Real Estate Information

Taken from the Deseret News.

-Laura Hancock
E-mail story

Utah's first open air "lifestyle center," The Shops at Riverwoods in Provo, is in foreclosure after the owners defaulted on mortgage payments in November, December and January.

Bank of America NA, which now holds the split mortgage loans after a succession of loan acquisitions, seeks the entire outstanding principal, plus interest — $30.6 million, according to documents filed March 17 in 4th District Court in Provo.

On March 25, both the bank and the mall's owners, Terranet Investments LC — comprised of investor partnerships in Utah and California — asked the court to appoint Salt Lake real estate firm Commerce CRG as a receiver. Commerce CRG now collects rents from retailers, manages the mall, and is selling the property. The Shops, located at 4801 N. University Ave., are only about 65 percent occupied.

The foreclosure most likely will not affect shoppers to the upscale development, which opened in 1998 and added housing and an office complex in phases. The housing and office portions of the development are not in foreclosure. "As far as operations of the center, it's continuing to operate as it had previously," said Kevin Flanagan, chief financial officer for Provo-based Esnet Corp., a member of mall-owner Terranet Investments.

Flanagan confirmed media reports that the center suffered with the 2003 closure of Eddie Bauer and 2007 closure of Copeland Sports. The owners of Eddie Bauer and Copeland closed the Provo stores as part of bankruptcies. The stores were among the largest tenants at the Riverwoods. The Gap and Banana Republic, which were among original tenants at The Shops, also closed doors. More recently, Abercrombie & Fitch Co. and Ann Taylor have closed.

With a rental shortfall in some years up to $1 million a year, Esnet had been subsidizing the difference in mortgage payments. "We tried to hold onto it for a period of time, but this economic downturn" made it impossible for a turn-around in the near term, said Dan Campbell, an Esnet managing general partner.

With new owners, the Riverwoods could become an outlet mall, or could be owned by a group that specializes in community retail, "or have enough retail malls across the country that they can leverage (retailers) into that site (by saying), 'If you want five locations, you have to put one into The Shops,'" Campbell said.

Wow, when they called today’s real estate market a “shifting market,” they were right on target. It keeps shifting, and shifting, and shifting … Every time we turn on the news there’s a new development that affects our economy and therefore the ability of buyers to “buy” and the sellers to “sell.”

SHIFT, the most recent book by Gary Keller, co-founder and Chairman of Keller Williams Realty Inc., begins with the following paragraph: “The Real Estate Market has shifted drastically and dramatically. Sales volume and the number of transactions have dropped significantly. Inventory has reached an all-time high. Buyers have never been more reluctant. Fear is rampant, anxiety is high, and people are getting out of the business left and right. Sounds familiar? Sure it does. The year was 1979!”

Does it make us feel better to know that this has happened before? What did we learn from it in 1979? Fast forward to 1987 and it happened again. Changing tax laws this time had a disastrous affect again. Well guess what? History repeats itself. Now we are faced with this again, in 2009 but this time there are real differences.

In 1979 mortgage interest rates topped 18 percent. Last week buyers were still getting approved at under 6 percent through local lenders. That is a huge difference! Today’s sellers, with the help of their real estate agents, are becoming realistic with today’s pricing, bringing our market back on track.

The real estate business is “cyclical.” An experienced real estate agent and a mortgage broker will understand this and be prepared to give counsel that is in tune with the current market. Remember though, the news you heard last week is “old news,” so stay in touch with your local, trusted real estate agent for updates on this ever changing market.

Real estate remains your single most valuable asset if handled correctly.

When I first heard about this hotel in Dalat, (in Vietnam - for the non-geography buffs), all I could picture were cobwebs floating across my face as I slept and hobos or other terrifying eight-legged creatures scampering about my room in the dark.

Me and my imagination. Actually the “Spider Web Chalet” is a uniquely built structure also known as the The Hang Nga Tree House Hotel, Hang Nga Guesthouse & Art Gallery, and The Crazy House (depending upon who you ask).

Dang Viet Nga, daughter of Truong Chinh, former president of the Socialist Republic of Vietnam designed this hotel so that guests would feel as if they were staying in a really great fantasy world.

The building itself may look like a real tree but it’s actually made out of cement. There are all kinds of unique touches; a spider web hanging over the pond, a giraffe sculpture in the garden, guest rooms that look as if the seven dwarfs decorated them, and not one window in the place is traditionally round or square.

The best place I’ve found on the web to learn more about this “crazy” house is Travelogues.net.

Click here for many amazingly neat pictures of this funky hotel.

Finally, there might be some good news for struggling homeowners. Thousands of mortgage loans that were supposed to reset at a higher rate this spring won’t be changing, putting off the grim threat of foreclosure or bankruptcy for many Americans by as much as a year. Unfortunately, the reprieve will only be a temporary one.

A year ago, real estate forecasters were warning that spring 2009 would be the start of a whole new wave of foreclosures. Across the country option adjustable-rate mortgages (ARMs), an especially scary loan type often compared to a ticking time bomb, were set to detonate at an accelerating pace.

But something happened that few could have predicted. Interest rates dropped to historically low levels and the wave of resets could now be delayed until well into 2010. As a result, many borrowers—who have the option of making payments so low that they don’t even cover the interest, which is then added to the original loan balance—now have some breathing room.

Third of Loans Deeply Delinquent

Credit Suisse (CS) estimates (click here to see the chart) that the resets will begin to accelerate next spring, rising from about $4 billion resetting in March 2010 to a peak of $14 billion in September 2011. The current level is about $1 billion. About $500 billion of option ARM loans are outstanding, according to the bank. “Things have gotten pushed out,” says Chandrajit Bhattacharya, director in U.S. Mortgage Strategy for Credit Suisse. “Right now it looks like the big increase is probably going to be somewhere toward the middle of next year.”

Option ARMs typically reset after five years, at which point the monthly bill increases 65% or more. About 37.5% of option ARMs originated in 2005 are still outstanding, 63% of the 2006 vintage are outstanding, and 82% of the 2007 loans remain, according to Barclays Capital (BCS). And about a third of the outstanding loans in these years are deeply delinquent.

In a given month, between 4% and 5% of borrowers who are current on their option ARMs taken out in 2006 and 2007 default in the following month, says Sandeep Bordia, Barclays’ head of residential credit strategy, who also expects resets to be delayed until next year. “These things have been performing horrendously,” Bordia said. “I don’t know how much of it will last into the recast.”

Moving Out of Option ARMs

But real estate analysts were predicting that many option ARMs would reset sooner as loan balances hit specified principal caps, typically 110% to 125% of the original principal. The decline in interest rates means that it would take much longer to hit the principal cap and many borrowers will instead face a reset only at the five-year mark.

The Mortgage Bankers Assn. is also estimating that the lower interest rates will delay the resets. But the group also expects that lenders will help borrowers move out of the option ARM products before they reset. Many of the investors who can’t easily qualify for modifications and the borrowers beyond help have already lost their homes, says Michael Fratantoni, vice-president of single family research and policy development for the Mortgage Bankers Assn.

And the homeowners who are holding option ARMs when the wave of resets hits won’t face as big a shock because interest rates have fallen, adds Fratantoni. “Interest rates have come down to the point where the resets that are going to occur are going to be a bit of a non-event,” he says. “Very few borrowers will experience the recast.” But Nicholas Chavarela, managing attorney for Orange (Calif.)-based America’s Law Group, which represents borrowers negotiating modifications, says banks remain reluctant to reduce principal for underwater borrowers.

Cutting Debt-to-Income Ratios

The Obama Administration’s loan modification plan, which only applies to owner-occupied homes, is a step in the right direction, Chavarela said. But lenders won’t do what’s needed unless they’re forced to, he said.

Under the plan, taxpayers and participating lenders would share the cost of cutting borrowers’ debt-to-income ratio to 31%. Loans terms could be extended to 40 years and interest rates dropped to as low as 2%. But option ARM borrowers would likely have to pay more each month, even with a modification, because they’d suddenly be required to pay both interest and principal. “The Obama plan needs to be built upon,” Chavarela said.

But even if they can refinance many borrowers can’t afford the higher payments. Philip Tirone, president of the Mortgage Equity Group in Los Angeles, said he reached out to borrowers with option ARMs, offering to help them refinance into a fixed-rate mortgage with a low interest rate. “For them, it’s all about the payments,” Tirone said.

Time to Work with Lenders

Keith Gumbinger, vice-president of HSH.com, a publisher of loan information in Pompton Plains, N.J., said the lower interest rates have helped to diminish the option ARM problem. But it remains unclear how many option ARMs are left to reset and how many borrowers will be able to get out of the loans before it’s too late. Moreover, by the time they do reset it is unclear whether the economy will be better off. If home values and unemployment continue to weaken, it will become even harder to refinance. But the delay in resets gives some motivated borrowers time to work with lenders and negotiate a solution.

“I don’t think this is going to be the tsunami that was forecasted a few years ago,” Gumbinger said. “But it’s probably bigger than a ripple in a pond.”

“Flipping” is the buzzword of the year in real estate - flipping books, flipping articles in the newspaper, and even flipping shows on TV! What is flipping, how does it work and how you can profit?

Flipping simply means buying a property and reselling it quickly, as opposed to holding on to a property long term as a rental. Flipping comes in several varieties, most of which are legal and profitable, some of which are not.

Flip Strategy #1: Buy, Fix and Flip

Let’s start with the most common form - the good, old “fix ‘n flip”. This process involves buying a property that needs work, fixing it up, then selling on the “retail” market, that is, to a person who will live in the property. This method is tried and true, and works very well. You can easily make $15 - $50k on one deal, depending on your market and how good you are at finding bargains.

The danger in fix and flips is either paying too much or underestimating repairs. Be very conservative in your fix-up costs and length of time it may take to resell. Also, make sure you include in your analysis the cost of paying a real estate agent to sell the property.

Flip Strategy #2: Buy, Refi & Lease/Option

Rather than sell the fixed up property for all cash, sell for terms. Once you have completed the rehab, refinance the property at its new appraised value. If you did the math correctly, you should have little or no money in the deal. Sell the property on a lease with option to buy. The rent payment from your tenant/buyer should cover your mortgage payment (if not, consider an interest-only or adjustable rate loan that is fixed for 3 years). When your tenant exercises his option to purchase, you reap a larger profit, since you don’t have to pay a broker’s fee. If the tenant exercises his option after 12 months, you benefit from a lower capital gains tax rate.

Flip Strategy #3: Buy & Flip “As Is”

Don’t like to do fix-up work? Consider selling the property “as is” as a light fixer upper. If the local real estate market is hot, you should be able to sell the property in poor condition just a little below market. This is especially the case with houses in “transitioning” neighborhoods. Make sure, of course, that you acquire the property sufficiently cheap enough that you can sell it below market quickly and still profit.

Flip Strategy #4: Wholesale

Strategy #1, the fix and flip, is very popular, which means there are a lot of investors looking for rehabs. You can buy the property cheap and sell it for just a few thousand dollars more to another investor without doing any work. You won’t make nearly as much as the rehabber, but you will realize your profit quickly.

(Money Magazine) --

1. Finding one has become easier

You don't need to show up at courthouse auctions or comb through legal filings. These days many banks sell foreclosed homes through real estate agents.

To find listings, look on sites that specialize in foreclosed properties, such as realtytrac.com and foreclosurepoint.com. The local multiple-listing service often has selections as well. (The fact that the home is in foreclosure is not always highlighted in the MLS, but it's often mentioned in the description.)

Finally, some agents specialize in foreclosures, so call your local realtor's office and ask for a referral.

2. It's best to buy from a bank

If you buy a foreclosed home at an auction before the bank repossesses it, you'll have to pay in cash, and you usually cannot inspect the property. You may also later discover that there are liens against it.

When a bank takes back a home, however, it will clear any outstanding liens. Plus, when you buy a bank-owned property, you can inspect it beforehand, and you can finance the purchase with a mortgage. Leave your suitcase full of cash at home.

3. Bring in a contractor before you buy

Many foreclosed homes have been abandoned, some even vandalized, and they often require major repairs. "One mistake a lot of people make is underestimating how much work it needs and the cost," says Rick Sharga of RealtyTrac.

To avoid getting stuck with a surprise bill, ask a contractor to give you an estimate of how much the restoration will cost and how long it will take. Many will do so for free in hopes of winning your business.

4. Bid low

Banks aren't necessarily selling foreclosures at fire-sale prices; some are listed at market value, says Gene Hacker, a broker in Orange County, Calif. So be prepared to haggle. The bigger the inventory of foreclosed homes the bank has and the longer the property has sat, the greater your chances of nabbing a great deal, says Chris Matty of ForeclosurePoint.com.

Set your initial offer about 20% below market price - or more if your area has a lot of foreclosures.

5. Be prepared to wait

While some lenders are getting back to bidders within 36 hours, others are dealing with an enormous backlog that can hold up their response for as long as three months. While you wait, someone can trump you with a higher offer.

To boost your chances at scoring a home you love, have multiple properties in mind, and get your financing pre-approved before you bid. Even if the lender says it has another offer, follow up every week - these deals can often fall through.  

Pending home sales rose in March for the second consecutive month and are up year over year. The Pending Home Sales Index from the National Association of Realtors showed a 3.2% gain to 84.6 from February, when it was 82. The index stands 1.6% higher than a year ago.

The consensus forecast of industry experts polled by Briefing.com had predicted no increase in the index.

It may still take a while before the market gains enough momentum to firmly state that the downturn has been reversed, according to Lawrence Yun, NAR's chief economist. And, the upturn may have been boosted by the first-time homebuyers tax credit, a temporary measure that will lapse in December.

"We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around," said Yun. "This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a down payment."

The index is understood to be a forward indicator of home sales trends since it measures contracts signed, not completed sales. The up-tick may indicate that home prices have fallen low enough for buyers to get off the fence.

Yun is not calling a bottom yet, however, because the index is still at a relatively low level. Instead, he's looking toward the summer selling season to determine what direction the market will take. Plus, he would like the number of homes on the market to drop to a more normal level of six to seven months of supply.

"If inventory goes down - it's at just under 10 months now - to below eight months, that would mean we're on the way to a sustainable recovery," Yun said.

Anecdotal evidence indicates that trend may be happening. Realtors and other industry insiders are seeing rising open house attendance and multiple bids on some particularly desirable properties. Plus, pricing has become sharper, according to Sherry Chris, the CEO of Better Homes and Gardens Real Estate.

"Overpricing seems to be ending," she said. "Properties are coming onto the market and selling quickly."

And buyers are feeling a little more urgency, she added. In many markets, buyers have not felt any pressure to make an offer. "They said to themselves, 'I don't have to act immediately. It will still be on the market two weeks from now,'" she said.

Today, buyers are more likely to bid because they perceive the market as at or near its bottom. An April Gallup Poll reported that 71% of Americans thought it was a good time to buy a house.

They don't, however, believe there will be price increases soon; three of four buyers think prices will stabilize or even decline in their areas over the next 12 months, according to Gallup.

Pat Newport, a real estate analyst for IHS Global Insight, is putting less emphasis on pending home sales than he once did for his housing market analyses. There has been a disconnect lately, he said, between the number of properties going into contract (pending home sales) and the number that actually close (existing home sales).

He speculates that this is because buyers are making offers and signing contracts but, because of financing problems, many deals are falling through.

The South saw the largest gain of any region, with pending home sales jumping 8.5%. Pending sales are 7.7% higher there compared with a year ago.

The Midwest gained 3.9% from February and 1.7% year-over-year. Northeast sales fell 5.7% and are off 24.1% compared with March 2008. The West dropped 1% for the month but are up 8.2% year-over-year.

Low home prices continued to help to drive sales, although NAR's affordability index actually fell 2.3% from February, when it hit a historic high. This index is based on family income, home prices and mortgage rates.

"Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment," said NAR President Charles McMillan, in a prepared statement. "For buyers who've been on the sidelines and have good jobs, the market has never looked more favorable

WASHINGTON — After a staggering 74 percent decline from the peak in July 2005, new U.S. home sales appear to be bottoming out.

The pace of home sales, which hit a record-low in January, jumped in February and was flat in March, the Commerce Department said Friday. At the same time, the inventory of new homes for sale dropped a badly needed 5 percent from February levels.

"We believe that the bottom is at hand and that sales will begin turning in the second half of this year," wrote IHS Global Insight economist Patrick Newport. "As previous recessions show, demand for new homes does not evaporate altogether, even in the hardest of times."

New home sales fell just 0.6 percent in March to a seasonally adjusted annual rate of 356,000 from an upwardly revised February rate of 358,000. February's results were adjusted upward by more than 6 percent.

The report shows the slide in demand for new homes is ending after more than 40 months of decline, wrote David Resler, chief economist with Nomura Securities.

"Sales and starts are at extremely low levels," he wrote in a note to clients. "But, probably having bottomed, they have nowhere to go but up."

That's not yet the case for prices.

The median sales price fell to $201,400, a 12 percent drop from a year earlier. The median price is the midpoint, which means half of the homes sold for more and half for less. Prices are likely to remain weak for months as builders continue to clear out their stock of unsold homes.

Sales varied dramatically around the country. The best performance was in the West, where sales rose more than 15 percent from February. The worst turnout was in the Northeast, where sales sank more than 32 percent. They were unchanged in the South, and down nearly 8 percent in the Midwest.

Since the data measures signed contracts to buy new homes rather than completed sales, they probably got a boost from the new $8,000 tax credit for first-time buyers passed in mid-February. In addition, California offers a $10,000 state tax credit for buyers of new homes, and that's likely boosting sales in that state.

An index of builders' confidence released earlier this month posted its biggest one-month jump in five years as many homebuyers seized on lower prices and incentives and took advantage of lower interest rates and tax credits.

"There are some buyers beginning to come back into he market," David Crowe, the trade association's chief economist said Friday.

Demand for new homes appears to be recovering faster than demand for previously occupied homes. In March, sales of existing homes fell 3 percent to an annual rate of 4.57 million from a downwardly revised pace of 4.71 homes in February, the National Association of Realtors said Thursday.

Unless we see a recovery in the housing market, we won’t really see a recovery in the economy. But is the housing market approaching a bottom? Or does it still have a ways to go?

The answer is critical to understanding the current economic depression.

This is a chart of the S&P/Case-Shiller Home Price Index.

As you can see, it’s plummeted over the last 18 months or so. It shows that U.S. house prices have been spanked hard. And, unfortunately, it shows no sign of bottoming anytime soon.

This makes sense considering the flood of foreclosures hitting the market. In Fort Lauderdale, Florida, homes that were selling for $250,000 during the peak are now going for $70,000 in foreclosure. Repeat this scenario across the country, and you’ll see that home prices still have further to go.

Making matters worse is the 8.1% U.S. unemployment rate and the fact that nobody can find credit to buy a home with. (Less credit means fewer mortgages.)

As the year drags on and foreclosures keep hammering house prices, this trend will continue to drain cash from homebuilders. That means homebuilders such Lennar Corporation (LEN) should continue to see lower share prices as the year wears on.