Entries from March 2008 ↓

Breaking real estate news, here.

Real estate road trip scouts troubled markets

(Washington Post) – A new form of sightseeing is catching on in the Washington suburbs, offering investment advice, free cookies and some eye-opening discoveries among the empty ramblers and forsaken townhouses of the region.

They are known as foreclosure tours or home buyer tours. One that originated yesterday at a Northern Virginia Long and Foster office was labeled “The Centreville Gateway Foreclosure Tour of Homes.” More than 30 “tourists” squeezed onto a green passenger bus for a three-hour spin through parts of Fairfax, Loudoun and Prince William counties. Some said they were looking for their first home, others were looking for a good investment, and some were just looking.

“I figure it’s probably a good time to get into the housing market,” said Anita Walter, a Centreville resident who saw an ad for the tour in a community newspaper. “I’m curious to see what’s out there, but I want a home that will be my home.

“I’m not trying to turn around and make a quick buck,” she said.

For homeowners and investors worried about the state of the housing market, the tours and their growing popularity are a sign that falling housing prices are attracting an increasing number of potential buyers — including those willing to travel in packs. Long and Foster offices have staged similar tours in Manassas, Gainesville, Alexandria and Mount Airy. Ones are planned in Prince George’s County and Southern Maryland.

“The general public doesn’t know how to find foreclosed properties,” said Pat Bogenn, a Long and Foster real estate agent. “There are deals out there, but there are also pitfalls.

“With bank-owned properties, most people don’t know that they’re buying ‘as-is,’ ” she said. Potential buyers might need to have utilities reconnected just to find out whether pipes are broken or the septic system works, Bogenn said.

The main draw of the tours is that they are a kind of rolling foreclosure seminar, counseling participants in everything from financing to property inspection to legal concerns.

“The benefit of this is that everyone is here at one time,” said Debbie Jeffries, a Centreville resident who was hunting for something with enough garage space for her mint-condition 1985 Lincoln Town Car. “I want rock-bottom prices.”

There was a home inspector on board to point out maintenance concerns and estimate repair costs, as well as two lenders and a real estate attorney. All of the homes on the tour were vacant and bank-owned, which eased some of the ambivalence participants felt about taking over a property its previous occupants might not have parted with willingly.

“It’s unfortunate that foreclosures have happened, but they can’t be reversed,” said Alex Bogenn, a real estate agent and Pat’s husband. “By filling the empty houses, we’re ensuring the integrity of the neighborhood, and it’s bringing money back into our economy.”

Kellian McIlwrath, a loan officer from Wells Fargo-affiliated Prosperity Mortgage, told tour participants it was the first time in memory that property shoppers could reap the benefits of both low prices and low interest rates.

Article continues here.

Housing slump hits 2nd homes: here

Greater Fool becomes a national bestseller

After just a couple of weeks on the bookstore shelves, Greater Fool: The Troubled Future of Real Estate has become a national bestseller in Canada. The Globe and Mail’s trendsetting list places it at No. 4, which is more than gratifying.

I had hoped this book would constitute a needed wake-up call for Canadians, so that they examine and re-examine the choices they are making, and think twice about our unhealthy fetish with over-priced houses. But to accomplish that, the thing’s got to be read.

So far, so good. The Globe bestseller list is here. Thank you, Canada.

Mr. Turner;
First let me say thank you for the insightful web site and I fully intend to purchase your book, Greater Fool. The subject matter is most interesting. I do have a question regarding my personal situation.

I have a variable interest rate mortgage (prime + 2%) that is short term (6 months). My mortgage is 170,000.00 and the value of my end unit townhouse is about $220,000. I have no intention of selling to buy the 4000 foot monster home.

With the Bank of Canada still cutting the prime lending rate, is it a good idea to have a short term variable interest rate mortgage or should I lock in for a few years? I like the short term variable because over the past fourteen years of being a home owner, I have consistently obtained lower interest rates on the short term mortgages as opposed to locking in for five or more years.

Your thoughts?
Thank you, Wesley

You are right on the money, and my advice to everyone with a mortgage right now it to go variable. The Bank of Canada has absolutely no choice but to drop rates given the impending impact of the US recession on Ontario and Quebec, and the collapse in investor and consumer confidence. Of course, lower rates are no long term solution to anything profound, since they just encourage more borrowing and more debt – which got us all into this mess following Nine Eleven.

In any case, Wesley, hang in there with a short-term VRM. You will see interest charges slide – an ideal time to maintain your monthly mortgage payment, and be eating into the principal at a deadly rate.

Hi Garth,
am feeling a quite a bit of sellers remorse. I sold my property in March 2006. Thinking it was the peak and I had some personal family issues to overcome. I used some of the money to invest in stocks… even still the housing market went beyond my expectations. though my cash increased 50 k these 2 years, Housing has gone up at least 100 k. Am I crazy to think about buying into the market now. Things just keep going up and up. I bought your book and read most of it ..throughout history Houses have gone up and down …when it does? how much..? No one knows. It is very frustrating. I ‘m the only one in my family that does own property.

Please advise
thanks.
Careful and a little crazy

Why be remorseful when you sold, presumably at a profit, when you have made $50,000 on your cash investments, when you have no mortgage debt, and when real estate values are set to decline? Get real, pal – this is a great time for you to think about re-entering the market, but not yet!

The Canadian housing decline is just beginning and although we should not expect the same 30% price dump that has hit California and Florida, Detroit and Phoenix, there in Vancouver you should certainly be anticipating a 10-15% correction, or possibly much more in some condo developments.

Play your cards right, and your family will think you are a genius. Then you can rub it in.

Hi Garth, would like your opinion re “holding costs” on property which has reasonable expectation of GAIN (no rental revenue, while holding). Assuming that interest and other costs are in fact deductible (CRA has not as yet changed the wording to my knowledge):
Would costs are deductible from other-source income as they accrue or are paid out OR should they be part of the adjustment to cost base upon disposal?

Here another possible twist: Does above hold true, even if the eventual disposal (a) results in a loss even before cost adjustment? (b) the adjustment would create the cap loss?

Should you not have a definitive answer to this, just let me know so and I will dig further.
Thanks for your attention to this!
Harold, Mississauga

Harold, you are delusional. There is no way the CRA is going to let you deduct the carrying costs of property which is not providing income. You are on your own here, gambling your money for the potential of a taxable capital gain on a property which is not throwing off any cash flow. Suck it up. Why expect the taxpayers to bail you out on the costs of owning a property you think will rise in value? Sheesh.