- Too many units in a building being rented and not owner occupied
- Too many units with delinquent HOA fees
- Inadequate HOA reserves
- Too many vacant units
- Pending Litigation
- Deferred maintenance or capital improvements needed
- Too high a percentage of the building being used for commercial purposes
The real estate market has been tough enough this year with the banks tightening up their credit guidelines for borrowers, owners not wanting to lower prices to market, and buyer wanting unrealistic foreclosure prices, but now things have gotten even tougher for us professionals. We now have to qualify not only our borrowers but the buildings that they are considering. Some of the potential deal killers for first time buyers seeking FHA, Fannie Mae or Freddie Mac approved bank loans are:
I am a complete realist when it comes to numbers. Numbers should always be taken with a grain of salt and you should always look at the potential agendas of the source. Given this I came across an article which I found somewhat disconcerting. It was called "Flawed housing data might mask depth of woes" by John W. Schoen.
In synopsis it stated that The National Association of Realtors (NAR) has been overstating the rate of sales of houses. This in turn has made the inventory numbers which is usually referred to as the monthly supply of houses suspect. Basically this number is the number of unsold houses divided by the pace of sales. When you have about 6 to 8 months of inventory, prices are typically stable. When you have under 6 months of inventory you have a tighter market and prices typically increase. When you have over 8 months of inventory you have a market where prices typically decrease due to the large supply of houses on the market.
Apparently the NAR has been stating that there was an annual sales rate of 4.88 million home and thus an 8.6 month supply. Meanwhile mortgage data and data from the private research firm CoreLogic which track closings in over 2000 counties came up with much lower annual sales. CoreLogic stated that for February the sales rate was 3.66 million homes on an annual basis which would mean that there is more like a 17 months supply of inventory.
How could such a discrepancy happen? Well it turns out the NAR only polls about 40% of its members and it used to benchmark its data with US Census data. In 2010 the US Census excluded some of these benchmarking questions from the census. Then the data is also suspect as with the collapse of the housing market there has been a consolidation of agencies. Thus some of the agencies may be experiencing higher sales not from purchasers buying more homes, but from more agents working for them.
In addition to all this I would also throw in that there is another factor the "off market" houses. There are a number of houses that are for sale but are not officially listed because they are over priced. The owners want to sell, but do not want to take the losses from their outstanding loans and home improvements they have put into the property.
Based on all of this you can expect to see national housing prices continue to decline at least in the immediate future. Note though each neighborhood and locality is different and should be evaluated accordingly.
I read an article recently about refinancing problems and came across this on the web. Basically people are having a wide variety of problems refinancing at the lower advertised rates for the following reasons:
1) Appraisals for their homes are coming in much lower than expected often times lower than the outstanding mortgage balances leaving no equity.
2) Sources of income are not being accepted by banks. The banks are not accepting many small business owner and self employed income reports. Also severance packages and some retirement income are not being counted as income.
3) Documentation and History. Banks want at least 2 to 3 years of financial information.
For those of you who don't know the America's Cup is Coming to SF. This is one of the largest yacht races in the world. With this race comes a lot of development and renovations to the waterfront area. This includes bleachers, tents, retail space, additional moorings, etc to accommodate between 100,000 to 500,000 spectators.
This is going to be an economic boon for the city of San Francisco, with more jobs, infrastructure development, and renovations. We here at GB And Associates are already seeing some of the impact as people working on the America's Cup projects and teams are already starting to look for places to purchase. There will also definitely be more people looking to rent the closer we get to the time of the America's Cup.
To get more information on some of the proposed plans see Socket Site which has a good summary. Also there is a good article on Team Ellison's Seawall Lot 330 here on SF Curbed and their condo development plans.
Greg Bryan is a realtor and an attorney in San Francisco
For Blog information on unique properties and values click here on SF Values and Property Highlights.