Monthly Archives: July 2013

Asian Buyers Move in on U.S. Commercial Real Estate

Asian investors are eying office and retail properties in North America and have already spent $1.9 billion on U.S. commercial real estate during the first six months of the year, according to data from Real Capital Analytics. That compares to $551.4 million Asian investors spent on U.S. commercial real estate in 2012.

The Wall Street Journal reports that Asian private investors are targeting small office buildings, retail shops, and branded hotels in North America as well as in Europe. "There's great depth and interest in deal sizes between $30 and $80 million,” says Alastair Meadows, head of the international capital group at Jones Lang LaSalle, based in Singapore. “That range falls above domestic private investors but below institutional investors. It's the sweet spot."

Many wealthy Asians investors found real estate success in their home countries are now looking to diversify, seeing if they can duplicate that success abroad. 

“They are attracted to the long, stable rents of more mature Western markets, which often offer better returns than the ultra hot real estate markets of Hong Kong and Singapore, the main destinations for offshore Asian investment,” The Wall Street Journal reports. “An average lease term for an office in Asia is just three years, compared with 15 or 20 years in a market like London or New York. Moreover, rental yields for prime office buildings [calculated by taking the annual rental income divided by the price of the property] are in the 5 percent to 6 percent range in those cities, higher than the 3 percent to 4 percent range in Hong Kong and Singapore.”

Source: “Asian Real-Estate Investors Are Thinking Small,” The Wall Street Journal (July 16, 2013)

3 Real Estate Scams People Fall For…

Though the housing recovery is trucking along, that doesn't mean real estate scams have gone away. Home owners have been duped out of an average of $4,000 to $5,000 from scams, but even five-figure losses aren’t uncommon for those who have fallen prey to fake loan modifications and other housing fraud. Forbes recently highlighted three of the most common real estate scams today:

1. Rental scams: Scammers illegally pull online listing information from a home for sale and re-post it as a rental on another site, such as Craigslist. They’ll often ask for money upfront, in the form of a security deposit or broker fee, from prospective tenants. Scammers often advertise the home at a low price and collect application fees from several prospective tenants in order to hold the property for them. 

Warning signs: Be cautious of wiring money or paying any upfront fee before you’ve met the agent or signed the contract. Also, be skeptical if they can’t show you the property when you ask. 

2. Loan modification scams: Scammers may offer “fake foreclosure counseling, phony forensic loan auditing, nonexistent mass rejoinder lawsuits, bait-and-switch ploys, leaseback programs, and fraudulent ‘government’ modification programs,” Forbes reports. 

Warning signs: Be skeptical if anyone asks for money for foreclosure counseling. Foreclosure counseling is free from agencies like the U.S. Department of Housing and Urban Development. Also, always contact your lender directly to work through a modification process. Don’t allow someone to do that on your behalf. 

3. Workshop scams: An investment guru will host a get-rich-quick real estate investing seminar and have you sign up for a course that is free or low-cost. The investor may then give you actual properties to invest in if you offer up thousands of dollars in advance. They make bold promises that you’ll become a millionaire, but then nothing ever happens. Also, a form you may have signed initially to take the class may prevent you from taking legal action against the instructor to recoup your money. 

Warning signs: While not every workshop instructor is a scammer, be sure to check out the program thoroughly before signing up. Check the company’s rating with the Better Business Bureau. Also, check if it’s linked to a reputable industry association.

Source: “3 Real Estate Scams and How to Avoid Them,” Forbes.com (July 16, 2013)

 

Did Cash Buyers Save the Housing Market?

Cash real estate sales have risen the last few years to some of the highest levels on record, and a new report by CoreLogic suggests that these sales heavily helped to contribute to stabilizing the residential housing market and leading it into recovery. 

In the early 2000s, cash sales averaged 25 percent of home sales. But in 2007 and 2008, cash sales began to rise as foreclosures started to increase. By 2012, cash sales were making up 40 percent of sales and have since inched down to 39 percent as of May 2013. 

“Without cash sales overall, sales today would be much lower and the price declines would have been worse,” Mortgage News Daily reports about CoreLogic’s findings. “More recently, cash sales have helped fuel price increases dramatically in several boom and bust markets. Median prices for cash sales are up 24 percent from a year ago while prices of sales generally have increased 15 percent.”

The rise in home prices will lead to a lower presence of cash sales as investor activity returns to more traditional levels, CoreLogic notes. With cash sales receding in recent months, first-time and trade-up home buyers will need to step in to keep the recovery expanding, CoreLogic notes. 

Source: “Cash Sales Saved Housing Market -CoreLogic,” Mortgage News Daily (July 16, 2013)

Report Suggests Intentional Underbuilding

With housing inventories so low, why aren’t homebuilders jumping in by ramping up production to meet demand?

A new housing report by Arizona State University suggests that homebuilders are methodically holding back their inventories and keeping the rate of new-home building low, despite population growth projections. 

“New-home builders don’t appear too anxious to help meet the demand,” says Michael Orr, a real estate expert at ASU’s W.P. Carey School of Business.

A few years ago, during the housing bubble, homebuilding outpaced population growth. But builders are taking the opposite approach this time around. In an environment with tight underwriting for loans, builders are exercising some caution and restraint. 

“They are trying to make sure they don’t overbuild like they did before the housing crisis, and they want to keep prices moving up,” Orr says. For example, Orr notes that in the Phoenix area, new-home sales rates are less than one-third of what is needed to keep pace with the projected population growth. He added that, with limited supply, builders are able to increase prices for new homes. 

Those in the building industry have cited labor shortages, tight underwriting standards, and the rise in lot prices as a reason building hasn’t kept pace. 

Source: “Why home builders aren't rushing to meet demand,” Phoenix Business Journal (July 9, 2013)

Home Prices Post Biggest Jump in 7 Years

Home prices are moving up at a quicker pace, rising in May by their largest annual amount in more than seven years with more to come, according to the latest report released by CoreLogic. 

Home prices increased 2.6 percent in May over April and have shot up 12.2 percent compared to last year’s prices. CoreLogic economists are predicting that home prices will rise by another 2.9 percent in June, making the yearly price gain 13.2 percent year-over-year. 

Tight inventories of homes for sale across the nation have pushed home prices higher, according to CoreLogic. 

“Home price appreciation, particularly in much of the western half of the U.S., is increasing at a torrid pace,” says Anand Nallathambi, president and CEO of CoreLogic. “Across the country, pent-up demand and continued low interest rates are fueling strong demand for a limited inventory of properties. We expect that trend to continue to drive up prices throughout the balance of the summer months.”

When including distressed sales, the following five states have seen the highest home appreciation in the past year, according to CoreLogic:

  • Nevada: +26%
  • California: +20.2%
  • Arizona: +16.9%
  • Hawaii: +16.1%
  • Oregon: +15.5%

Source: CoreLogic and “Home prices rise by most in seven years in May: CoreLogic,” Reuters (July 2, 2013)