Another Housing Bubble?

by qinfokusuma 2. November 2013 20:01

Just a few years ago, the Country was devastated by a crashing housing market.  Trillions of dollars in home equity was lost which devastated our economy and the financial well-being of millions of families.  Foreclosures and short sales were rampant.  People walking away, or worse, were being kicked out of their homes almost became the norm.  People who did nothing wrong were suddenly so far upside down on their homes that recovering was simply not possible.

However, over the last 12 months, we have gone from homes languishing on the market for months at rock-bottom prices with no buyers in sight to fierce bidding wars that have driven home 

prices sky high.  Potential buyers have written as many as 20 different offers on homes and been beaten out each time by somebody willing to pay more.  Sellers are asking for the moon…. and getting it. 

The question now becomes, with the median sales prices up on average 30% in just 12 months  - Are we about to do it again?   Haven’t we been through this before? Does this sound eerily familiar to 2006? Could we possibly be so stupid.

To answer that question, we have to look at several factors.  The main factor to consider is why prices ran up so far and so fast back in 2006 then compare that with what is going on today.  It’s a somewhat lengthy and difficult question to answer but much of it can be summarized with the availability of mortgage money back in 2006. 
 

Have you ever heard of what was called the “NINJA” Loan?  Its hard to believe but it was the name given to a loan which would be made for some body buying a home that had:  No Income, No Job, and No Assets.  Credit scores were not looked at and no down payment was required.  Sound hard to believe that banks would loan somebody like this hundreds of thousands of dollars?  Well, its true and they did!  Sometimes also called a “signature loan” because that’s all the person had to provide in order to get the loan and buy the house.  This loan and loans like it were later designated “sub-prime” loans and they can be directly attributed to the market crashing and the devastation that took place.

 

So, what did loans like the NINJA loan have to do with prices running sky high back in 2006?  Typically there is a balance between the number of homes for sale and the number of “qualified” buyers.  The balance between the two does ebb and flow but normally they keep each other in check and housing prices remain somewhat stable.  However, when banks started writing NINJA loans and other similar loans, the word “qualified” was removed and literally anybody could buy a home.  Suddenly, there was a dramatic imbalance in the number of buyers to the number of sellers.  Soon every Seller had 15 or 20 buyers trying to purchase their home, bidding wars started, and prices shot up.  The unfortunate part was that many of those buyers had no ability to make even their first mortgage payment.  Most quickly went into default and soon the market was flooded with foreclosures and short sales which devastated home prices.

Lets compare that with what is happening today: 

Today buyers have to go through strict qualifying guidelines and prove their income, assets, and job history.  Credit scores are highly scrutinized and people are held accountable for their past.  Down payments are required on all loans  except VA loans.  To summarize, and in contrast to the buyers of 2006, todays buyers can afford the homes they are purchasing.

 

So what is causing this huge run up in home prices now?  The answer is that there has been a lot people and a lot of money on the sidelines waiting (for years) for signs that the market had turned.  Those signs became very apparent late in 2012 and prices started creeping up.  Once the media got wind of this, the flood gates opened and buyers came out in droves.  Once again an imbalance between the number of Buyers and the number of Sellers has created a situation of hyper appreciation. 

 

So, are we experiencing another housing bubble?  Will this burst like the last one?  Most experts agree that this is not a bubble for a number of reasons that range from population growth to lack of construction workers to build new houses.  However, I believe that we wont see another crash simply because the Buyers in this market have to do something that the Buyers 2006 didn’t have to do – that is QUALIFY FOR A LOAN.  The point being that these buyers CAN afford their payment and mass foreclosures are not in our future.

STILL A LOOMING THREAT:  There is one looming threat to the housing market out there though and that is interest rates.  The Chairman of the Fed, Ben Bernanke, stopped an extremely “hot”  market dead in its tracks in early July 2013 when he “tested” the market by saying that the Fed will ease its support of Mortgage Backed Securities.  This comment caused interest rates to jump by nearly 1.5% almost overnight and largely shut down our booming real estate market.  It has since recovered and sales have started to happen again but the threat remains.  If you are thinking about sizing up or down with your home, or are a first time homebuyer, you may want to consider doing it soon, before another comment is made.  

 

Tags:

First Time Home Buyers | General | Real Estate Investing | Real Estate News | Special Reports - Buyers

SELLER FINANCING IS ABOUT TO GET UGLY ON JANUARY 10

by qinfokusuma 18. October 2013 10:11

Here is a recap of some of Dodd-Frank’s restrictions on private seller financing of residential property scheduled to take effect on January 10, 2014:

  • The seller cannot have constructed the home.
  • The loan must be fully amortizing. No balloon payments are allowed.
  • The seller must determine the buyer has reasonable ability to repay the loan.
  • The loan must have a fixed interest rate for a minimum of five years.
  • The loan must meet criteria identified by the Federal Reserve Board i.e., the rules will continue to change on you.

Click here for Original Blog from Clint Coons Blog

Tags:

Legal | Real Estate Investing | Real Estate News

Owner of vacant residential property

by qinfokusuma 23. January 2013 06:00

Existing California law requires an owner of vacant residential property purchased through foreclosure to maintain the property.  If the owner fails to do so, existing law allows a governmental entity to impose a civil fine of up to $1,000 per day, have the required work performed, and bill the property owner These provisions were scheduled to sunset 12/31/2012.  Recent legislation removes the sunset provision and extends the statute indefinitely.

 

This legislation also generally requires a public entity to wait at least 60 days after an owner acquires property after a foreclosure before the public entity performs work in place of the owner; prescribes notice that must be sent to the owner; authorizes a court to impose certain unrecovered abatement costs on the property owner; and makes other changes.

 

This legislation is AB 2314, ch. 201, passed by the legislature and signed into law by the governor on 08/27/2012.

Tags:

Legal | Real Estate Investing | Real Estate News

New 2013 California Law Requires Disclosure of Foreclosure to Tenants

by qinfokusuma 14. January 2013 08:39

As of January 1, 2013, property managers and landlords in California are required to disclose in writing to any prospective tenants if a notice of default has been recorded against the property. The law applies to rentals of single-family homes and apartment buildings of no more than four units.

The disclosure also includes a notice that if a new owner takes ownership of a property following foreclosure, the owner will not be able to evict the tenants for at least 90 days written eviction notices in many cases.

For landlords who violate the disclosure requirement, tenants may be able to void any lease and recover one month's rent or twice the actual damages - whichever is greater. Tenants may also be able to recover all prepaid rent from the landlord if the landlord violates the disclosure requirement, according to the new law. 


 

Get instant home values and recent sale prices

by qinfokusuma 7. December 2012 13:44

Find Out What Your House is Worth On-Line.
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and which houses are currently listed,
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Tags:

FOR SALE | General | Legal | Real Estate Investing | Special Reports - Home Sellers

TEAM NUVISION VIDEO

by qinfokusuma 13. November 2012 20:18

10 Questions You Must Ask When Interviewing an Agent

by qinfokusuma 23. August 2012 09:23

 

Warning! Do Not Hire Any Real Estate Agent Before You Read This FREE Special Report

 

Not all real estate agents are the same. If you decide to seek the help of an agent when selling or buying your home, you need some good information before you make any moves.

 

Picking the right agent is one of those critical issues that can cost or save you thousands of dollars. There are very specific questions you should be asking to ensure that you get the best representation for your needs. Many agents would prefer that you don't ask these questions, because the knowledge you'll gain from their honest answers will give you a very good idea about what outcome you can expect from using this agent. And let's face it - in real estate, as in life - not all things are created equal.

 

Hiring a real estate agent is just like any hiring process - with you on the boss's side of the desk. Buying or selling a home is a major financial action, probably the biggest you will ever take.  It's critical that you make the right decision about who will handle it.

 

To help homeowners do a better job of choosing an agent to represent them, industry experts have prepared a FREE Special Report entitled "10 Questions You Must Ask When Interviewing an Agent". This report identifies 10 critical questions that will help you make an accurate prediction of how good a job this agent will do for you.

 

Order this report NOW online at www.BeforeYouHireRealtor.com  and find out the questions that agents would prefer you never ask!

Take Control of Your Future: Use Your SD IRA to Invest in Real Estate

by qinfokusuma 7. June 2012 13:30

Did you know you could use your nest egg to purchase an investment property and increase its value through cash flow? You can roll your traditional IRA or 401k into a self-directed IRA (SD IRA) and—as the name implies—have direct control over where your funds are invested, namely a cash flow-producing rental property.

Traditional IRAs, in most cases, are distributed among stocks, bonds, and mutual funds at the discretion of the bank or financial institution by which they’re managed. The financial institution acts as the trustee or custodian of the IRA; it distributes, receives, and holds the account funds for the investor. In most cases, the investor is out of touch with his or her investment activity and just hopes for the best.

While approximately 97% of all retirement account assets are invested with banks, brokerage firms, mutual fund companies, and insurance companies, many people don’t know there are other retirement investment options available and that many of these options have greater return capabilities.1 Real estate, limited liability companies, private companies, and joint ventures are just a handful of possibilities. These investments require that you first roll your IRA into a self-directed IRA to allow you to direct its activity. Because self-directed IRAs are less profitable for financial institutions than traditional IRAs, and because fewer institutions are proficient at handling them, they’re more reluctant to communicate this option to investors.2

There’s no penalty for rolling your retirement funds into an SD IRA, but like a traditional IRA, it requires an account custodian. The difference is your ability to tell your custodian where to invest your funds. For example, you can have your custodian purchase real estate with your SD IRA, then hold the property as a rental investment and have the cash flow go back into your SD IRA. As a bonus, the fees associated with SD IRA custodians can be lower than traditional IRA fees.3

It’s much simpler than most people think. The first step is to find an SD IRA custodian. Not all banks and brokerages handle this type of account, and you’ll want to find one that specializes in SD IRAs. And be aware, rolling your IRA into an SD IRA typically takes six to eight weeks.

Once you have your SD IRA all set up, you can make an offer on a selected investment property in the name of your SD IRA. After negotiating a deal, your custodian executes the contract. There’s extra paperwork involved when going this route, but your custodian can help guide you through the process.

If you’re interested in boosting your retirement and diversifying your investments, using an SD IRA to invest in real estate is a great strategy. You’ll want to consult with your accountant and find a custodian who is experienced with SD IRAs. This method is certainly more proactive and lucrative than leaving your retirement funds in the hands of someone else and simply hoping for the best.

For immediate assistance, please contact your
TEAM NUVISION Real Estate Investment Broker Kyle Ngo
Tel: 626-215-2368 or email: Kyle@TeamNuVision.net


1Allen, Matthew M. Leverage Your IRA: Maximize Your Profits with Real Estate, Scottsdale: LIFESUCCESS PUBLISHING, 2010.

2Ibid.

3http://www.biggerpockets.com/articles/3088-4-reasons-to-invest-with-your-sdira-in-real-estate

 

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