The State of the Nations Housing

Ok, so out of Harvard comes some interesting information. A study published recently on the state of the nations housing for 2007 leave more questions than it answers them. Words like “it will depend” and “If builders par down” etc. left me wondering what good they really came up with in this study.

Let me provide some facts that they did come up with.

* Housing afford ability continues to be a major problem. What does that mean? Well in lay mans terms it means people don’t have enough money to pay their mortgages if they purchase a property. And it means that many will never qualify for a mortgage to start with. Overheated home prices, rising interest rates, tighter lending practices, and in some markets declining incomes all add to this lack of afford ability.

* “The down turn is in full swing” Yep that what it says and it took the Harvard people to let us know that!!! They did finally peg the start of the down turn right however. They put it during the last quarter of 2005. Which means we have been in that down cycle for 1.5 to 2 years now. in fact 277 major housing markets have registered this down turn. The downturn includes a decline in home prices and a decline in new homes being built. The number of VACANT homes on the market jumped by on half a million between the end of 2005 and 2006. This number is expected to reach 1 million this year.

* Federal subsidies to assist buyers and renters is not keeping pace and is of little effect. Once again, it to Harvard to let us know that.

* Continued risk to lenders will keep pressure on lenders to keep their underwriting standards tight which will keep many buyers out of the market. There is no loosening in sight for sub-prime borrowers who today were the A- and B borrowers of yesterday.

* Foreclosure rates are seen to continue to grow but as we mentioned above they would not venture a guess on when this trend would reverse.

With all of that information and my experience watching the housing market I tender the following:

* The tried and proven way to know when to invest and what exit strategy to be used is to have in your bag of tools, all the knowledge of structuring deals that you can have, and to study and graph each individual market you intend to invest in for the last 15 to 20 years. Markets trend and they follow those trends. If you will graph them, you will see that I am correct. You can know where the market is and be able to time your purchases and sales or refinances to take advantage of these trends.

* All of the Harvard (and other studies) forget to to look at trends. They look to the futures trying to guess what is coming, or in this studies case not guessing at all, but they have overlooked the simple easy way to forecast and that is to look at past trends as well as dynamics in the market now. Don’t you make that mistake!

I will offer my short story. I will tell you that as I graph market trends and look to any dynamics acting upon any individual market, I have been able to be fairly accurate in knowing what the timing of each market is when I enter and when I leave. It has worked for me and I believe will work for you.

Cary Beagley

The following article was published recently by PACIFIC SECURITY CAPITAL.  Invertors may order the full report from the author at the link below in the article.  Even though this is promotional information for the company producing it both this article and the full report contain excellent advice about purchasing or developing commercial property.
Pacific Security Capital Addresses Ways to Minimize Commercial Real Estate Investment Risks
Real Estate Services Firm Educates on Ways to Reduce Risks when Investing in Commercial Real Estate Ventures
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•    Know what your own financial capacity truly is, and not simply what you’d like it to be

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About Pacific Security Capital
Pacific Security Capital is a vertically integrated real estate services company providing investment and advisory services, asset management, development services, commercial real estate loans, structured finance, landlord/tenant representation, and investment sales. Our mission is to add value to client initiatives at every level of the real estate cycle. PSC is headquartered in Beaverton, Oregon with offices in major markets in North America. More information about the company can be found at www.PacificSecurityCapital.com.

RESIDENTIAL REAL ESTATE MARKET WATCH

Those in the know, when it comes to the residential real estate markets, continue to pass on bad news for home sales and home prices. However, many are now passing along some positive news as well. Recently there have been some articles indicating that research and projections by different companies and agencies indicates that there are some bright spots in the market.

Several Texas cities continue to be forecast with strong sales and positive price growth. In fact, out of the top 10 markets cited for growth Texas came in first with four. The top four markets for growth and strong sales in Texas include McAllen-Mission, Elpaso, San Antonio and FortWorth-Arlington. The forecast growth through 2008 ranges from 3.5% to 9.8%. Certainly not the double digit numbers of the recent past (in some markets), but none the less strong growth projections when juxtaposed with many other markets.

Other markets that have favorable sales and growth projections include Syracuse N.Y., Rochester N.Y., Burmingham Ala.,Albuquerque Nm., Baton Rouge La., and Salt Lake City Ut. These markets also show positive growth as well as projections for price increases through 2008. All price increases are estimated to be single midget growth. Once again not nice double digit increases but strong growth with strong sales is a major factor when most of the country is experiencing declining values as well as forecast sales.

As a Mentor/Coach I am exposed daily to markets throughout the Country. I experience students, real estate agents, investors, as well as mortgage brokers interest in local markets. Although I agree with the information above ( which I gleaned from my research ) there are other markets that show signs of strong sales as well as increases in property values. Just a few that I believe exist, other than those above would include Raleigh Nc., Atlanta Ga., Boise Id., Nashville Tn., Austin Tx. I’m sure there are many more. Simple research on any particular market can be done by you or anybody and can yield substantial results to investors who take the time to know where to invest and what market conditions have been, are and are expected to be.

Take a look! Tell me what you think!

Cary Beagley

An excellent article describing some of the details involved in closing a commercial real estate sale when a conduit loan is to be paid off using a defeasance process appeared in the May 2007 issue of “WESTERN REAL ESTATE BUSINESS�.  The article can be found at www.westernrebusiness.com/articles/MAY07/feature4.html.  It is entitled:

              A DECISIVE DISPOSITION SAVES TIME AND MONEY by Betsy Ross

The article advises that it typically takes 30 days to do a defeasance (the process whereby the seller of a property encumbered by a conduit loan has someone find a substitute security to replace the loan in the lenders portfolio and enable the seller to pay off the loan).  The actual closing of a defeasance transaction in the same escrow as the sale transaction usually takes 3 days and it is important that the timing issues be agreed upon by buyer and seller in the purchase contract and escrow instructions.

To avoid problems in transactions that involve short due diligence periods and buyer deposits that become non-refundable after this period expires it is important that the buyer and seller agree in advance about the coordination of the defeasance with the sale escrow.  It is also important that the seller obtain the buyer’s agreement to cooperate with the seller’s defeasance process including having the buyer’s funds delivered to escrow one day in advance of the close to accommodate the defeasance process.

The reader is referred to the article for more details on coordinating the sale and defeasance process.