Report Shows Real Estate Investors Buying Homes With Cash In Janurary

Investors snap up cheap homes, and new buyers miss out!

WASHINGTON -- Home sales are starting to tick up after the worst year in more than a decade. But the momentum is coming from cash-rich investors who are scooping up foreclosed properties at bargain prices, not first-time home-buyers who are critical for a housing recovery.

The number of first-time buyers fell last month to the lowest percentage in nearly two years, while all-cash deals have doubled and now account for one-third of sales.

A record number of foreclosures have forced home prices down in most markets. The median sales price for a home fell last month to its lowest level in nearly nine years, according to the National Association of Realtors.

Lower prices would normally be good for first-time home-buyers. But tighter lending standards have kept many from taking advantage of them. With fewer new buyers shopping, potential repeat buyers are hesitant to put their homes on the market and upgrade.

Cash-only investors are most interested in properties at risk of foreclosure. They can get those at bargain-basement prices.

"The cash-rich investors can come in and get foreclosed properties at incredibly favorable prices," said Paul Dales, senior U.S. economist for Capital Economics. "The average Joe can't take advantage because they simply cannot get the credit to buy."

Sales of previously occupied homes rose slightly in January to a seasonally adjusted annual rate of 5.36 million, the Realtors group said Wednesday. That's up 2.7 percent from 5.22 million in December.

Still, the pace remains far below the 6 million homes a year that economists say represents a healthy market. And the number of first-time home-buyers fell to 29 percent of the market - the lowest percentage of the market in nearly two years. A more healthy level of first-time home-buyers is about 40 percent, according to the trade group.

Foreclosures represented 37 percent of sales in January. All-cash transactions accounted for 32 percent of home sales - twice the rate from two years ago, when the trade group began tracking these deals on a monthly basis. In places like Las Vegas and Miami, cash deals represent about half of sales.

In the three states where foreclosures are highest, at-risk homes make up at least two-thirds of all sales. In Florida, 63 percent of sales in January involved homes that were at risk of foreclosure, according to a Campbell/Inside Mortgage Finance survey. And in Arizona and Nevada, a combined 72 percent of sales involved those homes at risk of foreclosure.

A major barrier for first-time home-buyers is tighter lending standards adopted since the housing bubble burst. These have made mortgage loans tougher to acquire. Banks are also requiring buyers put down a larger down payment. During the housing boom, buyers could purchase a home with little or no money down.

The median down payment rose to 22 percent last year in at least nine major U.S. cities, according to a survey by Zillow.com, a real estate data firm. That's up from 4 percent in late 2006 - as the housing bubble began to burst. The cities included some of the nation's hardest hit markets - Las Vegas, Phoenix and Tampa, Fla. - as well as areas that are rebounding, including San Diego and San Francisco.

That has prevented many from buying, even when the median price of a home fell in January to $158,800. That's a decline of 3.7 percent from a year ago and the lowest point since April 2002.

"If you can get the financing, it's a great time to buy a home with prices this low," said Patrick Newport, U.S. economist with IHS Global Insight.

Many potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further. High unemployment is also deterring buyers. Job growth, while expected to pick up this year, will not likely raise home sales to healthier levels.

With mortgage rates rising, mortgage applications have been volatile. They're now near their lowest levels in 15 years. Economists say it could take years for home sales to return to healthy levels.

"Home prices continue to languish," said Steven Wood, chief economist for Insight Economics. "Any recovery will be difficult to sustain given the still-large supplies of homes for sale and distressed properties."

Last year, home sales fell to 4.9 million, the lowest level in 13 years. And even that number, some say, was overstated.

CoreLogic, a real-estate data firm in Santa Ana, Calif., said it's found that 3.3 million homes were sold last year, far fewer than the National Association of Realtors' 4.9 million figure. CoreLogic has suggested that the Realtors figure is too high.

Since 1968, the Realtors group has produced the monthly report on the number of previously occupied homes sold. The group serves as chief advocate and lobbying arm for real estate agents. It says it's reviewing its 2010 yearly estimate.

One obstacle to a housing recovery is the glut of unsold homes on the market. Those numbers fell to 3.38 million units in January. It would take 7.6 months to clear them off the market at the January sales pace. Most analysts say a six-month supply represents a healthy supply of homes.

Analysts said the situation is much worse when the "shadow inventory" of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.

For January, sales were up in three of the four regions of the country led by an 7.9 percent rise in the West. Sales rose 3.6 percent in the South, 1.8 percent in the Midwest and down 4.6 percent in the Northeast.

The January increase was driven by a 2.4 percent rise in sales of single-family homes. It pushed activity in this area to an annual rate of 4.69 million units. Sales of condominiums rose 4.7 percent to a rate of 670,000 units. See the original post at www.MiamiHerald.com.

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Rapper Vanilla Ice Flips Houses In Florida

Vanilla Ice was most famous for his rap hits from the early 90's. Now Robert Van Winkle is flippin mansions as "cool as ice."

The DIY Network is debuting The Vanilla Ice Project. Rob is remodeling homes in Palm Beach, Florida.



New York Times (NYT): Tell me about the house in Palm Beach.

Vanilla Ice (VI): It was a tax-lien property. We auctioned on it. The house, before I even touched it, already appraised at over $800,000, and I got it for $400,000, so I had a lot of room to play with. It was completely gutted — they took every cabinet, every sink, every toilet, every door and door frame.

VI: It worked out good for me, because it shows really nasty on the show, and then we fix it up amazing. I use a lot of new things in this house that people have never seen in home building before, like ultra-modern, cool, high-tech things that even if you don’t care about Vanilla Ice you’re going to be entertained by. [Ed. note: EVEN if you don't care about Vanilla Ice!]

NYT: Like what?

VI: Most people aren’t accustomed to seeing mood lighting. If you’re in a bad mood, the lights will go red, and they’ll go blue if you’re in a good mood. [Ed. note: IT'S NOT A HOUSE, IT'S A HOME!]

NYT: How does that work?

VI: There’s some kind of sensor, like I guess a mood-ring sensor thing. I really don’t know, I still can’t figure out how it works, but it’s amazing. They’re all done in fiber optics. When they’re off, you can’t tell they’re in the house. [Ed. note: Ah yes, state-of-the-art mood-ring sensor thing lights.]

See the original post at www.videogum.com.

Foreclosure Relief: Good for Banks, Not So For Borrowers

Home sales are hitting new lows, the number of homeowners behind on their mortgages is again climbing, as is the number of foreclosures. Housing market misery is widespread—but particularly intense for the troubled homeowners relying on the Home Affordable Modification Program (HAMP), the federal foreclosure relief program.

Criticized both by those who argue for more aid and those who think the lackluster program only delays a needed bank reckoning, HAMP stumbles along, more often simply prolonging the pain of foreclosure than providing a solution.

The dismal new housing numbers—sales of existing homes are 27% lower than a year ago, new-home sales have fallen even more—underline just how little demand there is for all the properties that banks are foreclosing on.

Real Estate Mortuary's Waiting Room

In extending the process, foreclosure relief in many cases simply stretches out borrowers' slow bleed of resources. By keeping borrowers in limbo while letting lenders delay repossessing houses they can't sell, foreclosure aid is now benefiting borrowers less than the lenders who created the mortgage mess. For lenders, mortgage modification is the waiting room in the mortuary, a convenient place to hold borrowers while the banks deal with the overflow of houses already repossessed.

Of some 3 million homeowners behind on their mortgages, only about half are eligible for HAMP. Most of the rest, ironically, don't qualify because their income is too low to handle even a modified mortgage. For those that do qualify, HAMP offers little immediate respite: Homeowners have to immediately start making payments on a trial modification plan.

Some 1.3 million borrowers have gotten the trial modifications, which last for at least three or four months (though many banks have stretched this out for longer). But 600,000 of those have already dropped out, unable to make payments in the trial stage. Another quarter-million are in modification limbo, sending checks to the bank as they wait to know if they'll get permanent adjustments. (Detailed numbers are available in the modification program's monthly reports, here.)

What Happens After Gaining Relief Is Worse

If the wait for a modification is trying, though, what happens to homeowners who do manage to get relief is worse. Most borrowers behind on their mortgages are already overburdened with other debts. After the mortgage reduction, the typical modification recipient, despite an average $513 drop in monthly payments, has to devote 63.5% of his or her income to mortgage payments, other debt, and taxes.

It's not clear how many will default a second time. Treasury officials recently had to withdraw the government's numbers on mortgage modification success rates after they were shown to seriously understate re-defaults. One independent estimate from Barclay's Bank is that 60% of homeowners granted loan modifications will eventually default again.

So does HAMP really benefit anyone but the few borrowers who are able to run the foreclosure aid gauntlet, climb out from under their debts against tough odds and get back to making regular payments on their (still-underwater) mortgages? It does. If HAMP fails to make much of a dent in homeowners' troubles, it does mitigate a real problem for the banks: There are many more houses in foreclosure than today's market can absorb.

"Strategic Non-Foreclosure"

One of the foreclosure cascade's not-so-hidden secrets is that the banks and investors who hold millions of busted mortgages are in no hurry to kick debtors out of their homes. The markets hardest hit by the foreclosure crisis are already stuck with an enormous and growing inventory of repossessed houses, now estimated by Lender Processing Services, which tracks foreclosures, at 1 million to 1.2 million bank-owned homes nationwide.

Banks have steadily slowed down the foreclosure process: The average homeowner in foreclosure now is an amazing 461 days behind in his payments. (You can see that last stat in this report, on page 13). Barry Ritholtz of financial blog The Big Picture calls banks' reluctance to take over houses "strategic non-foreclosure." Taking a leisurely path to repossession lets lenders avoid the costs of maintaining properties they can't sell in a market that remains in free fall in much of the country.

However, there's a limit: Lenders must eventually make good on the threat of repossession or face an epidemic of homeowners who stay in their houses without making payments. Many houses have been in foreclosure for so long that the banks have little choice but to act, and repossessions are rising.

Mortgage modification lets banks put a brake on the process, keeping up the pressure on borrowers (most of whom will eventually be foreclosed on anyway) without adding to the banks' inventory of foreclosed properties. As they sit in this antechamber, instead of simply writing off their mortgages, the strapped borrowers, given the gift of reduced payments, are likely to squeeze out whatever they can manage in a last effort to keep their homes. It's a study in what Rortybomb's Mike Konczal trenchantly calls the credit "sweatbox" -- under the guise of foreclosure aid.

Another Cudgel in the Hands of Lenders

The last insult added to this mess comes from Fannie Mae, which has promulgated new rules that lock those who don't make the effort to modify their mortgages out of the Fannie-backed mortgage market for seven years. So ultimately this comes full circle, and what started as an effort to help borrowers has become another cudgel in the hands of lenders.

If we were to conceive a program to persuade borrowers to stick to their obligations and make every effort, no matter how unrealistic, to avoid foreclosure, we could hardly do better than HAMP. The program probably increases what lenders collect before they eventually foreclose -- and may let those lenders slow the process enough to prop up prices as they sell off their inventory.

In this way, it may lead to a more orderly unwinding of the busted housing market. If so, HAMP might accomplish some part of its goal—just not the part that has to do with helping homeowners.

See the original post at www.cnbc.com.

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May Foreclosure Rate Steadies As Banks Hold Back

The foreclosure crisis appears to be leveling off.

The number of people facing foreclosure is nearly flat from a year ago, according to the latest report from a private foreclosure listing service. A third fewer people are receiving legal warnings that they could lose their homes. And foreclosures are receding in some of the hardest-hit cities.

Still, the number of foreclosures remains extraordinarily high. Experts caution that a big reason for the stabilization is that banks are letting delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. New consumer protection laws, which vary by state, have also meant borrowers can spend more time in their homes.

A new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn't improve fast enough to lift home sales.

"It's not anything like a recovery yet," said Rick Sharga, a senior vice president at RealtyTrac Inc., a foreclosure listing service.

RealtyTrac reported Thursday that nearly 323,000 households, or one in every 400 homes, received a foreclosure-related notice in May. That was up 0.5 percent from a year earlier but down 3 percent from April. The report tracks notices for defaults, scheduled home auctions and home repossessions.

But in a sign that the crisis is far from over, the number of homeowners who lost their homes to foreclosure hit a record of nearly 94,000 in May. That number may finally peak next year, as lenders try to work their way through millions of delinquent loans.

Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

A record high of more than 10 percent of homeowners with a mortgage had missed at least one payment as of the end of March, according to the Mortgage Bankers Association. But the number of homeowners just starting to show trouble is trending downward as the economy improves.

"That's a very good thing," said Thomas Lawler, an independent housing economist in Virginia. But he noted that even with that positive trend, "you are highly likely to see an acceleration in the number of actual completed foreclosures."

Lenders are offering to help some homeowners modify their loans. But many borrowers can't qualify or they are falling back into default. The Obama administration's $75 billion foreclosure prevention effort has made only a small dent in the problem.

About 25 percent of the 1.2 million homeowners who started the program over the past year had received permanent loan modifications as of April. About 23 percent of those enrolled dropped out during a trial phase that lasts at least three months. Many more are in limbo.

Among states, Nevada posted the highest foreclosure rate in May. One in every 79 households there received a foreclosure notice. However, foreclosures there are down 16 percent from a year earlier.

Arizona, Florida, California and Michigan were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Idaho, Illinois, Utah and Maryland.

Las Vegas continued to be the city with the nation's highest foreclosure rate, but activity there was down 18 percent from a year earlier. And nine out of the top 10 cities with the highest foreclosure rates posted annual declines. The exception was the Vallejo-Fairfield area in California, where foreclosures were up 1 percent from a year ago.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties. That's a concern for local communities, and a drag on the economic recovery.

In recent months, home prices have started to sink again after stabilizing last summer. Economists at Goldman Sachs predicted in a report last week that prices will fall about 3 percent nationally over the next year, with the largest declines in cities where mortgage defaults are rising.

"The housing market remains plagued by enormous excess supply," wrote Goldman economist Sven Jari Stehn.

See the original post at www.huffingtonpost.com.

Buffett's Real Estate Housing Market Prediction - A Recovery In 2011

One of the wealthiest and most influential men in US history, Warren Buffett, was recently noted for saying, “Within a year or so, residential housing problems should largely be behind us. Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.” This was announced in his annual letter to shareholders of Berkshire Hathaway Inc.

As everyone knows, the accelerated decline in the U.S. housing market over the past two years has led to record foreclosures and a surplus of residential real estate. According to Mr. Buffett, he thinks that it will take another year (i.e. 2011) before housing demand catches up with supply. He also says that slowing the production of new homes is one of the fastest ways to bring supply and demand into equilibrium.

For additional information to ideas like the one above, simply enter your name and email address below for timely real estate investing tips, information and cutting-edge marketing strategies to help you become a better investor. You'll receive your FREE real estate investing newsletter. Learn two dozen investor mistakes to avoid. Most importantly, we'll notify you about the up and coming Knoxville investment club meeting.

Buying Investment Property?

As the old advice goes, "buying investment property is an excellent way to build your nest egg." Successful investors have found that the way to riches is littered with bargain priced real estate. Unfortunately many unsuccessful investors have learned about property investment through trial-and-error. The trial-and-error method more times than not proves to be costly. Read on to discover excellent tips to discovering bargain priced properties.

FIRST - You need to discover great property buys to be successful in real estate investing. Bargains are not just about the ‘price tags’ of properties. Successful investors know that part of the secret is to find real estate that is anticipated to increase in value. If your first acquisition is profitable, it goes without saying that it would encourage you to invest more in property. This method can be applied over and over again until an investor has enough properties that give him more pull in the property investment market.

SECOND - Location is also critical when buying an investment property. When buying investment properties, you must study your target areas and realize their potential. Your next cash flowing property can be located in a developing community, as long as growth is already in the making. These developing communities are excellent areas to spot real estate that are expected to rise in price soon.

THIRD - Suburbs just outside main capital cities are also great places to explore for investment properties. Plenty of neighborhoods are perfect for buying an investment property. However, don’t give attention to too many areas all at the same time so you can concentrate and specialize on how much real estate is worth sooner.

LAST - Most newbie investors get confused on whether they should acquire units or homes. While a few property investment advice consultants swear by units, but many others still are convinced houses are the better buys. The motivation for this latter suggestion is the grounds that come with a house. Land will increase in value, so the more land you own, the more value you possess. When you obtain a house, you also get the land on which it’s constructed. Units, on the other hand, don’t come with land, which can limit remodeling to it and negatively affect rent.

A good number of novice investors employ coaches to learn how to buy an investment property. These specialists can offer the requisite know-how and suggestions to guarantee your lucrative investments. Plenty of property investors opt to be knowledgeable about property investing on their own but this method can prove to be a big in time- and money-waster. If you heed the advice of investing experts, you can reap financial rewards sooner. Buying an investment property can be a very lucrative endeavor.

We want to see to it that you succeed as a real estate investor. Just for stopping by you'll receive your very own real estate investors guide and it's a yours to keep for FREE. In order to get immediate access simply fill out the form in the box and get instant access to our very own VIP buyers list. You'll get access to Knoxville's hottest investor deals. These are deals that other investors only WISHED they knew about.

The MAO Formula - It's How We Buy Houses!

No matter if you're in an up market or a down one, you can still use a simple method to buy homes. All the guru's will tell you that profits are made on the purchase price of the home (NOT the sell price). One of the best ways to make sure that you buy at the right price is to use the MAO formula. We buy houses in Knoxville using the MAO formula.

The MAO formula is THE mathematical equation used by investors to help insure buying at the right price. MAO stands for maximum allowable offer. The most widely used version is [(ARV * 70%) - Cost Of Repairs] = MAO. ARV stands for after repair value. This is the value of the home when is has been fully rehabbed and is ready to sell to a retail buyer. That value is then multiplied by 70% (some guru's may use a bit more or less). Next, this value is then subtracted from the cost of repairs. Sounds somewhat complicated doesn't it?

Here is a simple example of how the MAO formula is actually used. Say for example the ARV of a home is $100K. This amount is then multiplied by 70%, which in this case turns out to be $70K. Here's the hard part. You must estimate the repairs of the home as accurately as possible. If your estimate of repairs turns out to be, say $10K then the most you would ideally like to pay for the home is $60K.

Here's a recap of the above example.
*ARV is $100K
*$100K X 70% = $70K
*Repair Estimate is $10K
*[(100K X 70%) - 10K] = 60K = Maximum Allowable Offer

No matter if you buy houses in Knoxville, TN or Billings, Montana you can use the MAO formula as a tool to pay the least amount possible for your investment property. We at Roberts Investment Properties LLC want to see you succeed as a real estate investor. Our success is linked to your success.

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