-
Editors Note: This is the first part of a two-part series on how
real estate investors are preparing for another potential downturn
(or doomsday) in the housing market at some point in the future.
The first part establishes the shifting market sands that investors
are experiencing in various markets across the country. The second
part in our July issue will provide a deeper dive into emerging
opportunities and practical acquisition and exit strategies that
investors can employ in this shifting market.
Leland DiMeco is making hay while the sun shines in the Boston
real estate market.
But he knows that at some point in the not-too-distant future a
real estate winter is coming that will cool off the
citys still red-hot housing market.
I think weve got another year before we see any leveling, said
DiMeco, owner and principal broker at Boston Green Realty. Were
going to enjoy whats going on in the next year make sure my
investors Im working with have settled in by the end of next year.
Theyre willing to hunker down for the next few years, whatever it
is.History is going to repeat itself.
But in the meantime DiMeco said the hard literal winter in
Boston created pent-up demand that is now hitting the local market
with full force.
The market is still very strong right now. Im still seeing most
of my clients losing an opportunity to buy, he said, noting
June 2015 volume 9 issue 6
CONTENTS
7 My Take by Dr. David M. Blitzer S&P Dow Jones Indices 10
News Briefs
11 Legal Briefs
12 Financial Briefs
13 State Spotlight:
21 Book Review: Big Data Revolution, By Rob Thomas and Patrick
McSharry
Continued Next Page
By Daren Blomquist, Executive Editor
The Real Estate Doomsday PreppersNamed the Nations Best
Newsletter by the National Association of Real Estate Editors
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2June 2015
that he works with mostly investor clients, both international
and domestic, and also invests himself. I get people banging down
my door. Boston is very strong. Its a very good place to continue
investing.
Some of DiMecos clients are getting priced out of the
picked-over parts of the city and are starting to look for emerging
neighborhoods where they can add value through rehab and then
profit off an eventual flip.
For example East Boston right now is one of the neighborhoods in
the city (that investors are targeting), he said, noting that it is
a less expensive neighborhood that is still close to the city and
has public transportation.
The only thing that is slowing down the flips now is the
appraisals catching up, he said, noting that he sold a three-family
property in East Boston last year that was the highest-grossing
property in the area. The appraisal came in low, but the investor
he was working with was willing to put in an extra $10,000 to cover
the deficiency in the appraisal. He knows that this area is
growing, and his property is doing very, very well. (He will) make
some good cash flow and eventually sell at a profit.
Another $180,000 in Rental IncomeDiMeco provided another example
of an investor hes working with who recently bought five
three-family properties in East Boston. Each property was grossing
$2,800 a month in cash flow from rents when the investor bought
them, and after pretty modest renovation one of the five is now
grossing $5,000 a month in rental income.
You think about it, you times it by five thats a pretty
significant number, DiMeco said. Hes making another $180,000 a year
on those five buildings by the time were done.
I like working with the investors who are buying these
properties that need the work, and doing the work and seeing the
fruit of that labor, said DiMeco, adding that the city is still
seeing a decent flow of foreclosures that can provide investors a
healthy margin on the acquisition side, especially when the
properties are in poor condition and not attracting the average
buyer.
But when a bank-owned property is in good condition it may not
always represent a good deal for investors, DiMeco noted.
Banks are really seeming to get the concept of the market, he
said Now theyre coming on (the market) and theyre pretty close to
market value.
Fighting a Foreclosure DroughtWhile Boston has seen a recent
surge in foreclosure starts, with 15 consecutive months of annual
increases, foreclosures have largely dried up in Southern
California, according to RealtyTrac data. Overall foreclosure
activity has been down on an annual basis in the Los Angeles metro
area in nine of the last 12 months, and in May the metro areas
foreclosure
rate ranked 110th out of the 214 metro areas tracked by
RealtyTrac each month.
The resulting dearth of distressed properties along with
hesitant homebuilders has led to a market that is still hallmarked
by short supply despite the recent boom, according to Bruce Norris,
founder of The Norris Group, a Southern California company that
invests in real estate and also trains and lends money to real
estate investors. Norris predicted the 2006 housing bubble burst in
his report The California Crash.
Usually at the end of the boom you have this oversupply in the
sense that it represents 20 percent of whats for sale, said Norris,
who noted that at the beginning of 2015, the supply of new homes
for sale in California only represented 1 percent of all homes for
sale. Its so low
Continued Next Page
Leland DiMeco (right), owner and principal broker at Boston
Green
Realty stands with real estate investor Rafael Luna of LPY Urban
Development
in front of one of five three-family properties DiMeco helped
Luna and a group of Latin real estate investors recently purchase.
Now the group is renovating the properties and filling
them with new tenants before flipping them as turnkey rentals to
other
investors. After the first property was renovated, the gross
rental income
jumped from $2,800 a month to $5,000 a month, according to
DiMeco.
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3June 2015
its almost not worth mentioning.
Norris believes this low supply will provide continued steam for
housing market growth over the next 18 months, but its also causing
headaches for local real estate investors like Lin He, who recently
exited the home flipping business because of too much competition
and too little inventory.
I think in the next 18 months, depending on the inventory youre
looking at, I think its going to be mildly up, Norris said of
Southern California home prices. Its not up to the investor at this
point. We seem to have done our job. Now the world of financing
needs to get in there and get the owner-occupant in there.
Investors Squeezed in Orange CountyInvestors are getting
squeezed both on the front-end acquisition of properties and the
back-end disposition of properties, according to He, who operates
Rellion Inc., in Orange County, California.
On the front end buying, there are two problems here, he wrote
in an email. One is the fact that in a normalized market, it is a
challenge to find deals as there are so many regular home buyers
out there and they dont need to remodel as I do, so their borrowing
cost is lower, and they dont have to pay two more commissions to
sell the property immediately. So there are a lot of seasoned
investors now sitting on the sideline or do something else.
Two, here comes the newbie investors who have watched too many
TV shows, continued He, referring to the second challenge he faces
when acquiring properties, adding he is already seeing evidence
that these newbie investors are getting burned by an overheated
market. This year, I have had my hard money lender call me to talk
over a property they foreclosed on. Another investor wanted to
joint venture with me to buy a house at court house steps that an
investor has abandoned. I also heard some investors wanted to do
short-sale.
Continued Next Page
Bruce NorrisPresident
The Norris GroupRiverside, California
Its not up to the investor at this point. We seem to have done
our job. Now the world of financing
needs to get in there and get the owner-occupant in
there.
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4June 2015
He was first alerted to the shifting market when he had trouble
selling some of his flips in 2014.
I had four flips sitting on the market for months last year. My
flips typically carry a premium and go fast. Last year, however, I
was either not getting offers or getting low ball offers except for
one flip. So I was really puzzled, he wrote, noting his flips
finally sold quickly after interest rates dropped near the end of
the year. Fortunately three of the four went into escrow on the
same day, in January! The other one went into escrow two weeks
later.
That experience convinced him there is little margin for error
in the high-priced Southern California market, and that he could be
one of the flippers burned if interest rates go up again.
So I move on, he said, noting he is no longer flipping, but has
moved into the home improvement business, leveraging his flip crews
to efficiently remodel homes for homeowners. Instead of competing
with homeowners, why not work with them?
Mark Hughes, chief operating officer at First Team Real Estate,
one of the largest brokerages in Southern California, said hes
hearing more investors thinking about moving on.
As institutional and small mom-and-pop investors try to gauge
the top of the market, indications are that a growing number of
them feel that after riding the wave up on the rebound, now is the
time to divest and reallocate, he said. The chatter is growing
louder and many think we are starting to price peak and will soon
see an increase in inventory coming in the next few months coupled
with possible rate hikes, both of which would tamp down continued
rapid price growth.
Strength, Then WeaknessBut the Southern California market along
with other markets across the country may get stronger before they
get weaker, according to Robert Campbell, a real estate analyst and
author of Timing the Real Estate Market. Despite the possibility of
short-term strength, however, Campbell said hes still advising
investors to
pull back on their purchases.
Its better to hold off right now. Dont buy, said Campbell, who
publishes and sells detailed real estate reports on 17 housing
markets across the nation. Keep your cash in as safe a place as you
can, because the next downturn is looming. I think its sooner
rather than later. Probably near the end of this year. Late 2015 or
early 2016 I think the market is going turn.
Campbell said some markets are still strengthening in large part
thanks to an influx of foreign buyers willing to pay more than
local buyers constrained by local household incomes.
The market in California is seeing increased strength as opposed
to increased weakness. Momentum is starting to strengthen again, he
said, noting that the deepening crisis in Europe will push more
money into U.S. real estate markets. With Europe on the ropes, and
China looking kind of tough, there is a lot
of big money flowing into San Francisco its moving into the
safest places they know. New York City, Manhattan, London and San
Francisco.
Another market attracting European and Chinese money is Boston,
according to DiMeco, broker/owner there.
We still get a lot of European investors. Some of the more
aggressive investors we get are from China, he said, adding that
neighborhoods close to the universities in the city are also
attracting homegrown U.S. investors. Outside of Chinese investors
Im getting parents whose kids are going to college here for four
years.
Last Ponzi Scheme to Go BustCampbell said he believes the
international influence could possibly push up California prices
another 50 percent in the short term, but he cautioned that the
forces driving that international influx are bigger economic
dominoes that could eventually result in another U.S. housing
crash.
Were probably going to be the last Ponzi scheme to go bust, he
said of the U.S. real estate market. These are dangerous economic
times right now if I had to guess
Continued Next Page
Mark HughesChief Operating Officer First Team Real Estate
Irvine, California
A growing number of (investors) feel that after riding the wave
up on the rebound, now is the time to divest and reallocate.
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5June 2015
where the economy is going I would guess that things are going
to start going to hell late this year. Were seeing the early signs
of that in Greece everyone knows that but everyone is trying to
keep them alive.
While international investors and other cash buyers driving up
prices wont likely result in another foreclosure crisis like that
spawned by the last housing crash, the cash-buyer spigot can
quickly shut down once perceptions of the market change, according
to Jason Medley, a Tampa-based investor who also runs a mastermind
of high-powered investors from across the country called The
Collective Genius.
Whats driving this market is not crappy loans, its cash, he
said, noting that a sharp drop in the stock market could foreshadow
a drop in the real estate market. (Cash buyers) basic housing need
is not being filled. Its discretionary. They can shut off those
purchases in an instant.
Such a shutoff in cash purchases could
result in a price drop, but it likely wont result in another
bloodbath, according to Medley, who said hes starting to prepare
for the next housing downturn nevertheless.
Ive actually just started to stock cash, he said. Im 43 years
old. The first time the crash happened I was a victim. The next
time it happens I want to play ball.
Campbell noted that the timing of the downturn when it comes
will vary from a few mnths to a year depending on the local
market.
All markets will turn at different times, he said. (But) no
cities have gone against the major trend for too long.
Turning or Still Burning?Members of Medleys real estate
mastermind group provide him with on-the-ground intelligence that
some markets may be turning while others are still on fire.
Continued Next Page
Its better to hold off right now. Dont buy. Keep your cash in as
safe a place as you can, because the next
downturn is looming. I think its sooner rather
than later.
Robert M. CampbellInvestor, Author
San Diego, California
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6June 2015
In Houston, Medley said real estate investors who were willing
to pay $300,000 for a property four months ago are now only willing
to pay $260,000 even though sellers still think they can still get
the $300,000.
Thats because their mentality has not caught up with the market,
he said. That gap (between seller mentality and the market reality)
is a painful place for investor. Because I know the property is
worth 260, but if the sellers dont believe that I cant buy product,
I cant make money.
But the reality is the market is falling because of the impact
that the plummet in oil is having, he added.
Meanwhile, Medley said the Denver market is still going strong
in terms of appreciation, and investors are adjusting to that as
well.
A lot of my guys who were rehabbing in markets like Denver
Denver is just hot are transitioning from rehab to wholesaling, he
said, referring to an investor strategy where an investor acquires
properties and quickly typically within days or even hours resells
them to another investor who may not have the time to go out and
find the properties but is focusing on adding value through
rehab.
Investors may be shying away from the fix-and-flip strategy in
Denver because low inventory and high
demand often result in low profit margins, according to David
Powell, Managing Broker/Realtor for RE/MAX Alliance in Denver.
Investors arent shifting their strategies as much as deciding if
they want to buy homes as some perceive at the top of the market in
terms of pricing based on multiple offers and over-asking price
offers, he wrote in an email. Now the investor is having to pay
more upfront money initially for buying a home with the recent
increase in appreciation.
And according to Powell, that upward trend will continue at
least for the short term as builders continue to play catch-up with
low inventory.
I think appreciation will be accelerating in the next 12 months
based mostly on high demand, low inventory and investors still
active in our market, he wrote.
But even as home price appreciation continues to accelerate in
some markets, Medley urges investors to start applying the
brakes.
I think were getting to the point where everybody is getting
greedy, so I think Im going to be cautious. And it may cost me some
money, he said, Rapid appreciation fixes a lot of mistakes, but
when that appreciation stops, those mistakes hurt you.
Ginny Walker assisted with reporting for this article.
I think appreciation will be accelerating in the next 12 months
based
mostly on high demand, low inventory and
investors still active in our market.
David PowellManaging Broker/Realtor
RE/MAX AllianceDenver, Colorado
Im 43 years old. The first time the crash happened I was a
victim. The next
time it happens I want to play ball.
Jason MedleyFounder, Collective Genius
Investor MastermindTampa, Florida
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7June 2015
MY TAKE By Dr. David M. Blitzer Managing Director & Chairman
of the S&P Dow Jones Indices
The U.S. is witnessing a shift from single family homes to
apartments and condominiums. This is most obvious in new
construction where the share of housing starts that are
multi-family rose from 19.8 percent during 2000 to 2004 to 35.2
percent in the 15 months through March, 2015. Home ownership peaked
in 2004 and
has slipped since then, indicating both a move from owning to
renting and also a move from single to multi-family housing.
However, there are relatively few analyses of the housing boom,
bust and recovery that focus on condominiums. The
S&P/Case-Shiller Home Prices Indices cover condominiums in five
major U.S.
cities: Los Angeles, San Francisco, Chicago, Boston and New
York. This article uses these price indices, along with the
corresponding single family home S&P/Case-Shiller Price Indices
to compare the condo and single family patterns during and after
the financial crisis.
Both the single family and the condominium S&P/Case-Shiller
Indices cover entire metropolitan areas, not just the center city
downtowns. New York City is one of a handful of internationally
recognized cities attracting wealthy home owners globally. A weekly
column in The New York Times real estate section reports the most
expensive sale of the week; prices less than eight figures are rare
and a few approach nine figures. Because the S&P/Case-Shiller
Indices are repeat sales indices rather than averages or
medians,
Condominium Price Trends
0
50
100
150
200
250
300
350
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Condominium and Single Family Home Price Indices
Los Angeles San Francisco
Chicago Boston
New York LA-Home
SF-Home Ch-Home
Bos-Home NY-Home
Continued Next Page
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8June 2015
these extreme values do not skew the data.
Condo prices after the financial crisis recovered more ground
than single family homes. Three of the five cities San Francisco,
Boston and New York have set new all-time price peaks for condos
since the crisis. Among the 20 S&P/Case-Shiller cities tracking
single family home prices, only two cities, Denver and Dallas, set
new highs since the crisis. Condos in dense urban cities such as
New York, Boston and San Francisco are staging strong
recoveries.
Figure 1 (below) shows the year-over-year percentage change in
condo prices from January 1996 to February 2015 for the five
cities. The experiences vary from city to city and the data
highlight the way different cities reacted to economic events. The
technology boom of the late 1990s and the collapse of many tech
start-ups and the stock market in 2000 to 2002 are clearly seen in
the San Francisco data. The growth of condo prices made a double
peak in June 2000 and January 2001 and then reversed to bottom in
February 2002 when
prices were falling at a then-surprising 10 percent pace. That
rate of decline would seem mild a few years later. Although the
tech bust was as much a Wall Street event as a Silicon Valley
phenomenon, New York condo prices largely ignored changing tech
fortunes.
In the Big Apple, condo prices saw solid gains through the
entire technology boom and bust and then accelerated as the economy
recovered from the brief 2001 recession and the financial services
sector advanced in 2004 to 2006. Condo price gains peaked in March
2005 with a 20 percent year-over-year gain.
The hot performing condo market before the financial crisis
period was Los Angeles where prices gained 35 percent in the 12
months ended with August 2004. Los Angeles has a diversified
economy and tourism is a leading part of the economic base. These
factors point to a strong response to gains in the U.S. economy in
2002 to 2004. Moreover, the rate of population growth in the Los
Angeles area rose from 1995 to about 2003, adding to demand for
housing. However, there is no
-30%
-20%
-10%
0%
10%
20%
30%
40%Condo Prices
Year-over-Year Percentage Change
Los Angeles San Francisco
Chicago Boston
New York
Source: S&P/Case-Shiller Home Price Indices. Monthly data
1995-February 2014
Continued Next Page
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9June 2015
major development easily identified in Los Angeles like the tech
boom-bust in San Francisco. Chicago and Boston saw condo price
trends follow the other cities but without as sharp a pattern or
peaks and troughs.
The performance in the run-up to the financial crisis in condos
is similar to single family homes. The five condo series reached
peak levels October 2005 and September 2007, roughly the same time
period seen for single family homes. The condo peak index levels
are similar to the single family home peaks; there is no clear
pattern that peaks were higher, or lower, for homes or condo. Like
single family homes, condo prices collapsed in the financial
crisis. The bottom for condos was in February 2012 for four of the
cities and in March 2012 for Chicago. The peak to trough declines
in Los Angeles and Chicago were very close to those seen in single
family homes; in the other cities condos experiences slightly
smaller peak to trough declines. (See table below)
The table shows the maximum and minimum year-over-year
percentage price changes for the condo price series and for the
single family home series for the corresponding cities. Looking
over the five cities discussed here, the price patterns among
condos and single family homes are generally similar with some
hints that condo prices may be slightly less volatile. The data do
not support ideas that ownership in condos follows different
patterns or is more transitive.
While the shift in consumer preferences for condos versus single
family homes seen in the housing starts data may be a change in
peoples housing preferences or housing affordability, it does not
appear to be changing the patterns of price movement. Moreover, the
shift to condominiums isnt likely to make homes prices more or less
volatile than in the past. It certainly wont reduce the risk of
another housing boombust cycle in the future.
David M. Blitzer is Managing Director & Chairman of the
Index Committee for S&P Dow Jones, Indices, LLC (S&PDJI), a
part of McGraw Hill Financial. The opinions and analysis discussed
within are those of David Blitzer, are impersonal and are not
tailored to the needs of any person, entity or group of persons and
may not necessarily reflect the opinion of S&PDJI or any of its
affiliates. This report is being provided for informational
purposes only and should not be considered as a solicitation to
buy, sell or hold any security. Neither SPDJI, any of its
affiliates or David Blitzer guarantee the accuracy, completeness,
timeliness or availability of any of the content provided herein,
and none of these parties are responsible for any errors or
omissions, regardless of the cause, for the results obtained from
the use of the content. All content is provided on an as is basis,
and all parties disclaim any express or implied warranties
associated with this information.
Peaks, Troughs and Maximum and Minimum Price Changes Los Angeles
San Francisco Chicago Boston New York Condominium Series Index
Levels
Peak 287.12 201.84 160.98 183.68 229.64 Peak Date Jul-06 Oct-05
Sep-07 Oct-05 Sep-06
Trough 165.61 123.43 97.28 151.28 191.17
Trough Date Feb-12 Feb-12 Mar-12 Feb-12 Feb-12 Price Change
Maximum 35.9% 33.8% 18.5% 21.1% 21.0% Minimum -23.6% -27.5%
-15.7% -7.1% -12.1%
Single Family Home Series Index Levels
Peak 273.94 218.37 168.60 182.45 215.83 Peak Date Sep-06 May-06
Sep-06 Sep-05 Jun-06
Trough 159.18 117.71 102.75 145.83 157.40
Trough Date May-09 Mar-09 Mar-12 Mar-09 Mar-12 Price Change
Maximum 33.3% 29.8% 11.6% 18.4% 17.5% Minimum -27.9% -32.3%
-18.7% -8.0% -12.3%
Source: S&P/Case-Shiller Home Price Indices. Peaks values
are pre-Financial Crisis.
THE LATEST INDUSTRY NEWS AND TRENDS
www.RealtyTrac.com/Content
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10
June 2015
House Limits Disparate Impact in Housing The U.S. House of
Representatives passed a measure on June 3 that would bar the
Department of Justice from using federal funds to apply a
controversial legal theory on discrimination in housing
litigation.
The amendment introduced by Rep. Scott Garrett, R-N.J. passed by
a 232-196 vote. It is part of H.R. 2578, the Fiscal Year 2016
Commerce, Justice, and Science Appropriations Act. The amendment
would bar the Department of Justice from using funds for litigation
in which they seek to apply disparate impact theory.
In recent years, the Department of Justice has pursued and
obtained large legal settlements from lenders, landlords and
insurers in discrimination lawsuits using the disputed legal theory
of disparate impact. Disparate impact liability allows the
government to allege discrimination on the basis of race or other
factors based solely on statistical analyses that find
disproportionate results among different groups of people,
regardless of evidence of actual discriminatory actions or
intent.
Later this summer, the Supreme Court will decide whether the
disparate impact standard will remain available to those
complaining of housing discrimination under the Fair Housing
Act.
Even if Garretts measure makes it through the U.S. Senate, it is
likely to face opposition from the White House.
SOURCE: Rep. Scott Garrett, R-N.J.
Many Americans Have No Retirement Savings Nearly a third of
working Americans have no retirement savings or pensions, according
to a Federal Reserve 2014 survey.
Thirty-one percent of non-retirees have no retirement savings or
pension, including nearly a quarter of those older than 45, the Fed
said.
The Federal Reserves Report on the Economic Well-Being of U.S.
Households in 2014 found that 38 percent of respondents have either
no intention to retire or plan to keep working for as long as
possible.
A survey of 5,800 adults, conducted in October and November of
2014, also found that the lower the income, the more likely people
are to keep working: 55 percent of those making below $40,000 a
year plan to work as long as possible.
Sixty-five percent of respondents viewed their families to be
either doing okay or living comfortably financially, a 3 percentage
points increase from the 2013 survey.
SOURCE: Federal Reserve
Standard Pacific and Ryland Merge Two California homebuilders
Standard Pacific Corp. and Ryland Group Inc. announced on June 14 a
$5.2 billion merger of equals to create the nations fourth largest
new home builder with operations in 17 states.
The companies, which sold a combined 12,600 houses last year,
own or control 74,000 home sites. The combined company plans to
operate under one brand and will announce the new name before the
deal closes in the early fall.
Combining two industry leaders with nearly 100 years of
homebuilding experience between them puts us in a strong position
to benefit from the continued housing market recovery, Scott
Stowell, president and chief executive of Standard Pacific said in
a news release. With this merger we gain both geographic and
product diversification, expanding our reach and enhancing our
growth prospects in the entry level, move-up and luxury market
segments.
Ryland, based in Westlake Village, builds mostly lower priced
homes in states such as California, Georgia, Pennsylvania, New
Jersey and Texas. Irvine-based Standard Pacific builds mainly
upscale homes in California, the Carolinas, Florida and Texas.
SOURCE: Standard Pacific Corp.
NEWS BRIEFS
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11
June 2015
Supreme Court Protects Junior LiensThe U.S. Supreme Court ruled
unanimously on June 1 that bankruptcy courts cannot void a second
mortgage because it exceeds the value of the home.
In a pair of cases Bank of America v. Caulkett and Bank of
America v. Toledo-Cardona the Supreme Court reversed a lower court
ruling in favor of two homeowners, David Caulkett and Edelmiro
Toledo-Cardona, in Florida, where many homeowners have struggled to
pay their mortgages following the recent housing crisis.
Caulkett and Toledo-Cardona had won their appeals cases in the
11th U.S. Circuit Court of Appeals, claiming that homeowners in
Chapter 7 bankruptcy can void a junior mortgage lien when the debt
owed to the holder of the first mortgage is more than the propertys
current value.
In reversing the 11th Circuits earlier decision, the Court found
that declaring bankruptcy does not void second mortgages. The Court
ruled 9-0 that bankruptcy could not allow homeowners with first
underwater mortgages to simply invalidate second mortgages taken on
the same homes.
SOURCE: U.S. Supreme Court
Quicken Wins First Round Against DOJ, HUDA Washington, D.C.
federal judge ruled a False Claims Act accusing Quicken Loans of
improperly underwriting mortgages will be heard first in the U.S.
District court in Detroit.
Quicken Loans secured the first victory in its battle against
the U.S. Department of Justice and Department of Housing and Urban
Development when Washington, D.C. District Judge Reggie B. Walton
delayed further action in the governments case against Quicken,
arguing he first wants to see how U.S. District Judge Mark
Goldsmith rules on a motion in Quickens case in Detroit, which was
filed first.
On April 23, the federal government sued Quicken in Washington,
D.C., alleging the lender knowingly submitted false claims for
hundreds of improperly underwritten Federal Housing
Administration-insured loans.
Days before the federal government filed those charges in the
nations capital, Quicken sued the federal government
in Detroit on April 17, claiming that the DOJ and HUD were
trying to force the nations second-largest lender into a costly
settlement.
Judge Walton said he consulted with his counterpart in the
related case, U.S. District Judge Goldsmith of the Eastern District
of Michigan, and stayed the D.C. suit until Judge Goldsmith ruled
on a pending dismissal motion.
The full complaint from Quicken against the Justice Department
is Quicken Loans Inc. v. United States.
SOURCE: Detroit Free Press
San Francisco D.A. Sues LandlordSan Francisco has filed a
lawsuit against a property owner, claiming she has been harassing
and intimidating her rent-controlled tenants to force them from
their apartments.
The lawsuit filed June 4 came as rents in the city have climbed
past $3,000 a month for one-bedroom apartments and $5,000 a month
for two bedrooms in some areas.
San Francisco City Attorney Dennis Herrera said property owner
Anne Kihagi used strong arm and unlawful tactics to force
rent-controlled tenants out so she could raise rents on her
rentals.
Anne Kihagi is among the most abusive and lawless landlords Ive
encountered in my tenure as City Attorney and Ive gone after a lot
of lawlessness by landlords, Herrera said in a statement. It takes
breathtaking cruelty to so aggressively bully and displace even
elderly and disabled tenants from their rent-controlled homes,
especially in the midst of our severe housing crisis.
Kihagi and her associates own at least nine multi-unit
residential properties in the city and have more than 50
rent-controlled apartments, according to the city attorneys
office.
The case is: City and County of San Francisco and People of the
State of California v. Anne Kihagi et al.
SOURCE: San Francisco City Attorney
LEGAL BRIEFS
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12
June 2015
Mortgages: Down Payments DropIn the first quarter of 2015,
homebuyers on average put down 14.8 percent of their homes purchase
price compared to 15.2 percent in the fourth quarter of 2014 and
15.5 percent a year earlier, according to RealtyTrac. This was the
lowest average percentage for a down payment since the first
quarter of 2012. The average dollar amount put down was $57,710
compared to $57,618 in the previous quarter and a slightly higher
57,992 in the first quarter of 2014. RealtyTrac pointed to several
trends through the quarter. First, FHA loans represented a larger
share in each month of the quarter, rising from 21 percent in
January to 25 percent in March. Second, while overall low down
payment loans increased as a share of originations through the
quarter the low down payment share of conventional loans moved in
the opposite direction, from 11 percent in January and February to
10 percent in March while the share of FHA loans that were low down
payment loans increased throughout the quarter, from 83 percent in
both January and February to 84 percent in March.
Homeownership: Keeps DecliningNew renters will outpace new
homeowners in the next decade and a half and the homeownership rate
will decline even though there will be more homeowners than
renters, thus creating intense competition for rental housing,
according to a new study by the Urban Institute. Overall, from 2010
to 2030, UI estimates there will be 4 million more renters than
homeowners while the homeownership rate falls from 65.1
percent down to 61.3 percent during that 20-year period. In that
time, 22 million new households will need homes to rent or buy; UI
estimates that 13 million of those will rent while 9 million will
buy. Additionally, between 2010 and 2030, the number of senior
households will expand dramatically and new homeowners will be
disproportionately minority, especially Hispanic.
Survey: Housing Crisis Isnt OverA majority of Americans believe
the country is still in the midst of the housing crisis, according
to a new study from the MacArthur Foundation. According to the
survey, three in five Americans (61 percent) believe the country is
either still in the middle of the housing crisis (41 percent) or
believe the worst is yet to come (20 percent). The surveys results
are based on 1,401 interviews conducted by Hart Research Associates
on behalf of the MacArthur Foundation between April 27 and May 5.
According to the survey, more than half of the population (55
percent) said they had to make at least one sacrifice or tradeoff
in the past three years in order to cover their rent or mortgage.
Additionally, one in five (21 percent) reports having to get an
additional job or work more, 17 percent stopped saving for
retirement, 14 percent accumulated credit card debt, and 12 percent
cut back on healthy nutritious foods.
Report: Home Prices Will Fall in 2017Home prices are on the rise
across the U.S., but in a few years, the U.S. will witness a modest
decline in house prices, according to a new report from one of
Americas biggest mortgage lenders. Bank of America analyst Chris
Flanagan wrote that the prices will start to dip in 2017 and will
continue on that trajectory until the end of the decade. He
acknowledges that his outlook flies in the face of popular opinion
but he cites continued low wage growth against increasing house
prices for his reasoning. Bloomberg reported that Flanagan expects
prices to rise by 3.7 percent this year, then 0.8 percent in 2016
before reversing with a 1.7 percent decline in 2017, 2.1 percent in
2018 and 0.8 per cent in 2019. Flanagan, who in 2007 offered
prescient warnings over the very bleak conditions in the subprime
mortgage market, said that the downward path of prices would
depress housing activity, the economy, and interest rates.
FINANCIAL BRIEFS
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13
June 2015
By Octavio Nuiry, Managing Editor
Detroit Comeback? Investors Drive Motor City Real Estate
Revival
Rebirth, like decay, comes in many forms.
For Detroit, despite bankruptcy and a declining population, some
parts of the citys real estate market are bouncing back, as
pioneering real estate investors remake the Motor City. Progress is
slow, with false starts and setbacks, but there is hope that over
time that this once great city will reclaim some of its former
glory.
Nowhere is this urban revival more apparent than in downtown and
Midtown Detroit.
Opportunity DetroitThanks to a small group of investors,
downtown Detroit is experiencing a renaissance unlike anything it
has seen in decades. And real estate mogul Dan Gilbert, the owner
of Quicken Loans and the N.B.A.s Cleveland Cavaliers, is leading
the charge of Rust Belt fronteir optimism.
Gilbert, a billionaire and downtowns most prominent real estate
investor, has been snapping up shuttered skyscrapers and downtown
office buildings for the past four years. In 2011, Gilbert founded
Bedrock
Continued Next Page
STATE SPOTLIGHT
GILBERTVILLE: Dan Gilbert plans to breath new life into Brush
Park near downtown Detroit, a historic neighborhood that has fallen
on tough times near Comerica Park (the open-air ballpark of the
Detroit Tigers) and the soon-to-be-built Detroit Red Wings hockey
arena. This is going to be a place that people want to live, said
Mayor Mike Duggan at a news conference unveiling plans for a $70
million planned development of Brush Park.
SOURCE: City of Detroit
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14
June 2015Real Estate Services, his newly formed real estate arm,
and it now owns or controls a constellation of 70 properties mostly
high-rise skyscrapers in Detroit totaling over 11 million square
feet of space and worth $1.7 billion in the citys central business
district, according to Crains Detroit Business. Most of his
properties are clustered within Detroits 2.9 mile People Mover
elevated rail loop in the central business district along the citys
main drag, Woodward Avenue.
Gilberts genius is to see Detroit the most dilapidated, forlorn
urban environment in North America not as a hindrance but rather as
a unique opportunity to build the kind of place that Millennial
workers crave: authentic, inspiring, edgy and cheap, wrote Forbes
staff writer Joann Muller, referring to No. 117 on Forbes list of
the worlds richest people, who is worth $4.1 billion.
Where most see ruins, Gilbert sees opportunity.
Gilbertville: New Brush Park HousingIn May, Detroit Mayor Mike
Duggan and Gilberts real estate arm unveiled a $70 million planned
development to build 337 residential units and retail space in
Detroits historic Brush Park neighborhood, a sparsely populated
area northeast of downtown that thrived in the 19th century but has
fallen on rough
times recently. Currently, the Brush Park neighborhood is a
beleaguered mixture of blighted 19th century red brick mansions,
vacant homes, empty lots and pockets of occupied residences. The
neighborhood sits in the shadows of downtown Detroits Art Deco
skyscrapers, built largely in the 1920s during the citys golden
age.
Gilbert is partnering with the City of Detroit to revamp 8.4
acres of the Brush Park neighborhood, considered one of Detroits
oldest neighborhoods and bound by Mack on the north, Beaubien on
the east, the I-75 freeway on the south and Woodward Avenue on the
west. Bedrock is amassing a real estate empire anchored along
Woodward Avenue, which is experiencing a phenomenal rebirth of
mixed-use residential and commercial development.
Additionally, a new $180 million light rail system the M-1 Rail
line is being built along Woodward Avenue, the main axis of
Detroits planned redevelopment. It stretches 3.3 miles from the
Detroit River to 8 Mile Road.
Nicole Curtis, the Lake Orion native and host of Rehab Addict on
the HGTV cable network, is slated to rehab one of four Brush Park
mansions. The red brick Ransom Gillis House is a two-story mansion
that built in 1876
Continued Next Page
Nicole Curtis Realtor, Rehabber, Host
Rehab Addict
We have been staring down Brush Park for
a long time. I think we finally found a way
to make the numbers work. We hope to get it started this
summer.
RANSOM GILLIS HOUSE: Built in 1876, the Ran-som Gillis house in
Brush Park.
SOURCE: HistoricDetroit.org
REHABBERS DELIGHT: Nicole Curtis of the HGTV show Rehab Addict
announced that she would spruce up the Gillis House.
SOURCE: HistoricDetroit.org
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15
June 2015for Ransom Gillis, a dry goods merchant. It was
designed by architect Henry T. Brush and his assistant George D.
Mason, according to HistoricDetroit.org. The home is near the
Detroit Tigers open-air ballpark Comerica Park and the
soon-to-be-built Detroit Red Wings hockey arena.
We have been staring down Brush Park for a long time, said
Curtis in a WXYZ interview . I think we finally found a way to make
the numbers work. We hope to get it started this summer.
Slowly, after a half century of decline, Gilbert and a team of
entrepreneurs are celebrating something the city hasnt embraced in
a long time: entrepreneurship. The planned fulcrum of Gilberts
Detroit comeback is his Detroit 2.0 initiative to rebrand the city
as a Midwestern hub of tech-savvy entrepreneurs clustered in
downtown Detroit.
Outside of downtown Detroit, micro-moguls like Albert Hakim,
broker/owner of City Management Group in Detroit, are rebuilding
Detroits sprawling suburban housing market one transaction at a
time.
Hakim runs one of Michigans busiest real estate brokerages and
property management firms. Although Detroit still faces many
infrastructure problems, including a lack of police and
firefighters, Hakim said Detroits residential real estate was
improving, with prices rising, inventory tight and investor
activity surging.
Do I see Detroit coming back, asks Hakim. Yes. But its not going
to be what it was?
The residential market will slowly stabilize at the $60,000 to
$80,000 price range.
Hakim said Detroits residential real estate market is changing.
He said locals
Eighty-five percent of our business comes from overseas or
out-of-town
investors. The buyers come from everywhere: Ireland, Austria,
Dubai, Kuwait, England, China,
India and Singapore. You name it.
Albert HakimBroker/Owner
City Management Group Detroit, Michigan
Own this two-story Detroit home for only $325. Located in
northeast De-troit, this 1,456 square foot brick home has three
bedrooms and 2 bathrooms. Agent: Albert Hakim, City Management
Group, Inc. (313) 886-8888,
http://www.alwayssold.com/about_me.asp
WHAT: 3-bedroom homeHOW MUCH: $325
Live in one unit and rent out the other. This multifamily brick
home has two be-dooms and one bath in each unit. Agent: Albert
Hakim, City Management Group, Inc. (313) 886-8888,
http://www.always-sold.com/about_me.asp
WHAT: 4-bedroom MulitfamilyHOW MUCH: $21,600
This two-story colonial brick home in De-troit has six bedrooms,
two bathrooms, a dinning room, a breakfast nook, a li-brary, a
basement and a two car garage. Agent: Albert Hakim, City Management
Group, Inc. (313) 886-8888,
http://www.alwayssold.com/about_me.asp
WHAT: 6-bedroom homeHOW MUCH: $60,000
Detroit, Michigan
THREE FOR SALE Continued Next Page
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16
June 2015
are starting to get more active in the market. Our property
management business is getting huge, said Hakim, who manages a
growing portfolio of rental properties for international clients,
investors, Fannie Mae, local banks and hedge funds. We went from
managing 15 properties last year to over 600 today. Eighty-five
percent of our business comes from overseas or out-of-town
investors. The buyers come from everywhere: Ireland, Austria,
Dubai, Kuwait, England, China, India and Singapore. You name
it.
Not only does Hakims firm manage hundreds of investor rentals,
but his 12 agents are actively marketing 380 Detroit listings.
Im selling about 25 to 40 properties a month, said Hakim, who
closes over 250 transactions a year.
While Hakim said its still possible to buy a house for $1.00,
its nearly impossible to get a loan in Detroit. The biggest factor
why Detroits real estate is not improving is that banks wont lend
in Detroit, said Hakim, a 15-year veteran broker.
Rehabbers: Building Blocks of RebirthRehabbing is on the uptick
in metro Detroit. In the first four months of 2015, 532 homes were
rehabbed and flipped in Detroit, Warren and Livonia, according to
RealtyTrac. Although flipping in Detroit is down 19 percent from a
year ago, its up 13 percent from the previous quarter. The average
purchase price was just over $117,530. But the flip price was
$185,996.
Hakim said theres no shortage of properties for rehabbers. The
city has a staggering 85,600 blighted properties and vacant lots,
and half should be demolished, at a cost of $2 billion,
Continued Next Page
Darren JohnsonBroker/Owner
Johnson Premier RealtyWest Bloomfield, Miichigan
Our market is being dictated on what Wall Street hedge funds do.
Wall Street controls our
real estate market. I dont know if its good or bad.
But they play a major role.
This newly constructed West Bloomfield home has five bedroom and
six and half bathrooms. The home is 70 percent complete. The 7,167
suare foot luxury home ioverlooks a private pond. Agent: Darren
Johnson, Johnson Premier Re-alty Co., (313) 506-8861,
www.johnson-premierrealty.com
WHAT: 5-bedroom homeHOW MUCH: $699,000
With approximately 4,000 square feet of living space, this four
bedroom, four bathroom home is located Bloomfield Hills. This
unfinished newly constructed luxury home is waiting to be
customized. Agent: Darren Johnson, Johnson Premier Realty Co.,
(313) 506-8861, www.john-sonpremierrealty.com
WHAT: 4-bedroom houseHOW MUCH: $599,000
Located in the Rosedale Park neigh-borhood, this nearly 1,585
square foot home features three bedrooms and one and half
bathrooms. This two-story brick home has an open floor plan and a
custom kitchen. Agent: Darren Johnson, Johnson Premier Realty Co.,
(313) 506-8861, www.johnsonpremierrealty.com
WHAT: 3-bedroom homeHOW MUCH: $90,000
THREE FOR SALE Detroit, Michigan
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17
June 2015
according to the Detroit Blight Removal Task Force. Indeed, the
precipitous depopulation had left huge swaths of the citys 139
square miles poised on the cusp of returning to nature. It also has
the highest property tax rates in Michigan, but half the Detroits
property owners dont pay taxes, according to The Detroit News.
Every day, the Detroit Land Bank auctions off three properties,
said Hakim, referring to the citys online auction. Bidding starts
at $1,000 and goes up by increments of $100. This week, a guy bid a
home up to $20,100. A second sold for $19,000 and a third property
went for $16,000.
Detroit has tens of thousands of abandoned homes. There are so
many vacant properties the city owns one-quarter of all properties
that the city has three land banks: the Detroit Land Bank Authority
(DLBA), the Michigan Land Bank Fast Track Authority (MLBA) and the
Wayne County Land Bank Corporation (WCLBC). Tax Foreclosure Deluge
Foreclosures are still a problem in Detroit. This year, 16 percent
of all Detroit property owners are not paying real estate taxes,
and 62,000 properties are headed to the Wayne County tax
foreclosure auction, according to Loveland Technologies., a Detroit
consultancy that maps land ownership in cities. More than half will
wind up at a Wayne County foreclosure auction this fall, where they
will be auctioned off at $500 each to the
highest bidder. About half dont sell and revert back to the city
of Detroit. The city of Detroit owns 97,000 properties; these are
properties that didnt sell at the Wayne County auction.
This is both a massive problem and a massive opportunity, said
Alex Alsup, chief product officer at Loveland Technologies. Theres
two ways of looking at this: Detroit cannot recover as long as tax
foreclosures continue in its current form; this is the existential
threat to the city. The revival of 7.2 square miles around downtown
is very impressive, but its not going to sustain 132 square miles
that are empty. It cant.
Alsup said that in Detroit alone, 75,000 properties owing $326
million in delinquent taxes, interest and fees are set to be
foreclosed. Some 25,000 Wayne County property owners have paid
their back taxes. Another 25,000 delinquent homeowners have worked
out some sort of payment plan. And 25,000 are headed for the tax
foreclosure auction this fall.
Every fall, the Wayne County treasurers office auctions off
tax-delinquent properties. This fall, 31,000 properties face a tax
foreclosure by the Wayne County treasurers office, according to the
Detroit Free Press. If no one bids, the Detroit Land Bank takes
possession of the homes, demolishes the rundown ones and auctions
off those that are salvageable to qualified bidders.
Continued Next Page
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18
June 2015Its a devastating problem, said Alsup, referring to the
tax foreclosure deluge.
Antoine Benjamin, broker/owner of Benjigates Estates, LLC in
Detroit, is one to the top buyers at the Wayne County tax auction
properties. He and his two partners Eugene Broadway and Keith
Hudson buy hundreds of Wayne County auction properties each year,
many for the minimum bid price of $500. Last year, they purchased
over 200 properties at the Wayne County auction.
Benjigates then fixes up the properties, sells them to investors
or rents the properties to the former owners or renters.
The Triple WinSince 2008, weve helped over 700 people to become
homeowners, said Benjamin. Its a triple win: Its a win for the
person moving into the property. Its a win for the investor. And
its a win for
the city itself.
Benjamin said Detroit has some of the nations highest property
tax burdens. He also worried that too much emphasis was being
placed on the redevelopment of downtown Detroit at the expense of
the surrounding neighborhoods.
Im bullish on Detroit, said Benjamin. Weve got great leadership
in the new mayor. But we need some additional help in the
neighborhoods surrounding downtown. We need to put some attention
on the less prominent parts of town. I commend them for what they
are doing downtown. But we cannot forget about the neighborhoods.
Weve got to make this where everybody has a shot to be
successful.
Why Cities Decline Downtown Detroit once buzzed with activity,
but the city went from being one of Americas most prosperous cities
to one of the most distressed.
Detroit, Michigan
Antoine BenjaminCEO/Broker/Owner
Benjigates Estates, LLC Detroit, Michigan
Im bullish on Detroit. Weve got great
leadership in the new mayor. But we need
some additional help in the neighborhoods
surrounding downtown. Weve got to make this where everybody has
a shot to be successful.
Priced to sell, this north Detroit invest-ment property has two
bedrooms and one bath. Agent: Antoine Benjamin, Benjigates Estates,
LLC, (313) 915-8780, http://www.bgedetroit.com/
WHAT: 2-bedroom homeHOW MUCH: $25,000
THREE FOR SALE Continued Next Page
This 1,049 square foot red brick home has four bedrooms and
three bath-rooms. Agent: Antoine Benjamin, Ben-jigates Estates,
LLC, (313) 915-8780, http://www.bgedetroit.com/
WHAT: 4-bedroom homeHOW MUCH: $45,000
Located in west Detroit this single-story red brick Ranch home
has three bed-rooms and one bathroom. Agent: An-toine Benjamin,
Benjigates Estates, LLC, (313) 915-8780,
http://www.bgedetroit.com/
WHAT: 3-bedroom homeHOW MUCH: $35,000
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19
June 2015
Once a crowded urban center, Detroit has been hemorrhaging
population for five decades. Between 1950 and 2015, Detroit lost
half of its population. Detroits population has plummeted from a
high of nearly 2 million in 1950, when it was the 5th largest city
in the country, to an estimated 688,700 people today and the 18th
largest city, according to the Census Bureau. Two trends
suburbanization and deindustrialization accelerated the staggering
depopulation of Detroit. Today, one-third of its population lives
in poverty. Detroits median family income is $26,325, about half
the U.S. average.
Detroits downtown is compact, but the city is enormous,
encompassing 139 square miles, said Darren Johnson, broker/owner of
Johnson Premier Realty in West Bloomfield, Michigan. Like Benjamin,
he said more emphasis needs to be placed outside of downtown
Detroit.
In the suburban areas prices are going up, said Johnson, a
17-year real estate veteran and investor. But when you get into the
city of Detroit prices are still pretty low. In the city of
Detroit, there are pockets that are doing pretty good, including
historic neighborhoods like Rosedale Park, Sherwood Forest, Indian
Village and Palmer Woods. These are middle-class areas that are
well maintained.
Johnson said an inventory shortage has put a pinch on his
business. He added that well capitalized, out-of-state Wall Street
hedge funds have been buying up huge swaths of Detroit residential
real estate with cash.
Our market is being dictated on what Wall Street hedge funds do,
said Johnson, an REO broker who sells HUD and Fannie Mae-owned
properties. Wall Street controls our real estate market. I dont
know if its good or bad. But they play a major role. My cheese is
gone. The hedge funds ate my cheese.
Hedge funds, which invest billions of dollars on behalf of
wealthy individuals, pension plans and college endowments, are
circling the Detroit distressed market, buying large pools of HUD,
Fannie Mae-owned and bank properties, said Johnson.
One of the hedge funds active in Detroit is run by James C.
Paine, a partner at West Realty Advisors in San Diego, California.
Paines firm has bought, renovated and flipped hundreds of Detroit
properties. He said his firm buys large pools of 500 to 3,000
properties directly from the banks.
While the rest of the country isnt looking, a movement is
quietly underway to entirely reinvent Detroit, said. And that is
why we are investing in Motor City with everything weve got.
Paine said an upswing in completion in Detroit has forced him to
invest in other
markets, including Chicago.
Detroits recovery is starting now, said Paine, referring to the
exciting resurgence of Detroits downtown and the entrepreneurial
ecosystem flourishing there. That means it has miles to climb and
many junctures along the way for us to cash in our investment. For
those willing to buy and hold, the potential for returns is higher
than anywhere else in the United States. Make no mistake, the city
parks will be cleaned up, the fountains will be turned on, and
major corporations will put their names on the citys skyscrapers.
We want to see that city back on its feet and were confident that
it will be soon. There is still time to be an early adopter of
Detroit investment, but that window will close, its just a matter
of when.
Detroits decline is extreme, but its not unique. Many other
aging cities in the northeast and Midwest Baltimore, Buffalo,
Cleveland and Pittsburg, to name a few are similarly experiencing
depopulation and urban decline. Even New York City, which teetered
on
Continued Next Page
James C. PainePartner
West Realty Advisors San Diego, California
Detroits recovery is starting now. For those willing to buy and
hold, the potential for returns is higher than anywhere else in the
United States.
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20
June 2015
the brink of bankruptcy in the 1970s, rebounded and today
Manhattan is thriving.
Can Detroit Find the Road Forward?Andrew Hargreaves, a top
producing broker with Coldwell Banker Preferred in Plymouth, is
sold on Detroit.
Whats interesting about Detroit is that years ago everybody left
the city and went to the suburbs, said Hargreaves, who sold 290
properties last year. Now, Millennials are selling their suburban
homes and moving to downtown Detroit. Or, if theyre still living
with their parents, theyre flocking to the five or six micro
bubbles downtown that are hot right now like the University
District, Brush Park and Midtown. They want to be part of that
urban environment. People want to go there now.
For Mark Binelli, author of Detroit City Is the Place to Be, the
Motor City is a vast, enormous canvas where anything imaginable can
be accomplished.
Its a place so unspooled, ones wildest experiments, ideas that
would never be seriously considered in a functioning city, might
actually have
a shot here, wrote Binelli, referring to the dreamers who are
flocking to Detroit to rebuild something new from the crumbling,
semi-majestic ruins of a half-century of industrial, economic and
political decline. The ongoing catastrophes had, in a strange way,
bequeathed the place an unexpected asset, something few other
cities of its size possessed: a unique sense of possibilities.
No American city has fallen so far, so fast. But is Detroit a
modern-day hellacious, smoldering Pompeii or will Detroit re-invent
itself into a smaller, more nimble city?
Surely, Detroit will come back, Hakim, Binelli, Benjamin,
Hargreaves and other optimists argue. But it will take time. Like
all of Americas older cities, Detroit has unique problems and
unique promise. Detroit is a city both desperate and hopeful.
Im a huge believer in Detroit, said Hargreaves. The early
adapters are going to take it all the way to the bank.
It will come back.
Andrew HargreavesBroker
Coldwell Banker Preferred Plymouth, Michigan
Millennials are selling their suburban homes
and moving to downtown Detroit. Or, if theyre still living with
their parents,
theyre flocking to the five or six micro bubbles downtown that
are hot
right now like the University District, Brush
Park and Midtown.
THE LATEST INDUSTRY NEWS AND
TRENDSwww.RealtyTrac.com/Content
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21
June 2015BOOK REVIEW
Using Big Data To Track New Real Estate ClientsBy Octavio Nuiry,
Managing Editor
Increasingly, real estate agents are using big data to track
down clients. A recent Wall Street Journal article chronicled how
tech-savvy agents are reaching out to data companies to
electronically farm for new business opportunities. To target
prospective clients in competitive markets, tech-savvy agents are
buying data subscriptions and teaming up with firms that use
data-crunching
algorithms to identify likely home sellers and buyers.
Sophisticated data
collection is increasingly becoming crucial to the growth of new
business development in real estate brokerages. Today, data mining
is getting a 21st century makeover. Searching for life changing
events like a deceased homeowner, job changes, divorce, homeowners
with no mortgage, high-net worth homeowners, upside down borrowers
and others are clues of a potential impending sale.
To learn more about these fast-moving new techniques, agents and
brokerages need to be on the cutting edge of big data technology.
Enter Big Data Revolution: What Farmers, Doctors and Insurance
Agents Teach Us About Discovering Big Data Patterns, (Wiley), 272
pages, $19.99, a new book by Rob Thomas and Patrick McSharry.
In Big Data Revolution, authors Thomas and McSharry document the
ever-widening impact that big data is having across the business
world. The authors argue that companies who fail to adopt these
methods will be overtaken by more data-savvy competitors.
Data is the new intellectual property, they write in the
introduction. It can be harnessed for advantage or ignored at
peril. Organizations that do not manage to utilize their data
assets will eventually become extinct.
Thomas is vice president of product development in IBM Software
Group and McSharry is a senior research fellow at the Smith School
of Enterprise and the Environment at Oxford University. They
provide a detailed look at how data is transforming different
industries and distill these stories into an overview of the
methods used to derive insights from data.
Unfortunately, many have a vested interest in resisting the data
revolution due to their fears about the impact it will have on
their own professions, write Thomas and McSharry. It is likely that
such resistance will be futile and that those who actively embrace
the oncoming disruptive change will benefit most from the
opportunities offered.
Today, with the rise of big data, agents are finding new and
creative ways to track new business leads. And Big Data Revolution
reveals how businesses can harness this new marketing tool.
Scanning obituaries for leads and foreclosure auctions have long
been a tactic for agents looking for new business.
In the 20 chapters covered in Big Data, Thomas and McSharry
reveal that big data can be a powerful tool for creating effective
business solutions with innovative and efficient use of
technology.
Readers are guided through tried-and-true methodologies for
getting more out of data, and using it to the utmost advantage.
This book describes the major trends emerging in the field, the
pitfalls and triumphs being experienced, and the many
considerations surrounding big data.
Big Data Revolution
By Rob Thomas and Patrick McSharry
(Wiley, 272 pages, $19.99)
Rob Thomas
Continued Next Page
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22
June 2015
Thomas and McSharry argue that many business owners even doctors
and Realtors will become data scientists, collecting, processing
and analyzing data. They argue that in the new data era a new
paradigm shift will emerge where decisions are made not by
intuition and opinion but through data. Businesses will shift away
from opinion-based decision making to a future based on hardened
data analysis.
The book is organized into three sections: Part 1 illustrates
nine industries that are being transformed with data, including
farming, medicine, insurance, retailing, customer relations,
intelligent machines, government, corporate sustainability and
weather forecasting. The second part of the book chapters 10
through 12 outlines pattern recognition in big data. The authors
identify 54 specific big data patterns. Finally, the third part of
the book chapters 13 to 20 focuses on how to create a big data
revolution in your own organization.
The big data revolution today is not about the quantity of data
that is revolutionary. The big data revolution is that now we can
do something with the data, the authors argue.
The revolution lies in improved computational methods, not in
storage capacity, they explain. New ways of linking datasets have
played a large role in generating new insights. And creative
approaches to visualizing data have helped humans see patterns
that computers may miss, they claim.
The true competitive advantage will come from those that manage
to overcome the challenges of volume, velocity and variety the
three Vs of big data when harnessing big data
for decision-making, Thomas and McSharry conclude. Volume refers
to the fact that more data (SMS, emails, voice, video, social
media, etc.) is being created than can be stored and that
sophisticated computational techniques are required for processing
this vast quantity of data. Velocity is a challenge as we attempt
to cope with high-frequency data that require data-stream
algorithms to transform this flow of data into real-time decision
support to enable organization to respond immediately to threats
and opportunities. Variety is a key component for describing big
data and highlights the need to consider both structured and
unstructured sources of data, ranging from official business
and government statistics to satellite imaging to social media
channels such as Twitter and Facebook
Big Data Revolution is a fascinating, enthusiastic view of the
possibilities of vast amounts of big data and the entrepreneurs who
are taking advantage of the new information society.
THE LATEST INDUSTRY NEWS AND
TRENDSwww.RealtyTrac.com/Content
Patrick McSharry
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State Rank
State Default Auction REO Total 1/every X HU (rate)
% from April 2015
% from May 2014
U.S. Total 32,563 49,413 44,892 126,868 1,041 0.79 15.52
29 Alabama 0 792 514 1,306 1,668 -12.64 17.24
37 Alaska 42 58 37 137 2,238 -6.16 -2.84
20 Arizona 0 1,126 928 2,054 1,392 26.01 9.96
41 Arkansas 0 221 251 472 2,798 -15.26 20.72
15 California 5,090 3,593 3,341 12,024 1,142 -8.34 -5.18
25 Colorado 0 1,078 361 1,439 1,545 41.08 91.36
27 Connecticut 359 129 426 914 1,627 21.87 -48.59
11 Delaware 240 89 79 408 1,000 -21.39 -17.74
District of Columbia 0 13 10 23 12,971 -23.33 4.55
1 Florida 3,929 8,041 10,038 22,008 409 3.90 6.74
12 Georgia 0 1,797 2,199 3,996 1,025 -5.24 17.98
30 Hawaii 172 39 102 313 1,668 96.86 48.34
32 Idaho 160 136 101 397 1,688 -6.59 2.32
8 Illinois 2,055 2,966 1,892 6,913 765 -9.11 3.16
9 Indiana 868 1,205 835 2,908 963 -0.45 -14.47
16 Iowa 372 434 318 1,124 1,193 51.08 4.85
42 Kansas 76 241 124 441 2,802 -26.50 2.32
39 Kentucky 82 478 278 838 2,303 -1.41 10.70
43 Louisiana 248 60 333 641 3,080 -38.95 -38.78
35 Maine 196 112 78 386 1,870 42.96 -48.74
4 Maryland 1,605 1,433 1,458 4,496 531 11.90 17.42
36 Massachusetts 798 382 269 1,449 1,938 0.42 2.48
24 Michigan 0 1,324 1,612 2,936 1,543 -35.56 26.23
40 Minnesota 0 486 482 968 2,432 -24.38 -1.93
45 Mississippi 0 188 92 280 4,563 36.59 204.35
33 Missouri 0 813 761 1,574 1,724 -3.32 39.91
49 Montana 0 12 24 36 13,425 -43.75 89.47
38 Nebraska 155 76 120 351 2,280 -41.40 237.50
5 Nevada 684 536 775 1,995 590 -5.98 22.09
31 New Hampshire 0 200 166 366 1,681 14.38 4.27
2 New Jersey 4,125 1,835 1,418 7,378 483 23.03 69.14
6 New Mexico 675 214 353 1,242 726 249.86 163.14
23 New York 3,402 1,075 1,033 5,510 1,472 -2.46 16.22
13 North Carolina 1,703 1,104 1,416 4,223 1,030 14.82 93.54
50 North Dakota 2 2 5 9 36,079 -18.18 350.00
7 Ohio 1,419 2,289 3,008 6,716 763 11.04 5.51
18 Oklahoma 440 427 474 1,341 1,245 -35.75 78.32
22 Oregon 170 520 464 1,154 1,454 -15.52 0.79
14 Pennsylvania 1,297 1,873 1,833 5,003 1,112 -4.34 -9.95
26 Rhode Island 0 159 131 290 1,595 7.41 -9.94
10 South Carolina 1,119 590 462 2,171 987 -7.14 -13.40
47 South Dakota 0 23 25 48 7,619 92.00 23.08
3 Tennessee 0 4,590 1,227 5,817 485 33.36 658.41
34 Texas 2 2,844 2,706 5,552 1,814 7.60 44.10
21 Utah 234 255 202 691 1,431 -37.01 -9.91
46 Vermont 0 17 34 51 6,332 4.08 64.52
28 Virginia 0 1,520 546 2,066 1,637 14.52 31.34
17 Washington 48 1,431 874 2,353 1,232 -10.43 21.66
48 West Virginia 0 17 74 91 9,681 -8.08 -18.75
19 Wisconsin 796 522 589 1,907 1,377 -5.87 -19.67
44 Wyoming 0 48 14 62 4,243 -15.07 -21.52
May 2015 State-by-State Foreclosure Activity Summary
Rank Metro
Housing Units Per
Foreclosure Filing (Rate)
1 Miami, FL 347
2 Tampa, FL 357
3 Baltimore, MD 491
4 Philadelphia, PA 577
5 Chicago, IL 594
6 Riverside, CA 675
7 Atlanta, GA 853
8 New York, NY 945
9 Washington, DC 1,108
10 Seattle, WA 1,136
11 St. Louis, MO 1,139
12 San Diego, CA 1,281
13 Los Angeles, CA 1,310
14 Dallas, TX 1,330
15 Phoenix, AZ 1,396
16 Detroit, MI 1,403
17 Minneapolis, MN 1,764
18 San Francisco, CA 1,887
19 Houston, TX 1,909
20 Boston, MA 2,388
TOP 20 Foreclosure rates in the
Nations 20 largest metros in May 2015
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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
CONTACT USPhone: 800.306.9886
LETTERS TO THE EDITORE-mail:
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