Entries Tagged 'real estate indicators' ↓

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Back in March I talked about how the Michigan legislature was trying to destroy real estate values in the state with a new tax system. Well, they passed the tax and now it is in effect.

Take a wild guess who it is going to hurt the worst. You got it, landlords and real estate firms.

So a state with a worse than moribund real estate picture is now adding a huge tax to those who are willing to buy real estate. There are some real rocket scientists in the Michigan Statehouse these days.

The first filings of estimated liability under the MBT were due in April, and some real estate firms are seeing six- or eight-fold increases in taxes, said Kirk Profit, lobbyist for Government Consultant Services Inc.

He’s been retained by some local firms to push for changes in the tax, which replaced the Single Business Tax this year.

Profit said the credits in the MBT for personal property, payroll and research and development don’t benefit property owners and managers.

“There’s not a lot of that activity,” he said.

So you have real estate that is dropping like a rock and raising taxes by 6–8 times for the landlords that might be thinking about buying real estate in the state? Smart, huh…

“It’s going to take away a lot of your profit,” he said. The temptation is to pass along those costs to tenants through higher rents, but that might not be possible today, Chaconas said.

“I’m not sure you can get away with that because the market is soft,” he said. Profit predicted that will be the only option for many landlords. “You’ll probably see a dramatic increase in rents,” he said. via MLive.

Sure, increase rents from what. The economy in Michigan is in the toilet, real estate is not far behind, and you have a social welfare system that is bankrupting the state.

No wonder why we have so many former Michigan residents living in Georgia now, they just might be the smart ones.

“There are some incredible buys out there for first-time home buyers.”

When you start seeing quotes like the one in the headline, you know we are getting near the bottom. In the middle of a gloom and doom report coming out of Florida, and it is very rough there right now, a nugget pops out that starts to say the conventional wisdom may be starting to lag the market.

And like any market, when prices drop far enough, consumers re-enter and start buying. When enough buyers drop in we get a firm bottom. At that stage word starts to filter out to those who have been waiting on the sidelines and the market starts  to turn upwards.

And then 6 months later the conventional media will have a string of articles asking if we have hit bottom.

Sandra Israelson, an agent with Michael Saunders & Co., had bank-owned listings that included a two-bedroom one-bath home on Baldwin Avenue in Sarasota listed for $114,000 and a luxury Siesta Key penthouse in The Pointe that was going for $437,000.
In both cases, the bank asked that the homes be priced at a point that allowed them to sell within 30 days.
Apparently, Israelson struck the right prices. She received four full-price offers for the Siesta Key penthouse within one week, and the pending sale is set to close next month.
The starter home on Baldwin also found an interested buyer, who has made an offer and is waiting to hear back from the bank.
“There are some incredible buys out there for first-time home buyers,” she said. “These homes we’re seeing are the type of houses that would be perfect for them.” via  HeraldTribune.com

According to Wellesley University professor and housing market guru Karl Case, that may very well be the situation we are seeing. The historical trends and demographics of new home starts and sales data are showing what has in the past 40 years show the bottom of the housing market.

Now, I profess to have all the knowledge that Karl Case has on this, and to be honest the housing index he is associated with, that Case Shiller thing that his partner is always shilling, I have never been a huge fan of. However, it seems like Robert Shiller is the poster child of talking the market down. Now Karl Case comes out of the shadows and tells us that the bottom is upon us.

I tend to listen to the quiet guy when he speaks.

Case is basing his optimism, which stands out in a sea of gloomy predictions, on a key economic indicator. It’s not the first time he’s courted controversy. Back when real estate prices were headed skyward, Case was a lone voice predicting a painful real estate downturn.
“Every single time we have gotten to this point, at this time, almost to the exact decimal point, things start to rebound,” Case said.
According to Case, the decline in housing starts nationally has reached a key threshold, dropping below the 1 million mark last month.
Over the past 30 years, this has signaled the end of a real estate market downturn. Housing construction rebounded sharply in the ’70s, ’80s and ’90s after reaching this low point, Case said. via the BostonHerald.com

In one of the best written articles on the housing market problems and how the Federal Governments intervention could make it worst has now been written by J.D. Foster. If you have a few minutes please read it. It is one of the most succinct articles on how much damage the meddling of our government can do to the housing market.

Stop the housing bailout before it undoes all of us – Federal plan could unravel effective private efforts 

I tried to excerpt the best part of the editorial but it is such a solid piece that I can not do it justice by pulling one part of it.

Borrowers by the millions are falling behind on their mortgages. The problems are most severe in a few states. Some, such as Nevada, California and Florida, enjoyed a huge, multiyear speculative bubble that’s now popped in spectacular fashion. Others, such as Ohio and Michigan, are seeing home prices decline because of more fundamental weaknesses in their economies, in some cases significantly exacerbated by extraordinarily foolish state fiscal policies. Yet just about every state is experiencing a housing problem: unusual numbers of borrowers who are delinquent or soon will be, home prices falling a little or a lot and contraction in construction.
Fortunately, the mortgage industry isn’t waiting for Congress to get its act together. Spurred on by the Treasury Department through a program called Hope Now, the industry — supported by services, counselors and community non-profit organizations — is actively seeking creditworthy borrowers who are or are likely to get into financial trouble. Why? To find a way to rework the mortgage or the payment schedule so the borrower can stay in the home.
Since last summer, the industry has successfully reworked more than a million mortgages, and is reworking hundreds of thousands more every month. via the Houston Chronicle.

The United States real estate market has an inventory problem. When there are over 18 million empty homes across the country we have no reason to continue to build new homes. If this were a logical marketplace we would tell builders to take a 2 year moratorium until absorption met demand.

Instead we have builders building 2.1 million homes last year. Yikes! And of those homes almost half of them are now sitting empty. The speculative years between 2000 and 2005 drove construction of homes not based upon need in the marketplace but demand created by speculators. When that demand dried up many of these homes are sitting empty and forlorn.

Now we see in the first quarter of 2008 construction is down significantly which is a great thing. The key thing is to get rid of this overhang in inventory and fill up some of the homes. Once that occurs the market can regain it’s equilibrium and prices will stabilize.

The homeowner-vacancy rate rose to a record 2.9% in the first quarter from 2.8% in the fourth quarter, about 1 percentage point higher than normal. The vacancy rate has jumped in all four regions of the country, as well as in cities, suburbs and rural areas since the housing bubble exploded.

The total U.S. housing stock increased by 2.1 million to 129.4 million in the past year, with about half of that gain accounted for by the increase in vacancies. Much of the newer stock of housing is vacant, the data show.

Of all housing units built for owner-occupancy since April 2000, 10.2% were vacant, up from 8.8% in the fourth quarter and 4.7% two years ago.

While the vacancy rate for single-family homes has risen to 2.5%, the most dramatic increase in vacancies has been in smaller condominium projects. via Marketwatch

The creation of a fully solar home is an ambitious concept. Fortunately the developer is thinking of putting it on the Dubia coastline and not in the middle of Seattle, Washington.

United Arab Emirates (UAE)-based real estate giant Nakheel is planning to build entirely solar-powered homes on its iconic Palm Jumeirah development. “The idea is still under study and we have to make sure it’s feasible before we put in on the market. It’s very difficult to give a deadline but we have a very ambitious plan,” Abdulrahman Kalantar, managing director of Design and Development at Nakheel, told Emirates Business 24-7.
Palm Jumeirah is one of the three palm-tree shaped artificial islands being developed by Nakheel along the Dubai coast. via Thaindian News.

Alphonso Jackson, Secretary of Housing and Urban Development, is expected to resign his post as head of the Cabinet Department. The timing of this resignation is not a great indicator of how the White House and Congress are dealing with housing issues.

There have been reports that one of the stumbling blocks is the relationship between Jackson and the Democrats in the Congress. While this can not be a surprise, the Democrats want huge spending programs enacted to counter the housing issues while the administration is fighting for a market solution, it will put back any agreement between the two.

One of the problems facing the housing industry right now is they do no know how Washington is going to react to the housing and credit problems out there. Companies do not want to make the hard decisions if there is a bailout from Washington coming.

Mr. Jackson, a former top housing official in Texas, Washington, D.C., and Missouri, has consistently denied any improper behavior while leading HUD. Still, his poor relationship with Democrats has hurt the White House’s efforts to broker deals in response to the housing crisis. For example, Democrats have criticized the way he handled public housing after Hurricane Katrina, an issue that has dogged him ever since.

HUD, usually out of the spotlight among the federal agencies, has been at the heart of the administration’s attempts to ease problems for homeowners. Mr. Jackson has been the junior partner to Treasury Secretary Henry Paulson in that effort. At events, the HUD secretary generally stressed the human cost of the nation’s housing-induced financial woes, while Mr. Paulson handled the technical details. via WSJ.com.

Hat tip to the Industry Report.

As housing prices drop folks are coming out of the woodwork looking for bargains. If you are looking in fringe subdivisions far outside of major metropolitan areas they are all over the place. But if you are looking to get a bargain on prime beachfront property that will be very hard to do.

Lets face it, supply of beachfront property is way below the demand and will continue that way as the Baby Boomers retire and expect to have their birthright retirement on the beach. So if you were thinking that the prices for homes overlooking Cape Cod are going to drop dramatically, forget about it. The only place prices are weaker according to Money Magazine are in Florida and Hawaii in the United States and even then you will still pay a pretty penny to get direct access to the beach.

Ross says she sees “great value” right nowin Hawaii, where prices have fallen some 10%. Keith is finding deals in the Caribbean archipelago of Turks and Caicos - particularly the Grace Beach section, where developers overbuilt during the boom.

One market where both Ross and Keith see buying opportunities galore is Florida. The best Florida bargains are in condominiums. Kerry McNulty, a real estate agent in the Panhandle resort town of Destin, says Panhandle prices have fallen 25% to 30% since 2005. A two-bedroom beachfront condo that might have sold for $600,000 in 2005 can now be had for $425,000, he says.  via Money Magazine

There is a great deal of discussion going on in the real estate world that the real estate downturn in the United States is going to mimic the 10 year downturn that Japan went through in the 1990’s. The fear of rampant deflation or at best stagflation is often the fear raised by those who profess doom. Chicken Little works well with these folks.

However, after reading a speech by Edward Lincoln, director of the Center for Japan-US Business and Economic Studies and Professor of Economics at New York University Stern School of Business, most of the fears that cross my mind at 4 am in the morning have been put to rest.

His general thesis is that the flexibility of the United States economy is designed to weather financial storms much easier than the central command economy of Japan. Add to that much stricter and tighter financial controls, problems that linger in Japan get recognized and fixed much quicker in the United States.

This is an enlightening speech and I do hope you have time to read it. Lincoln does not sugar coat our problems, he points out some very glaring ones. But overall he shows how the US economy is resilient and can avoid severe downturns like many are projecting.

On the real estate side, part of the difference may be simply in both economic growth and in population growth. In terms of economic growth, we’re growing at 3.0-3.5% a year, on average, over long periods of time. Japan is now down to probably 1.0-2.0% a year. As you grow, you have more demand for office buildings and things like that. That demand growth is stronger in the United States, and should be stronger over the next decade in the United States, than in Japan.

And similarly with population. We still have a growing population. Japan does not. Japan now has a shrinking population. It is shrinking particularly rapidly at the younger end of the demographic chain, and that means that we are going to see fewer and fewer and fewer new households looking for a place to live. So the longer-term prospects are, I think, for a fairly quick recovery in real estate prices - or at least a turn back up, if not a total recovery - in the United States.  via Asia Times Online

The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money. Alexis de Tocqueville

We are getting closer and closer to the end of the republic and into a world of quasi socialism as the politicians pandering increases. The most recent example is the New York State Legislature looking to enact a 1 year moratorium on foreclosures.

That’s right, essentially they are telling the lenders that they have to suffer an additional governmental tax by having to subsidize homeowners that have essentially no interest in the home. So think about it.

• First, you sign a liars loan and fradulently get a mortgage. (Not all are liars loans but enough to make the point.)
• Second, you fail to pay the mortgage sufficiently and are in foreclosure.
• Third, the lending institution has to absorb the losses that come with processing a foreclosure.
• Fourth, the lending institution may now have to provide you a year of housing free due to the mandate by the government with no confidence that it may be extended.

New York’s one-year moratorium, if passed, would not take effect on a case-by-case basis; it would be mandatory for court-ordered foreclosures. It would impose a one-year delay from the time a lender has proved its entitlement to foreclosure to the time the court order allows the foreclosure to proceed.

The bill, which has been referred to the Judiciary Committees of the Assembly and Senate, calls for the lenders and the homeowners in foreclosure cases to work out monthly payment schedules in the interim under terms that are “equitable and just.”  via New York Times.

With the onerous property taxes that are imposed in the state of New York they would be more ethical by giving a pass on all property taxes to those in foreclosure. For many these taxes are more than their mortgage.

But that would be quite illogical, wouldn’t it.

Hattip to Moke at Altos