Real Estate Crowdfunding Poised to Reinvent Private … · Jilliene Helman founded the real estate crowdfunding website RealtyMogul in ... “Real estate is one of the last areas

Jilliene Helman founded the real estate crowdfunding website RealtyMogul in 2013, not long after legislation passed making it easier to raise funds for business ventures through the Internet.

“Real estate is one of the last areas in financial services and investing that hasn’t leveraged the power of technology and the reach of the Internet to improve and transform an inefficient model,” wrote Helman, who formerly worked in wealth management and risk management at Union Bank, in an email response to questions from Housing News Report.

“That changed when Title II of the JOBS Act passed, which allowed firms to more broadly solicit investors

through the Internet – the most pervasive marketing channel of all,” continued Helman, referring to the Jumpstart Our Business Startups Act (JOBS) signed into law by President Barack Obama in April 2012. “For the first time ever, accredited investors now have the option to invest online in real estate opportunities that were historically unavailable to them.”

Helman is confident that technology can help overcome some of the current obstacles real estate investors face when trying to obtain financing for deals.

“We have an automated underwriting process that helps us expedite the loan application process, and we use big data and proprietary algorithms to assess the creditworthiness of borrowers, which helps us get their loans funded quickly and efficiently,” she wrote, noting that the reluctance of traditional banking institutions to lend is pushing more real estate investors to seek creative financing options such as crowdfunding.

Real Estate Crowdfunding BasicsThe basic concept behind real estate crowdfunding through a website such as RealtyMogul is relatively simple: pair investors who have capital with real estate investments that need capital. The capital investors need not front

Real Estate Crowdfunding Poised to Reinvent Private Money Financing

SEPTEMBER 2014 volume 8 issue 9

CONTENTS

6 My Take by David Charron, MRIS 9 News Briefs

10 Legal Briefs

11 Financial News

12 State Spotlight: Baltimore, Md.

17 Book Review: “House of Debt” By Atif Mian and Amir Sufi

Continued Next Page

By Daren Blomquist and Peter Miller

Named the Nation’s Best Newsletter by the National Association of Real Estate Editors

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SEPTEMBER 2014

the cash for an entire investment, but only a portion of one investment or a portion of multiple investments. In exchange those capital investors receive a return on their cash in the form of interest paid on a fix-and-flip investment or in the form of cash flow and equity on a buy-and-hold investment.

The launching of RealtyMogul and other similar real estate crowdfunding websites such as Fundrise reflect the promise of leveraging the power of the Internet to raise smaller amounts of capital from a much broader pool of investors. This promise has been proven through general crowdfunding websites like Kickstarter and GoFundMe that allow entrepreneurs to fund various types of business ventures without selling securities.

Why has real estate crowdfunding not taken off as quickly as these general crowdfunding websites? The answer lies in three simple letters: SEC. Because real estate funding requires the selling of securities it is regulated by the Securities and Exchange Commission.

This leads to the good news-bad news part of the crowdfunding story.

Constraints on Real Estate CrowdfundingThe good news is that crowdfunding legislation passed in 2012. Title II of the JOBS Act — the part which opens crowdfunding to accredited investors — became effective with passage of the legislation. The bad news is that crowdfunding regulations for unaccredited investors — Title III of the JOBS Act — have yet to be written. As the SEC explains, until then “we are reminding issuers that any offers or sales of securities purporting to rely on the crowdfunding exemption would be unlawful under the federal securities laws.”

The key concept here is that until the Title III rules are written and implemented, real estate crowdfunding is only available to accredited investors, defined by the SEC as those who earn a minimum of $200,000 in annual income individually (or $300,000 as a couple) or a have a net worth of $1 million or more, excluding the value of their primary residence.

That constrains crowdfunding — for now — to a very small pool of investors, severely limiting its promise, according to Jordan Fisher, managing partner of Inspire Capital Management Group, a private money fund based in Southern California that lends money to fix-and-flippers and other real estate investors.

“I am a big fan of giving a lot of people access to the type of real estate investments now only available

to accredited investors,” said Fisher, explaining that won’t be the case until Title III of the JOBS Act is implemented by the SEC. “If that passes sometime soon that’s really going to change things and make it more of a Kickstarter type of thing.”

Real Estate Crowdfunding ‘Still in its Infancy’Fisher’s company follows the more traditional private money route of acting as a lender that provides a single source of funds for each investment that it participates in, although he explained that its mortgage pool fund operates a form of crowdfunding “in terms of bringing investors together to invest in a fund that pools money together.”

But Fisher said the only way for his company to structure an agreement where multiple investors are investing directly in a single investment is “in the form of fractionalized deeds of trust where multiple parties each loan money which is pooled together to become a 1st trust deed,” a structure which he said is typically “just not an efficient way of doing things.”

For now Fisher considers true real estate crowdfunding “still in its infancy.”

“It’s talked about like it’s this big monster,” he said. “But I think there are all sorts of legal challenges … everyone has a different perspective on how you let nonaccredited investors participate.”

The SEC provided some insight into how it may allow nonaccredited investors to participate when it published proposed standards for Title III of the JOBS Act on Oct. 23, 2013, asking for public comment.

Continued Next Page

Jilliene HelmanFounder

RealtyMogul

Real estate is one of the last areas in financial

services and investing that hasn’t leveraged the power of technology and the reach of the Internet

to improve and transform an inefficient model.

3

SEPTEMBER 2014

First, a company would be able to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.

Second, investors, over the course of a 12-month period, would be permitted to invest up to either:

• As much as $2,000 or 5 percent of their annual income or net worth, whichever is greater, if both their annual income and net worth are less than $100,000. • Or, 10 percent of their annual income or net worth, whichever is greater, if either their annual income or

net worth is equal to or more than $100,000. During the 12-month period, these investors would not be able to purchase more than $100,000 of securities through crowdfunding.

Old-School Real Estate CrowdfundingIn the meantime, local real estate investors are relying on more tried-and-true old school crowdfunding methods.

“Raising money is part of the business as in any business. It usually starts with friends and family,” wrote Lin He, owner of Rellion, a real estate investing company in Southern California, in an email to Housing News Report.

He said the structure of agreements typically falls into one of two categories: fixed rate interest return between 8 and 12 percent or a 50/50 split of profits.

“What I have learned is that typically people start with the interest as it’s quite enticing to earn such a high interest rate,” he said, noting that often after one or two deals his investors often opt for half of the deal. He provided an example of a recent fix-and-flip in Santa Ana, Calif., where an investor put up the money

Continued Next Page

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U.S.  Home  Sales:  Cash  &  Ins2tu2onal  Investor  Cash  Share   Ins<tu<onal  Investor  Share   30-­‐Year  Fixed  Interest  Rate  (Freddie  Mac)  

30-­‐Year  Fixed  Interest  Rates  from  Freddie  Mac  Primary  Mortgage  Market  Survey  

U.S. HOME SALES: CASH & INSTITUTIONAL INVESTOR

Lin HeSouthern California Real

Estate Investor

What I have learned is that typically people

start with the interest as it’s quite enticing to earn such a high interest rate.

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SEPTEMBER 2014

to purchase the property at $205,000. He rehabbed and resold the property for $407,500, providing the investor — who had opted for the 50/50 profit split — with a 38 percent annualized return after expenses.

He also sometimes offers a hybrid deal where the investor can earn either 6 percent interest or 40 percent of the deal, but that hybrid offer typically results in the investor realizing that one of the two original options is best for them based on their risk tolerance.

Private Money PartnershipsMaria Giordano offers similar options to private money investors in her real estate deals in the Phoenix market.

“Most of the ones I deal with are partnerships, basically. I’m partnering the property with one investor. They’re putting up all the money, all the repair work, everything. … I’m charging them a $5,000 fee for finding the property, managing the job, all that stuff,” said Giordano, who owns City Line Properties with her husband, Gary.

Giordano said some capital investors want to split the profits 50/50 and others just want a fixed rate of return. For buy-and-hold investments, Giordano typically sets up a seller carry-back arrangement where the private money investor funds the down payment and repairs along with ongoing maintenance and property management fees and then receives dividends based on the cash flow generated by the property.

“I’ve found there are so many sellers out there that are willing to do a seller carry-back. … These are people who have a problem and we are problem solvers,” she said, explaining a seller carry-back arrangement is a financing option where the seller holds the mortgage note and receives a monthly mortgage payment from the buyer.

“There are a lot of baby boomers out there and older that have amassed a lot of properties and don’t want to be a landlord,” she said of prime seller carry-back candidates. “They are used to getting income every month, and by doing the seller carry-back you are giving them their income over time.”

Giordano said most of her private money investors utilize a self-directed IRA, allowing her to put the returns from the real estate investment back into that IRA, an arrangement she highly recommends.

“I think people who want more control of their money should definitely look into self-directed IRAs,” she said, noting that she sometimes uses her own self-directed IRA to secure hard money loans. “If I have an expensive rehab going … the rates for hard money are still so great

it’s really soft money.”

Private Money PerksEven with the favorable rates on hard money loans, Giordano said she still prefers using private money because it removes many of the limitations on her as an investor.

“You have only so much money personally and you always run out … this allows me to do a lot more projects, and at the same time because it’s private money your credit does not have to be approved,” she said, noting that she can close a deal with private money within five days. “That is so key because it is harder to find good deals … It’s not uncommon for me to go in a house where a guy has seven people making him offers, and time can be the deciding offer.”

Lin He, the Southern California real estate investor, agreed with those advantages of utilizing private money for real estate deals.

“Raising private money has its advantages. It can be quick. Loans can be made in a matter of days instead of months. Terms can be flexible to satisfy both parties’ wants and needs. It gives leverage to the active investor like myself, so I can do multiple deals,” he wrote.

Private Money PitfallsHe and Giordano agreed the primary pitfall of private money is choosing a poor private money partner, and both said they had turned down deals because they were not comfortable with the person behind the private money.

“I have turned down people who have a small amount Continued Next Page

Maria GiordanoOwner

City Lane Properties

It’s amazing how many people want to invest in real estate, but they just

don’t have the time.

5

SEPTEMBER 2014

of money and feel like their life is on balance by handing over their life-long savings to me,” He said. “There are also people who are not easiest to deal with, I don’t deal with them. That’s the beauty of the business.”

“It’s amazing how many people want to invest in real estate, but they just don’t have the time,” Giordano said of the potential pool of private money, before cautioning that not every potential source of private money is a good one. “You’ve got to know them and you’ve got to like them.” Giordano also advised having an attorney draw up the partnership documents so they are ironclad in protecting both parties if anything goes sideways or south.

“It’s not something you just type out yourself,” she said. “I always encourage my investors to run it by their attorney, their accountant.”

Private Money ProfitsWhen she identifies a quality source of private money, Giordano said she likes to give them “the best deals because that keeps them happy and wanting to come back and do more deals.”

Giordano gave an example of a new capital investor who funded one property with her and made “a modest rate of return” of about $20,000. That whet his appetite for something bigger so she found a fourplex and triplex owned by the same person in the same neighborhood and targeted them for a fix-and-flip given that they were “pretty distressed properties.”

She said she purchased both properties for $355,000 and spent $70,000 to rehab the units — about half of which came back in the form of rents during the year it took to rehab all seven units. She’s now sold the fourplex for $280,000, and the triplex is up for sale for $290,000. Both come fully occupied with tenants and the corresponding cash flow.

“I honestly wanted to keep the property,” she said, acknowledging that her capital investor is still making a hefty return with the flip strategy.

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Atlanta-­‐Sandy  Springs-­‐Marie=a,  GA  

Las  Vegas-­‐Paradise,  NV  

Jacksonville,  FL  

Memphis,  TN-­‐MS-­‐AR  

Charlo=e-­‐Gastonia-­‐Concord,  NC-­‐SC  

Phoenix-­‐Mesa-­‐Sco=sdale,  AZ  

Knoxville,  TN  

Columbus,  OH  

Kansas  City,  MO-­‐KS  

Miami-­‐Fort  Lauderdale-­‐Pompano  Beach,  FL  

Detroit-­‐Warren-­‐Livonia,  MI  

Orlando-­‐Kissimmee,  FL  

Dallas-­‐Fort  Worth-­‐Arlington,  TX  

Houston-­‐Sugar  Land-­‐Baytown,  TX  

Tampa-­‐St.  Petersburg-­‐Clearwater,  FL  

Metros  with  Highest  Ins;tu;onal  Investor  Share  Q2  2014   Q2  2013  

METROS WITH HIGHEST INSTITUTIONAL INVESTOR SHARE

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SEPTEMBER 2014

MY TAKE By David CharronPresident and CEO of MRIS

It seems every month there is news of something that is going to change real estate forever. Along with that comes the inevitable discussion about whether or not an MLS will still be relevant in five, 10, 20 years’ time. I’m at the front lines of this debate, watching very closely for signs of our imminent demise. But from where I sit, I see continued

proof that an MLS is uniquely poised to stay ahead of the curve instead of falling behind it. The MLS I oversee has been a tale of two markets over the past eight years. As such there are plenty of examples of how an MLS can stay relevant to both its member agents and the consumers they serve.

Recent RealtyTrac data show that different counties within our Mid-Atlantic region make the lists for both affordable and unaffordable places to buy a home.

Locales that are mere miles away from each other weathered the economic downturn with completely opposite results. We were not only able to stay afloat during all this upheaval, but we were able to grow our user base and increase engagement with our audience by delivering products tailored to their needs. Here are a few lessons I gleaned from all the tumult.

Best-in-Industry TechnologyTechnology, of course, is the first place to look. But we had to be savvy about which

resources we deployed when bringing new products on board. One deciding factor we kept in mind is that the consumer would be more impressed with speed and accuracy than with the bells and whistles. The big demand for mobile platforms ensured our products had a solid mobile interface — either a stand-alone app or a website that works well on both phones and tablets. Some of the best products we have rolled out recently include a smartphone app allowing agents to access agent-only listing information from their mobile device so they can answer almost any question as soon as they see the listing (consumers love this during showings); easy-to-produce marketing materials that can auto-populate information directly from the property listing; and software that quickly estimates settlement amounts and pre-qualifies buyers. All of these products, and more, sent the message to our clients that we were in tune with what would make their jobs easier while keeping their

How An MLS Can Stay Relevant During The Current Tsunami of Change

Continued Next Page

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overhead costs low.

Accurate Listing InformationEven though our customers are brokers and agents, we never lose sight of the fact that we ultimately exist to help them serve the consumer. One of the most important ways we serve them is a way we hope they never see at all. We are the first line of defense in making sure listings are presented truthfully and in accordance with the Fair Housing Act and we go to great lengths to make sure no unfair or inaccurate listings are published. There is no other mechanism that can have as fast of a turnaround time as an MLS can when it comes to verifying the facts presented in a listing. If we’re doing our job correctly, the consumer ideally will never see inaccurate listings.

We can help our customers keep the consumer happy in other ways too. For example, our consumer portal is updated as soon as the agent changes the record in our database. Other third-party sites have a time delay for updating the listing records, but only an MLS can provide information that is updated in the amount of time it takes a webpage to refresh. In a market that moves as fast as the Washington area’s, this can save a lot of frustration for everyone involved. Also, since we’re not chasing page views we can present the pertinent information without making the user click through extra webpages

unnecessarily.

Search CapabilitiesWe also made it a priority to provide different ways of searching through our listings so that the user experience meets a wide variety of preferences. In addition to searching for homes using the standard price and location method, two of the other most popular ways to find listings is our Lifestyle Search. The search allows users to rank different lifestyle attributes in order of priority and create a radius search that will only list homes within a chosen radius of a specific address. We also provide a link to search results for “Bargain Buys” directly from our homepage that appeals to first-time homebuyers. Another popular perk is the ability to

have your estimated commute time pop up whenever you look up a listing. It is this wide variety of tools that create so many points of entry into our site that brings the traffic and, consequently, builds loyalty with the user.

Hyperlocal Housing Market DataThe other thing consumers want is accurate data about how the housing market is doing in their region and the neighborhoods they’re interested in. We found during everything from the home buying frenzy, to the foreclosure spike, to the first-time homebuyer credit period that we were called upon from all corners to provide local-level information and “in the trenches” analysis for what was happening. We have such a strong following for our data that when we release our standard report each month reporters have been known to publish it before the embargo lifts just to be the first to report the news. By consistently providing quality information that drills all the way down to the neighborhood level and reaches all the way up to the city or regional level we have met the needs of inquiring minds at every point along the spectrum.

It has been a time of tremendous change and the next five to 10 years will bring even more of it. But an MLS has several big advantages to make it through whatever

Continued Next Page

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is waiting around the next corner. We can respond to change faster than any entity operating on a national scale, provide accurate housing data that no one else has access to, and allow a user to customize their online experience in ways that macro-sized websites can’t. This approach of tailoring our products to a hyper-local audience is what helped us over the past 10 years and no doubt will contribute to the next 10 as well.

Sources:

http://www.realtytrac.com/content/news-and-opinion/least-affordable-housing-markets-for-millennials-8121

http://www.realtytrac.com/content/news-and-opinion/most-affordable-housing-markets-for-millennials-8120

http://www.realtytrac.com/content/news-and-opinion/14-best-counties-for-profitable-home-flipping-in-2014-8076

David Charron, President and CEO at MRIS, has been recognized by Inman News for eight consecutive years as one of the “Most Influential People in Real Estate.” David has also been named as one of the “Top Ten Newsmakers” by the Swanepoel Trends Report and was inducted into NAR’s Dr. Almon R. (Bud) Smith, RCE, AE Leadership Society, a prestigious honor for an MLS Executive. Since joining MRIS in January 2001, David has brought a wealth of leadership and strategic industry experience, combining an extensive background in real estate, information systems and Internet business solutions. David brings customer-service focus and first-person management style to his role overseeing all MRIS operations as President and CEO, as well as the Chairman of the MRIS Investment Committee.

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SEPTEMBER 2014

BofA Sets Record $16.65 Billion SettlementBank of America has agreed to pay a record settlement of $16.65 billion over allegations that the nation’s second largest bank knowingly sold faulty mortgage securities to investors and the federal government.

“As part of this settlement, Bank of America has acknowledged that, in the years leading up to the financial crisis that devastated our economy in 2008, it, Merrill Lynch, and Countrywide sold billions of dollars of RMBS backed by toxic loans whose quality, and level of risk, they knowingly misrepresented to investors and the U.S. government,” said U.S. Attorney General Eric Holder in a statement announcing the deal. “Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”

The settlement amount is the largest ever reached between the U.S. government and a private company, eclipsing the $13 billion JPMorgan Chase negotiated with the Justice Department last year. Another $9.6 billion will go to the Justice Department and several state attorney generals, including California, Delaware, Kentucky, Illinois, Maryland and New York.

“We believe this settlement, which resolves significant remaining mortgage-related exposures, is in the best interests of our shareholders, and allows us to continue to focus on the future,” said Brian Moynihan, BofA’s chief executive officer, in a statement.

SOURCES: Wall Street Journal, Justice Department, Bank of America

Countrywide’s Mozilo Faces Civil Suit Over Bad LoansAngelo Mozilo, the co-founder of Calabasas, Calif.-based Countrywide Financial Corp., is facing a civil lawsuit over the excesses of the subprime mortgage boom, according to Bloomberg.

Bloomberg reports that the U.S. attorney’s office in Los Angeles is poised to bring a new civil suit against Mozilo and 10 other former Countrywide employees.

“There is no sound or fair basis, in law or fact, to pursue any claim against Angelo Mozilo,” said David Siegel, Mozilo’s defense lawyer at Irell & Manella LLP in Los Angeles. Mozilo, 75, “stands virtually alone among banking and mortgage executives to actually have been pursued by this government before and already paid a record penalty.”

In 2010, Mozilo paid the U.S. Securities and Exchange Commission $67.5 million to settle allegations that he misled Countrywide investors.

In the wake of the housing bust, Countrywide was toppled by bad subprime loans and Bank of America bought the troubled subprime lender in a shotgun wedding in July 2008 for $4.5 billion. Since 2009, Bank of America has paid $55 billion in fines and charges, mostly attributed to Countrywide.

SOURCE: Bloomberg

Goldman to Pay $3.15 Billion to Settle Mortgage ClaimsGoldman Sachs agreed to buy back $3.15 billion in mortgage bonds from Fannie Mae and Freddie Mac to end two lawsuits filed in 2011 by the Federal Housing Finance Agency (FHFA), the federal regulator that oversees the two mortgage companies, The New York Times reported.

The deal would settle claims that the bank sold bad mortgage-backed securities to Fannie Mae and Freddie Mac. Under the terms of the agreement, Goldman has agreed to repurchase mortgage-backed securities from the two financial companies for $3.15 billion.

The settlement halts a trial planned for Sept. 29 over two lawsuits brought against Goldman Sachs by the FHFA in 2011, as the agency looks to recover damages from faulty mortgage bonds.

On August 21, Bank of America reached a $16.65 billion settlement with U.S. regulators to settle charges that it misled investors into buying troubled mortgage-backed securities.

Separately, FHFA still has lawsuits pending against HSBC, Nomura and Royal Bank of Scotland.

SOURCE: The New York Times

NEWS BRIEFS

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SEPTEMBER 2014

Ex-Fannie Mae Worker Gets 15 Months for Kickback SchemeA former Fannie Mae employee was sentenced on Aug. 4 to 15 months in federal prison, plus an additional six months in a halfway house, for taking kickbacks from a real estate broker who sold properties on behalf of the federal mortgage agency.

Armando Granillo, of Huntington Beach, Calif., worked for Fannie Mae’s Irvine office. He was convicted at trial in March of three counts of wire fraud for soliciting kickbacks, according to the U.S. Attorney’s Office.

As a real estate owned foreclosure specialist, Granillo had the power to approve sales offers from brokers who wanted to list and sell Fannie Mae foreclosures. He asked a Tucson real estate broker for kickbacks, and the broker reported him to law enforcement.

In February 2012, Granillo traveled from Irvine to Arizona to meet the broker, asked for 20 percent kickbacks and promised him multiple listings, the prosecutors said. The meeting was recorded on videotape, with Granillo promising to steer 100 foreclosures at a time to the agent in exchange for 20 percent of the real estate commissions.

Granillo was arrested on March 2013, after taking an envelope stuffed with $11,200 in cash from the broker.

SOURCE: Orange County Register

NY Attorney General Sues Donald Trump for $40 Million New York Attorney General Eric T. Schneiderman sued Donald Trump for $40 million on Aug. 24, saying the real estate mogul helped run a phony “Trump University” that promised to make students rich, but instead steered them into expensive and mostly useless seminars.

The attorney general said that from 2005 to 2011, the Trump school operated without an educational license while misleading consumers into paying for courses promising to teach Trump’s real estate investment techniques nationwide.

“No one, no matter how rich or popular they are, has a right to scam hard-working New Yorkers,” Schneiderman said in a statement. “More than 5,000 people across the country who paid Donald Trump $40 million to teach them his hard sell tactics got a hard lesson in bait-and-switch.”

“Lightweight NYS Attorney General Eric Schneiderman is trying to extort me with a civil law suit,” Trump said in Twitter post.

SOURCES: Reuters, New York Attorney General

Connecticut Establishes Alternative Foreclosure MethodSeeking to bypass the lengthy judicial foreclosure process in Connecticut, the state’s legislature has enacted a new foreclosure law that permits the marketing of a property to be foreclosed by a licensed broker prior to legal proceeding.

On June 3, Connecticut Governor Dannel Malloy signed H.B. No. 5514 into law, which establishes an alternative to the state’s current judicial foreclosure method, creating a new “foreclosure by market sale” method. The bill, which was sponsored by State Representative Joe Diminico, who has been a Realtor for more than 30 years, allows property owners who are in the beginning stages of the foreclosure process to work directly with a broker and the mortgage holder to “speedily sell the property” and avoid the time-consuming judicial foreclosure process.

Under current law, a court may issue a foreclosure judgment via the traditional judicial method. Under the new law, which takes effect October 1, 2014, a court will be permitted to approve a foreclosure sale on the open market provided that both the lender and the borrower consent to the sale.

The new method is available only for a first mortgage on a one-to-four family residential property that is the borrower’s principal residence.

SOURCE: USFN Report

LEGAL BRIEFS

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SEPTEMBER 2014

Mergers: Pulte Buys Dominion Atlanta-based Pulte Group has acquired the real estate assets of Dublin, Ohio-based Dominion Homes from a group of hedge funds and private equity fund owners. In 2013, Dominion, which operates in Columbus, Louisville and Lexington, Ky., was the 46th largest homebuilder in the United States, with 850 closing and $170 million in revenue, according to the Builder 100. Dominion is Pulte’s first acquisition since it bought Centex in 2009. Pulte Group, which operates the Pulte, Centex and Del Webb home brands, is the nation’s third-largest homebuilder, according to Builder magazine. Last year, Pulte sold 17,766 homes and recorded total revenue of $5.7 billion.

Mortgages: Wells Fargo Warns GSEsWells Fargo CEO John Stumpf warned the government-sponsored enterprises (GSEs) that they must stop being so quick to accuse banks of faulty underwriting and then forcing them to repurchase soured loans, according to the Financial Times. “We’re just not going to make those loans,” warned Stumpf.” If you’re going to pick through each one looking for a technical fault not to pay your insurance policy we’re not going to be in that business.” Meanwhile, Wells — and other lenders — are working overtime to combat the industry-wide plummet in mortgage volume, easing its lending standards and lowering its FICO score requirements on Federal Housing Administration-backed mortgages.

New Homes: Sales Fall in JulyAfter another weak month, new home sales remain far from pre-recession levels, in part because of sticker shock due to rising prices. Sales on news U.S. single-family homes declined 2.4 percent in July from a month earlier to an annual rate of 412,000 units, according to the Commerce Department. New home sales were 12.3 percent higher than the rate of new homes sold in July 2013. The median sales price of new houses sold in July 2014 was $269,800, the lowest figure since October 2013.

Mortgages: 3 Reasons Why Mortgage Origination Are Down Mortgage interest rates are at historic lows, but so are originations. Freddie Mac offers three reasons why originations are so depressed: First, the refinancing boom is over. Refinance mortgage originations were down about 60 percent percent from 2013 to 2014. Second, home sales are off. Sales of existing and new homes are down 5 percent during the first six months of 2014 compared with the first half of 2013. Finally, cash sales are up. People are buying homes, but the number of people who take out a mortgage to purchase them is down compared to last year.

Finance: HUD Secretary Says Lending Too Tight In his first major policy speech since joining HUD in July, housing secretary Julian Castro said policy makers should focus on steps to expand the housing market. Castro said lending standards have become too tight. “This has to change,” he said. Castro wants to increase access to mortgages for borrowers with low credit scores. In recent months, some lenders, home builders and real-estate brokers have called on the FHA to lower the premiums it charges to insure loans, which would result in lower mortgage payments for some low-income home buyers. The FHA had raised its fees as expected losses on crisis-era loans piled up, requiring a cash infusion from the U.S. Treasury. The FHA is in the midst of clarifying rules on what problems would trigger penalties and when those penalties can be found, which it hopes will allay banks’ fears.“By clarifying the compliance process, we’re giving lenders the confidence they need to lend, while protecting our financial health,” Castro said.

FINANCIAL BRIEFS

12

SEPTEMBER 2014

By Octavio Nuiry, Managing Editor

Baltimore: Real Estate Market Makes a Comeback

In Baltimore real estate investment circles, Janet Tonkins is known as “The Baltimore Real Estate Diva.” Tonkins buys run-down inner city row houses, fixes them up and rents them out.

“I buy properties, just like a lot of women buy shoes,” said Tonkins, a real estate investor who purchases two to five properties every month. “I buy all over Baltimore in nice working-class neighborhoods.”

Tonkins said most of her tenants are single women with children who qualify for federally-subsidized housing. She said the Section 8 housing voucher program is “guaranteed money.” She carefully screens each renter and requires them to sign a long term lease.

“I cater to single women,” said Tonkins — who along with her husband, Owen Jr. — started investing in real estate in 1987, after she retired from Verizon Communications at age 50. “I buy as long as it’s in a good neighborhood. I fix up the kitchen and bathrooms. I place granite counter tops, stainless steel or black appliances in all my properties. They are top notch rentals. Our renters are very picky and very choosy. I ask my tenants to sign a three year lease. I want them to stay a long time. Ninety percent stay with me for a long time because our properties are well maintained.”

Tonkins turns Baltimore City row house shells into showpieces. The last one she purchased she paid $17,000 in cash to a wholesaler. She plans to invest around $45,000 to rehab the kitchen and bathrooms. Rents for a three bedroom with one-and-half bathrooms run $1,350 to $1,500 a month, she said.

Tonkins said she and Owen Jr. have bought, sold and

rehabbed over 100 properties in Baltimore, New Jersey and Atlanta. She’s active in the local Baltimore Real Estate Investor Association and heads the investor group’s Savvy Women’s Investor Network. Asked how many properties she owns, the Baltimore’s Real Estate Diva was guarded.

“I would prefer not say how many properties I own, but we are well on our way to over 100 rentals,” said Tonkins, president of A*R*T* Enterprises, LLC, a family-owned business named after her deceased mother, mother-in-law and aunt. “I absolutely love real estate. Our goal is to pass on generational wealth to our kids.”

When asked where in Baltimore investors should shy away from, Tonkins said: “Baltimore is a block-by-block city. One block is great and the next one is boarded up. I buy all over the city, but you couldn’t get me to buy in Cherry Hill or North Avenue.”

Baltimore’s housing market is rebounding in slow motion.

The metro area is a study in contrasts, with both gritty inner city neighborhoods and leafy suburban homes. Row houses in poor neighborhoods can sell for $50,000 or less, but the area’s median home price is nearly a quarter of a million dollars. Home prices are up modestly across the region, but held back by a shadow inventory of

lingering foreclosures.

RealtyTrac data shows Baltimore median home prices increased 2 percent in June compared to a year ago, the 14th consecutive month with an annual increase. The metro area’s median home price was $223,625 in July, up 15 percent from the bottom of $195,000 in April 2013. The average annual appreciation over that 14-month period was 2.7 percent.

Continued Next Page

STATE SPOTLIGHT

Janet Tonkins President

A*R*T* Enterprises, LLCBaltimore, MD

I buy properties, just like a lot of women buy

shoes. I buy all over Baltimore in nice working-

class neighborhoods.

13

SEPTEMBER 2014

While any real estate rebound is welcome, the rebound in Baltimore has been relatively flat compared to many other parts of the country. Nationwide median home prices were up 13 percent in June compared to a year ago, the 27th consecutive month with a year-over-year increase. During that 27-month period the average annual appreciation has been 6 percent — more than twice the Baltimore number.

Baltimore Bulldozing Blighted HomesBaltimore, however, like other industrial cities in the Northeast and Midwest that have lost big chunks of population, is no stranger to blight and urban decay. Over the last 30 years, the city has lost roughly one-third of its total population. Baltimore, which lost nearly 110,000 jobs from 1990 to 2010, has seen its population shrink from 950,000 in 1950 to 622,000 today, according to the Census Bureau.

Baltimore has been left with scores of vacant buildings amid a steep depopulation. Between 1990 and 2000, the number of vacant homes in Baltimore went from 27,000 residences, about 9 percent of the city’s homes, to about 46,800 in 2010 — 16 percent of the city’s residences, according to Census figures reported by The Baltimore Sun. Today, the city estimates it has 16,000 vacant building and lots in Baltimore, and more than one house in eight is empty. For Baltimore, the bulldozing of abandoned row houses is increasingly regarded as a path to salvation.

For years, the city of Baltimore has declared war on huge swaths of its formerly treasured brick row houses, whose distinctive architecture has sheltered thousands of immigrants and the city’s working class for over a century.

In the late 1970s, the poor, inner-city Baltimore neighborhoods began to deteriorate. Since then, sizable chunks of East Baltimore and West Baltimore and parts of north central Baltimore near Johns Hopkins Hospital had depopulated because of the deteriorating condition of the aging row houses. Today, whole blocks lie in rubble, according to investors and real estate agents.

While some see Baltimore blight as a problem, homebuilder and investor Tyler Banks, owner of Charm City Builders in Baltimore, sees only opportunities.

“In 2008, I started buying homes in Baltimore City,” said Banks, who started investing in Baltimore real estate shortly after college. “We did well for a little while, but the market quickly changed for the worse. In 2009, we started to really struggle. I made a ton of mistakes. I worked through it and got my inventory off my books.”

After liquidating his housing inventory, Banks took a hiatus from rehabbing and flipping for a while. “In late 2010, I started acquiring properties again,” said Banks, a former real estate agent. “I started buying and fixing up row houses using private money. I would

Continued Next Page

Before: Janet Tonkins, president of A*R*T* Enterprises, LLC in Baltimore, MD, bought this fixer-upper row house on Park Ave. for $17,000. This is the kitchen before the remodel.

After: Tonkins spent $45,000 to rehabbed the entire house. In the kitchen, she added new cabinets, granite counter tops and stainless steel appliances. Tonkins plans to rent this home for $1,300 a month.

14

SEPTEMBER 2014

do equity partnerships, where private lenders would provide the capital and I would do the rehabs and management.”

Then in 2012, Banks made another pivot.

Instead of fixing up an older Baltimore row house and hoping a buyer liked the improvements, Banks noticed that some competitors had set up a model row house that served as a sales center, where buyers can come in and customize their own row house before they buy it.

“That’s when I created the Charm City Builders brand,” said Banks, referring to his new company. “We bought and totally renovated a corner row house on 445 S. Robinson Street that serves as our sales center. That’s been our core business ever since. We buy mainly row house in neighborhoods surrounding the water.” Baltimore is a large, diverse city, but Banks said he buys in gentrifying neighborhoods like Federal Hill, Canton, Highlandtown and Fells Point. In Federal Hill, a neighborhood near the harbor, block after block of classic Baltimore row houses, most of them built in the nineteenth century, have survived decades of

gentrification. Banks buys two-story red brick homes, closely packed and rather humble, but affordable to working class buyers. “In 2013, Charm City Builders sold 26 homes,” said Banks. “We’re on pace to do 35 this year.” Banks expects to sell 45 properties next year, ranging in price from $225,000 to $425,000. Competition has increased tremendously in the rehab market. There’s a lot more inventory than last year.”

On the Eastern Shore of Maryland’s Chesapeake Bay, agent Deborah Dawkins of Coldwell Banker Residential Brokerage in Annapolis, Md., said buyers — especially first-time home seekers — are cautious about purchasing because of the shaky job market.

“What’s hurting our market is the lack of good paying jobs,” said Dawkins, who works in the Eastern Shore towns of Caroline, Easton, Cambridge and Stevensville. “In the Baltimore area, prices have improved, and employment is better there. But if you look at our side of the Bay, for example, Dorchester County’s unemployment rate is 8.2 percent, while Caroline is 6.3 percent. It’s very frustrating for those buyers.”

Tyler Banks Owner

Charm City BuildersBaltimore, MD

We buy mainly row house in neighborhoods surrounding the water.

Continued Next Page

Tyler Banks, owner of Charm City Builders in Baltimore, is a full-time Baltimore rehabber. He bought and rehabbed this corner row house at 445 S. Robinson Street, which Banks uses as a sales model home. Here’s a look at the dining room at 445 S. Robinson Street.

15

SEPTEMBER 2014

Still, things are improving, Dawkins said.

“We are seeing some modest price increases,” she said. “There’s also pent-up demand from young couples who have been living with their parents. Living in an extended family can be pretty stressful.”

Dawkins said that many homeowners on Maryland’s Eastern Shore have walked away from their properties. She said Maryland has a huge backlog of foreclosures.

“Maryland is a judicial foreclosure state, and many of the foreclosure proceedings are still a work in process,” she said. “Sometimes it takes years to foreclose in Maryland.”

Foreclosures Still High Several factors are behind Maryland’s elevated foreclosure rate.

Maryland has some of the nation’s strictest foreclosure laws. In 2010, the flood of foreclosure filings in Maryland slowed to a trickle when a new mediation law went into effect July, requiring more oversight and a more drawn out process for banks to repossess a property. Before the law was passed, foreclosures in Maryland could be completed in 15 days. Now, on average, it takes 575 days.

Maryland’s mediation law requires lenders to send borrowers an application for a loan modification or mitigation and information about housing counseling services 45 days before filing a foreclosure. Lenders also will have to file an affidavit 30 days before a foreclosure sale, swearing that they checked borrowers’ eligibility for loan modification or mitigation options. Additionally, some lenders have dragged out the foreclosure process, extending the foreclosure timeline and giving distressed borrowers more time to pursue mortgage modifications or a short sale.

Despite the mediation law and extended the foreclosure timelines, Maryland posted the nation’s

second highest foreclosure rate in July, according to RealtyTrac. Statewide, foreclosure activity increased 5 percent in July from the previous month and was up 9 percent compared to July 2013 — continuing a two-year trend in rising foreclosure activity in Maryland. One in every 553 Maryland housing units had a foreclosure filing

in July, the nation’s second highest state foreclosure rate for the sixth consecutive month. Unemployment RisesUnemployment in Maryland has been inching upward. Statewide, Maryland’s unemployment rate rose from 5.6 percent in May to 5.8 percent in June, according to the Bureau of Labor Statistics. Baltimore’s unemployment rose from 5.9 percent in May to 6.5 percent in June.

“I’ve talked to people who haven’t made a payment in five years,” said Dawkins, a 12 year real estate veteran. “We’ve gotten past the bottom, but we’re still bumping along.”

Marcellus Kendell, a Baltimore real estate agent with Home Resource Realty, said fewer for-sale signs has led to crowed open houses and bidding wars. Kendell said short sales are driving most of his business.

“The market is pretty slow,” said Kendell, who works the west Baltimore area. “Short sales still seem to be the highlight of most of the Baltimore area

sales. Prices are picking up, but there’s not enough inventory. The banks have not released the shadow inventory. There’s more than enough investors looking for properties, but the properties are not there. A lot of the foreclosure inventory still hasn’t hit the market yet.”

Kendell doesn’t know why the banks aren’t selling more properties, but he’s got lots of buyers looking for deals.

“This month I had two short sale deals that fell apart,” he said. “The banks aren’t eating expenses like water bills and utilities. Homeowners — who already have a financial hardship — can’t afford to pay utility costs. We

Continued Next Page

Deborah DawkinsColdwell Banker

Residential Brokerage Annapolis, MD

Maryland is a judicial foreclosure state, and

many of the foreclosure proceedings are still a work in process.

Sometimes it takes years to foreclose in Maryland.

16

SEPTEMBER 2014

can’t get the lenders to eat those costs so the deals are falling apart.”

In East Baltimore, urban gardens have replaced dilapidated red brick row houses. In the Reservoir Hill neighborhood of West Baltimore, the city has begun to turn over vacant lots to groups of amateur farmers.

The exodus, while not over, is slowing, according to 2010 Census data released recently. That may be a cause for celebration in a city that’s long struggled to shake a battered image that was showcased in HBO’s television crime drama “The Wire,” a stark portrait of an urban center in decline.

Fells Point, a historic district along the Patapsco River, is a mixed-use area known for its low-rise brick buildings and occasional cobblestone street, some dating back to the 1700s. In the 18th and 19th centuries, Fells Point was a shipping and manufacturing district. Today, it is gentrified, well-heeled community east of Little Italy dotted with restaurants, bars, grocers, shops and parks.

Even as they bulldoze thousands of vacant homes, Baltimore and other shrinking cities have continued to seek new residents. Johns Hopkins Hospital is converting the once-blighted East Baltimore neighborhood into a biotechnology research center. Under the largest planned urban renewal in the country, Johns Hopkins will tear down hundreds of homes as part of a 100-acre site for the $1.4 billion project. It will also include 2,200 new and renovated housing units.

Realtor Margaret Robert, a real estate agent with HomeSource Residential in Crofton, MD, said the scarcity of listings in Prince George’s County was fueling competition among buyers and sparking multiple officers.

“There are more short sales than anything else,” said Robert, who estimates that half of her business is short sales. “There is still a lot of distress in the market because many sellers are underwater.” Baltimore rehabber David Page is upbeat about the city’s real estate market.

“The market overall is fair to good,” said Page, who has flipped 20 properties since 2009. “There are a lot of people doing rehabs right now. Certain neighborhoods are gentrifying and they are attracting young professional buyers.”

Page said several gentrified Baltimore neighborhoods are currently hot right now. He said Canton, overlooking Baltimore’s outer harbor, is popular with young professions looking for urban lifestyle close to restaurants and nightlife. Locus Point, where athletic apparel manufacture Under Armour is headquartered, attracts millennial buyers too. And Federal Hill is in demand, he said.

“Rehabbing houses works here,” said Page. “I’m still buying. I’m always looking for a good deal.”

JULY 2014 BALTIMORE HOME SALESMedian sales price by county compared with July 2013

Anne ArundelBaltimore CityBaltimore Co.CarrollHarfordHoward

$325,000$135,000$227,750$295,000$232,316$418,000

0.9 percent increase9.1 percent increase0.2 percent increase3.5 percent increase5.1 percent increase0.9 percent increase

Location Price Change

SOURCE: RealEstate Business Intelligence

David PageRehabber

Baltimore, MD

Rehabbing houses works here. I’m still buying. I’m always

looking for a good deal.

17

SEPTEMBER 2014BOOK REVIEW

The ‘House of Debt’ —– Rescued Banks, Not PeopleBy Octavio Nuiry, Managing Editor

When the real estate bubble burst in 2006, it not only triggered the Great Recession of 2008, but it also unleashed an avalanche of financial stress that rattled across global markets, all of this occurring before the collapse of Lehman Brothers in September 2008, a new book claims.

According to economists Atif Mian and Amir Sufi, Washington, D.C. policy makers rescued the wrong economy. Instead of bailing out the too-big-to-fail banks,

Mian and Sufi claim that the Great Recession could have been largely avoided had the federal government acted swiftly and more aggressively to help underwater borrowers by reducing mortgage debt.

In their new book, “House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again,” (University of Chicago Press, 2014), Mian and Sufi challenge conventional wisdom that the Great Recession was caused by the financial market meltdown, arguing that a run-up in housing debt — not broken banks — fueled the recent recession after underwater homeowners stopped spending money.

Mian and Sufi, professors at Princeton and the University of Chicago respectively, contend that crushing mortgage debt was the main driver of the tepid recovery in consumer spending since the Great Recession of 2008. They claim that the dramatic rise in household debt from 2000 to 2007, in combination with the dramatic decline in housing prices, triggered a sharp pull-back in consumer spending that ushered in the Great Recession.

“So one fact we observe is that both the Great Recession and the Great Depression were preceded by a large run-

up in household debt,” they write. “There is another striking commonality: both started off with a mysteriously large drop in household spending.”

In essence, the duo argue, the recession was human-made, rather than a cyclical economic event. Policy makers in Washington underestimated the importance of helping distressed borrowers, which exacerbated the problem.

“The real cause was elevated household debt and a housing crash that led to a massive pullback in spending,” write Mian and Sufi. They found that consumption fell most sharply in counties that experienced the biggest drop in property values, including Arizona, California, Florida and Nevada.

The authors argue convincingly that overextended household spending during the housing boom was artificially boosted by crushing mortgage debt. They found that the drop in consumer spending was concentrated in areas that saw the sharpest increase in borrowing during the boom and the sharpest home price declines during the bust.

“During the Great Recession in the United States, the housing bust disproportionately affected low net-worth, highly indebted home owners,” the authors write. “Indebted home owners bore the first losses associated wih the collapse in house prices; as a result, they saw a massive collapse in their net worth.”

The housing crash, they argue, was exacerbated by a lack of policy initiatives to ameliorate the crushing consumer debt.

Washington rescued the wrong economyMian and Sufi believe that sharing the losses between lenders and borrowers would have been a more prudent policy.

“Economic disasters are almost always preceded by a large increase in household debt. In fact, the correlation is so robust that it is as close to an empirical law as it gets in macroeconomics. Further, large increases in household debt and economic disasters seem to be linked by collapses in spending”, write Mian and Sufi.

Continued Next Page

18

SEPTEMBER 2014 The book is particularly critical of the Treasury, the Federal Reserve and the government sponsored enterprises, or GSEs, which lavished the banks with cheap credit when the problem was really consumer demand, the authors claim. Consumer wealth evaporated, and with it the desire to borrow, which could have been alleviated by writing down the mortgages, Mian and Sufi assert. They fault Timothy Geithner, the former Treasury secretary, Ben Bernanke, the former Federal Reserve chairman, and Edward DeMarco, the former director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, for bailing out bankers at the expense of consumers. They contend that by preserving the financial system without addressing the more important problem of distressed borrowers, the recovery remains painfully sluggish as a result.

Lawrence Summers, reviewing the book for the Financial Times, defended his actions as President Obama’s director of the National Economic Council, writing: “Looking back, there are things I wish had been done differently, such as putting in place more satisfactory leadership at the Federal Housing Finance Agency (FHFA) and more effectively mobilizing Fannie Mae and Freddie Mac to help bolster the housing market. Certainly, I have stayed up at night while in government and afterwards worrying over these possibilities.”

The authors found an interesting correlation between household debt and the U.S.’s recent decline in economic

growth: “the bigger the increase in debt, the harder the fall in spending.” Mian and Sufi’s theory applies both in the U.S. and internationally.

To avoid future meltdowns, lenders should have some skin in the game, earning more when home values climb and sharing the pain if they fall, they argue in the final chapter. Mian and Sufi recommend “shared responsibility mortgages” whose principal

would decline along with house prices.

“Principal forgiveness would have resulted in a more equal sharing of the losses associated with the housing crash,” they write.

Many books have been written trying to explain the housing crash and the subsequent mortgage meltdown. This book, however, adds clarity to a murky topic. It offers new insight into housing debt, consumer spending, and how mortgage debt — if abused — can lead to disastrous results. Moreover, their proposal to shift mortgage

risk to lenders is an interesting concept.

Surely, mortgage write-downs and refinancing of troubled loans would have helped stabilize the economy faster. Maybe it’s time to dispassionately analyze what’s suggested in this thin volume as we barrel our way to the next housing bust.

Economic disasters are almost always preceded by

a large increase in household debt. In fact, the correlation is so robust that it is as close to an empirical law as it gets in macroeconomics. Further, large increases in household debt and economic disasters

seem to be linked by collapses in spending.

DOWNLOAD REALTYTRAC’S FREE 2014 GUIDE TO SHORT SALES

Rank State Default Auction REO Total 1/every X HU (rate)

%Δ from June 14

%Δ from July 13

U.S. Total 31,902 51,595 25,937 109,434 1,203 2.09 -16.39

30 Alabama 0 863 194 1,057 2,055 -1.12 -21.99

13 Alaska 136 65 58 259 1,179 191.01 114.05

19 Arizona 0 1,283 808 2,091 1,359 18.47 -35.80

41 Arkansas 0 212 121 333 3,955 -9.76 -55.12

10 California 6,210 4,547 2,484 13,241 1,032 3.41 -0.06

28 Colorado 0 937 263 1,200 1,843 112.77 -17.30

11 Connecticut 819 185 420 1,424 1,043 0.21 -36.63

8 Delaware 219 121 88 428 948 -5.93 -2.06

District of Columbia 4 30 4 38 7,807 153.33 100.00

1 Florida 3,709 9,610 5,847 19,166 469 -12.67 -29.71

12 Georgia 0 2,479 1,421 3,900 1,048 23.65 -28.81

42 Hawaii 84 15 30 129 4,030 -16.77 -50.95

29 Idaho 141 96 93 330 2,020 0.92 -21.99

4 Illinois 2,372 2,786 1,930 7,088 747 -13.66 -8.60

7 Indiana 875 1,508 686 3,069 911 9.14 -2.07

37 Iowa 395 8 94 497 2,691 -68.78 -34.61

35 Kansas 131 233 143 507 2,432 23.66 -30.17

34 Kentucky 197 473 178 848 2,273 -3.53 16.64

15 Louisiana 294 899 354 1,547 1,270 83.51 1.18

22 Maine 301 72 109 482 1,496 -26.97 -23.00

2 Maryland 1,504 1,692 1,103 4,299 553 4.50 8.51

38 Massachusetts 418 374 139 931 3,012 5.56 -19.18

18 Michigan 0 2,369 1,038 3,407 1,330 26.61 -22.48

31 Minnesota 0 815 315 1,130 2,078 24.72 -27.84

44 Mississippi 0 245 30 275 4,634 1.48 118.25

40 Missouri 0 430 306 736 3,683 -22.20 -47.62

49 Montana 0 15 4 19 25,337 58.33 -29.63

45 Nebraska 22 66 34 122 6,535 1,642.86 -21.79

3 Nevada 1,037 540 255 1,832 639 35.80 15.37

33 New Hampshire 0 180 104 284 2,162 17.84 -47.79

14 New Jersey 1,323 1,194 481 2,998 1,186 -15.50 -26.91

32 New Mexico 197 99 129 425 2,119 17.40 -67.85

25 New York 3,796 428 271 4,495 1,802 29.20 12.18

16 North Carolina 2,030 781 484 3,295 1,313 39.68 86.79

50 North Dakota 0 0 2 2 159,734 0.00 -83.33

5 Ohio 2,012 2,814 1,283 6,109 839 -11.58 -23.73

24 Oklahoma 412 387 222 1,021 1,630 88.72 1.79

23 Oregon 108 769 228 1,105 1,515 -4.58 -31.96

17 Pennsylvania 1,303 2,103 802 4,208 1,322 -5.90 -13.66

26 Rhode Island 0 166 88 254 1,821 1.20 -34.37

6 South Carolina 985 830 575 2,390 893 21.26 -11.38

47 South Dakota 0 18 16 34 10,700 -32.00 126.67

43 Tennessee 0 403 207 610 4,610 -1.29 -44.95

27 Texas 0 4,528 942 5,470 1,824 50.90 11.31

9 Utah 236 631 103 970 1,010 -3.29 -17.52

46 Vermont 0 22 10 32 10,070 14.29 -55.56

36 Virginia 0 980 384 1,364 2,468 -1.80 -27.02

21 Washington 46 1,389 573 2,008 1,436 19.10 -23.59

48 West Virginia 0 24 44 68 12,974 -21.84 -25.27

20 Wisconsin 586 821 423 1,830 1,432 -31.07 -30.55

39 Wyoming 0 60 17 77 3,395 67.39 -16.30

JULY 2014 State-by-State Foreclosure Activity Summary

Rank Metro

Housing Units Per

Foreclosure Filing (Rate)

1 Ocala, FL 296

2 Orlando, FL 357

3 Palm Bay, FL 404

4 Lakeland, FL 407

5 Miami, FL 421

6 Port St. Lucie, FL 434

7 Tampa, FL 448

8 Cape Coral, FL 478

9 Columbia, SC 484

10 Akron, OH 525

11 Rockford, IL 546

12 York, PA 553

13 Baltimore, MD 559

14 Riverside, CA 564

15 Las Vegas, NV 570

16 Chicago, IL 577

17 Sarasota, FL 585

18 Atlantic City, NJ 607

19 Bakersfield, CA 628

20 Visalia, CA 647

TOP 20 Foreclosure rates in

the Nation’s 20 largest metros in July 2014

20

Residential Sales Counts & Median Prices by State — July 2014

Annualized Sales %Δ from June 2104 %Δ from July 2013 Median Sales Price %Δ from June 2014 %Δ from July 2013 Distressed Discount%

U.S. Total 4,634,513 -3.43% -12.17% $191,000 3% 12% 37%

Alabama 46,920 -5.25% 5.42% $126,500 5% -2% 45%

Alaska* 10,121 -3.97% -4.83% $249,000 0% 4%

Arizona 152,016 -4.33% -17.01% $173,500 2% 4% 23%

Arkansas 28,459 -2.44% -15.72% $131,800 1% 4% 49%

California 446,429 -4.56% -21.48% $375,000 1% 10% 32%

Colorado 117,275 -3.12% -11.06% $246,500 2% 5% 32%

Connecticut 22,010 -6.85% -27.56%

Delaware 15,264 -2.13% -12.35% $189,900 0% 0% 46%

District of Columbia 8,683 -3.35% -13.95% $502,853 1% 6% 35%

Florida 512,237 -1.64% -12.59% $145,000 2% 12% 30%

Georgia 173,616 -2.82% -8.70% $148,500 2% 13% 44%

Hawaii 19,741 -4.40% -15.58%

Idaho* 19,845 -7.57% -23.90% $185,000 -3% 0%

Illinois 183,273 -4.60% -3.68% $177,000 1% 9% 45%

Indiana* 70,874 -5.03% -18.09% $134,900 0% 5%

Iowa 34,585 -4.28% -6.65% $135,000 1% 2% 47%

Kansas* 17,284 -4.49% 13.74% $147,000 -2% 8%

Kentucky 28,751 -5.44% -7.94% $120,000 0% -11% 44%

Louisiana* 39,071 -5.19% -16.01% $158,900 -3% 5%

Maine* 20,351 -10.73% -13.71% $199,700 0% 5%

Maryland 79,020 -2.29% -14.29% $245,000 4% 2% 43%

Massachusetts 43,533 -8.36% -38.34%

Michigan 144,608 -2.19% -16.00% $120,000 9% 24% 60%

Minnesota 70,086 -4.04% -19.73% $198,000 3% 14% 34%

Mississippi* 7,589 -4.28% 7.29% $152,500 -2% 9%

Missouri* 81,114 -5.11% -9.35% $144,000 -1% 7%

Montana* 9,810 -6.54% -23.89% $255,000 2% 2%

Nebraska 27,394 -1.92% -3.56% $144,000 3% 7% 31%

Nevada 70,567 -4.69% -14.22% $170,000 0% 11% 21%

New Hampshire 12,847 -6.94% 7.46% $0

New Jersey 117,308 -2.73% -8.93% $273,750 6% 0% 41%

New Mexico* 29,752 -1.89% -11.67% $199,900 0% 0%

New York 150,043 -2.09% -5.17% $319,600 1% 13% 30%

North Carolina 167,476 -2.15% -3.52% $160,000 3% 8% 41%

North Dakota 6,464 -8.66% -24.56% $167,700 5% -3%

Ohio 171,905 -2.66% -10.09% $125,000 4% 20% 56%

Oklahoma 54,882 -3.54% -11.58% $130,000 4% 4% 54%

Oregon 65,177 -4.08% -8.96% $240,100 0% 5% 27%

Pennsylvania 154,340 -1.41% -9.27% $145,000 4% -3% 51%

Rhode Island 7,229 -6.03% -31.42%

South Carolina 93,668 -2.45% -11.54% $150,000 5% 12% 41%

South Dakota $0

Tennessee 115,608 -4.05% -7.01% $130,000 2% 6% 45%

Texas* 477,823 -3.83% -13.53% $189,000 -2% 0%

Utah* 59,165 -5.29% -18.92% $241,500 1% 5%

Vermont 12,625 -1.75% -24.69% $195,000 3% 0% 59%

Virginia 92,481 -3.49% -19.67% $329,000 3% 20% 38%

Washington 114,990 -4.72% -5.41% $254,500 2% 8% 31%

West Virginia 6,055 -5.29% -19.68% $128,000 1% 7% 56%

Wisconsin 66,297 -6.33% -19.45% $157,500 3% 6% 54%

Wyoming* 5,378 -4.32% -12.54% $245,000 0% -1%

* Insufficient data available for states not included in the table and blank cells

Housing News Report is a monthly publication dedicated to helping investors succeed by providing them with timely and relevant information about the housing market.

EXECUTIVE EDITORDaren Blomquist

MANAGING EDITOROctavio Nuiry

WRITERSDaren Blomquist, Octavio Nuiry, Peter Miller

ART DIRECTIONEunice Seo

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