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Foreclosure Activity Down in California

By Paula · Comments (0)
Friday, July 27th, 2012

 Foreclosure Activity Down in California

Following promising reports of increased sales in California’s Southland Empire, analytics company DataQuick issued another release revealing that foreclosure activity is down in the state.

According to the company’s data, the number of California homes entering the formal foreclosure process dropped in the year’s second quarter to its lowest level since early 2007.

During the period between April-June, a total of 54,615 Notices of Default (NODs) were recorded on houses and condos, a 2.9 percent decrease from the first quarter and a 3.6 percent decrease from the same period in 2011. This total is the lowest since second-quarter 2007, which saw 53,943 NODs.

The most noticeable year-over-year drop was in the Bay Area, which saw a 13.4 percent drop in NODs from 2011.

The fall in activity is attributed to several factors, including an improved housing market, growth in short sale activity, and the falling number of egregious mortgages originated between 2005-2007.

However, DataQuick president John Walsh said that the decrease in foreclosure activity could just be a brief lull.

“The foreclosure process has always been the sanitation department of the housing sector. It’s where financial distress is processed. The question is whether these lower NOD numbers mean that there’s less distress to process, or if we’re just seeing distress get processed at a slower pace,” said Walsh.

According to DataQuick, most of the loans going into default are from the 2005-2007 period. The median origination quarter for defaulted loans is third-quarter 2006 for the third straight year, indicating a peak in weak underwriting standards at that time.

DataQuick’s findings showed that mortgage defaults tended to remain concentrated in the state’s most affordable neighborhoods. Zip codes with median sales prices of $200,000 or less had a ratio of nearly nine NODs filed for every 1,000 homes, while zip codes priced between $200,000 and $800,000 had a ratio of 5.6 NODs filed per 1,000 homes.

In the state’s larger counties, mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties. Tulare, San Joaquin, and Sacramento counties had the highest probability of foreclosure.

As the economy slowly regains its strength, Walsh said the housing market may start looking to other options to avoid foreclosure activity.

“Obviously the economy has been on the mend – however slowly. But because housing is widely seen by economists as the biggest drag on growth, some interesting alternatives to the foreclosure process are being discussed, such as the use of eminent domain to buy and restructure mortgages. Needless to say, we’re all watching closely,” he said.

Article courtesy of DsNews.com

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Real Estate Outlook: Existing-Home Sales Rise Again

By Paula · Comments (0)
Thursday, February 9th, 2012

Real Estate Outlook: Existing-Home Sales Rise Again

 

The National Association of Realtors latest existing-home sales survey shows that sales are on the rise again. This is the third straight month of increases as well the rate rising above year ago levels. December saw a 5.0 percent rise and is now 3.6 percent above December 2010. The entire of year of 2011 experienced an overall 1.7 percent rise in existing-home sales over 2010.

Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

Regional increases were seen across the board, but had the largest increase in the Northeast which rose by 10.7 percent for the month of December. Next in line was the Midwest, rising 8.3 percent. The South and west followed suite, rising 2.9 and 2.6 percent respectively.

This rise in existing-home sales has led to a dip in available inventory, which is welcome news for many sellers who are facing steep competition. NAR reports “available inventory has trended down since setting a record of 4.04 million in July 2007, and is at the lowest level since March 2005 when there were 2.30 million homes on the market.”

Total housing inventory fell a staggering 9.2 percent in December to 2.38 million homes for sale. “The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future,” Yun said.

NAR President Moe Viessi, broker-owner of Veissi & Associates Inc., in Miami, said more buyers are expected to take advantage of market conditions this year. “The American dream of homeownership is alive and well. We have a large pent-up demand, and household formation is likely to return to normal as the job market steadily improves,” he said. “More buyers coming into the market mean additional benefits for the overall economy. When people buy homes, they stimulate a lot of related goods and services.”

Partially to blame for pent up demand has been the large amount of contract failures. The NAR says failures were reported by 33 percent of NAR members in December, unchanged from November; they were 9 percent in December 2010.

Declined mortgages and depressed home values leading to loan values under appraised values are heavily at fault. A recent Government Accountability Office (GOA) found that the appraisal process needs more monitoring procedures.

A recent NAHB survey shows that one out three builders have lost signed sales contracts because of flawed appraisals.

NAHB Chairman Bob Nielsen says, “The current system is not working.” He called for resolution of a flawed appraisal process. He says the current system “fosters price instability, puts more families in danger of default or foreclosure, and undermines the housing and economic recovery.”

Published: January 30, 2012 By Realty Times
Written By: Carla Hill

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Pending home sales continued to rise in November

By Paula · Comments (0)
Friday, January 20th, 2012

Pending home sales continued to rise in November, reaching their highest level in 19 months, the National Association of Realtors (NAR) reported late last week.

The trade group’s index of signed sales contracts jumped 7.3 percent between October and November and is 5.9 percent above its level a year earlier. The last time the index was higher was in April 2010 as buyers rushed to beat the deadline for the homebuyer tax credit.

James Frischling, president and co-founder of NewOak Capital, says the latest results are likely to feed the view that there is a recovery going on in the housing market.

“This was an unexpected jump-up, with every region showing gains including a 15 percent increase out west, which has been the hardest hit area since the housing bubble burst,” Frischling noted.

Despite the strong gains atypical of the season, Frischling remains cautious. He says with contract cancellations above 30 percent, Realtors are keenly aware that it’s premature to conclude a housing recovery is underway based on November’s strong pending sales report.

Lawrence Yun, NAR’s chief economist, agrees that contract failures have been running unusually high.

“Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,” he said.

Still, Yun described November sales activity as “doing reasonably well in comparison with the past year.”

“The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead,” Yun added.

According to Frischling, the overarching question is whether there are a sufficient number of buyers to absorb the supply of homes which will inevitably hit the market.

With the foreclosure pipeline still growing and over 6 million borrowers behind on their mortgage payments, he says the inventory of homes available for sale will continue to build up, putting downward pressure on home prices and holding back any meaningful recovery.

“Yet with the rental market on fire, an improving jobs picture, and with interest rates being so low, the spike in contracts signed was a welcomed way to finish the year,” Frischling said. “The follow-through on these pending home sales will tell whether the positive factors facing the housing market outweigh the negative and if this market has finally turned the corner.”

NAR acknowledged last month that it over-estimated actual sales closings for existing homes, going back to 2007. The trade group has adjusted sales and inventory figures for the last four years downward by 14.3 percent, citing discrepancies between sales reported by multiple listing services (MLSs) and sales included in its U.S. Census benchmark.

Pending home sales, however, are not affected by the recently published re-benchmarking of existing-home sales, according to NAR, namely because the pending sales index uses a different methodology based directly on contract signings and is adjusted for seasonality.

Article courtesy of: DSNews.com

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It’s Time to Buy That House

By Paula · Comments (0)
Sunday, November 27th, 2011

It’s Time to Buy That House

U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.

The good news? Two key measures now suggest it’s an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation’s ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter “throws money down the drain.” Whether buying is a better deal than renting isn’t a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.

But the math is turning in buyers’ favor. Stock-oriented folks can think of a house’s price/rent ratio as akin to a stock’s price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody’s Analytics. The average from 1989 to 2003 was about 10, so valuations aren’t quite back to normal.

But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren’t hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or “points.”) The latest rate is still less than half the average since 1971.

As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index’s historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today’s buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.

For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer’s monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.

Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. “If you have good credit, a job and a down payment, you can get a mortgage,” Mr. Humphries says. “There’s more paperwork and scrutiny than five years ago, but things are pretty much like they were in the ’80s and ’90s.”

Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.

For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent “yield.” The median market’s rent yield is 9.3% and Detroit’s is 17.9%.

Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor’s 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.

A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody’s Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. “If the economy slips back into recession, however, we could easily see a 10% drop,” Ms. Chen says.

And property “flipping” can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren’t that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.

Houses aren’t the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.

Resource: http://WallStreetJournal   Written by: Jack Hough at SmartMoney.com.

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Energy Tax Credit Facts

By Paula · Comments (0)
Friday, October 14th, 2011

Energy Tax Credit Facts

Buyers and contractors alike are looking for new ways to incorporate green technology into homes. Not only do these upgrades save money in the long run, but they also go a long ways in preserving Mother Earth.

Have you heard about the government’s “green” homeowners’ incentives? Take a moment to see how you can upgrade your home and get money back!

There are two basic tax credits available for those interested in making energy efficient improvements to their homes.

First, the Wind, Solar, Geothermal and Fuel Cell Tax Credit. It’s good for both existing homes and new construction, when used for a homeowner’s principal residence.

Homeowners will received a credit totaling 30 percent of their cost for improvements put into service between January 1, 2011 and December 31, 2011.

Here’s a list of what can qualify:

*  Geothermal Heat Pumps
*  Solar Panels
*  Solar Water Heaters
*  Small Wind Energy Systems
*  Fuel Cells (on this item the credit may not exceed $500 for each 0.5 kilowatt capacity; other limits apply in the case of joint occupancy)

The second notable credit is for Qualified Energy Efficiency Improvements, which gives a 10 percent credit for purchases that were “placed in service” this year.

This particular credit does have a limit, with “the maximum credit for a taxpayer for all taxable years being $500, and no more than $200 of such credit may be attributable to expenditures on windows. This rule means that taxpayers who have claimed $500 or more of this tax credit in prior years, particularly 2009 and 2010, can no longer participate in the program.” (NAHB)

Let’s take a look at what qualifies, according to the National Association of Home Builders an item qualifies if it:

*  meets or exceeds the prescriptive criteria for such a component established by the 2009 International Energy Conservation Code as such Code (including supplements) (or, in the case of windows, skylights and doors, and metal roofs with appropriate pigmented coatings or asphalt roofs with appropriate cooling granules, meets the Energy Star program requirements);
*  is installed in or on a dwelling located in the United States and owned and used by the taxpayer as the taxpayer’s principal residence;
*  the original use of which commences with the taxpayer; and
*  that reasonably can be expected to remain in use for at least five years.

These items can include building envelope components, insulation materials or systems, exterior windows, skylights, doors, storm windows and storm doors, metal or asphalt roofs, advanced main air circulating fans, and qualified natural gas, propane, or oil furnaces or hot water boilers.

Perhaps most important is how one goes about filing these claims. First, keep every single receipt, along with make, manufacturer, and model number on items. You can file these credits alongside your taxes using Form 5695. If you have lots of credits and deductions to take, it might be wise to enlist the help of a tax professional. Also check out http://energystar.gov/taxcredits for more information!

Written by Carla Hill

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Forget The Market

By Paula · Comments (0)
Saturday, August 27th, 2011

Forget the Market… Buy a House

With the Dow Jones Industrial Average down more than 400 points today, and many market experts predicting more volatility ahead, some advisers are recommending their clients put some of their cash to another use: To buy that house or summer home at the shore.

Potential home buyers certainly have plenty of incentives: Home prices are still way down in many parts of the country, and mortgage rates are nearing their all-time lows. Consider: The benchmark 30-year fixed-rate mortgage fell 1 basis point this week, to 4.45 percent — just a few basis points above the record low hit in October 2010, according to the Bankrate.com national survey of large lenders. Freddie Mac, meanwhile, reported today that the 30-year fixed-rate mortgage averaged 4.15% for the week ended Aug. 18, its lowest reported rate in 50 years.

Another reason to act now, say experts: While the recent passage of the debt deal is likely to keep mortgage rates low for now, home buyers could soon find themselves with fewer incentives once the details of the debt deal are ironed out. Lawmakers have been debating a simpler tax system with lower tax rates and fewer tax breaks that could include reducing the generous mortgage tax deduction as part of the long-term spending cuts that must be agreed on this fall.


Of course, buyers still need significant down payments, stellar credit and job security, but if “you’re financially prepared to do so, it’s a great time to buy a house,” says Greg McBride, senior financial analyst at Bankrate.com. “Affordability is tremendous, and if you’re in a position where you have the financial security that others are lacking, you’re in a great position to grab a good deal.” Rebecca Hall, a financial planner in Reston, Va., said several of her clients have decided to buy second homes instead of putting more money in the market. “People don’t view real estate as volatile as the market,” says Hall. “Housing prices go down, but people aren’t on-line looking at it every day,” she says. “You view housing as a much longer term investment so it’s a little easier to handle [the volatility].”

**Posted courtesy of http://SmartMoney.com
By Jilian Mincer

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What Comes Around Goes Around

By Paula · Comments (0)
Monday, May 16th, 2011

Rancon’s 9th Annual Merchant Builder Symposium Wrap-Up

What Comes Around Goes Around 

Mark Boud sees new real estate cycle around the corner
Temecula, CA – On April 21st, Rancon Group held its Ninth Annual Merchant Builder Symposium a Rancon’s brand-new Prelude at Europa Village in Temecula Wine Country. Over 40 leaders in the homebuilding industry were treated to presentations by a panel which included Mark Boud, Principal of Real Estate Economics; Bob Johnson, Assistant City Manager for the City of Temecula; and, Riverside County 5th District Supervisor Marion Ashley. 

Mark Boud – A Believer in Real Estate Cycles

As founder and principal of Real Estate Economics, Boud has worked through, logged and analyzed real estate cycles during the past 25 years. In April, Boud told a group of public and private home builders that for those who understand the cycle, there is an opportunity brewing in Southwest Riverside County.
Boud defined our market cycles as periods that typically register “double-digit appreciation” in homes for at least two years before a period of correction. He talked about the cycles in the late 1970s and 1980s, the anomalies associated with the past cycle, and the horrific cycle crash we’ve just experienced.
He said that typical cycles are when house appreciation registers at 10 to 14 percent annually for two to three years, then goes through a correction period. In the most recent cycle, the extended ‘bubble’ caused by loose lending, and the resultant financial crash, has caused an over correction such that we’ve never experienced before, spelling a short window of opportunity that we may never see again in terms of home purchase and land acquisition.
He noted that the market should have corrected itself in the early 2000s, but that loose lending that helped homebuyers and derivative bankers, inflated the market.
“After 2002 we experienced a non-traditional market where instead of housing appreciating at eleven or twelve percent a year for a couple of years, they were going up 20%+ for four consecutive years,” said Boud. “In 2008 home prices dropped by 38 percent and more in some areas, which is the price paid for allowing such artificiality into the cycle.”
In the bad news, Boud noted that the Inland Empire lost in the neighborhood of 180,000 jobs during the recession. He also said that the market was “very oversupplied” at the time and the combination of tightened lending, distressed properties and oversupply of new homes was like a perfect storm for collapsing the value of homes.
In better news, the market has already formed a floor, according to Boud. Houses in the Inland Empire are more affordable than they’ve been in decades and, in fact, are currently more than $100,000 undervalued, on average. Also, the economy and job market are beginning to improve. In December, the Inland Empire reported the first year-over-year job growth since 2008. In addition, distressed housing inventory is being whittled down, although still about 57 percent of home sales are distress-related. “In the next five years a lot of jobs will be created in Orange and San Diego counties as well as here in the Inland Empire. Jobs are directly related to new home sales, “said Boud. “For those who understand the cycle, there is an opportunity now to purchase at dramatically under valued levels.” Boud said that “very little land is being improved and very little housing is being built,” and these factors will combine with economic growth to build upward pricing pressure during the new cycle.
“I’m a believer in the cycle and I anticipate the next cycle is beginning and we will see this cycle build a foundation in 2012 through2014 for another double-digit run-up in price thereafter,” said Boud. This cycle will be driven by new job creation in high-tech, bio-tech, green-tech, medical and others.”

Mark Boud Presentation – At a Glance

· The Inland Empire economy is now gaining jobs, with year-over-year job growth beginning 1st Qtr 2011

· Housing Construction is at an all-time low – small builders can’t get financing to build homes

· Housing Affordability is an all-time high – a severe over correction is already well established

· Despite an anticipated rise in foreclosures during 4th quarter, distressed housing inventory is still trending downward

· Marginal price appreciation has begun, but a prices will recede mildly during the next six months

· Transactions remain high, but may fall during the next few months

· Current market improvements are being driven by under valuation as opposed to economic growth

· Mature market demand will become a driving force in the next cycle

Bob Johnson – The Next Generation of New Homes and New Home Buyers

Jobs are the key to improving the current economic climate in Riverside County, according to Bob Johnson, Assistant City Manager for The City of Temecula. Johnson told the group of Merchant Builders that Riverside County went from having the nation’s second fastest growing economy in 2005 to an economy with almost no growth for past couple of years.

“It’s absolutely shocking to see the housing market as it is today,” said Johnson in his opening remarks. He pointed to all the usual suspects: high unemployment, uncertainty, workers making less money, foreclosures, etc.

On a brighter note, he said that the inventory of existing foreclosures is diminishing, and that the next cycle of new home buyers will be a “creative class” of knowledge workers. He advised the homebuilders to create walkable, transit-oriented communities, to attract the next class of new home buyer.

Marion Ashley – Riverside County Gearing Up

Marion Ashley, 5th District Supervisor, touched on job creation and infrastructure speaking at the Merchant Builders Symposium.  Ashley noted that since the recession started services from Riverside County Staff have been reduced by 25 percent to 50 percent in some areas.

He also noted that even though services have been reduced, the County is going forward with several infrastructure projects such as the widening of the I-215, rail improvements to Perris, and beatification programs in several areas.

He told the audience he looks to developing areas such as March Global Port and the planned new freight facility in Cabazon as good signs for the job market.

_________________________________________________________________

The Rancon Group will be at the Pacific Coast Builders Conference June 22nd improving our market knowledge and continuing to foster new relationships while enhancing existing ones.
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It’s time to buy again

By Paula · Comments (0)
Thursday, April 7th, 2011

Real estate: It’s time to buy again

Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.

A home under construction in Austin. The number of new homes in the pipeline nationwide is quite low. 

From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”

Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company’s client list includes virtually every major homebuilder and bank — from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC).

The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory — the key metric in determining whether a market has a surplus or a shortage of new housing.

Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. “If we had anything like normal levels of buying, those houses would sell in 2½ months,” says Castleman. “We’d see an incredible shortage. And that’s where we’re heading.”

If all the noise you’re hearing about housing has you totally confused, join the crowd. One day you’ll read that owning a home has never been more affordable. The next day you’ll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it’s hard to know what to think. Even Robert Shiller and Karl Case can’t agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing’s future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: “The lack of new home building is a huge help that a lot of people are ignoring,” says Case. “People think I’m crazy to be optimistic, but housing is looking like the little engine that could.”

To see where real estate is truly headed, it’s critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled “Is the Housing Boom Over?,” this writer’s analysis found that the basic forces that govern the market — the cost of owning vs. renting and the level of new construction — were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals — only now they’re pointing in the opposite direction.

So let’s state it simply and forcibly: Housing is back.

Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.

Drumming up sales 

Of course, home prices are low and home construction is weak for a reason: incredibly low demand. For our scenario to play out, America will need a decent economy, with job creation and consumer confidence continuing to claw their way back to normal.

One big fear is that today’s tight credit standards will chill the market. But we’re really returning to the standards that prevailed before the craze, and those requirements didn’t stop prices and homebuilding from rising in a good economy. “The credit standards are now at about historical levels, excluding the bubble period,” says Mark Zandi, chief economist for Moody’s Analytics. “We saw prices rising with fundamentals in those periods, and it will happen again.”

To see why, let’s examine the remarkable shift in home affordability. A new study by Deutsche Bank measures affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8% of their income in after-tax mortgage, tax, and insurance payments. That’s down from 17.2% at the bubble’s peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it’s now cheaper to pay a mortgage and other major costs than to rent the same house. What’s most compelling is that in all of the distressed markets, owning now wins by a wide margin — a stunning reversal from four years ago. It now costs 34% less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or stucco cottage as an owner. (For more, see The top 10 cities for home buyers)

Not all markets will bounce back equally, of course. Housing resembles the weather: The exact conditions are different in every city. But in general the big U.S. markets fall into two different climate zones right now. We’ll call them the “nondistressed markets” and the “foreclosure markets.” A more detailed look shows why the forecast for both is favorable.

Nondistressed markets: Ready for launch

No cities went untouched by the collapse in prices over the past few years. But markets such as Northern Virginia, Indianapolis, Minneapolis, San Diego, the San Francisco suburbs, and virtually all of Texas held up reasonably well. In those areas prices spiked far less than in bubble cities — the foreclosure markets we’ll get to shortly — chiefly because they didn’t get nearly as many speculators who thought they could flip the homes or rent them to snowbirds.

The nondistressed markets will be able to get prices rising and construction growing far faster than the harder-hit areas for a simple reason: Although some of these markets are still suffering from foreclosures, they don’t need to work through the big overhang haunting a Las Vegas or a Phoenix. The number of new homes for sale or in the pipeline is extraordinarily low in nondistressed markets. San Diego is typical. It has just 921 freestanding homes for sale or under construction, compared with 4,425 in late 2005. The challenge for these cities is to generate enough demand to reduce inventories of existing, or resale, homes. In the entire country the resale supply stands at 3.5 million houses and condos. That’s a fairly high number, since it would take more than eight months to sell those properties; seven months or below is the threshold for a strong market.

But in the nondistressed cities, the existing home inventory is lower, closer to seven months on average. So a modest increase in demand will translate into strong gains in both prices and new construction. That should happen quickly, because most of those markets — including Silicon Valley, Northern Virginia, and Texas — are now showing good job growth.

Zandi of Moody’s Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents, which are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.

In Northern Virginia, Chris Bratz, an engineer, and his wife, Amy DiElsi, a publicist, are planning to leave their rental apartment and become homeowners for the first time. The main reason? Buying has simply become a far better deal than renting. “The market got completely inflated, then it crashed, so prices are coming back to where they should be,” says Chris. As the couple have watched prices fall, they have also watched the rent on their apartment spiral upward, reaching $2,700 a month. They calculate that they should be able to purchase a townhouse for between $400,000 and $500,000 and pay less per month for a mortgage.

The nondistressed markets will also lead the way in construction. Zandi predicts that for the nation as a whole, single-family housing “starts” — measured when a builder pours a foundation for a new home — will rise from 470,000 in 2010 to as much as 700,000 this year. A large portion of that activity will happen in nondistressed markets where a tightening supply of resale houses will start making new homes look like a good deal. “Our main competition is from resales,” says Jeff Mezger, CEO of KB Home. “The prices of those homes have stayed so low, because of low demand, that it’s hampered the ability of builders to sell new houses.”

But many would-be buyers simply prefer a brand-new house. Eventually they’ll move from renters to buyers, and the trend will accelerate now that prices are no longer dropping. In Minneapolis, Yuan Qu and her husband, Xiang Chen, a researcher at the University of Minnesota, just moved from a two-bedroom rental to a new light-blue four-bedroom ranch with a chocolate-colored roof on a spacious corner lot. They paid $400,000, a bargain price compared with a few years ago. The couple, both in their early thirties, moved to Minnesota from China six years ago. “We wanted to buy a house, and we’ve been waiting and waiting and waiting,” says Qu. “The prices went down for so long, we finally thought they couldn’t keep falling.” For Qu the only choice was new construction. “We’re not very handy people,” she admits.

Foreclosure markets: The outlook is brightening

A home off the market in Mesa, Ariz. 

The true disaster areas for housing since the bubble burst have been Sunbelt cities such as Las Vegas, Phoenix, and Miami — places that boasted great job and population growth in the mid-2000s, only to suffer a housing crash that swamped them with empty homes and condos and crushed their economies. But people always want to live in those sunny locales, and their job markets are starting to recover, albeit slowly. In foreclosure markets the inventory problem is far greater because it includes not just traditional resale homes but millions of distressed properties. Fortunately those houses are now such a screaming deal that investors, including lots of mom-and-pop buyers, are purchasing them at a rapid pace. To be sure, some foreclosure markets won’t rebound for years because they’re both vastly overbuilt and far from big job centers; a prime example is California’s Inland Empire, a real estate disaster zone 80 miles east of Los Angeles.

But the outlook is brightening for Phoenix, Las Vegas, Miami, and parts of Northern California. A big positive is the tiny supply of new homes entering the market. Phoenix, for example, has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006. The big test in these cities is absorbing the steady stream of distressed properties. The foreclosures put downward pressure on the market far out of proportion to their numbers because of markdown pricing. “We had levels of inventory even higher than this in 1990 and 1991,” says MIT economist William Wheaton. “But they were traditional listings, not foreclosures, so they didn’t create the big discounts you get with foreclosures.”

Wheaton reckons that we’ll see a flow of around 1 million foreclosures a year, at a fairly even pace, from now through 2013. That figure is frequently cited as evidence that the market is doomed for years in most foreclosure markets. Not so. The reason is that the vast bulk of those units, probably over 600,000, according to Gleb Nechayev, an economist with real estate firm CB Richard Ellis (CBG), are being converted to rentals either by investors or their current owners. Those properties are finding plenty of renters, since the rental market is still extremely strong across the country. Remember, the millions who lost their homes to foreclosure still need somewhere to live.

A typical investor is Alex Barbalat, a Russian immigrant who’s purchased seven homes east of San Francisco in the towns of Bay Point, Antioch, and Pittsburg. His average purchase price is around $100,000 for homes that once sold for between $300,000 and $500,000. But he has no trouble finding renters, since his tenants can commute to jobs in San Francisco on the BART transit system. Barbalat is pocketing rental yields on the prices he paid of around 12%, and he’s in no hurry to sell. “I’m holding them until prices drastically rise,” he says.

Investment funds are also entering the game. Dotan Y. Melech looks for bargains in Las Vegas for UnitedAMS, a firm he co-founded that manages apartments and other real estate investments. The firm has raised more than $20 million from outside investors to purchase distressed properties. So far, Melech has bought around 300 houses and plans to purchase another 200 this year. He has no trouble renting the houses he buys, since, he estimates, occupancy rates in Las Vegas are touching 95%. The “cap rate,” or return on investment after all expenses, is between 8% and 10% — twice the rate on 10-year Treasuries. Melech rents to people who lost their homes but are reliable renters. “A lot of people can’t be buyers because their credit got hurt,” he says.

Even with investors jumping in, buying activity in foreclosure markets hasn’t yet increased enough to bring inventories down. It will soon. Zandi thinks prices will fall a couple of percentage points lower in the distressed markets in the short run. “But that will be overshooting,” he says. “It’s like an elastic band. If prices do drop this year, they will need to bounce back because they’ll be far too low compared with rents and replacement cost.” Renters will come off the sidelines to purchase homes in the years ahead, precisely the opposite trend of the past few years.

Consider the example of Michael Dynda, a retired Air Force avionics technician who now works for a government contractor in Las Vegas. Dynda, 49, is a first-time buyer who put off purchasing for years, in part because prices were falling so rapidly in Las Vegas, with no bottom in sight. But last year the combination of bargain prices and low mortgage rates became too good to resist. He ended up purchasing a 2,300-square-foot stucco home for $240,000, or about half what it would have fetched in 2007. Dynda got a 4.38% home loan, and pays the same amount on his mortgage as on the rent on the house he left to become a homeowner. “The timing was about as good as it could get,” says Dynda.

Mike Castleman’s company tracks the inventory of new homes in 19 states across the country. He sees supply getting tight. “Home prices are fixin’ to rise,” he says. 

Back on the ranch, Mike Castleman is lounging in his creek-front mansion, built from “a hundred tons of fine central Texas limestone.” As he shows off his collection of custom-made guitars, including one crafted to resemble the skin of a rattlesnake, the homespun housing guru once again returns to his favorite topic.

Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. “It takes three years between the time a bull mates with a cow and when you get a calf ready for market,” he says. “That’s how it is in housing too. We’ll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house.” But those folks, says Castleman, will be set on buying a place. “And they’ll want it so bad they’ll bid the prices up!” In other words: Beat the crowd.

It’s a Great Time to Buy a House
Mike Castleman, the Texan with the best realtime view of housing in the U.S., tells editor-atlarge Shawn Tully that the naysayers are about to get a big surprise: rising prices for new homes.

–Reporter associates: Anne VanderMey and Christopher Tkaczyk
Article Courtesy of: http://cnn.com  Direct link to article: http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/

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Forget Napa Temecula is home to Southern California’s best wineries

By Paula · Comments (0)
Thursday, April 7th, 2011

Forget Napa, Temecula is home to Southern California’s best wineries

Temecula has often been known as the Napa Valley of southern California and rightfully so. With four-diamond accommodations, golfing, impeccable wine tasting, and even a casino, Temecula is quickly becoming the best hidden gem in the west for wine tasting and luxury amenities and dining. Here are our favorite picks for business travel in Temecula.

Pechanga Resort and Casino is a Four Diamond property offering more than 500 guest rooms, on site spa, Arthur Hills-designed 18-hole master golf course, impressive entertainment and concert venue, comedy club, eight restaurants and 200,000+ sq. ft. gaming floor. Place your bets on slot machines, table games and exclusive High Limit Gaming Area. We bet wineries in Napa are pretty disappointed they don’t have a casino in their valley to gamble, relax and unwind.

Journey at Pechanga is one of Southern California’s newest Championship Golf Courses and has a walk-in rate of $150 during the week and $200 on the weekends. Views are spectacular and the course is a favorite among golf’s big whigs. Since the golf carts are equipped with state-of-the-art GPS systems with course tips and narration by U.S. Ryder Cup captain Corey Pavin, you won’t ever get lost if you venture too far off course.

Wilson Creek Winery & Vineyards went from humble beginnings to a powerful force in the valley. While the winery is most known for its delicious red wine and almond champagne, what really sticks out is Bill Wilson’s hospitality and welcoming staff and family. Wilson Creek has an amazing event space for corporate meetings and weddings and make sure to ask about jazz concerts on the lawn.

Do not leave the winery without 1) taking home a case of the Almond Champagne, 2) going on a winery tour to see how the winery operates and see what’s coming up for the season 3) trying the Almontini, the Wilson Creek Port Decadencia served in a Dutch chocolate cup, and 4) sitting and relaxing on their expansive grounds.

Palumbo Family Vineyards and Winery is a must-see and has the most amazing 2009 Viognier that is punch full of crisp and fresh notes of honey and floral hints. Nick and Cindy Palumbo own the 13-acre winery and offer some of the best handcrafted artisanal wines in the area. And not to mention, a breathtaking winery with unparalleled views.

Hart Family Winery is another must-see in Temecula Valley and is one of the original wineries that have made a lasting impression on residents and visitors alike. The 2006 Zinfandel is out of this world and I kept hearing about their Sauvignon Blanc that was still in the tanks at the time of my visit. It sells out every year so consider yourself lucky if you get your hands and lips on it. And apparently the folks over at Hart call their Rose Blanc de Franc a “hot tub wine” because it’s best enjoyed with your clothes off. Make sure Hart is one of the first stops you make. Trust me.

Doffo Vineyards is what I like to call the “man’s winery” and is micro-boutique winery estate adorned with refurbished racing and vintage motorcycles, masculine color palettes and an amazing winemaker, Marcel Doffo. The Doffo family, who can most likely be found in the tasting room, shares their Argentinean and Italian roots with everyone who walks through their doors. Their Doffo Port – Non Vintage was the best I’ve ever tasted and blends six vintages into a single bottle. Who knew blending old and young wine could be so lovely? And don’t even get me started on their Reserve Malbec; it’s worth every penny and must show up at your next business meeting.

If Doffo is for gentlemen, then Keyways Vineyard & Winery is for the ladies. It’s the only woman-owned Temecula winery and the charming and inviting environment keep women coming back for more. Of course, the wood-burning fireplace, leather chairs, and jewelry and baubles for sale are another reason why Keyways is so popular. Teri Pebley Delhamer is the wine owner and has created a beautiful space for a day perfect for wine tasting, romantic proposals, and even your wedding and reception.

Her Traditions 2009 Merlot is a favorite and so is the Late Harvest Roussanne 2010. If you’re a new wine drinker and still trying to figure out what your palette likes best, Keyways is the perfect choice for your taste buds to explore. If you’re planning a romantic weekend out to the valley and don’t want to feel bad about hitting some balls on the course sans your lady, drop your wife off at Keyways for a couple hours (with your credit card) and she’ll thank you. I guarantee it.

Thornton Winery is a favorite among executives not only because of its annual Jazz Series, sparkling wine and decadent Café Champagne, but also because it houses its very own helicopter landing pad – just in case you wanted to fly in for the afternoon. Drop by for a glass of their 2006 Late Harvest Zinfandel and stay for a meal. It’ll be one of the best you’ve had in Temecula wine country. The menu changes with the season so come, and come often. Make sure you take advantage of the ever-changing Artisan Cheese Platter, along with the Crab and Shrimp Louis Salad, Short Rib Sliders, and Fried Green Tomato BLT Sandwich. And please do yourself a favor. Buy you and your lady friend tickets to a Gourmet Supper Package during the Jazz Series this season to get the perfect blend of fine wine, amazing music, and even more amazing food.

Old Town Temecula is another route to take if you’re in the area for awhile and want to take a break from tasting. The area is rich in history and tour guide Dale Garcia leads candlelit walking tours if you want to really delve into old Temecula’s historic footprint. Old Town spans only a few blocks so it’s easy to park and walk down the main drag to find a spot for lunch and dinner in between tastings. Definitely check out Public House, Rosa’s Cantina, The Bank, The Edge, or just follow your nose and the most of amount of people in line for a restaurant.

You may also want to check out Temecula Olive Oil Company for a complimentary olive oil tasting of the best olive oils and vinegars made in the area. It’s a friendly little spot to indulge in some artisan olive oils and lucky for you, they offer special memberships and can ship bottles to you. And of course, wine tasting rooms are also available for your pleasure if you want to tap off your meal with a great class of Zin or Sangiovese. Check out Tesoro Winery’s tasting room as they offer the best selection on a little bit of everything.

Wineormous is one of the best routes to take if you know you want to visit a few of the area’s best wineries, but need some extra guidance on the best places to go. Owner Tom Plant can take you and your five friends on an intimate tour of the valley, custom tailored to your preferences. Take your pick at the area’s best wineries and restaurants and let them lead the way.

Accommodations are plentiful in Temecula Valley. There are a couple nice bed and breakfasts, and of course rooms at Pechanga. For the most part, discount hoteliers seem to rule the area. I stayed at the Temecula Valley Embassy Suites, and other hotels were in the surrounding area.

All in all, Temecula Valley has so much to offer. The Valley offers decadent wineries, dining, entertainment and at an affordable price when compared to its counterparts up north. For more information, visit the Valley’s website.

Article originally posted from http://businessreviewusa.com

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Rancon Celebrates 40 Years!

By Paula · Comments (0)
Thursday, February 17th, 2011

Rancon’s 40 Year Syndication History

Rancon was formed in 1971 for the sole purpose of forming real estate partnerships to acquire land in the Inland Empire area of Southern California. During the decade of the 70’s, Rancon formed over 100 small Private Land Partnerships that acquired, entitled, subdivided and sold land for its partners. Rancon also formed fourteen public partnerships; thirteen of which acquired over 5,000 acres of land planted with avocados. By 1976 these Rancon Partnerships combined, were the largest grower of avocados in the world. Then in 1979, Rancon’s fourteenth public partnership, called Green Gold 79, acquired 2,167 acres planted with navel oranges. This ranch was the largest navel orange ranch in the world. With the change in the tax laws in the late 1970’s, Rancon discontinued its public syndication efforts and withdrew from the public syndication business until 1982.

During the decade of the 80’s, Rancon formed approximately twenty-five private partnerships, most of which purchased land. Approximately 5% developed their land into commercial, industrial, or retail buildings and/or apartments. In 1982, Rancon began forming a series of Development Funds and from 1982 to 1989 formed seven large SEC registered public Limited Partnerships. Between these seven partnerships, Rancon raised approximately $400,000,000 in capital and became the largest land syndicator in the United States. With the tax law change in 1987 and the severe recession that began in 1988, this type of real estate syndication, limited partnerships, came to a standstill. As a result, Rancon discontinued forming Public Partnerships and stayed out of that segment of the business until 2001.

The decade of the 90’s were challenging years for real estate investors and companies as we went through a very severe recession lasting approximately seven years. However, in hindsight, what a magnificent time to buy. During that decade, Rancon only did five private offerings and no public offerings. The bright side is that two of our private offerings acquired $300,000,000 in Notes from the Resolution Trust Company (RTC) at a significant discount.

All these Notes were secured by land projects in Southern California and we took possession of the real estate. We then did what we do, which is to create value through the completion of entitlements and sale of the assets, generating over 300% profit to our investors. The other three partnerships formed this decade purchased land, entitled it and sold it at a substantial profit for its investors.

By the first decade of the 2000’s, it was time again to start aggressively acquiring land and forming partnerships. We made our first acquisition in Winchester Valley where we optioned 348 acres and later formed three partnerships called Rancon Winchester Valley 63, LLC; Rancon Winchester Valley 200, LLC; and Rancon Winchester Valley 85, LLC. During this ten year period we formed approximately fifteen land partnerships.

What’s in store for the next decade?

This country has been in a deep recession since 2007. However, most experts feel we have reached the bottom of the cycle. We, at Rancon, are convinced that now is the time to aggressively acquire property. As a result, we are committed to re-entering the public offering arena and for the fourth time, our company is gearing up to raise capital through security firms that sell direct placement investments.

We look forward to this next decade and the opportunities that lie ahead. There is no doubt that Rancon’s forty years of experience in forming real estate partnerships to acquire, entitle and develop land in the Inland Empire, provides us with the knowledge and expertise to perform well for our investors.

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