Rebound or Cycle?

February 19, 2012 by Michael Borger

Aloha. Once again, I continue to hear encouraging feedback from folks in the industry about a promising future and rebound for Hawaii real estate. Is this true? Of course, there’s no real answer and your opinion lies in the data available to you and how you use them.

On one hand, we have the continued ineffectiveness of governmental housing policies to encourage economic recovery. Hey, the easy judgment of that is that if everything was back on track, why would we keep needing new programs? If HAMP and the like aren’t serving their purpose, that means there’s still a need to solve the same problem, hence: no recovery.

The latest? Word that Hawaii’s own President Obama will be extending the 2007 Mortgage Forgiveness Debt Relief Act (which lets homeowners completing successful short sales write off their taxes from otherwise taxable deficiency waivers). The only reason to extend it beyond the current 2012 expiration date is that we’re not yet where we ought to be. I mean, that’s a quick two-cent judgment, but it kind of makes sense on the surface, right?? (By the way, I’m in favor of extending the policy as it encourages homeowners with over-leveraged mortgages to complete short sales and ideally put them back on a fiscally sound economic path and, therefore, aid overall economic health).

The other view is that we’ve seen 5 straight months of rising median sales prices, according to data by the Hawaii Board of Realtors. The data doesn’t lie, but they’re just numbers. That’s the difference between data and information. Information tells a story.

Courtesy: Hawaii Board of Realtors

So what are the implications of this 5-month run? Does it mean we’re out of the doldrums and can expect a continuation of the current trajectory? Are Hawaii housing prices expected to keep creeping north? Possibly. Then again, January’s median price of $618,900 (single family) isn’t far from September 2010’s price of $620,000. If you’re following along, then you know what that means — prices must have dropped after that month in order for a 5-month run to bring us right back to where we are.

Cycles, my friend. Cycles. It’s all in what you make of the data. We could see another dip similar to before or this might be the last one that sees climb out of the tip into a brighter day.

I will say this — the one thing that sort of crushes the cycle idea is that surrounding factors are always changing. Today’s geopolitical environment is a powder keg. Syria’s on the brink of civil war as Assad refuses to cede power. Iran is threatening everybody with nuclear bravado, especially Israel, which history tells us is a bad idea (see: Baghdad). And Greece is once again with empty pockets asking for a handout.

Does this affect Hawaii housing? It certainly has ripple effects through the American economy, so I’m very inclined to say “yes”.

Your thoughts?

Options for Avoiding Foreclosure in Hawaii – Part 1

January 25, 2012 by Michael Borger

STOP FORECLOSURE

About a month into 2012, the Obama administration has recently come out with news of new initiatives to both punish banks for mortgage improprieties and help homeowners stay in their homes. Sounds great on the surface, but there are still folks in Hawaii staring down the barrel of a judicial foreclosure. What kind of help is there? Let’s look at the different options:

Loan Modification — A loan modification is when your lender changes the terms of your mortgage, usually by lowering your interest rate. Homeowners are normally given a trial period to show the ability to make modified monthly payments for 3 to 6 months, after which the new plan stays in effect or they are rejected from the “loan mod”. Unfortunately, banks today have very little incentive to grant a successful loan mod. A colleague of mine and former REO broker recently informed me that banks make only about $500 per successful modification. Think that motivates them at all? Neither do I. This means the homeowners often find themselves back where they began. I’ve talked to people right here in Hawaii who went through THREE loan modification trials only to be rejected.

Avoid Foreclosure in Hawaii – CLICK HERE…..

Short Sale — A short sale occurs when your bank or lender allows you to sell your property for less than the mortgage balance. In this situation, your lender is taking a ‘short’ position on the transaction, even if the sale itself could take 4 to 6 months or longer as your agent or short sale processor negotiates with the bank on your behalf to accept an offer. Short sales are a different breed of real estate transaction and are beyond the skill set (and patience!) of many professionals, whether agents or investors (I don’t mind them, though!). Ask any homeowners who’s attempted a Hawaii short sale, and they’ll likely tell you horror stories of being routed through 10 people at the call center and faxing in the same stack of paperwork, only to see it collapse at the last second because a BPO (broker price opinion) came in too high and the buyer left, or they were working with someone who didn’t understand the intricacies of a short sale. Make sure you work with a pro.

Forbearance — A forbearance occurs when your bank or lender takes your past due amount (arrearages) and rolls it into the current loan. This increases your monthly mortgage payment and/or extends the life of the mortgage. You’re not getting debt forgiveness — you’re essentially getting a form of loan modification or restructuring. A forbearance may reinstate your loan into good standing, although you may be putting lipstick on a big if you’re saving a mortgage you’re better off not keeping around for the next 20 years, like an adjustable rate mortgage (ARM) that was popular not too long ago.

Remember, just because you can save a house and mortgage doesn’t mean it’s best to do so. That’s a personal decision to make with your family (and your attorney and/or CPA) after weighing all your options.

Sell Your House (non-short sale) — This is really only an option if you have equity in your house, which is not the case for most Hawaii homeowners caught in the foreclosure process. However, if you have equity but just haven’t been able to keep up with your mortgage payments, then you may have the option of selling it outright with the help of a realtor or directly to a Hawaii real estate investor. Depending in your debt to equity ratio, you might even profit well from the sale. The primary advantage, however, is that you keep both a foreclosure and a short sale from your credit history.

Click here for “Options for Avoiding Foreclosure in Hawaii — Part 2“…..

2012 Predictions – What to Watch Out For

January 4, 2012 by Michael Borger

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.

What’s Your Walkability?

December 1, 2011 by Michael Borger

Walkability — “a measure of how friendly an area is to walking.” (Wikipedia – who else?)

Walk This Way

Tonight I was standing along Waialae Avenue in Kaimuki for my neighborhood’s annual Christmas parade. I really love events like this because it reminds us that a lot happens at the local community level. There’s so much diversity within neighborhoods in Honolulu and other towns in Hawaii that it’s important to get out once in a while, meet the neighbors, see what new stores have opened, etc. But there’s one thing I’ve always wondered a bit about Kaimuki, and it usually comes to mind when I’m sitting in Big City Diner having a poached salmon and eggs breakfast (so good) and people-watching out the front windows (guilty). For every decent store or restaurant, there’s an empty office building. For every block that would promote people walking about, there’s a hard end at a gas station or other type establishment that kind of tells the brain: “Nothing more to see here. End of the line. Time to turn around.” I’m probably exaggerating, but Waialae Avenue seems to lack some continuity with regard to “walkability“. It feels “chunked up” to me. Is this a result of the economy? Zoning and planning? Lack of business development incentives? Or do I have it wrong altogether?

Imagine block after block of actually active stores, shops, etc. with people walking up and down the length of Waialae instead of just the same two or three blocks or so. I know, easier said than done, and I don’t have a plan of action. I’m just wishing. But standing there tonight on the street with all my neighbors made me think about the concept of “walkability” again. I think it’s so key to the vitality of an area, especially in a locale like Hawaii where the weather is pleasant year round.

It might sound simple — almost childish — to insinuate that promoting people walking around an area (versus driving to a predetermined restaurant and then leaving) could do wonders for revitalization, but I really think it’s true. It goes a long way in creating a true community and that, in turn, creates business which feeds the positive feedback cycle, reciprocal relationship or whatever you wish to call it. And where a vibrant business area grows, housing grows along with it. There are already fantastic establishments here and boatloads of potential – what can we do to see it to fruition?

Better sidewalks, getting more businesses in the empty spaces, etc. Regarding Kaimuki, I truly think continuity is a key — give people a reason to walk four more blocks down the street instead of just circling the same two blocks on the Koko Head Ave side. But this is certainly not restricted to my neighborhood — I’m not picking on Kaimuki, because I LOVE this area (can’t argue with the Movie Museum and Himalayan Kitchen). It’s just what I know best. Every neighborhood is, to some degree, “walkable” or “unwalkable”, in Hawaii and across America.

What about your community? Does it feature long stretches of stores and general commerce that promote people walking up and down the streets? Or do people drive in, do their shopping and whatnot, and turn around to go home? Does it have sidewalks that encourage an evening stroll? Storefronts close to the sidewalk or set far back behind parking lots? How does this impact your sense of community and what would you change if you had the power to do so? How important is walkability to you when shopping for a new home?

Be Heard Here – Voice Your Opinion Below!

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