Sign of 2nd Dip? So CA Aug 2009 Real Estate Sales Data

Data Quick, real estate information service company, has announced August 2009 sales data in Southern California.

"Southland home sales fall; median price edges up again"

Key points are:

- Total transaction is 21,502, down 10% from July 2009 (usually transactions in August are higher than that of July.

- 21,502 transactions are smaller than average transactions of last 20 years (27,458).

- Key reasons are 1) inventory of distressed properties has gone down, 2) uncertain economic condition & 3) median sales price has been increasing since April.

- Share of REO (bank owned property) is 38.8%, down from 40.7% in July and 56.7% in February 2009.

- Median sales price was $275,000, up 2.6% from $268,000 in July and from $247,000 in April 2009 (the peak median price was $505,000 in mid 2007).

- Share of FHA mortgage is 37.4% (24% nationwide), up 10 points from August 2009.

I believe real estate markets in former bubble area like CA/NV/AZ/FL is facing "mini-bubble" from first time home buyers. However, as I pointed out in previous posting, real estate markets in former bubble area might face "second dip" in near future.

Below is possible problems:

- Due to lack of reserve fund and mounting defaults, qualification of FHA loan is getting tighter.
- $8000 First Time Home Buyer Tax Credit expires on November 30th 2009.
- 23% of mortgage holders nationwide have negative equity (approx. 40% in California).
- Banks are accelerating foreclosure.
- Possible "shadow inventory" of distressed/REO homes in millions.

While this analysis is about Southern California, August 2009 Bay Area real estate transaction has gone down by 14.8% Vs. July 2009. I think you can see same transaction trend in other former bubble markets such as Las Vegas and Phenix. Let's see if "second dip" will happen or not!

Happy Investing!!!

America's Coolest College Towns

Article/Slide show from Travel + Leisure.

America's Coolest College Towns http://bit.ly/102Sz6

- Oxford, MS (University of Mississippi)
- Olympia, WA (Evergreen State College)
- Charlottesville, VA (University of Virginia)
- Austin, TX (University of Texas)
- Burlington, VT (University of Vermont)
- Boulder, CO (University of Colorado)
- Berkeley, CA (University of California)
- Ann Arbor, MI (University of Michigan)
- Madison, WI (University of Wisconsin)
- Chapel Hill, NC (University of North Carolina)

I have been posting about benefit of investing college towns. This article point out college towns' attractiveness as tourist destinations. As college enrollment in US is expected to grow over next 10 years, college towns are proven to be good place to invest as well as visits!

Why College Towns Are Looking Smart?

WSJ - How to Earn Money Off Campus As Rest of Housing Market Cools
http://www.realestatejournal.com/buysell/tactics/20070321-kim.html

WSJ - Seven Tips for Managing College-Town Rentals
http://www.realestatejournal.com/buysell/tactics/20070321-kim2.html

WSJ - The Pros and Cons Of Living Off Campus
http://www.realestatejournal.com/buysell/tactics/20070321-mattioli2.html

WSJ - Recommended Reading: Investing In College Town Real Estate
http://www.realestatejournal.com/buysell/tactics/20070321-mattioli.html

Business 2.0 - Own Where Kids Are
http://money.cnn.com/2006/10/24/magazines/business2/newrules_colleges.biz2/index.htm

Kiplinger - Attraction of College Town
http://www.kiplinger.com/magazine/archives/2007/05/collegetowns.html

Forbes - Exploiting College Boom
http://www.forbes.com/free_forbes/2006/1211/186.html

Happy Investing!!!!

A Talking Head Dreams of a Perfect City

Very interesting article from WSJ, written by David Byrne, formerly headed Talking Heads.

Commemorating publishing of his new book Bicycle Diaries, David talks about his criteria for Perfect City.

I like his comments about Size of the City --- NYC Vs. SF. I agree that SF is "provincial" but not "small village".....

A city can't be too small. Size guarantees anonymity—if you make an embarrassing mistake in a large city, and it's not on the cover of the Post, you can probably try again. The generous attitude towards failure that big cities afford is invaluable—it's how things get created. In a small town everyone knows about your failures, so you are more careful about what you might attempt. Every time I visit San Francisco I ask out loud "Why don't I live here? Why do I choose to live in a place that is harder, tougher and, well, not as beautiful?" The locals often reply, "You don't want to live here. It looks like a city, but it's really a small village. Everyone knows what you're doing" Oh, OK. If you say so. It's still beautiful.

Happy investing!!!

World's Most Photographed Cities and Landmarks

Very interesting finding by mining 35 million photos, uploaded in flicker.com.

New Report Reveals World's Most Photographed Cities and Landmarks by Travel + Leisure
http://bit.ly/gcfUy

Top 10 Cities Most Photographed Cities:

1. New York City
2. London
3. San Francisco
4. Paris
5. Los Angeles
6. Chicago
7. Washington, D.C.
8. Seattle
9. Rome
10. Amsterdam

Top 7 Most Photographed Landmarks:

1. Eiffel Tower
2. Trafalgar Square
3. Tate Modern
4. Big Ben
5. Notre Dame
6. London Eye
7. Empire State Building

I was surprised that Golden Gate Bridge is not listed in Landmark ranking!

Happy Investing!!!!

Can We still Count on First Time Home Buyer?

As I posted previously, nowadays, First Time Home Buyers represent 50%+ transactions of residential real estate in US. In regular market, move-up-buyers represents 60-70% of transactions, this shows US residential real estate relies too much on First Time Home Buyers.

There are 3 things that drive First Time Home Buyers:

1. Rapidly declined value of US real estate market.
2. $8000 tax credit
3. FHA loan with 3.5% down payment.

Firstly, $8000 tax credit expires on November 30th 2009. I am pretty sure that Government will extend the this credit in order to continuously incentivize real estate market. But it is not yet determined yet.

Secondly, as for FHA loan, here is the summary of the problems:

- The share of FHA mortgage among residential real estate has gone up from 5% in 2005 to 23% in 2009.

- You can get FHA loan with 600 credit score (conforming loan requirement is around 700) and with 3.5% down payment.

- FHA has to have 2% of total mortgage outstanding amount as cash reserve but there is not enough cash to continue lending.

- Delinquency rate of FHA loan has gone up to 7%, much higher than prime loan.

- Therefore FHA either 1) tighten the lending guideline and reduce the lending amount or 2) need cash infusion from US government.

It is totally true that FHA is driving US residential real estate market. However, government has intentionally created source of bad debt for future.

I think most important thing for US residential real estate market is to revive the transactions amount move up buyers. "Moving Up" buyers are bread and butter of residential real estate. Move up buyers often create double transactions. Without reviving "Move Up" business, US real estate may face second dip......

Happy Investing!!!!

Would you default on your mortgage, even if you could afford to make the monthly payments?

26% of says YES, found research by Northwestern University.

I like the finding about:

When negative equity rose to $50,000, 7 percent of those who consider strategic defaults to be immoral said they'd walk away. At $100,000 negative equity, 22 percent would do so. At negative $200,000, 37 percent of those with moral objections would nonetheless default, and at $300,000, 38 percent said they would.

As negative equity is rising rapidly and, in many metro it has exceeded 50% of all home owners, it looks like we will see more and more foreclosed or short sale houses!

Happy Investing!!!!

Is Austin Least Stressful City in US?

Forbes.com think so.....

The most stressful cities are:

1	Chicago-Naperville-Joliet, IL-IN-WI
2	Los Angeles-Long Beach-Santa Ana, CA
3	New York-Northern New Jersey-Long Island, NY-NJ-PA
4	Cleveland-Elyria-Mentor, OH
4	Providence-New Bedford-Fall River, RI-MA
6	San Francisco-Oakland-Fremont, CA
7	Detroit-Warren-Livonia, MI
8	Boston-Cambridge-Quincy, MA-NH
9	Washington-Arlington-Alexandria, DC-VA-MD-WV
10	San Jose-Sunnyvale-Santa Clara, CA

11	Seattle-Tacoma-Bellevue, WA
12	Riverside-San Bernardino-Ontario, CA
13	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
14	Portland-Vancouver-Beaverton, OR-WA
15	Sacramento--Arden-Arcade--Roseville, CA
16	San Diego-Carlsbad-San Marcos, CA
17	Minneapolis-St. Paul-Bloomington, MN-WI
17	Tampa-St. Petersburg-Clearwater, FL
19	Cincinnati-Middletown, OH-KY-IN
20	Miami-Fort Lauderdale-Pompano Beach, FL
20	Las Vegas-Paradise, NV
22	Atlanta-Sandy Springs-Marietta, GA
23	St. Louis, MO-IL
23	Milwaukee-Waukesha-West Allis, WI
25	Phoenix-Mesa-Scottsdale, AZ
25	Baltimore-Towson, MD
25	Charlotte-Gastonia-Concord, NC-SC
28	Orlando-Kissimmee, FL
29	Pittsburgh, PA
30	Indianapolis-Carmel, IN
31	Columbus, OH
32	Houston-Sugar Land-Baytown, TX
32	Jacksonville, FL
34	Virginia Beach-Norfolk-Newport News, VA-NC
35	Denver-Aurora, CO /1
36	Dallas-Fort Worth-Arlington, TX
36	Kansas City, MO-KS
38	Nashville-Davidson--Murfreesboro--Franklin, TN
39	San Antonio, TX
40	Austin-Round Rock, TX

Happy investing!!!