Data tracker CoreLogic released a report that, among other things, points to a $100 billion valuation of the market for foreclosed homes turned into rentals. Yeah, $100 billion. And that’s for this year alone.

The market for turning foreclosures into rentals opened up this year when Fannie Mae began marketing foreclosed properties to investors as rental units in February. And this month, the Fed has released guidelines to ease the conversion of properties into rentals.

Having those entities support the process has resulted in a confidence shift for many investors. Couple that confidence with the lowest prices for properties we’ve seen in years, and you end up with a flock of soon-to-be landowners ready to sign checks.

Hence the $100 billion valuation. A Los Angeles real estate agent recently told the LA Times, “I’ve never seen it like this before…There are so many investors buying right now it’s insane. The top 1% is buying up all the real estate.”

That 1% is betting big money that the middle class will become the renting class. It’s taken some years for big banks to get involved, but with the Fed’s recent guidelines, big names like Bank of America and other Wall Street hedge funds have positioned themselves to grab what they can of rental units.

BofA in particular is operating in its interest by providing a pilot program for 1,000 homeowners about to foreclose. The troubled mortgages can be eliminated if the borrowers agree to a “deed in lieu of foreclosure” and commit to a rental contract with the bank. BofA can then sell those rental properties to investors.

It might seem tough renting out the home you once thought you’d leave to your children. And it is. But the last few years have seen no confidence brewed for fresh homeowners, and banks have finally taken the hint. Instead of waiting for the buyer that will never come, they’re opting to supply a hungry rental market with properties that almost made it.

Facing this reality is a smart move for banks. And the new supply of rental units is a relief for a market that’s seeing rents rise all over the country. But its tough seeing middle class America go from working hard for themselves, to working hard to pay the rent.

Fortunately, actually investing in this market will help the middle class. Rents are high right now because of the enormous quantity of demand for rent units and the low quantity of supply. But with more suppliers in the market, property owners will have to lower rents to compete. That lower rent can be the catalyst for middle class America to start saving again, and hopefully turn those savings into a down payment some years later.

That’s the altruistic aspect. But financially, those with money are moving it to the one sector of real estate that has any chance of a positive return. That $100 billion valuation may seem exaggerated, but given the low action happening in homeownership, it looks pretty spot on.

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LA Times
http://www.latimes.com/business/realestate/la-fi-foreclosure-rentals-20120407,0,4980912.story

CoreLogic Report
http://www.corelogic.com/about-us/researchtrends/the-marketpulse.aspx?WT.mc_id=prwr_120411_qfLTU 

Included in this update are the usual fixes, some speed improvements, and patches as well.  We’re keeping our promise to be continually improving the RentPost software, simplifying rent!

Have a look at a few of the screenshots of the new work order features below…

Assign work orders to colleagues and vendors

View details of who it's assigned to, reassign if needed

Add your custom questions to work order forms

Included is a custom availability scheduler, get tenant availability when submitting

Their last report was issued in February. That Real Estate Market Report reaffirmed what many have noted on the real estate scene: the continuing success of rental investments and the furthering decline of home values.

According to the Zillow report, median rents rose 2 percent from February 2011 to February 2012. But during the same period, home values fell 4.5 percent.

The reported drop in home values coupled with the rising rents shows how prevalent the shift has been away from homeownership and towards renting. This shift has stayed on the national level for years now.

Zillow uses their own algorithm to create their zestimate of values, and it’s often come under criticism. But their market reports use loan equity data and foreclosure transactions that are obtained from public records, so they’re more reliable than zestimates.

Zillow also calculates a Zillow Rent Index (ZRI) to show an aggregate number for the rental industry. The ZRI showed year-over-year gains for nearly 68 percent of metropolitan areas covered by the ZRI. In contrast, only 8 percent of metro areas covered by the Zillow Home Value Index saw home values rise.

An interesting correlation in the data shows that rental markets tend to be strongest wherever home values decline consistently. Chicago, for instance, had rents increase 8.6 percent since last year, while home values fell 11 percent. Philadelphia’s rents rose 14.8 percent annually, but its home values fell 5.4 percent.

The unfortunate case of hundreds of thousands of foreclosures nationwide are a main contributor to the depressed home prices. This will probably not get any better soon, as the majority of foreclosures will only start getting processed this year by the banks.

Zillow Senior Economist Svenja Gudell said “rental market(s) remain a bright spot in the housing market….Converting distressed and vacant properties into rental units will reduce the oversupply of homes and speed up the recovery process.” That’s a positive side effect to investing in rental units, one that the entire country can appreciate.

Although Zillow uses aggregate data for their conclusions, local markets have plenty of room to fluctuate. So in some places, the opposite effects could be taking place: we could see rents dropping and housing prices rise.

So tell us, what have you seen happen to your local real estate market? Are rents rising and home prices falling? Or is it the opposite for you? Tell us in the comments below. Data-driven research is fancy, but there’s nothing more powerful than eyewitness accounts straight from the ground.

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Zillow Real Estate Market Report (with graph)
http://www.zillow.com/blog/research/2012/04/09/rentals-continue-to-outshine-purchase-market-home-values-still-plagued-by-foreclosures/

It’s not just in some parts of the country. Rental sector landlords have seen increasing rental yields in all parts of the UK. Last year, monthly Buy-to-Let rents increased by 4.8%, giving property investors a rental yield of 6.1%.

That number fluctuated depending on location. Residential property rents in East Anglia increased as much as 8%. Other parts of Northern England grew only 6.9%, and in Greater London that increase was only 5.6%.

But the fact that rental yields were positive across the country shows the distress of the housing market on the rest of the British economy. Housing prices are set to fall again annually, after a short-term boost by a break in the stamp duty tax.

As we’ve seen here in the US, those falling housing prices are a signal of the movement of capital away from that industry. The only other alternative for that capital is to move towards rental units.

It’s why rental yields have been unanimously positive across the board for all of the UK.

In the US, we’ve seen rental markets boom in cities like San Francisco and Seattle, where tech jobs have attracted hundreds of thousands of new residents. A similar phenomenon may be happening in the UK, but we are yet to see if we can attribute it to tech booms.

It’s more likely UK investors are seeing their yields go up due to the wariness of the middle class. Housing has been a scary industry for those that were forced out. It’ll likely be some years before many are ready to jump back in.

BM Solutions, the organization that conducted the study mentioned, recently commented “There is a very healthy demand for rental properties across the UK right now”. After the stamp tax break ends, costs for owning a home will further increase, and this will only drive rental demand even higher.

Currently, the rental industry is a strong niche, and at the time it seems to be international. We’ve only yet to see how long this ride will last.

The average age of seniors using reverse mortgages is 73, but 46% of homeowners considering it are under age 70.

Essentially, more seniors are asking for reverse mortgages earlier. What does this mean?

For one, it shows the deep impact of the housing crisis. Even for homeowners that bought before the rising prices, the effect on prices and mortgages has been felt. Seniors that live on a fixed income have seen interest rates squeeze away at their disposable cash. As a last resort, many have turned early to a reverse mortgage.

A reverse mortgage is a loan offered to seniors 62 or older that reside in the home. It allows them to borrow against the value of the home, giving up equity and increasing the debt owed. The loan, with interest, does not have to be repaid until the last surviving homeowner moves out of the property or passes away.

It’s a fast way to access capital, but you run the risk of a devaluing property and owing more than your home is worth.

The tight economic times have pushed more homeowners to reverse mortgages. More than 80,000 Americans over 62 completed a reverse mortgage in 2010.

Some 10,000 people a day reach 62 in the US, according to Gregg Smith of One Reverse Mortgage. So the number of reverse mortgages finalized will likely only increase in coming years.

What does this mean for the rental industry?

Those seniors asking for reverse mortgages are stuck in their homes unless they’re able to pay off the entire loan, with interest. That means a big chunk of potential renters are out.

And while reverse mortgages remain an option for other seniors, its unlikely they’ll be in a hurry to sell their homes and remain renters. The rental market is still most accessible to younger tenants.

But even with many seniors out of the rental market, rents continue to rise. The dual effect of increasing rents and reverse mortgages shows the trend in preferences away from ownership and towards renting.

This isn’t to say many don’t prefer owning. But the decreasing wealth in equity shown by the increase in reverse mortgages is a sign of the trouble many homeowners face. It’s true that reverse mortgages supply the borrower with easy cash that doesn’t have to be paid off for years. But that comes at the expense of equity.

Building wealth is a huge incentive for many homebuyers. But seeing the increasing trend of more senior homeowners trading in wealth for quick cash, how many still see ownership as a good way to increase equity?

For many, renting is still a better option. The generation of future homeowners is seeing what might happen in the future if they aren’t careful when buying. For today’s seniors, it’s a difficult situation to go through. But for tomorrows’ seniors, it’s a lesson in careful waiting, planning, and (for now) choosing to rent instead.

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Reverse Mortgage News
http://bottomline.msnbc.msn.com/_news/2012/03/16/10722646-more-seniors-use-reverse-mortgages-to-raise-cash

Reverse Mortgage information
http://www.mortgageloanplace.com/reverse_mortgages_qualifications.html 

MetLife Research Report
http://www.metlife.com/assets/cao/mmi/publications/studies/2012/studies/mmi-changing-attitudes-changing-motives.pdf

Tony Salloum on Business Radio – CLICK HERE

15-year fixed-rate mortgages averaged 3.13% last week, a new record low. And the average rate on a 30-year fixed-rate mortgage fell to 3.88%, less than 1% from the record low.

The low rates are a reaction to the decreased demand of homes. Depressed prices, high rents, and low mortgages are all incentives for borrowers to purchase homes.

The record rates make housing more affordable than ever. Yet home prices continue to stay low. So why aren’t more people buying?

While the rates make buying possible, actually getting a loan is still difficult. The banking industry has tightened up its standards for qualifying on a loan.

Potential buyers must meet criteria like a minimum credit score, putting 20% down, and earning enough income to make payments. Additionally, most banks now want a loan-to-value ratio of 80%. Banks want the home value to exceed the loan balance so if the borrower defaults, the bank can sell the home and recover its losses.

And even with that criteria met, borrowers with blemishes on their record can have trouble getting a loan. Short sales will disqualify you for a few years, and bankruptcies will hurt your credit and your chances of a loan offer.

While many Americans can afford housing in today’s market, the stringent conditions of many banks keep those families out.

So what can you do to increase your chances of qualifying?

If your credit is low, it could be worth hiring a credit repair service to increase your score.

Have a bankruptcy on your record? You might have to stick it out and endure the waiting period, which could vary from one to seven years. And after a bankruptcy, your credit must be flawless. Even one late-payment on a credit card could disqualify you from some loan-programs.

If it’s a problem of not making enough income, you may be looking at too expensive a home. Areas like New York, San Francisco, and Chicago will always be higher-than-market. If it costs too much downtown, look for nearby towns and suburbs.

While getting loans could be difficult, the money is there. Bob Ryan, acting commissioner for the US Department of Housing and Urban Development, recently said that mortgage money “is flowing, it’s stable, it’s tightened from the boom years, but it’s there.”

If you can get through the restrictions, becoming a homeowner could be cheaper than ever. But until more Americans jump into the housing market, rental properties remain a lucrative investment and a strong industry for the future.

Although every situation is unique, here are the top 5 reasons why new landlords lose in the real estate game. Missing even one of these will make a new real estate venture turn south.

You might be a losing landlord if you’re:

1. Not addressing small problems quickly.
When little things come up, a successful landlord will take care of them immediately. The unsuccessful one waits until they become big problems (and big expenses). That tiny leak in the roof you ignored could become a $5,000 mold repair job. Planning for expenses before they happen takes the surprise and pain out of repairs, and getting little things done on time makes the big things happen less frequently.

2. Not putting a dollar value on your time.
Tracking every nickel spent is good. But when you start unplugging toilets yourself on a Saturday afternoon instead of being with your family, you stop owning your business and your business starts owning you. Outsourcing that work to a property management company might seem expensive, but consider it an investment that buys you time and freedom.
Successful landlords stay enthusiastic about their business because they aren’t dragged down by daily trivialities. In the long run, being happy about what you’re doing results in winning at it.

3. Having a bad relationship with tenants.
This doesn’t mean you have to be best friends with tenants. But landlords that have been too lenient often end up struggling. Do you let late rent payments slide unpunished? Are your tenants respectful, or do they feel entitled? Problems with tenants are a major headache for landlords. If you didn’t screen properly before renting out, watch out for this one.
It might be worth giving good tenants (good credit history, steady employment) a discount to attract them (be careful that you don’t violate fair housing and equal opportunity laws) . You might see less cash flow every month, but it’s better than having a high rent that doesn’t get paid on time (or at all) by bad tenants. Consistent cash flow is better than “more” cash flow that fluctuates a lot.
Troublesome tenants have been known to cause landlords to stress and worry, keeping them up at night and their morale low. Don’t do that to yourself. Screen, interview, and make sure you’re selling your product to a worthy customer.

4. Not treating it as a business.
Your property is not a charity to the community. It’s a business. If you run it any other way, you’re business fails. Many landlords skip having a business plan, evaluating for growth opportunities, and pricing their product accurately (overcharging or undercharging rents). If you haven’t looked at the business side of your property, you’re leaving it to chance.
This also relates to your relationship with tenants. If tenants see you as a business person that only looks at numbers and isn’t afraid to replace bad tenants, they’ll know you aren’t afraid to evict. If they see you as a soccer mom, they’ll treat you like one.

5. Not understanding financial management of property.
This one is related to the previous, but it’s so important it deserves it’s own point. The biggest threat to a landlord is not having an objective view of a property’s finances. Too many landlords have unrealistic expectations about cash flow. It might look good on paper, but in reality tenants do not always pay on time or in full.
Real world operating expenses are also huge. Many newbies fail to consider all the expenses they’ll have and end up losing money. Your positive cash flow must cover operating expenses and your long-term costs, like improvements, upkeep, and repairs.
Not finding a solid accountant or understanding pre and post tax cash flow make your business rely on luck more than logic. A good understanding of depreciation, expenses, equity, risk, and reserves is also something every business needs.
At the very least, plan an exit strategy. Don’t get stuck in a bad situation.

These 5 points aren’t everything needed for a successful real estate venture. But leaving any of these out will result in a failing rental property. If you’re serious about making money and building equity through real estate, make sure you can check all these off your list.

The reality is that this deal has great points but a lot of shortcomings.

Main Points of The Deal
A $25 billion settlement between State and Federal Governments and 5 banks. The banks will provide $17 billion in mortgage relief to more than 1 million homeowners. Another $1 billion will go to the Federal Government. And $3 billion more will go to refinancing borrowers into lower-interest rate loans. This will occur during a 3 year period.

The deal will also set strict standards for how mortgage servicers treat distressed home loan borrowers.

One practice that will be restricted is “dual tracking”. It’s where servicers continue with a foreclosure even if the borrower is attempting a loan modification. The settlement won’t ban the practice completely, but it will prevent the banks from completing a foreclosure sale if a loan modification is being attempted.

Who’s Involved
The 5 banks involved are Bank of America, JP Morgan Chase, Citigroup, Ally Financial, and Wells Fargo. The Obama Administration, the 5 banks, and several State governments worked for over a year to foster the deal.

Who’s Eligible For Aid
To get a mortgage reduction, you have to have been making payments and be on the brink of foreclosure. Being underwater on your loan is not enough to qualify for help.

Another huge gap – only loans under the 5 banks mentioned can be considered. If you have a private lender or a different bank, you’re out of luck.

Loans under Fannie Mae, Freddie Mac, and the Federal Housing Administration likewise do not qualify. Unfortunately, they make up half the nation’s mortgage loans.

Like everything, this deal has it’s good points and bad. Every player involved stands to benefit, but there are several gaps in the settlement.

Benefit to Banks
Pros: The 5 banks will get “credit” for each mortgage writedown they do. They will also get partial relief from future legal claims.

Cons: Discontent borrowers can still sue individually or as part of a class action, so banks are not entirely safe. The relief does not cover future or ongoing lawsuits in the area of securitization. Securitization is where loans are packaged and sold to investors. This was a big reason for the collapse. The settlement also does not prevent criminal investigations.

Benefit to Borrowers
Pros: More than 1 million homeowners will benefit from the mortgage relief. They’ll see their principal go down as banks start to rewrite loan deals. Hundreds of thousands of borrowers will also be eligible for restitution, averaging $1500 to $2000.

Stricter standards will also be set concerning how banks deal with borrowers. Borrowers will be able to have a single point of contact instead of dealing with the bureaucracies of big banks.

Cons: The biggest downside of this part of the deal is that not every homeowner is eligible for a mortgage writedown. Only those that have mortgages with the 5 banks involved will get a reduction.

The biggest gap previously mentioned is overlooking Fannie Mae, Freddie Mac, and the Federal Housing Administration. Loans under these three do not qualify for a writedown. That leaves half of the nation’s mortgages out.

The restitution is only eligible to borrowers that lost their homes to foreclosure from 2008 to the end of 2011. Since banks have held off on completing foreclosures until investigations were over, many borrowers have been in limbo for the past several years. Losing their homes now means it’s too late for collecting restitution.

Another huge gap that is often overlooked – the relief is set to come during a 3 year period. Homeowners may have to continue struggling as they wait for banks to reach out to them.

Benefit to State Governments
Pros: A big boost to state governments is the aid they don’t have to give. With private banks providing relief, state governments can apply their budgets to other endeavors.

The relief could be enough for local housing markets to stop sinking. If enough foreclosures are avoided, states could see more residents coming in as home prices recuperate.

Cons: More than half of the $25 billion will go to only two states – Florida and California. Since those states were hit the hardest with loan delinquencies, they’ll see the most relief. That’s good if you’re living there. But for the other 48 states, there’s less help coming your way.

Benefit to Federal Government
Pros: The Obama Administration can use this as a victory in fixing the housing market. The 1 million homeowners helped is an impressive number on the campaign trail. By touting this as a win for the middle class over big banks, President Obama can sway more popular votes his way this election year.

Cons: While the numbers sound great, the relief comes during a 3 year period. It’s unlikely that many homeowners will get immediate writedowns, so announcing a victory now may be premature.

The Housing Market
Ideally, with more help coming to borrowers, less foreclosures will occur and house prices will stop sinking. $25 billion in aid and 1 million foreclosures avoided is a good start.

But the reality is that borrowers owe $700 billion more on their homes than the homes are worth. So while $25 billion sounds great, it’s unlikely to make a huge dent to the number of underwater loans.

This settlement will end up being the biggest involving a single sector since a deal with the tobacco industry in 1998. It’s a great start to fixing the housing market.

However, the cons are so numerous and great that it’s very unlikely this will cause a housing recovery. There are too many gaps left unfilled and too many borrowers still without help.

The Obama Administration has tried in the past to fix the housing market. So far, nothing has worked. Striking a historically huge deal with big banks seems like a better step in the right direction. But it’s still only a step. The journey to a healthy housing market is a long one.

Until then, the rent market will continue getting stronger.

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General Info
http://www.usatoday.com/money/story/2012-02-08/states-mortgage-settlement/53016420/1

$700 billion mortgages outstanding
http://www.nytimes.com/2012/02/10/business/states-negotiate-26-billion-agreement-for-homeowners.html?hp

As the Baby Boomers retire, there’s a new group ready to take their place. They are called Generation Y, Millenials, or Echo Boomers.

Defined as those born between 1977-1989, they make up 70 million strong. That’s larger than the Baby Boomers, and three times the size of Generation X.

Generation Y is checking into the workforce. By 2025, Gen Yers will make up roughly 75% of the world’s workforce, according to a BPW Foundation’s study published last year.

Those 70 million individuals wield a spending power that exceeds $200 billion.

To forecast real estate, we can’t ignore such large numbers. So how does Generation Y affect the market? Are they primarily buyers or renters?

A myriad of studies have found some commonalities in this generation. Here are the ones that matter to real estate:

More Likely to Change Jobs or Careers
Gen Yers have grown up with the realization that they can mold their lives and careers into anything they want. They’ve seen technology-driven revolutions firsthand. They’ve been raised with high expectations to live the lifestyle of their dreams. As a result, they aren’t as hesitant as prior generations to switch jobs or even careers. This volatility in the workplace means they need easy mobility to chase the jobs they want. And that mobility comes easier with renting than buying.

Witnessed The Housing Bubble First-Hand
These young people grew up seeing home prices take a roller coaster ride from the high’s of 2006 to the crash 2 years later. They witnessed parents’ credit get wiped out, investment banks engage in unethical practices, and a slow economy as a result. They’re aware of the risks of homeownership. Consequently, they’re willing to wait for the right time to buy so they don’t make the same mistakes their parents made.

Student Debt That Outstrips Credit Card Debt
Gen Yers attended college when tuition prices were at historic highs. Add to that a very lax lending system that made student loans available to millions of students, and the result is an outstanding student debt total near $1 trillion. That’s more than outstanding credit card and mortgage debt. Until that number dwindles, Gen Yers are unlikely to add another debt (like a mortgage).

Waiting to Marry
Only 21% of Gen Yers say they are married. And according to the US Census Bureau there has been a significant increase in the number of women who have never been married, particularly in the 20-34 age bracket. With no rush to get married and start families, there’s less pressure for Millenials to become homeowners.

Urban vs. Suburban Living
Gen Yers show a preference for living in urban settings where they are in walking distance of everything. As children of the Baby Boomers, most have grown up in the suburbs. So when it comes time to choose for themselves where to live, many will want to try urban living.

Gross generalizations aside, most of Generation Y prefers to rent. It may be out of touch with the traditional American Dream, but the new generation has it’s own dreams to chase. Rather than rush to own a home and raise a family, they prefer to have a lifestyle that excites them.

And more than any legislative change or micro-trends, this demographic quality will be the biggest force that shapes the future of real estate.

The current rent market is picking up, and it’s partly because of Gen Yers entering the workforce. But there are millions that have yet to graduate, move out, and find their own residence. When that happens, the rent market will really be stimulated by the large demand.

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Population of Generation Y
http://online2.cartus.com/primetimes/200804/featured_article.html

Workforce (75% by 2025)
http://www.forbes.com/sites/85broads/2012/01/23/gen-y-workforce-and-workplace-are-out-of-sync/

Marriage Facts
http://www.forbes.com/sites/prospernow/2012/01/11/millennials-divorce-marriage/

Spending Power ($200 billion)
http://www2.honolulu.hawaii.edu/facdev/guidebk/teachtip/GenY.htm

Student Loan Outstanding Debt
http://www.usatoday.com/money/perfi/college/story/2011-10-19/student-loan-debt/50818676/1