US Repos News and Articles

There are Apprehensions That Increase in Apartment Rents Will Add Fuel to Inflation

It is apprehended that apartment rents will increase in 2011 as the economy overcomes the impact of recession. But this increase will add fuel to inflation said the National Association of Realtors. There will be a general improvement in the commercial real estate market with the focus being on the multifamily units. NAR opined that the commercial property market has been ailing in all its segments – office, retail, industrial as well as tenancy housing. Now after a deep plunge they are stabilizing after having suffered the worst battering in decades.

The Chief Economist of NAR, Lawrence Yun has forecasted an increase in demand with the slow betterment of the economy. The recession officially came to an end in 2009 June.

The number of those buying new houses has fallen mainly because of the staggering number of unemployed. Values of houses have dropped following the bubble about three years previously. He said, “Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011”. According to Yun rents of apartments would increase by 1% to 2% during the forthcoming year. It had dropped in 2009 and did not register any growth in 2010. He explaine, “This rent rise therefore could start to force up broader consumer prices as well”.

In the consumer price index of the government the biggest slice is taken up by the cost or rent and or mortgages. It accounts for 32% of it.

It had been predicted that vacancies in multifamily unites would drop to 5.8% during the fourth quarter of 2011 from 6.4% during this present quarter.

The consumer price inflation has continued to be subdued during the past few months although energy prices have gone up. The inflation in the core sector has tended to be low, noted the Federal Reserve during the meeting targeting policy setting.

The weak inflation was taken as an excuse by the Federal Reserve to justify its plan to inject 600 billion by purchasing Treasury bonds. This plan has invited controversy. The critics feel that this will further spur on inflation.

NAR commented that prospects for the office as well as industrial markets had improved. Vacancy rates have been declining modestly while the retail segment is expected to remain steady. Vacancy rates have remained grounded in double digits but despite there are signals that the demand for rented units will increase. Yun explained, “High vacancy rates imply falling rents”.

Amidst Foreclosures, a New Committee will Look Into Economic Reforms Soon

Filed under: Real Estate

The real estate industry in the US is in the throes of a crippling crisis. What with unemployment at its zenith, people are faltering on mortgage payments. Hence, foreclosures of homes have become a common phenomenon.

Now a panel has been set up to look into the financial crisis that is crippling the nation. This panel has been modeled on the lines of the 9/11 Commission.

The Financial Crisis Inquiry Commission with 10-members on board held a meeting recently. The team has a budget of $5 million. What is surprising is that the report will be submitted long after the Congress comes up with a new law to stave off another financial meltdown triggered off by Wall Street collapse. There will also not be any significant effect on the Congressional races.

The co-chairperson of the commission is a Democrat by the name of Phil Angelides. Republican Bill Thomas is also the other chairperson of the committee. Thomas happens to be the former chairman of the House Ways and Means Committee. The executive director of the panel is Thomas Greene. He is a high-flying lawyer. He has been in charge of a case that was fought against the tobacco industry. The case had resulted in a settlement of $26 billion. Greene had also been responsible for cases against Enron and an antitrust lawsuit against Microsoft. The panelist’s background has been released by the committee.

It may be noted that at the beginning of the year, the Democratic leaders and White House had stated that the revamp of the financial system was the main priority. But there is no uniformity on how there could be a method to the madness. There is yet no agreement on what should be the structure and form of the regulatory authority.

The government, it may be pointed out, had come up with a $787 billion bill to speed up recovery. The government had also come up with a Making Homes Affordable program. According to this program, loans would be modified and down payments made to borrowers to avert foreclosures. However, the government gave importance to global warming and health care before dealing with the financial collapse firmly.

The Congress agrees that the present system is not very stringent. It allows banks to write bad mortgage which is again sold off to the investors. Experts observe that the situation will improve only when more jobs are created.

Mark Zandi of Moody’s Opines that the Meltdown of the Real Estate Market has not Come to a Close

Filed under: Real Estate

The meltdown of the real estate market has not come to a close – this is the opinion of Mark Zandi of Moody’s Economy.com of West Chester, Pennsylvania. He is of the view that the prices will start going down again as foreclosures are poised to flood the economy. Speaking to Reuters he said that the fall will kick off some time early in 2010 as foreclosure sales would again pick up speed. He categorically stated, “The housing crash is not over.”

The real estate market has endured the worst debacle since the time of the Great Depression and its fallout has snowballed across the entire economy causing all round recession. The world markets have not been spared either. The collapse of the housing market and its continuing woes does not portend well for the economy of USA.

Zandi said that home prices as calculated by S&P/Case-Shiller hit the bottom during the third quarter of next year after falling by 38%. The index had reached its heights in 2006 but hit a ditch during the first three months of 2009 – falling by 32%.

However in many places sales of homes have been picking up together with increase in price tags. This was because of a drop in foreclosure sales last summer as mortgage servicers tired to fit borrowers into the HAMP loan modification plan. Zandi said, “This lull in foreclosures sales has resulted in the price gains in the past few months. Foreclosure sales will increase, and home prices will resume their decline by early 2010 as mortgage servicers figure out who will not qualify for a modification”

Zandi estimates that from 2006 to 2011 the foreclosure sales would number about 7.5 million. Most of the foreclosure sales are apprehended from 2009 to 2011.

The housing market has become attractive because of low prices and affordability. These have gone up as purchasers are eager to avail of the tax credits offered by the government to first time nest builders. Originally it was scheduled to close on 30th November but the dates have been extended and eligibility expanded. Contracts however have to be signed by 30th April and deals closed by 30th June.

Zandi explained that one of the major obstacles to the recovery in the housing sector is the increasing number of underwater mortgages where the value of the property is less than the loan due. Negative equity has prevented many borrowers from refinancing or from short sale. It is these borrowers who are most likely to run into defaults and end up in foreclosures.