Real Estate Investing

Are you in foreclosure? You’re not the only one. Click here to view a photo gallery of million-dollar homes that are in the foreclosure process. What is the deal?

A recent Forbes magazine article points to a series of unfortunate occurrences. In many cases, the buyers found themselves in a negative equity situation. In other words, they overpaid for the home initially or the house’s value has declined along with the overall housing market, leaving them panicked and seeking an escape. In many cases, housing lenders approved outrageous loans that far surpassed the homeowner’s ability to pay.

“There were people with $100,000 incomes getting million-dollar loans,” Wendell Cox, founder of St. Louis-based housing research firm Demographia, told Forbes.

The situation puts banks in a prickly position. They must either continue paying brokers to maintain, market and sell the properties, or — in light of the surplus of foreclosure properties and the sea of choosy buyers — they must decrease the price and take a financial hit. Forbes reports that sellers in the pre-foreclosure stages are getting some decent offers from international investors, but there is often still no meeting of the minds between buyers and sellers.

This is far from the first time the high-end housing market has experienced trouble, although the problem seems to be more significant now than before. But before we go entirely into the Land of Gloom, take a look at Peter Viles’ real estate blog for the L.A. Times. The blog lists several neighborhoods around Los Angeles where the housing prices have not dropped “one iota.” Granted, they are all sub-million dollar homes, meaning the $700,000 to $900,000 range. Still, not too shabby, right? So here again, there may be local pockets of prosperity amidst the nationwide picture of despair. In any case, if you’ve ever thought about buying a luxury home, now may just be the time.

In the midst of a shaky market for existing homes, many homeowners are choosing to proceed with building their own custom homes. It’s the classic American dream, and there has never been a better time to pursue it.

As Money magazine reports, building material costs are down significantly. Couple that with acting as your own general contractor and you could see a significant savings of as much as 50 percent. Of course, acting as your own general contractor requires skills, expertise and time, but can save you up to 25 percent.

Over the past 18 months, land prices in some areas of the country have fallen 20 percent. The decreased prices of building materials range from a six-percent decrease on insulation costs to a 40-percent decrease on sheetrock and drywall. Of course, all of this translates into significant savings for you.

This largely stems to the fact that builders overbuilt, then stopped building until the housing inventory thinned out a bit. That leaves supply companies and building contractors scrambling to meet their bottom line, slashing prices and recruiting every “Harry Homeowner” they can find. Just like you would be in the cat bird seat were you purchasing an existing home, you are also presently in the perfect position to negotiate on material and labor costs when building a home.

“In terms of finding land you want at a good price, this is the best market that I have seen in my 30 years of home building,” Carl Heldmann, builder and author of Be Your Own House Contractor, told Money.

So seize the day and watch the blueprint of your dreams become a bricks and mortar reality. You’ll get a smaller loan, which can mean smaller payments or a shorter term. You’ll also get more house and more land for your buck, and ultimately, your wallet will thank you.

Ah, it’s good to be loved. It seems yours truly was the subject of a “mini-rant” over at South Beach Condos Blog. There, it was kindly pointed out that they did not like my recent post on the future of Miami real estate, and furthermore, that Miami and Miami Beach are two separate cities (not that I ever stated otherwise).

So the following list is our effort to alleviate any further confusion and save the readers of blogland from future mini-rants (OK, well probably not, but it’s a goal):

DIFFERENCES BETWEEN MIAMI AND MIAMI BEACH

1) The city of Miami was incorporated in 1896, while the city of Miami Beach was founded in 1913.

2) Miami has 362,470 residents, according to the 2000 census, whereas Miami Beach only has 93,535.

3) Miami Beach claims the beaches. Period. There are technically no beaches in Miami proper. At least, that’s the word over at South Beach Condos Blog.

4) The official web site of the city of Miami Beach appears much more colorful and user-friendly than the city of Miami’s.

5) Miami Beach remains one of the most lucrative neighborhoods in the United States, according to Forbes magazine. In fact, property values in Miami Beach have escalated 1,532% since 1990, a faster appreciation than any other U.S. market. Property values in the city of Miami, meanwhile, still pretty much just stink. The city is facing a projected 15.2% market depreciation this year as it tops the list of worst real estate forecasts among major metro U.S. markets. However, to its credit, the city of Miami is spinning the grim news into a positive thing. Foreign Direct Investment magazine named the city of Miami one of the top five most cost-effective major cities in North America for developers. That sounds about right.