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The Norris Group Real Estate News Roundup 5/28/10

Friday, May 28th, 2010

Today’s News Synopsis:

Of the homeowners receiving foreclosure counseling through the National Foreclosure Mitigation Counseling (NFMC) program, 58% listed unemployment as the main reason for default. According to MDA DataQuick, Sales of both new and resale houses and condominiums were down 1.3 percent year-over-year. Weekly claims for unemployment insurance have now failed to improve for five straight months. Web searches for rental properties have increased by 45 percent from April 2009.

In The News:

Housing Wire – “Stewart Lender Services Sees Loss Mitigation Business Jump Ten-Fold” (5-28-10)

“Houston-based Stewart Lender Services (SLS), a wholly owned subsidiary of Stewart Title Company, is disclosing that business in its loss-mitigation departments increased ten-fold in the last 18 months. In a conversation with HousingWire, the company reported processing more than 725,000 troubled mortgage loans and generated more than 1m lines of outreach to delinquent borrowers in the past year.”

Housing Wire – “Fannie Clarifies Mortgage Insurance Standards for Loan Purchases” (5-28-10)

“In updating its requirements on finance mortgage insurance for loans it purchases, Fannie introduced the concept of a ‘prepaid mortgage insurance transaction,’ in which the borrower finances all or part of the premium and monthly escrows into the loan amount of a refinance. In this case, the mortgage insurance coverage amount is based on the loan-to-value (LTV) ratio after all closing costs and mortgage insurance are included in the loan amount.”

Housing Wire – “NeighborWorks Finds Unemployment Drives Most Mortgage Defaults” (5-28-10)

“Of the homeowners receiving foreclosure counseling through the National Foreclosure Mitigation Counseling (NFMC) program, 58% listed unemployment as the main reason for default.”

Housing Wire – “Home Builders Quick to Praise Proposed Government-Backed Construction Loans” (5-28-10)

“The Government Printing Office has yet to publicly forward a copy of HR 5409, but the bill, which seeks to establish a construction loan guarantee program for residential builders, is already gaining support from the trade body representing the industry.”

Inman - “Agents sell more higher-priced homes in California” (5-28-10)

“Real estate professionals in California sold slightly fewer homes in April than they did a year ago, according to a report by real estate data company MDA DataQuick. Sales of both new and resale houses and condominiums were down 1.3 percent year-over-year, to an estimated 37,481 units. That a 0.5 percent increase from March, however. The median price for a home in the Golden State stayed flat month-to-month at $255,000, but was a 15.4 percent increase from April 2009.”

Inman - “Low rates won’t fix economy” (5-28-10)

“Nothing has changed in the fundamentals behind the rate decline, certainly not in Europe. U.S. manufacturing has enjoyed temporary inventory rebuilding and export sales (April orders for durable goods soared 2.9 percent), but the overall economy is more ‘L’ than ‘U.’ April personal spending was flat, and weekly claims for unemployment insurance have now failed to improve for five straight months.”

Inman - “Hitwise: Rental sites gaining ground” (5-28-10)

“Popular search terms indicate that consumer interest in rentals is growing, according to a webinar presentation by Web metrics firm Experian Hitwise. The firm’s data indicates that despite recent upticks in home sales, real estate-related searches fell 22 percent year-over-year in April — the 11th straight month of year-over-year declines, the firm said. For the past 10 months, however, searches related to rentals have been increasing. In a custom real estate website category for rentals (excluding vacation rentals), searches climbed 45 percent year-over-year in April, the firm said. Heather Dougherty, the company’s director of research, gave the presentation.”

Orange County Register – “VACATION RECOVERY” (5-28-10)

“Even in a damaged market, the vacation rental industry is making a rebound this season, with demand up in Orange County beach cities and more homes available to rent than last year. The National Association of Realtors reported recently that the vacation home market is mending its wounds – sales are up 8 percent nationwide, according to an investment and vacation home buyers survey.”

Looking Back:

One year ago, the delinquency rate for mortgage loans on one-to-four-unit residential properties was 8.22 percent. New home sales increased 0.3 percent to an annual pace of 352,000. C.A.R. reported a 49 percent increase in California home sales in April 2009.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 4/16/10

Saturday, April 17th, 2010

Today’s News Synopsis:

California unemployment increased to 12.6 percent last month. The SEC charged Goldman Sachs with fraud. According to the Commerce Department, Housing starts climbed to an annual rate of 626,000 last month. Fannie Mae is developing a new program to help families in foreclosure gain access to a new mortgage within 2 years.

In The News:

Sacramento Bee – “Jobs rebound, but California unemployment at 12.6 percent” (4-16-10)

“California’s unemployment inched up to 12.6 percent last month even though the state added 4,200 jobs, the federal government reported today. The numbers from the Employment Development Department are further evidence of the economy beginning to stir.”

Los Angeles Times – “Housing starts, permits rise as builders rebound” (4-16-10)

“Housing starts climbed to an annual rate of 626,000 last month, up 1.6 percent from February’s revised 616,000 pace, which was higher than initially estimated, Commerce Department figures showed Friday. Building permits, a sign of future construction, climbed to the highest level since October 2008.”

Wall Street Journal – “Mortgage Rates Reverse Course and Fall” (4-16-10)

“The 30-year fixed-rate mortgage averaged 5.07% for the week ended April 15, down from 5.21% last week. A year ago, the mortgage averaged 4.82%. The 15-year fixed-rate mortgage averaged 4.40%, down from 4.52% last week and 4.48% a year ago.”

Housing Wire – “Fannie Mae Director Outlines Program to Turn Homeowners into Renters” (4-16-10)

“Miguel Gutierrez said the goal of Fannie Mae is to minimize family displacement for borrowers that participate in a deed-in-lieu of foreclosure program, launched early in November 2009, while managing it in a way so as to not put any undue pressure on Fannie’s ever-growing rental portfolio. The homeowner-turned-renter is required to pay fair market rent to stay in their home for up to 12 months. The renter must have enough income to sustain a 31% income-to-rent ratio and rental payments are not subsidized by Fannie Mae, but could include renters eligible for Section 8 payments.”

Housing Wire – “Fannie Shortens Wait for Some Distressed Borrowers to Get New Loans” (4-16-10)

“Fannie Mae (FNM: 1.24 -4.62%) announced it is reducing the wait time for some borrowers between when they complete a short sale or deed-in-lieu of foreclosure transaction and when they can obtain a new mortgage. Previously, a borrower was required to wait four years before getting a new mortgage, or two years if their home sold in a short sale. Under the new guidelines, a borrower that previously completed a deed-in-lieu of foreclosure transaction can get a new mortgage in two years, provided the borrower has a 20% down payment.”

Housing Wire – “SEC Charges Goldman Sachs with Fraud Over Subprime RMBS CDO” (4-16-10)

“The Securities and Exchange Commission (SEC) today charged Goldman Sachs (GS: 160.70 -12.79%) and one of its vice presidents for allegedly defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages, demanding a jury trial for the allegations to be heard.”

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The Norris Group Real Estate News Roundup 10/30/09

Friday, October 30th, 2009

Today’s News Synopsis:

The Census Bureau reports that rental vacancy rates for Q3 of 2009 were at 11.1 percent. According to RealtyTrac, Chico, California had a 98 percent increase in foreclosures from Q3 of 2008. The Attorney General claims that 60 percent of the nation’s pay-option ARMs, originated between 2004 and 2008, are located in California. Wilber Ross Jr. believes that commercial real estate is headed for a major collapse.

In The News:

NAR - “NAR Commends Congressional Action to Extend Higher Mortgage Loan Limits” (10-30-09)

“NAR commends both houses of Congress for their quick action in continuing these higher limits during a time for recovery in the housing market and national economy. The higher limits, along with the home buyer tax credit extension, are necessary to keep the markets moving at this critical time”

Inman - “California official warns of loan resets” (10-30-09)

“Economists estimate that about 1 million pay-option ARMs will reset in the next four years, ‘dramatically worsening the foreclosure crisis,’ the attorney general’s office said in a letter to lenders. With 58 percent of all pay-option ARMs originated between 2004 and 2008, California will be the “epicenter of this crisis,” the letter said.”

Housing Wire – “Rental Vancancy Rate Up, Homeowner Rate Steady: Census” (10-30-09)

“The rental vacancy rate was 11.1% in Q309, an increase from 9.9% in Q309 and 10.6% in Q209, according to the latest data released by the Census Bureau. The homeowner vacancy rate held steady at 2.5% from Q209 to Q309, which is lower than Q308’s 2.8%. The homeownership rate was 67.6%, nearly even with the 67.9% in Q309 and 67.4% in Q209.”

Housing Wire - “Foreclosures Growing in Suburbs and Secondary, says RealtyTrac” (10-30-09)

“Foreclosures are beginning to flare up in suburban and secondary metro markets for Q309, according to a report from RealtyTrac. In several states, foreclosure activities drifted toward new focal points, such as smaller towns with previously self-sustaining industries. Chico, California in Sacramento Valley, and agricultural hub, had a 98% increase in foreclosures from Q308, according to the report.”

Housing Wire – “Genworth Earns $45m with Savings on Loan Modifications” (10-30-09)

“Mortgage insurer Genworth Financial (GNW: 10.62 +4.32%) reported a net income of $45m in Q309, compared to a net loss of $258m in Q308. Despite the overall earnings, Genworth registered $116m in net operating losses of its US Mortgage Insurance (US MI) segment, compared to $121m in losses in Q308.”

Housing Wire – “California AG Wants Pay Option ARM Answers” (10-30-09)

“California homeowners hold nearly 60% of the nation’s pay option ARMs originated between 2004 and 2008, the attorney general’s office said. Nationally, about 1m of these loans are schedule to reset in the next four years, creating higher payments for many loans on the brink of negative equity.”

Bloomberg - “Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash” (10-30-09)

“‘All of the components of real estate value are going in the wrong direction simultaneously,’ said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. ‘Occupancy rates are going down. Rent rates are going down and the capitalization rate — the return that investors are demanding to buy a property — are going up.’”

Bloomberg - “Simon Property Says FFO Increased in Third Quarter” (10-30-09)

“Simon Property Group Inc., the biggest U.S. shopping mall owner, said third-quarter earnings excluding items rose as the company cut expenses. Funds from operations climbed to $473.1 million, or $1.38 a share, from $463.9 million, or $1.61, a year earlier, the Indianapolis-based company said in a statement today. This year’s per share earnings were diluted by the sale of more than 40 million common shares. Analysts surveyed by Bloomberg predicted FFO of $1.32, according to the average of 16 estimates.”

Orange County Register – “More than half H.B. escrows are repos, short sales” (10-30-09)

The article contains 3 charts which include numbers for active listings and escrows in Huntington, CA.

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138-TNG Radio – National Real Estate Investors Association 9-5-09

Saturday, September 5th, 2009

nreia

The National Real Estate Investors Assocation

Director, Rebecca McLean & Charles Tassle

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This week Bruce is joined by Rebecca McLean and Charles Tassle. Rebecca is the Executive Director of Nation Real Estate Investors Association, and Charles is the Director of legislation affairs.

From 2000 to 2005 NREIA’s membership greatly increased. In 2002, NREIA only had 44 groups. In 2004-2005 the membership grew to over 200 groups, and in 2006-2007 the membership grew to 250 organizations. Rebecca estimates that NREIA’s peak membership was around 45,000. NREIA is a federation of local real estate investing associations. Since the market peaked, NREIA has gone down to 230 groups, but there are still people sending in applications every day asking if they can start a local REIA.

Bruce wonders if some of these groups have developed from a group of speculators to a group of investors in which they have the mentality of holding on to real estate. There are more experienced people in the real estate business now than there are people who are new and curious about real estate.

Charles believes it is better to approach legislation with a group of people who are viewed as investors rather than speculators. When NREIA representatives present themselves to state and federal legislation, they try to explain to the government that they are just as much of an investor as they are a local business owner. They contribute a significant amount to the community just like associations such as CAR and NAR. Bruce thinks that too many associations approach Congress with a single minded purpose. They do not consider the investors when they work with the government to change things. Rebecca agrees with Bruce on this issue. What makes NREIA unique is that membership includes Realtors, appraisers, and investors, and this has helped open the eyes of government leaders to realize that NREIA’s members represent a different segment of the real estate industry.

California has too many homes that are going to go back to the lenders in disrepair. Most of the loan programs are geared towards selling the next home to owner occupants, but owner occupants will not be interested in buying these damaged homes. These loan programs will not work without the help of investors, and NREIA has tried explaining this to congress.

Part of the purpose that NREIA has in coming before Congress is to gain respect, so Congress will be more interested in hearing NREIA’s opinions on important topics. Congress has a niche mentality. Each Congressional office latches onto different groups that deal with specific issues.

Bruce has interviewed many people and he has found that people appreciate when he helps to explain what his interviewees are trying to write about. Bruce asks if Charles gets to assist Congress by explaining legislation. Charles says that Congress does ask for NREIA’s perspective.

Bruce asks how politically motivated Congress members are to stand up for certain ideas that may be unpopular. Charles says that in the end, it comes down to the impact of voters. NREIA is supporting the bill HR 3440 which changes the way Realtors and dealers are recognized so that people will not be considered a dealer just because they have done a couple installment loans. This will increase the number of land contracts. As NREIA has explained this to Congress, they gained an understanding of how their voters would benefit from the bill and they started to gain interest in the bill.

203K loans were once available to investors, but that program was taken away from investors in 1996. The program allows people to get financing for a house including the repairs. Bruce asks if it is politically unfavorable to help investors. Charles says that investors are no longer an unfavorable group to support. The mortgage brokers and the appraisers are currently the politically unfavorable groups. People who are rehabbing properties are considered politically favorable. REIA has been making an effort to display investors as an important group of people in the real estate industry. Communities that were once not so open to investors are now open because investors have done a great service for them. There are a lot of misconceptions about what happens to an area when there are a lot of rentals there. Bruce was recently interviewed on a television show and the people who viewed his properties were astonished and pleased by the results they saw. People need to be exposed to the changes that investors make in communities. The work that investors do increase employment, increase the values of neighborhoods, and also increase tax revenue. Rebecca estimates that investors contribute about $3 billion dollars to the economy because of the other businesses that are affected by investors.

Bruce asks how investors can send a message to the people who are in charge of financing options that we need more generous financing because it is very difficult to get financing for rentals and properties that need to be fixed. Charles says that banks are looking for a 750 credit score. Right now the banks are sitting on a lot of cash, and NREIA is hoping that HR 3440 will help encourage the banks to lend that cash out.

Right now there is a program that gives owner occupants an $8,000 check for buying their first property. Bruce thinks that it would be better if existing loans could be taken over subject to without worrying about an assumption fee or the lender calling the loan due. FHA once had a loan in which people did not have to qualify for taking over the payment. Under this loan, all you had to do was send in a fee. Bruce asks if there has been any talk about this sort of loan being available again. Charles says that this has not been discussed, but the chances of this showing up will increase as long as NREIA has an influence on Congress.

In California, there are many investors who 1031 exchanged to other states, but cannot return back now. If they exchange without financing, they will have to pay a hefty tax bill, and they cannot get financing once they pass the 10 property limit. A lot of the decisions we are making are preventing our problems from being solved more easily. Rebecca says that part of the problem is that making good changes, which will help investors, may not be politically favorable. As investors continue to be displayed in a positive light, our chances of having helpful legislation get passed will increase.

Bruce asks what date NREIA’s “Day on the Hill” is scheduled for. This event traditionally goes on during April. The technology conference is coming up soon. This conference will allow NREIA to tell people about what NREIA is doing legislatively. NREIA is trying to make investors look good to the public. Information for “Day on the Hill” will be posted on the website after the technology conference, and people will also have the ability to register there.

Bruce asks Charles if there are any bills coming up that are bad for investors. Charles says that there a couple bill trends that are concerning. One is the foreclosure moratoriums, and there is a foreclosure modification process being proposed. This means that judges or someone else will be given the power to modify loans. This modification process is meant to save people from foreclosure, which seems good, but if we do not deal with our problems on a piece by piece basis we will cause more problems.

To find out more about the National Real Estate Investors Association, visit their website at nationalreia.com

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97-TNG Radio – John Husing 11-22-08

Friday, November 21st, 2008

John-Husing

John Husing

Inland Empire Economist

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Bruce Norris is joined once again by Inland Empire Economist and Specialist John Husing.

Bruce Norris mentions that The Norris Group is now ready to start purchasing properties with the intent to hold them as rentals. Bruce says we’re buying at 28% of what the lender was owed.

John takes Moreno Valley as an example of what happened in the last cycle with rentals. The injection of rentals in areas that were traditionally owner occupied caused problems. Rentals are generally not as well cared for as owner occupied properties in the area. Home values go down because of this. In areas dominated by rentals, calls for police soar. Soon turnover increases as renters look for the best deals and there’s soon a rent war. Side effects of too many rentals can cause many issues. John says Moreno Valley was destroyed by HUD in the last cycle because they didn’t even think about the effects to the communities.

In the stabilization act, money has been given to cities to help stop this issue. Cities can negotiate prices in bulk and then double escrow the homes at certain prices over to construction firms to bring them back to nice homes. They then sell these homes to qualified first time home buyers. San Bernardino did this in the last cycle. 90% of the people who purchased those homes were still in 10 years later.

Bruce mentions that homeownership levels got too high and that more rentals will be a natural conclusion. John thinks it’s more of a pricing question. If prices got down to a level that’s affordable, people will buy. He says California has never built enough homes for its population.

John says that demand for homes is accelerating greatly. Unfortunately, the supply of foreclosures is still coming in great quantity which continues to bring down prices. John feels the only real solution is to get the principal down.

Bruce says Riverside is one of the possible hot spots once this all turns around. John says the Inland region has more construction dirt available then other counties. Over the next 25 years, Southern California will add 6 million people. Orange County and San Diego are built out or zoned out of being able to build. LA is in a similar situation. Once we get through this downturn, the Inland region has tremendous growth opportunity.

Bruce says that people would rather be in California then many other states. For the next couple of years, people from other states will start to recognize the opportunity to move to California and be making the same payment or less and be able to live in a better climate. Bruce thinks we’ll see massive in migration. John says he too thinks people will be looking at California as a place to retire.

Bruce talks about how he got to Riverside and the massive growth that’s taken place. John explains the three stage growth process. By the late 70s, Riverside developers started developing in the area. People were putting up houses where people didn’t want to live. But affordability is important. Later, the entrepreneurial developers come out here because there was a market. Retail centers soon follow because of demand. Housing boom tends lead to population serving businesses coming into the area. Industrial developers follow after which creates blue collar jobs. The Inland area was in Stage 3 where we saw increasing upscale houses being built. The Inland Empire saw much younger people move into the area. This influx of young talent with higher education opens up the area for much different jobs and services. The Inland Empire economy will be back on John’s three stage development once we get through this cycle.

John says San Fernando and Orange County went through this same three stage growth cycle. Orange County went through stage three in the 70s. John tells the story of South Coast Plaza. Orange County is actually worried because it’s losing its young and educated workers to the Inland Empire.

In Riverside, all industries are having a difficult time. Residential construction brought in a large about of jobs. Warehousing and distribution have also been main drivers for jobs. Now that these have both slowed, unemployment has boomed.

Bruce asks John if the Feds will crank up infrastructure projects. John says that would be the way to help the economy. The influx of cash to consumers by the government in May didn’t work because they paid off debt or went to Walmart.

Bruce asks John about the difference in median incomes from the Orange County and Riverside. John says they are very different. However, if you take the median income and then subtract the cost of housing, it’s about dead even. As the economy approves, we’ll continue to pull more and more people from Orange County for this reason.

More on John Husing and his research at johnhusing.com

In August 2006, Dr. John Husing was listed by the L.A. Times Magazine as one of the 100 most powerful people shaping life in Southern California. He is a leading authority on the impact of the goods movement industry on the region, and in particular its role as a provider of upward economic mobility to blue collar workers. He has just completed major studies on the impact of the proposed Clean Truck Program at ports of Los Angeles and Long Beach and has recommended some changes in strategy.

In addition, Dr. Husing has spent decades studying the city & county economies of Southern California with a specialty on the Inland Empire. This research began when he began working on his doctoral thesis at Claremont Graduate University in 1964. For the past 43 years, Dr. Husing has conducted extensive research plus interviews with executives and entrepreneurs to understand the forces shaping Southern California. He has a deep understanding of our political process, having managed over 100 partisan and non-partisan campaigns. Today, he uses his extensive knowledge of the region and his political experience to explain the economy to business leaders and policy makers throughout the Southland.

Privately, John Husing enjoys life as an adventurer, taking treks into uncharted territories as well as traveling to 52 different countries. In recent years, he has twice entered the unexplored jungles of NW New Guinea to make first contact with previously undiscovered stone-aged tribes. His last trip was trekking over the Himalayas from Nepal into Tibet. Closer to home, Dr. Husing is an amateur genealogist with his American roots traced back 12 generations to Robert Fuller and his family on the Mayflower.

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78-TNG Radio – Joel Singer 7-26-08

Friday, July 25th, 2008

Joel-Singer

Joel Singer

Executive VP for The California Association of Realtors

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Bruce Norris is joined this week by Executive Vice President for the California Association of Realtors, Joel Singer. Joel will also be a panelist at the I Survived Real Estate 2008 event. Bruce and Joel discuss how financing helped the huge California boom, the psychology of demand, the trade-up market, cheap money, lending standards, the last boom markets, down payments in last cycles, no documentation loans in this cycle, if lenders compensated too far the other way, lending practices today, the ease of borrowing, the long boom and the consumer forgetting about risk, home ownership for those that can afford it, speculation throughout the system, putting blame on certain groups, the current finance market, FHA, Fannie, and Freddie, seller financing in a down market, simple assumptions of the past, the unlikely chance it will come back, the Wellencamp Wars being phased out by the Garn-St Germain Act, the 203k loan program, the Nehemiah Program, why having skin-in-the-game is required by lenders, FHA loan limits and if they will be permanent, inventory levels in California, what makes a balanced market, sales activity up, if declining in inventory is healthy or if it means retail consumers are pulling their homes off the market, what happened to the median price and why it got hit so hard, the risk of people walking away, the different ways of rescuing people and their homes, the unintended consequences of government fixes, the market not being in full recovery mode just yet. Please see isurvived2008.com.

C.A.R. Executive Vice President Joel Singer has held the Association’s top staff position since November 1989 after serving as C.A.R.’s chief economist and heading the Association’s public affairs department. Singer was instrumental in developing Real Estate Business Services Inc. (REBS), C.A.R.’s for-profit subsidiary, and serves as its president. He also is president and chief executive officer of RE FormsNet LLC. Singer joined C.A.R. in 1978.

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