EUREKA REALTY NETWORK » Commercial

Construction of new homes continue falling nationally

Amitesh Kumar — Tue, 27 Jul 2010 15:00:00 +0000

It the direct aftermath of foreclosure crisis is hitting the housing markets, by flooding of foreclosure properties, the side-effect is bringing the construction industry to a grinding halt. When there are huge inventory of unsold homes, inevitably new home building had to take a back seat for want of buyers.

The downward economy saw to it that the demand for new homes dwindle, due to the resultant cash-crunch and consumers left with only meager amounts, to take care of their buying the day-to-day needs. From shopping malls to hotels and resorts, the financial strain is felt everywhere, whereby the revenues of all these outfits got thinning.

New home constructions are normally taken up as big projects, involving sizeable capital in millions of dollars. Lots were purchased with the intention of building more housing units economically, in full use of the available space.

Consequent to the continued fall in demands, many a housing projects were either put off indefinitely or abandoned totally, even before the starts. This is the situation obtaining today, invariably at various locations – high-end or low-end.

News is – according to the Commerce Department – new home construction activity plunged to the lowest level in June – the adduced reasons being weak economy and reduced housing demands. The seasonally adjusted annual rate – because it is usual that home buying activity will slow down in June and July every year – fell to 549,000 new constructions in June. This is a drop by 5 percent from the previous month, where it was revised downward to 578,000.

The decline in June is attributed to a drop of more than 20 percent in housing apartment and condo markets. However, the drop was comparatively lighter, just 0.7 percent in respect of construction of single-family homes.

Some more statistics relating to new home construction are : there is a brighter side to this sorry-state of affairs, namely increase in new home building permit applications by 2.1 percent, indicating future activity; competition for new home building is stiff from foreclosure properties, which are available at considerable discount; sentiments expressed by home builders about future prospects, fell to the lowest ebb of 14 points since March 2009; every new home constructed means creation of 3 jobs per year and tax collection of $90,000 to local and federal governments.

How healthy is Realtors’ business? A see-through of NAR Member Profile 2010

Amitesh Kumar — Sat, 03 Jul 2010 15:00:00 +0000

The 2010 National Association of Realtors Member Profile was based on a survey of 58,022 members, which generated 6,830 usable responses. Here are some excerpts:

On a survey to assess the business activities of Realtors in US, it is found that 22 percent of respondents also offer commercial brokerage; 21 percent are in relocation; 18 percent residential property management; 15 percent counselling and 13 percent land developments, apart from full time residential property real estate business.

In addition, smaller percentages were also in commercial property management; residential appraisal; international; auction and commercial appraisal. Residential brokerage was cited as a secondary business for 11 percent of respondents, who had other primary specialties.

Despite the fact that home sales increased modestly in 2009, the bottom line was only lower value properties. Last year the median income of Realtors fell 3 percent to $35,700, following a decline of 14 percent in 2008. Members, who are licensed as brokers, earned a median income of $49,100 in 2009 and sales agents earned $26,600.

Realtors in the business for two years or less earned a median income of $8,800 on an average, while those in the business for 16 years with impeccable knowledge and experience earned $52,300.

NAR President Vicki Cox Golder says that the longer you are in the real estate business, the more you make based on growth in referrals and repeat clients from serving their long term interests; Real Estate is constantly changing, which is why continuing education is so important.

The median income of 20 percent of all NAR members’ business is from referrals from past clients, ranging from 2 percent for new comers in the business for two years or less, to 23 percent for respondents with at least 16 years of experience.

NAR vice president, Paul Bishop says 24 percent of Realtors in 2010 held at least one out of six certifications in specialized training, up from 16 percent in 2009. The fastest growth in training is for members holding the Short Sales and Foreclosures Resource Certification, underscoring the impact of distressed sales on the housing market.

So you can rest assured that there are sufficient numbers of good and seasoned Realtors in your area, to help you out in your requirements.

HAMP Fails To Achieve Objective – COP Report

Amitesh Kumar — Tue, 27 Apr 2010 12:00:51 +0000

In its latest Report running 189 pages dated 10th February – titled “Commercial Real Estate Losses and the Risk to Financial Stability” – The Congressional Oversight Panel, a “watchdog” committee overseeing the implementation and progress of Obama Government’s foreclosure crisis mitigation programs, has regretted the ineffectiveness of the same.
This report which has sent shockwaves in the real estate and financial circles, begins at the outset thus –
“The Congressional Oversight Panel is deeply concerned that commercial loan losses could jeopardize the stability of many banks, particularly the nation‘s mid-size and smaller banks, and that as the damage spreads beyond individual banks that it will contribute to prolonged weakness throughout the economy.”
The above report elaborates into pages, in typical elusive explanations, the ineffectiveness of the The Home Affordable Mortgage Program (HAMP), announced just over a year ago. The report makes extensive analysis on the problems faced by troubled property owners in the country, but miserably fails to offer any solutions.
Of course, they may say that it is the government to act upon it, as it is a mere overseeing agency to find fault with the program. But it is a vital point to note that the agency is much worried over the execution of the program – as can be seen from the very first paragraph of their report – to ultimately fulfill the objectives.
There is no denying that for the last 3 years market watchers and analysts of US real estate are sadly watching the deterioration of the system; lack of response in buying and selling of both residential and commercial properties; nose-diving of property values; sluggishness in selling markets; huge inventories of unsold properties piling up month after month; banks and lenders scratching their heads, holding hundreds of thousands of “dead weight” properties in their books, eating up their principal along with interest; and capping them all millions of proud American home owners driven away from their properties by the foreclosure fiasco.
At the time HAMP was announced, the government stated as its goal to achieve through this program, to create 3 to 4 million loan modifications – note “permanent loan modifications”- within a specified time of one to two years at the most. Against this, during the last one year period, HAMP has created all in all 66,465 permanent loan modifications only.
The main objective of HAMP is to save people from foreclosure devastation or at least check the flooding of foreclosure activity in the market. Has it achieved this objective? See for yourself – according to authentic foreclosure reports, the total number of foreclosure filings – in all stages of pre-foreclosure; scheduled foreclosure auction and repossession – in 2009 was 3,957,643 and the total number of US properties affected was 2,824,674. The increase in total properties affected, as against that of 2008, when HAMP was not there, is 21 percent and a staggering 120 percent increase from 2007.
Worse still – nearly 25% of US home owners are living in homes, whose property value is less than their mortgage loan outstanding, meaning they are not only “under water” but are also sinking. It is only a question of time these troubled home owners walk away from the property – a liability on which they are paying mortgages indefinitely, without any hope of the market value increasing in the near future.
On commercial properties COP has suggested further loan modifications, without taking into account the reality. Banks are elusive to take up loan modifications and have reported to COP that they are unable to do so, blaming the borrowers for non-submission of proper documents. Also Banks are under-staffed to cater to the influx of loan modification applications, as is the real-time experience of many commercial property owners under foreclosure process.
Considering all these, it is anybody’s guess whether HAMP is achieving its objective or not.

Foreclosures on a hopping spree from residential units to commercial real estate

Eureka Expert — Tue, 09 Feb 2010 14:37:20 +0000

The crisis in the housing market made its debut with foreclosures in residential units – primarily with those who had sub-prime mortgages. These mortgages were granted without checking on the financial capability of the loan taker and thus when the interest spiraled they began to default. It was a cascade of foreclosures like nine pins that triggered the greatest foreclosure crisis in the history of America.
With the economy being interlinked it did not remain confined to sub-prime mortgages but when the economy in general came to be hit, those with prime mortgages also began to tumble. The sub-prime mortgage collapse had set off a chain reaction because of its staggering numbers. The construction industry was hit and this led to an entire network of ancillary units from interior decorators to plumbers and electricians and furniture shops to down shutters. Restaurants and tourism began to suffer. Massive unemployment set in and this led to more people with prime mortgages, without jobs to support them, defaulting.
It was inevitable that the commercial real estate would not remain immune from the foreclosure mayhem. It is the ordinary man who goes to the shops and malls, who travel and buy. But without jobs they can no longer spend. It is the consumers that set the ball of the economy rolling.
Looming large ahead are commercial foreclosures. On Thursday 11th February a watchdog panel set up by the Congress said that increasing losses in the real estate market could put at risk the entire banking system and is placing brakes on the fragile recovery.
Commercial property loans amounting to $1.4 trillion would have to be refinanced within the forthcoming four years noted the panel. Over half of these loans have gone underwater – the value of the mortgaged units having become less than the loan amount.
The estimated loss from these units could range from $200 billion to $300 billion. It would pose a threat to 3,000 small and middling banks that have a top-heavy share of assets in real estate properties on their books.
The report of the panel is waving a red flag of warning to the White House as well as to the Congress that the condition of the real estate market is poised to worsen. The chairperson of the panel, Elizabeth Warren said, “We’re at a point where even as TARP is ramping down another major challenge in our economy is ramping up. We need to start now, before the system is on the brink of collapse to figure out a plan.”