Aloha, friends. I hope everyone enjoyed a safe and happy holiday season as we bounce into 2012. I’ll spare you all the recap everyone else is giving you of the 2011 calendar year, which is old news, and jump right into what I see happening in the next 12 months.
Flipping Houses Just Got Easier
If you didn’t notice, the FHA just extended its anti-flipping waiver. That means it doesn’t matter how long the current owner has held the property if a buyer is using FHA financing. Those 90-day seasoning periods are gone for at least another year, so house flipping investors with capital should step up the plate because you just increased your buyers pool and reduced your holding costs. With the economy of the last few years, not everyone is a Cash Buyer (if you are, then get on this list!). Marketing to FHA buyers not only helps people get a new home but should also help the banks plow through their backlog of REO inventory.
The Hawaii Foreclosure Moratorium Backfires
I’m not saying I want this to happen, but I fear the intended objectives may not be attainable. I still get calls from people in foreclosure asking about their options because they’re getting taken through the judicial foreclosure process. Keeping someone in a pay-option ARM mortgage isn’t always the best decision for anyone, especially the homeowner. I know it’s a process that needs to take its course, but I’m skeptical. I’m wary that people in trouble before will be put right back in a situation of not being able to make their monthly payments and need foreclosure help all over again. Another downside to this is that it will clog up the banks’ property pipeline, likely delaying a Hawaii housing market rebound.
Landlords Line Up
There’s been a lot of talk lately about the “Nation of Renters” that’s headed our way and I think there’s a lot of truth to that. Investors are getting creative again in how they purchase and sell properties, and this includes the Lease Option. It’s no secret that Hawaii has some of the highest housing prices in the nation. As such, many people who’d like to buy simply can’t do so the conventional way, but a lease option gives them a way to get their foot in the door. What does that mean? It means landlords and cash flow investors should reach out to this group of buyers who will take better care of their place because they see themselves as the future owner and will pay a rent premium for that right. Until the economy comes around, it’s a specialized yet profitable niche.
Investors Will Step Back From Stocks
Ok, this may not be housing related, per se, but there’s a correlation, of course, between real estate prices and the stock market. The S&P 500 reportedly finished right where it started twelve months ago. Let me repeat that another way — the market gave out DIDDLY SQUAT for the entire year. When you consider that most people are taught that stocks and bonds are the only way to grow your portfolio, it’s outright depressing. A year wasted.
My friends over at New Direction IRA just reported phenomenal growth for another consecutive year in their Self-Directed IRA business (SDIRA). These financial instruments allow people to invest in much, much more than the stock market. You can invest in gold, silver, startups, and, yes, real estate. Flip houses, earn cash flow or grow at 12% or more as a private lender for real estate investors — all inside your IRA. With the growth reported, I predict that more and more people will step out from behind the tightly-controlled veil of commodities brokers and embrace the freedom of a Self-Directed IRA. Education is empowering.
Need another reason to watch out for the market? The next country in Europe to go belly up or Arab country to get overthrown or natural disaster in who-knows-what corner of the globe affects your return on investment. Scary, isn’t it? I agree.
One Giant Leap for Mike…
I also predict that my wonderful girlfriend Nanae will move here in early April from San Diego and start a very successful career as a Honolulu piano teacher (here’s her current site in SD). Know any kids needing lessons? Let me know!
That’s all I have on this Wednesday afternoon before I head over to the FAMES Hawaii monthly event at Dave and Buster’s. Let’s all keep a watch out in this first month for some signs of where the new year is taking us.
I disagree. I’ve been a real estate attorney and investor for over thirty years. The moratorium did not backfire. It did exactly what it was supoosed to do. Impose a moratorium on non-judicial foreclosures. The real problem is too much misinformation from people (including attorneys) who never read the 120 page bill and are misinformed about how a judicial forecloseure works and how a chapter 13 bankruptcy plan may help anybody in foreclosure. Quite simply: anybody facing a judicial foreclosure should file a general denial and ask for a jury trial. If they have a counterclaim for violation of Reg Z they should file it and again ask for a jury trial. If they lose the judicial foreclosure they should then file Chapter 13 BK.
Thanks for your insight and contribution, Peter. I didn’t say the moratorium backfired — I just predicted that it may indeed happen. It’s still too early to tell and it may be some time before we can truly evaluate its impact. However, I do agree that there’s a lot of misinformation out there.
Filing Chapter 13 bankruptcy is certainly an option for some homeowners who want to restructure their debt while not losing their assets.