Investors Take Big Bite Out of Housing Market

Investors Take Big Bite Out of Housing Market

DAILY REAL ESTATE NEWS | MONDAY, FEBRUARY 04, 2013
Hedge funds and private equity firms are looking to cash in on real estate, “rushing in to buy up companies and assets in every part of the housing supply chain, including undeveloped land, homebuilders, foreclosed homes, and building parts manufacturers,” according to a recent CNNMoney article.

"A lot of investors see a short window of opportunity where there's good inventory on the market at bottom market prices," says Brad Geisen, CEO of Foreclosure.com. "No one knows how long it will last, so these investors are trying to buy as much as they can right now."

Last year, the Blackstone Group spent $2.7 billion buying up 17,000 single-family homes in foreclosure to turn into rentals, and they’re continuing to snatch up thousands more homes per month. Pine River Capital Management’s Silver Bay Realty Trust went public in December and, so far, has purchased more than 2,500 homes in once hard-hit housing markets to turn into rentals. It plans to buy 3,100 more homes, according to its recent SEC filing.

Hedge fund manager John Paulson is betting on big growth in home building and focusing on buying up undeveloped land in areas like California, Nevada, and Arizona, which were among the hardest hit in the housing crisis. Reportedly, Paulson & Co. have accumulated enough land in these states alone to build up to 25,000 homes.

Also showing investors interest in housing: Stocks reflecting the housing market are soaring. Publicly traded homebuilder stocks like PulteGroup, KB Home, and Lennar have been trading near 52-week highs. Tri Pointe Homes, a single-family home builder in California and Colorado, raised $232 million for an IPO last week—the first homebuilder IPO since 2004.

Source: “Big Money Betting Big on Housing,” CNNMoney (Feb. 4, 2013)

Frugal Tips for Making a Home More Appealing

Homeowners who want to sell but don’t have a lot of cash to spruce up their properties might consider these tips from Bankrate.com for upgrading a property without spending a fortune.

Polish up the kitchen. Add new cabinet door handles, replace lighting and update the faucet set. Unless the cabinets are mica, give them a fresh coat of paint. Order new doors for kitchen appliances.

Tidy up the bath. Replace the toilet seat. Clean up the floor with vinyl tiles or sheet vinyl applied over the old floor. Re-grout the tub and, if the tub is dingy, add a new prefabricated tub and shower surround.

Paint the walls.

Add closet systems to all the bedrooms, pantry, and entry closets.

Hire a plumber and an electrician to fix anything that is loose or that leaks.

Clean the carpets or, if they are worn, cover them with area rugs.

Replace ceiling lights with inexpensive but attractive fixtures.

Refinish or repaint the front door and replace the hardware.

Mow the lawn, edge the sidewalks, mulch all the beds and put two big planters at either side of the front door.

Source: Bankrate.com (07/14/2010)

What Causes Borrowers to Walk Away?

While borrowers with “super prime” credit scores accounted for just 5 percent of the mortgage delinquencies, about 28 percent of their defaults were calculated and strategic.

This relatively small actual number is nevertheless causing the credit industry to look at new ways to evaluate walk-away risk even among the very creditworthy.

Credit bureau Experian reports that borrowers in California, Florida, and other hard-hit states are more likely to walk away than people living in states with more stable markets. Also, residents of states where lenders have no recourse are more likely to toss in the towel.

People with small amounts of negative equity also are more likely to stay and pay.

Source: Washington Post (07/03/2010)

Dealing With IRS Tax Credit Rejections

The IRS has been rejecting first-time home buyer claims from anyone who shows a Form 1098 Mortgage Interest Expense in their prior year files. In many cases, the applicants are entitled to the credit because their previous mortgage interest deduction is for a timeshare, mobile home, boat, or other recreational property. If you have a client who is in this unfortunate position, here is some advice from Enrolled Agent Eva Rosenberg, who authors the Web site TaxMama.com. • Respond to the IRS immediately and tell them why their rejection is wrong. Be prepared to prove that the mortgage the IRS is seeing isn’t on a personal residence. First-time home buyers are entitled to own other types of real estate and still get the home buyers credit, so provide proof that the previous mortgage was on something else. • Send a letter explaining the situation and providing proof of a previous rental or other non-ownership living situation, including copies of rental contracts for the last three years, an old driver's license showing that address, utility bills, etc. • Home buyers who believe the IRS may view their situation in this way should be proactive, providing proof that they are a first-time buyer when they initially file for the credit. • Anyone who is rejected after two attempts to explain the problem to the IRS should call the Taxpayers Advocate Service toll-free, (877) 777-4778, their Congressman, and their Senator, Rosenberg advises.
Source: TaxMama.com, Eva Rosenberg, EA (06/16/2010)

Fiserv Study Says Markets Are Improving

Fiserv on Monday released a report that analyzed housing financial data from fourth quarter 2009, which seemed to suggest real estate could be improving. “Optimism that a sustainable economic recovery is underway and is driving increases in home prices across many U.S. metro areas. More and more, consumers have confidence that buying a home doesn’t mean catching a falling knife,” says David Stiff, chief economist for global financial technology firm Fiserv. Among the conclusions of the report were:

• California markets collapsed about one year before much of the rest of the U.S., creating increased affordability. Year-over-year prices are up in eight of 28 California metro areas and prices have increased from recent lows in 24 of 28 metro areas. The strongest rebounds were in coastal markets, including the Bay Area, Los Angeles, Orange County, and San Diego, where there are decreasing levels of foreclosed homes. Markets in the interior have also experienced a price bounce, mainly due to strong investor demand.
• In Washington, D.C., home prices were up 5.2 percent year-over-year. Since the market bottomed in early 2009, prices in this metro area have risen more than 9 percent. Washington boasts a relatively strong local economy with 6.8 percent unemployment compared to 9.9 percent for the U.S. The earlier rapid decline in prices also substantially improved affordability.
• Ohio and Michigan, two states hit hard by the recession and loss of manufacturing jobs, are seeing signs of stabilization. Housing is very affordable across metro areas in these states. There is less uncertainty about the future of the U.S. auto industry and jobs in auto and auto parts manufacturing have been increasing since December 2009.
• Other markets where investor purchases of foreclosed homes have dominated housing sales are also coming back into balance. This includes metro areas such as Minneapolis, Detroit, and Memphis, where recent sales have included more regular, non-distressed homes.

Source: Fiserv (06/14/2010)

Chinese Status Symbol: A Hong Kong Home

For many wealthy Chinese, the ultimate travel souvenir is a vacation home, especially a vacation home in Hong Kong. According to one of Hong Kong’s largest real estate companies, Centaline, Chinese buyers represented 18 percent of all real estate purchases in Hong Kong in 2009. Other estimates say the Chinese are responsible for 40 percent of all Hong Kong purchases of property over $1.13 million. Benedict Ma, associate director of research at CB Richard Ellis, says buying Hong Kong property is a status symbol. “You buy an apartment, go back, and tell your friends all about it. If you can afford a place in Hong Kong, you are saying you have arrived.” Ma says many Chinese are also interested in buying U.S. properties, but strict visa policies restrict Chinese visitors to the U.S.

Source: Newsweek International, Alexandra A. Seno

The 'Cher House' Sold in Miami

ONE Sotheby’s Realty in Miami closed this week on the resale of a mansion sold by singer Cher in 2006 to Sean Wolfington. The recent sale brought $10.45 million, about $2 million more than Wolfington paid.

"There's a shortage of trophy properties on the market and we are seeing an increasing number of wealthy foreign buyers from Latin America and Europe looking to capitalize on the weak U.S. dollar," says Daniel De La Vega, broker of ONE Sotheby's Realty.

Associate Jorge Uribe, who listed the property, says, "A lot of people told me to lower the price by 20 percent to 30 percent because everything was down, but I advised my client to be patient. In the end, the new owners paid a great price for one of the most unique properties in Miami.”

Source: ONE Sotheby’s Realty (05/06/2010)