Norada Real Estate Investments

Last Weeks Impact on the Housing Market

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If you stop and think about it, it was the housing market collapse that pulled these large financial institutions down over the last several weeks.

Fannie Mae and Freddie Mac owned or guaranteed one-half of the $12 Trillion mortgage market.  Lehman Brothers had over $60 Billion in mortgage related assets on its books.

This has all led to a credit bubble burst in the shadow of the housing “bubble”.  So what happens if credit tightens even more because money isn’t available to the financial system?  Simply put, we may see house prices fall even further in most parts of the country because those who want to buy won't be able to.

If the housing market doesn’t stabilize, then the financial market won't either.  Are we talking a year or two from now?  There is strong evidence that the worst hasn’t even happened yet – particularly in states like California and Florida.  You can expect to see banks taking back and unloading a lot of inventory over the next twelve months or more.

In the meantime, focus your real estate investing in markets that have strong economic fundamentals to maximize your short and long term appreciation and overall return on investment.

Will We Survive These Tough Economic Times?

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In just the past week the US experienced the largest bankruptcy filing in history, the stock market fell over 500 points, the largest drop since the markets reopened after September 11, 2001, and recovered almost as much with the government’s announcement for a federal bailout.

Lehman Brothers, a company that has been around for over 100 years and survived the Great Depression, is one of the latest in a series of unprecedented implosions in the financial sector.  The magnitude of the Lehman Brothers collapse dwarfs the combined failure of WorldCom and Enron by several times.

Other casualties include IndyMac, Bear Stearns, the Freddie Mac & Fannie Mae bail out by the federal government, CountryWide’s likely buyout by Bank of America, and now Merrill Lynch which may layoff up to half of its 60,000 employees. [Read more…]

Your Next Mortgage May Be Risk Adjusted

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Your next mortgage may be risk adjusted!

Up until now your mortgage rate was based on the type of mortgage you chose and your credit profile.  But lenders have already started to assess up-front fees based on an individual’s credit score, and in the future this change may begin to resemble pricing similar to homeowners insurance factoring in many more variables.

If your credit score is under 720, you may be paying anywhere from a half point (0.5%) to as much as 2.75% in extra fees as your score gets lower according to Freddie Mac.  While some lenders assess a higher interest rate on your mortgage instead of charging you upfront fees.

The good news for those with exceptional credit may be lower than average rates and better loan terms.  The bad news is that those with below average credit score will be paying more for their loans than previously before.

In addition, shopping for a loan may become more time consuming because these risk adjusting fees may vary widely among lenders and mortgage brokers.

In the future, spending more time shopping for your mortgage loan will be time well spent.

2007 Top 20 U.S. Tourism Destinations

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The 2007 annual ranking of the nation's leading tourism destinations compares domestic and international tourism spending, tourism job creation, and the degree to which each city's economic vitality is dependent upon visitors. The results show that a significant gain in international visitors propelled New York City to the top spot in 2007.

Rank City Rank change from 2006
1 New York City +2
2 Orlando -1
3 Las Vegas -1
4 Los Angeles 0
5 Chicago 0
6 San Francisco 0
7 Washington, D.C. +1
8 San Diego -1
9 Miami +3
10 Atlanta -1
11 Phoenix 0
12 Tampa -2
13 Dallas 0
14 Honolulu +1
15 Houston -1
16 Santa Ana +1
17 Boston -1
18 Seattle +2
19 Philadelphia -1
20 Virginia Beach +5

The U.S. City Tourism Impact, recently released by Global Insight, combines domestic and international travel volumes and spending data from D.K. Shifflet & Associates, as well as the U.S. Department of Commerce's Office of Travel and Tourism Industries with metropolitan area economic data and models from Global Insight to rank the most popular tourist destinations in the U.S.

Why Invest In Dallas Texas Real Estate

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As the housing market continues to decline in areas around the country, especially Florida and California, and with the threat of a recession looming like a dark cloud overhead, Texas' economy and housing market remains strong.

According to numbers released by the U.S. Census Bureau, eight out of the 10 fastest-growing metropolitan areas in the U.S. are in the South, and the South also accounted for more than half of the 50 fastest growing regions.

Dr. James Gaines, a research economist at the Real Estate Center at Texas A&M University said, “From 2000 to 2007, 3 million people moved to Texas, a 14.6 percent jump in the population, making Texas the fastest growing state in the country.”

“In the next 25 years we'll add another 13.6 million people, that's the equivalent of another Metroplex, metropolitan Houston and metropolitan San Antonio with enough left over to add another Corpus Christi.”, he said.

Dallas/Fort Worth drew in more people than any other metropolitan area in 2007.  The population there increased by 162,250 between July 1, 2006, and July 1, 2007, according to a new U.S. Census Bureau report.  Houston, Atlanta, and Phoenix also witnessed a swell by more than 100,000 people each.

With its affordable housing, low cost of living and cost of doing business, rising employment opportunities and attractive lifestyle, more people than ever before are being drawn to Dallas.  [Read more…]

Resales Up, Rates Down

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There are more signs of improvement in the real estate markets around the country.

Nationally, sales were up by 2% in May with the Midwest reporting a 5.5% increase and 6% in the Northeast. Condo sales also jumped up by 6% nationwide. Even some of the hardest hit markets showed increases including Sacramento, CA, Sarasota, FL and battle Creek, MI.

Mortgage rates took a welcomed dip recently reversing the upticks over the previous weeks. Thirty years fixed rate loans are back under 6.4% and fifteen year rates are under 6%.

It’s going to take more than lower interest rates and increased sales to help the housing market recover, but they are positive signs in the right direction. Along with increased prices in the hardest hit markets we should begin to see the beginning of a recovery.

2008 is the Year to Invest

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With interest rates still at historic lows, and investment opportunities in single family homes abundant, 2008 may one of the best years to invest in 30 years.

Even if prices drop a little more within the next twelve months, you may still be getting a great deal over the long term given the low interest rates which may not be around in the years to come.

It is best to stick to well-located detached single family homes in well researched markets that offer good prospects for growth and resale down the road. Middle of the road, bread-and-butter homes might be best in most cases for attracting your largest resale market.

Duplexes also make for smart investments but remember they are a little more difficult to sell because your typical buyer will probably be another investor.

And finally, avoid condos since you lack the control you have in single family units. Condos also require extra due diligence to make sure that you are not buying from speculators or developers at prices above market value or where there is excess inventory for sale.

The Housing Crisis Is Over

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The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor. Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. [Read more…]

The Worst Real Estate Markets

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The worst performing markets, according to a recent report by the Office of Federal Housing Enterprise Oversight (OFHEO), where property values are falling the fastest in the country are Florida with eight (8), California with six (6) and Michigan with three (3).

Merced, California has the honor of being that fastest deflating city in the country with an annual depreciation of -13% over the past 12 months. This is followed by Punta Gorda, Florida at -12%, and Santa Barbara, California, one of the most expensive markets in the country at -12%.

So where are some of the best markets? Well, the US Gulf Coast where markets are rebounding from hurricane Katrina happen to have some of the best investment opportunities for investors today. Housing is affordable, rental numbers make sense, and property values are increasing between 6% to 7% per year. Those are some of the biggest reasons for our Bayside Park investment opportunity in Waveland, Mississippi.

Investor Market Strong

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Last year investors accounted for 21% (about 1 out of 5) of new home purchases according to a new study by the National Association of Realtors (NAR).  That’s a whopping 1.35 million housing units – a large portion of the total market.  The record was set in 2005 at the height of the boom at 28%.

A major difference today is that investors are not buying to speculate and push prices up quickly as we’ve seen happen in the first half of the decade.  The median price for an investment property in 2005 was $183,500 compared to $150,000 in 2007.

According to the study, about 50% of the investors said they planned on holding onto their properties for anywhere from 3 to 11 years.  Another 18% planned to hold from one to three years and 20% were not sure.  Only 10% said they planned to sell (or flip) their property in a year or less.

The median household income of all home buyers last year was $71,700 while investor’s median income was about $93,000.  Interestingly 40% of all investor sales last year were accounted for by those under age 35.

The study also revealed that investors are optimistic about the direction of the market.  57% said they plan on buying additional property in the next 24 months compared to 44% primary vacation home buyers.  80% of investor buyers said that this is a good time to buy real estate compared to 59% of primary home buyers.

I agree that most real estate investors know there are many good deals out there.  They key is to have a clear investment strategy and know where to buy based on local economics and market timing.

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Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
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