According to a report released by First American CoreLogic estimating that the typical U.S. homeowner whis is currently in a negative equity position will not see positive equity in their homes until late 2015 to 2016. Furthermore, in some depressed markets, the underwater homeowner won’t see positive equity until 2020 or later.
According to an earlier report by First American CoreLogic, once a homeowner has over 25 percent negative equity or the mortgage balance is $70,000 higher than the current property value, homeowners begin to default with the same propensity as investors, meaning they no longer feel like they have to do whatever it takes to keep their home and consider walking away, see that as a better financial alternative. In the 4th quarter of 2009, the average amount of negative equity an underwater homeowner had broker the $70,000 threshold.
Even with the current lending programs introduced from the Obama Administration, underwater homeowners will find it hard to be optimistic enough to stay in their homes. This means short sales and foreclosures will continue to steadily stream in over the next couple years supplying the investor pool with consistent inventory.
Tuesday, April 20, 2010
Friday, January 29, 2010
Buy It Now and 2009 Housing Review
I’m not going to spend oodles of time showing you the analytics of a bunch of properties. Suffice to say, I sifted through more than 100 homes and 40 multi family properties currently on the market, and narrowed it down to 15 homes, and 8 multi family properties I would characterize as “Interesting” and worthy of watching. There are a few that, if I can borrow the eBay phrase, I would “Buy It Now.”
Buy It Now #1
711 Bayview in Emerald Hills, Redwood City listed at $825,000. It has some issues with a leaky roof, and some interior damage. But the property is 2500 square feet with a view that lives up to the streets name. And with larger homes in Emerald Hills trading in todays market at $500 per foot, this property has plenty of room to make the repairs necessary. In addition, the property would fetch $3500+ in monthly rent which gives an investor an option to buy and hold or just fix and sell.
Buy It Now #2
68 Arch St, Redwood City for $438,000. This is a 2 unit property with a 2 bed 1 bath unit plus a studio. Great Westside location, close to downtown, and at this price, produces positive cash flow with limited money down. With a $200,000 down, property would make more than $500 per month.
I’ll keep watching for more, because as time progresses, many property that fall under the “Interesting” category, can become buys very quickly. Speaking of interesting…below is a review of the housing markets in 2009 compliments of my friend and collegue Mark Martinho……
The end of this decade was one huge reset button for everything of value. The Down Jones Index started 2000 at around 10,500 and it ended 2009 at around 10,500. The DJI did shoot up to 14,000 in 2007, but that was all wiped away over the next two years.
Similarly, average single-family home prices in San Mateo County started at around $900,000 in 2000 and shot up to $1,400,000 by 2007. However, we closed the past decade with an average home price of about $900,000.
The good news for local homeowners was that 2009 ended on a strong note. December home inventories in San Mateo County were about 20% below the past couple of years, but still well above those in the hot seller’s markets. December sales were also strong, 358 homes vs. around 250 for this time of year in both 2007 and 2008. Home prices also bounced back from around $700,000 in December 2008 to $950,000 in 2009. This increase in average value was due to two phenomenons. First, high-end homes were not selling at all in early 2009, but did begin to sell once more towards the end of the year. Despite selling at discounted prices, the mere presence of expensive homes once again in the average price calculation was enough to skew the average upwards.
Second, the start of the year began with the bottom of the market selling like hot cakes, homes in the $300-$500K range were selling quickly and often at 40-50% off their 2007 prices. Multiple offer situations became common at the bottom towards mid 2009 and this market actually increased in price. An increase in value at the bottom was not surprising since it appeared the huge price drop was unwarranted. During this period cash became king at the low-end as investors poured in to purchase many of the cheaper homes, leaving regular home buyers hoping to purchase a home with a loan, out to dry. Many of the cheaper properties were bank owned and banks preferred cash offers, even if they were a little lower, over waiting for a loan that may never materialize.
Overall sales for the year were a little better in 2009 (4,068 homes) vs. 2008 (3,876). This 5% increase in sales was a welcome improvement, but it is still a far cry from the 6,000 homes per year of the mid 2000s. Over all, only about 65% of homes put up for sale in 2009 sold vs. about 85% in years like 2004. In my opinion, price stability depends on this 65% ratio not decreasing too much. The biggest catalyst that could negatively impact this ratio are the inventories owned by banks that are not yet on the market for sale; sometimes referred to as shadow inventories. In Q3 of 2008, shadow inventory was 1.1M homes, in Q3 2009 it shot up to 1.7M. How many of these are in the Bay Area and how quickly will they be put up for sale?
Where does all this go next, as mentioned above, housing inventory will play a significant role, but so will jobs and interest rates. Both are still a complete unknown to anyone offering an honest opinion. While unemployment rates are slowing down in the US, we need about 120,000 jobs created per month just to keep up with the population growth and new college graduates. Yet every month, we have been loosing jobs. As for the future of interest rates, opinions are all over the board. Today, they are extremely low and let’s hope they stay that way for both buyers and sellers.
I do believe the real estate market is at least in a good position to recover if no shocks are applied to the system. The overall 20-30% price drops have made homes much more affordable for buyers coupled with the low interest rates. In addition, the rent vs. own comparison also bodes well for home sellers. Today, with tax savings calculated into the equation, the monthly payment for a homebuyer is not that much more than renting in many cases. Most people will always be willing to pay a small premium to own their home vs. living in someone else’s property.
No. of Avg. Avg
Year Closed Sales Price DOM New Listings
1998 5,746 $520,901 40 7,830
1999 6,434 $620,436 45 7,273
2000 5,659 $838,782 29 6,944
2001 4,740 $791,809 46 8,033
2002 5,951 $787,021 44 8,211
2003 6,454 $805,867 46 8,471
2004 6,564 $957,347 33 7,756
2005 5,877 $1,097,324 32 7,998
2006 5,006 $1,126,572 43 7,723
2007 4,172 $1,209,838 51 7,452
2008 3,876 $1,038,395 71 7,550
2009 4,068 $876,820 72 6,496
Dec-09 $948,117
Buy It Now #1
711 Bayview in Emerald Hills, Redwood City listed at $825,000. It has some issues with a leaky roof, and some interior damage. But the property is 2500 square feet with a view that lives up to the streets name. And with larger homes in Emerald Hills trading in todays market at $500 per foot, this property has plenty of room to make the repairs necessary. In addition, the property would fetch $3500+ in monthly rent which gives an investor an option to buy and hold or just fix and sell.
Buy It Now #2
68 Arch St, Redwood City for $438,000. This is a 2 unit property with a 2 bed 1 bath unit plus a studio. Great Westside location, close to downtown, and at this price, produces positive cash flow with limited money down. With a $200,000 down, property would make more than $500 per month.
I’ll keep watching for more, because as time progresses, many property that fall under the “Interesting” category, can become buys very quickly. Speaking of interesting…below is a review of the housing markets in 2009 compliments of my friend and collegue Mark Martinho……
The end of this decade was one huge reset button for everything of value. The Down Jones Index started 2000 at around 10,500 and it ended 2009 at around 10,500. The DJI did shoot up to 14,000 in 2007, but that was all wiped away over the next two years.
Similarly, average single-family home prices in San Mateo County started at around $900,000 in 2000 and shot up to $1,400,000 by 2007. However, we closed the past decade with an average home price of about $900,000.
The good news for local homeowners was that 2009 ended on a strong note. December home inventories in San Mateo County were about 20% below the past couple of years, but still well above those in the hot seller’s markets. December sales were also strong, 358 homes vs. around 250 for this time of year in both 2007 and 2008. Home prices also bounced back from around $700,000 in December 2008 to $950,000 in 2009. This increase in average value was due to two phenomenons. First, high-end homes were not selling at all in early 2009, but did begin to sell once more towards the end of the year. Despite selling at discounted prices, the mere presence of expensive homes once again in the average price calculation was enough to skew the average upwards.
Second, the start of the year began with the bottom of the market selling like hot cakes, homes in the $300-$500K range were selling quickly and often at 40-50% off their 2007 prices. Multiple offer situations became common at the bottom towards mid 2009 and this market actually increased in price. An increase in value at the bottom was not surprising since it appeared the huge price drop was unwarranted. During this period cash became king at the low-end as investors poured in to purchase many of the cheaper homes, leaving regular home buyers hoping to purchase a home with a loan, out to dry. Many of the cheaper properties were bank owned and banks preferred cash offers, even if they were a little lower, over waiting for a loan that may never materialize.
Overall sales for the year were a little better in 2009 (4,068 homes) vs. 2008 (3,876). This 5% increase in sales was a welcome improvement, but it is still a far cry from the 6,000 homes per year of the mid 2000s. Over all, only about 65% of homes put up for sale in 2009 sold vs. about 85% in years like 2004. In my opinion, price stability depends on this 65% ratio not decreasing too much. The biggest catalyst that could negatively impact this ratio are the inventories owned by banks that are not yet on the market for sale; sometimes referred to as shadow inventories. In Q3 of 2008, shadow inventory was 1.1M homes, in Q3 2009 it shot up to 1.7M. How many of these are in the Bay Area and how quickly will they be put up for sale?
Where does all this go next, as mentioned above, housing inventory will play a significant role, but so will jobs and interest rates. Both are still a complete unknown to anyone offering an honest opinion. While unemployment rates are slowing down in the US, we need about 120,000 jobs created per month just to keep up with the population growth and new college graduates. Yet every month, we have been loosing jobs. As for the future of interest rates, opinions are all over the board. Today, they are extremely low and let’s hope they stay that way for both buyers and sellers.
I do believe the real estate market is at least in a good position to recover if no shocks are applied to the system. The overall 20-30% price drops have made homes much more affordable for buyers coupled with the low interest rates. In addition, the rent vs. own comparison also bodes well for home sellers. Today, with tax savings calculated into the equation, the monthly payment for a homebuyer is not that much more than renting in many cases. Most people will always be willing to pay a small premium to own their home vs. living in someone else’s property.
No. of Avg. Avg
Year Closed Sales Price DOM New Listings
1998 5,746 $520,901 40 7,830
1999 6,434 $620,436 45 7,273
2000 5,659 $838,782 29 6,944
2001 4,740 $791,809 46 8,033
2002 5,951 $787,021 44 8,211
2003 6,454 $805,867 46 8,471
2004 6,564 $957,347 33 7,756
2005 5,877 $1,097,324 32 7,998
2006 5,006 $1,126,572 43 7,723
2007 4,172 $1,209,838 51 7,452
2008 3,876 $1,038,395 71 7,550
2009 4,068 $876,820 72 6,496
Dec-09 $948,117
Thursday, January 7, 2010
$369,000 for Redwood City home still not cheap enough
If the adage "You make money on the BUY" is true, how do you determine what is a "good buy" and what isn't. What is the sorting process in selecting a property and determining what the right price to pay for a property is? The best way to learn, is to go out and see LOTS of property; but who has time to spend their entire day looking at homes?? Since, it is my job, I do! Here I will share a few of the places I visit each week. And, thanks to today’s technology, I can video my adventures for you to see. (Go to www.youtube.com/realsmartvideo and you'll see 3 clips for this property)
The first property I visited turned out to be a “don’t buy” property. It looked good on the surface, and at $369,500 sales price for a west side Redwood City home, I was motivated to view the home minutes after being listed. You can check out a video tour of the property.
Here’s the profile:
Single Family Home on Clinton St in Redwood City listed for $369,500
2 bedroom, 1 bath located West of El Camino, South of Jefferson Ave. in a neighborhood with a mixture of single family and multi family dwellings.
What drew me to this home was, of course, the price. But the price relative to other prices in the same neighborhood. In the last 3 months, the average price for a home under 950 square feet, in this area, was $498,000. In addition, homes in this range will rent for close to $2000 per month. (I have one rented right now for $1950 just up the street). It appeared to be priced well, and had the potential to provide very good cash flow. The picture of the front of the house looked promising, and certainly lower square footage homes were selling. But the property was only 670 square feet, and while it looked on paper to have potential from the outside, the inside was a different matter. It wasn’t the square footage that killed it for me, but the floor plan. The house itself was in moderate condition, but there was 70 square feet of wasted space at the entry of the home, and another 80 square feet wasted to get to the bathroom. Wasting 150 square feet in a 670 square foot property is painful. Certainly with some floor plan modifications, the home would show itself in a better light. But floor plan changes triggers alarms for me. Remodeling is cheap, moving walls is expensive. Not only is more construction involved, but it takes longer to complete. Time is money, and a vacant home doesn’t produce any money! I’ll take an old, beat up house with a good floorplan everyday over a home in good condition that requires moving around walls to make it marketable. Once more, a small home with the right floorplan, can feel big. And, a large home with an awkward floorplan feels small. At a list price of $369,500 I would easily sink $50,000 into the home to remodel and improve the floorplan. This means the rental options looks much less appealing. And to fix and sell the house looks worse. By the time, I would sell the home, I would be into it the house $450,000 with all the costs….much too high a number for this home.
In the end, what appeared to be a screaming deal, turns out to be overpriced for a RealSmart investment by at least $50,000. Speaking of smart investments, the RealSmart Fund is a fantastic vehicle to allow all investors to invest in a pool of properties….it's a mutual fund of Peninsula real estate. You can get more information at our website http://www.realsmartgroup.com/ or just contact me directly.
The first property I visited turned out to be a “don’t buy” property. It looked good on the surface, and at $369,500 sales price for a west side Redwood City home, I was motivated to view the home minutes after being listed. You can check out a video tour of the property.
Here’s the profile:
Single Family Home on Clinton St in Redwood City listed for $369,500
2 bedroom, 1 bath located West of El Camino, South of Jefferson Ave. in a neighborhood with a mixture of single family and multi family dwellings.
What drew me to this home was, of course, the price. But the price relative to other prices in the same neighborhood. In the last 3 months, the average price for a home under 950 square feet, in this area, was $498,000. In addition, homes in this range will rent for close to $2000 per month. (I have one rented right now for $1950 just up the street). It appeared to be priced well, and had the potential to provide very good cash flow. The picture of the front of the house looked promising, and certainly lower square footage homes were selling. But the property was only 670 square feet, and while it looked on paper to have potential from the outside, the inside was a different matter. It wasn’t the square footage that killed it for me, but the floor plan. The house itself was in moderate condition, but there was 70 square feet of wasted space at the entry of the home, and another 80 square feet wasted to get to the bathroom. Wasting 150 square feet in a 670 square foot property is painful. Certainly with some floor plan modifications, the home would show itself in a better light. But floor plan changes triggers alarms for me. Remodeling is cheap, moving walls is expensive. Not only is more construction involved, but it takes longer to complete. Time is money, and a vacant home doesn’t produce any money! I’ll take an old, beat up house with a good floorplan everyday over a home in good condition that requires moving around walls to make it marketable. Once more, a small home with the right floorplan, can feel big. And, a large home with an awkward floorplan feels small. At a list price of $369,500 I would easily sink $50,000 into the home to remodel and improve the floorplan. This means the rental options looks much less appealing. And to fix and sell the house looks worse. By the time, I would sell the home, I would be into it the house $450,000 with all the costs….much too high a number for this home.
In the end, what appeared to be a screaming deal, turns out to be overpriced for a RealSmart investment by at least $50,000. Speaking of smart investments, the RealSmart Fund is a fantastic vehicle to allow all investors to invest in a pool of properties….it's a mutual fund of Peninsula real estate. You can get more information at our website http://www.realsmartgroup.com/ or just contact me directly.
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