This week The Norris Group Real Estate Radio Show and Podcast presents Part 3 of I Survived Real Estate 2009. This week starts with a continuation of John Young’s segment. He is the founding partner of Young Homes which is located in Rancho Cucamonga, and he is the Vice President of the California Building Industry Association (CBIA). He has been associated with the real estate business for 30 years.
Many home builders have had to reduce staff in this down turn. John Young has always worked in the first time home buyers industry. His business has picked up because these people can get FHA loans, they have good FICA scores, they have a job, and they have decent credit. There are buyers who couldn’t buy a few years ago who can buy today. In the Inland Empire, prices are still going down because of the large volume that is in those markets.
The California Builders Industry Association (CBIA) is working with the National Association of Home Builders (NAHB) to address the inappropriate appraisal practices, and also the acquisition, development, and construction lending crisis that is damaging home builders. Additional credit resources could help home builders greatly.
The inappropriate use of distressed and foreclosed sales in determining new home values is driving down home prices and stalling an economic recovery. NAHB has found that twenty-six percent of builders are losing sales because the appraisals are continuously going below the contract sale price. These appraisal practices are contributing to the credit crisis. Falling appraised home values have lead some financial institutions to stop lending to home builders.
The CBIA and NAHB are calling on government regulators to develop clear and concise regulatory guidelines, which will allow appraisers to develop realistic expectations by accurately comparing homes. CBIA and NAHB supports ideas to help resolve issues pertaining to expiring subdivision maps, reducing unsold inventory, and extending the first time buyer tax credit.
New home builders are now focusing on building on smaller lots with less square footage. They are trying to control the amount of standing inventory, and they are controlling costs and demand less waste. Most private home builders have survived because they had some left over cash from the good times.
Young Homes anticipates that this market will stabilize in two years. John admits that home builders are by nature very optimistic, and that sometimes gets them in trouble.
The next speaker on the show is Pat V. Combs. She is a Realtor with Coldwell Banker. She has worked as a Realtor for 35 years, and she was the 2007 President of the National Association of Realtors.
All real estate is local. Pat can give you a national report, but that is about as accurate as a national weather report. The nation has witnessed 4 straight months of rising existing home sales. The national inventory has decreased from a year ago. These statistics show that recovery is occurring on a broad scale, but not necessarily a regional scale.
The federal tax credit has encouraged 350,000 first time home buyers, around the nation, to buy a home. Pat has been encouraging her children without homes to buy houses right now. Pat has noticed, in Michigan, a lot of entry level buyers getting into the home business. She is not encouraging everyone to buy a house, but anyone who has been “sitting on the fence”, who can qualify for a mortgage, should buy.
When Pat holds open houses, around 5 to 10 people come. Of those 5 to 10 people, 75 percent of them have houses to sell.
Pat expects the total impact of the home buyer tax credit to be somewhere between 300,000 and 650,000 additional home sales in 2009. When you consider that each home sale generates roughly 62,000 dollars in economic activity, that means that around $18.6 to $40 billion dollars are being pumped through the national and local economies.
Cash for Clunkers injected roughly $20 million into the economy. Realtors and home builders are encouraging the tax credit to be extended through 2010, and hopefully the credit will be extended to all home buyers, not just first time buyers.
There is some concern that another wave of foreclosures is going to hit the market place. Pat hopes that the other panelists will be able to give us some options for helping with those foreclosures. We need to resolve problems that have come up because of the new appraisal rules. Realtors are concerned by the out of town appraisers being used, and because of the higher costs that consumers must now pay, and because of the loss of transactions that home sellers and buyers are experiencing because of the appraisal problems. NAR has met with New York attorneys to discuss these problems, but little effort has been made to make changes.
Realtors continue to complain that good credit is not available to good buyers. Fannie Mae and Freddie Mac are still needed because we need to make the increased loan limits permanent. The current limit is capped at $729.750, and this higher limit will expire on December 31, 2009. It is important for people in high costs states to keep these loan limits high.
Two years ago, FHA was used less than 3 percent of the time. Today, FHA is used over 36 percent of the time. NAR submitted a testimony to the House Financial Services Committee expressing support for increased FHA staffing, and for increased resources to meet rising demand.
President Obama’s proposed Consumer Financial Protection Agency offers the potential to protect consumers from fraud and other deceptive practices, but experts in the real estate industry need to work with Congress to make sure that such an agency supports efficient and effect markets, while protecting consumers at the same time.
Realtors are discovering a new way to do business through the internet, social media, and new applications to methods used in the past. The old mantra “location, location, location” is being pushed into “price, location, price”. Our market places are becoming global. Tweets on new listings are sometimes being answered from China.
The next speaker was Tommy Williams. Tommy has over 40 years experience in real estate auctions, land development, and real estate investments. He is the founding partner of Williams and Williams Auctions, and he is the immediate past president of the National Auctioneers’ Association. He has conducted over 10,000 auctions in 48 states, and has even auctioned for Bruce Norris.
We have two economic systems that are flourishing in the world. One is the China system, which is completely government controlled; all individuals and businesses operate on the government’s direction. We once had the exact opposite of that. The U.S. has risen to the place that it is at, because it has always placed the individual as number one. It has always placed private business as number one with government interference.For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.