Although I am not an advocate of comparing changes in prices from month to month or from year to year but we need to be aware of trends. The following is from the Standard & Poor’s/Case Sheller index showing the year-to-year housing price changes for the top 20 metro areas. It is good to see that there are metro areas showing a positive price change. Without the benefit of further research, I would conclude the positive changes in Los Angeles, San Francisco and San Diego may be due to dwindling supplies. And in Washington DC – well it is the federal government!
The price reduction year over year in most areas has slowed, hit bottom and gradually turning positive. This may signal the best time ever to buy – especially with mortgage rates around 4%!
Metro Area 1-year Price Change (%)
Atlanta -2.0
Boston +1.5
Charlotte -3.4
Chicago -2.9
Cleveland -0.4
Dallas -1.7
Denver -1.2
Detroit -0.1
Las Vegas -4.5
Los Angeles +5.4
Miami -1.0
Minneapolis +2.9
New York +0.1
Phoenix +0.4
Portland -2.3
San Diego +6.9
San Francisco +7.8
Seattle -2.4
Tampa -4.1
Washington DC +4.8
Thursday, October 28, 2010
Wednesday, October 27, 2010
Robo-Signing and the Foreclosure Scandal
Robo-signing is a new word coming from the Foreclosure Scandal that has found its way into our everyday lives. So, what does robo-signing mean exactly?
Upon initial review of the information robo-signing looked to be a result of the huge number of foreclosure documents that needed to be approved and signed off on.
It seems that many people thought these were qualified individuals who were overwhelmed with the amount of paperwork they needed to complete to have a foreclosure proceeding move forward.
Now, in some recent developments, it seems as though another component of robo-signing took place. As the servicers of the lenders tried to keep up with the paperwork they started to hire employees who did not have the correct mortgage background.
How can someone who does not have an understanding of basic mortgage terms and practices be expected to appropriately review foreclosure documents?
Many States have joined in on this to help consumers. As stated in my previous posts, this scandal will slide foreclosures into 2011 which will have a significant impact on the housing recovery. So goes housing – so goes the economy!
Financial institutions continue to play havoc with our economy. If you remember, the 1991 housing recession was caused in part by the collapse of the Savings & Loan industry due to toxic real estate loans. The federal government should have recreated the RTC (Resolution trust Corporation) which was formed in the early ‘90’s to deposit all of the failed real estate loans under a single receivership. It worked then but not now?
Tuesday, October 26, 2010
Charlotte Housing Market - 3rd QT.
The following charts illustrate the housing inventory for Charlotte, NC and surrounding towns. Compare the data to your market. As you know every market is different and submarkets may not be consistent with adjacent towns. As an example, the inventory in the Lake Norman area is still not good but better than other submarkets. Ask your real estate agent for similar statistics for your market and use this guide to determine price trends for your area.
Monday, October 25, 2010
Charlotte Housing Market in September 2010
Every month, Carolina Multiple Listing Service releases the Charlotte region’s monthly statistics.
Below please find Carolina Multiple Listing Statistics from September 2003 through September 2010. Look for trends rather than year to year comparisons.
In September 2010, Charlotte’s housing market experienced historically low levels of activity in:
New Listings (4043)
Pending Contracts (1658)
Closed Transactions (1658)
These activity levels are well below any September between 2003 and 2009.
Low pending sales means that there are were only 1658 people that chose to buy a home last month, as compared to ~3400 buyers each September in the peak years of 2004 and 2005. That’s 50% less buyers in 2010 than the peak years of 2004 and 2005 and 30% less buyers than 2003.
On average, homes are selling at 88% of list price. Listing prices are as high as they were in 2007-08 and closed prices are still down in the 2003-05 range. This significant List to Sales Price disparity is probably due to the increased level of foreclosure and distressed sales in our market.
According to the Business Journal, “In the 3rd quarter, foreclosures were up 34% year over year in Charlotte.”
On October 15th, a Business Week article stated, “Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.”
Below please find Carolina Multiple Listing Statistics from September 2003 through September 2010. Look for trends rather than year to year comparisons.
In September 2010, Charlotte’s housing market experienced historically low levels of activity in:
New Listings (4043)
Pending Contracts (1658)
Closed Transactions (1658)
These activity levels are well below any September between 2003 and 2009.
Low pending sales means that there are were only 1658 people that chose to buy a home last month, as compared to ~3400 buyers each September in the peak years of 2004 and 2005. That’s 50% less buyers in 2010 than the peak years of 2004 and 2005 and 30% less buyers than 2003.
On average, homes are selling at 88% of list price. Listing prices are as high as they were in 2007-08 and closed prices are still down in the 2003-05 range. This significant List to Sales Price disparity is probably due to the increased level of foreclosure and distressed sales in our market.
According to the Business Journal, “In the 3rd quarter, foreclosures were up 34% year over year in Charlotte.”
On October 15th, a Business Week article stated, “Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.”
Thursday, October 21, 2010
SBA redefines “Small Business”
Effective November 5, 2010, the criteria defining what constitutes a Small Business will change. The criteria will be expanded to include companies with less than 200 employees. Also, the annual receipt cap has been increased to $35,500,000.
The SBA predicts this easy rule change will add about 20,000 additional companies eligible for SBA loans. This will also help these companies with Federal contracts.
It is estimated that small business create about 65% of all new jobs (not this recession, however) and employ 50% of the private-sector workforce.
So why redefine the criteria defining a small business. Politics!
Do you consider revenue of $35,500,000 per year a SMALL business? Since banks are not lending money, the SBA wants to widen the net and show that the federal government will loan money!
Why would a small business of this size seek government money --- to expand and hire more workers or have better access and improve their ability to win federal contracts?
The SBA predicts this easy rule change will add about 20,000 additional companies eligible for SBA loans. This will also help these companies with Federal contracts.
It is estimated that small business create about 65% of all new jobs (not this recession, however) and employ 50% of the private-sector workforce.
So why redefine the criteria defining a small business. Politics!
Do you consider revenue of $35,500,000 per year a SMALL business? Since banks are not lending money, the SBA wants to widen the net and show that the federal government will loan money!
Why would a small business of this size seek government money --- to expand and hire more workers or have better access and improve their ability to win federal contracts?
Wednesday, October 20, 2010
Congress – Examples of why it is Broke
Example:
House adjourned September 29, 2010
House will reconvene on November 15, 2010
New Congress sworn in on January 19, 2011
There will be limited number of legislative days during the “lame duck” session.
So……………… 4-months with limited legislative activity while us “worker bees” and 26,000,000 Americans wanting to work are left holding the bag.
Don’t you think something needs to be done about how Congress works and reacts to We the People? Terms limits would be a start.
Example:
HR 2853 was introduced in the House on June 12, 2009 states: “To require the purchase of domestically made flags of the United States of America for use by the Federal government”
Passed by the House on September 29, 2010 --- 15 months after the bill was introduced!
It just seems to me:
(1) Why do we need this bill in the first place – the Federal government should be buying American flags made in the USA without being told to and
(2) Why did it take so long to pass this legislation?
House adjourned September 29, 2010
House will reconvene on November 15, 2010
New Congress sworn in on January 19, 2011
There will be limited number of legislative days during the “lame duck” session.
So……………… 4-months with limited legislative activity while us “worker bees” and 26,000,000 Americans wanting to work are left holding the bag.
Don’t you think something needs to be done about how Congress works and reacts to We the People? Terms limits would be a start.
Example:
HR 2853 was introduced in the House on June 12, 2009 states: “To require the purchase of domestically made flags of the United States of America for use by the Federal government”
Passed by the House on September 29, 2010 --- 15 months after the bill was introduced!
It just seems to me:
(1) Why do we need this bill in the first place – the Federal government should be buying American flags made in the USA without being told to and
(2) Why did it take so long to pass this legislation?
Tuesday, October 19, 2010
Do you buy a Home or a House?
Will you buy your house as an investment?
OR
Will you buy your home for a place to raise your family?
If you purchased a home to achieve a historical average of 26% appreciation and if you bought your home at the peak of the market, when will you see the home value recover?
The answer is not easy and it depends on many factors, i.e. location, price point, etc. If you review the charts previously posted, most “experts” expect housing prices to decline through 2011. However, every market is different and price recovery will vary.
Some “experts” expect a gradual price recovery which will prolong regaining your purchase price. Although not an expert, I think prices will escalate rapidly due to the lack of supply and pent-up demand. You will regain your sales price and achieve some equity.
Regaining a sense of a “normal” housing market will take years if not decades to overcome the impact of the recession on housing. Things to think about:
1. buy a home close to where you work
2. buy a home that fits your family needs
3. buy a home that is close to shopping and recreation
4. buy a home for a “home” and not as an investment
OR
Will you buy your home for a place to raise your family?
If you purchased a home to achieve a historical average of 26% appreciation and if you bought your home at the peak of the market, when will you see the home value recover?
The answer is not easy and it depends on many factors, i.e. location, price point, etc. If you review the charts previously posted, most “experts” expect housing prices to decline through 2011. However, every market is different and price recovery will vary.Once housing prices stabilize, calculate the percent drop in prices since the day you purchased the home. Use a 26% appreciation per year to determine the length of time it will take to equal the purchase price. That’s if we can expect a normal recovery.
Some “experts” expect a gradual price recovery which will prolong regaining your purchase price. Although not an expert, I think prices will escalate rapidly due to the lack of supply and pent-up demand. You will regain your sales price and achieve some equity.
Regaining a sense of a “normal” housing market will take years if not decades to overcome the impact of the recession on housing. Things to think about:
1. buy a home close to where you work
2. buy a home that fits your family needs
3. buy a home that is close to shopping and recreation
4. buy a home for a “home” and not as an investment
Monday, October 18, 2010
The Federal Reserve – Printing more Money???
For the past 30 years, the Federal Reserve has been lead by only three individuals:
I remember the 1981 recession very well. You had to buy your home with a credit card with the high interest rate of 18%! We watched the Fed’s action every month to see if the interest rates would be lowered. We probably refinanced three times during that period of time.
The 1991 recession was triggered by the Savings and Loan failures. All of the toxic real estate assets were bundled into the newly formed RTC - which worked very well.
Since 1979, we have had six Presidents – three Democrats and three Republicans! We know everything about the President’s but know very little about the role of the Federal Reserve Chairman. Yes, they are confirmed by Congress but you would think that “fresh” ideas can be generated from more people.
Now today, Ben Bernanke is in favor of generating actions to cause inflation to rise. His thought process is that increasing inflation will cause more people to buy and companies to expand. With inflation come higher interest rates which have always been a benchmark for people to buy. Also companies may borrow, hire more workers, and make more goods if the interest rates start to increase.
I am not sure how this will work but let’s think about it for one second!
The Federal Reserve will print more money to trigger this action!
With higher inflation due to Fed policies, how can they control the outcome? I don’t think they can and we may have a gradual increase in inflation for years to come.
With interest rates at already historic lows and no one is buying or expanding, will interest rates moving up to 5% or even 6% cause people to reevaluate their options?
Maybe this will help in the short term but not in the long term. This is a political move not an economic decision. Increasing inflationary pressures and having higher interest rates will not make us feel better nor cause us to have greater confidence in the economy. Triggering inflation and delaying foreclosures going into the holiday season just doesn’t sound right. Does it? Just how does this anticipated action by the Fed help the unemployed?
It just seems to me that the Federal Reserve has enormous power influenced by politics. They take actions without expert oversight, have stagnant leadership, and have apparent arrogance.
Bernanke is supposed to be the expert on the Great depression
Isn’t it time to try something different or ask someone else for opinions? I am sure there are qualified people willing to bring new ideas to the table ……………don’t you think??????
- Paul A. Volcher 1979 – 1987 (1981 recession)
- Alan Greenspan 1987 – 2006 (1991 & 2001 recessions)
- Ben Bernanke 2006 - ? (the 2008 Great recession)
How would you rate their performances?
Volcher is working on the Obama team and
Greenspan voices his opinions almost weekly.
Friday, October 15, 2010
Career Change? Raise your hand if you want to be a………....
Least Stressful Jobs in USA – 2010 – per “Career Cast”
• Musical Instrument Repairer
• Medical Records Technician
• Appliance Repairer
• Actuary
• Forklift Operator
• Librarian
• Medical Secretary
• Bookkeeper
• Piano tuner
• Janitor
• The unemployed worker that wants to work but can’t find a job in their profession. They would consider another type of job but some jobs pay less than unemployment. So, they stay unemployed and with the extended benefits, they will become unemployable when the economy turns. (D. Johnson opinion)
Most Stressful Jobs in USA – 2010 – per “Career Cast”
• Firefighters
• Senior Corporate Executive
• Taxi Driver
• Surgeon
• Commercial Airline Pilot
• Public Relations Officer
• Advertising Account Executive
• Real Estate Agent
• The unemployed worker that wants to work but the jobs have disappeared or no longer exist. They have to compete against hundreds of applicants for a job opening. Or the job opening is in another state but they can’t move because of their housing situation. The basic fibers of their family are stressed and no one is listening.(D. Johnson opinion)
• SOLE PROPRIETOR. This worker regardless of profession is literally one paycheck away from bankruptcy.
They can’t go on unemployment.
It is difficult or almost impossible for them to get a mortgage.
It is difficult for them to pay for health care coverage.
And this worker is NOT included in any statistical data base. The real problems of the economy are not reported because the sole proprietor is overlooked. (D. Johnson opinion).
• Musical Instrument Repairer
• Medical Records Technician
• Appliance Repairer
• Actuary
• Forklift Operator
• Librarian
• Medical Secretary
• Bookkeeper
• Piano tuner
• Janitor
• The unemployed worker that wants to work but can’t find a job in their profession. They would consider another type of job but some jobs pay less than unemployment. So, they stay unemployed and with the extended benefits, they will become unemployable when the economy turns. (D. Johnson opinion)
Most Stressful Jobs in USA – 2010 – per “Career Cast”
• Firefighters
• Senior Corporate Executive
• Taxi Driver
• Surgeon
• Commercial Airline Pilot
• Public Relations Officer
• Advertising Account Executive
• Real Estate Agent
• The unemployed worker that wants to work but the jobs have disappeared or no longer exist. They have to compete against hundreds of applicants for a job opening. Or the job opening is in another state but they can’t move because of their housing situation. The basic fibers of their family are stressed and no one is listening.(D. Johnson opinion)
• SOLE PROPRIETOR. This worker regardless of profession is literally one paycheck away from bankruptcy.
They can’t go on unemployment.
It is difficult or almost impossible for them to get a mortgage.
It is difficult for them to pay for health care coverage.
And this worker is NOT included in any statistical data base. The real problems of the economy are not reported because the sole proprietor is overlooked. (D. Johnson opinion).
Thursday, October 14, 2010
Revisiting Foreclosures
Foreclosure Rates
NC rate = 1 in every 867 homes rate NC is #35 in USA
USA pace is 1 in every 381 homes – 24% of all sales in 2nd Qt were distressed.
34% of all sales were distressed for past year, up from 31% in August, 09
Nevada is #1 in USA with 1 every 84 homes - 56% of all sales were distressed
Pictures tell it all! As housing goes so goes the economy!
NC rate = 1 in every 867 homes rate NC is #35 in USA
USA pace is 1 in every 381 homes – 24% of all sales in 2nd Qt were distressed.
34% of all sales were distressed for past year, up from 31% in August, 09
Nevada is #1 in USA with 1 every 84 homes - 56% of all sales were distressed
Pictures tell it all! As housing goes so goes the economy!
Wednesday, October 13, 2010
HOME PRICES FALLING AGAIN?
Why?
Note: with the upcoming election, "lame duck" session, January 19th - new congress is in session, withholding foreclosures, the above reasons and the lack of confidence in the economic recovery, I can understand how the experts are "sliding" their predictions further out.
It would seem that prices may go lower but in a broader context, the price expectation in 2013 is a dramatic increase in prices. Why?
Back to supply and demand. We will have a shortage in housing and it will hit us like a ton of bricks! Exactly when, I will leave it up to the experts for their prediction. After all these experts make their living by analyzing numbers, data, trends and publish % changes.
It is up to us to use the information to our advantage.
All I know is from history and what is happening now. There will be a shortage of housing and the pent-up demand will instantaneously change a buyer’s market to a seller’s market. Each of the graphs illustrates a dramatic increase in home prices during the last of ’12 and into ’13. Please read my previous posts on this subject.
Prepare now!
- Upcoming holiday season – real estate sales will become slower due to the holiday season starting before Thanksgiving. It is a matter of fact!
- Distressed properties continue to come onto the market in large numbers – foreclosures and short-sales are the #1 competitor for resales. If the banks are withholding foreclosures due to the “paperworkgate”, this will cause further price pressures in the first half of 2011.
- High unemployment
- Reluctant buyers
Note: with the upcoming election, "lame duck" session, January 19th - new congress is in session, withholding foreclosures, the above reasons and the lack of confidence in the economic recovery, I can understand how the experts are "sliding" their predictions further out.
The Case Shiller graph has been posted on my blog in the past. I am including two other graphs for your review.
As per KCM, Housing analysts have recently grown gloomier about the outlook for home prices as sales slump, with a survey released by MacroMarkets LLC finding that 79% of economists and analysts surveyed expecting home prices to decline this year, up from 40% in May.
OK, so?
It would seem that prices may go lower but in a broader context, the price expectation in 2013 is a dramatic increase in prices. Why?
Back to supply and demand. We will have a shortage in housing and it will hit us like a ton of bricks! Exactly when, I will leave it up to the experts for their prediction. After all these experts make their living by analyzing numbers, data, trends and publish % changes.
It is up to us to use the information to our advantage.
All I know is from history and what is happening now. There will be a shortage of housing and the pent-up demand will instantaneously change a buyer’s market to a seller’s market. Each of the graphs illustrates a dramatic increase in home prices during the last of ’12 and into ’13. Please read my previous posts on this subject.
Prepare now!
Tuesday, October 12, 2010
Today’s buyer – impacted by Recession?
Fewer people are changing households – 84.6% didn’t change in 2009, up from 83.2% in 2006
Up until the ‘90’s families moved on an average every 7-yrs. The average slowly changed to an average of every 4-yrs. Due to this recession, families will not be moving anytime soon – especially if they have established their “home”!
Women over the age of 18 – 50% are not married – highest % ever tracked
Those in the age group of 25 to 34 who are not married grew from 34.5% in 2000 to 46.3% in 2009
First time home-buyers = 31%, down from 38% in July
Investors = 21%, up from 19% in July
Cash sales = 28%, down from 30% in July
What are the current factors impacting the demand for housing?
• Unemployment
• Credit Standards
• Equity Losses
• Consumer confidence uncertainty
The following graph shows the demand for home resales during a three month period in 2010. The resale number has remained low going into the 4th quarter which is typically a slow real estate period. New housing starts have remained consistently low over the same period of time.
Up until the ‘90’s families moved on an average every 7-yrs. The average slowly changed to an average of every 4-yrs. Due to this recession, families will not be moving anytime soon – especially if they have established their “home”!
Women over the age of 18 – 50% are not married – highest % ever tracked
Those in the age group of 25 to 34 who are not married grew from 34.5% in 2000 to 46.3% in 2009
First time home-buyers = 31%, down from 38% in July
Investors = 21%, up from 19% in July
Cash sales = 28%, down from 30% in July
What are the current factors impacting the demand for housing?
• Unemployment
• Credit Standards
• Equity Losses
• Consumer confidence uncertainty
The following graph shows the demand for home resales during a three month period in 2010. The resale number has remained low going into the 4th quarter which is typically a slow real estate period. New housing starts have remained consistently low over the same period of time.
Monday, October 11, 2010
Long-Term New Construction Needs
In previous posts, I have highlighted the following long-term housing construction needs essential to keep pace with the population growth and family formations.
I am reposting this information on new home construction and resales to set the stage for my blog posts this week.
DEMAND
• 3 million more people each year
• 1.3. to 1.5 million household formation per year
• 1.4 million per year was the 30-year average
SUPPLY
• 300,000 home demolitions per year
• Need to build 1.6 to 1.8 million per year to keep up with population, housing formations and replace demolitions each year.
Resales
I am reposting this information on new home construction and resales to set the stage for my blog posts this week.
DEMAND
• 3 million more people each year
• 1.3. to 1.5 million household formation per year
• 1.4 million per year was the 30-year average
SUPPLY
• 300,000 home demolitions per year
• Need to build 1.6 to 1.8 million per year to keep up with population, housing formations and replace demolitions each year.
Resales
Resales
Friday, October 8, 2010
4- Major Reasons for Buying a Home
From the Fannie Mae National Housing Survey;
80% - you have a good place to raise and educate your children
79% - you have a place where you and your family feel safe
71% - you have control over your own living space
From the desk of harsh realities:
INTEREST RATES over the past 4-months:
80% - you have a good place to raise and educate your children
79% - you have a place where you and your family feel safe
71% - you have control over your own living space
From the desk of harsh realities:
INTEREST RATES over the past 4-months:
Thursday, October 7, 2010
Wall Street Journal’s: Top 10 Reasons to Own a Home:
1. You can get a good deal – you will never catch or time the bottom and it really doesn’t matter in the long haul anyway (remember you are buying a home not a house)
2. Mortgages are cheap – lowest on record that you will not see again in your lifetime (What is the mortgage rate this week???? Around 4.2%!!!!!!!!!!!!!!)
3. You will save on taxes – this often is the key analysis of the total cost in in the rent vs owning, and these tax breaks can be huge
4. It will be yours – you can change the kitchen, the paint, etc. You cannot do that when you rent!
5. You’ll get a better home – in many parts of the country, it’s hard to find a a good rental. Buying often gets you the best. (and in areas with the best schools)
6. It offers Some Inflation Protection – it’s not perfect, but over the long-term housing has tended to beat inflation by a couple % points a year
7. It’s Risk Capital – over the long-run your home’s equity is linked to the growth of the economy
8. It’s Forced Savings – most people don’t save their money, but part of the mortgage payment goes to principal repayment, not a cost – equity
9. There Is A Lot To Choose From – great choices and great prices as there are more homes on the market than ever
10. Sooner Or Later the Market Will Clear – Supply and demand will meet again for equilibrium
You should send this post to all. If an expert non-biased reporting from the Wall Street Journal doesn't convince someone to purchase a home this year, nothing will. They will be sitting on the sidelines saying "I should have ........."
2. Mortgages are cheap – lowest on record that you will not see again in your lifetime (What is the mortgage rate this week???? Around 4.2%!!!!!!!!!!!!!!)
3. You will save on taxes – this often is the key analysis of the total cost in in the rent vs owning, and these tax breaks can be huge
4. It will be yours – you can change the kitchen, the paint, etc. You cannot do that when you rent!
5. You’ll get a better home – in many parts of the country, it’s hard to find a a good rental. Buying often gets you the best. (and in areas with the best schools)
6. It offers Some Inflation Protection – it’s not perfect, but over the long-term housing has tended to beat inflation by a couple % points a year
7. It’s Risk Capital – over the long-run your home’s equity is linked to the growth of the economy
8. It’s Forced Savings – most people don’t save their money, but part of the mortgage payment goes to principal repayment, not a cost – equity
9. There Is A Lot To Choose From – great choices and great prices as there are more homes on the market than ever
10. Sooner Or Later the Market Will Clear – Supply and demand will meet again for equilibrium
You should send this post to all. If an expert non-biased reporting from the Wall Street Journal doesn't convince someone to purchase a home this year, nothing will. They will be sitting on the sidelines saying "I should have ........."
Wednesday, October 6, 2010
Housing Scenario
Depending upon the source, the number of new homes needed each year varies slightly and the following is the most recent estimate.
400,000 homes are demolished each year and must be replaced
1,400,000 new households are formed each year. Although there is evidence that this number has decreased since the recession started simply because of the job market and family members moving back together. As an example, college graduates are moving back with their parents since they can’t find a job.
In my June 18th post, I used 1,500,000 new homes are needed to satisfy the demand and replenish the housing stock.
So why do we have new housing starts hovering between 500,000 and 600,000 this year and LESS than 500,000 in 2009.
From 2002 – 2009, it is estimated that there were 3,000,000 new housing starts in EXCESS of the households formed.
A scenario that may happen:
Because of population increase and household formed, the demand is being met by the difference between the 1,500,000 new housing starts needed and the actual/estimated 600,000 new housing starts.
My simple conclusion is that the inventory of excess number of units built will exhausted between the end of 2011 and mid-2012. My prediction:
Housing shortage in 2012.
Interest rates much higher back to the 6-7% range
Material shortages i.e. concrete, sheetrock, lumber, etc.
Labor shortages
Results: inflation and escalating home prices
We have less than a year to position our business to a new reality. Don't be watching from the sidelines.
Review the following graph and come to your own conclusions. After all, I don’t expect anything from our national leaders anytime soon – after all they are on VACATION!!!
400,000 homes are demolished each year and must be replaced
1,400,000 new households are formed each year. Although there is evidence that this number has decreased since the recession started simply because of the job market and family members moving back together. As an example, college graduates are moving back with their parents since they can’t find a job.
In my June 18th post, I used 1,500,000 new homes are needed to satisfy the demand and replenish the housing stock.
So why do we have new housing starts hovering between 500,000 and 600,000 this year and LESS than 500,000 in 2009.
From 2002 – 2009, it is estimated that there were 3,000,000 new housing starts in EXCESS of the households formed.
A scenario that may happen:
Because of population increase and household formed, the demand is being met by the difference between the 1,500,000 new housing starts needed and the actual/estimated 600,000 new housing starts.
My simple conclusion is that the inventory of excess number of units built will exhausted between the end of 2011 and mid-2012. My prediction:
Housing shortage in 2012.
Interest rates much higher back to the 6-7% range
Material shortages i.e. concrete, sheetrock, lumber, etc.
Labor shortages
Results: inflation and escalating home prices
We have less than a year to position our business to a new reality. Don't be watching from the sidelines.
Review the following graph and come to your own conclusions. After all, I don’t expect anything from our national leaders anytime soon – after all they are on VACATION!!!
Monday, October 4, 2010
Due Diligence Report - Neighboring Property
1. Existing and Proposed Uses
Start with a recent aerial photo to understand the existing uses of land adjacent to the property in question (PIQ). During the site visit, investigate all adjacent parcels for existing development patterns. Understand the relationship of the existing uses and development pattern and illustrate how the existing developments may or may not impact the PIQ’s development approach. Take photos and inventory each for future reference. Find out if there is an association or a property management company involved with any of the existing projects.
Research the land use map, master plan, and zoning map for the surrounding property as well as for the property under consideration for purchase. It is important to understand the development potential of the adjacent property and how it may impact the development plans for the PIQ. It is conceivable that the adjacent property should also be purchased for subsequent phases of the project. The adjacent property may have attributes that would significantly increase the market appeal of the PIQ. Each parcel would be a puzzle piece in the development pattern and how the property fits together for a comprehensive development pattern is advantageous for the community and developer.
2. Positive and Negative Surrounding Property Analysis
Prepare a detailed list of the positive and negative impacts surrounding properties may have on the development pattern of the PIQ. Consider technical, marketing, and political aspects of each property and describe how to overcome the negative and how to best utilize the positive aspects of the development. As an example:
(a) Technical – the adjacent property may have an endangered species on the property requiring a buffer which may extend into the PIQ.
(b) Marketing: the proposed development may be consistent with the adjacent existing project and both project designs must be have road and pedestrian connectivity.
(c) Political: the PIQ is adjacent to a 4,000 unit active adult community – and the intended use is first time homebuyer product.
3. Neighborhood Reaction to Development Plans
• Citizens are voicing their opinions at public hearings
• Seek neighborhood and community input on project plans and goals
• Create guidebooks on development costs and regulatory processing costs
• Outline citizen involvement in the process and define their role
• Prepare educational material on the public approval process
• Educate newly appointed board members on the process
• Develop an effective and mediation or arbitration system
• Increase public awareness
4. Political Assessment
It is important to know the political climate of a community. Is it a “no growth community” or a community open to growth and new growth trends? With each local approval/permit requirement, the more influence the politicians will have over the property and its use.
Become familiar with:
• The local politicians that would support your project
• The staff that processes projects and their influences
• Learn the regulatory permitting process
• The surrounding neighborhood and if they will oppose to the project
• The community “hot buttons” for inclusion in the project design
• An experienced land use/zoning attorney
• Master plan and growth management plans
• Subdivision approval process and the time required “to be in the ground”
Start with a recent aerial photo to understand the existing uses of land adjacent to the property in question (PIQ). During the site visit, investigate all adjacent parcels for existing development patterns. Understand the relationship of the existing uses and development pattern and illustrate how the existing developments may or may not impact the PIQ’s development approach. Take photos and inventory each for future reference. Find out if there is an association or a property management company involved with any of the existing projects.
Research the land use map, master plan, and zoning map for the surrounding property as well as for the property under consideration for purchase. It is important to understand the development potential of the adjacent property and how it may impact the development plans for the PIQ. It is conceivable that the adjacent property should also be purchased for subsequent phases of the project. The adjacent property may have attributes that would significantly increase the market appeal of the PIQ. Each parcel would be a puzzle piece in the development pattern and how the property fits together for a comprehensive development pattern is advantageous for the community and developer.
2. Positive and Negative Surrounding Property Analysis
Prepare a detailed list of the positive and negative impacts surrounding properties may have on the development pattern of the PIQ. Consider technical, marketing, and political aspects of each property and describe how to overcome the negative and how to best utilize the positive aspects of the development. As an example:
(a) Technical – the adjacent property may have an endangered species on the property requiring a buffer which may extend into the PIQ.
(b) Marketing: the proposed development may be consistent with the adjacent existing project and both project designs must be have road and pedestrian connectivity.
(c) Political: the PIQ is adjacent to a 4,000 unit active adult community – and the intended use is first time homebuyer product.
3. Neighborhood Reaction to Development Plans
• Citizens are voicing their opinions at public hearings
• Seek neighborhood and community input on project plans and goals
• Create guidebooks on development costs and regulatory processing costs
• Outline citizen involvement in the process and define their role
• Prepare educational material on the public approval process
• Educate newly appointed board members on the process
• Develop an effective and mediation or arbitration system
• Increase public awareness
4. Political Assessment
It is important to know the political climate of a community. Is it a “no growth community” or a community open to growth and new growth trends? With each local approval/permit requirement, the more influence the politicians will have over the property and its use.
Become familiar with:
• The local politicians that would support your project
• The staff that processes projects and their influences
• Learn the regulatory permitting process
• The surrounding neighborhood and if they will oppose to the project
• The community “hot buttons” for inclusion in the project design
• An experienced land use/zoning attorney
• Master plan and growth management plans
• Subdivision approval process and the time required “to be in the ground”
Friday, October 1, 2010
Next Due Diligence Report Section
A. Neighboring Property
1. Existing and Proposed Uses
2. Positive and Negative Surrounding Property Analysis
3. Neighborhood Reaction to Development Plans
4. Political Assessment
We are about half way through the due diligence investigative report outline. Remember you can use this approach to assess the development potential of vacant property. I will probably complete the section on Neighboring Properties next week so that I can concentrate on revisiting housing issues as the mid-term elections fast approach. Remember the power of 1-vote!
I happen to believe that as "Housing goes so goes the Economy".
As I revisit statistics, policies, and trends, I want to ask you these questions --
Are you better off today than this time last year?
Will you be better off NEXT year at this same time? If so, what is your inspiration for change?
1. Existing and Proposed Uses
2. Positive and Negative Surrounding Property Analysis
3. Neighborhood Reaction to Development Plans
4. Political Assessment
We are about half way through the due diligence investigative report outline. Remember you can use this approach to assess the development potential of vacant property. I will probably complete the section on Neighboring Properties next week so that I can concentrate on revisiting housing issues as the mid-term elections fast approach. Remember the power of 1-vote!
I happen to believe that as "Housing goes so goes the Economy".
As I revisit statistics, policies, and trends, I want to ask you these questions --
Are you better off today than this time last year?
Will you be better off NEXT year at this same time? If so, what is your inspiration for change?
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