Usa real estate information. ENGLISH VERSION

Investor Report: Energy Efficiency

For real estate investors buying houses at discount prices, it could be a hot new trend. Instead of simply doing the usual renovations, paint jobs and landscaping to turn around properties for resale or rental, growing numbers of investors are emphasizing energy efficiency improvements to increase market values and cut marketing times

In Baltimore, A-Plus Neighborhood Homebuyers LLC is now acquiring central city rowhouses -- spending thousands of dollars extra on eco-friendly upgrades they'd never done before -- extra heavy insulation, bamboo flooring and high energy- efficiency appliances and lighting.

Three thousand miles to the west in Seattle, Aaron Fairchild of G2B Ventures is raising $50 million for the Efficient Real Estate Fund, the first limited partnership designed solely to buy urban houses at wholesale prices, perform major energy-efficiency retrofits on top of regular rehabs, then turn the properties around as rentals and for-sale houses.

In an interview with RealtyTimes, Fairchild said energy upgrades, documented by before and after audits, are a key new direction for investors, "even if it sounds like non-sexy stuff."

Research studies have found that houses with high energy-efficiency ratings sell at premiums ranging anywhere from seven to 14 percent over comparable, non-efficient houses, and take fewer days on the market to sell.

He cited a recent study on Seattle-area single family houses constructed in 2007 or later and certified as "built green," Energy Star and LEED (L-E-E-D), a top energy efficiency rating. "Green" certified properties of essentially the same size as non-certified units sold for seven and a half percent more per square foot and sold 24 percent faster - an average of 38 days versus fifty.

"It seems fairly obvious that if we spend two and a half percent extra" on renovations to achieve high energy efficiency," said Fairchild, "that we will recapture much more than that" when the houses are remarketed.

"When you can show people that the house consumes less energy" and emits much lower levels of greenhouse gases -- and you've got pre-renovation and post-renovation audits and operating numbers to prove it, "it only makes sense the property will have a competitive advantage in the marketplace." Fairchild's program is targeting houses in Seattle that can be acquired for 25 percent below current market value, primarily through short sales, bank-owned and pocket listing situations.

The renovations are intended to drastically lower energy usage and carbon emissions, and offer Energy Performance Scores from independent auditors.

Fairchild believes small and large-scale investors who ignore energy consumption and carbon emissions "are missing an important opportunity," not only for profit, but to do the right thing for the planet.

Mortgage Rates Down This Week Amid Concerns Over Labor Market
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM)averaged 5.20 percent with an average 0.7 point for the week ending July 9, 2009, down from last week when it averaged 5.32 percent.

 Last year at this time, the 30-year FRM averaged 6.37 percent. The 15-year FRM this week averaged 4.69 percent with an average 0.7 point, down from last week when it averaged 4.77 percent. A year ago at this time, the 15-year FRM averaged 5.91 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.82 percent this week, with an average 0.6 point, down from last week when it averaged 4.88 percent. A year ago, the 5-year ARM averaged 5.82 percent.

One-year Treasury-indexed ARMs averaged 4.82 percent this week with an average 0.6 point, down from last week when it averaged 4.94 percent. At this time last year, the 1-year ARM averaged 5.17 percent.

“Interest rates for 30-year fixed-rate mortgages fell for the second week in a row to the lowest level in six weeks amid market concerns over a weakening labor market,” said Frank Nothaft, Feddie Mac vice president and chief economist. “The economy lost 467,000 jobs in June, more than the market consensus, and the unemployment rate rose to 9.5 percent, the highest since August 1983. Moreover, hourly employee wages increased at an annual rate of 0.7 percent on average in the second quarter of 2009, the smallest gain since records began in 1964."

“The weak employment situation coupled with falling home values is adding to greater defaults on home equity loans and lines of credit. The American Bankers Association reported that the number of home equity loans that were 30-days or more delinquent rose to a record high of 3.52 percent in the first quarter and home equity lines of credit also reached a record of 1.89 percent. For comparison sake, such loans totaled $1.1 trillion outstanding in the first quarter of 2009, representing nearly 10 percent of all home mortgage debt, according to the Federal Reserve Board.”

The Loan Modification Debacle


In an article written by Ms. Podmolik that appeared in the Business section of the Chicago Tribune, I guarantee you the only real point in this story was missed by 98% of those who read it. In following the attempts of a couple individuals who have been trying in vain to have their loans modified, it's easy to see that banks are frustrating matters by their lack of motivation in pursuing a loan modification that would allow the borrowers to stay in their homes. Like all loan modification attempts, it seems like the banks just don't know how to get out of their own way as honest homeowners attempt to keep their homes.

 The problem here is a simple one. First, banks are awash in procedural folly, a check and balance system that is way over cautious, and doomed to self regulate to a degree that they’ve begun to operate more like inefficient governmental agencies than private sector corporations. While I hate the way banks are doing business, I do not blame them for their lack of efficiency or motivation in dealing with loan modifications, because there's a very hard truth that most of us just don't understand... Your bank doesn't want to modify your loan.

Your bank is like your brother. You're 8 and he's 10. He calls you a name, so you punch him, your mom, always looking for reasons to blame you for the strife, tells you to apologize to your brother. You know it was his fault for starting the trouble, but you apologize, with an under the breath "sorry" while you storm into your room for an afternoon of playing with the 1986 style Transformers. You're the bank. The bank feels slighted in this process, but has been told by a tweed-jacket-with-leather-elblow-patches-wearing Obama that they should be granting these modifications, so the bank gives a have hearted attempt at the loan modification that it's being forced into by the socialist Federalies.

Whether or not your bank has a nice little section on their website regarding the "Hope for Homeowners Act", or some warm hearted story about how they're helping millions of homeowners avoid foreclosure and stay in their homes, be sure you know this. The bank doesn't want to modify your loan, not in the least bit.

Think about it from the bank's point of view. They agree to eat some past due payments, rework your loan to lower your rate, and then send you on your way. They spend real money doing this modification, both in legal fees and in lost time by their employees. Banks are over burdened, slow moving creatures that have a hard enough time just walking in a straight line, and now you want them to do a front flip and stick the landing?

The bank doesn't want to modify your loan because they know the odds are that it just isn't going to help, and for that claim, they have statistics on their side. According to a study by Barclay's, "current loans receiving rate modifications will experience a 62% redefault rate; while delinquent loans receiving rate modifications will experience an 83% redefault rate." If you're in trouble with your loan, the bank knows that if they don't modify your loan, you default. But they also know that if they do spend time and money modifying the loan, you'll also default. The result is the same to them, but one option requires more energy on their behalf and increased the amount of money they're going to lose off of the troubled homeowner.

You see now why the banks don't want to waste time and money modifying a loan that is statistically doomed even after the modification? In spite of these realities, Obama and friends continue to think this is the answer to our housing crisis. It's no wonder a bunch of academics from Harvard who boast a combined real estate resume roughly the size of the fingernail on my pinky can't figure out how to fix this mess.

The free market is moving towards a resolution, but every bit of Obama intervention, outside of the Mortgage Backed Securities purchases that are keeping mortgage rates artificially low, is only getting in the way of recovery. Let the banks ignore modification attempts, and although it's cruel, it will indeed speed up our housing recovery. Why Obama doesn't understand that is beyond me, and is further proof that the principles guiding this administration are feel good principles that prove an easy sell to a simple minded public, but have little statistical proof to back them up. I believe that's called hot air, but in this case, it's really, really expensive hot air.

Market Conditions

Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.

 The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. "Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," he said. "Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy."