Category Archives: Real Estate

This Housing Bubble Is Set to Pop

For generations, it was always a good bet to invest in a place Americans call home. Housing had almost always increased in value, and you received a multiple of whatever you invested into it in your total return.

Until 2008 that is.

That’s when home prices tanked and our economy entered a recession, leaving people like you and me holding the proverbial paper bag when it comes to overpriced and overleveraged mortgages.

Since then, the root cause of the housing bubble has remained in place – easy-money policies by the Federal Reserve to fuel lending. It has led to another housing bubble.

One that is set to burst sooner than most are anticipating.

Since 2009, the Fed has pinned interest rates near zero in an attempt to prop up our aging, lackluster economy.

With a sub-2% GDP growth rate, it’s hard to believe that this has been a success.

But the easy-money policies have propped up aspects of the market, just not in the pockets of the everyday American. Instead, it has bloated the pockets of Wall Street and investors.

Had someone told you in 2006, 2007 or even most of 2008 to sell your home, you likely would have ignored them. Not many people on Main Street noticed the lending practices going on behind the scenes and understood the extent of the bubble that was in place.

But hindsight is always 20/20.

The problem now is spotting similar bubbles going forward.

I’ll be the first to say that timing the week, month or even year that a bubble will pop is extremely difficult. But that doesn’t mean you can’t notice when that day is near, and for housing it may be just around the corner.

The Truth About the Housing Bubble

There is a substantial divergence as we approach 2015. Prices have climbed about 50% since 2000 and rebounded strongly from the bottom in 2010 to 2011. But existing home sales – the amount of homes actually sold – have lagged and are up just 5% since 2000.

Median prices have topped their bubbled peaks set in 2005, but this time, the amount of homes sold is 30% less.

That means we are seeing prices set new highs as fewer buyers are in the market.

The rationale is that housing currently has a tight supply, meaning there aren’t enough homes to meet the amount of potential buyers. That may be the case to some extent. But right now, homes that are either in foreclosure, bank-owned or completely vacant are near all-time highs.

Clearly there is more going on here than just a lack of supply. The reality is that many buyers are investors, buying properties and sitting on them. This crimps supply, which helps raise prices.

Back in 2008, you could have heard the same story. The goal was to flip houses, or own a few of them to rent out. We are seeing these actions roaring back today.

And if supply was so tight, buyers would simply build new homes, but those numbers are no better than the existing home sales.

There’s a big discrepancy from new homes sold versus the price these homes are fetching – and this is supply that is practically infinite as we can always build a new home.

Something’s got to give, and it’s going to happen soon.

Fed-Fueled Crash

I see one of two scenarios at play. Which one do you think will ring true?

  • Homebuyers continue to fork over more dollars to buy properties while we sit with stagnant wage growth, stagnant economic growth and low-wage jobs being about all that’s created.
  • We are on the edge of a bubble larger than the one we experienced less than a decade ago as housing prices race back down to where it is affordable and sees demand from new buyers.

The Federal Reserve is held accountable for this fiasco. If it goes forward with a rate increase in the near future, it will be us who pay the price of another bubble.

There’s only one action to take if you ask me – lower your exposure to the industry.

In stocks, that’s homebuilders and mortgage originators. Avoid them at all costs. In your personal investments, that’s being prepared for another real estate shock.

These prices are unsustainable and due for a correction.

Once that happens, opportunity awaits you to pick up houses and housing-related stocks on the cheap.

Article Source: http://EzineArticles.com/expert/Chad_Shoop/1964189

House Valuation – Its Importance and How It Is Done

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Independent house valuation is one method which is being adopted by those who are willing to buy or sell a house. This is one method, which gives them a clear and comprehensive idea about the value of the property with regards to the market rate. Most of the people are not aware about the technicalities that go in when it comes to house value assessment; however, most of them know that is an important thing to do while buying or selling a property. When it comes to know the value of properties, there are numerous aspects which need to be considered. In the following sections, an insight will be presented on house valuation.

Income Method – What is it?

This is one method which is used for the property valuation. Here the total worth of a property is being estimated based on the revenue potential. The income which is calculated can either be generated as rental income or from re-selling the property. This is quite a complicated method; however, it is quite frequently being used by the investors when they are to fix a value on a property or when it comes to assessing the profitability of their investment in the days to come.

Certain assumptions need to be made and one needs to rely on them in order to come to an accurate conclusion using the income method. Here are the assumptions that are required to be made:

• Property Resale Value: This includes assuming the value which the property is likely to yield if it is being resold. Various factors need to be taken into consideration while assessing the resale value of a property.

• Income which is likely to be generated from Rent: This is another area which needs to be assessed. As mentioned, income from rent plays an important role while using the income method for property valuation.

How a Property’s Value is being calculated?

In order to get a better idea about the Independent house valuation, there are various assumptions and considerations which are needed to be made. This type of valuation comes into the picture when the generated income is set against the invested capital in order to find out how much profit can be generated by re-selling the property. One very common method which is being used to estimate the profit which is likely to be generated is by comparing the value of the property in question with the same type of capital expenditure or investment of similar nature.

Calculating the risk factors are perhaps the most difficult thing to do when it comes to ascertaining the value of a property. Though some sort of idea can be gained by having a look at the past market trends; however, it is very difficult to predict the nature of the property market in the days to come. Hence, it is wise to take the help of the valuation experts to know the actual worth of your property.

Before buying a property, selling it, hiring a property or giving out your property for rent, get it evaluated perfectly. For this one of the best companies you can find is Valuations.

Article Source: http://EzineArticles.com/expert/Chris_K._Ward/2091020

Rent or Buy? Which Option Makes Sense for You?

If you are the individual who is weighing the option of buying or renting a house, you need to consider a few factors. Your financial situation has to be assessed for your long-term planning and that it is not that simple as well.

Understanding your house budget and expenses

It is wise to review your household budget in comparison to the expenses before you begin looking for a new house. You have to find out how much can you afford to pay for accommodation without putting a burden on the budget.

You simply cannot go for rent or mortgage payments if you are unable to pay them on time. Several factors are involved both for renting or buying that should be considered prior to making a decision.

What are the requirements while renting or buying a house?

Your credit history and credit score are crucial and that they will be looked upon by the rental agency or the landlords for the mortgage or rent. You will be checked whether you are can pay the bills on time and are not overdue with the loans or the credit card balances. You have to check your score and credit history before applying for the apartment or the mortgage.

Other factors that are important include your strong employment history, W-2 forms and current bank statements that have to depict a good picture. A few rental agencies require professional or personal references as well as background check and contact information from the previous landlord respectively.

When is renting a viable option?

If you have uncertain employment: According to Evelyn Zohlen (financial planner), if you are unsure about your living paycheck and job situation, it is best to save money for the future living expenses. This will help you to build an emergency fund for you as well.

Limited funds: Renting is the better alternative when you do not have enough money for making the down payment or for managing the additional costs of owning the house.

Short time frame: If you have an assignment that lasts two years or you plan to move abroad in a couple of years, then renting a house is a better option.

When is purchasing a house a feasible option?

Buying a house only makes sense when you have the ability to cover the additional costs for owning a house. It is vital that you pay the closing costs and the down payment before you buy a house. It is seen that many banks receive a 20 percent down payment. This means for a house that costs 250,000 dollars, at 20 percent the down payment will be 50,000 dollars. So, the total amount includes percent in commission and another one percent in closing cost as well.

But if you have much debt, you should not put your savings for the down payment at all. It will be better to pay off the entire debt first until you get a better financial position for yourself. If there is no debt, then you need to work out the buying or renting options in detail.

Article Source: http://EzineArticles.com/expert/Aleena_Afzal/1504604

Apartment or House?

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Apartment is defined as, a set of rooms which have all the facilities like a house. The major types of apartment are studio apartment, bedroom apartment, duplex, lofts, garden apartment. If I was asked where I would I prefer to live in a traditional house or in a modern apartment building, I think, I would hesitate to answer. This question, from my point of view, is a controversial one. In the following paragraphs I will analyze both these options and present my view.

It’s everyone’s dream to have a comfortable place to live. As the majority of people say, I want to get an attractive house someday, but unluckily it is not so easy to get because it is very costly. But there are several differences between owning a house and renting an apartment. The first difference is the noise. If you are renting an apartment and you are a noisy person, it is very painful for the rest of the people who live with you. For example if you are always playing melodic instruments, listening to loud music and cleaning the house with noisy machines you are really troubling the other people and I’m sure that you wouldn’t want to be in their place. But also, in a lot of cases the noise depends on if the owner permits it or not. In contrast, owning a house is more comfortable if you are a noisy person because you are the owner and responsible for all the things of your house and you don’t have to care of disturbing someone. For example, if you are the owner of the house you are free to even have a noisy party or whatever you want because it is your house. The second and most important difference for me is about the policy. When you live in an apartment, you have to comply with the owner’s policy. For example, you have to ask for him or her if you are free to have visitors, pets, parties, etc. On the other hand, when you rent an apartment, you are not as free as you are when you are the owner of a house to do whatever you want. In contrast, owning a house permits you to be free without caring that someone is dissatisfied with your ideas and decisions about your house. In this case you can paint your house, buy a big tape recorder or do all the things that you want. In conclusion, I prefer owning a house that is better than renting an apartment because I can be free to do whatever I want, without policy and it gives me more sovereignty and relieve.

From the one side, living in a modern apartment building brings many paybacks. First of all, it is cheaper than living in a traditional house and paying different kinds of fees I am not familiar with. For instance, my buddy, who recently bought a new house for his family, told me that it is much easier to live in an apartment and I tend to believe him when I see his bills. So, living in an apartment will definitely help me to save some money. Second of all, since I live alone, I do not need a big house with many rooms. I just need a bedroom and a living room where I can take my guests and have my work place. Another important benefit of living in an apartment is that I will not have to buy much weighty furniture in order to furnish all rooms.

Article Source: http://EzineArticles.com/expert/Farooq_Bashir/2166162

Wholesaling Horror Stories

A couple months ago I had a client bring me a deal to fund. He was pursuing a wholesale deal and the precursory buy/sell figures looked great. I started building his file, which I anticipated to be a no money down deal with a fast close in 2 weeks. Then, he sent me the contract. As a standard practice, we always review the contract to make sure there are no “gottcha’s” that might derail a deal, and in reviewing this client’s file, everything looked good, with the exception of the name of the buyer. The wholesaler had prepared the contract using their company name instead of using a “throw-away” LLC (see below). I’ve seen this before, and it typically doesn’t cause any issues if you schedule a double closing; however, before I could advise the client, the wholesaler had received an addendum from the seller adding the client to the contract. The result: both the wholesaler and the end buyer, the client, were listed on the contract! In other words, the client, unbeknownst to him, just landed himself a partner.

As you probably know, the title for the property has to match the Deed of Trust, and both documents match the name(s) of the buyer(s) on the contract. Being as such, we had to scramble to qualify the wholesaler since he’s now the client’s partner, which completely changed the funding strategy. Most importantly, I had to have a heart to heart with the client. Did he want a partner? Was the wholesaler even willing to be partner? Ultimately, the wholesaler agreed to sign on the note and Deed of Trust, but would immediately quit claim the Deed to my client after closing and gracefully bow out of being partnered into the deal. Easy enough, right?

Wait, what about the insurance? The insurance would probably be a simple fix, similar to the Deed, but what about the note? Upon signing, the wholesaler, unbeknownst to himself, was going to be responsible for repayment of the loan without being part of the deal! More red flags. Did I mention we only had 2 weeks to get this closed??? Time was moving fast and nothing was falling into place. After many more emails and plenty of phone calls all around, the deal ended up disintegrating for many reasons, such as the seller not being willing to rewrite the contract, allowing for a proper wholesale and the two new “partners” disagreeing on structuring the deal between them. Worst part, both parties had put down big earnest money checks. Last I heard they were all trying to get their money back.

The moral of the story, before you try to wholesale a deal, make sure you fully understand how to properly structure the transfer. Here are a couple of ways to structure a wholesale:

Assignment. The easiest and best way to structure a wholesale is to do an assignment; simple, clean and easy. Usually a one page assignment of contract will suffice, so long as the contract is assignable, which most private seller offers are.

“Throw-Away” LLC. If you are buying a bank REO and the bank won’t allow assignments, the next best strategy would be to use that “throw-away” LLC I mentioned earlier, or alternatively a trust. Under the “throw-away” LLC method, a wholesaler creates a brand new LLC for the sole purpose of buying and transferring ownership in the property. The wholesaler simply sells his interest in the LLC to the buyer, and from the bank’s standpoint, the buyer remains the same (i.e. the “throw-away” LLC).

Double Closing. An alternative, and less desirable way to wholesale, would be through a double closing. This alternative results in two closings at the same time: the first results in sale of the property from the seller to the wholesaler, and the second results in the sale of the property from the wholesaler to the end-buyer. Like I mentioned before, this method is the least desirable and should be avoided if possible, due to the added costs of an extra closing, as well as the management of all of the moving parts associated with the second closing.

If you have any questions on any of these methods, or if you have a success or horror story of your own you’d like to share, we’d love to hear from you!

Article Source: http://EzineArticles.com/expert/Kevin_Amolsch/725898

Why Sky-High SoCal Housing Costs Just Keep Rising

Any SoCal Resident Can Tell You Rent is High,

But did you know the average cost of a home in Los Angeles ($658,000) is more than double the national average for houses of the same size? Real estate experts say that the gap between the cost of living in LA and the rest of the country will continue to get larger, all the way through 2018. When gainfully employed, educated people with salaries hovering around $250,000 a year are looking to move to nearby cities due to the inability to find a home within their budget that meets their standard of living, it is clear that California is pricing out its own residents. And the truth is – there isn’t really much anyone can do about it.

The Cause

While no single problem is exclusively to blame for the incredibly inflamed housing cost in Los Angeles, the generalized answer is that there are not enough houses to meet the demand, and in addition to that, the cost to build more housing keeps developers away. It is a vicious cycle of economics – people want housing, construction companies can’t fill that demand because the cost to them is too high, this takes money and jobs out of the metropolitan area as builders, investors, and developers look to the suburbs to build, so the demand grows, and the cost grows alongside it.

What is even more unexpected, is that the positive growth in jobs and the rest of the economy is actually putting more of a strain on housing cost. Los Angeles has added tens of thousands of jobs in almost all sectors of the market, from the lower level entry jobs, all the way to opening space for new executives and CEOs, and as you can expect, that means more people look to move to the city to fill the openings which the jobs have created; thus adding to the demand for housing that seems insatiable in Los Angeles.

The Proposed Solutions…

The answer seems simple, right? Just build more houses. Unfortunately, nothing is ever that easy. Up until recently there was a push among lawmakers to, at the very least, keep the cost of housing under control through litigation.

The solution seemed concentrated on reducing the cost for contractors to build homes and new developments. Prior to this year, litigation seemed to offer great tax incentives to builders willing and able to quickly build new multi-family units, especially in urban areas. Especially to those builders who made such new developments more eco-friendly and energy-efficient.

Many state law makers have focused energy and attention on low-income housing subsidies. The legislative analyst’s report estimated that building affordable homes for the 1.7 million low-income households in California that now spend half their salaries on housing would cost as much to finance each year as the state’s spending on Medi-Cal.

… And why they have failed

As much as state litigators may want to deal with the overwhelming housing shortage in LA, there is a huge problem – namely, that most decisions regarding new developments and building fall into the laps of city and local government. The state governments’ hands are tied. Unfortunately, the smaller governments tend to have a much more narrow view of the situation, seeking to raise gains and find solutions for /their/ city, without much consideration for the surrounding areas.

Additionally, the main tool that state legislators could use to quickly build homes, is in direct opposition to a myriad of business and environmental interests. The C.E.Q.A (California’s governing environmental law), in many ways, prevents the building of new housing developments at any rate which would make an impact on the housing shortage.

So the question becomes… what can we do? Should we sacrifice environmental protection laws to lower housing costs? It is a question that has to be addressed, but with so many political influences and issues, most lawmakers won’t touch it.

And SoCal residents and home owners associations aren’t making it any easier. Many of these local governing bodies are in stark opposition of rapid development of housing- because that means that their neighborhoods would have to face the dreaded “D” word… Density.

Push-back from neighborhoods and suburban areas is obvious- no one wants to be crowded in, especially in the areas which are the most affected by the housing shortage (affluent coastal communities). So it seems as though lawmakers are blocked on all fronts.

Have Lawmakers given up?

This year, it seems as if state lawmakers have given up on dealing with the increasing housing cost. Little to no new solutions have been proposed, and those that have are not being passed through and put into place. The state is at a stand-still and lawmakers seem to take the “I guess we’ll just have to wait and see what happens” approach.

As litigation passes to increase the minimum wage to $15 an hour, many people believe that this increase will ease the burden on low and middle-income families and low for economic growth and eventually lead to a reduction in the housing shortage.

“Economists worry that if lawmakers don’t fix the housing supply problems, many of the state’s efforts to improve the lives of low-income residents will falter. Many legislators cited high housing costs as a reason to boost California’s minimum wage to $15 per hour over the next six years, but “‘unless something’s done to stem housing costs, much of that pay increase could be eaten up by higher rents, ‘Thornberg said.” (LA Times)

The Verdict?

SoCal is in a pickle, and with legislators openly admitting that the housing problem is not a priority for this year, the residents will have to pay the price. Housing costs in Los Angeles will continue to rise, unchecked, until newer, bigger ideas come into place which can put a stop to the vicious cycle of demand, lack of supply, and the overwhelming influence of special interests.

Article Source: http://EzineArticles.com/expert/Mark_Segal/650380

Real Estate Statistics Explained

Basic Real Estate Statistics Explained

We are going to define some of the basic real estate statistics that get thrown around on a regular basis. To do that, we will use one real estate market, located in Hood County Texas. Even more granular, we will use the single family numbers for homes in Granbury Tx, a small town of approximately 8,000 residents which has seen substantial real estate growth in the past 12 months. It is important when reviewing real estate statistics to use a group of numbers large enough for consistency, but granular enough to tell your story.

The statistics that we will be referencing are true and accurate for the year discussed but are being used to define the real estate statistic itself.

We have chosen Granbury Tx as our example because the growth of the local real estate market there make the statics stand out.

Anytime you are evaluating statistics, especially in real estate, the source of the numbers are extremely important. In most instances, the MLS (Multiple Listing Service) provides the most accurate numbers when referring to real estate. This is because they have all listings by all local real estate brokers in their database. For the sake of explanation of the data, we will be looking at the numbers for home sales in Granbury Tx, directly from the MLS. These numbers are meant to give an example of how to read the statistics themselves. Anytime you evaluate real estate numbers, its important to pay close attention to how the numbers are gathered. In this instance, we will be using ONLY single family properties in the city of Granbury.

Basic Real Estate Statistics

    • Number of Sales – This one is pretty self explanatory. It is simply the number of single family homes sold in a particular month. In January of 2015, they had 51 single family homes sold. One thing to pay attention to when looking at this statistic is are they using the Under Contract date or the day the property actually went to closing. These two dates are usually between 30 and 60 days apart, so its critical that you know which one is being referenced. In addition, many of the homes that get calculated, if you are using the “under contract” number may not actually close! In our example, we are using the number of homes that actually closed. In January of 2016 they had an increase of over 49% which brought the total to 77 from 51. Growth of that level is very seldom ever seen.
    • Sales Volume – Sales Volume is simply the total amount of dollars spent on single family housing within that month. Once again, when reviewing this statistic, its important to keep the property types consistent. If you are comparing two areas to see which one has grown more and you include vacant land in the number for one area, you must include it in the other too. As previously mentioned, our examples only include single family properties. With Number of Sales looking at the units, you would expect the Sales Volume to go up appropriately, but in this instance, it went up even more than the units (by percentage). The total Sales Volume of single family homes in Granbury in January of 2016 was $15,191,500 as opposed to the January of 2015 number of $9,281,915. That is an increase of over 63%. Because the Sales Volume went up at a larger rate than the number of units, this reflects the average home sale being much larger in 2016 than 2015.
    • Months of Inventory – This is a commonly referred to statistic when examining a real estate market. This statistic refers to at the current rate of sales, how long will it take to sell through the existing level of inventory. This reflects the supply and demand for the market. In our example, in January of 2015 the level of inventory was 9 months and in January of 2016 it had dropped to 6 months. That is a 33% drop in available inventory! This means if you are looking to buy a home in Granbury Tx, it will be a little tougher in 2016 as there is less inventory available to buy.
    • Median Days To Sell – This stat simply refers to how long it takes for single family properties to be put under contract. Don’t let the “to sell” confuse you. To accurately show the demand for active homes, you really want to track how long it takes to go “under contract”. The process of acquiring final lender approval, insurance and getting to a closing can vary on a variety of factors. In January of 2015, the Median Days to Sell was 88. That number dropped by over 30% to 61. Once again, this tells you if you are looking for homes in Granbury TX, you better get your offers in quickly as the most desirable homes are going fast!
    • Average Price – This statistic can be derived in a variety of ways. We are going to use it in its most raw form and simply be the Average Price of Homes Sold within that month. Be careful when looking at this statistic printed anywhere as how the user defines the date sold can vary. Needless to say, Average Price can be used for active homes for sale or for the homes that sold. The Average Price of ACTIVE homes for sale is generally a pretty useless number as you can list a home for any price, without any possibility of it ever selling. Many homes listed for sale are at unrealistic prices thus the Average Price of Active homes for sale can fluctuate dramatically and give little insight into the market. You will want to look at the Average Price of SOLD homes. In January of 2015, the Average Home Sale was $181,998 and it jumped to $199,888 in the same month in 2016. This is an increase of almost 10%. This is not a number that truly tells the increase in home values across the board, but simply of the homes sold in that month, what the average was.
  • Median Price – The Average Home Sales Price can be skewed by a variety of factors. All it takes is one 5 million dollar home sale to throw those numbers off. To get a better view of the overall increase in value, it can be better to look at the Median Sales Price. Median Sales Price takes the number that is perfectly in the middle. For instance, if you have 11 homes that you are using in your statistic, you would take the sales price of the 6th one. This leaves 5 homes sold higher and 5 homes sold lower. In this instance, they are pretty close as the Median Sales Price increase from January 2015 to 2016 was 9.69%. This shows that we didn’t have the Average Price skewed too much because of an extremely large or extremely small sale.

There are hundreds of ways to look at the same numbers, when referencing to real estate, so be very careful to read the fine print on exactly what numbers they are using. When making comparisons, you will want to make absolutely sure that both are referencing the same property types, dates etc. It like the old saying says… there are lies, damn lies and statistics.

In an effort to describe some of the most basic real estate statistics, we are using the market statistics from Granbury Tx as they have seen some extraordinary growth.

Article Source: http://EzineArticles.com/expert/Dean_Cacioppo/2071322

British Home Owners Are Waiting Longer to Move Up the Property Ladder

Research carried out last year revealed that British home owners are waiting longer than expected to move up the housing ladder.

The survey which was carried out by Lloyds Bank found that a whopping 33% of Brits should be further along the property ladder than they currently are. Thanks to the never-ending rise in house prices, the research also found that an incredible 83% of home owners have to wait longer than ever to reach their goal of owning a long-term family home compared to just a decade ago.

40% of people surveyed said that they feel the highly competitive housing market has an impact on their aspirations as it’s so difficult to become a home owner in the first place, let alone move to a bigger property. This figure has fallen since 2013 however when 47% of people felt this way and 2012 when this number was at 53%.

Naturally, first-time buyers are being hit hard with nearly half (48%) saying that the housing market has an impact on how long it takes them to become a home owner.

Despite the difficulties that Brits are facing to get onto or move up the property ladder, it seems as if they still have high hopes for their future. 44% say that even though it’s harder than ever, they still won’t make any compromises when choosing a home and they believe that this is something that’s still a realistic achievement.

63% believe that this is a goal they will reach within the next five years and 64% think they will only have to make one more move before they will be able to achieve their long-term housing aspirations.

If you live in London or the South East then chances are that you will have to wait longer then the rest of the country to own your dream three bedroom property. The average age of applicants for this type of house is 35 which is a year older than the national average. Many are all too aware that these areas remain the least affordable in the country.

This is a stark contrast to the North and Wales however where properties are much more affordable. The average three-bedroom house in these areas will set you back between £129,000 and £135,000. In London, the average price of a three-bedroom property will set you back a staggering £1.3 million.

Lloyd’s survey also revealed that the majority of home owners (43%) aspire to own a three-bedroom property. 24% want four bedrooms and many dream of having a nice garden, high quality kitchens and bathrooms and conservatories.

Article Source: http://EzineArticles.com/expert/Charles_Cockerton/1467443

Pressures That Dominate Real Estate Value

When people usually think of real estate value they think of two forces; supply and demand. Yes, this is correct; however supply and demand only fall under the one of the four main categories that drive/depress real estate value. Supply and demand fall under the economic category of influences in real estate value. The other three include; social impact, government subjection and environmental forces.

When looking at social impact, there are a few things one would want to consider determining the effect it will have on real estate value. Most of all the value would fluctuate accordingly with population characteristics. This tie into the potential for demand in the economic section of value; the more demand, the more value a property can derive. Population however should be looked at in more depth by breaking down the sample by age and gender, rate of household formation and partition, as well as analysis of the social values such as education, law and order, and lifestyle preferences. Careful consideration of these factors will help establish trends in what would be reflected in real estate values.

Next is the government subjection, accounting for a large aspect of real estate value. This includes political and legal activities on several levels of government. These government influences have the power to overwhelm natural market forces such that you would find in the economic category. Government has their hand in providing facilities and services that affect values as well as a one of the main contributors to patterns of land use (zoning, by-laws, etc). The following are some things to look out for when assessing the government subjection of a market; fire and police services, garbage collection, transportation arrangement, utilities, zoning, building codes, health codes, and fiscal policies. Also the legislation that is set forth by the governmental factor must be accounted for, this would include; rent control laws, rights to farm, rights for managing forest, rights to agricultural land, restriction on ownership, new development laws, control of hazardous and toxic materials, and laws affecting investment power, loan terms, and mortgage lending institutions. All in all this is quite the category and its understanding will provide for a great idea of where values are currently and where they are headed.

In addition to the social impact, as well as government subjection, the environmental forces also play a part in real estate values. These can be natural or man-made and are analyzed by observing several aspects. Climatic conditions (snowfall, rainfall, temperature, humidity) would be an obvious one that would affect the values of building somewhere as well as maintenance and carrying costs, as well as the quality and type of build. Topography, soil and consideration of any toxic contaminants would also be of great importance as well as natural barriers, such as rivers, mountains, lakes, etc.

Just to get out of the 4 factors of real estate value; it is important to mention that there are some overlying factors that would be part of 2 or more of the categories. Once such factor is location, this is the link of a property in time/distance to any given origin or destination of a resident/user of the property. Location could fall under for environmental and economic, if not all categories. Due to the area and property type, properties access to public transport, schools, hospitals, stores, employment, suppliers, recreational and cultural facilities, parks, and places of worship would of importance.

This would also lead us back to the economic factor of influence on real estate value. The fundamental aspects to look for here include: employment, price levels, wage levels, industrial and commercial expansion, mortgage credit availability and cost, stock of vacant property, stock of improved property, occupancy rates, construction costs and rental/price trajectories of existing properties.

And there you have it, the 4 major pillars of real estate value; social, governmental, environmental, and economic. Taking a deep look at each of these sections one would assemble the entire spectrum of current real estate values and more importantly future real estate values.

Article Source: http://EzineArticles.com/expert/Jonas_Perov/2268273

The Chill in US Real Estate

You know things are starting to get dicey out there when even a multimillion-dollar penthouse in Manhattan can’t sell.

It seems a developer in SoHo, having just recently finished primary construction for his high-rise condo tower, realized the project’s focal point – a $45 million, 8,400-square-foot penthouse – was just a bit too much.

“The air is very thin up there in that buyer pool,” was the way the builder, Kevin Maloney, put it to Bloomberg.

You’ll love the Solomon-esque solution Maloney came up with.

The penthouse has a wonderfully grandiose name: the Summit of SoHo.

Sure, it has its own indoor pool. And yes, it has 23-foot living room ceilings. Plus, it has not one but two private elevators. One goes to the lobby; the other is so you don’t have to take the stairs to the penthouse’s upper levels (for entertaining, a spa and a rooftop kitchen and grill).

But the stock market cracked hard at the start of the year, with the S&P 500 down 11% at its lowest point in 2016, while Hong Kong’s Hang Seng dropped roughly 17%. In recent months, Chinese real estate buyers pulled a disappearing act from realtor offices all around the U.S. And after years of ultra low interest rates and easy lending policies, there’s now an excess of iconic luxury living quarters on the island of Manhattan.

The developer’s solution? Chop his project’s expansive space into two smaller penthouses – an $11 million, 3,000-square-foot unit (though at that size, it hardly seems big enough for one’s collection of bespoke suits), and a second, 5,400-square-foot unit for a comparatively cheap $29.5 million.

I’ll keep an eye on it and let you know if either gets a sale or not.

Red Hot Real Estate No More

These days, even the bond rating agencies, ever late to calling the turns in any market, are jumping on board…

Fitch Ratings noted last month that home prices in San Francisco have “risen to a level unsupportable by area income.” According to Fitch, that makes the local market overvalued by around 16% – which probably means that you’d need to double that figure to estimate a true “fair value” for this once white-hot luxury market.

Just in the last few days, the National Association of Realtors noted weakening demand among foreign buyers, blaming a strong dollar and rising U.S. home prices for pushing U.S. real estate beyond the bounds of affordability even for rich foreigners.

The crash of China’s Shanghai Composite stock index (down nearly 22% just since the start of 2016 with nary a bounce) forced many of the country’s wealthy elites to pull back on their property purchases. You can see the impact in regional news headlines around the country:

In San Francisco: “At High End, SF’s Housing Market Finally Cooling Off.”

From The Boston Globe: “High-end housing market cooling off.”

In Fort Lauderdale: “South Florida condo market cooling off.”

Will it get worse for premium real estate? I think we’re still in the early innings.

Uncle Sam’s War on Cash (Property Buyers)

The story didn’t get much media play back in January, but that’s when the U.S. Treasury Department and its Financial Crimes Enforcement Network (FinCEN) announced the issuance of “Geographic Targeting Orders” for New York City and Miami.

The “GTOs,” according to FinCEN’s press release, require “certain U.S. title insurance companies to identify the natural persons behind companies used to pay ‘all cash’ for high-end residential real estate.”

Basically, the folks at the Treasury are worried whether corrupt foreign officials or “transnational criminals” might be laundering piles of dirty money through these multimillion-dollar property purchases.

Or is Uncle Sam just worried about the flood of Chinese cash into the American real estate market? “All cash” is practically a synonym for rich Chinese property buyers.

At least, that used to be the case. As we’ve seen in the “cooling off” headlines around the country, the absence of this class of real estate purchaser is starting to be felt in markets around the country.

An article in The New York Times late last year really brings the impact of Chinese property buyers into focus. When it comes to purchasing a home in America, they pay an average price of $831,000 – nearly double what international buyers from India ($460,000), Britain ($455,000) and Canada ($380,000) pay for their homes in the U.S.

In coming quarters, I believe the FinCEN “targeting orders” will likely spell the end of the property-speculation craze among Chinese buyers. The government action may only be limited to New York City and Miami, but it will have a deep chilling effect everywhere. After all, it only takes another press release from FinCEN to announce an expansion into other American cities of its inquiry into the identities of those big-money, anonymous all-cash property buyers.

The trend will take time, with the data trickling onto economists’ spreadsheets. But as Chinese elites continue to pull back from American real estate, well, get ready for a “Wile E. Coyote” moment in high-end luxury home prices – and more pressure on the Federal Reserve to reverse its stance on interest rates.

Article Source: http://EzineArticles.com/expert/JL_Yastine/2192663