Institutional Investors:Their Impact on the Housing Market

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The real estate conversation in many corners has been dominated by the potential impact that ‘institutional investors’ may have had and will continue to have on the housing market. Institutional investor is a term used to define organizations which pool large sums of money and invest those sums in securities, real property and other investment assets.

These large institutional investors are buying residential properties throughout the United States. The New York Times recently reported that the Blackstone Group, the largest investor in single-family rentals in America, has recently bought 26,000 homes and that Colony Capital owns 10,000. There are other such firms also adding to their portfolio. In a recent Seeking Alpha article, Chris Martenson revealed that JPMorgan has initiated a fund to buy up to 5,000 homes and that Morgan Stanley has raised money to buy up to 10,000 homes.

Some are concerned that renters and absentee landlords may not properly maintain these properties. Others wonder what would happen to prices if these large scale buyers became large scale sellers.

What Could Be the Impact?

We must first realize that the number of homes being purchased by this type of investor, even if 100,000, pales in comparison to the 5 million homes projected to sell this year. Also, these investors are concentrating in the hardest hit areas where they can find the best investment opportunities. In an article last week, DSNews revealed:

“Institutional purchase activity has been especially notable in seven metros areas—Atlanta, Los Angeles, Las Vegas, Miami, New York, Phoenix, and Tampa.”

The article explained that the impact of this type of purchase would be stronger in these particular markets.

“In these markets, the impact of their exit will be more strongly felt.”

What About Going Forward?

With both prices and interest rates rising, many of these institutional investors may already be winding down their purchases. Bloomberg, in a recent article, quoted Hedge fund manager Bruce Rose, chief executive officer of Carrington Holding Co. LLC a fund that has managed over 25,000 rental homes:

“We just don’t see the returns there that are adequate to incentivize us to continue to invest. There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

The article also revealed that Och-Ziff Capital Management Group LLC , a $31 billion hedge fund managed by Daniel Och, has stopped putting money into rental homes.

The reason these firms are beginning to back away is that they are not seeing the returns they had hoped for. Bloomberg reports that Colony American Homes Inc. has found tenants for only 51% of the 9,931 homes it bought. American Residential Properties Inc. and Silver Bay Realty Trust Inc., two additional investors, both reported losses in the quarter ending March 31.

CONCLUSION

The impact of the institutional investor has yet to be fully determined. However, based on their limited purchasers as compared to all sales and their current uneasiness to continue with these purchases, the overall effect will probably be limited to a few markets that originally saw the greatest interest from these investors.

Selling a House? 5 Reasons You Should Do It Now

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Many are talking about why now is a great time to buy a home. Today, we want to look at why it might also be an opportune time to sell your house. Here are the Top 5 Reasons we believe now may be a perfect time to put your house on the market.

1.) Demand Is High

Homes are selling at the fastest pace since November 2009 when the market spiked in response to the home buyer tax credit. The most recent Existing Home Sales Report by the National Association of Realtors (NAR) showed that monthly sales increased 9.7% over the same month last year. Total sales have been above year-ago levels for 22 consecutive months. There are buyers out there right now (buyer traffic is 31 percent stronger than a year ago) and they are serious about purchasing.

2.) Supply Is Beginning to Increase

Total housing inventory last month rose 11.9% to 2.16 million homes for sale. This represents a 5.2-month supply at the current sales pace, compared with 4.3 months in January. Many expect inventory to continue to rise as more sellers escape the shackles of negative equity. Selling now while demand is high and before supply increases may garner you your best price.

3.) New Construction Is Coming Back

Over the last several years, most homeowners selling their home did not have to compete with a new construction project around the block. As the market is recovering, more and more builders are jumping back in. These ‘shiny’ new homes will again become competition as they are an attractive alternative for many purchasers.

4.) Interest Rates Are Rising

According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year mortgage have shot up to 3.98% which represents a jump of more than ½ point since the beginning of the year. Even those trying to be the voice of reason on this issue are projecting higher rates. For example, Polyana da Costa, senior mortgage analyst at Bankrate.com said:

“Rates are unlikely to keep going up so quickly and should remain below 5%.”

Whether you are moving up or moving down, your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

5.) It’s Time to Move On with Your Life

Look at the reason you are thinking about selling and decide whether it is worth waiting. Is the possibility of a few extra dollars more important than being with family; more important than your health; more important than having the freedom to go on with your life the way you think you should?

You already know the answers to the questions we just asked. You have the power to take back control of your situation by putting the house on the market today. The time may have come for you and your family to move on and start living the life you desire. That is what is truly important.

When To Buy a House? RIGHT NOW!

traffic lightsAfter witnessing the housing bubble ‘pop’ just a few years ago, many would be buyers may be hesitant to pull the trigger. Today, we want to explain that the greatest risk a buyer can take right now is actually waiting to buy a home.

We realize that every purchaser wants to be able to get the best deal. They want a great price and the lowest mortgage interest rate possible because those to items together will determine the monthly cost their family will pay. Let’s look at each one:

Are home prices rising?

Just last week, the Case Shiller Pricing Index was released. The index revealed that U.S. home prices increased by 10.2% over the last twelve months. Last month, the Home Price Expectation Survey was released predicting that home values would increase by at least an additional 3.5% for each of the next five years.

If you were waiting for the absolute bottom of the home price declines, you already missed it.

Are interest rates rising?

According to Freddie Mac’s Weekly Primary Mortgage Market Survey, the 30 year mortgage rate shot up to 3.81% last week – the highest level in over a year. This is an increase of a half of a percentage point in the last six months. And the Mortgage Bankers Association, Fannie Mae and the National Association of Realtors all predict that rates will continue rise over the next eighteen months.

Conclusion

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

5 Tips to Fit Social Media into Your Busy Workday

Using social media to market your business shouldn’t take up most of your workday, but you do need to carve out some time for it.

Unfortunately, there are plenty of reasons why people don’t bother doing that. They tell themselves things like: I’m too busy with important work, I can’t see any value in it, I don’t know what to post, I can’t figure out the tools, I think social media is just for kids.

But deep down inside, most business people know they really should spend more time with social media. Here are 5 tips to help you find the time to fit social media into your busy schedule.

1. Understand the importance of social media to your business. 
With all the professional and personal demands on you, there’s only one way to find the time to blog, tweet, share, and comment: you make the time for social media because you know it’s important. The truth is, as a business person, you need to do more online than just consume content or share what others have created. You also need to be a content creator, because that ultimately will build your business.

2. Take a good hard look at how you spend your day.
A recent survey revealed that we business people spend more than one fourth of our day (28%) dealing with emails. We’re in meetings for 19% of the day and we think half of them are a total waste of time. Another 25% of the day is taken up with meaningless distractions. A second study reported that executives spend up to 33% of the day in meetings. What all this tells us is that finding the time for social media is just a matter of making it a priority over unimportant emails, non-productive meetings, and a list of activities that are just daily distractions.

3. Make a commitment to spend a small amount of time on social media every day.
Consider this your daily social business investment. Spread out your activities. Tweet daily, but perhaps post to your blog just once a week. Share links and comment on other sites as the opportunities arise, but limit these pursuits to ten or fifteen minutes a day. Amazingly, this small daily commitment soon adds up. In a year, you’ve tweeted hundreds of times, written dozens of blog posts, connected with a good group of people, and discovered lots of things you didn’t think you’d be learning about.

4. Be guided by your strongest interests.
Blog, tweet, share, and comment on the things you care about most (of course, keep it work-related and avoid politics and religion). It takes far less time to write about and share the things you really know about and appreciate. It also attracts an audience of like-minded people. They in turn can provide stimulating questions, ideas, and points of view that will inspire fresh thoughts from you. You wind up creating an idea factory that keeps generating more terrific share-worthy content with a lot less time and effort.

5. Focus on helping others.
The idea of “pay it forward,” give-to-get (G2G), “karma” if you like, works well in the social world. Share the ideas and work of people you regard highly and they’ll take a look at what you’re doing. Helping others doesn’t take a lot of effort, but over time, people will start to see you as another authority.

If you follow these tips, you can become an active social media contributor without spending a ton of your life online. Why not get started now. Here’s to your success in social media as you keep putting together your best year ever…. Enjoy a great month!

Myths: The Earth Is Flat and Newspapers Sell Houses

With the housing market beginning to heat up, we are afraid some sellers may consider trying to sell their house as a For Sale By Owner (FSBO). This week we will be posting on the reasons that we believe trying to sell on your own may be a mistake. – KCM Crew

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It is amazing how masses of people can believe something that is absolutely untrue. The greatest example of this is that at one time the vast majority of people believed the world to be flat. Today, we want to debunk another commonly held belief – that newspapers sell houses. Somehow this notion gained believability even though the facts consistently prove it to not be true.

When you are selling your house, you should know what methods perspective purchasers use to find the home of their dreams. That would enable you to develop the best marketing strategy to attract a buyer.

Google recently teamed with the National Association of Realtors (NAR) on a new report, The Digital House Hunt: Consumer and Market Trends in Real Estate.

Let’s look at the actual search habits of today’s buyers revealed by the report:

  • § 90% of buyers now begin their search for a home online
  • § Real estate related searches on Google.com have grown 253% over the past 4 years

Of the 90% who use the internet, they gain information from these sources (with percentages):

  • § The internet – 100%
  • § A real estate agent – 89%
  • § A yard sign – 53%
  • § An open house – 46%
  • § Print newspaper – 28%

If you want to develop a great marketing strategy giving your house maximum exposure, forget newspapers. Less than 30% of buyers will ever see your home. Instead, look toward the internet and a real estate agent.

Where on the internet should you advertise your home?

The buyer is attracted to the type of sites that have the greatest number of listings. These sites are normally generated by the real estate industry. You should make sure your home is on as many of these sites as possible. That will give you the best chance of attracting your buyer.

Bottom Line

Print media never was a great way to market a house for sale and its effectiveness is diminishing each year. Meet with a local real estate professional and put together an internet marketing strategy worthy of your home.

How Housing Is Leading Us Out of the Great Recession

 

How Housing Is Leading Us Out of the Great Recession

We are often asked if the housing market can truly rebound if the all-round economy remains sluggish. We answer by explaining the housing market is not dependent on the economy but rather the economy is reliant on the housing market. Mark Zandi, Chief Economist at Moodys.com, addressed this issue in a recent report.

“Historically, housing has always led the U.S. out of recessions. It is the most interest rate-sensitive part of the economy, and as rates fall during recessions, housing rises first.”phoenix

How does real estate impact the economy?

Real estate impacts the economy in several ways. As Zandi explains:

“Housing’s resurrection is crucial to the creation of more jobs. Every new single-family home creates and sustains almost five jobs for about a year. These include not only construction jobs, but manufacturing positions for producing lumber, paint, nails, plumbing fixtures, carpets, wall board and so on. Truckers are hired to move this material around, and retailers add workers as new homeowners shop at home-improvement and hardware stores. Realtors, mortgage bankers, landscapers and cable installers all increase staff.”

Is the current market momentum sustainable?

If the economy is dependent on a recovering housing market, we need to know whether the current good news being reported in the real estate industry will continue as we move forward. Again, Mr. Zandi:

“The pace of construction has risen to 900,000 homes per year and is set to double to 1.8 million in the next few years. Even this will be only enough to meet demand; in an average year, 1.25 million households are formed, 350,000 houses are irreparably damaged or demolished, and an additional 200,000 are built for use as vacation or second homes. Given pent-up household formation—hundreds of thousands have put off their plans because of the tough job market—there could be a couple of years in which closer to 2 million homes will need to be built to meet demand.”

Housing will remain strong for the next several years. That will enable the economy to continue to heal until it fully recovers.

 

Thank you to The KCM crew for the post~

Will Millennials Drive House Sales in 2013?

Will Millennials Drive House Sales in 2013?

The cover story of last month’s Barron’s Magazine discussed the Millennial generation and the impact they will have on the economy including the housing sector. There have been many contrasting views about this age group and their feelings on whether or not homeownership is a part of their personal American Dream.Millenials

Here are few questions about this generation that have been debated over the last several years… along with some current findings.

Is the Number of Millennials Large Enough to Make an Impact?

The Barron’s article quantifies their potential impact:

“Millennials sometimes called Generation Y, and defined by many demographers as ranging from ages 18 to 37 — make up the largest population cohort the U.S. has ever seen. Eighty-six million strong, it is 7% larger than the baby-boom generation, which came of age in the 1970s and ’80s. And the Millennial population could keep growing to 88.5 million people by 2020, owing to immigration, says demographer Peter Francese, an analyst at the MetLife Mature Market Institute.”

Do Millennials Even Believe in Homeownership?

There have been many recent studies showing this generation’s belief in homeownership is as strong as previous generations. Just last month, Gallup released a poll, American Dream of Owning Home Lives On, Even for Young, which revealed that 91% of young adults between 18 and 29 years old either own a home or plan to buy one. The report says:

“Nearly 7 in 10 Americans aged 18 to 29 currently do not own a home, but plan on buying one… Coupling this with the 21% of younger Americans who say they already are homeowners leaves few adults under 30 who say they don’t own a home and have no plans on buying one.”

What about Student Debt?

Barron’s explains the challenge may not be as crippling as some think.

“There is almost $1 trillion of student debt outstanding in the U.S. today, which could limit the purchasing power of Millennials…But, total figures are misleading. The average student loan among Gen Y-ers is $25,000, and the median loan is nearly $14,000, according to the Federal Reserve Bank of Kansas City. Less than 1% of student loans are larger than $100,000.”

Are They Ready to Leave Mom & Dad’s?

The economy forced many young adults to return home after college to live with their parents. Barron’s explains that, as the economy improves, this anomaly will correct itself:

“As the millennials’ employment situation improves, more young adults living at home will pack their bags and move out. That could spur an increase in U.S. household formation, which turned negative in 2007-08. Since then, the number of newly created households has recovered to about a million a year, still well below an annual average of 1.5 million since the 1970s, according to Census Bureau data.”

According to the latest CoreLogic Market Pulse Report, this correction is already occurring. They explain:

“The recession curtailed household formations, causing doubling-up in living arrangements and driving young potential buyers back to their parents. More recent data shows a shift with household formations returning in force.”

Also, Freddie Mac recently projected new household formations to again return to the 1.5 million levels in 2013.

Will They Prefer Owning over Renting?

The Barron’s story gives a good reason why they might:

“Greater financial security could mean an increase in the birth rate, which typically slumps during economic downturns. Francese sees the average birth rate for U.S. women rising to 2.1-2.2 in coming years from a depressed 1.9 recently. ‘A lot of Millennials put off having babies, and now they will get to work,’ he says. That suggests they will also start buying homes.”

CoreLogic believes that the first time homebuyer is poised to return to the market this year. They explain:

“As new renter-households are formed, rental prices are bid up, making the prospect of owning more attractive to existing renters. Sustained low interest rates add to the appeal for current renters to convert to homeownership. The expectation this spring is that more renters will take advantage of historically low interest rates and low home prices to become homeowners.”

We agree.

 

Thank you to The KCM crew for the post~