Nurul Hana Adi Maimun

A slight drop in interest rates was not enough to rejuvenate the mortgage market, although refinances are still elevated since the Brexit vote caused the initial rate plunge. Total mortgage application volume fell 3.5 percent last week on a seasonally adjusted basis from the previous week, according to the Mortgage Bankers Association.

Refinance volume, which is highly rate-sensitive, fell 4 percent last week, but it is nearly 56 percent higher than one year ago, when rates were higher. The drop in rates after the Brexit vote brought the total number of borrowers who would benefit from a refinance to 8.7 million, according to Black Knight Financial Services. Mortgage applications to purchase a home fell 2 percent for the week and are up just 6 percent from a year ago. Purchase applications are less rate-sensitive week-to-week.
“Purchase application volume continues to run ahead of last year’s pace, but after growing quite strongly in the first half of the year, the rate of improvement has decelerated this summer,” said Lynn Fisher, the MBA’s vice president of research and economics.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.67 percent from 3.69 percent, with points decreasing to 0.24 from 0.32 (including the origination fee) for 80 percent loan-to-value loans.

Homebuyers have not benefited as much from the lower rates as they might have because home prices are still rising so fast. Prices were up 5.7 percent in June from a year ago, according to CoreLogic. That is a decrease from the 5.9 percent annual gain in May, but still significant.

“Home prices continue to increase across the country, especially in the lower price ranges and in a number of metro areas,” said Anand Nallathambi, president and CEO of CoreLogic. “We see prices continuing to increase at a healthy rate over the next year by as much as 5 percent.”

Mortgage rates have moved off their post-Brexit lows, but they have been increasingly stubborn to make significant gains. The July employment report being released on Friday could move rates more significantly, depending on the results. Bond yields, which mortgage rates loosely follow, could break out of their current tight range.

“With 10yr yields ending the day near 1.55 percent, rates are essentially threatening to move higher,” Matthew Graham, chief operating officer of Mortgage News Daily, wrote late Tuesday. “The next three days bring a series of important economic reports that could act as motivation for such a move, if they turn out to be stronger than expected.”

Source: realestate_iq

Rents are soaring and demand for apartments is historically high, but some developers and landlords are overestimating the strength of the U.S. apartment market — and paying for it in quarterly earnings. Others are warning that the second half of this year will be even tougher.

Construction of new multifamily units has been robust over the past five years, far outpacing that of single-family homes, but most of the product is in pricey markets and pricier neighborhoods, not in areas where demand is highest. That is because the costs of land and construction rose.

“Any time the numbers will work, developers will build. That’s what happened in San Francisco and New York. Land prices and construction costs went up so much, the only thing you could build was high-end apartments,” said Alexander Goldfarb, senior REIT analyst with Sandler O’Neill, which currently has a hold rating on all the apartment REITs it covers.

That is precisely why Equity Residential missed expectations so badly in its second-quarter earnings and revised its outlook lower yet again. After exiting the Florida market, the bulk of its holdings are in San Francisco and the New York City area.

Clearly 2016 will not turn out to be the year we had originally expected due to deteriorating market conditions in San Francisco and New York City, which combined made up 50 percent of our initial growth forecast for the year,” Equity Residential CEO David Neithercut said on a quarterly earnings call this week. “These markets have turned to become quite volatile.”

Boston, Washington, D.C., Seattle and Southern California are performing better for Equity Residential, but that is not where they expected the most growth. Oversupply is part of the problem, but jobs, especially high-paying jobs, are weighing on all the apartment developers.

AvalonBay had a reasonably solid quarter; it benefits from having a mix of products in both higher-priced markets as well as close-in suburbs. Still, there is concern that the market overall is softening.

This trend appears to be largely demand-driven as economic and job growth fell short of expectations for the first half of the year, and declining business confidence and investment no doubt was a contributing factor as recent uncertainty and global events have left businesses hesitant to make new commitments,” AvalonBay CEO Timothy Naughton said on the company’s earnings call this week.

The same is true of Essex Property Trust, which outpaced its peers in the second quarter but lowered some guidance for the second half of the year.

“Northern CA is underperforming: the company lowered its ’16 market-level rent forecast to 3.8 percent (-270bps vs. prior), with San Francisco now at 2.5 percent (-380bps vs. prior). This is being offset by steady growth in southern CA (market-level rent forecast left unchanged at 5.5 percent) and acceleration in Seattle,” Cantor Fitzgerald analyst Gaurav Mehta wrote.

While rents are still rising nationally, concessions are now the rule more than the exception. AvalonBay gave renters four times the monetary concessions in the second quarter of this year compared with those of a year ago.

If you start offering two months free, a $3,500 a month apartment is now $2,900, Goldfarb said. “There is a cascading effect down,” he said.

UDR is somewhat better positioned than others, with properties in Texas, Nashville and Florida. Executives there tightened their earnings outlook for the rest of the year, rather than giving some leeway in an increasingly volatile market.

“That inaction is a small, and likely deliberate, show of force in a space that is increasingly jittery over supply, absolute rent levels, asset pricing, and the potentially wobbly employment backdrop,” David Toti, a REIT analyst with BB&T, said in a note to investors.

Thousands of new units are set to come on line next year, the vast majority on the higher end. On the bright side, noted Goldfarb, after the current wave of construction, only those developers with strong banking relationships will be able to build.
Commercial lending has tightened dramatically, and the loans are getting smaller. That will mean less construction and a more balanced market on the high end. The trouble is, that tightening also hits affordable rental housing, which is most in need.
Correction: This story was revised to update with the analyst correcting the amount in his example to $3,500.

Source: realestate_iq

The government’s crackdown on anonymous real estate buyers hiding behind shell companies seems to be working.
In January, the Treasury Department announced a temporary initiative that requires title insurance companies to identify all-cash buyers of certain high-end real estate in Manhattan and Miami.

Now, it’s expanding the order into other markets in New York City, Florida, California and Texas. The rule will soon apply in all New York City boroughs, San Diego County, Los Angeles County, three counties in the San Francisco area and two counties directly north of Miami (Broward and Palm Beach).

It’s also expanding into Bexas County, in Texas, which includes San Antonio. The rule only applies to non-financed purchases above a certain amount, and that threshold varies by market, but typically includes homes priced at the top 10% of each market.

For instance, cash purchases made with shell companies above the $2 million mark in the California counties and above $1 million in Florida markets would be tracked.

The order is temporary — lasting for 180 days starting on August 28.

Currently, buyers can avoid having their name attached to an address by making the purchase through a shell company, like a limited liability company or other entity.

In early 2015, the New York Times published an investigation that found high-end properties in New York City were increasingly being purchased by shell companies. The report claimed that in 2014, more than 80% of the units sold in the Time Warner Center were purchased using shell companies. (CNN’s New York offices are also located in the Time Warner Center.)

The original initiative started on March 1, and has helped authorities track and identify suspicious money activity, according to FinCEN, the Treasury Department’s financial crimes unit.

“FinCEN remains concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures.”

A FinCen official said a significant portion of the records being reported by title insurance companies have been tied to possible crimes, including one person involved in a $16 million suspicious withdrawal, another involved in a possible counterfeit check scheme and a buyer involved in shuffling millions around through suspicious wire transfers in South America.

Source: realestate_iq

You can make good or bad investments in any market because each property is different. Even good analysis can’t guarantee success – the math may be right or wrong, luck may be for you or against you, and there’s also lots of lying in real estate.

But good analysis can increase your odds of making a good investment. Our Top 20 is a list of local markets where the odds of making a good investment in rental property are in your favor right now – and, equally important, where the odds of making a bad investment are low – because the number of renters is growing fast. So fast that brokers and builders aren’t yet aware of how much future demand there will be.

We winnowed our Top 20 list down from 320 real estate markets, first throwing out those where the local economy is in poor shape, then looking at the increase of lower-paying jobs in the past two years. For several decades now, the US has been changing into more and more of a service economy – that is, one with more lower-paying jobs – as foreign outsourcing and computerization eliminate better-paying manufacturing and middle-management jobs. This is a major trend that will continue unabated in the near future, creating political problems and producing permanent changes in how Americans live, and particularly in the kind of housing they can afford. The last few years saw a lot of speculation in foreclosed homes. Buyers who got them cheaply quickly resold them, often as rentals. Our list is NOT a list of such bargains. The good returns we foresee in our markets are due to strong fundamental demand over the course of future years, not quick flips. That doesn’t mean you can’t sell for a nice profit in a couple of years, just that you don’t have to.

In some of these markets, you’ll do fine just buying a property and renting it out as is, with a little bit of fixing up. In others, the cost of buying is so high that you won’t be able to get the rent you need for a good return – in these markets you should buy a property and split it into multiple rental units; or you should consider buying an apartment building. Splitting a property into rentals is a more complex investment but can produce a better return.

Top 20 Markets for Investing in Real Estate Rentals

Provo UT split

Austin TX

Fayetteville AR split

Nashville TN split

Riverside-San Bernardino CA

Charleston SC splitCharlotte NC split

Orlando FL

Raleigh NC split

Atlanta GA

Las Vegas NV

Salem OR split Grenville SC split

San Antonio TX

Colorado Springs CO split

Phoenix

Modesto CA

Jacksonville FL

Salt Lake City UT split Grand Rapids MI split

Because this is not a list of bargains, you don’t need to rush your investment. Even a year from now you’ll still be in a favorable situation. The trends (and the Force) are with you. Happy hunting!

Data Details.

We counted local jobs in retail, business services, healthcare, and hotels and restaurants. Together, these make up half of all jobs in the US.

We also looked at the proportion of local housing that is rentals. The more rentals, the greater the barriers to ownership – which means that most of the new lower-paying jobs will turn directly into rentals.

We looked at recent population growth (must be above-average), recent over-all job growth (must be above-average), average income (not too low), average home prices (not too high or low), recent increases in home prices (above average but not too high), the “income” home price (no over-priced markets), average rents (not too low), and retirees (not too many). All of these stats had to be favorable for a market to make our list. We also excluded small markets – they may have good opportunities but are too illiquid if you want to get in or out, and they often rely heavily on just a few employers.

Source: realestate_iq

Despite the hordes of frenzied home buyers hoping to take advantage of very low mortgage interest rates and sign on the dotted lines for their dream homes, builders still aren’t putting up nearly enough residences to appease the rising demand.

There was no monthly change in the number of newly constructed homes that went under contract—54,000, to be exact—from May to June, according to a new residential construction report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. But compared with June 2015, sales of the brand-new properties were up 22.7%. The numbers were not seasonally adjusted, which means they weren’t smoothed out over a 12-month period to account for the ups and downs of home buying at different times of the year. “[Builders aren’t] taking any risks. They aren’t starting homes without buyers,” says Jonathan Smoke, chief economist of realtor.com®. Builders are taking orders for the bulk of new abodes, he says, instead of building them on spec. And “they’re not offering homes in more affordable price points.” New homes, complete with brand-new appliances, typically cost more than existing residences. For example, the median price of the new homes was $306,700 in June, according to the report. That was up nearly 6.2% from May and almost 6.1% from the same month a year earlier.

Meanwhile, the median price of an existing home reached an all-time high of $247,700 in June—still a relative bargain selling for a whopping 23.8% less than a new home, according to National Association of Realtors® data.

In June, just 3,000 new homes costing less than $150,000 were sold, according to the government report. Buyers closed on an additional 12,000 selling for between $150,000 and $199,999.

But the bulk of sales were in the $200,000 to $499,999 range. About 33% of the sales were in the $200,000 range, 21% were in the $300,000 range, and 18% were in the $400,000 range. “[Builders either aren’t] trying or they’re not capable, in this environment, of offering lower price points,” Smoke says.

Across the country, monthly sales of new homes remained virtually unchanged from May to June, according to the report.

The West was the only region to see a monthly uptick as buyers signed on the dotted line on 14,000 new residences—up nearly 7.7% from 13,000 the previous month. They were also up almost 27.3% from the same time a year earlier.

Sales were up annually 50% in the Northeast, with 3,000 homes purchased in June. They rose 33.3% year over year in the Midwest, with 8,000 sales, and 20.8% year over year in the South, with 29,000 sales.

Source: realestate_iq