Real Estate Investing

Many positive stories hit the news this morning saying the housing market is showing sure signs of recovery. The online Redding.com (California) site reports good news,

Has the north state’s housing market hit bottom? Data from Zillow.com, among the many Web sites that track values, suggest that prices have not only bottomed out but are coming back up.

The Associated Press provides a detailed analysis about the housing market, economic growth and unemployment. A recovery is definitely in sight for housing, but companies will continue to be cautious about spending and hiring.

Forecasters are hopeful that the housing slump _ in terms of home sales _ will hit bottom this year. However, economists were divided over whether the low point would be reached in the second, third or fourth quarters of this year. House prices, though, are still expected to drop this year and next.

The good news is the story waits until the third paragraph to use the “R” word: Recession.

In other retail news, Lowe’s - the big daddy of building supply - is definitely feeling the pain of the slow housing market. Sales were down according to Bloomburg Business News,

Sales in stores open at least 13 months fell 8.4 percent in the quarter. They dropped 12 percent in February and March and 1 percent in April, helped by better weather and demand for flowers, plants and bushes…

I’m glad to have helped out Lowe’s and Home Depot. We bought new flower pots for outside, some pansies, and yellow lantana flowers that I’d never heard of but are pretty.

Special Note for you would be gardeners: I just searched for a photo of the lantana flower to share with you and learned that it’s an invasive weed-type flower and poisonous to boot.

Some of the housing markets hardest hit by the foreclosure epidemic are seeing small signs of new life, thanks to eager bargain hunters seeking to capitalize on a golden opportunity. Home buyers in Detroit, Las Vegas, and Chicago are saving 30% to 50% by buying foreclosures, according to USA Today.

The article tells the story of Ruth Ahlbrand, a Las Vegas realtor who capitalized on her city’s tremendous foreclosure rate. Ahlbrand trained her agents in foreclosure deals, transformed her marketing campaign and even purchased a 40-seat bus to escort deal seekers around the city. Not only will bus tour participants see actual foreclosures available on the market, they will have the added bonus of hearing an agent on a loudspeaker lecture them on the ins and outs of buying foreclosures.

“It’s like a seminar on wheels,” Ahlbrand told USA Today. “Buyers are saving up to 30% or 50%. People are really looking for a deal. I’d almost call it a frenzy. We’ve hit the bottom, and Las Vegas is growing.”

Leading the pack in terms of reduced housing costs are Las Vegas and Miami with more than 19% reduction, Phoenix with around 18% reduction, Los Angeles and San Diego with more than 16% reduction and Tampa and Detroit with over 15% reduction. If ever you’ve thought of owning a home, now’s the time. Just don’t be afraid to wait out the seller or even pitch a low-ball offer. Amber Gilmore, one home buyer mentioned in USA Today, played the waiting game and earned a reward of $100,000 off her foreclosure purchase. While many buyers are still tentative about dipping their foot in the real estate waters, content to wait out the deals, it’s good to see that the really hard-hit cities could start seeing a turnaround soon.

This is a real shame. It seems the affordable housing program in Napa Valley, California is falling victim to the mortgage crisis. Two of the homes were recently foreclosed upon, one of which will bring the city of Napa’s Housing Authority a financial loss to the tune of about $56,000. In one of the foreclosure cases, the homeowners had previously used about $100,000 in home equity to pay off consumer debt and fix up the home.

Altogether, the city’s Housing Authority owns 230 properties for low-income, first-time homebuyers. Most of the mortgages are fixed rate, but the two foreclosures were on properties with adjustable rate mortgages. The mortgages reset to a higher rate, while the values of the homes simultaneously declined by as much as $100,000. Those two combined factors proved to be a crippling blow that the homeowners could not overcome.

The Housing Authority has learned from this little setback. All future low-income first-time homebuyers in the program will be required to take a 30-year, fixed-rate mortgage. No more ARMs. Furthermore, city council members are asking the organization to place restrictions on when and for what reasons participating homeowners can refinance their homes.

Here’s the really interesting part: The Housing Authority’s purchase limits for qualifying “low income, first-time homebuyers” is $532,000. At least one of the foreclosures involved a house worth about $430,000 after the value had dropped significantly. Wait, are we talking half-million dollar homes here? I’m low-income, sign me up!