only mortgaged properties. Say for example we have a $220 positive monthly cash flow. We add that amount to the interest payment due each month. If some month an unexpected repair is require, we just lower the $220 additional payment by the amount of the repair.

Our interest payment shrinks each month and so does our payment. Although the payoff is due in 30 years, we will have it paid off far in advance of the time period and remember, the tenant is paying for it all. When I know that it’s the tenant’s money paying off my mortgage I just love to write that mortgage payment.

So if you hold one of those great interest only mortgages congratulations, and remember to use that cash flow from the tenant to grow your wealth.