Housing Crisis to End in 2012 as Banks Loosen Credit Standards

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.


Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.


Click here to read the whole article.

Bay Area home prices expected to stabilize in 2012

After years of decline, housing prices are expected to stabilize or even increase in some parts of the Bay Area this year, according to a new forecast.

Stabilizing prices are a sign of a healthier market, even though homebuyers still face challenges -- tight credit, not many homes for sale and competition from investors paying cash.

In a report to be released Monday, Clear Capital, a real estate valuations company in Truckee, predicts that prices will remain almost flat this year -- compared with a 4.7 percent drop in 2011 -- in the San Francisco-Oakland-Fremont metropolitan area, including Contra Costa County. Silicon Valley should see a 1.6 percent increase in home prices, compared with a 2.5 percent drop last year, the company said.
"This region overall is doing pretty well," said Clear Capital research director Alex Villacorta.

In three of the past four years, Bay Area home prices have declined from the previous year, including a dramatic 35 percent drop for the San Francisco metro area in 2008 and a 28 percent drop in Silicon Valley that year. Only in 2010 were there slight increases, followed by last year's drop.

See more By Pete Carey of Mercury News

Rise in Home Sales Signifies Strengthening Market: Economists

The long-awaited housing recovery is beginning to blossom, according to industry experts taking a look at recent existing-home sales.

Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.

However, listed inventory is only part of the equation, and according to CoreLogic’s latest numbers, shadow inventory stands at about 1.6 million.

See the whole article here.

Also, in Commercial Real Estate market,  the outlook also looks positive. See this article for more details:

A Strong Close to 2011 Confirms Improving Outlook for 2012

Housing Inventory Ends Year Down 22%

There were fewer homes listed for sale at the end of 2011 than in any of the previous four years, a positive sign for the housing sector.

But appearances can be deceiving, and it remains to be seen whether the drop is the beginning of a real recovery or if inventory is being held down by sellers waiting for prices to pick up and banks moving slowly on foreclosures.
The 1.89 million homes on the market at the end of December represented a 6% decline from November and a 22.3% decline from one year ago, according to data compiled by Realtor.com.

See more on Wall Street Journal January 19, 2012

Mortgage Rates Break Record Lows

With property values across the country at depressed levels and interest rates dancing around historical lows for months now, housing affordability has hit an all-time high. That affordability inched even higher this week, as mortgage interest rates broke through their previous record lows to fall further still.

( Note: isn't this very ironic? When it is very cheap, very affordable, people can't buy or hesitate to buy ? )

Freddie Mac says all loan products covered in its regular weekly market survey eased to set new all-time lows for the week ending January 12, 2011.

Read more on DSNEWS ................
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Foreclosures in Most of Top 20 Metros Decline From Past Two Years

See which States have the highest foreclosure rate: Nevada, Arizona, California .......

Half of the metros in RealtyTrac’s list top 20 foreclosure rates for 2011 were located in California. The California metro with the highest foreclosure rate for the year was Stockton, which came in second on the top 20 list with a rate of 5.43 percent.


California metros also took the third, fourth, and fifth spots on the top 20 list: Modesto (5.20 percent), Vallejo-Fairfield (5.2 percent), and Riverside-San Bernardino (5.16 percent). Las Vegas had the highest foreclosure rate in 2011 among metro areas with populations of at least 200,000. About one in 14 homes – 7.38 percent – received at least one foreclosure filing in the Las Vegas area over the year.
However, Nevada’s foreclosures declined sharply from the third quarter to the fourth quarter after the implementation of a law mandating lenders file an additional affidavit in order to initiate the foreclosure process. With Arizona posting the second-highest foreclosure rates among the states, Phoenix also maintained an elevated foreclosure rate of 3.69 percent, earning it the No. 6 spot on the top 20 list.

Apartment-Vacancy Rate Tumbles to 2001 Level

In bay area, the rental has been strong in the past 2 -3 years. Some east bay rents of 4/2, 1800 sqft houses has increased from $1900 to $2300, a 21% increase in around 3 years.

See a Wall Street article below.

WSJ, 1/5/2012

The nation's apartment-vacancy rate in the fourth quarter fell to its lowest level since late 2001 as Americans continued to favor renting homes instead of buying them.

Rents climbed, but data firm Reis Inc. said the increase was less than expected. Landlords of properties intended for lower-income renters found it more difficult to raise prices, according to Reis.

In the fourth quarter, the vacancy rate fell to 5.2% from 6.6% a year earlier and 5.6% at the end of the third quarter, according to Reis. The vacancy rate rose as high as 8% in 2009.

During the depths of the downturn, landlords had to offer incentives such as flat-screen TVs and months with no rent to attract tenants. But in the fourth quarter of 2011, landlords in 71 of the 82 of the markets that Reis follows were able to raise rents.

Darlene Shaffron recently moved into a loft apartment that rents for $2,800 a month in Jersey City, N.J. She considered buying—and was preapproved for a mortgage—but was too scared to put money down on a home that could see its value decline in a volatile market. "If we went into a double-dip recession or something worse, then I would have spent all of the cash," the 40-year-old said. Ms. Shaffron decided to "save the money...and rent for a little bit longer."

Reis said the market has been weakened by job losses in the financial-services industry. Also, the city has the highest rent level in the nation—$2,876 a month—making it difficult for landlords to raise prices. By contrast, San Francisco's landlords managed a 5.1% gain over the past year, while San Jose climbed 5%, fueled by a booming tech sector. The higher-quality properties in the most desirable locations posted gains of over 10%, Reis said. 

The rental market also has been fueled by a dearth of new supply. Just 8,865 units were delivered in the quarter, the second-lowest quarterly figure since Reis began publishing quarterly data in 1999.

The strength of the market hasn't been lost on developers who are racing to move plans off their drawing boards.

More than 173,000 units were likely started in 2011 and some 225,000 and 280,000 starts are expected nationwide in 2012 and 2013, according to Zelman & Associates.
One concern for landlords is that the housing market will bottom or improve in 2012, which could curb rental demand. "Most any person or industry would be happy to see the single-family market stabilize, except for the apartment sector," said Richard Anderson, an analyst who covers apartment companies for BMO Capital Markets. "You're either an owner or a renter. There's no middle ground."

$1,000 a month NET Free Cash Flow

A nice single family house close to bay area can now generates $12,162 NET cashflow a year or around $1,000 a month. 

What happens if you have 5 of these kinds of houses below? Will $5,000 a month support your living expenses for the retirement?  Not to mention the gains from possible real estate appreciation in the future. 

Here is one example which you can build your retirement portfolio when California housing price is very low now. 

Investors See Bigger Profits From Rising Rents

The rents in Bay Area also rises up quite a bit in the past several years. Many 4/2, 1700 sqft single family houses were rent for $1,800 are now rent for $2,300 ..... 

Daily Real Estate News | Friday, October 21, 2011

Rental demand and prices continue to soar, and investors are cashing in. Rents are rising at a 5.17 percent annual rate — up from last year’s 4.72 percent rate. If rents continue to grow at their current pace, they won’t be too far behind the record-high reached in 2000 of 6.18 percent, according to Axiometrics Inc.
The rental market has added about 1.4 million new renters this year, some of whom were former home owners who faced foreclosure or a short sale. Renters are increasingly showing an appetite for single-family homes owned by investors.
As such, the number of investors in the market is growing. Investors make up anywhere between 20 and 40 percent of monthly existing home sales, according to home-sale data. With home prices and interest rates low, more aspiring investors are jumping in. Nearly 60 percent of investors in a recent survey by Realtor.com considered themselves newcomers to real estate investing.
“This is a long-term investment,” says Greg Rand, CEO of OwnAmerica. “Rents are a steady return on your investment through the years, leaving you with an attractive asset when prices improve. And they will. The best profits in real estate accrue to long-term investors who take a long-term view.”