How Can Renters Solve the Housing Crisis?

By Greg Rand

RISMEDIA, Saturday, December 10, 2011— Residential real estate is not rocket science. We know that this housing crisis is:
1. Explainable – bad lending, mad speculation, wild expectations, government meddling
2. Isolated – bad mortgages, negative equity, strategic default, government meddling
3. Temporary – demand for housing always catches up to supply eventually
Anyone with any experience and perspective will agree that this market will recover over the next 10 years, but what will this particular recovery look like? Since the root of the problem was unprecedented, the solution might be as well.
My belief is that renters are going to solve the housing crisis.
Homeownership rates have fallen by a few percentage points, which has translated into more than four million new rental households in just the past few years. According to the Census, 1.4 million of those were added between July 2010 and June 2011, showing that this trend is accelerating.
As a result, rental rates are growing at more than 5% per year, and this trend is also accelerating.
As a result of this, investors are pouring capital into American housing with a long-term mindset, kicking this trend into hyperspeed.
This crisis will not be solved by enticing home buyers. Their confidence is waiting for unemployment to come down and government to act responsibly, which could take a while.
But investors are confident right now. Why? Because they see the big picture. Rental demand equals stable cash flow. So what can be done to encourage them?
How about eliminating archaic waiting periods for investors who want to buy foreclosures? How about eliminating waiting periods for investors who paid cash and want to tap it with a refinance? Today they have to wait months to put that money back to work. Why not eliminate the overall bias against investors in FHA, Fannie Mae and Freddie Mac and require big down payments to make it safe to lend, and lend?
Better yet, keep your eyes peeled for a private sector player to seize this opportunity to create America’s first national investor mortgage brand. The estimates are that half a million investor loans close every year, and who owns that niche? No one.
The Martial Arts teach you how to use the weight and momentum of your opponent against them (or so they say in the movies). This is the same thing. This drastic increase in rental demand is a by-product of the foreclosure crisis. Use it against the crisis by turning it into positive cash flow investments for those willing to be confident and take a risk in this environment.
Burn off that shadow inventory and create housing options for newly minted renters, which will, in turn, stabilize rental rates, and everybody wins. Good credit renters and buy-hold investors will be the heroes at the end of this saga.

Greg Rand is CEO of OwnAmerica.com.

For more information, please visit www.ownamerica.com.

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Gradual Recovery expected for Housing in 2012

Chief economist of the National Association of Realtors, Lawrence Yun, stated

“Tight mortgage credit conditions have been holding back home buyers all year, and consumer confidence has been shaky recently,” he said. “Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can’t continue indefinitely. This demand could quickly stimulate the market when conditions improve.”

Mortgage rates are expected to gradually rise over the next year.

For the full article, click here.

What does this mean for you if you are looking to buy or sell in the next year? Contact Dan Petersen to find out more! www.petersenpartners.com

Pending Home Sales Jump in October

RISMEDIA, Thursday, December 01, 2011— Pending home sales rose strongly in October and remain above year-ago levels, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, surged 10.4 percent to 93.3 in October from 84.5 in September and is 9.2 percent above October 2010 when it stood at 85.5. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said improved contract activity is a hopeful sign. “Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions,” he said.

“Many consumers are recognizing that home buyers in the past two years have had one of the lowest default rates in history. Moreover, continued inventory declines are another healthy sign for the housing market,” Yun added.

The PHSI in the Northeast surged 17.7 percent to 71.3 in October and is 3.4 percent above October 2010. In the Midwest the index jumped 24.1 percent to 88.7 in October and remains 13.2 percent above a year ago. Pending home sales in the South rose 8.6 percent in October to an index of 99.5 and are 9.7 percent higher than October 2010. In the West the index slipped 0.3 percent to 105.5 in October but is 8.1 percent above a year ago.

“Although contract signings are up, not all contracts lead to closings. Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one,” Yun said. “Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close to the margins of qualifying, or they might get a loan but with less favorable terms.”

For more information, visit www.realtor.org.

Dan Petersen
Petersen Partners, Inc
Prudential Georgia Realty
www.petersenpartners.com

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