Norada Real Estate Investments

Could This Be the Best Real Estate Market in 5 Years?

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I've spoken many times on my radio show about how fear is used to move us. Well, recently I spotted a great example. Just last week I wrote about how a mortgage “expert” was predicting a “death spiral” in the housing market. That was last week. This week, the National Association of Realtors is saying that the housing market in 2012 will be the strongest in five years. February was actually a 9.2 percent increase in home sales from last year.

For most people those two things wouldn't compute, especially since the “expert” I quoted last week was predicting a 6 percent reduction in housing prices in 2012. This just all goes to show you something I've said for a long time: don't believe the doom and gloom.

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Median Rent Prices on the Rise as Home Values Drop

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While homes prices continue to be on the decline, rent prices are actually on the rise and showed a 3 percent increase from January 2011 to January 2012, as opposed to home values, which dropped 4.6 percent during that same period, according to a recent Zillow Real Estate Market Report.

“While it seems that rents are rising at the expense of home values, the opposite is true. A thriving rental market will stimulate home sales as investors snap up low-priced inventory to convert to rentals,” said chief economist for Zillow Dr. Stan Humphries in a release.

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Real Estate Investors Can Profit in a Down Market

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One of the most exciting things about being a real estate investor is knowing what markets will produce the greatest long-term returns – especially while in the middle of a challenging housing market.

In a down market, savvy real estate investors are eager to find out how they can best leverage their resources. And expert forecasts are some of the best tools they can use to back up their strategies. A good example comes from real estate consulting firm John Burns Real Estate (JBRE), which has recently predicted that homeownership will fall from 70.0 percent to 62.1 percent by 2015 due to a weak economy, weak consumer confidence, limited mortgage availability, higher rates of foreclosures and short sales, and other factors.

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Benefits of US Property for International Investors

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flags_globe[1]For many individuals, the single largest “investment” of their lives will usually be their home, as opposed to investing stock, bonds, mutual funds or certificates of deposits (CD’s). This is because purchasing real estate is less risky than investing in the stock market and can be more rewarding than changing CD interest rates.

US investment property has been enticing foreign investors since the 1970s, and has become extremely attractive since 2008 based on the weakening of the US dollar.  Many financial institutions in this country are reluctant, if not somewhat skeptical, of providing mortgages to foreign investors who want to finance real property here in the US.

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The Housing Bust is Over

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“The bursting of the global housing bubble is only halfway through,” The Economist magazine wrote recently.

I disagree…

Here in the U.S. at least, the housing bubble is completely over.

It drives me nuts when I hear commentators say, “We're halfway through,” and, “We have more pain to come.”

The fact is, right now, houses in America are the best value they've been in many generations. It's not hard to understand…

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The Asset Class of Single-Family Real Estate

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If there’s one thing that Morgan Stanley would like to advise to you, it’s to take a look at single-family homes and consider it as part of your real estate investing strategy.

That’s right, these properties have become hot among real estate investors recently considering the shift in the US property market from home ownership to rentals (or as Morgan Stanley puts it, a “renter-heavy society”). It’s exactly the new real estate paradigm!  Even Bank of America and the Federal Housing Finance Agency have sought measures to reduce the impact of mortgage delinquency by working on an REO rental program for its underwater borrowers.

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The New Rental Real Estate Paradigm

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Morgan Stanley Research released its latest real estate report, Housing 2.0: The New Rental Paradigm to provide market insights to investors. It’s interesting to know that the research team observes how more Americans have become renters instead of homeowners, attributing to different factors in the economy.

The report states:

Across the country, more Americans are becoming home renters, and fewer Americans are becoming homeowners. The beginning of the rentership society is upon us. But all renters are not equal – of the roughly 40MM rental housing units in the country (representing roughly $6 trillion in asset value), about half are multi-family and half are single- family.

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National Economic Outlook (December 2011)

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Although the overall health of the economy is of interest to everyone, if you're a banker you particularly want to know when people will start borrowing money again.

Very roughly speaking, banks typically hold equal amounts of commercial loans, commercial real estate loans, home mortgages, consumer loans, government securities, and cash. With commercial, mortgage, and consumer lending sharply lower in the last few years, banks now hold more government securities and a lot more cash, both of which don't produce much income.

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Freddie Mac Needs 15 Years to Unload All REO Inventory

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Sales of Freddie Mac REO homes took a dip in 3Q11 compared to the first two quarters of the year as nonperforming loans surged consistently over the previous quarter.

The number of repossessed homes plunged to 25,300, falling by 13.5% quarter-on-quarter (q-o-q) or approximately 30,000 units in 3Q11. REO sales also stumbled from 31,600 in 1Q11, the highest number recorded in the government sponsored enterprise’s (GSE) history.

In 3Q11, Freddie Mac thrust back 24,300 homes into its current inventory while disposing 25,300 REO properties at the same time. At the end of the quarter, the mortgage capital provider has already accumulated 60,000 REO properties on its books, down by 25 percent year-on-year (y-o-y) as a result of newly completed foreclosures.

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What Can Foreign Investors Teach Us About Our Own Country?

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You’ve seen the headlines. The combination of lower prices, increased rents and a weak dollar are drawing investor capital from all around the globe and funneling it into American housing.  According to NAR, foreign investment is US real estate has increased by 20% in the 12 months ending march 2011, totaling $82 billion in just one year. What’s missing in most of these stories is why.

Why are overseas real estate investors, who are standing thousands of miles away with little if any personal experience in US real estate, pouncing on this opportunity? Low prices and great exchange rates don’t explain it. If you hear of a stock that has plummeted, would you buy it based on that fact alone? Or would you want to understand the fundamentals of the company behind the stock. What do they produce? Who are their customers? Why should you believe this investment will pay off, as opposed to seeing the new low price as an accurate reflection of the value of the company? In other words, if it’s a piece of junk, you wouldn’t care how cheap it is.

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

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