Real Estate Bubble Bust

By: Tsu-Han (Ina) Chang

Real estate bubble is a term used to describe a rapid increase in the value of housing prices in the real estate market. The housing prices during the real estate bubble are at such a high that it typically cannot be sustained by the income level and economic elements at the time, and therefore, lead to a real estate bubble bust.

In 2005, during the middle stage of the real estate bubble the U.S. housing prices were at an all time high. However, the increase in the values of the properties began to slow as fewer buyers were able to afford homes. Furthermore, due to the inability of the housing prices to increase further as properties owners/investors had hoped it created a situation where homeowners and investors were starting to incur negative equity. Typically, when an investor purchases a property they are expecting the property’s value to increase, or at the least sustain the same value. However, negative equity in a real estate bubble bust occurs when the mortgage, or the debt taken out by the investors are higher than the actual value of the property. This is just one of the reasons that create the real estate bubble bust.

Some other reasons a real estate bubble will burst are the following:
1. Interest rates are rising, leading to foreclosure
2. 1st time buyers are unable to buy in the high priced housing market
3. Fear that the real estate bubble will burst and acting upon the fear

References:
http://ezinearticles.com/?3-Of-The-Top-9-Reasons-That-The-Real-Estate-Bubble-Is-Bursting&id=192244
http://en.wikipedia.org/wiki/United_States_housing_bubble
http://en.wikipedia.org/wiki/Housing_bubble

US housing price freefall extends into January

Posted by: Sarah Reilly
Originally Posted by: Simone Baribeau

Single-family home prices in the 20 largest metropolitan areas dropped 2.8 per cent in January, according to Case-Shiller’s index of the 20 largest US cities, another sign that the housing market bottom may still be distant.

Nationwide home prices are down 19 per cent on the year, the largest fall since the index started in 2000. Home prices in the 10 largest metropolitan areas dropped 2.5 per cent in January, leaving them more than 30 per cent below their peak in mid-2006. Prices, which rose at roughly the rate of inflation over the first 13 years of the index, grew more than 90 per cent in real terms between 2000 and the market’s peak.

Though prices were decline faster than ever, a faint glimmer of hope can be seen in the decreasing speed of the rate of decline, said Robert Shiller, co-creator of the index and professor of economics at Yale University. But, he added, “I don’t read too much into it yet.

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Sales of second homes fall 22 percent

posted by SooYeon(Pia), Shin

WASHINGTON (AP) — Sales of vacation and investment homes slid 22 percent last year, a sign that tough economic conditions and tight lending requirements shut out buyers, the National Association of Realtors reported Monday.

Second home sales comprised 30 percent of the entire housing market, down from a peak of 40 percent in 2005 when financing was easier.

"The vacation home market really was driven by the availability of debt," said Daniel Alpert, managing director of Westwood Capital LLC, a New York-based investment bank. "Folks were able to pick up vacation homes with very little money down and substantial loans. Given the absence of mortgage money for primary homes, one can imagine that there's no mortgage money for vacation homes."

Just 9 percent of sales last year were for vacation homes, down from 12 percent in 2007. Proportionally, investment properties held steady at 21 percent.

Wealth and age are strong factors in second home sales. Nearly half of vacation home buyers and two-fifths of investment home buyers had a household income of more than $100,000. The median age for vacation home buyers was 46, nine years older than buyers of primary homes.

Overall, second home sales dropped from about 2.09 million in 2007 to 1.63 million last year. Vacation home sales dropped 31 percent to 512,000, while sales of investment properties fell 17 percent to 1.12 million.

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Who's Still Investing in Real Estate

By Brandon Zimerman

The share of homes purchased as vacation residences or investment properties dropped to 30% of all sales in 2008 from 33% in 2007, according to the National Association of Realtors. However, amid continued gloom in the housing market, it raises the question of who still is investing in real estate.

Vacation-home buyers appear to be taking advantage of reduced prices, and are more interested in long-term value than investment. According the NAR, vacation-home buyers plan to keep their property for a median of 12 years, with 58% planning not to sell for 11 years or more.

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John Hancock Building Sold to Normandy Real Estate Partners

Written by: Hui-yong Yu

Posted by: Connie Yee

March 30 (Bloomberg) -- Boston’s John Hancock Tower, the tallest skyscraper in New England, may be sold to lenders led by Normandy Real Estate Partners for about half the $1.3 billion paid in 2006 by Broadway Partners, which defaulted on its loan.

The building will go on the auction block tomorrow in New York under state rules that govern mezzanine loan foreclosures. Mezzanine loans are intended to fill the gap between a first mortgage and the borrower’s cash down payment.

While mezzanine lenders seeking to foreclose must hold an auction of ownership interests, they start out ahead of other bidders because they are credited the unpaid balance of their loan as part of their bid. Normandy controls about $472 million of loans on the Hancock Tower, according to people familiar with the financing, who asked to remain anonymous.

“By the time the process gets to a public auction, the most likely winner will be the senior-most foreclosing mezzanine lender,” said David Furman, a real estate partner at law firm Gibson Dunn & Crutcher. “It is allowed to credit bid the amount of its loan; therefore, it can usually outbid everyone else.”

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U.S. home price drops set records in Jan.

By: Bovemsa Cheung

WASHINGTON - Home prices sank by the sharpest annual rate on record in January, and the pace continues to accelerate, but there were a handful battered metro areas where price declines slowed, according to data released Tuesday.

The Standard & Poor’s/Case-Shiller index of home prices in 20 major cities tumbled by a record 19 percent from January 2008. It was the largest decline since the index started in 2000. The 10-city index dropped 19.4 percent, also a new record.

All 20 cities in the report showed monthly and annual price declines, with 13 posting new annual records. Prices dropped by more than 10 percent in 14 cities. Faring better were Dallas, Denver and Cleveland, with annual price declines of around 5 percent.

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Whos Going to Invest In Real Estate

By Rudy Armstrong


I found this article as i looked on google news under real estate. The article talks about investing in real estate and whether or not it would be a good decision to invest. To learn more read the article "Who’s Still Investing in Real Estate?" click here for the article

The 7 Biggest Home Price Negotiation Blunders

Posted By Michael Collins

With the national real estate market in a deep slump—and homeowners scrambling to unload properties—consumers are in a great position to save some cash by bidding down asking prices. "It's a feeding frenzy," says Glenn Kelman, the CEO of online brokerage firm Redfin. But in the often-complex process of buying a home, negotiations can be tricky, and people considering doing so should make sure they understand what they are getting into. U.S. News spoke with five negotiation experts and came up with a list of the seven biggest mistakes you can make in negotiating to buy a house

.

1. Not understanding the seller. In a home price negotiation, it's essential to look at the deal from the opposite side of the table. "You want to make best use of the seller's fears," says Ed Brodow, a negotiation expert and the author of Negotiation Boot Camp. "So the question is: What are the pressures on the seller of this house?" Sellers today could be facing any number of anxieties. Perhaps the local housing market is even weaker than the sluggish national one. Maybe the seller has landed a job in another city and already bought a home there. He or she could even be facing bankruptcy. Any information you can obtain about the local real estate market or the seller will strengthen your negotiating position. When Steven Cohen, president of the Negotiation Skills Co., first visited a home that was for sale in 1981, he noticed that the property had no furniture or heat. "That gave us a little bit of a sense of the degree to which the people wanted out and gave us a heck of a lot more bargaining power," Cohen says. "We offered tons less than what they were asking." The sellers eventually accepted the offer.

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Real estate pros push tax credit advance for home buyers

By Velida Alemic

A coalition of real estate professionals, including home builders, lenders and Realtors, said it would pressure state lawmakers to find a way to advance a new $8,000 tax credit to new home buyers so they can use it to make down payments. The $8,000 federal tax credit was part of a recently enacted stimulus law and is good for homes purchased between Jan. 1 and Nov. 30 of this year for buyers who have not bought a home in the past three years.

The alliance, led by the Consumer Federation of the Southeast, believes that finding a way to get homeowners the cash upfront, rather than when they file their tax returns, could help spur sales and mend the troubled housing market.

Florida Home Builders Association, Florida Bankers Association, the Florida Association of Realtors and the Florida Credit Union League are members of the group.

The coalition said in a news release Friday it had not yet devised exactly how the credit would be advanced, but would be meeting with lawmakers soon to discuss details.

They estimate as many as 12,000 prospective buyers could benefit from the advance because they have not saved sufficient cash for a down payment and closing costs. The group also points out that every dollar invested in housing returns $7 to $10 to the broader economy.

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Now is good time to buy home for first-time home buyers

Posted by SooYeon(Pia), Shin

Real estate professionals tell now is the good time to buy a home, especially if you are a first time homebuyer. Prices are the main reason what makes the first-time home buyers to consider buying a house. According to the CENTURY 21 First-Time Home Buyer Survey, 85 percent of potential first-time home buyers says that they think current home prices are affordable. Also, 73 percent says that current prices plays the major role in their decision to buy. Tom Kunz, Century 21 Real Estate president and CEO, said, “Current pricing, rates and incentives, such as the First Time Homebuyer Tax Credit, provide tremendous opportunities for first time home buyers to get into the market.” The first-time home buyers are possible to get up to $8,000 tax credit. Furthermore, the government has made the new tax credit to be unpaid unlike the 2008 $7,500 tax credit.

It is a good time for not only first-time home buyers but also renters. According to a New York brokerage firm, tents have fallen throughout New York. Furthermore, studio apartments in doorman buildings made the biggest drop – 8.33 percent from the same time last year. Therefore, New Yorkers whose leases expire are, now, looking for better place for less money or a few increases. Lastly, owners are starting to pay the broker fees themselves, because finding good tenants is more difficult nowadays. So, New Yorkers gets another bonus on the broker fee.

http://waldo.villagesoup.com/realestate/story.cfm?storyID=151745
http://www.pr.com/press-release/141879
http://www.nytimes.com/2009/03/29/realestate/29cov.html?_r=1&ref=realestate

In-Depth Look - Saving Commercial Real Estate - Bloomberg

Posted By: Tsu-Han (Ina) Chang

When it all Falls Down...

By: Alcides Hoy Jr.

With the Big Apple being one of he many places us college graduates drift toward, we must be concerned on how those Manhattan homes and apartments are holding up. As we go through this economic crisis Manhattan real estate sales begins to decrease. We could suspect the harder the fall the further the sales will drop. So many people are losing their jobs and not receiving high paying jobs which is making it difficult for anyone to afford an apartment in Manhattan. The worst part is that inventory is accumulating faster than Real estate agents can rent these spaces. Now banks are not trying to give out credit to just about anybody which leads us to think how will we pay for these high class living quarters. Its as if they leave us with no choice but to search for different job markets to apply to. The longer we have this economic downturn the harder it will be for the New York City real estate market to get back on track. So now we have to pose a challenge to ourselves and think what can we do to change this harsh backdown?

http://money.cnn.com/2008/10/02/real_estate/manhattan_real_estate/index.htm

http://www.nysun.com/business/unthinkable-happens-manhattan-apartment-prices/84900/

http://www.nytimes.com/2009/03/08/realestate/08condo.html?ref=realestate

Buying Your First Home

Posted By: Madeleine Brooks

Say you just got married and you want to raise a family but you're living in a one bedroom apartment in a major city. Maybe it is time to consider buying your first home. Buying a home isn't like buying a pair of shoes or an article of clothing. There are many decisions one must make to decide whether or not a home is the best decision for your financial situation. Buying a home is an investment that will be fifteen to thirty years down the road an investment that can be converted into cash to pay off debt, pay for your childrens' college education and even pay for your retirement.

So what do you, as a home buyer need to keep in mind? You always hear the phrase "location, location, location". Location is an important factor in purchasing your home. Would you like your home to be behind a railroad track where you hear trains passing through every hour on the hour? Or would you like your home to be in a residential area that is quiet and secluded? Do you as a home owner want to be relatively close to a major city or out in the country? Would you also like your home on a heavily traveled street or far into your neighborhood? Every location decision has a positive attribute and a negative consequence.

Another question as a home buyer is what type of home would you like to have? A one story home known as a ranch, a two or more story home, a split level? Also many people have a specific requests for the interior of the home. How many bedrooms? Bathrooms? A large kitchen? A spacious living room? Then external factors play a role as well. Whether or not you would like a pool (in the ground vs. above ground), have a swing set, building a fence around your property.

Besides the physical home itself, people will also take into consideration school districts for their children, the community around your home, the neighborhood you are living in, and possibly the distance from your home to your workplace. It is highly recommended to have a real estate broker to help you with your home purchase. Because you are buying your first home, having a broker will assist you in knowing the value of homes, good locations, and to help you with your needs and wants in your ideal first home.

It is a new and exciting process in your life. Take these questions into consideration and hopefully your first home buyers experience will be one that is worthwhile and easy!

References:

http://homebuying.about.com/od/buyingahome/a/buyerinfo_2.htm
http://homebuying.about.com/od/buyingahome/a/buyerinfo.htm
http://finance.yahoo.com/how-to-guide/real-estate/12819

Fed's Move Good News For Mortgages

Article Written By: Jilian Mincer
Posted By: Madeleine Brooks

f you've held off on buying a home or refinancing a mortgage, waiting for some special sign - well, it may have come.

The Federal Reserve's unusual decision yesterday to buy Treasury bonds and mortgage securities will drive down already-low rates on conventional mortgages, maybe to 4.5%.

"Perspective homebuyers have the type of opportunities they haven't seen in years," says Greg McBride, senior financial analyst at Bankrate.com. He expects prices and interest rates to drop to 2003 levels.

But unlike several years ago, borrowers will need good credit - typically scores above 700 - as well as proof of income and a 20% down payment.

The Fed hopes that by buying long-term government bonds rather than short-term debt it will lower interest rates and help unclog the financial system.

"The biggest impact of this will be drive down mortgage rates," says Richard B. Hoey, chief economist for The Bank of New York Mellon and chief economist of the Dreyfus Corp.

Lower rates, he notes, are good for consumer confidence and good for the housing sector. Homeowners and potential buyers will benefit from new or refinanced mortgages. If people start buying homes, it will help stabilize rapidly declining prices.

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Foreclosure Crisis Hits Hard in Brooklyn

By Andrew Cho



News clip talking about how the housing crisis is affecting Brooklyn, NY.

Existing home sales spike 5%

Written by Ben Rooney

Posted by Yen Ho

NEW YORK (CNNMoney.com) -- Sales of existing homes unexpectedly rose in February, recovering from a sharp drop in the previous month, according to an industry report released Monday.

The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January. February sales were down nearly 5% from year ago levels.
Economists surveyed by Briefing.com were expecting existing home sales to decline to 4.45 million.

Link: http://money.cnn.com/2009/03/23/real_estate/existing_home_sales/index.htm?postversion=2009032311

Real Estate Outlook: Rates and Applications Improve

Written by Kenneth R. Harney

Posted by Yen Ho

We've all learned not to get too far out ahead of occasional spurts of good economic news, and not to assume too early that the long-awaited real estate turnaround has arrived.

But for the past few weeks the positives have been significant and sustained. You really can't ignore them.
Take mortgage rates and new loan applications. Rates hit their low point in decades last week, and it looks like they're going lower in the wake of the Federal Reserve's announcement that it plans to pump hundreds of billions more into mortgage securities.
Average thirty year fixed rates dropped to 4.89 percent, according to the Mortgage Bankers Association's latest national survey. Fifteen year rates hit four and a half percent with one point.
Not surprisingly, loan applications are rocketing. Last week they were up by 21 percent over the previous week and are now 31 percent higher than applications were at the same time in 2008. A lot of the volume is for refinancing, but applications for home purchases are up as well.
Meanwhile, housing starts took a surprise jump of 22 percent in February over January's depressed levels. Most of the increase was attributable to apartments and condominiums, but single family starts were up by one percentage point, and new home permits were up by 11 percent, after months of sharp declines.

Link: http://realtytimes.com/rtpages/20090324_realestateoutlook.htm

Choosing the Right Mortgage

Posted by Andrew Moran

Buying a home is one of the most stressful and confusing times in many peoples’ lives. When looking for a home, whether it is your first or fourth, there are many questions you need to ask yourself. One of the last things people seem to spend time considering is which type of home loan is the best fit for them. Obviously, when you are looking to buy a home, you spend your time visiting open houses, seeing which homes you like or don’t like, comparing school districts, etc. However, choosing the right type of home loan is one of the most important aspects of the home buying process.

There are many different types of home loans available to consumers, and they differ by the rates offered, terms, length, etc. Here are some simple steps to follow when choosing which type of home loan to take:

- First, you need to figure out how much money you can afford to pay on a monthly basis. This will give you an idea of how large of a loan you can afford to take out.

- Get preapproved for a mortgage

- Lock in your rates. If you think interest rates will rise, this will save you money in the long run

- Compare and contrast the different types of mortgages available to you

o 30 year fixed rate

o ARM

o Option ARM

o Interest only

- Understand the terms of the loan before you commit to one

Following these basic steps will surely help any home buyer in the market. Simply signing a home loan with no knowledge of what the terms are, is a sure fire way to get yourself into financial turmoil.

Sources:

http://money.cnn.com/2007/04/05/real_estate/rates.moneymag/index.htm?postversion=2007040516

http://articles.moneycentral.msn.com/Banking/HomeFinancing/The5MinuteGuideToHomeLoans.aspx

http://money.cnn.com/2006/11/03/real_estate/choosing_mortgage/index.htm?postversion=2007042715

Low Mortgage Rates

By: Corey Mutterperl

NEW YORK (CNNMoney.com) -- Mortgage interest rates are already flirting with record lows and the Federal Reserve's move to buy up government debt will send those rates even lower. But it doesn't look like it will get any easier for borrowers - even those with good credit.

Bankrate.com reported Thursday that the average interest rate on a 30-year fixed mortgage fell to 5.29%, compared with 5.37% in the prior week. In January, rates fell as low as 5.28%.

This week's Bankrate.com data do not even reflect the Fed's Wednesday announcement that it will purchase $300 billion in long-term government debt.

"This is a big commitment made by the Fed," said Mike Larson, a real estate analyst for Weiss Research, "like going all in in poker. The Fed is buying anything and everything to drive down rates."

The 10-year Treasury yield is used to help calculate 10-year mortgage rates, so as the yield falls, the corresponding mortgage interest rate follows.

Larson said he would not be surprised to see mortgage rates drop into the 4.5% range soon. If they do, that would surpass the 4.7% loans available just after World War II, the cheapest mortgages in American history, according to Larson.

However, one expert cautioned that mortgage rates may not fall as quickly as Treasury yields.

Click here to read the full article. 

New Home Construction Surge

By: Corey Mutterperl

 According to an industry report, existing home sales surprisingly rose for the month of February.  This was unexpected as January sales dropped sharply.  The report showed that half of the home purchases in February was by first time homebuyers and that almost half of these homes were distressed properties.  The only catch to this news is that the increase in sales is coming at the expense of pricing.  This is due to the fact that most of these sales are for foreclosed homes, which are selling at below market pricing.  Analysts are hoping that the collapse in home sales is over, although they still feel that a long-term recovery is still a ways off.

A government report shows that new home construction has unexpectedly surged for the month of February, after it fell for eight straight months.  Experts had expected a decline for the month.  While new construction of single family homes are usually the bulk of the housing starts, February saw a huge increase in multi-family housing starts.  Although this is welcome news, analysts fell that this is only a temporary rebound and not a full turnaround.  There is still too much of an inventory of homes to sustain this rebound.  The report showed the Northeast with the greatest increase in new construction, while the Midwest and the South also had increases.  The West has yet to get involved in this increase.

 

References:

http://money.cnn.com/2009/03/23/real_estate/existing_home_sales/index.htm?postversion=2009032311

http://money.cnn.com/2009/03/17/real_estate/housing_starts/index.htm?postversion=2009031709

AIG money problems

Posted By C. Brown

Everyone might know of a company named AIG, since they have been in the news for quite sometime now. They are known for taking bailout money and then giving their employees (executives-people in management role positions) over $165,ooo,ooo in cash as bonuses. To some this isn't anything to worry about or to even talk about. To many others, this is a huge deal. The U.S. government gave AIG over $85 billion in bailout money, and for what? Our model in the U.S. is that "you are too big of a company to fail", so guess what that means, everyone has to pitch in and help these companies that end up taking too many risks and bail them out with no consequences. Now since there has been so much controversy over AIG giving $165,000,000 to their employees, 15 out of the 20 employees that received bonuses have decided to give the bonuses back to the company. I think everyone knows that these employees were pretty much pressured/forced to give the money back in someway, because if they wanted to give the money back, we wouldn't be talking about the situation. Not only is AIG trying to keep the company afloat and keep the company alive and well, they are also fighting battles with the IRS over tax benefits and credits. AIG has been using complex transactions to save customers and themselves a lot of money in tax not only here in the U.S. but overseas. AIG is under a lot of scrutiny, and I believe that there is a lot more of it to come in the next year. Either 2 things are going to happen. 1: AIG is going to turn the company around and start turning a profit, everything is legal and no playing countries tax regulations against one another. 2: we are going to find out a lot more about AIG that we didn't know, we are going to question why we ever gave them bailout money, and they are soon going to fail or seek new leadership.

References:

http://online.wsj.com/article/SB123785925883921027.html#mod=testMod

http://online.wsj.com/article/SB123784730479718425.html

http://blogs.wsj.com/economics/2009/03/24/treasury-fed-leverage-aig-bonus-outcry-for-new-authority/

Desperate Times, Desperate Measures

by D. Babbs

One would think that qualified individuals may not have to face any difficulties when applying for mortgages. After all, they’re not the people who were able to buy a home with little or no down payment during the housing bubble. But even the good potential homebuyers are facing tough times. Not only are mortgage rates at a record low, but also were mortgage approval rates.

Last week, the mortgage rates on 30-yr fixed mortgage were slightly below 5%, causing numerous homeowners to running to refinancing their mortgages. With the spike in applications, I am curious just how many individuals will get the opportunity to capture these lower rates? On the lending side, what does this mean? According to bankrate.com, many lenders, after laying off workers in droves, don’t have the capacity to keep up with a refinancing boom.

With the housing bubble now popped, more creditworthy individuals are applying for loans but they still have to make it pass underwriters. Such underwriters are looking for way more information to determine before approving potential homeowners. This step is very justifiable given current times but it may deter people from even considering mortgages and becoming homeowners. Borrowers are now forced to fix any credit problems and/or work to improve their credit scores before taking the homeowners step in their lives.

Given the current state of our economy, everyone is being more careful when it comes to investments. I guess desperate times call for desperate measures.

http://money.cnn.com/2009/03/19/real_estate/rates_low_approvals_too/index.htm?postversion=2009032009

http://www.msnbc.msn.com/id/7148582/

http://www.youtube.com/watch?v=25cWcYok56I

Up In Smoke

NOTHING TO SHOW FOR IT Louis Andriopoulos expects to lose a $100,000 deposit on a place at Fifth on the Park.

by Lionel Creech

Some of the buyers who thought they would be moving into new condominiums in the region this year are finding that those plans are in ruins as they are being forced to walk away from the hefty down payments they made a year or more ago.

They can’t complete their deals because the mortgages they lined up before the credit crisis took hold have evaporated and they can no longer get financing.

Elizabeth and James Pham put all their savings into the deposit they made on a $956,990 two-bedroom apartment at Maxwell Place, a new development in Hoboken, N.J.

They signed an agreement for the apartment in 2005, put down $93,199 and were preapproved for a mortgage for the rest of the purchase price....Click to Read More...

Existing Home Sales Spike 5%

Posted by Andrew Moran

NEW YORK (CNNMoney.com) -- Sales of existing homes unexpectedly rose in February, recovering from a sharp drop in the previous month, according to an industry report released Monday.

The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January. February sales were down nearly 5% from year ago levels.

Economists surveyed by Briefing.com were expecting existing home sales to decline to 4.45 million.

The report said first-time buyers made up half of all purchases in February, and that sales of distressed properties accounted for about 45% of all transactions.

Sales were unexpectedly strong in the West, with activity increasing more than 30% over last year. Click here to continue reading...