Why it May be Best to Sell Your Home Now.

By Troy Corman, www.t2realestate.com

Now may be the best time to sell your home. From a local perspective, if you have a DFW area or Dallas home to sell, the available inventory for sale is about 20% below year-ago levels. In fact, DFW home for sale inventory is now below a 5-month supply. That means less competition to attract able and willing home buyers.

Nationally, the economy seems to be improving. Unemployment claims just hit the lowest level since 2008. Plus, shoppers seem to be spending more this holiday season and feeling better about the economy.

Now for the areas of concern. That European debt crisis. The jury is still out on how this one will play out, as the recent wild, daily stock market swings attest. A severe slowdown in Europe has to have some affect on us locally at some point, as Houston and DFW are the 4th and 5th busiest US exporter metros. If we are affected in a big way, it's likely to send would-be home buyers back to the sidelines.

The last wild card is the "shadow" inventory of foreclosed homes that have yet to hit the market. DSNEWS.com just issued a report stating that nationally there is 1 home (delinquent or in foreclosure) in the "shadows", for every 2 homes currently for sale.

According to Corelogic, there are 1.6 million distressed properties that are not yet on the market. This represent about 5 months supply of inventory of distressed homes, while a 1 month supply is considered healthy. The top six states which account for half of the "shadow" inventory include Florida, California, Illinois, New York, New Jersey and Texas.

The shadow inventory includes 770,000 homes that are seriously delinquent, 430,000 are in foreclosure, and 370,000 are REO (owned by bank or lender) according to CoreLogic's report.

To read the full report, visit DSNEWS.com

If you would like to know the precise market conditions in your neighborhood, you can reach me at 214.690.9682. I'd be happy to help.

Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.


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Lenders Expect To Sue Foreclosure Home Owners In Next 2 Years.

RealtorMag article summarized by Troy Corman

Industry experts expect a wave of lawsuits in the next two years as lenders try to recoup losses from home owners who merely walk away from their mortgages. Also, those that damage homes and face foreclosure can also expect to be targets of lender lawsuits. The suits will most likely discourage future home owners from throwing in the towel. Also, as the taxpaying public grows tired of government bailouts and handouts, it's unlikely that politicians can implement crony capitalism much longer - as natural market forces are best equipped to return us to a healthy economy.

As foreclosure delinquency rates remain elevated, lenders are expected to work with homeowners who negotiate in good faith, while others can expect to face collection agencies who purchase the mortgage debt from the lender.

Are banks holding on to commercial foreclosures?

By Troy Corman, t2realestate.com
Everyone was expecting fire-sale prices on commercial real estate. But it doesn't seem to be happening on the grand scale some were predicting. Many commercial properties that have been foreclosed on are being leased instead of being sold at fire-sale prices.

“All the banks are taking haircuts (losses) now, but in stages,” one banker stated. “Most banks don’t have the capital to absorb sizable losses all at once, so they are holding onto their commercial real estate to stagger the losses.”

The smaller the bank, the harder it is to absorb the loss from selling depressed properties.

The FDIC only allows banks to hold on to properties for 5 years, although banks can request extensions. During this period, banks must offer a plan to dispose of their real estate assets.

FDIC real estate assets are growing as the FDIC continues to take over insolvent banks.

Most large assets seem to be gobbled up by the REITS, which have a clear advantage over individual investors.

However, individual investors are having some success financing assets of up to $3 million through the federal government’s Small Business Administration (SBA) loan programs, like the 7(a) and 504 loans.

Commercial Real Estate Blows To Increase In 2010

American Banker article summarized by Troy Corman, t2realestate.com

Banks will face major problems with commercial real estate in 2010. For many community and regional banks, it will be their biggest headache. Many talking heads are usually referring to CMBS, or commercial mortgage-backed securities when discussing commercial real estate. But many local and regional banks hold whole loans on their books. Most of these loans have short maturities of around 3 to 5 years. And many were financed during the boom. As many commercial assets must refinance out of those loans in the next few years, the problem is that the underlying real estate has declined in value so much that it is now under water. And it's getting worse every day. Each quarter, non-performing loans and commercial mortgage delinquencies are rising.

There is nearly $40 Billion in problem commercial real estate loans but only $5.8 Billion in commercial REO, or properties banks have seized through foreclosure. Unfortunately, the problems are accelerating.

Sooner or later, someone is going to have to pay the piper, and let's hope it's not the American taxpayer again. For those with access to capital and real estate investing expertise, the next few years will mark a golden opportunity.

Meredith Whitney On The Banks And Dramatically Rising Mortgage Rates.

Posted by Troy Corman, t2 Real Estate

Banking analyst Meredith Whitney doesn't expect bank lending to loosen any time soon. Personally, I've been having a heckuva' time going through a refinance. She expects mortgage rates to go up at least 10%. So lock in low rates now. Tight lending should fuel great housing deals for the remainder of 09 and 2010. Meredith Whitney was the first banking analyst to call the problems at Citi Group and other banks before the official bust. See her sobering outlook in the video below.

How To Add $100K To Your Net Worth In Uncertain Times.

By Troy Corman, t2 Real Estate

We live in uncertain times. Pundits argue if we're out of the recession, if the stock market will continue to rise, and if we're looking at another leg down in the economy when the government exhausts it's stimulus programs.

So what's one to do to not only protect, but create wealth? You can store it in the bank in low-yielding money market accounts. But that doesn't produce gains if we get hyper-inflation. You can continue to speculate in the stock market. But the market can produce horrific losses if the doomsdayers are correct and we get a massive decline. You can buy gold, but gold doesn't pay you monthly income, or give you terrific tax deductions, and it is much more volatile than my investment of choice, rental real estate.

Rental real estate makes you money in 5 ways.
1. Cash Flow - renters pay more each month than the home's carrying cost.
2. Principal Pay Down - rent money pays down our mortgage each month.
3. Equity Capture - we buy homes for thousands less than they're worth.
4. Appreciation - we sell homes in a sellers market when prices are rising.
5. Depreciation - rent homes produce about $10K in deductions per $100K home annually.

The formula to add $100K to your net worth is simple. We buy homes that would be worth around $100K once they are repaired. We look for a $20,000 profit margin by subtracting the purchase price and rehab costs from the home's ARV (after repaired value). In other words, we buy a home for $70K, put in $10K in upgrades and repairs, and sell the home for $100K or more. Buy 5 homes using this formula and you've added $100K to your net worth.

In this price range, we're able to rent the homes for around $1,000 a month, which will produce $100-$300 a month positive cash flow. The cash flow helps cover vacancies and any repair work. We never buy homes that don't have positive cash flow because then we've just bought ourselves a liability.

So should we invest in real estate in Dallas/Fort Worth now? Yes. I expect lenders and banks to ramp up the disposition of their bank-owned real estate and foreclosed properties. Many have talked about a shadow inventory of foreclosures that have yet to hit the market. According to the November 9th issue of National Mortgage News, "Bank of America is now saddled with $33 billion worth of nonperforming assets, almost triple what it had a year ago". Wells Fargo comes in with $20 billion in nonperforming assets, double what it had a year ago. Sooner or later, those nonperforming assets, whether they're residential or commercial real estate, have to be off the books.

As a result, I think that 2010 will offer a once-in-a-lifetime gold-mine for investors willing to take action. The economy, government spending and unemployment will freeze many in fear, which means there will be more deals for those that step up to the plate. Despite some dour predictions of a W-shaped recession, the Dallas/Fort Worth real estate market is consistently ranked as one of the top 10 markets in the nation. Out-of-staters continue to migrate to the Lone Star state in droves attracted by our job market, affordable cost of living and lack of a state income tax. So take action. Because as Wayne Gretzky says, "you miss 100% of the shots you don't take".

Check out this video about the future of Texas real estate.

Attending The Five Star Default Servicing (Foresclosures) Conference

This week in Fort Worth is the 2009 Default Servicing Conference. It should be quite interesting. I'm looking forward to gaining more education in the foreclosure selling process and meeting with some of the servicers and banks that need help marketing and selling their Dallas/Fort Worth foreclosure properties.

According to Friday's edition of Investors Business Daily, industry insiders believe that as much as 70% of foreclosed properties nationwide have yet to be listed with real estate agents and brokers. Nationwide, distressed properties accounted for nearly a third of the 5.24 million homes sold in June.

"Adjustable-rate mortgages will trigger the next wave of defaults, which will make the subprime meltdown look like a walk in the park," according to Rick Sharga, with RealtyTrac.

Michael Barr echoed that statement in a meeting with a House committee last week. The Treasury assistant secretary said, "Expect millions of foreclosures ahead" despite loan-modification efforts.

Jeff Frieden, CEO of Real Estate Disposition Corp, the nation's largest residential-auction firm shared in those views. His quote, "we expect 2010 to be a watershed of a year for us as millions more of foreclosures loom. Some have sensed it's the bottom of the market; we feel that's a false sense."

I'll compare these sentiments with those attending the foreclosure conference this week. But if these guys are right, now would be the time to sell if you're sitting on the fence - because I would expect a big wave of foreclosures will put downward pressure on most sales prices in 2010.

Fannie and Freddie Get Hammered

Lenders continue to tighten and no one really knows how long that trend will last. Just today, Fannie Mae and Freddie Mac are getting punished on Wall Street since Treasury secretary Hank Paulson said that the government would not serve as a backstop for the GSEs. However, an article in Barron's over the weekend suggested that the Treasury may have no other choice.

A government bailout would likely wash away shareholder equity in the companies. And the future doesn't look promising. I recently spoke with a large REO listing agent who said that Fannie Mae expects an increase in foreclosures in 2009.