“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…
Half of refinance applications are abandoned or rejected, as are 30 percent of purchase mortgage applications, according to the Mortgage Bankers Association. All told, the Federal Financial Institutions Examination Council (FFIEC) says that well over 2 million mortgage applications were rejected last year.
Want to avoid falling into that number? It's tough — especially in light of the fact that mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash.
Here, as a cautionary tale and primer on what to expect, are the top six reasons mortgage lenders reject applications.
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.
Real estate is one of my absolute favorite areas in the tax law because there is so much flexibility in how to do things to legally maximize the tax benefits available.
Real estate is also one of the most complex areas of the tax law. This makes it easy to overlook important steps, which can lead to missing out on tremendous tax savings.
I recommend reviewing your tax strategy throughout the year, particularly as it relates to real estate. This makes it much easier to make adjustments timely, minimize oversights and reduce stress at the end of the year and tax return time.
With the end of the year approaching quickly, it is an ideal time to implement a year round strategy to review your tax strategy as it relates to your real estate.
Start with my year-end checklist for rental real estate and adapt it to use throughout the year.
Here are a few items from the checklist my team and I use:
The question most real estate investors often ask is, “Where do I invest now?”
As always, there are local housing markets around the country where homes are affordable, the underlying economy is strong, and appreciation is imminent. These are markets you should consider for your next long-term real estate investment.
Norada Real Estate Investments tracks the economic conditions and real estate trends of nearly 400 markets across the country. Because of the dynamic nature of real estate market conditions, we continually monitor and rank the top markets to make it easier for you, as an investor, to concentrate on the areas that will give you the greatest opportunity for success.
While you might be inclined to look for bargains in areas that have seen the largest price corrections in the past, watch out – there is no guarantee that home prices in areas of high speculation will ever rebound to boom levels.
Unlike the stock market, local real estate markets usually move in slow, predictable cycles. Appreciation is not luck or magic. It correlates closely with economic development and population growth in a local market.
If you missed out on Phoenix, Vegas and Florida (or if you rode those waves and know what it's about), download the current issue of our free report.
Download your free copy of the 2012 Housing Market Forecast Today!
Home prices and sales may be flat, but the rental industry is booming. The percentage of renters is on the rise, the number of households is increasing, and more Americans are downsizing, all of which point in a single direction: rents are on the rise.
At the peak of the housing boom, home ownership in America reached an all-time high at 69.2%. Today that number has plummeted to fewer than 67%, which may not sound like a huge drop, but that represents roughly 3 million households that were owner-occupied and are now tenant-occupied.
The high foreclosure rate has accelerated the transition toward leasing, but there are a myriad of other trends coalescing to boost demand for rental housing.
USA investment property is becoming very popular these days, and many foreign investors, especially from the UK, Australia and Europe, would prefer purchasing properties in this country.
There are several economic reasons that are responsible for the US property market to work well, where investors can make large profits from relatively small investments. It is important therefore to comprehend the crucial elements that contribute to the unparalleled opportunities which are available now, as the country is fast becoming one of the top property investment locations.
Economy – Even with the economy still in recession, the USA remains the largest national economy in the world that is complemented by its huge land mass and population. The country has an appraised GDP of more than $14 trillion with a relatively low cost of living, and an advanced market with contemporary infrastructure consisting of large finance and private sectors.
Many entrepreneurs believe that, if you want something done right, do it yourself. Personally, I believe that is the rationalization of control freaks unwilling to delegate.
In reality, your dream team will help you reach your financial goals faster than you ever can alone.
Sure, you can find motivated sellers and build a great buyer's list on your own, but other tasks require the expertise of others.
Some of the members of your team should include:
Categories are graded from A thru F:
Economic Growth: C- (June 2011: D+)
The U.S. economic recovery remains sluggish. Real GDP grew at a 1.3% pace in 2Q11, following downwardly revised growth of 0.4% in 1Q11; far below the 1.9% rate of expansion previously estimated for last quarter. We now have positive Y/Y employment growth for eleven consecutive months, with payrolls expanding by 117,000 in July, up from 46,000 in June, and the unemployment rate dropping from 9.2% to 9.1%. Initial jobless claims fell to 400,000 in July. Government payrolls decreased by 37,000 in July, the ninth straight sequential drop.
The average length of unemployment increased to 40.4 weeks (new record high), and the labor force percentage of those unemployed over 27 weeks dipped slightly from 4.1% to 4.0%. On a positive note, retail sales continue to improve, with Y/Y growth at 8.5%.
Leading Indicators: C- (June 2011: C)
Leading indicators for the economy are mixed this month, with our overall grade for this subsection of indicators dropping from a C in June to C- in July. Many of the leading indicators we analyze have been trending down over the past several months, returning to levels not seen since mid-2009, a time when the U.S. economy was still in the midst of the Great Recession. For example, the ISM Purchasing Managers Index has fallen two consecutive months, dropping to 50.9 (just above the expansion threshold value), a level not seen since July 2009. In addition, the Vistage CEO Confidence Index fell in 2Q11, crossing into negative Y/Y territory for the first time since 2Q09. Corporate profit growth was revised down from last quarter, rising at an 8.8% Y/Y clip in 1Q11, the weakest annual growth rate since Q309. Other leading indicators such as the ECRI Leading Index were relatively flat versus last month.
Real estate investors are likely to be three times more active than other types of home-buyers in their local markets within the next two years, according to a national survey by Realtor.com operator Move Inc.
Market research firm GfK Custom Research North America conducted the survey on behalf of Move from April 11-15, 2011. The survey included telephone interviews of 1,200 U.S. adults, of which about 200 were identified as real estate investors. Data was weighted by age, sex, education, race and geographic region.
A third of real estate investors are planning to buy in the next 24 months, compared to 8.6% of typical home-buyers — those planning to purchase a primary residence, vacation home or retirement property. Another 9.1% of typical home-buyers, and 28% of investors, plan to purchase between two and five years from now.
Among the investors, half plan to hold their properties for five or more years while 11% expect to sell within a year of purchase, according to the survey.
