Housings Future

I am copying an article I received from Franklin American Mortgage Company that puts some definition around reasons I believe the market is coming back.  Particularly, while some indicate that current conditions will direct more people to rent vs own, the statistics continue to support ownership.

"The average homeowner has a net worth that is about 41 times greater than that of a renter, according to a report from the National Association of Realtors. Homeowners’ net worth averaged between $150,000 and $200,000 this year, according to NAR. The trade group for Realtors said homeowner equity accounts for a substantial part of that net worth. NAR based its research on results from a 2007 Federal Reserve Survey that provides a snapshot of family income and net worth in conjunction with basic demographic makeup. The Fed survey is conducted once every three years. A 2010 survey has not yet been released. Homeowner net worth back in 2007 was 46 times greater than that of renters, reflecting the economic conditions before housing price declines and a decreasing equities market. The average net worth of a homeowner was above $200,000, while the average net worth of a renter in 2007 was $5,000. Source: HousingWire




Total housing sales in 2010 will be down about 8 percent from last year, and will mark the bottom of the downturn, says a monthly report from Fannie Mae economists. The economic outlook from Fannie Mae is fairly upbeat looking ahead. Foreclosures will keep housing sales subdued in the final quarter of this year, the report says, but sales will see gradual improvement in 2011. “We expect home sales to increase by about 3 percent in 2011, says Fannie Mae (OTC BB: FNMA) chief economist Doug Duncan. “However the pace of the recovery will be largely determined by labor conditions. If hiring improves at a faster pace than expected, home sales will likely see a stronger gain in 2011 and vice-versa.” Improving financial conditions and recent encouraging signs from the labor market should set the stage for an above-par growth trend by mid 2011, the report says. Source: Washington Business Journal



A tougher economy is changing the way people regard housing design. Here are some of the new realities:

• The ideal home size is less than 2,000 square feet, according to Trulia.com.

• Formal living rooms and dining rooms are out; flexible space that can double or triple as home offices,

guest rooms or dens is most appealing.

• Porches are back.

• Energy efficiency trumps everything, with a private wind turbine in the back yard a real winner.

Source: USA Today"

Fifth & Poplar

There is a new listing at Fifth & Poplar that I find quite incredible.  It is on the 7th floor and is a large 2 br 2 ba unit.  It is a Short Sale, and the price is $224,000.  I showed it this morning and was very impressed at the size and finishes that it affords. 

I have mentioned before the great values that are available in this building.  To be sure, the tax value of the property remains high, and the HOA dues are high, and there is a monthly assessment surcharge of around $100 as well.

Despite that, this building is one of the best values in the city.  The amenities, including an interior park of about 1 acre, a swimming pool, a fitness center, a cyber lounge fully equiped, indoor and outdoor fireplace, a patio deck above the Harris Teeter, and of course, it sits on top of a grocery store.  Include with that a 24 hr a day concierge, and a location 2 blocks from the center of town.

Wow!

More On The VUE

The VUE remains the biggest topic in this marketplace. Standing 51 stories tall, and looking front on to the Charlotte skyline it can hardly be missed. But the size is only one of the reasons it is a Big Topic here.


Born in the heady real estate days of the mid 2000’s, it promised to deliver a location, style, and ambiance that would be unsurpassed. Several other towers that were planned or in the works have either never developed (One Charlotte) or have disappeared due to legal and zoning battles (210 Trade Street).

The sale center for The VUE was prominently located at the center of town, on the corner of Trade and Tryon.

Back in the mid 2000’s per square foot pricing downtown was comfortably over $300, and in the case of Fifth and Poplar, The VUE’s next door neighbor, the prices were well over $350. A natural progression of value would have pushed the pricing levels to somewhere between $450—$500. Initially, all sales were handled internally by the developer. Several times during the sale cycle, changes were made to the staff. Some of the contracts that were written were done directly by that team, with the team acting as a Dual Agent, meaning representing both sides of the transaction.

Those of you who have purchased new from a developer will recall that the contract you signed was written specifically to cover the developer in almost every instance, only the 7 day right of rescission remained.

The VUE is complete now, just work on interior finishes or build out’s. Closings began in September, and of this writing, two units have closed.

Contract holders have received notices to set their closing, and they are finding that the appraised value of the property, that is the number that a lender gauges the amount of a loan they are willing to give, is coming in anywhere between 15% to 35% below the contract price. Faced with not being able to secure a loan for the balance of their purchase price, they will need to bring additional dollars to the closing.

The developer is sticking with the contracts in hand and can sue for non performance if the buyers do not close. Courts have upheld contracts when a buyer has the means to close.

There are no mulligan's in real estate. When you make a purchase make sure you have proper representation going in.

Foreclosure Myths Explained

Go to this article to read about common myths regarding Foreclosures.  It is important also to note that foreclosure is a process, and not a tangible thing.  This means that when you see the word "Foreclosure" it is referring to the process.

Today's market is providing plenty of opportunities to purchase at significantly below the market value.  It is unfortunate, but it is the market we are in.

Ahead Of My TIme?

The article I have linked here discusses the potential beginnings of a trend away from car ownership.  The article talks of many reasons for not owning a car, but the best reason can be found in the last paragraph.  It appears these generation "Y"'s are realizing that they can best allocate the assets they have in other directions.

Way Cool Transit Information

Go here:

http://toddata.cnt.org/

Register (it is free) at this site and you will have the ability to get an incredible amount of information on existing and proposed transit stations in terms of population and median income.  How do they know this stuff???

Here in Charlotte, you can select the station (example: Seventh Street Station), and find out how many residents or jobs are within .5 miles, or .25 miles. So you can compare which stations are most TOD friendly with real numbers. You can also do this for future lines in Charlotte.

Could The VUE Consider This?

Before I get into this, please note that this is just pure speculation.  I have not talked to any potential owners, and I have not talked to the developer or the sales team for The VUE.

That said, please go to this article:  Equity Sharing  It might be a vehicle that would allow someone to close on this property without the developer having to make pricing adjustments from the contract price to meet the current appraisal value.

In this situation, again this is just unsupported conjecture, a unit which went under contract for $1,000,000 with a $150,000 down payment might only appraise for $800,000.  A lender would in most cases only provide financing for $640,000, leaving a shortfall of $210,000.  The developer might choose to do an Equity Sharing agreement, taking that $210,000 as part ownership in the property. 

If as the developer says, the property will increase in value as we climb out of this recession, the developer may stand to make more long term profits on the property, if not, the developer will stand to recoup the investment upon the sale of the property. 

Sale prices will be maintained for appraisal value, and mortgages will be able to be obtained.

Not a perfect situation, but food for thought on a sunny October morning.

Freezing Foreclosure Action?

1. What is robo-signing and what all the fuss is about? The phrase robo-signing refers to what we’re now realizing has been a very common practice in the banks’ foreclosure document processing divisions, where one person was essentially given the job of signing as many 10,000 foreclosure documents per month, by hand. These individuals were supposed to be reviewing the files, making sure grounds for foreclosure actually existed, signing the docs in front of notaries. But because of the volume of documents, what they actually did was just sign thousands of documents at a time, without even reading them, and ship them off somewhere else to be notarized.


If you do the math on an 8 hour workday, you'll see that that only gives the staffer 1.5 minute to review each file and documents to make sure the foreclosure is warranted. That's not humanly possible, which is how these staffers got the nickname “robo-signers”

Government regulators are very concerned that the banks may have been taking people's homes without following the proper legal procedures. As a result, 40 states' attorneys general are teaming up to launch a multi-state investigation, and the federal Comptroller of the Currency and federal attorney general may also get involved in investigating this issue.

2. Will the freeze will make the banks cancel buyer contracts on REO properties? Currently, the freeze impacts bank-owned properties that are owned and/or serviced by Ally Financial/GMAC Mortgage, JP Morgan Chase, and some properties that were owned by Bank of America. Generally, contracts to buy these homes are being put on hold and extended for 30 days. As well, the banks are often reaching out directly to buyers and offering them the option to cancel their contracts and recoup their deposit money.

3. Is it safe to buy a foreclosed home? There's lots of talk right now about the "clouds" that this scandal will create on the titles to homes that were foreclosed by the banks' foreclosure mills. And that makes sense: if the home wasn't properly foreclosed on in the first place, then the legitimacy of the bank's resale can be called into question. Normally, don't worry about it, buyer - that's why you'll get title insurance! But last week, 3 of America's largest title company insurers declared that they will not offer title insurance on a number of the homes that may have been involved in this scandal.

In the vast majority of cases – when the foreclosure was justified and a bona fide purchaser, someone who was not involved in the bank’s wrongdoing, has purchased the home, courts will not reverse these foreclosures or their sale to buyers. But if you’re in the market for a foreclosure, get clear on which bank owns the place as soon as you can, and run the property past your title insurer before you get too far into the transaction to make sure they can write a policy of title insurance on the property before you spend too much money on inspections and appraisals.

4. How the foreclosure freeze will impact American home values, say after you buy. In the short term, these freezes might cause prices to stabilize, as we expect to see the supply of foreclosures for sale start to shrink. However, if these freezes stretch out for a long period of time, they could simply be delaying many inevitable foreclosures, which could delay the recovery of the housing market and home prices, over time.

Fifth & Poplar Moves Distressed Properties

Fifth & Poplar located in the Fourth Ward has always been a wonderful location. The interior park is peaceful, and well maintained. An apartment conversion project, it sold out during the peak of the market back in 2005 - 2006. It was not uncommon to see square foot prices as high as $385!

Back then, lenders were both lending, and being creative with the types of loans available. Balloon mortgages were frequently the mortgage of choice, and many others got a mortgage and a second mortgage basically putting nothing down.

The beauty of this property was that it was chocked full of amenities, everything from a great pool, to a doggie park, to a concierge, etc. These things all cost money, and the HOA dues, based on square footage, was in the upper $300 range.

Due to maintanence issues and needing to develop a legal fund to potentially pay for legal action against the builder, the HOA fees have been increased by around $110 per unit per month! Yikes.

The recession cost many their jobs, or lead to transfers out of the city. As the market went down, the balloon payments became due, further strapping the abilty of some owners to meet their obligations. Foreclosure activity and Short Sales began to be the norm.

I have shown the building many times, and there are significant deals and values to be had there. The good news is that it is beginning to work. Since July 1, five (5) properties have sold, and another six (6) have gone under contract. The average selling price is under $200,000, and the average $ per square foot is at $200!

There are still properties available, and I would love to help you to secure one if you are motivated. Call me.

Interesting Times At The VUE

There have been some rumors going around that some of the people who have contracts to purchase at The VUE were considering walking away from their investment. There is a blog VueCharlotteBuyersBlog that has reported much of this, and describes the difficult wavering that some are experiencing.

There was a post on that blog from the developer MCL which links to a court order on a different property ruling in favor of the developer and instructing the buyer to go through with the purchase of the unit they contracted for.

Court Order

Stay tuned, more to come!