Act fast! Homebuyer tax credit ends soon
Use any metaphor you want: the ticking clock, sands running through the hourglass or pages falling away from the calendar. The fact is, time is running out to claim the $8,000 first-time homebuyers tax credit.Property taxes: How to beat ‘em
You know that your home's value has tanked. So why doesn't the blasted tax man? Home prices fell 27% from the 2006 peak to the end of 2008, according to the S&P/Case-Shiller Index, while the amount municipalities collected in property taxes rose 12% from 2006 to 2008.Home Buyer Enthusiasm Fades As Tax Credits Expire
Just when the home building industry seemed to be bouncing back, news from California raises troubling questions. The California Building Industry Association says its members reported a significant drop in traffic to their developments in July because the state stopped taking applications for a $10,000 tax credit for new home buyers.
The $10,000 credit was authorized by the state legislature last February as a way to jump start California construction jobs. The credit, coupled with the $8,000 federal new home buyer credit, had been a big reason why builders in California saw a jump in sales this past spring.
Now with the initial funding exhausted, buyers are less eager. “Activity stopped as quickly as it started, which is bad news for housing and the broader economy,” says Robert Rivinius, the builder association’s president. The trade group is lobbying to get the credit extended.
That the expiration of the state tax credits already seems to be dampening buyer enthusiasm in California doesn’t bode well for the home building, real estate sales or auto manufacturing industries nationwide. As the initial boost from government incentives ends, those industries could post poor sales numbers again.
Overall home sales increased 12 percent in July in California compared with the same period a year ago. But a lot that may be due to the still-in-place federal tax credit. (The state credit applied only to buyers of newly-built homes).
“The federal tax credit for first-time buyers played a critical role in the purchase decision of many buyers,” says California Association of Realtors President James Liptak. “Nearly 40 percent of first-time buyers said they would not have purchased a home if the tax credit was not offered." Realtors are lobbying Congress to extend the federal credit beyond its Dec. 1 deadline, and to include all buyers, not just first-timers.
According to statistics compiled by the Construction Industry Research Board, California homebuilders pulled permits for 2,045 single-family homes in July, down 29 percent from June. The research board also announced that it is revising its home building forecast downward from 40,000 total units to 39,500 in 2009, which would be by far the lowest total on record.
Real Estate TV Shows Can’t Keep Up With The Plunging Market
On vacation last week I watched a lot of real estate reality shows and realized just how quickly they can get outdated in this horrible housing market.
Some of the shows do reflect the post-bubble reality. A show on HGTV called Real Estate Intervention follows a guy who looks and acts like a tough-as-nails police detective as he convinces homeowners that they can’t sell their house at the high price they hoped.
The worst example was HGTV’s House Hunters International which told the tale of a couple selling their small condo in Carlsbad, Calif. for an expansive townhouse at a new beach development in Mexico. I kept watching, thinking the show would end in disaster. Pay $400,000 for a townhouse in an empty, half-built development in another country? And they had young kids! Yet, by the end of the show the couple was shown happily enjoying dinner with their new neighbors, even though, oddly, neither family spoke the others’ language.
Sure enough I Googled the development, Loreto Bay, and found out the developer has since defaulted on the property and there are many unhappy owners wondering what will ever become of their homes.
I’ve always thought the best of the real estate shows was Bravo’s Flipping Out. This season is definitely reflective of the bust. Star flipper Jeff Lewis says he sold his last two properties at a loss and he’s been forced to take humbling remodeling jobs to make ends meet. Even still the season opener seemed out of date on the day it aired. Lewis is forced to live in his last remaining house, which he is still trying to sell. He tells his Realtor “No more giveaways” and “I’m going to build a wheelchair ramp,” meaning he’ll live there forever, if need be.
When the Realtor suggests listing the house in the “mid to high 2s” –meaning $2 million—Lewis says high, not mid. But check out the property’s current listing. Lewis has already had to lower his asking price from $3.1 million in April 2008 to $2.29 million today. Considering that he paid $1.7 million for the house in 2007 and did a ton of remodeling, he’ll probably take a loss if he sells it now.
Worse still was the overall sadness of what used to be a funny show. Jeff and his sidekick Jenni don’t spar in a good-natured way like past seasons. Instead, they just fight. Hard times will do that to people.
Did land regulations contribute to Florida’s boom and bust?
Liberals tend to blame the bust we're going through on underregulation. Conservatives finger overregulation. Example: Tight land-use controls that impeded housing construction, limiting supply and (temporarily) driving up prices.
Jay Brady, a writer for Florida's Gulf Coast Business Review, recently wrote a long article arguing that land-use rules, mostly at the county level, were culprits in Florida's soaring home prices, which of course ended with a huge bust. (He thought I'd be interested since the article quotes an article I wrote in 2006, "Boom! Bust! Boom?")
Writes Jay:
Economic research reveals a series of government missteps led to over-regulation of the housing industry in Southwest Florida, “tragically distorting” housing and creating the root cause of the real estate crises.
Before the housing boom kicked off in 1997, a typical lot in working class Lehigh Acres was $5,000. At the peak of it, that same lot may have sold for $55,000.
And now, according to Brad Hunter, of housing development tracker Metrostudy, it’s back at $5,000 and may not have yet hit bottom. In one zip code in this 96-square-mile unincorporated city in east Lee County, one in eight housing units faces foreclosure.
For the whole article, click here.
Florida’s Population Dropping with its Home Prices
Florida's population, which has been rising year after year since the end of World War II, fell for the first time this year, according to the demographers at the University of Florida.
The population dropped by 58,294 from April 1, 2008 to April 1, 2009, according to UF's Bureau of Economic and Business Research, which measures population using household electricity connections and disconnections and housing permit data. That might not seem like much for a state with a population of about 18 million. But it's the first drop since 1946 and it follows a population boom. By comparison, the state's population increased by 430,905 from 2005 to 2006 (By 2007-2008, the population rose by just 126,852).
Florida's speculative building boom was driven by the idea the retiring baby boomers and new immigrants would create steady demand for the condos towers rising from Miami to Jacksonville. But many of the immigrants who helped build homes during the boom have likely left as the state's economic promise diminished, said David Denslow Jr., a professor and Research Economist for the Bureau of Economic and Business Research.
And seniors, who have lost money in the stock market and have been unable to unload primary homes up north, have delayed purchasing their Florida retirement pads, he said. It's also likely that many people cashed out before the end of the boom and moved to less expensive states such as North Carolina, South Carolina or Georgia, he said.
But Denslow is hopeful that the population will start growing again once the economy improves. The snowbirds are slowly coming back, said Denslow, who estimates that 3.5 million Americans will retire by 2020 (compared to about 2 million in 2000).
"We’re bottoming out," he said. "The stock market is coming back. And to some extent, people are able to sell up north. There are some indications that the market is coming back. But I don’t see house prices rebounding sharply."
Moving in on Distressed Hotel Market, $1.5B Fund Makes First Play
The 353-room Hanover Marriott in Whippany, N.J., has just become the first purchase of HEI Hotels & Resorts' third investment fund, HEI Hospitality Fund III L.P. The Norwalk, Conn.-based investment firm acquired the property from Bethesda, Md.-headquartered Host Hotels & Resorts for $27 million. Raised in 2008 with $515 million in commitments, the discretionary fund has approximately $1.5 billion in leveraged buying power and allows HEI to capitalize on the growing pool of low-priced, distressed assets hitting the market.
Foreclosures and mental health
In case you missed it ... the University of Pennsylvania School of Medicine put out this press release last week:
PHILADELPHIA – The nation’s home foreclosure epidemic may be taking its toll on Americans’ health as well as their wallets. Nearly half of people studied while undergoing foreclosure reported depressive symptoms, and 37 percent met screening criteria for major depression, according to new University of Pennsylvania School of Medicine research published online this week in the American Journal of Public Health. Many also reported an inability to afford prescription drugs, and skipping meals. The authors say their findings should serve as a call for policy makers to tie health interventions into their response to the nation’s ongoing housing crisis.
“The foreclosure crisis is also a health crisis,” says lead author Craig E. Pollack, MD, MHS, who conducted the research while working as an internist and Robert Wood Johnson Foundation Clinical Scholar at Penn. “We need to do more to ensure that if people lose their homes, they don’t also lose their health.”
For the full press release, click here.
Just a guess here, but I'd bet that foreclosure isn't always the worst thing for mental health. For some people, it could even be a safety valve. Sometimes, the most stressful thing is to try to stave off foreclosure by making huge sacrifices to hang onto a house that's unaffordable.
(Sorry for being late with this. Vacations have hit the Hot Property staff pretty hard lately.)
9% of all home loans are delinquent
The number of Americans who have fallen at least 30 days behind on their home loan payments inched up slightly between the first and second quarters of 2009, but jumped 44% compared on an annual basis, according to an industry report.He Wrote The Book On Real Estate Investing
Long before “Rich Dad, Poor Dad,” “Art of the Deal” and the gazillion other books on how to get rich in real estate were published, William Nickerson was the author everyone read. I recently poured over his classic “How I Turned $1,000 Into A Million In Real Estate--In My Spare Time” and think it’s still the best of the genre.
Nickerson’s formula—which he calls pyramiding—involves buying properties that need a little work, fixing them up and renting them out at higher rates. You then use the equity you build through that process to trade up to a larger property. Nickerson starts with a duplex and ends up with a 30-unit apartment building.
The first version of his book came out in 1959. I was struck by how much of what he wrote is still relevant today. Granted the first duplex he bought cost $8,500 and the initial rents were $90 a month. But the interest rates—at 5%--are about what you would pay today.
Nickerson’s description of how the housing market sunk in the Great Depression also sounds familiar. Home owners took out high-interest loans, 8% at the time, on a short term loans. The loans left them with much larger payments due in five years. When the big payments came due they were unable to refinance and got foreclosed on.
In between his financial wheeling and dealing, Nickerson spins some homey business advice. For example, never use the same Realtor you used to buy a property to help you sell it later. That’s because the Realtor will have the low price you paid stuck in the back of his mind and he’ll try to get you to accept less in order to close a deal.
In a section on leasing your apartments, Nickerson reminds the reader to never forget to say “Buy before Goodbye.” It’s another way of saying “Don’t forget to ask for the order.” Nickerson advises that when you’re showing an apartment to prospective tenant make sure to ask questions that lure them into saying yes, such as “Would you like to move in on he first of the month?”
Nikcerson updated his book every decade or so. The $1 million in real estate became $2 million, then $5 million. He died in 1999…penniless.
Just kidding about that last part.
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