An emerging trend of the real estate downturn shows a significant spike in the home improvement industry.  According to the National Association of Home Builders (NAHB) Remodeling Index showed big upturns in the consumer confidence.

Rose Quint, an economist for NAHB, “The phones are ringing more.  That has led to a nice increase in the future indicator.”  The index still is under the threshold 50-point barrier, which is the index’s dividing line between pessimism and confidence.

With prospects realizing that current values are will below the values achieved during the real estate boom, many homeowners are opting to stay put.  These owners have decided to invest in upgrades and take advantage of bigger lots by adding space and new upgrades in the competitive home improvement marketplace.

Additionally, many homeowners are capitalizing on new government energy tax incentives to improve and economize on home energy.  Marvin Windows and Doors reports that replacement windows are outselling new construction windows for the first time. 

The revitalized nesting population is typical for down markets.  But with more than 28% of homeowners in foreclosure or late on payments, owners know many homes are underwater, with more owed on the home than its current value.  Rather than take the loss, owners are improving and waiting for an upturn.

Home improvement sales volume is up more than 20% during the first three quarters of 2009m compare to the first three quarters of 2008.  The key ingredient for new home improvements is a desire to increase living space and add at-home office space.

Depending on the area. today’s home improvement costs can range from $100 - $200 per square foot.  When considering their options, homeowners are leaning toward remaining ion their neighborhood, in the same school district and surrounded by known friends.  Demand is expected to continue to increase through 2010.

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Unemployment and the abnormally high foreclosure rate continue to weigh heavily on a full-scale housing recovery, but there are signs of hope.  According to Lawrence Yun, chief economist of the National Association of Realtors, pending sales increased for the ninth consecutive month ion November.

Yun credits more determined short sale lenders, low interest rates and the extension of the 2009 Homebuyer Tax Credit with contributing factors.  The expansion of the tax credit bill to existing homeowners should spark even more sales.  Existing homeowners are still reluctant to carry two mortgages, but existing homeowners are helping to clear some of the abundant upscale housing inventory.

Yun also points to the availability of more qualified renters who are anxious to turn rent into equity and tax deductions.  Yun asserts that these buyers have been on the sidelines, waiting to find the bottom of the market.  The reality that they can now acquire more space than in the past ten years is certainly motivating a new wave of prospective purchasers.  With 15-year interest rates at the lowest rate since 1970, buyers are gaining confidence that the time is right.

Meanwhile, newly constructed home sales jumped by 6.2 % in November.  For existing sales, the northeast still remains the most stable area.  November existing sales increase by 20% in year over year comparisons.  The Midwest rose by 12 % and the south surprised with a 6% increase.  Only the west showed a November decline of 5%.

To add hope to a muddled picture, November layoffs decreased to 50,000 compared to 182,000 in November 2008.  With the Obama Administration aggressively tackling unemployment and willing to pump billions into employment initiatives, housing may begin to emerge in the spring of 2010.  That makes this a great time for investors to buy low with the idea of selling high in a relatively short time.      

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4,000 American homeowners will enjoy a less stressful holiday season thanks to a new stance taken by Citigroup.  The bank has announced that it will suspend all foreclosure activity for the next 30 days beginning December 17, 2009.  That means that 4000 homeowners have some extra time to try to work out their financial re-arrangements.

Loans owned by CitiMortgage and City Financial North America whose owners meet certain criteria will not be subjected to foreclosure sales or notifications until January 17^TH.  CEO Sanjiv Das said, “We hope that with this suspension we can make the holidays a little less stressful for our customers who are going through a very difficult time.” 

The Citigroup announcement came less than one week after the bank met with President Obama.  Financial institutions and various Wall Street banks have come under fire by the administration. As they have announced $30 billion of intended bonuses and had a record year for profitability. Wall Street followed this announcement with reports that record profits were reaped as a result of the taxpayer bailout.

The Citi foreclosure suspension gives temporary relief to 2000 homeowners already in foreclosure and anther 2000 scheduled for foreclosure in the next 30 days.  The hope is that these owners will pursue alternative measures to remedy their delinquencies.  Citigroup services $20 billion o mortgages.  These 4000 loans represent about 20% of the portfolio.

In related news, Fannie Mae released a similar announcement.  The agency revealed that it will suspend foreclosure activity from December 19 2009, through January 3^rd 2010.  Owners and tenants living in foreclosed properties will not be evicted during this time frame.

In addition to creating a sense of goodwill, these actions may be representative of a social consciousness not previously exhibited by the American banking industry.  Of course, the banks may want to hold off on absorbing so many homes in the dead of winter, but at least homeowners will have the holiday season to weight their options. 

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Dr Laurie Goodman also indicated that the prices could see a fall of around 8-10 percent in the forth-coming months. This may not completely push down the prices since the consumer demands are also increasing, which might just counter balance the price depression. Adding to the inventory of homes are the delinquent accounts, which have not been able to sustain the repayments due to a job market that has not really improved. Thus, with income in trickles, many have not been able to meet their commitments. These homeowners have been forced by circumstance to approach banks with foreclosure requests to qualify for government programs. The foreclosure rates in the country have increased over the second quarter by 5 percent.

There are multi fold factors, which have increased the foreclosure rates and will most likely keep them high for some time to come. Most lenders have not yet pressed foreclosures due to the loan modification programs extended to the homeowners. When this period ends, and the modifications don’t bring in the necessary economic relief, many more will be forced to close.

Adding to the difficulty is the yearly rate adjustments in flexible home loan rates, which will kick in now and may produce increased commitments resulting in greater financial difficulties for owners. Compounding to the fiscal problems is the mounting unemployment of 9.8 percent, which is slated to increase further. Therefore, most believe there will another tide of foreclosures soon.

The picture looks bleak and gloomy for many, but for others who have saved enough and are in financially secure positions, the situation is ripe for a home. The interest rates are the lowest and going down week by week, the prices are low and the choices are many, including resale homes. If you are financially stable, you should drive a hard bargain not only on the price of the house, but also on the interest rate of your home loan. This might be your best opportunity, but do your financials right and get them double-checked before you take the plunge.

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Smart real estate investors retain a real estate attorney.  Investors have one week to review the purchase and sale offer and one week to review loan terms and conditions.  Why gamble?  The right attorney can serve as consultant, tax adviser and listener.  You could do a lot worse.  Yes the attorney will cost some mo0ney, but the peace of mind is well worth the investment.   

Real estate investments are sizable.  Your investment is a serious, business transaction.  Attorneys who specialize in real estate law are worth their salt and can protect your interests, make sure you get what you expect while helping to negotiate with all interested parties.

Here are a few of the services your real estate attorney will provide:

·                     Review and explain the purchase offer and contract.

·                     Resolve all contingencies including issues with the structural inspection.

·                     Check that there are no covenants, easements, liens or other conditions that could affect the title.

·                     Prepare and register all legal documents.

·                     Review, explain and clarify the terms of the mortgage.

·                     Modify mortgage terms

·                     Calculate all adjustments to be made at closing including tax adjustments and utility and water credits.

·                     Review all documents prior to and at closing.

·                     Attend closing.

·                     Arrange title insurance protection.

·                     Make sure everything proceeds in an orderly manner and that you receive what you expect.

When selling, there is more to do than collect the money.  You need representation to accomplish the following:

·                     Review the purchase offer and contract.

·                     Help clarify all negotiations.

·                     Prepare the deed for transfer

·                     Procure power of attorney if you will not attend closing

·                     Attend closing

·                     Review all closing documents and statements

·                     Arrange for transfer of deposits

·                     Arrange insurance certificates

·                     Calculate credits

·                     Confirm and arrange mortgage payout.

Many of today’s homeowners would not be in the position they now find themselves had they elected to retain legal representation.  Can you imagine spending hundreds of thousands of dollars and entering into a financial commitment for 15 or thirty years without expert advice?  It doesn’t make sense, does it?

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At the International Commercial Property Exposition in Munich Germany, some pretty surprising and very disappointing numbers were released.  Foreign investment in U.S. real estate fell a whopping 77% in year-over-year comparisons.  The $14 billion outside investment in U.S. real estate fell behind the $15 billion invested in Japan and ahead of the $11 billion invested in the United Kingdom.

Perhaps the most startling transaction was the sale of the Worldwide Plaza at 825 Eight Avenue in Manhattan.  When the building was fully occupied in 2007, investor Harry Macklowe purchased the property for $1.7 billion.  After Macklowe defaulted on $7 billion in debt, Deutsche Bank took over the Plaza and eventually sold it to a joint venture spearheaded by George Comfort & Sons.  The selling price was $605 million.

The building is only 60% occupied with an initial net yield of about 6.3%.  If the new owners improve the building’s occupancy rate, the net yields should increase to 12%.

Also in New York, SL Green has agreed in principle to sell 49.5% of its interest in 485 Lexington Avenue to a joint venture between Gilmore USA and Optibase Ltd., an Israeli-based technology company.  The joint venture is paying $21 million and assuming the $450 million of existing debt.  Once the property is closed, the joint venture expects to acquire another 49.4% interest from SL Green.

While the downturn in the first half of they year was dramatic, July and August have seen investment from Germany and Asia begin to come back to the market.  New York and San Francisco have become popular targets for on and closed-end German and Asian funds. 

In Washington D.C., the largest transaction of the year has taken place.  Public REIT Vornado sold 1999 K Street to German investor Deka, an open-end fund.  The sale price was $208 million or $830 per square foot.  At the same time, Credit Suisse purchased 1099 New York Avenue from Tishman Speyer for $90.5 million.  Big investor’s are wheeling and dealing in big markets and betting on their ability to fill unoccupied space.

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Fannie Mae’s recent report indicated that the portfolio balance remained stable at $779.4 billion in August 2009.  The August stabilization follows a July pullback of 18.2% and lowered the year-to-date decline to –1.5%.  Meanwhile, Freddie Mac reported a stunning decline of 30% in its August portfolio size as volume fell to $779.4 billion.  Year-to-date decreases at Freddie Mac have settled at –4.7%.

Congress has mandated that Fannie Mae and Freddie Mac trim their portfolios by 10% per year beginning in 2010.  Trimming is to continue until portfolios settle at $250 billion each.  Both funds have used the opportunity to elevate credit requirements to boost the quality of the two troubled portfolios.

Fannie Mae’s delinquency rate rose sharply by 23 basis points in August.  Fannie Mae loans that required mortgage insurance or the “credit enhanced” borrowers are incurring the greatest number of foreclosure actions.  “Credit enhanced” delinquencies rose to 10.83%.  Non-credit-enhanced delinquencies also increased to 2.47%. 

Delinquencies among non-credit enhanced borrowers are most troublesome as delinquencies are rising at a faster rate than the credit-enhanced failures.  Investors will note that delinquencies in multi-family loans are 400% above year-over-year figures.

The Obama Administration has countered these trends with aggressive loan modification programs for Freddie Mac and Fannie Mae borrowers.  New incentives have been added to the loan modification plans.  Lenders who process loan modifications for Freddie Mac and Fannie Mae loans receive $1,000 per year for three years while the homeowner who remains current with the new modification receives a $1,000 principal reduction for each of the first three years. 

While Fannie Mae and Freddie Mac have been pressured, the rise in Ginnie Mae activity is surprising.  Ginnie Mae’s fund has quadrupled in size as credit demands have eased and loan limits have increased beyond $729,000.

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The Mortgage Bankers Association released favorable data regarding August mortgage applications and applications for refinancing.  As interest rates fell to the lowest levels since May, consumers rushed to capitalize on the downturn.  In August,  the 30-year fixed interest rates hit their lowest point in three months.

Applications for refinancing climbed as did the number of applications for new mortgages.  As of September 4, 2009 the Mortgage Bankers Association (MBA) said its seasonally adjusted index of mortgage applications, which includes both new application and refinance applications, increased 17.0%, the biggest jump since may 2i9, 2009.

Many of the new applications are believed to be sparked by first homebuyers seeking to beat the November 30^th closing deadline fore the 2009 tax credit.  A spokesperson for the Charlotte, North Carolina, based Lending Tree, said that purchasers were not upsizing but were taking advantage of lower prices and lower interest rates to either refinance or purchase their first home.

It appears that the low end of the real estate market is busy.  It is believed that there is a substantial inventory of existing homes waiting to come on the market.  Some real estate experts project 12 months of housing inventory is waiting in the wings.

With interest rates at record lows and with excess supply, the conditions could not be more favorable for real estate investment.  Interest rates on 30-year fixed mortgages dipped 0.13 percent to 5.02%.  The all-time low was set in March at 4.61%.  Fixed 15-year interest rates averaged 4.45% down from the 4.57% rate the week before.

The four-week moving average of mortgage applications was up 7%.  With Congress reconvening this week, the National Association of Realtors and other real estate and mortgage groups will be asserting pressure for the passage of an expanded 2010 tax credit.  The industry is lobbying hard for passage of the bill, which will serve as a credit for all real estate acquisitions.

The climate is strong for the real estate investor.  Real estate agencies indicate a upswing in pending sales.  Prices have begun to stabilize and investors who want to stay ahead of the curve are buying now.  

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Much of the current good news about the real estate marketplace stems from the terrific benefits provided by the 2009 First Time Homebuyers Tax Credit and revisions that have enabled the tax credit to be used towards the down payment requirement.  There has been speculation that a 2010 tax credit is under consideration but as of this date, there does not seem enough support or funding for the initiative.

Unlike the 2008 real estate tax credit program, the 2009 first time homebuyer program does not require repayment.  The program only applies to properties purchased as of November 30^th, 2009.  So, the rush is on.  First time homebuyers know a good deal when they see one and this is it.  Many of today’s upward sales trends are based on first time homebuyers rushing to capitalize on the government’s unique incentive programs.

On May 29, 2009, the U.S. Department of Housing and Urban Development (HUD) announced revisions to the tax credit that allowed borrowers to use the first time homebuyers tax credit for a down payment.  This reversed the agency’s previous stance and helped to trigger an immediate upswing in real estate sales.

Currently there are 11 state housing finance agencies (HFA’s) that provide products permitting buyers to monetize the tax credit for down payment purposes.  Generally, thee programs offer tax credit advances with second liens on the home being purchased until the credit is processed.  In some states, the second lien does not require monthly installments.

The eleven states currently offering these HFA programs are:

·                     Colorado

·                     Delaware

·                     Idaho

·                     Illinois

·                     Kentucky

·                     Missouri

·                     New Jersey

·                     New Mexico

·                     Ohio

·                     Pennsylvania

·                     Tennessee

·                     Virginia

Several other states are considering the initiative and buyers should check with their agents for availability.  There are many expanded proposals before Congress for a 2010 homebuyer tax credit that will not be limited to first time homebuyers, but as of this writing, no details have been released.

Currently the FHA requires a minimum down payment of 3.5%.  Of course, there are additional closing costs and the $8,000 tax credit goes a long way toward easing the up front cash requirement.

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On the retail scene, consumer confidence is low as tight-fisted consumers wait for better employment reports.  Look around any strip mall and you will see available space.

As lenders scrambled to keep mortgages performing and began to make powerful concessions, new players arrived on the commercial real estate scene.  These lenders see opportunity.  They also see falling prices, lower exposure and potential for big gains, just like savvy investors.

With vacant space, supply has increased and prices are climbing back to fair market value.  Existing property owners cannot get out from under their debt and are helping buyers negotiate favorable concessions at new, reduced prices.

In mid August 2009, insurance companies and securities sales by the Federal Reserve have opened doors for investors looking to acquire office space, retail space or apartment buildings.  Overall, the commercial real estate market is completely different than existed just two months ago.

As equity markets rebound, speculation is that the recovery is underway and that the current availability of commercial space will soon be challenged.  New construction for commercial space is recovering slowly, leading investors and lenders to take closer looks at their commercial portfolios.

The commercial real estate market in California has been struggling to find the floor since the recession began.  Analysts like Darrell Wheeler of Maguire Properties, Inc. project that the new infusion of investment capital will spur the commercial market recovery.

“These disposition options would not have existed just two months back, so market conditions are changing very quickly,” said Wheeler.  Opportunity is knocking on commercial real estate doors.  Walk on in.

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