2015’s Hottest Distressed Real Estate Markets

Posted by JD Esajian

Real estate activity is doubling in some major cities, while some types of foreclosures are too. So where are home buyers flocking? Where are the hottest and most distressed real estate markets in the U.S. this year?

Busting the Two Biggest Myths about the U.S. Housing Market

There have been two very counterproductive and irresponsible myths being floated around this year. You’ll be glad there is proof that they aren’t true.

Myth #1: The U.S. Housing Market has Finished its Growth Phase

People love controversy and attention. As a result. the media has published plenty on how growth may slow. Historical data clearly shows that once we get back to par, we’ll still have years of great growth ahead. While some markets may be getting back close to their previous values, there appears to be no signs of slowing. Given that the economy really hasn’t caught up yet, we should see robust growth when it finally does.

Myth #2: Foreclosures Are Over

This is a dangerous myth for two or three reasons. First, it can take the motivation out of additional aid for those that are struggling to keep their homes. Second, it causes some real estate investors that rely on the hype to pause. They become afraid that there aren’t any deals left. This, in turn, can cause many to overpay for properties, or buy wildly due to a scarcity mindset. However, new data from the Mortgage Bankers Association reports that the percentage of Fannie Mae loans that were 60 days or more past due almost doubled in the first quarter of 2015.

Sizzling Summer Buyer’s Season Starts Early in 2015

According to Realtor.com, website traffic is up 50 percent. More individuals are shopping for houses online. According to the firm’s chief economist, house searches and online real estate traffic keep setting new highs. Expectations are that the summer buying season will boost these numbers even further.

Consumers aren’t just looking either. Rising home prices are enabling more homeowners to get out from being underwater and list their homes. However, while home listings are up, Realtor.com reports that the national average marketing time for homes keeps dropping. In May 2015, days on market (DOM) fell 10 percent month-over-month.

America’s Hottest House Markets in 2015

According to the latest rankings, California has half of the country’s hottest housing markets based on online search activity, searches per home listed, and how fast homes are selling.They include:

• San Diego-Carlsbad, CA
• San Francisco, CA
• Vallejo, CA
• Santa Rosa, CA
• Sacramento, CA
• Los Angeles, CA
• Venture, CA
• Stockton, CA
• Santa Cruz, CA
• San Jose, CA

America’s Hardest Hit House Markets in 2015

RealtyTrac reports that banked owned properties doubled in April 2015 over the previous year, and rose almost 25 percent month over month. RealtyTrac shows the 5 states with the highest foreclosure rates as:

1. Florida
2. Nevada
3. Maryland
4. New Jersey
5. Tennessee

Real estate investors and homebuyers are likely to find high foreclosure density in ‘judicial’ foreclosure states where the foreclosure process takes the longest. Think New York, where it can easily take over 900 days to foreclose on a home.

Even though California is now one of the hottest and healthiest housing markets in the nation, the statistics show there are plenty of distressed properties coming online in the Golden State. Properties in foreclosure appear to be split almost equally between pre-foreclosure, going to foreclosure auction, and becoming bank owned REOs. California bank REOs shot up 74 percent in April 2015 alone.

Summary

Looking at the big picture, we see plenty of distressed properties working through the system. Meanwhile, the retail end of the market is experiencing a great uptick in demand, and with sunny expectations for price growth. This creates an incredible sweet spot and window of opportunity for those ready to step in and serve both distressed borrowers and asset holders.

Home Building: Your Best Chance At A Real Estate Niche?

Posted by JD Esajian

Could home building be your best option for finding a real estate niche?

One source suggests that home building could be one of the few industries left to dominate. Could that really be true? What are the pros and cons of building houses as a form of investment? Are there any other options that stand out?

Aspire to Become a Market Leader?

Simply looking for a viable way to make money in real estate? Or to create a business empire? Either way, it can help not to have to go head to head with one dominating force. If one conglomerate has the vast majority of market share, they can crush new challengers with ease. And they’ll be highly motivated to do so. So where are the gaps? They might surprise you!

Inc. poses that there are still five industries without a clear market leader in 2015. These are mature industries, with great growth projecting for the next few years.

1. Home builders
2. Heavy equipment rental
3. Mobile storage
4. POS software developers
5. Conference and trade show planning

All of these are related to real estate in some way. They can all make great side businesses for successful real estate entrepreneurs and firms. However, home building stands out for several reasons. Firstly; it is kind of shocking. Secondly: the figures. According to Inc. and IBISWorld, the industry generated $81.8 billion in 2014. It is expected to grow 11.3% by the end of this year. Industry revenue is forecasted to top $110.9 billion by 2019. Yet, there is reportedly no giant brand dominating the industry. That means there is room for one. And perhaps more space for smaller new entries.

The Need for a Real Estate Niche

A niche is important whether you are launching a business, or simply investing to boost personal finances. A niche empowers business owners and investors to get more for their money, and gain more traction. A niche provides focus. It allows for better results from resources invested. A niche can minimizes competition. Real estate agents know this all too well. This is why we see “waterfront specialists,” ‘luxury home experts,’ ‘Condo Kings,’ and more. Instead of being just another individual in a giant pool of unrecognizable badges, agents with a niche stand out. With a niche, they become masters of a domain overnight. Who do home buyers and sellers turn to when they want waterfront properties? ‘The Waterfront Specialist.’ They might have just passed the real estate licensing exam yesterday. All of the listings on their real estate website might be borrowed from others, but that’s the power of a niche.

How Do You Choose a Niche?

There are many real estate niches to choose from. So how do real estate agents, investors, and entrepreneurs choose one? It’s really about find the best fit for you. There can be limitations, or at least better options depending on the current competition in the marketplace. For example; if the equivalent of Zillow was trying to dominate high end waterfront condos in your neighborhood, you might want to choose something else – especially if you are on a budget. Volume of competition isn’t as significant as their brand recognition and market share. Remember, 20%, maybe even 10% or less, are really doing any significant amount of business. So ask yourself:

1. Where is there a space to fill in the market?
2. What strengths do I have to fill those gaps?
3. What am I passionate about?

There’s no point in choosing a niche you hate, just because the numbers work. And there’s no point in choosing a niche you love, if the numbers don’t work.

Niche Options

There are dozens of real estate niches. When they are combined, there can be hundreds of them. A few of the potential options include:

• Affordable housing
• Green housing
• Luxury homes
• High end condos
• Commercial property
• Beachfront homes
• New homes
• Distressed property
• Golf property
• Pet friendly housing
• Specific buildings and neighborhoods

Home Building as a Niche

Some aspire to get into home construction from the get-go. For others, it is the last thing on their minds. So what is the attraction, and turn-offs to home building as a niche?

Pros of building include:

• Prestige
• High profit margins
• Flexing your creativity
• Influence on housing trends and impact on the community

Cons of building include:

• Cost and cash flow needs
• High risk with many variable expenses
• Low profit margins
• Time to realize returns

Building houses can be highly profitable. It can also result in huge losses. Sometimes you don’t know what demand will be, where prices will be, and other factors until it is built. That’s risky. Building your own home to live in is one thing. Building houses and condos as a business or investment strategy can be a totally different venture altogether. It’s worth noting that some of the nation’s largest home builders have turned to building rental homes instead of properties to sell.

A Hybrid Solution

Fixing and flipping existing houses is a hybrid solution. It provides many of the benefits of building homes. While also minimizing the risks. Many would say it is far more valuable and needed than adding more housing stock to a pool of tens of billions of dollars that still needs to be sold. It’s easier to use financial leverage. It’s faster. And in many cases it can be more profitable too. Positioned well real estate professionals can still build a great brand, and dominate their market.

What’s your niche?

7 Ways To Spot A Rising Real Estate Market

How can home buyers and investors spot rising real estate markets?

While the U.S. property market is only headed upwards, it is clear that the country is full of very diverse sub-markets – each of which are in different parts of their own cycle. There is a little something for every real estate investor, strategy, and budget. However, everyone is looking for rising markets that promise growth and longevity returns. So how can real estate investors best cut through the cloudiness, and discover which markets are really on the verge of growth?

New Construction

New construction can be one of the best tells of a rising real estate market. While it is true that over-building has been the sign of markets getting frothy, building is a very positive sign. This applies to multifamily construction, new home communities, retail, and custom home building. Builders have big research budgets, and normally do their homework very well before digging in and investing in the process. So look for neighborhoods that are quietly breaking ground. They should bring sizable equity gains in the near future.

Job Signs

While the real estate market is on fire, and many parts of the economy have been catching up, jobs and wages have been the one laggard many industry experts have been waiting for. Some, job markets appear to be as disparate as housing has been. Some areas and sectors seem to have plenty of jobs, while others have clearly failed to keep up with rising housing and living costs. Publicly published job and unemployment statistics can be tainted and seriously difficult to decipher. In contrast; local job ads, and talking to local employers about their hiring and interviewing experiences can reveal enormous amounts about the strength and direction of the market. How many jobs are being advertised? How tough is the competition for talent?

Population Growth

Population growth can be a side effect of strong housing and job markets, but it is also a sign of great growth to come. So is the population in the destinations you are evaluating growing or shrinking? While these trends are quite obvious, some markets can be very deceptive. For example; the population bleed California was experiencing a couple years ago has reportedly changed. Some older and well entrenched markets might now be dying due to a lack of movement among wealthy aging buyers. Others might be doing better than expected. Some off the beaten markets like Alabama and Wisconsin actually appear to have consistently grown since the 1800s, according to the U.S. Census.

What They are Talking About

What are locals at the coffee shop and gym talking about? When the conversation at the adjoining tables and treadmills is increasingly focused on real estate, refinancing, buying homes, and investing, you can tell there is action in the works. Don’t be shy about interjecting yourself into the conversation to get a better feel for how others feel about the current market. Note that this might be a great way to rack up some highly valuable local leads too.

Infrastructure Investment

When government and other entities are making heavy investments in a local market, businesses, buyers, and investors will not be far behind. That means more real estate transactions, jobs, money in the local economy, rising property values, demand for property and rents. However, once it has already happened, or is in action, a lot of the smart money may already be in. Getting ahead of this by joining the local Chamber of Commerce, sitting on planning committees, or at least networking with those that are on the inside can provide a significant edge for the serious investor, and those that want to lock in the most equity up front.

Easier Lending

Lenders and banks may have the most exhaustive research and data sets on the planet. They frequently pull back lending and even stop lending in markets they are concerned about. In the reverse; they’ll offer deals and make borrowing easier and less expensive in the real estate markets they are the most bullish about. So keep an eye on where banks are promoting loans, where they are opening or closing branches, and even talk to mortgage brokers about where the easiest and most difficult places to get loans are at.

Media Attention

While incredibly easy to manipulate, what the media is saying about different markets can have a great impact. It is important to watch who is publishing what, and to look behind the headlines to double check the data and the motivations for publishing both positive and negative information. However, where there is attention, there will certainly be more investment too. Just as the masses will always follow where leading stock investors go. Recognize this for what it is and invest appropriately.