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Six Ways Investing in Real Estate Can Save You Money

In Buyers, Commercial Real Estate, florida, Investing, Investor, IRS, miami, miami beach, Miami-Dade County, Multi-Family Real Estate, real estate, Roth-IRA, Self-Directed IRA, Sellers, tax deductions, Tax Matters on May 10, 2013 at 1:28 pm

There are many investment vehicles. Stocks, bonds, art, coins, postage stamps, toys, commodities and real estate, among others.

Some economists even suggest that as long as you are disciplined and can comfortably pay for it, you should buy any investment you can. If you can finance the purchase, even better.

However, real estate is probably the only one against which you can borrow and have the asset pay itself off through rental income, EVEN as it pays YOU.

In fact, I have spoken to property owners who have managed to leverage a property two, even three times in their lifetime, by borrowing against the property they now own free and clear, to buy another.

What’s more, the income from the new property (let’s call it property B), paid with borrowed funds from say, property A, plus the income they still generate from that newly leveraged property A, can over time, pay back the loan on A from rent collections on A and B, while proving the owner with a boost in passive income. In other words, party money.

Even if you can purchase property in cash, many recommend you consider financing after the fact. Leveraging allows you to possibly, acquire two or more properties, update or fix them up and let themselves carry the burden of paying down the loans with rental income.

Over time, you would have the ability to acquire even more properties and eventually, when you are at the right stage in your life, own them all free and clear while enjoying all that income in retirement. The ultimate 401K or IRA.

Of course, you must buy right and be disciplined throughout. With every payment received in rents, you must set aside a portion every month to pay for licenses, taxes, insurance maintenance and miscellaneous repairs, improvements, etc. In short, you must budget as you would with any business.

Below, we examine some of the advantages for owning investment property and in particular, multi-family property.

1. Economies of Scale

When you buy a single family house or condo unit, small investors often feel they’re easy to manage. That may be true to some extend. On the other hand, consider that with a multi-family building, you only deal with one roof and/or one yard to mow, you are the board that approves tenants or how many times a year you rent your property and in one single trip, you can fumigate, inspect and have a punch list ready for your handyman, plumber and/or electrician to take care of, minimizing headaches.

2. Lower Taxes

There are several tax incentives for real estate investors. If you are employed, deductions from real estate investments may be used to offset wage income. In addition, there are a number of tax breaks for real estate investment which often allow property owners to turn a loss into a profit. Deductions can include any actual costs involved in financing, managing and operating the property, to include maintenance, repairs, property management fees, travel, advertising, and utilities. In addition, the IRS allows a depreciation deduction that accounts for a portion of the building (not the land portion of the property) over time, usually some 27 years.

3. Cash Flow

A property can generate negative or positive cash flow. Cash flow simply refers to the amount of money that flows in and out in pursuit of maintaining a property. Rents are an example of cash flowing in while taxes and insurance must be paid out, typically from a portion of the rents received. When the amount of income received exceeds the payments, it is said you have a positive cash flow. There are times when the amount of payments exceed your income and in these cases, you are said to have a negative cash flow. Regardless, when it comes to real estate investment, there are two more important concepts involved: pre-tax and after-tax. A pre-tax positive cash flow for instance, may also be said to occur when income received is greater than expenses before taxes are paid. However, even if your are experiencing a negative cash flow, you may end up with an after-tax positive income when your expenses are more than your collected income, but the tax breaks bring you back in the black. Depreciation can often help turn a negative into a positive.

4. Use Leverage

An old rule of thumb in real estate is to never spend a dime on your real estate investment unless you have to and/or unless it will save you money. Leverage is an important aspect of saving money through real estate investment because a real estate investor uses leverage to increase their assets without spending their own money. By taking advantage of your equity, you also improve your return on equity and it provides you with tax-free funds to help fund your next deal or improve the value of your existing property by making updates, upgrades or repairs that entice tenants (to come in or stay) and should allow you to raise rents and improve your bottom line.

5. Equity Growth

The best way to save money and earn money, is to build up equity from real estate investments. That way, with high equity you are able to save on your mortgage while earning a nice chunk of profit. However, idle equity is like idle funds in the bank. Ideally, you are always utilizing your equity to improve the value of the property and/or pursuing and acquiring new opportunities. Often, selling is a great way to take advantage of existing equity, which would allow you to reposition yourself in a potentially better property with better opportunities. For instance, you may own a building sitting on prime land which may allow you to build a much larger structure for more potential. However, you are not a builder and you’re not in the mood to start. Even if that property is making money, selling it may bring enough to allow you to purchase a more suitable property or properties.

6. The Benefits of Inflation

Generally speaking, inflation can help you save money on your real estate investment because as rent increases, your mortgage costs will remain static (assuming it is a fix-rate loan), which means you will improve your position with the increased cash flow from the rent and equity growth. Although inflation is quite low these days, there is a typical amount of appreciation properties experience as a result of even low inflation, which adds to your equity without a single penny out of pocket.

Of course, it is not all rosey with real estate investing. There are a LOT of factors that deter people from getting involved. It is scary, you could lose a lot if you engage from an emotional standpoint and there are headaches and horror stories borne from bad tenant situations to fill a few books.

Regardless, I reiterate that if you buy properly, budget properly and stay involved, you may never have to worry about money when it counts – throughout the live of the property and during your retirement. What could be more beautiful than that?

Most real estate professionals can help a buyer or seller make the right buy or sell decisions. Obviously, as you would listen to a quality attorney, doctor or accountant, listening to a quality real estate professional’s valuable information will go a long way in helping you achieve your buying or selling goal. Budgeting however, is a function of habit and here again, you must proactively seek qualified, quality, professional advise.

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Study: Trulia, Zillow less effective than Realtors

In real estate on October 5, 2012 at 8:56 pm

Here’s something I typically warn buyers I work with, to be aware of…

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SEATTLE – Oct. 4, 2012 – The WAV Group, an independent real estate industry research analyst, studied 33 zip codes in 11 U.S. markets to analyze the accuracy of website listing services.

According to the study funded by Redfin, online listing services such as Trulia and Zillow didn’t have the same accuracy as broker-owned websites, in large part because licensed agents have direct access to a local Multiple Listing Service (MLS).

According to the WAV Group release, “local real estate brokerage websites give consumers the most complete, accurate and timely information about homes for sale.”

The study evaluated sites from three local real estate brokerages that help consumers buy and sell homes. It compared those brokerage’s listing search results to two national portals, Trulia and Zillow.

In the markets analyzed, the study concluded:

• Local real estate brokerage sites display 100 percent of agent-listed homes for sale compared to about 80 percent on the national sites.
• Local real estate brokerage sites show newly listed homes for sale seven to nine days earlier than national portals.
• Local real estate brokerage sites almost never show a home listing as active after it has been sold; about 36 percent of listings that appear as active on national portals are no longer for sale.
• The WAV Group, a national consultancy specializing in real estate technology, conducted the study. Independent analysts verified the study data, record by record.

Redfin, a technology-powered broker with more than $5 billion in home sales, sponsored the study. Listing data from the websites of Long & Foster, one of the largest independent real estate brokerages in the U.S. and Windermere, the largest regional real estate brokerage in the Western U.S., was also included in the study.

“We analyzed … more than 6,000 listings in 33 zip codes in 11 markets (and compared) the data on various websites against 14 local Multiple Listing Services,” says WAV Group CEO Victor Lund. “The findings are clear: real estate brokerage websites showed by far the most homes for sale, recognized which homes were no longer for sale, and displayed new listings much earlier.”

According to WAV Group, the brokers’ advantage comes from direct access to local real estate databases. Only real estate brokers are members of a local MLS. In contrast, national portals usually rely on real estate agents or brokers to re-post MLS listings, or the portals aggregate data from real estate information syndicators.

Since syndicators wait until an agent updates a listing, the full results can be inaccurate. With a broker’s MLS-based service, most listings are updated in real time, typically every 15 to 30 minutes.

According to the study, it took a median of nine days for a listing to appear on Trulia or Zillow after it appeared on a real estate broker’s website. Homes, once sold, also appeared to be active listings for a while on Trulia and Zillow.

Markets included in the study: Boston, Chicago, Denver, Los Angeles, Philadelphia, Phoenix, Portland, San Diego, San Francisco, Seattle and Washington, D.C.

Reprinted by permission: © 2012 Florida Realtors®

CoreLogic: Fewer homes underwater

In real estate on September 12, 2012 at 4:35 pm

SANTA ANA, Calif. – Sept. 12, 2012 – CoreLogic says 10.8 million (22.3 percent) of all residential properties with a mortgage had negative equity (underwater) at the end of the second quarter 2012. That’s down from 11.4 million properties (23.7 percent) at the end of the first quarter.

An additional 2.3 million borrowers had less than 5 percent equity in their home, referred to as near-negative equity, at the end of the second quarter.

So far in 2012, 1.3 million homeowners have moved from underwater status into positive equity.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

About one in four homeowners with a mortgage in the U.S. (27 percent) had negative or near-negative equity in the second quarter, a drop from 28.5 percent in the first quarter.

Most borrowers in negative equity continue to pay their mortgages; 84.9 percent of underwater homeowner were current on their mortgage payments, up from 84.8 percent at the end of the first quarter.

“Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity,” says Mark Fleming, chief economist for CoreLogic.

“Nearly 2 million more borrowers in negative equity would be above water if house prices nationally increased by 5 percent,” adds Anand Nallathambi, president and CEO of CoreLogic. “We currently expect home prices to continue to trend up in August. Were this trend to be sustained, we could see significant reductions in the number of borrowers in negative equity by next year.”

Highlights as of Q2 2012

• Nevada had the highest percentage of mortgaged properties in negative equity at 59 percent, followed by Florida (43 percent), Arizona (40 percent), Georgia (36 percent) and Michigan (33 percent). These top five states combined account for 34.1 percent of the total amount of negative equity in the U.S.

• Of the total $689 billion in aggregate negative equity, first liens without home equity loans accounted for $339 billion aggregate negative equity, while first liens with home equity loans accounted for $353 billion.

• Of the 10.8 million upside-down borrowers, 6.6 million hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $216,000, the average underwater amount is $51,000, and 18 percent of the 6.6 million are in negative equity.

• 4.2 million upside-down borrowers have both first and second liens. The average mortgage balance for this group of borrowers is $300,000, the average underwater amount is $84,000 and 38 percent of the 4.2 million are in negative equity.

• Approximately 41 percent of borrowers with first liens without home equity loans had loan-to-value (LTV) ratios of 80 percent or higher and approximately 60 percent of borrowers with first liens and home equity loans had combined LTVs of 80 percent or higher.

• At the end of the second quarter 2012, just over 17 million borrowers possessed qualifying LTVs between 80 and 125 percent for the Home Affordable Refinance Program (HARP) under the original requirements first introduced in March 2009. The lifting of the 125 percent LTV cap via HARP 2.0 opens the door to another 5 million borrowers.

• The bulk of negative equity is concentrated in the low end of the housing market. For example, for low-to-mid value homes (less than $200,000), the negative equity share is 32 percent, almost twice the 17 percent for borrowers with home values greater than $200,000.

• As of Q2 2012, there were 1.8 million borrowers who were only 5 percent underwater. If home prices continue increasing over the next year, these borrowers could move out of a negative equity position.

Reprinted by permission: © 2012 Florida Realtors®

Florida’s DBPR unveils 2011-2012 unlicensed activity media campaign

In real estate on December 14, 2011 at 6:55 pm

TALLAHASSEE, Fla. – Dec. 14, 2011 – The Department of Business and Professional Regulation (DBPR) unveiled its annual media campaign to educate the public about the dangers of unlicensed activity. The ad campaign encourages Florida consumers to check for professional licensure before hiring someone to do any work that requires a license, including real estate representation.
Last fiscal year, DBPR received 969 legally sufficient complaints about unlicensed real estate or unlicensed appraisal activity. The Department also received more than 1,700 complaints about unlicensed construction, electrical and contractor activity.

“Unlicensed activity can threaten the livelihood of law-abiding, state-licensed professionals and can pose serious personal or financial harm to consumers,” says DBPR Secretary Ken Lawson.

Members of the Florida Outdoor Advertising Association are donating billboard space throughout the state, part of a multi-component campaign that will focus on the licensed activities with the highest number of consumer complaints.

Unlicensed activity occurs when an individual offers to perform or performs services that require a state license, and the individual does not hold the required license. Florida law sets specific rules and guidelines for obtaining professional licensure, and the people who have met these requirements are held to professional standards. Consumers can verify professional licenses online at www.myfloridalicense.com.

Unlicensed activity is illegal and can result in misdemeanor or felony charges if an individual is convicted. Floridians should report any suspected unlicensed activity by emailing ULA@dbpr.state.fl.us, or calling the Unlicensed Activity Hotline at (866) 532-1400.

Reprinted by Permission: © 2011 Florida Realtors®

UF survey: Fla. real estate experts still not excited

In real estate on December 11, 2011 at 11:56 pm

GAINESVILLE, Fla. – Dec. 2, 2011 – Florida real estate experts and investors were pessimistic for a second consecutive quarter, despite encouraging signs in the rise of occupancy rates and prices in the rental apartment market, a new University of Florida (UF) survey finds.

“The Survey of Emerging Market Conditions,” conducted quarterly by the Kelley A. Bergstrom Center for Real Estate Studies at UF’s Warrington College of Business Administration, indicates the main reason for the third-quarter malaise was the falling market for single-family houses, condominiums and most types of land.

Uncertainty over unsettling economic news at the international, national and state levels provides the backdrop for the declining perspective, said Timothy S. Becker, director of the Bergstrom Center. The Commercial Real Estate Sentiment Index declined in the third quarter, marking the second consecutive decline of the year.

The survey takers anticipate a sluggish recovery for the real estate market in the coming years. A large inventory of home foreclosures partly explains their gloomy expectation. Respondents also worry about employment. Since January, 70,000 new jobs have been created in Florida, but they were offset by 63,000 lost positions, keeping the unemployment rate at 10.6 percent since April.

Respondents also believe that a weak economy continues to discourage the private sector from adding new hires. Companies instead are likely to squeeze more productivity from workers and store profits to sustain them through future tough economic times. Concern over stock market turmoil, ongoing gridlock in Washington and the upcoming presidential election added to the overall pessimistic outlook.

Survey respondents also said that they’re worried because a securities-backed mortgage for commercial property was harder to get in the third quarter. There was also wariness over the newly enacted Dobbs-Frank Act, which expands federal regulation of banks.

“The problem is that individuals involved in banking don’t yet know what the rules are under the new law, and whenever there’s uncertainty, people tend to drop from the investment horizon,” Becker said. “What we’re hearing from the respondents is that because of this uncertainty, there’s a freezing up of capital that should otherwise be going to construction projects.”

That lack of capital, however, is good news for the rental apartment market, which, according to the survey, is real estate’s “best performing asset.” Becker said widespread home foreclosures have forced displaced homeowners to rent apartments. In addition, many young job seekers who want flexibility are seeking rental units. That trend helps to drive up occupancy, allowing owners to charge more rent.

The survey also identified bright spots in Florida’s economy. Condo projects are under way in Miami, which is also enjoying an influx of investment from South America. Respondents are also somewhat cheered by prospects for Florida ports as the Panama Canal expansion project continues.

Still, the overall perception of Florida’s real estate market is glum.

“Where we go from here depends on macro-economic forces, ranging from the debt crisis in Europe to the many we have here at home,” Becker said.

A total of 231 Florida professional real estate analysts and investors, representing 13 urban regions of the state and up to 15 property types, participated in the survey.

Reprinted by permission: © 2011 Florida Realtors®

July home sales in Miami – a reflection of the economy at large

In Buyers, Condo rules, FIU, Fl, Florida Legislature, government, HAMP, Home Warranty, HomePath, Investing, Lease Agreements, Leasing, lenders, Loan Originator, scams, SIOR, Treasury on September 3, 2011 at 9:52 am

Some say our economy will not recover until this or that is changed. Some feel housing must recover in order for everything else to recover. Others blame the low dollar, the amount of money that is printed, Europe, earthquakes and climate change.

I still feel that the key to a recovery is JOBS. Without jobs, folks’ confidence and ability to spend and qualify to buy homes, will remain low – hec…non-existent.

With unemployment stubbornly high above 9% (well over 18% according to experts if one includes the under-employed and all those who just…quit looking), it is no wonder housing can’t seem to recover.

In spite of Miami’s ability to appeal to the affluence of non-residents and investors (and THANK GOD for that), Miami’s home resale market looms.

One great aspect is that Miami’s available real estate inventory for sale has been rapidly dropping from a high of 24,368 units in Sept., 2010 to our July, 2011 low of 15,578 units available for sale. A 63.9% drop in inventory, 4.3% lower than June, 2011’s inventory of 16,272 units, 35% lower than the 23,976 units in July, 2010 and almost 32% lower than at the end of the same quarter in 2010. The drop of New listings has also helped inventory levels continue to drop.

By all accounts, less inventory is great. This generally means that buyers have less inventory to choose from and that prices should begin to pick up. Supply and demand. Yet, low supply continues to be coupled to low demand as reflected by the meek Pending sales number between June and July, 2011 (2.2% lower) and the much weaker Sold (Closed) units which dropped 21% between June and July, 2011.

Thankfully, Pending Sales (an indicator of future closed sales), had been quite strong in July, 2011 as compared to July, 2010 (up 19.4%) and as reflected by the Pending Sales number between the end of Q1-2011 as compared to Q1-2010 (up 21.1%).

Will these numbers improve? Again – I say, not until JOBS recover.

Comparing sectors of our market, sales in properties valued at different price ranges appear to be mimicking the market at large, including market segments under $500,000 and between $500,000 and just under $2M as shown in the two charts below

Under $500,000

Between $500,000 to just under $2M

Between $2M and just under $5M, we begin to see some changes, though Pending Sales – the so important forward looking indicator of future closed sales has completely stalled.

Above, are the numbers for properties valued at between $2M and $5M

However, by the time we get to homes valued at $5M and above, the difference is stark.

Above, properties in our highest market segment – above $5M

As you can see, properties valued at $5M and above are among the only market segment displaying improvement on all accounts. Between June and July, 2011, between July, 2011 and July, 2010 and between Q1-2011 and Q1-2010. Most impressive are the improvements between July, 2010 and July, 2011. I mean, 10 properties Sold and 12 under contract may not seem like much until you are reminded that these are at least $5,000,000 a pop and financing…well…this is not their bag.

So, the $5M and above market segment is where most affluent buyers are doing their bidding. After all this is Miami!

Get your home Sold faster

In real estate, Sellers, Short Sales, Trends on September 2, 2011 at 7:13 pm

Many sellers have bought and sold more than one home in their lifetime.  Today, these sellers struggle to understand that this is not the market they bought their current home in, nor the market they sold their previous home in.  They may even be holding on to the hope that the market will recover “soon” and holding on to past selling experiences that no longer work.

In fact, these reluctant sellers could sell their home soon(er) if they could only wrap their head around a few simple selling tricks. These are the same tricks professionals and most successful sellers (those who’s homes are now showing in the “Homes Sold” statistics you receive from your agent), have used to get their home SOLD. What tricks did they use you ask? Simple…

Use Sales Incentives

Incentives are used to market everything, from car insurance, to beds, cars, clothing, airline tickets, etc. Don’t think so? Consider paying attention to the incentives used by pretty much every vendor in almost every commercial on t.v. or radio.

Hec, what incentives have you used to lure your boss, employees, spouse or your kids to do something they initially did not want to do and you “incentiviced” them to?

The incentives don’t have to be big – they can be little – either way, their purpose is to get them (a buyer), to pay attention and to seek you (the seller), out over all other competing homes.

If vendors offers some sort of incentive to get you to call or at least consider their product or service, many of them spending hundreds, thousands, even millions in advertising dollars to make sure they get you to listen or have your eyeballs zoom-in on their advertisement and at least get you to think about and consider them or their product or service, then why would you not consider these tactics yourself to get what may be the largest asset you own ( your home), sold?

Here’s the best part…unlike advertisers who pre-pay for your attention, you often don’t have to spend a dime ahead of closing to get your home sold. So, what did successful sellers use to get their homes sold? Here are four tactics they used – and now, you can too:

  1. Buy-down buyer’s interest rate.  Interest rates are at all-time lows. However, if a marginally qualified buyer may be turned off by the fact that, for whatever reason they will have to buy your home with a higher interest rate, then offering to buy-down their rate may make them re-consider and choose to buy your home over a neighbor’s house. In fact, they may even like your neighbor’s house more than they like yours but, your neighbor may not offer this incentive and this “financial” reward, which may save the buyers thousands over the live of the loan, may be enough to get them to commit and buy your home instead.
  2. Pay for Closing cost.  Besides the down payment lenders require from buyers, they typically also require buyers to come to closing with an additional 3 to 6 percent of the loan amount to cover closing costs such as loan fees, title and mortgage insurance, prorated charges like taxes, homeowner’s insurance, etc. Depending on the lender or loan program the buyer applies and qualifies for, you may be able to pay all or a portion of these closing costs for the buyer. Again, if your neighbor is not willing or able to do this, this may give you the competitive edge you need to get this buyer to sign on the dotted line and place your home on the SOLD side of the equation.  Think about it.  A 3% closing cost contribution you offer to your buyer on a home that requires a $200,000 loan, represents $6,000 the buyers no longer have to bring to closing and use instead for other things like decoration, moving or just keep tucked-in for a rainy day.
  3. Offer to pay their HOA/COA dues.  If you are selling a home or condo that is in a homeowners’ or condo association, then surely you remember how these buyers may feel when that bill comes due after being depleted of cash from down payment, closing costs, moving expenses and personalization (updates, upgrades, decorating, etc). Buyers may put pencil to paper and realize that this incentive alone could get them interested in at least considering your home or condo over your neighbor’s. Obviously, you can offer to pay this fee for a period of time you negotiate – be it 6 months, a year or longer.
  4. Brokers are people too.  Smart sellers using the expert services  of real estate professionals typically understand that agents are people too, and that incentives can also move some agents to make sure your property gets shown often.  Offering to pay an extra commission as an incentive to buyer brokers also helps get your home sold. Consider that, most buyers who are ready, willing and able to make the ultimate commitment (well…after marriage), to buy a home are usually represented by a broker.  After all, buyers typically do not pay for the broker’s services and they use them for their expertise and for guidance between contract to post-closing. Since buyer brokers have to sort through dozens, sometimes hundreds of listings to decide which ones to show a buyer, it stands to reason that these brokers may be a key buffer between you and a buyer and that incentives may get them to present your home to their potential client. If the broker sees they will get pay 1% or 2% more in the chance their buyer likes your home, they will make absolutely sure to show your home first – and to as many buyers looking for your type of home they come in contact with. This, in combination with the right price and property condition, helps improve your “traffic” (or exposure), because Buyer-brokers will be sure to include your home in the list of homes they will show to all their qualified buyers.

Remember, your home must be competitively priced, must be kept in “show condition’ every time it is shown and in today’s market, you must also consider “incentives” to get buyers through your door. This increase in traffic will increase the probability of getting an offer – even multiple offers, ensuring a faster sale of your home than your neighbor’s, often at a higher price (in today’s market – property values are still fragile. Not selling today, may mean selling for less tomorrow).

Finally, none of these ideas will cost you a dime before closing, and though they may reduce your proceeds at closing, incentives will help ensure you “move-on” with your life and begin to look forward to new opportunities you will now be able to pursue and enjoy sooner – without the looming and persistent effect of a home that won’t sell.

===

Your comments and opinion welcomed

Housing less affordable for many Americans

In real estate on March 1, 2011 at 7:33 pm

WASHINGTON – Feb. 28, 2011 – Although home values have fallen over the past few years, housing affordability has significantly decreased for working owners and renters, according to an annual report released by the Center for Housing Policy, the research affiliate of the National Housing Conference.

The report, titled “Housing Landscape 2011,” provides an in-depth look at housing affordability trends for working households between 2008 and 2009 focusing on the effects of employment, income and housing costs.

According to the report, nearly one in four working households had a severe housing cost burden in 2009, spending more than half of its income on housing costs. Nationwide, some 10.5 million working households experienced a severe housing cost burden in 2009 – an increase of nearly 600,000 households from the prior year. This increase occurred despite a drop of 1.1 million in the overall number of working households.

“Housing costs for existing homeowners have declined only slightly, while housing costs for working renters have actually gone up,” said Jeffrey Lubell, Executive Director of the Center for Housing Policy. “Meanwhile, high unemployment and falling incomes have left low- and moderate-income families struggling to make ends meet.”

The study found that five states’ share of severely cost-burdened working households exceeded the national average, and they had a statistically significant increase between 2008 and 2009: Florida, Arizona, California, New Jersey and New York.

Among the 50 largest metropolitan areas, the following five metropolitan areas had the highest share of working households with a severe housing cost burden in 2009:

Nationally, housing affordability declined substantially for working renters across the country. Approximately one-fourth of working renters (24.5 percent) had a severe housing cost burden in 2009 – an increase over the 22.1 percent with the problem in 2008.

Housing affordability declined among homeowners as well. Some 21.2 percent of working homeowners had a severe housing cost burden in 2009, as compared with 20.1 percent in 2008.

The report identified several factors as contributing to the decline in housing affordability, including an increase in rents, a reduction in the number of hours worked per week, and falling incomes.

In a state-to-state comparison, the share of working households with a severe housing cost burden increased significantly in 25 states and decreased significantly in none. The share of working households with a severe housing cost burden increased significantly in 16 of the largest metropolitan areas and decreased significantly in none. Of these 16 metro areas, 14 are located in the Midwest and the South.

Overall, the level of severe housing cost burden amongst working households displayed a high level of variation at the metropolitan level. Levels ranged from a high of 42 percent in Miami to a low of 15 percent in Pittsburgh and Louisville.

The complete report, “An Annual Look at the Housing Affordability Challenges of America’s Working Households,”is available in PDF format online.

Reprinted by Permission: © 2011 Florida Realtors®

Florida foreclosure facts

In real estate on February 25, 2011 at 12:12 am

TALLAHASSEE, Fla. – Feb 24, 2011 – One media story says foreclosures are up – the next story says foreclosures are down. A report released by Florida Realtors clears up the confusion by explaining the three different levels of foreclosure activity that analysts consider, and listing the state numbers for each during 2010.

“The Florida Foreclosure Report” found general confusion about the definition of foreclosure. One group might focus on the number of homeowners who received at least one notice of foreclosure and consider that “the number of homes in foreclosure.” A second group might focus only on the number of homes actually taken over by a bank. But while the number of foreclosure notices could be rising, the number of homes actually taken over by a bank could be declining.

The report outlines three levels of foreclosure, which added together are the “foreclosure rate”:

Lis Pendens: Homes under Lis Pendens have received at least one foreclosure notice.

• Notice of foreclosure sale: Homes that received a notice have been scheduled for a foreclosure sale, but the homeowner may still find a way to keep the house.

Real estate owned (REO): Bank-owned homes post-foreclosure.

In 2010, only 2,800 Florida properties made it through the foreclosure process to become REOs. Of the rest, 180,402 were Lis Pendens and 140,105 received a notice of foreclosure sale. However, the total number of homes in some phase of foreclosure – all three categories – comes out to 323,307 Florida households.

Other report highlights:

• In 2010, 1 in every 29 Florida housing units were in some phase of foreclosure. In 2008, it was only 1 in every 54.

• The top Florida counties for high foreclosure rates are, in order: Lee, Miami-Dade, Osceola, Charlotte and Orange.

• The Florida counties for lowest foreclosure rates are, from least up: Taylor, Union, Jefferson, Lafayette and Liberty.

The complete report is posted online on Florida Realtors website under Legislative Research.

Reprinted by Permission: © 2011 Florida Realtors®

 

There are 3 types of sellers these days. Which one is the top performer?

In real estate on February 16, 2011 at 11:13 am

These days, there are 3 types of sellers under two major categories: Distressed Sellers and Non-Distressed Sellers.

The first major category are the Distressed Sellers which include two distinctly different types of sellers. One, is all lenders dumping acquired inventory assets (well…these are really a liability to them that are not producing for them), via foreclosure auction. These are what are known as REO property or Real Estate Owned (once bought back at auction by the lender).

The second type of Distressed Seller is John and Jane Distressed Seller who for whatever reason, may now be facing foreclosure and are only able to get out from under this cloud by selling during the pre-foreclosure stage via the Short Sale process.

The second major category of seller is the Non-Distressed seller. This does not mean that if they were to sell at true market value (today’s true market value), they wouldn’t be selling for less than they owe and be considered Distressed Sellers like John and Jane above. These sellers are often fishing to find a buyer though many times, you also find reasonable sellers in this category looking to get what they can today.

The type of buyer that overpays and buys one of these non-distressed properties are mostly those looking to completely avoid the hassles of buying distressed properties and are cash buyers with a long-term outlook to owning these.

January, 2011 saw drops in New Listings, Total Available Inventory and Closed REO Sales from December, 2010. However, every category mentioned before is sharply up from January, 2010 and comparing Q1/2009 to Q1/2010 as demonstrated by the chart below.

Short Sales have performed quite differently, signaling that lenders are STILL not looking to help homeowners by helping streamline the short sale process. Although Short Sales typically sell for more, maintain a more stable market by keeping families in their home (rather than creating vacancies), cost less in legal fees, help family and neighborhood morale, have a potential for increased goodwill towards the institution for helping rather than foreclosing, help current owners become more responsible owners again in as little as 2-3 years when they’re able to buy again rather than 7-10 years or more because of the foreclosure mark in their credit and other factors, neither the government nor institutions do enough still to encourage short sales over foreclosures. This sentiment is reflected in the numbers seen below.

In spite of the above, we can see a surge of 37.6% in Pending Short Sales from December, 2010 to January, 2011. Year-over-Year and Q2Q however, the numbers are not as impressive as those in the REO category.

The biggest underperformer among the 3 seller types are the Non-Distressed Sellers, as seen below.

Incredibly, this category has the largest inventory of available properties for sale among all seller types in the MLS (Multiple Listing Service) and yet, the lowest performance of Pending and Closed Sales. The chances of sellers in this category to move from the “I wish to sell” list to the “I Sold” list are almost like the chances of winning the lottery and a reflection of the disconnect between these sellers and today’s reality – even after 3+ years of this!

In short, Buyers ARE SMART and have online access to information that makes them smart. Also, professionals in the business are able to provide them the same data sellers see during the Listing Presentation. Somehow, they both (buyers and sellers), see and hear a different message whereby, sellers still ‘think; things aren’t as bad as the agent is showing them and buyers appear convinced that there are (and are actively pursuing), those deals ‘on sale’.

After all, why pay retail when you can buy wholesale?!

Sellers who do not need to sell and refuse to understand this, must be prepared to have their property just sit on the market for a long time.

Months of Inventory based on Closed Sales tell a very telling story when it comes to which market is performing. This is a measure of how long it is taking a property to go from Listing to Closed in months. Below, is the Months of Inventory based on Closed Sales for each as follows:

Non-Distressed Sellers

Short Sales (pre-foreclosures)

REO (lender owned / foreclosed)

While it takes about 2-months to list and close an REO, about 18-months to list and close a Short Sale (mostly because the process is not yet streamlined), it is taking about 2 years to list and close non-distressed property according to January, 2011’s numbers.

Thus the phrase “BUYER’S MARKET” – in which we’re clearly, still in it.

Disclaimer: All charts are created from reports published February 2011, based on data available at the end of January 2011. This representation is based in whole or in part on data supplied by Realtor Association of Greater Miami and the Beaches, Realtor Association of Miami-Dade County, Realtor Association of Greater Fort Lauderdale and Northwestern Dade Association of Realtors. Neither the Board or its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Board or its MLS may not reflect all real estate activity in the market.

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