Headlines – Week of April 8, 2012
April 19, 2012
Now is a Good Time to Buy
CoreLogic recently released a new monthly economic publication called the CoreLogic MarketPulse report. The MarketPulse provides monthly insight into the current and future health of the U.S. economic climate with particular focus on housing and mortgage metrics.
Highlights from the April MarketPulse report:
- “Now is a good time to buy,” with housing affordability at its highest level ever (as of February 2012), and shows many of the key housing metrics are holding steady through the typically slow winter season.
- Reports the single-family rental market is strong and vibrant with high and stable rents, low months’ supply and a healthy pace of signed rental leasings. The report reveals what markets offer the best return for single-family rental investors.
- Shows capitalization rates for single-family rental properties in 26 geographically diverse markets. Capitalization rates are the most common metric for determining the profitability of an investment property.
- Provides a chart of the rent-to-mortgage ratio for Miami, Fla. The chart indicates the point in time when it became cheaper to buy than to rent, providing insight to investors buying and holding rental properties, as well as to new first-time home buyers.
Foreclosures Expected to Surge
Even as real estate sales are picking up across most of the country, a recent report indicates that many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.
Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.
Many industry guru’s are projecting that 2012 will be a bigger year for foreclosures than 2010 and that 2011 an anomaly due to the “robo-signing” scandal which prompted banks to hold back on new foreclosures pending a settlement.
The group watchdog group 4closurefraud.org, uncovered the “robo-signing” scandal and believes there was a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash.
Although foreclosure starts were 50 percent or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo’s rose 68 percent, and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold – 251 starts vs. 37 in the same period in 2011.
According to Moody’s Analytics, sales of repossessed properties probably will rise 25 percent this year from 1 million in 2011.
Prices for the foreclosed homes could drop as much as 10 percent because they deteriorated as they were held in reserve during the investigations by state officials resolved in February, according RealtyTrac. That month, 43 percent of foreclosures were delinquent for two or more years, from a 21 percent share in 2010, according to Lender Processing Services.
Real estate company Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.
As Home Rents Head Higher, Owning Regains Its Appeal
A recent article in the Wall Street Journal, indicates that climbing rents for apartments are combining with a continued decline in home prices to push home buyers into finally taking the plunge.
As the rental market heats up, rising rents and slumping home prices with interest rates at near record lows are boosting demand for homes at entry-level prices.
According to a survey by Reis Inc., average apartment rents rose by 2.7% last year while the national vacancy rate dropped below 5% for the first time since 2001.
The largest rent increases came in San Francisco and San Jose, Calif., which saw increases of 5.9% and 4.9%, respectively. Even Las Vegas saw average rent rise 1.8% from a year earlier.
The firm Zelman & Associates believes 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year as the equation of renting versus owning is becoming much more favorable for owning.
According to Deutsche Bank, the cost to rent an apartment has been about 10% lower than the after-tax cost of owning a home. That rental discount began to fall in 2010 and disappeared entirely last year. By the end of 2011, their research found that the cost to rent an apartment was about 15% higher than the cost to own a home.
To be sure, not all markets have seen the same development. In Orange County, Calif., and New York City, where home prices are extremely high, renting is still cheaper. But even in New York, real-estate agents say sales of small studio and one-bedroom apartments are brisk because renters don’t want to pay such high amounts to rent.
The National Association of Realtors trade group shows that the number of homes purchased by investors rose 65% during 2011 to 1.2 million, representing 27% of all sales.
Posted by Scott R. Lodde