Flood insurance costs soaring for thousands of homeowners

Homeowners who live along the nation’s coasts and river valleys are discovering that changes made to the National Flood Insurance Program are causing their insurance premiums to skyrocket at alarming rates.

Read more at: http://money.cnn.com/2013/10/21/real_estate/flood-insurance/index.html

Should real estate investors incorporate?

The main reason to set up an entity like a corporation is to protect your personal assets against a lawsuit — say, if someone gets injured on your property.

Instead of incorporating, though, Richmond real estate attorney Katja Hill suggests you set up a limited liability company, or several LLCs, to hold your properties.

LLCs are easier to maintain, she says, than the “S corp” corporate structure that’s also used by small businesses.

See more at: http://money.cnn.com/2013/10/18/pf/expert/real-estate-investing.moneymag/index.html

House flipping remains fruitful in Las Vegas, if not elsewhere

The nationwide slowdown in house flipping isn’t nearly as sluggish in Nevada.

The Silver State had 1,014 single-family home flips in the third quarter, down 16 percent from the second quarter but down just 1 percent from a year ago, according to a new report from RealtyTrac.

Nationally, house flipping fell 35 percent from the second quarter and 13 percent year-to-year.

In the Las Vegas area, the volume of flipping dropped 15 percent from the second quarter but rose 9 percent from a year ago, to 780 transactions in the three months ending Sept. 30, the report found.

RealtyTrac, based in Irvine, Calif., defines flipping as selling a house within six months of buying it.

The practice was rampant during Las Vegas’ housing bubble, when investors with no real estate expertise — but backed by easily obtained loans — bought property and sold it for profit a short time later.

And though it’s not nearly as common as it once was, flipping remains a profitable business. House flippers in the Las Vegas area booked an average profit of $53,503 per deal in the third quarter, compared to $54,927 nationally, according to RealtyTrac.

Read more at – http://www.vegasinc.com/news/2013/oct/16/house-flipping-remains-lucrative-las-vegas-drops-a/?_ga=1.11546868.137834913.1381187019

Real Estate in Crisis

Foreclosed and for sale homes line the 9800 block of Fast Elk Street in northwest  Las Vegas.

Photo by Richard Brian / Las Vegas Sun

Foreclosed and for sale homes line the 9800 block of Fast Elk Street in northwest Las Vegas.

The subprime mortgage crisis is hitting the Las Vegas metro area particularly hard. In fact, Nevada has the highest foreclosure rate in the country and the metro area is consistently one of the top five worse in the nation. The crisis jeopardizes further growth by creating an overflow of available homes, which in turn slows the construction of new homes and invariably effects property values. But at the same time it creates opportunities of more affordable housing for those who have been priced out of the market in recent years.

The crisis entails homeowners losing their houses after they are unable to afford their mortgage payment. It was brought about by lenders and banks giving risky loans, or subprime mortgages, to people with poor credit scores or finances. Low interest rates first attracted such homebuyers. However, as many loans were adjustable rate mortgages (ARMs), higher interest rates down the road made payments nearly impossible, ultimately leading to foreclosure. Furthermore, predatory lenders have been accused of perpetuating the situation by unfairly taking advantage of uninformed or new buyers. There were a large number of investors who bought homes at the height of the market and expected to flip them for a profit, only to see values decline.

Read more at – http://www.lasvegassun.com/news/topics/real-estate/

7 reasons rentals are rocking the housing market

By Beth Braverman of TheFiscalTimes.com

Home sales have finally begun to slow after a red-hot summer that saw prices soaring so quickly that some began to worry about the return of a housing bubble.

But despite the recent housing gains, the country’s homeownership rate has continued to fall. Just 65 percent of households in the first half of this year owned their homes, the lowest level in 18 years, and a significant decline from the record-high of more than 69 percent reached at the height of the housing boom in 2004.

Although buying a home is 35 percent cheaper than renting in the long term, an increasing percentage of Americans are choosing to sign a lease rather than a deed.  Experts predict homeownership will fall even more in the next few years.


Read more at – http://realestate.msn.com/7-reasons-rentals-are-rocking-the-housing-market

Gov’t Reopens, Averts Housing Impact

President Barack Obama signed a bipartisan measure early Thursday to end a 16-day partial government shutdown and avert a U.S. default on its debts. The measure had been passed by the House and Senate late Wednesday.

The White House directed all government agencies to reopen immediately.

The government showdown over fiscal policy disputes and the looming default deadline had prompted concern over the impasse’s effects on the housing recovery. Some real estate industry and mortgage experts had predicted that if the government defaulted on its debts, it could send mortgage rates skyrocketing quickly—by one to two full percentage points.

Gary Thomas, president of the National Association of REALTORS®, testified last week before the Senate Banking Committee that a debt ceiling breach could lead to a one-percentage point increase in mortgage rates and potentially could drop homes sales by 450,000 units.

“This is a bump in rates immediately because of the crisis, so it’s going to have a detrimental effect on the housing industry, which obviously has a detrimental effect on the overall economy,” Thomas had testified.

The 16-day government shutdown has taken an estimated $24 billion out of the U.S. economy, according to Standard & Poor’s estimates. After the bill was signed reopening the government, NAR released a statement warning of “residual delays in programs as workers address issues caused by the 16 day lapse,” and pledged to maintain their web page that made shutdown information available for members over the next several days as government operations return to full capacity.

The new legislation, approved by the House and Senate, will fund the government through Jan. 15. However, “the bill’s passage was only a temporary truce that sets up another collision between Obama and Republicans over spending and borrowing early next year,” the Associated Press reports. “It’s the second time this year that Congress has passed legislation to increase the government’s borrowing cap.”

Source: “Gov’t Reopens After Congress Ends 16-Day Shutdown,” The Associated Press (Oct. 17, 2013)

3 biggest headaches for real estate if government defaults

If House and Senate leaders can’t work out even a temporary solution to the debt-ceiling crisis by Thursday’s deadline, the impact on the overall economy is likely to be felt not with a bang but a whimper, at least at first.

As Congress dickers, there are many strategies to delay the impacts of a government default.

The government can prioritize payments, delaying defaults on Treasurys, and banks will likely be willing to advance funds to many companies and even citizens that are owed money by the government as the standoff continues, CNBC’s John Carney reports.

JPMorgan Chase, for one, says it’s willing to fund as much as $8 billion in government benefits that it processes every week for clients.

But the impacts to housing markets — already limping from the government shutdown that preceded the current crisis — could be more immediate.

Among the top concerns:

1. Homebuyer sentiment

In a climate of uncertainty, would-be homebuyers are likely to keep shopping, but wait to head to the closing table until it becomes clear that the debt-ceiling showdown isn’t snowballing into the worst-case scenario — another financial market meltdown on a 2008 scale. Consumer confidence was already at a nine-month low in October, in part because of worries about the budget impasse.

“So far, for me, it has been stressful having a closing with a farm loan being delayed till Lord knows when,” said Angie Scarborough, an agent with McGraw Realtors in Broken Arrow, Okla. “Just trying to keep both buyer and seller interested in keeping it held together and not having answers is a challenge. Meanwhile, if not for cash investors, I would be job hunting.”

2. Mortgages, mortgages, who needs a mortgage?

The government shutdown has already hindered mortgage lenders’ ability to get records they need to verify borrower income from the IRS and the Social Security Administration. Banks have come up with “workarounds,” including following the example of Fannie Mae and Freddie Mac in requiring IRS verification of income only when borrowers finance multiple properties, CBS Moneywatch reports.

FHA has put nearly half of its workers on leave during the shutdown, but loan applications by owner-occupants can still be routed through automated underwriting systems.

The big question is, with so many mortgages relying on some kind of government backing, what happens to secondary mortgage markets in the event that the debt ceiling is reached?

Although rates on some adjustable-rate mortgage (ARM) loans are tied directly to Treasury yields –which could rise sharply in the event of a default — fixed-rate mortgages will have some cushion.

That’s because despite having required billions in bailout assistance during the downturn, Fannie Mae and Freddie Mac are now generating surplus revenues from guarantee fees they charge lenders, and have been unaffected by the shutdown.

Investors who fund most mortgage loans by purchasing mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae (which securitizes loans insured by the FHA) may expect to see better returns on their money, but are unlikely to flee secondary mortgage markets altogether.

John Lonski, chief economist with the capital markets group at Moody’s Analytics, estimates that if the current 1.53 percent spread between 30-year fixed-rate mortgages and 10-year Treasurys grows to 2.8 percent, rates on 30-year mortgages would be at least 5.5 percent, Marketwatch reports.

3. It’s the economy, stupid

The long-term impacts of a government default are hotly debated, with some conservatives claiming the potential economic harm has been overstated in order to pressure Republican House members into backing down from their demands.

An analysis by Reuters concludes that many people would not notice much right away if the government hits the $16.7 trillion debt ceiling on Thursday.

“The 17th will come, the lights will still be on and everything will look normal for 99 percent of Americans,” budget expert Steve Bell with the Bipartisan Policy Center in Washington, D.C., told Reuters.

The government would start by slashing spending by about a third, which would quickly have noticeable impacts on the economy.

One of the first milestones of serious concern is a $12 billion payment due Oct. 22 to the Social Security pension program. If the government missed debt payments due on Oct. 24 or Oct. 31, “there would be a greater risk of a financial crisis because the value of U.S. government debt could be called into question,” Reuters said.

Forecasting firm Macroeconomic Advisers estimates that the combination of government spending cuts and a severe credit crunch could lead to 3 million layoffs, pushing the jobless rate to close to 9 percent.

– See more at: http://www.inman.com/2013/10/15/3-biggest-headaches-for-real-estate-if-government-defaults/#sthash.QlCM8FwQ.dpuf