Posts Tagged ‘Investors’
Government, Fannie Mae Considering Help for Housing Investors
Multiple sources now tell me that the Administration is considering ways to get more investors into the housing market, possibly with the help of Fannie and Freddie. HUD would not confirm that, but Fannie Mae's chief economist Doug Duncan said it is definitely on the table both at HUD and at Fannie.
As Shadow Inventory Grows, Time for More Subsidy?
We know that there are investors out there looking to get into the market, and that's a good thing, especially since investors are almost exclusively all-cash these days. But there aren't enough investors to soak it all up, so we have to look to the demand side for regular, organic buyers.
Bank of America urges funding for investors
Analysts from Bank of America have a unique proposal: Instead of further funding TARP to help distressed homeowners hold onto their properties, give the money to property management companies that would then buy property and turn it into rentals. In a recent research paper, Bank of America analysts suggested that the government spend as much as $400 billion to encourage property management companies to buy properties and rent them out. That, according to research, would bring the homeownership level to “a more natural level of 62 percent to 64 percent” from its current 67 percent. Under Bank of America’s recommendation, investors would be prevented from reselling the properties quickly. Source: The Wall Street Journal, Emily Peck
Where is the shadow inventory?
For the last year, the real estate industry has been talking about shadow inventory and the coming flood of distressed properties. Where are they? Here’s what’s happening, according to a recent paper by Alan Mallach, a senior fellow the Brookings Institution: • Some delinquencies have been resolved through loan modifications or people working out the problems on their own. • Banks are getting better at managing short sales. • Investors are aggressively buying up properties, sometimes in bulk, directly from the banks or at courthouse auctions so they don’t hit the market. The likeliest outcome, Mallach predicts, is a steady flow of foreclosures over a long timeframe that will prevent another crash in home prices – but it will probably lead to low or no appreciation in home prices for a while. Source: The Wall Street Journal, Nick Timiaros
Investment property: four considerations
– Real estate entrepreneur Ryan Moeller offers these four tips for anyone considering a consumer real estate investment: 1. Don’t count on appreciation. Appreciation is a bonus. 2. Watch the loan-to-value ratio. Ideally, the total cost of the purchase, fees and repairs should be no more than 70 percent of the appraised value of the property in good condition. 3. Maximize annual return. Aim for properties that can be rented for at least 1.5 percent to 3 percent of the purchase price. For example, plan to pay no more than $50,000 for a property that can be rented for $750 per month. 4. Have an exit strategy. Seek properties that are attractive enough to have value no matter what happens to the market – as rentals, for sale to other investors, or for sale to somebody who plans to live there via conventional financing or lease purchase. Source: BiggerPockets.com, Ryan Moeller (09/01/2010)
Commercial real estate yields spur investors
Yields on U.S. commercial real estate are nearing a record high compared to Treasury bonds. Many investors take that as a signal to buy property. Capitalization rates, a measure of real estate yields, averaged 7.22 percent in the second quarter, as calculated by the National Council of Real Estate Investment Fiduciaries. That was 4.29 percentage points higher than the yield on 10-year government bonds as of June 30 and 4.75 percentage points higher than Treasury yields as of Aug. 31. Current returns are near the record 5.39 percentage points in the first quarter of 2009, when the U.S. was dealing with the worst economic downturn since the Great Depression. The spread shrank to less than 80 basis points when commercial real estate prices peaked in 2007. “The data indicate that real estate is poised for a rebound,” says Gerardo Lietz, who advises pension funds on property investments. Source: Bloomberg, Hui-yong Yu
Investors turn to flipping for quick profits
Private equity firms and other groups of wealthy people are purchasing foreclosures at distressed prices, rehabbing them and selling them for a quick profit. This used to be a game for amateurs, but because of the lack of other investment opportunities, the money-management pros have stepped in. The influx of new players is pushing up auction prices and making it harder to make a profit. The average discount at auctions – the difference between a home’s sale price and its actual value – is 21.6 percent, down from 28 percent in January 2009, according to ForeclosureRadar. “In crisis there’s opportunity,” says Rick Hudson, president of investment firm Prosperity Group Real Estate in Irvine, Calif. “Right now there’s huge opportunity with flipping houses.” Source: Los Angeles Times, Walter Hamilton and Alejandro Lazo
Average mortgage rates hit low of 4.42%
Mortgage rates fell to the lowest level in decades for the eighth time in nine weeks, a sign that investors are concerned about the weak economy. The average rate for 30-year fixed loans this week was 4.42 percent, down from 4.44 percent last week, mortgage buyer Freddie Mac said Thursday. That’s the lowest since Freddie Mac began tracking rates in 1971. The average rate on 15-year fixed loans dropped to 3.9 percent, down from 3.92 percent last week and the lowest on records dating back to 1991. Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields. Falling rates have pushed refinancing of home loans to the highest level since May 2009. But it’s still lower than during the first three months of that year, when rates first fell to around 5 percent. Low mortgage rates, however, have failed to spark home sales. They remain hobbled by the weak economy and tight credit standards. Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields. To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day. Average rates on five-year adjustable-rate mortgages were unchanged at 3.56 percent. Rates on one-year adjustable-rate mortgages also were unchanged at an average of 3.53 percent. The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year and 1-year mortgages. They averaged 0.6 of a point for 15-year and 5-year mortgages. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Stock Swoon Tanks Mortgage Rates
For those of you who consider me far too 'glass is half empty,' here's a little bright side to the near 1000-point drop in the Dow yesterday: Investors fled to the 10 year Treasury, driving the yield way down and pulling down the rate on the 30-year fixed mortgage right along with it.
Loose Lending Didn’t Create the Housing Bubble
Yes, after years of bashing the mortgage industry for lax underwriting, bashing the Federal Government for negligently low interest rates and blaming investors for vacuuming up homes with no-money-down loans, three guys from Harvard say they're all off the hook.
