Bank Repos on the Rise in 26 States

Bank Repos on the Rise in 26 States. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

RealtyTrac reports in its U.S. Foreclosure Market Report for April that foreclosure filings dropped 1 percent over the previous month. Despite the decrease, bank repossessions rose 4 percent that same month.

The number of bank repossessions rose from the previous month in 26 states, and 16 states posted increases over the past year. The following states posted the largest year-over-year increases in bank repossessions:

• New York: +142% year-over-year
• Oregon: +91%
• New Jersey: +58%
• Illinois: +55%
• Indiana: +52%
• Maryland: +45%
• Connecticut: +44%
• California: +27%
• Nevada: +15%

“The rise in bank repossessions in many states is a sign that those markets are working through the final remnants of foreclosures left over from the recent housing crisis,” says Daren Blomquist, vice president at RealtyTrac. “Many of these bank-owned homes are bottom-of-the-barrel properties in terms of location or condition, but they will provide much-wanted inventory of homes for sale in some markets in the coming months. Investors and other buyers willing to do more extensive rehab will likely be best-suited for these upcoming REOs.”

Source: RealtyTrac

5 Property Management Mistakes

5 Property Management Mistakes. Image courtesy of digitalart / FreeDigitalPhotos.net

“It doesn’t matter how good you are in the property management business, there’s always something you’re can get sued for,” Lori Burger, CPM and the Institute of Real Estate Management’s 2014 president-elect, said at a property management forum Thursday during the REALTOR® Party Convention & Trade Expo in Washington, D.C.

Part of it is just the nature of the business: Balancing relationships and contractual agreements with both property owners and renters can leave property managers open to litigation from all sides. To mitigate this, Burger outlined five common mistakes property managers make and five ways they can protect themselves.

Mistakes

1. You don’t have a written property management agreement. Burger calls this “your greatest protection.” The agreement should clearly state your responsibilities as the property manager and your client’s responsibilities as the property owner. Do not perform work that is not listed in the agreement as part of your management duties.
2. You’ve pieced together a makeshift lease agreement. “Don’t take a lease agreement you found somewhere and edit it to meet your needs,” Burger said. Draw up a lease with your attorney, and make sure it complies with laws while still meeting your needs.
3. You don’t put the security deposit in a proper trust account. If you hold a renter’s security deposit for the owner yourself, you may be required to pay interest on it.
4. You don’t make the tenant sign a move-in and move-out form. “You should personally do a move-in and move-out inspection and checklist with the tenant,” Burger said. You need to be able to document the condition of the apartment at both move-in and move-out times. Take photos and video, and save them to the tenant’s file. One thing many property managers overlook is documenting the serial numbers of a unit’s appliances. That way, if tenants take appliances with them when they move out, you can track them down more easily.
5. You incorporate a lease-purchase agreement into the lease agreement. Should an issue with a tenant arise that lands you in court, a judge could have a hard time determining whether the property is purchased or leased — thus making it more difficult to determine what your rights are as the property manager. Keep lease-purchase and lease agreements separate.

Successful Strategies

1. Keep properties close together. You might not have the staff to manage properties that are too far apart from one another. Distance shouldn’t be a factor that makes it difficult for you to keep an eye on your inventory. Generally, properties shouldn’t be more than 25 or 30 miles apart, Burger said.
2. Select tenants very carefully. “I would love to believe that I am the best judge of character there is, but I’m not,” Burger said. “It’s unfortunate when people you think will prove to be good tenants turn out not to be.” Have strict criteria for renters to meet, and do not make exceptions.
3. Be visible to tenants. Keep in communication with tenants, and be responsive to their needs. Most times that will give you an opportunity to swing by and check on the property.
4. Stay in touch with the client. “We’re not just collecting rent,” Burger said. “We’re there to preserve, protect, and enhance the owner’s investment.” She said her company once set up roof inspections for all its clients for $250 apiece, giving the owners a chance to opt in or out. “If the owner knows you can add value like this, you can turn that client into a referral,” Burger said.
5. Charge what you’re worth. Many will be tempted to lower their fees to land the deal. But that can backfire. “You need to be compensated for the work you do,” Burger said. Don’t sell yourself short, and if you do extra work, charge accordingly for it.

—Source REALTOR Mag

Home Sales Struggle, But Improvement Seen

Home Sales Struggle, But Improvement Seen. Image courtesy of phanlop88 / FreeDigitalPhotos.net

Two years into the economic recovery, residential home sales are struggling. But because of demographic and other trends, long-term growth prospects remain good, NAR Chief Economist Lawrence Yun said Thursday at the REALTOR® Party Convention & Trade Expo.

At the Residential Economic Issues & Trends Forum, Yun forecast 4.9 million existing-home sales this year, a roughly 3 percent drop from last year and a signal that the recovery in home sales that started two years ago is flagging.

Weakness in the broader economy is part of the problem. Economic growth turned negative in the first quarter of 2014, by about a percentage point, in part because severe winter weather hampered consumption. The rest of the year should be better, Yun said, but growth will remain tepid: only about 2.1 percent rather than the 3 percent that analysts would like to see.

Home sales were hit by the cold weather, too, although a portion of the stalled activity is expected to return now that the weather is improving.

The more fundamental problem is the continuing tough time households face getting financing and the lack of inventory, which is hurting affordability by keeping prices rising at a time when interest rates are going up as well.

Yun is forecasting a national median home price of $209,000 for this year, up from $197,000, and an average rate of 4.7 percent for a 30-year, fixed-rate loan. The rate remains historically low, but the days of an accommodating Federal Reserve interest-rate policy are ending and the rate could get close to 6 percent next year.

What’s needed is a ramp up in new-home starts to about 1.7 million a year, the historical average, from about 1.1 million now, Yun said. Until there’s more inventory, sales volume will remain low and prices will keep rising.

To get more starts, community banks—the traditional sources of credit for small builders—need to pick up their lending. Although there are lagging signs that lending might be poised to head up, uncertainty over banking regulations enacted after the financial crisis is contributing to the status quo.

For the long term, the picture is much brighter, because there is a lot of pent-up demand from young adults who can’t overcome income and financing hurdles to buy and increasing interest from international buyers who want to purchase in the United States. As the broader economic recovery strengthens, with the creation of more and better-paying jobs, the gap between the country’s growing population and flat-lining home sales will narrow.

For 2015, Yun is forecasting 5.2 million existing-home sales, 710,000 new-home sales, up from 510,000 this year, and a home-sale dollar-volume increase of 11 percent from the year before.

Looking further ahead, as the global population nears the 9 billion mark at the beginning of the next decade, destination cities including New York, San Francisco, Washington, Boston, Chicago, San Diego, Dallas, and Miami, among others, will see ever-increasing home values as global buyers stoke demand.

—Source, REALTOR® Magazine

Home Loan Demand Rises 3.6%

Home Loan Demand Rises 3.6%. Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net

Mortgage applications were on the rise this week as interest rates dropped to the lowest level in six months, the Mortgage Bankers Association reported Wednesday in its weekly market survey.

Mortgage applications, reflecting applications for home purchases and refinancing, rose 3.6 percent for the week ending May 9. Broken out, refinance applications increased 7 percent, reaching the highest level since the week ending April 11. Applications for home purchases, viewed as a leading gauge for future home sales, rose less than 1 percent unadjusted from one week earlier. Purchase applications are 12 percent lower than year-ago levels, the MBA reported.

Average interest rates for the 30-year fixed-rate mortgage dropped to 4.39 percent last week, the lowest average rates since November 2013.

Source: “U.S. Mortgage Application Volume Up 3.6% Last Week, MBA Says,” The Wall Street Journal (May 14, 2014)

Demand Grows for Big-Screen Phones

Demand Grows for Big-Screen Phones. Image courtesy of cuteimage / FreeDigitalPhotos.net

Bigger is becoming better with smartphones. Shipments worldwide of smartphones with screens 5 inches or larger have grown 369 percent in the first quarter compared to just a year earlier, according to Canalys, a market research firm.

Big-screen smartphones comprised 34 percent of worldwide smartphone shipments in the first quarter. Samsung holds a 44 percent share of smartphones with displays of 5 inches or larger.

“The trend is unmistakably toward larger-screen handsets at the high end of the market,” Canalys analyst Jessica Kwee told The Los Angeles Times. “Consumers now expect high-end devices to have large displays, and Apple’s absence in this market will clearly not last long. Apple plainly needs a larger-screen smartphone to remain competitive, and it will look to address this in the coming months.”

Overall, Android devices accounted for 81 percent of worldwide smartphone shipments in the first quarter, followed by iOS on 16 percent and Windows Phone on 3 percent.

Source: “Big-screen Smartphone Shipments Soar, Account for One-Third of Market,” The Los Angeles Times (May 12, 2014)

Builders See Growth in Master Communities

Builders See Growth in Master Communities. Image courtesy of cuteimage / FreeDigitalPhotos.net

Houston boasted the most housing starts in the nation last year, and one-third of those starts were in master planned communities (MPC), a growing sector for the homebuilding industry.

In the U.S., the top 50 master planned communities captured 5.4 percent of new-home sales in 2013 – a 12 percent increase over 2012, according to John Burns Real Estate Consulting. One-third of the top 50 master planned communities are in Texas alone.

With MPCs, builders carefully plan out the residential development, often with a mix of housing types, recreational amenities, retail, and employment centers.

MPCs have been growing in demand nationwide. Among the top 20 MCPs, the average pricing of homes in these developments has increased 16 percent over the past year, and by more than 24 percent in the past two years, according to Metrostudy.

“Historically, we’ve found that during a recession, home values in master planned communities have held up better because of thoughtful planning that includes mixed-use development with jobs, retail, and professional services,” says David Jarvis, Metrostudy’s regional director in the Houston market.

Builders with Johnson Development, which has opened up some of the nation’s best-selling MCPs in the past year, say that the MCPs nowadays are different from two decades ago. They’ve moved beyond just family-oriented housing to accommodate broader demographic needs.

“Family units are changing, so you want a broad array of housing types and price points in one community,” says W. Douglas Goff, COO of Johnson Development. “We call this vertical integration, with family housing on various lot sizes to town homes and zero-lot-line patio homes that young professionals, single parents, and move-down empty-nesters are interested in because they’re low maintenance.”

Source: “Master Minds,” Builder (May 8, 2014) and “5% Capture Rate for Top 50 Master-Planned Communities,” John Burns Real Estate Consulting