According to the recent Macro Markets survey, economists sentiment on home prices is weakening.  Just 21% of economists surveyed see home prices gaining in 2010, down from 48% in May.  For 2011 64% of economists and housing analysts suggested price gains, down from 75% in May.

This deteriorating view comes as most realizing the “recovery summer” is running out of steam.  Job creation remains low and a double-dip in home prices is becoming a self-fulfilling prophecy.

I feel confident that smart investors are purchasing for yield not for price gains as a primary factor as I told the Wall Street Journal a week ago.  I remain steadfast on this.  Rents are very low now and are likely near their bottom.  If you can purchase the right properties and factor in a potential rent decline of 10% and still hit your base yield target, then with today’s rates, it might be the right time to acquire real estate.

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I published an article this spring on the BiggerPockets real estate investing blog recently which was reprinted in Realty411 discussing minimizing your downside risk by investing in high-quality properties.  I’ve deemed this type of real estate investment, “Blue-Chip” because I believe some of the same fundamentals apply whether one is investing in equities or real estate.  I’ve noticed personally that my high-quality homes held up well during the recent housing crisis as these tenants were better equipped to whether the economic storm.  Also these homes were located in primarily owner occupied neighborhoods where the impact of foreclosures was light.

The inverse, of course, is also true.  Homes on the very bottom were devastated by foreclosures, high vacancy, unemployment, and ultimately crime.  I believe investors who are seeking alpha can achieve it through high-quality properties available today at deeply discounted prices.  The article seems more timely now than it did then. Enjoy.

Full Article:

Blue-Chip Real Estate – Page 1

Blue-Chip Real Estate – Page 2

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Foreclosures actually fell year-over-year in April according to RealtyTrac.  This is the first drop since RealtyTrac started tracking the number of foreclosure notices.

The drop was only 2% which I suspect will be wiped out with increases in foreclosure filings in the second half of the year.  This drop can be attributed to many of the pressure banks are receiving from the government, consumers, and media to try new work out programs with debt holders.

Despite the 2% drop, there were still over 300,000 foreclosure filings in April.  The number is plateuing and next year we’ll start seeing significant decreases.

Other interesting stats in RealtyTrac’s report

• 6 states accounted for more than half of April’s bank repossessions nationwide
• Nevada tops the list in rate of filings for the 40^th consecutive month
• Foreclosure rates dropped in both California and Arizona

The good news for housing doesn’t stop there.  9 of the top 10 leading metropolitan areas for foreclosure-related activity showed a drop in annual activity.  Only Reno, Nevada showed an increase.

Buying distressed homes is big business, according to the National Association of Realtors, accounting for 35 percent of all home resales with a typical discount ranging near 15 percent on value.  While many investing out of state are looking for improved properties, I still think there is a larger value in buying the distressed assets if the right team is in place to improve it.

But with the discount comes some caution. You need to know how buying a foreclosed can be different from buying a non-foreclosed home.   For example, distressed properties are often sold as-is and may have defects that render them “un-lendable”.  Secondly, fast closes aren’t usually possible with bank-owned homes.   Thirdly the number of competing offers makes this process especially difficult.

And, lastly, not all foreclosed homes are searchable online. You’ll usually find more stock if you work with a real estate agent or investment property firm versus searching online.  I’ve personally seen much of the data online being a little dated too.

You’re likely to see a lot more inventory now that the home buyer tax credit has expired maybe even driving prices down a bit.  During this period of slight price declines, appraised values will actually rise as the purchases from the tax credit start being logged.  Appraisers will be using these recent comparable sales to value your new purchase or refinance.  This could be just a short window of 3 months or offering an opportunity to purchase a distressed asset using bridge financing (hard money), and get a very favorable refinance.

-    Ryan Hinricher, Housing Analyst

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The Federal Reserve says that “bank lending continues to contract” despite market conditions that are supportive for growth.  I’m curious to see what the next update of their statement will be after yesterday’s wild ride on Wall Street.

If you’ve applied for a investment property loan lately, you probably felt the extra scrutiny on income, assets and credit scores, among other things.  Things are changing and getting tighter.  The proof, however, can be found in the Federal Reserve’s quarterly survey of its member banks.

In the first quarter of 2010, 1 in 8 banks surveyed toughened their qualification standards.

Only 4% loosened them.

When we account for the Fed’s survey in conjunction with new underwriting standards from Fannie Mae and FHA, it’s clear that getting approved for a mortgage in 2010 is more difficult than many of us would have expected.

Today’s real estate investors and home buyers in Memphis have higher hills to climb

• Minimum credit scores are higher
• Higher downpayments
• Debt-to-Income thresholds are tighter

In other words, mortgage rates may stay low throughout 2010 (although the trend is higher), but that won’t matter to investors unable to obtain financing.

If you’re among the many residential real estate investors  wondering when the right time to buy is, remember that  along with a probable increase in mortgage rates, you now have a tougher lending standarts as mortgage approvals are getting more scarce.

Finding that foreclosure steal won’t matter if you can’t get qualified to purchase.

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In February the average sales price of a home was $112,035 up slightly from January’s $111,598 according to the Memphis Area Association of Realtors.  This reflects some demand from 1st-time home buyers executing on the soon to expire tax credit.

While this number is good, it’s still down 5.5% over February 2009 as home prices struggle to recover.  Also inventories increased slightly as foreclosure pace picks up.

I’m seeing inventories increase more in the lower end where I think investors will continue to see prices drop.  The strong sales activity seems to be near the average sales price.   That $100,000-125,000 range is hot right now for first time buyers,  people moving up from smaller homes and those downsizing to lower their cost of living.

Of course I’m slightly biased as that also is the average value of the investment homes Investor Nation offers for sale here in Memphis.  I’m a huge proponent of investing in what is the highest in demand and average sales price is that product.

With the lack of new homes being built it, foreclosure inventory will be absorbed quickly in 2010.  Unfortunately that doesn’t mean someone who wanted to build a new home in the $125,000 range isn’t going to purchase a $30,000 home in place of it.  My strong belief is that the inventory swell will be in highest on the low end and lowest near the middle.  The people in the middle will buy near the average sales price when they can’t build a home.

You’ll see appreciation this year in Memphis near this average sales price and slightly higher.  So target investments with multiple exit strategies that have appraised values $90,000 and higher.  This should catch the bottom of the owner occupant contingent.  If long term value is not on your list, then take a closer look at the lower end.  Keep in mind the equity on the lower end can be false as the exit strategy is usually to another investor versus an owner occupant.   You also need to pay attention to socio-economic factors such as crime, unemployment, schools, and education levels.  These can impact your cash flow significantly.  Analyzing the numbers along isn’t enough.

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With new home construction hovering at record low levels it makes one think that existing home sales should be rising.  Instead existing home sales remain in decline.  The decline is evident though and happened again in January after a huge drop in December.

In January Existing Home Sales fell by 7% after falling 17% in Decemberaccording to the National Association of Realtors.   So what’s going on and how are investors benefiting from this?  Well a number of things are happening but a couple of them stand out.  The Turnover Rate is in decline, now just above 6% (down from 9.5% in 2005.  This is the percentage of all homes reselling in a year.  Frankly people aren’t moving as much.  Corporations are reluctant to transfer people on a whim and pay them to relocate.  Also in the last 60 days, the weather has been anything but cooperative around the country.   Here in Memphis where my own home is on the market (become of a relocation, ironic, isn’t it?), low temperatures are keeping people inside instead of house hunting.  This can have a larger impact than most would believe.

Investors are using low home sales numbers and looming foreclosures hitting the market to negotiate prices with motivated sellers, banks, and investment companies.  Despite the declines in the number of sales, the prices are remaining consistent and even increasing (7 months in a row of price increases).  Although I suspect foreclosures peaking in 2010 will keep prices from advancing much further.

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I’m hearing a lot of buzz about people trying to time the market from a pricing perspective.  Reminds me a lot of people trying to time the stock market.  Looking closer at the fundamentals, most economists agree the market is bottoming out and prices will remain stagnant over the next 3-4 years.  This will be largely due to continued heavy amounts of distressed inventory hitting the market (2.4million foreclosures in 2010 according to Change.org).

However with the lack of building taking place we are seeing significant inventory contraction which will buoy prices at about where they are now, at least in our primary market here in Memphis.   What I do see though is a move towards interest rate increases.  It started with the Fed raising the Discount Rate in an unexpected move and today Kansas City Fed President Thomas Hoenig said rates need to rise sooner, rather than later.

Most recently clients of Investor Nation have been receiving fixed 30-year 5.5%-5.75% interest rates on refinances of investment homes and 5.25% on purchases with 30% down.   Locking in at low interest rates increases the return on money borrowed in an environment where rents have been in slight decline.

Consider the current rates and know that the move towards higher rates has already begun.

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Thanks to Turn Here for helping create the video.  Brad Inman’s new company helps small start-ups like mine have a professional commercial for web distribution.  Very tasteful.  Thanks Brad for the complimentary video!

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September 22, 2009 — On August 1, 2009, Investor Nation, a real estate investment company based in Memphis, TN, began offering its investment home blog on Amazon’s Kindle. With outlets in multiple cities in the U.S., Investor Nation offers a unique perspective on the investment home market. Through the Investor Nation blog, Chief Marketing Officer Ryan Hinricher and his team update residential real estate investors on industry trends and opportunities.

Many of our clients are well-read and well-informed individuals

“Many of our clients are well-read and well-informed individuals,” says Hinricher. “The Kindle gives us another avenue to keep them current on real estate investment news, property and product roll-outs, and educational events.”

Unlike reading blogs on your PC, Kindle blogs are downloaded onto Kindle so you can read them even when you’re not wirelessly connected. And unlike RSS readers which often only provide headlines, blogs on Kindle give you full text content and images, and are updated wirelessly throughout the day. The Investor Nation blog is wirelessly delivered to your Kindle for only $.99 per month.

“Investor Nation is committed to providing the leading client experience in the investment home economy. To do so, we put a big focus on listening to clients and innovating,” says Investor Nation President Stephen Green.

Investor Nation offers a turn-key real estate investing system for investors to purchase, renovate, and rent real estate investment property in key markets throughout the US. It focuses on, 3 bedroom / 2 bathroom homes to people looking for positive cash flow real estate investments.

Posted via email from Investor Nation: Now

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