Norada Real Estate Investments

Double Dip Has Come and Gone

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The S&P/Case Shiller Home Price Indices reported Tuesday are, as usual, so far behind the curve that not only did they miss the “double dip” that has come and gone, it will be at least July or August before it reports an apparent upturn in prices in March and April. S&P's view of the data was dour. “There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing, ” said S&P's David Blitzer. “The 20-City Composite is within a hair's breadth of a double dip.”

There's just one problem with that. Other price indicators that are not constructed with the Case Shiller's large built in lag, passed the 2009-2010 low months ago. The FHFA (the Federal Agency that runs Fannie and Freddie) price index showed a low in March 2010 that was broken in June 2010 and never looked back. That index is now 5.6% below the March 2010 low. Zillow.com's proprietary value model never even bounced. It shows a year over year decline of 8.2% as of February. Zillow's listing price index shows a low of $200,000 in November 2009, followed by a flat period lasting 6 months. As of March 31, that index stood at $187,500, down 6.25% from the 2009-2010 low for data.

The Case Shiller Indices for February held slightly above the January level (not seasonally adjusted). I follow their 10 City Index due to its longer history. It was at 153.70 in February versus 152.70 in January. These levels are still above the low of 150.44 set in April 2009.

The Case Shiller index showed a recovery in prices in 2009-10 only because of the weird methodology it uses.  [Read more…]

U.S. Housing Market Intelligence Report (April 2011)

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Categories are graded from A thru F:

Economic Growth:  C-
Economic growth trends were mixed this month, as several key metrics ticked up while others ticked down.  The employment market improved once again as year-over-year employment growth has now been positive for seven consecutive months, and unemployment now stands at its lowest level since March 2009.

In addition, retail sales improved this month, while real GDP for the fourth quarter was revised slightly higher to 3.1%. On the downside, the rate of inflation (both full and core) continues to increase, while the average length of unemployment increased to an all-time high, currently at 39 weeks.

Affordability:  D+
Affordability has rarely been better for entry-level buyers, and rarely worse for move-up and move-down buyers, who need to extract equity from their existing home.  As such, we continue to grade our overall affordability indicator at a D+.  After increasing every quarter from Q1-2009 through Q2-2010, owner equity declined for the second consecutive quarter in Q4-2010; a reflection of the continued downward pressure on home prices.

Mortgage rates remain near historical lows, and home prices have dropped from unrealistic boom levels to entirely sustainable levels, with some markets like Las Vegas well into “over-correction” territory.  Our housing-cost-to-income ratio remains low, now at 22.4%, and our JBREC Affordability index stands at a remarkable 0.0, which is the highest possible rating for affordability.  The median home price-to-income ratio has declined to 2.8, which is less than the long-term historical norm and near a level conducive to market health.

[Read more…]

The Return of Real Estate – Fortune Magazine

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This week’s issue of Fortune Magazine proclaims the “return of real estate”.  I didn’t think I would see an article like this from a mainstream publication so soon – especially from one of the most trusted financial magazines.  Could this mark the beginning of more good news to come?

“Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing,” writes Shawn Tully.

The article covers five trends as justification for improvement in the real estate market:

  1. The steady decline in prices which has been going on nationally since 2005 has finally hit a level where it costs less to own a house than to rent in many cities.
  2. The supply of renters has increased sharply in the recent past, which has already begun to cause rapid increases in rental rates.
  3. Home builders have held back on building new homes for several years, creating the conditions for a shortage of new homes when demand goes up just a little bit.
  4. Investors, responding to the big demand for rental units, are rapidly buying down the overhang of foreclosed homes which has dogged the market.
  5. Finally, the U.S. economy seems to be on the path to improvement, although we still struggle with high unemployment and weaker-than-normal consumer spending.

[Read more…]

Real Estate Investing Myths

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There are various myths about real estate investing that never seem to die no matter how much you try to kill them!  Hopefully, the information provided below will help you avoid falling for these untruths.

Myth #1: You Can’t Make Money in Real Estate Without a Lot of Money.

It’s true that you usually (but not always) need money to get started in real estate.  However, you don’t need hundreds upon thousands of dollars to get your investment career started and moving!

As discussed in one of my other articles, one of the great benefits of real estate is “leverage”, that is, you can use very little money to buy your way into properties that will keep on appreciating over time and increasing your wealth. In effect, you have what the military calls a “force multiplier”, that is, with one effective “weapon” you can eventually conquer your piece of the real estate market.

[Read more…]

Why You Should Buy a Rental Property

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It is an out-of-favor asset class that has attracted the attention of David Ackman, a hedge fund manager with a fondness for contrarian investments.  “The best investments we've made are the ones no one else would touch,” Ackman explains.  That's why he's so hot on Single Family Home Rental Property.  They are cheap, he says.  They are a buy.

Ackman argues that Single Family Home Rental Properties possess the identical investment attributes that strongly performing stocks typically possess.  Says Ackman:

We believe we've identified an investment with:

  1. A low valuation – The lowest valuation in at least a generation.
  2. Forced sellers – A large number of distressed transactions.
  3. Extremely attractive financing available – High loan-to-value, low-rate, fixed-rate, long-dated, non-recourse debt, pre-payable without penalty.
  4. Favorable long-term supply dynamics – Short-term oversupplied market, but long-term supply is controlled.
  5. Favorable long-term demand dynamics – Demographically driven demand growth.
  6. Out-of-favor – Currently, this is a somewhat shun asset class.

Ackman's bullish perspective flies in the face of the pervasive pessimism about home-buying. “Experts Say Housing is a Lousy Investment and it Always Will Be,” an August 2010 headline on Yahoo! Finance declared. “The US Housing Market is Headed for a Complete and Total Nightmare,” another financial news service predicted. And just last week, a CNNMoney.com headline warned: “Why Home Prices Could Fall Even More.”

[Read more…]

Finding Good Tenants

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Ideally, you’d have tenants who paid promptly every month, never complained, and lived in your property for a long time while maintaining it in pristine condition. But that ideal seldom happens for the simple fact that we’re dealing with human beings. They move, get sick, marry, have different temperaments and needs, and so forth – all of which can affect the goals you have for your properties.

However, there are general guidelines you can follow in order to get the best possible tenants, the ones who do pay on time and who seldom complain unless there’s a good reason to do so:

Guideline 1: Qualify Your Applicants

This is a vital first step, because it helps identify great tenants and eliminate potential trouble-makers. The process of qualification involves a combination of asking good questions and using your intuition about an applicant. What are good questions to ask?  Here’s a suggested list to which you can add your own questions:

[Read more…]

Why Real Estate Investors Love Inflation!

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Investors love real estate because it acts as a hedge against inflation. This occurs for several reasons:

One, on an historical basis, housing prices rise just as fast or faster than the rate of inflation. Two, although investors can’t always raise rents to account for inflation (due to fixed-rent leases of one year or more), the value of the property itself will increase. Three, when real estate investors have a fixed-rate loan, expenses will stay the same, and they pay back that loan with money that’s worth less than what they borrowed! In effect, it’s a form of debt reduction. It just doesn’t get any better than that!

Inflation should be moderate in order to benefit investors. Hyperinflation or its opposite – deflation – are definitely bad news for everyone.

[Read more…]

What is a Short Sale?

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You may have heard the term “short sale” and wondered what it referred to – and what kind of opportunities these types of transactions offer in the real estate market. Let’s define a short sale first.

A short sale can occur when a home owner’s debt on a property is greater than the amount for which the property can be sold. The result – lenders are sometimes willing to accept less than the total amount due on the house if the economic situation dictates such an action.

Here’s where the term “short sale” came from: Assume a homeowner has an unpaid loan balance of $200,000, but the property will only sell for $150,000. The lender accepts that $150,000 as full payment. This is “short” of the full $200,000 amount.

[Read more…]

Diversification in Real Estate

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You normally hear the term “diversification” from financial planners and stock brokers. But you don’t hear the term used so often when it comes to real estate investing. The goal of diversification, regardless of the investment, is to reduce the investor’s overall risk.

Diversification in real estate is easily achieved by purchasing income-producing properties in different markets around the country. In some cases, investors even purchase property in other countries. By creating a real estate portfolio of income-producing properties across multiple and separate markets, they reduce their exposure to risk.

[Read more…]

Real Estate Is a Business!

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Real estate is a business – plain and simple. You’ll need to plan, analyze, negotiate, write offers, manage, market, and sell just like any other form of business. A business does not stay in business for very long if it’s not producing a profit!

In real estate, there’s a certain level of commitment required, but that commitment pays off handsomely. And, unlike many other businesses, real estate allows you to control your hours and set your own schedule. You set the goals you want to achieve, and then you set out to make them happen.

As part of being a businessperson, the most important attitude any investor can have in this field is one of…objectivity! As human beings, we have a tendency to fall in love with certain houses or, conversely, hate them upon sight. Of course, this is a natural tendency since homes at their core represent security, safety, love, family, etc.

[Read more…]

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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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