Barrons – Landlords rejoice

Smart Real Estate News & Commentary by Chris McLaughlin July 30, 2010

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Barrons – Landlords rejoice

Demographic and economic forces, together with some perversities of government policy, are combining to push the share of ownership back to where it was in the early 1990s. Already, in the wake of the housing bust that brought on the Great Recession, the share of U.S. households owning homes has slid steadily—from 69% at its peak in 2004 to 67.2% in this year’s first quarter. And the rate is likely to fall to its 1993-94 level of 64% by 2015.  The flip side of this trend is a rising rental rate, which probably will hit 36% by 2015, versus 32.8% in 2004. Every percentage-point increase represents nearly 1.3 million households, and the average household includes more than two people—so roughly 10 million extra folks could be moving into rentals over the next five years. Why? From now through 2015, the long slog that will unfortunately characterize the economic expansion will bring slow growth in jobs and wages.

That pace of improvement should be just strong enough to permit new households to form, but not robust enough for the members of those households to afford to own homes. In addition, lax lending standards, fraud and predatory lending practices— key factors in the unrealistic bubble in home ownership in the mid-2000s and the subsequent debacle—appear to have become rarer, at least temporarily.  Demographics also will deal home sellers and builders a clear blow. Not surprisingly, the home-ownership rate tends to rise with age. For example, while the overall U.S. rate is 67.2%, the rate for households headed by someone under 35 is just 38.9%.  Thus, whenever the age distribution of households tilts in favor of younger adults, the overall home-ownership rate declines. That happened in the early 1980s, when young (and numerous) baby boomers began to form households. And, says demographer Peter Francese, former president of American Demographics magazine, a similar tilt is likely over the next half-decade.  Francese projects substantial growth in households formed by people under 35, who mainly rent rather than own. Worsening the shift will be a decline in the number of households led by people 35 to 49 years old—the very ages when there is normally a huge jump in ownership. Francese does expect a rise in households led by people 50 and older, but the boost to ownership from this won’t be great. Home-ownership rates tend to level off when Americans reach their late 40s and early 50s.

GDP slowing more than expected

The Commerce Department says gross domestic product, the broadest measure of the nation’s economic activity, rose at a 2.4% annual rate during the three months ended June 30.  Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 2.5% rate in the second quarter. The government had previously estimated a 2.7% growth rate for the first three months of this year.  Growth during the second quarter was also supported by new home construction, which surged at a 27.9% rate after being a drag on growth in the first quarter, reflecting a spurt in building activity spurred by a popular homebuyer tax credit that has since expired. The rate of increase was the biggest since the third quarter of 1983.  Residential investment had contracted at a 12.3% rate in the first quarter.  Growth in the last quarter was held back by 28.8% surge in imports, which eclipsed a 10.3% rise in exports.

That created a trade deficit, which lopped off 2.78 percentage points from growth, the largest subtraction since the third quarter of 1982.  The report showed consumer spending was not as robust as had been previously thought. Growth in consumer spending was at a 1.6% rate in the second quarter after increasing at a revised 1.9% in the first quarter.  Consumer spending, which normally accounts for 70% of U.S. economic activity, had previously been estimated to have grown at a 3.0% rate in the first quarter. Spending added 1.15%age points to GDP last quarter.  The sluggish economy, 9.5% unemployment rate, and his constant attacks on business, banks, and Bush are eroding President Barack Obama’s popularity and dimming Democrats’ prospects in November’s mid-term elections.  A Reuters-Ipsos poll this week showed only a 34% approval of Obama’s handling of the economy and jobs compared to 46% who deemed it unsatisfactory.

DSNews.com – Home Prices to Drop Another 4.9%

Despite recent increases in a number of the industry’s home price measurements, and even an uptick in the company’s own index of residential property prices, Fiserv Inc. says the gains will be short-lived. The Wisconsin-based information technology firm is forecasting home prices to fall by nearly 5% more over the next 12 months.  According to the Fiserv Case-Shiller Indexes, which covers trend data in 384 U.S. markets, single-family home prices in the United States rose 2% in the first quarter of 2010 compared to a year earlier, Fiserv reported Thursday.  It was the first year-over-year gain recorded by the company since 2006, but Fiserv says the national numbers mask the broad declines seen in most markets. Home prices were actually lower in 303 of the 384 metro areas included in the Q1 study.

Fiserv expects home prices nationally to fall by another 4.9% in the year ahead, as unemployment remains high, mortgage rates rise, and markets such as Florida, Arizona, and Nevada add even more distressed properties to their inventories.  “The stabilization of residential real estate markets will take many years as buyers and sellers try to find price levels that clear large inventories of vacant homes from the market,” said David Stiff, Fiserv’s chief economist.  “Consequently, we expect to see prices bounce up and down around their lows for the next two to three years, especially in markets that experienced the largest home prices bubbles,” Stiff continued. “This will result in alternating bouts of optimism and pessimism regarding the housing market recovery… [and] will make it difficult to know exactly when the housing market has reached its bottom.”

Now for our real estate education section…

Friday File – 15 Minute Resolution: Get the Most of Google Listings

As the most widely used search engine in the nation, Google real estate listings are becoming a one-stop shop for buyers and sellers alike. Unfortunately, making sense of how all the different parts fit together isn’t always easy especially, Google Base, Google Places, Google Maps, business listing and more all form distinct parts of the whole. Use these quick tips to get the most from your Google listings.

1. Visit Google Base and submit your item type (real estate): http://base.google.com/base/

2. Visit Google Places to submit a business listing: www.google.com/places

3. Upload photos and/or YouTube video feeds so visitors can see the house or other property listings.

4. Include a full street address and house number – verify the link works correctly with Google Maps.

5. Include appropriate tags such as the “People” snippet to include agent or investor information, “business” snippet for your office and “even” snippets to advertise an open house or showing times.

6. Create a housing or data feed for your specific area.

7. For multiple properties or to make quick updates, simply store the information as a spreadsheet then upload on a regularly scheduled basis.

Remember, listings expire after two weeks so you will need to either automate (as mentioned above) or schedule a time to perform regular maintenance. However, given the effectiveness and price (FREE!!!), this is one more tool to keep in mind for your short sale, foreclosure and investment advertising.

See you at the top! 

Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
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