Brian Davison's Alternative Investment Times

Where Have All the Homeowners Gone?
We’ve heard it before: “The 2008 real estate crash resulted in more than 7 million foreclosed homes.” But what does this number represent in real terms?  It means 7 million home owners whose creditworthiness has plummeted, leaving them unable to again enjoy homeownership. Where have they all gone? It would seem, to renting. More than 100 million Americans are renters. Never before in history has the business of renting single-family homes been more centralized, thanks to behemoth investors like Blackstone setting the pace. From individual investors purchasing just a few properties to multibillion dollar hedge funds buying thousands, the rental market has become big business. Multiunit landlords are enjoying access to bank financing at the same time that many homeowners – especially blacks, Hispanics and the under-40 crowd - are being denied. Is this a welcome trend? Thomas Lawler, an economist and formerly with Fannie Mae, stated, “Early buying...
Real Estate Bidding Wars Spark Housing Bubbles in Hot Markets
You may have seen the headlines…“Bidding Wars Return to Boston Condo Market”…“National Association of Realtors (NAR) Announces Home Sales Lowest Since 1999”…“Why Real Estate Listings Are So Hot Right Now”… and others. Do these headlines contain typos? No. Home prices are rising in many areas across the United States and investors from Wall Street and other countries are leading the charge.  They took advantage of distressed real estate during the short-sale glory days, purchasing properties at bargain-basement prices and, rather than flipping those homes as might happen in a healthy housing market, renting homes to former homeowners displaced by short sales and foreclosures. Now, with fewer homes for sale and increasing buyer demand, the bidding wars have begun in earnest, producing bubbles in the hottest housing markets like Charlotte, Los Angeles, and San Diego. Are we headed for another housing crash? No, says Zillow’s director of economic research,...
As Feds Slow Bond Program, Mortgage Rates Jump
United States mortgage rates soared to their highest since September 2013 as real estate investors speculated the Federal Reserve’s slowdown on its $85 billion-a-month bond-buying program is aimed at maintaining lower borrowing costs. Freddie Mac reports the average 30-year fixed mortgage rate was 4.46% during the first week of December, up from 4.29%, while the average 15-year rate rose to 3.47% from 3.3%. Despite near-record lows in May, mortgage rates have steadily climbed, all while the Fed continues to weigh when it should scale back its stimulus. 10-year Treasury notes yields are their highest in two months, due to lower unemployment rates. The Treasury notes are considered a benchmark for home loans. Experts agree that the Federal Reserve is likely to taper sooner, not later. With a December 17 meeting looming, Federal Reserve Bank of Atlanta President Dennis Lockhart said he is optimistic about the economy's outlook. "I...
Crowdfunding Comes to Real Estate Investing
Today, individual real estate investors have more opportunity than ever to invest in income-producing property, thanks to a new rule  - The Jumpstart Our Business Startups Act of 2012 (The JOBS Act) – which ends an 80-year ban on “general solicitation”, allowing private firms and investment funds to broadly advertise securities offerings. Expect to see real estate sponsors giving it their all via the Internet, television, newspapers, and billboards…and, more importantly, keep your eyes and ears open to avoid getting swindled. What Spurred The JOBS Act? The JOBS Act came about as Congress pushed to promote crowdfunding as a means of raising capital. Crowdfunding is defined as the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. Currently, The JOBS Act allows only for private placement issuers to sell to accredited investors. Accredited...
Homeowners Prejudiced Against The Growing League of Renters?
Ask almost any American which type of neighbor is ideal, and the answer can be reduced down to “people like us”. It is the impetus behind Italian neighborhoods, Polish neighborhoods, Jewish neighborhoods, and every other neighborhood defined by ethnicity. And while it’s no secret that people want to live with other people who are like them, it may be surprising to learn that, over the past three decades, “residential segregation” has increased, based on a study conducted by The Pew Center. The study also found that the share of U.S. middle class areas is down to 76% in 2010 from 80% in 1980, while the share of lower-income neighborhoods rose to 28% from 23%, and upper-income areas have doubled to 18% from 9%. The home ownership rate now hovers at 65%, the lowest since 1995, according to the Census Bureau. So what happens when millions of...
The Renter Nation: What’s Behind It?
“After going through what was the housing market's darkest hour, housing is now one of the most popular investments in America.” (StreetAuthority) During the recession, many homeowners found themselves facing some very tough decisions. Renting a home became a viable, albeit temporary, housing option. Or so Americans believed. However, some former homeowners have permanently embraced renting, along with those individuals who cannot yet purchase a home, or those who remain indecisive about home ownership. Along with these changing views of the rental lifestyle, real estate investors are loosening the strings on short sale and foreclosed homes in their portfolios, allowing more rental homes to flow into the market. Together, these forces have created a renter’s nation. Jeffrey Friedman, CEO of apartment REIT Associated Estates Realty, predicts that “of the 5.5 million new households (newlyweds, boomers, college grads) that will be formed between now and 2016, an estimated 3.8...
With Homes for Sale in Short Supply, Prices Rise
Home prices increased 12.5% this October over last October, according to a report from Case-Shiller, which also reveals that the increase is likely due, not to a reduction in foreclosures, but a tight supply of unsold inventory. Home price gains are the strongest in eight years, according to the National Association of Realtors, rising in 88% of metro markets, and encouraging real estate investors. Among individual states, home prices rose 25.9% in Nevada, 22.4% in California and 14.2% in Georgia, considered the hottest market because this percentage represents the smallest gap across all states, and is only two percentage points away from the highest year-over-year price increase in thirty-five years. Cities posting growth of 10% or higher include Las Vegas, Los Angeles, Atlanta, Phoenix, Detroit, and Miami, among others. And there is more good news. The Case-Shiller report lists twelve US cities with double-digit annual returns, along...
Single-Family Home Rental Boom: Who Wins, Who Loses?
For two years, a single-family home rental boom has been sweeping through the Tampa, FL area. Investors are buying up hundreds of single-family homes in attractive neighborhoods and counting on renting them to both the thousands of local residents affected by foreclosures and short sales, and new residents arriving from across Florida or from the north. Demand Keeps Pace with Supply Property management firm Home Encounter reports an increase in leased homes between early 2011 and this past September from about 120 to more than 500 in Hillsborough County. But rather than reducing rents, as some renters wish, average rents have remained fairly flat across three years, running $1300-$1500 in Hillsborough and Pinellas counties. The biggest buyer of Tampa-area rental homes is Dallas-based Invitation Homes, a division of giant investment firm Blackstone Group.  Property records reveal the purchase of 1,801 homes in Hillsborough and Pinellas counties for at...
Risks That Crouch Hidden In the Grass
“As prudent investors and managers, we must be aware of the realities we face.” ~ John Mauldin No one would argue that there has been plenty of time for discussion of the 2008 financial crisis among central bankers. But coming up with answers, well, that’s a different crouching tiger. Central bankers have accepted no responsibility for ignoring the warning signs of excessive debt, keeping interest rates too low for too long, ignoring housing market bubbles, or failing to regulate banks properly. In fact, they were hugely rewarded with money, power, and prestige, leaving taxpayers to foot the bill for bailouts. Does this point to the need to remove banking supervision from central banks? Or to put politicians in charge of setting interest rates? Clearly, reform of the Federal Reserve is sorely needed. However, more rules and regulations are not needed - rather, holding the feet of central...
Wars in the U.S. Housing Market? Bidding Wars That Is…
Mortgage applications for U.S. home purchases have tumbled 17 percent since May on a seasonally adjusted basis and are down 6.9 percent from the same time a year ago. Capital Economics Ltd. last month lowered its 2014 home-sales forecast to 5.2 million from 5.4 million after U.S. pending residential sales for September that slumped 5.6 percent, the fourth straight monthly decline. The firm predicts prices will rise 4 percent next year, half of this year’s projected gain. “We are shifting from a frenzy to where buyers are taking a step back and being more analytical and unwilling to just make rash decisions,” said Ellen Haberle, an economist for Seattle-based brokerage Redfin. Asking prices in September were lowered on about 25 percent of listings, the biggest share in two years, while last month they were cut on 23.8 percent, according Redfin, which tracks 22 cities across the country. The inventory of unsold...