Wednesday, April 30, 2014

Taxicabs, Then Uber. Real Estate Brokerages Then ???

Long-time real estate journalist Brad Inman published this piece about a coming disruption in the real estate industry, comparing it to such upheavals as Uber has caused for the taxicab biz, and other examples. It's in line with some thoughts I've had for years (except he does it better), some of which I wrote about for LinkedIn, which you can read here if you're interested. I've been following Inman News off and on for decades, and Brad continues to be on his game.

In my article, I wrote that demographics and technology are likely forcing a change in real estate buying and selling as we know it. Brad took a slightly different--and probably better--tack by discussing the changes between brokerage and consumer brought about by the internet, such as Zillow and Trulia, and comparing the situation to the upheavals technology caused in other industries.

A few years ago, I fooled around for about 20 minutes with the idea of setting up a website that would serve as a real estate exchange, where people could post their homes for sale, for free. Revenue would have come from various real estate professionals advertising services on the site. A programmer friend looked into it and me know how much work it would take--a lot--and friends and colleagues in the real estate trade didn't seem to think much of the idea. Sadly, I went home and locked myself in the closet.

Now, I'm wondering if that's what Zillow et al aren't up to. Redfin's part way there, since they're already licensed. But what if Zillow and Trulia started pitching to sellers to list for free on their sites? These websites already make their money by getting brokers and others to advertise. Free listings would only up the advertising game.

Upheaval is coming, but like the Big One on the West Coast, we just don't know when.

Tuesday, April 8, 2014

The Return of FHA Spot Loans on Condominiums?

Most people don't even know what an FHA "spot loan" is, and most of them don't care and wouldn't care even if they did know what one was. Anyway. If you own a condo and you're trying to sell it, but can't, or you're trying to buy one, but can't, you're in the minority of lay people who probably know what a spot loan is.

Since 2009 (some say 2010), a condominium project had to have FHA certification before units could be financed with FHA loans. Those are the cool low-down (3.5%) loans detached homes and townhomes are eligible for. But un-FHA-approved condos? Not. But that may be changing, according to this article in today's Inman News.

In the olden days before FHA changed its mind, units in non-approved facilities could receive spot loans, whereby a certain number of units could get FHA-insured loans placed on them when sold. To receive FHA's blessing, a condo project had to prove up this really dumb and inconvenient stuff, like being in good financial condition, the units having kitchens, the walls and foundation being in decent shape, and other such tedious details.

So, who cares, and why?

Condo owners for sure. If they want to sell, someone can buy without having to put at least 20% down. Some first-time buyers might care, too, because condos often offer a lower-priced alternative to scarce detached homes and townhomes.

Condominium Owners' Associations will do the happy dance, especially those too cheap and lazy to go through the FHA certification process (and, to be fair, some tried, but were denied approval because of kind of dumb technicalities; hey, this is the gummint, after all).

Real estate and mortgage brokers will be doing the High Five and Butt bump.

Not so developers, at least for a while. For years, they've been blaming construction defect laws for not building condominium projects. Colorado, Nevada, and Mississippi legislatures (and others I couldn't find) have at least considered bills to modify CD statutes. But now, the truth will out: They haven't been building new projects (a) because the economy isn't great, and (b) no one could buy the condos anyway because of the lack of FHA financing.

What does The Captain think? Hmm. The jury's out. I have always had a love-hate relationship with condo-minimums, but I'll save that for later. And I'm also scratching my head over what looks like one more step along the Yellow Brick Road to Subprime Oz and the masked men behind the curtain.

Tuesday, April 1, 2014

This Old House: Market Killer?

An exit strategy for old houses
I've reduced the first three drafts of this post to this one sentence: Guess what, Boomers? Younger buyers don't want your old house.

When the 3.5% to 5% downpayment is added to the closing costs of the loan--usually 1% to 3%--first-time buyers don't have a lot of geedas laying around for fix-it work.

And your--our--1990's and 1980's (and older) suburban homes don't just need work. They are boring houses in boring neighborhoods run by cranky HOAs with school districts in decline. Okay, that's not universally true, but still. It sort of is true. When new construction houses are the same price and more appealing than older ones, what does it mean for the recovery of the overall market?

Mostly, it means what the data show: Sales of existing homes are down for the eighth straight month.  The National Association or Realtors has weighed in, touting high prices because of low inventory and blaming cold weather for everything else. Now Is a Great Time to Buy a House and Always Has Been, and of you don't believe it, ask a Realtor.

In other words, the headlines announcing the loud sucking sound of buyers inhaling homes is really more of a wheeze. Look around the suburbs of Denver Metro and you'll see block after block, neighborhood after neighborhood, community after community of houses decades old, occupied by members of the Flower Power Generation and all wondering if they can sell their houses to someone and if they did, where would they move. And it's not so different in suburbs everywhere else, where the only thing residents can walk to is the corner fire hydrant.

That said, the way things are now isn't the way they will always be, a statement which defies the feelings of day traders and baseball fans. As I learned in an appraisal class years ago, the only certainty in real estate is that nothing is certain. Change is inevitable.

Buyers: A killer deal may be had in someone's old house. Tell your friends, and before long, you'll have a community.