29October

Equity Crowdfunding | Finally Small Investors May Get a Piece of the Action

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“Crowdfunding is rapidly changing the real-estate investment market, offering developers new ways to finance projects, small investors a way in, and the socially conscious an avenue to support their local communities.” – Forbes

Housing-MovementOn Wednesday, October 23rd a unanimous vote of the five-member Securities and Exchange Commission (SEC) made headline news. The vote advanced a proposal which could re-define who gets to invest in “ground-floor” business opportunities. It could radically change how start-ups raise capital. The proposal has the potential to unlock billions of investment capital allowing investors to consolidate revenue to fund real estate portfolios or new products and ideas.

The proposed rules were introduced to support the implementation of Title III of the Jumpstart Our Business Startup (JOBS) Act. The intent of the legislation and proposed structure is to allow smaller companies to gather capital from a broader spectrum of investors, avoiding the need for high cost Initial Public Offerings (IPOs), or the pursuit of millionaire private investors.

Imagine a virtual Shark Tank, but with a lot more sharks. Instead of being limited to small panels of mega-millionaires, entrepreneurs could appeal to a virtual audience of mainstream backers, each investing blocks of capital in exchange for equity.

For the first time since the 1933 Securities Act, the proposal (if finalized) would open equity investment opportunities allowing  small investors to purchase a stake in promising start-ups. Currently such equity shares are reserved for “accredited investors” with a verifiable net worth of $1 million or earnings of $200,000/year for the most recent three years.

The SEC proposal created a structure (funding portals) for the new brand of financing and established limits for crowdfunding investors. Funding portals, will act as intermediaries linking business owners with investors online.

A company would be allowed raise a maximum of $1 million via crowdfunding per year.  Within a 12 month period investors would be bound by the following limits:

  • If annual income is less than $100,000 the limit is the greater of $2000 or 5% of annual income or net worth.
  • If annual income equals or exceeds $100,000 the limit is the greater of 10% of income or net worth. Securities purchased via crowdfunding would be capped at $100,000/year.

A major SEC concern is the potential for fraud. Many are worried that non-accredited investors may be less sophisticated and more vulnerable to deceptive offerings by scam artists.

The SEC has implemented a 90 day comment period to field questions and feedback on the proposed structure. Afterward, the Commission will review input and make a decision regarding implementation. Click here to register a comment with the SEC.

For information on effective ways to manage institutional and individual real estate portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter .

21October

Government Re-opens But Builder Confidence Drops

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After days of meetings, discussions and negotiating, the government finally came to a short-term resolution to allow the government shut-down to conclude and ensure default would not ensue.  But this “my way or the highway” mentality on both sides of the political isle has damaged Washington’s credibility and confidence ratings among Americans.  The lack of leadership in Washington and the “kicking the can down the road” ideology has affected several parts of the economy; both macro and micro in scope.

Reports released this Wednesday from the National Association of Home Builders (NAHB) showed a weakening in home builder confidence.  In the market for new single family homes, the NAHB/Wells Fargo Housing Market Index (HMI) reflected a two point drop from an already downward revised report in September.  NAHB Chief Economist David Crowe noted, “A spike in mortgage interest rates along with the paralysis in Washington that led to the government shutdown and uncertainty regarding the nation’s debt limit have caused builders and consumers to take pause.  However, interest rates remain near historic lows and we don’t expect the level of rates to have a major impact on sales and starts going forward. Once this government impasse is resolved, we expect builder and consumer optimism will bounce back.”

Builder ConfidenceThe NAHB describes the HMI as a an index that “gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”  The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.”  Current sales, sales expectations and traffic of prospective buyers all experienced a two point drop showing confidence is waning.

It appears that home builders aren’t the only ones lacking confidence.  Consumers are showing signs of caution in the midst of Washington’s uncertainty.  Last week during the partial shut-down, mortgage applications for government mortgage products dropped to a six-year low according the Mortgage Bankers Association (MBA).  Mortgage applications to purchase a home declined by 5%.  “The government shutdown had a notable impact on the mortgage market last week. Purchase applications for government programs dropped by more than 7 percent over the week to their lowest level since December 2007, and the government share of purchase applications dropped to its lowest level in almost three years. FHA lenders with delegated authority have been able to continue, but those that rely on the regional homeownership centers have not. Additionally, HUD staff at headquarters are generally furloughed and not able to answer questions,” said Mike Fratantoni, MBA’s vice president of research and economics.

It will no doubt take time to re-instill confidence that the American people had in their government’s elected officials.  The negative impact of these past few weeks might haunt the economy and consumers for some time.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

Sources:  http://www.nahb.org

http://www.mbaa.org/NewsandMedia/PressCenter/85948.htm

17October

Boomerang Buyers | The Next Big Wave?

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ID-10076536Are “boomerang buyers” the missing link needed to accelerate the housing recovery? How many are eligible to purchase sooner as a result of recent changes to FHA guidelines and are they even interested in owning a home again? Could this impact the profitability model of reo-to-rental investors?

If interest rates remain low, the stage may be set to see a new wave of homebuyers take center stage. It is estimated that new FHA guidelines made it possible for 2.5 million former homeowners to re-enter the market two years earlier than expected. Often referred to as boomerang buyers the 2.5 million new prospective shoppers are former home owners who experienced foreclosure, short sale, or deed-in-lieu agreements between September 2010 and August 2012.

The August 15th,  FHA Mortgagee Letter 2013-26, entitled, “Back to Work—Extenuating Circumstances,”  made it possible to shorten the required waiting period for former  FHA borrowers from 3 years to as little as 12 months, given certain circumstances.

On October 4th, Fannie Mae issued a major “Desktop Underwriter” upgrade announcement which will take effect November 16th. The change may allow short sale (“preforeclosure sale”) participants to re-enter the market after just two years instead of seven. Many borrowers who underwent preforeclosure sales discovered afterward that credit bureaus recorded both a preforeclosure and a foreclosure sale; imposing a seven-year penalty (standard for foreclosures) instead of appropriately applying a 2 year wait. This correction alone may create an additional wave of eligible buyers sooner than expected. During the housing crisis, 4.8 million home-owners forfeited homes due to foreclosure and 2.2 million opted for short sales, as reported by RealtyTrac and cited by CNN Money.

Many of the 7 million former owners who underwent foreclosure, short sale or deeds-in-lieu early in the housing crisis, have already rebuilt their credit and their finances and are eligible to re-enter the market even under the former guidelines.

The question is will boomerang buyers re-enter the market or remain renters?  So far this year one in ten homebuyers is a boomerang buyer. And that was prior to FHA and Fannie Mae announcements.   According to research firm John Burns Real Estate Consulting, the pace has doubled since last year. According to the 2013 National Association of Realtors (NAR) National Housing Pulse Survey 51% of renters say that “eventually owning a home is one of their highest personal priorities.” Eighty percent of Americans believe that buying is a sound decision.

Boise, Idaho Broker Mike Edgar coaches boomerang buyers back to eligibility. He consulted with more than a dozen such buyers in 2012 and expects  twofold growth this year.

The news from FHA and Fannie Mae could be the spark that millions of former owners hoped for and the lift the housing recovery needs.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter .

15October

Yellen and the Future of the Housing Market

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The United States Federal ReserveLast week was a quiet week for reported economic data due to the government shutdown.  Leaders on Capitol Hill are still in negations to hopefully pass a bill both sides can agree to before the looming date of October 17th (the date the U.S. would default on some of its obligations).  President Barak Obama announced last Wednesday his nomination of Janet Yellen as the next chairman of the Federal Reserve.  If confirmed by the Senate, she will replace Bernanke on February 1st of next year.  Bernanke has been known for his low interest rates and easy money policies.  How will the housing market respond to Yellen as the next chairman?

A Yellen-led Fed would remain very dovish on monetary policy. Dovish advisors, like Bernanke, prefer low interest rates in hopes of spurring consumer spending and borrowing; thus, leading to economic growth (in theory).  The effects of inflation resulting from this type of policy are believed to have very little impact in theory (in theory).  Increased borrowing in terms of home loans would help to boost the housing market as homebuyers could lock in lower rates.

The housing market has responded very positively to the low interest rates which began when QE1 was initiated.  Yellen would likely keep rates low for some time.  She has articulated the case for upholding a highly accommodative monetary policy, as far out as late 2015.  “She’s even more of a dove than Bernanke is, but there’s nobody who can say she’s not credentialed because of the range of experience she’s got,” said J. Alfred Broaddus, a former president of the Federal Reserve Bank of Richmond.

While many people don’t support the dovish philosophy, in the short term housing and housing stocks are in a position to benefit from it.  According to recent housing statistics, it appears the growth in housing has been slowing and Yellen might be able to get it moving in the right direction again if she utilizes a robust QE-program.  Having this foresight about the future of the Fed has helped stocks to bounce back as they assume status-quo will continue during the transition of chairmen and beyond.

Several economists believe the long term effects of this policy will not go unnoticed, but housing and the stock markets aren’t concerned with long term repercussions at the moment.  Instead they continue to drink the Kool-Aid and enjoy the gains.  If tapering is far out in the future under Yellen’s direction, demand for housing would likely increase due to prolonged low rates.  An increased supply of construction jobs and building supplies would be necessary to meet demand for home building.  If the market’s supply can’t keep pace with demand as recently experienced, home prices could continue to climb.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

3October

Home Sales Starting to Level Out

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Recent housing data show that the market might be cooling off.  Weak housing figures reported in July gave the Fed one reason to continue its asset purchases without tapering.  August reports from the Commerce Department last week showed a 7.9 percent increase from July in new single-family home sales.  This equates to 421,000 annualized sales vs. 390,000 annualized sales reported in July.  While this news in isolation seems to be hopeful, this figure fell marginally below economists’ expectations and is still near the lowest levels reported this year.  After some have labeled this market a bubble, it seems it might have lost its hot air.  Economist Patrick Newport from HIS Global Insight commented, “New home sales were up in August, but this market has lost momentum.”

existing home sales

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Pending Home Sales slowed in August according to The National Association of Realtors (NAR).  The Pending Home Sales Index declined 1.6 percent to 107.7 from 109.4 in July.    Lawrence Yun, NAR chief economist said, “Sharply rising mortgage interest rates in the spring motivated buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month.  Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead.”  Some economists expect 2014 to see less than a 1 percent jump in sales.

While new home sales data appears to be decelerating, so do home prices.  The median new home price in August dropped to $254,600.  According to reports, the median price has been in decline since the month of May.  Data on existing home sales prices released from NAR mirrored that of new home sale price numbers.  The median price range is at $212,000 in August which is down from a median sales price of $213,500 in July.  This is good news for homebuyers who have been looking for declining house prices, whether new or existing.  Some industry leaders are predicting only a 5-6 percent rise in median existing home sales in 2014 with some improvement in inventory levels.

Mortgage rates are starting to fall again.  The 30-year fixed mortgage rate was 4.5% and last week’s 30-year rate was 4.32 percent, according to Freddie Mac.  The Fed’s decision to delay tapering could help mortgage rates to continue on the decline if the Fed unwinds its balance sheet slowly.  Then homes sales might start to pick back up.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

Sources: http://www.freddiemac.com/pmms/
http://www.realtor.org/research-and-statistics/housing-statistics

30September

Federal Reserve Decision Benefits Homebuyers

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After the much anticipated announcement of the Federal Reserve’s decision and lots of market speculation that tapering would finally begin, Bernanke announced the continuation of its easy money policies (QE).  The markets had already baked in the expectation of tapering along with several traders making bets on the Fed’s play, only they found out the punch bowl was still flowing and wouldn’t be taken away in the near term.  Bernanke hasn’t yet seen the recovery in the economic data that he has been watching for.

Existing home sales reported a 6-1/2 year high in August showing strength in the housing market and strong demand.  According to The National Association of Realtors (NAR), existing home sales increased 1.7 percent last month which was more than economists expected.  This increase puts sales at an annual rate of 5.48 million units.  Much of this recent rush to buy can be attributed to the expectation of rising mortgage rates and the increases in home prices.  Homebuyers want in on the action before interest rates and home prices over heat.  Bernanke’s latest announcement, however, should help to ease the 30-year fixed mortgage rate until the next Fed meeting.

TDemand for houses on property market, business metaphorhe median home sales price last month rose to $212,100; a 14.7 percent year-over-year jump.  Although inventories are still tight and as a result, prices continue to inch upward, homebuyers can still lock in a historically low mortgage rate giving them more purchasing power.  While this scenario seems great for prospective homebuyers, at some point the punch will run out and the party will end.  “Clearly the Fed has been spooked by the extent of the surge in long-term interest rates over the past couple of months and the impact that now appears to be having on the housing market.  But there is a dangerous circularity here because the initial rise in long-term rates was largely a response to the Fed hinting that it would begin to reduce its asset purchases sometime in the second half of the year,” Paul Ashworth at Capital Economics commented.

Mortgage rates fell after the Fed made its announcement.  They are still above the low of 3.35 percent seen in May but with the Fed continuing to print money, mortgage interest rates could stay around this range for a while longer, giving those who haven’t purchased yet, the opportunity to get in the game.  If interest rates withdrawal to the lower rates seen earlier in the year, it’s quite possible that more mortgage refinancing would occur.

It will be interesting to see what the next few months of housing data bring from this recent news announcement.  The housing market should experience some more positive gains if all plays out like the Fed has planned.  Growth and demand can remain strong with low interest rates and this gives homebuyers time to still purchase as rates rescind, but the underlying cost of artificially inflating the housing market remains to be determined.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

17September

Who Throws The South’s Best Tailgate Party?

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Fabulous food. Spirited Refreshments. Passionate Rivalries.  And a $2,500 Sweepstakes for voting fans. It’s time to decide who takes home the prize for The South’s Best Tailgate 2013.

 Southern Living University of Texas burgerCaptureIt’s official. The coin has been tossed. We’ve officially entered the, Football Standard Time Zone (FSTZ) across America. Nowhere is it a more revered ritual than in the south where a football game is a perfect excuse to throw a party and the bigger the better.  

Southern colleges have perfected the art of Tailgating. Imagine a combination cook-out, portable feast, cocktail party and pep rally all rolled into one. Typically held near the site of the game; some draw more attention than the action on the field.  From flatbed pick-ups to elegant RVs, there’s a tailgate style to suit every fan.

For southern charm it’s hard to beat the linen table cloths and tents with chandeliers at the University of Mississippi (Ole Miss). Their gathering spot, (The Grove) hosts ladies in cocktail party attire and tents with candelabras.  

One of this year’s contenders has a waterfront stadium invaded weekly by a flotilla of partying fans. The University of Tennessee boasts a 200 vessel “Vol Navy” with amenities like hot tubs, waterslides, and flat screens.

 Each region has perfected its own miniature or jumbo delicacies and spirited refreshments. For Jambalaya and alligator stew, try the purple and gold of LSU. Gourmet burgers like the Texas Tackler featured here, tackle pre-game appetites of Longhorn fans.

Alabama’s game day crowds have been known to top 100,000 for high stakes rivalry match-ups.

A major lifestyle magazine searched the south to discover “The South’s Best Tailgate.” They compiled a list of 15 top contenders.  Your votes are needed to determine who will win this year’s bragging rights as “The South’s Best Tailgate”. Voters get a chance to win $2500—just for voting. Clemson took 2012 honors.

If you don’t see your #1 candidate on “The South’s Best Tailgate” list, reply with the name of your favorite and tell us why they should be on the next list. We’ll relay the results and watch for your picks in next year’s top crop.

Here’s a list of the “15” finalists. Vote early and vote often (daily), through September 30 by clicking on the links below. If you’re new to our social community remember to like us on Facebook and follow us on Twitter.

  1. University of Alabama
  2. Appalachian State University
  3. Clemson University
  4. Florida State University
  5. University of Georgia
  6. Louisiana State University
  7. University of Mississippi
  8. Marshal University
  9. Oklahoma State University
  10. University of Tennessee
  11. University of Texas
  12. Texas A&M
  13. Vanderbilt University
  14. Virginia Tech
  15. West Virginia University

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT   .

12September

Jumbo Mortgage Rates, Not So Jumbo

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JumboRateNotOnce in a blue moon economic theories and trends break from conventional rationale.  Over the past two weeks this “blue moon” appeared in the mortgage loan market concerning conventional and jumbo mortgage rates.  For the first time that lending executives can remember, the interest rate on the jumbo 30-year fixed-rate mortgage (4.71%) dropped slightly below the conventional 30-year fixed rate of 4.73%, according to the Mortgage Bankers Association.  “In my 30-year career, I’ve never seen non-conforming loans priced below conforming loans,” said Brad Blackwell, executive vice president of Wells Fargo Home Mortgage.  Typically jumbo mortgage rates are at least .25% above conventional mortgage rates.

Jumbo mortgages exceed the $417,000 limit set on conventional loans (in most areas) and are not backed by government-sponsored enterprises (GSEs).  Conventional mortgage loans fall below $417,000 and are backed by GSEs (Freddie and Fannie). So what is causing this anomaly?

Conventional mortgage loans have become more expensive due to higher guarantee fees charged by GSEs to the companies that sell their loans.  These fees have increased by more than .25% over the last three years.  The higher guarantee fees result in higher mortgage interest rates.  Conventional mortgage rates are also closely tied to how mortgage backed securities (backed by GSEs) trade; and therefore, follow the increase in mortgage backed interest rates.

Jumbo mortgage loans are a bit different in nature.  They are not as securitized as conventional mortgage loans, tend to be carried on the bank’s balance sheet, and are tied to the bank’s cost of capital, which has not increased in this environment.  Lou Barnes, a mortgage banker in Colorado commented on this situation, “Commercial banks are just desperate to book an asset that will pay something.”

Wealthy Americans are taking advance of this rare occurrence and going on a shopping spree.  According to recent data from Realty Trac, the percentage of people buying houses in the price range of $1-$2 million with a jumbo mortgage increased to 63% in July, up from 49% a year over year.  Properties priced at $2-$5 million increased to 46% from 27%.  This could be correlated to still historically low interest rates and the opportunity to buy property before prices appreciate further.  For these wealthy Americans who are still sitting on lots of cash, this is more of an investment and financial decision rather than needing a roof over their heads.  Some believe this trend could continue if the cost of capital for banks remains stable while demand for mortgage loans continues to grow at a steady pace.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

 

Sources: http://www.mortgagebankers.org/NewsandMedia/PressCenter/85594.htm  http://www.realtytrac.com/

9September

Mortgage Applications and Home Prices Look Up

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As the markets continue to ride the proverbial roller coaster, housing data has managed to avoid such large swings and appears to be steadily chugging onward and upward; showing a clearer picture than the last few weeks.  The Mortgage Bankers Association’s mortgage application activity index reflects refinancing and home purchase demand.  It reported a 1.3% increase during the last week of August which comes off the heels of a 2.5% drop the week prior.  Last week’s refinance index increased 2% from the week before.

render of rising arrowThis increase in mortgage applications could be due in part to the 30-year mortgage rate which dropped to 4.73% from its high earlier this year of 4.80%.  The slight drop in interest rates has also encouraged current homeowners to refinance before rates go any higher, even though they are still very low.  Some economists expect that as the fed begins to taper bond purchases, the housing recovery may in the long term slow and lose its momentum, meaning mortgage applications and home prices could top out.  For now, it could encourage potential home buyers to get off the sidelines and get in the game before rates rise even more and before home prices tick even higher.

The monthly CoreLogic report indicates that home prices, including distressed homes, jumped 12.4% higher in July from a year ago (1.8% up from a month ago).  This is the 17th month in a row for home prices to increase.  “Looking ahead to the second half of the year, price growth is expected to slow as seasonal demand wanes and higher mortgage rates have a marginal impact on home purchase demand,” said Mark Fleming, chief economist for CoreLogic.  This high number is also in part due to fewer distressed homes for sale.  Home prices were up 11.4% excluding distressed home sales over the last year.

The current supply of properties for sale is tight, which is also helping to push home prices higher.  Recently, home builders have slowed their pace of construction, not keeping pace with the demand for new homes, leading to lower inventory numbers.  Demand for housing is supported by the recently reported mortgage application numbers.  Some believe this situation won’t change much over the course of this next year.  Recalling from Econ 101, tight supply and strong demand will push home prices up whether they are new builds or existing homes.  The biggest threat to this bullish story in housing continues to be interest rates and how quickly they move up.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT.  Like us on Facebook. Follow us on Twitter.

 

Souces: http://www.corelogic.com/about-us/researchtrends/home-price-index-report.aspx

http://www.mbaa.org/NewsandMedia/PressCenter/85594.htm

30August

The Best Places For Business And Careers | Forbes Surprising Top 10

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Large Cities Distressed-PropertiesAmericans love cheering for the home team. We also enjoy taking a sneak peek inside our neighbor’s reality to see whether the grass is truly greener on the other side.  Forbes recently released their 15th annual list of “Best Places for Business and Careers”. Recent graduates and those re-shaping their careers might find interesting insights. This analytical sneak peek reveals surprising details about why some cities excel while others continue to struggle.

The report reveals that the winning formula for many thriving cities includes a combination of low business costs,  an affordable cost of living plus access to a well-educated labor pool. This year’s Forbes list of “Best Places for Business And Careers” includes 200 major metros.  See how each scores on key metrics such as: Cost of Business, Job and Population Growth, and Education Rank.

Some of the Forbes “Best Places for Business and Careers” top performing metros appear to receive the least amount of news coverage from mainstream media.

This year’s #1 city is Des Moines, Iowa. Des Moines out-ranked all competitors by scoring in the top quartile on 9 of 12 key metrics used to grade the field of 200.  Des Moines rose to the top by keeping business costs 17% below the national average and by maintaining an educated workforce. Reportedly, 35% of the population has a college degree and 92% have high school diplomas.

Struggling California metros overshadow the bottom of the rankings. Cities such as Salinas, Stockton, Modesto and Merced face high unemployment, negative growth and less educated work forces.  Click here to browse all 200 rankings. Whether you agree or disagree with the rankings, the insider facts and insights in the report are riveting.

Here’s a quick peek at the top 10 metros:

Top 10:  

  1.  Des Moines , Iowa    
  2. Provo, Utah
  3. Raleigh, North Carolina
  4. Lincoln, Nebraska
  5. Nashville, Tennessee
  6. Denver, Colorado
  7. Fort Collins, Colorado
  8. Oklahoma City, Oklahoma
  9. Seattle, Washington
  10. Durham, North Carolina 
   

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT.  Remember to like us on Facebook. Follow us on Twitter.