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Mar 5

Foundation Repairs–Should You Flee or Stay?

by Mary Teresa Fowler
House Foundation Repairs

When a home inspector lists 'foundation repairs' in the inspection report, those two words shock home buyers. Yet knowing that your potential new home has foundation problems puts you one step ahead in the game. At least, home inspections alert buyers to major (or minor) concerns about a home's condition.

Professional Help

Buyers need professional advice before they buy a home in need of foundation repairs or a house with a repaired foundation. In both cases, a buyer has reason for concern. Before home buyers commit, they have a choice whether or not to purchase the home. They can weigh their options and explore the solutions.

Second Home Inspection

For peace of mind and a sense of security, buyers could consider getting two home inspections completed before closing. Sometimes, a second home inspection is required as part of the official process of buying a home. A second inspection carries an extra cost but it will give the home buyer another professional opinion. Home inspection is not regulated in all U.S. states. Especially in these unregulated regions, a second home inspection is a smart decision.

Inspections help avoid unpleasant surprises

Repaired Foundation

A home inspection in a previously owned home could reveal foundation repairs. Buyers should not feel at ease with that report. Finding foundation repairs means that a repair has been done to correct earlier damage.

Early failing of a foundation is not a good sign and could be an indication of future damage. As well, surface water and plant life cause foundation damage. While these conditions remain, the foundation is in danger.

Home foundation repair information

Foundation Repairs

When a home inspection reveals a need for foundation repairs, buyers cannot ignore these findings. The problem cannot be delayed and a repair completed somewhere down the line. Foundation repairs are expensive but a St. Louis engineering firm warns buyers not to ask sellers about fixing foundation repairs. The engineers advise that many sellers will choose the cheapest repair option. With a foundation settlement concern, that move could be catastrophic for a new home owner.

Foundation Problems

Complete Fix

Buyers can choose to buy a home with foundation repairs or in need of foundation repairs but they must be prepared for a substantial repair bill. Earlier problems could resurface and current problems must be addressed without delay. Engineers explain that partial piering is not a smart solution. The rest of the piers will have to be replaced at a later date. Choose a reputable company because inadequate piers will cause problems in the future.

Winter Inspections

The Challenge

Sharon Marinaccio, of LeConte Realty in Hasbrouck Heights, N.J., raises the issue of home inspections in a wintry climate.

"Home inspections can be more difficult if snow covers decks and the home's foundation. And buyers won't be able to have the air conditioning tested or the pool inspected," says Sharon Marinaccio ~ realtor

The Solution

If a complete home inspection becomes an issue because of extreme winter weather, the buyer does not have to be left out in the cold. Marinaccio explains the solution.

"Agents recommend that buyers ask the seller to put aside money in escrow or supply a home warranty in case repairs are needed later." ~ Sharon Marinaccio

Winter needn't freeze out home sales

Would You Buy A Home In Need Of Foundation Repairs?

Image courtesy of foundationrepairdallas.biz

Mar 3

White House Sale

by Mary Teresa Fowler
Government Real Estate Surplus Sale

The White House is not for sale but the Obama administration is planning a sale. Actually, the government is organizing a huge clear-out - thousands of vacant or underused federal buildings. The transactions will occur gradually over the coming years.

Huge Sale

Obviously, arranging such a substantial deal requires plenty of professional help. The administration must determine which office towers and courthouses should be put on the market. If the government does not see a need for a specific property, it could make the real estate listings.

Review Panel

At least 1.2 million federal buildings will have to endure the review process. The reviewers will be an independent commission of public and private sector real estate experts. Although the announcement was not made until March 2, the panel was referred to in President Obama's 2012 fiscal budget request. The panel is modeled on the military's Base Realignment and Closure Commission.

Groups have raised concerns, however, about the review process and availability of information to interested buyers. People note prior cited federal properties in California and Missouri that were declared surplus in 2002 but not sold by 2009. Sen. Thomas R. Carper (D-Del.) who is writing a bill to trim the federal real estate portfolio is in favor of the sale.

"Clearly this is an area where the federal government gets better results for less money by reducing the amount of property we own and by better managing the property we keep," said Sen. Thomas R. Carper (D-Del.).

Common Sense

According to Jeffrey Zients, deputy director of the Office of Management and Budget, the decision to sell is a common sense approach.

"The government doesn't need all of these properties," explained Jeffrey Zients, deputy director of the Office of Management and Budget.

It could make sense for government to sell off a few buildings. The federal government's annual building operation and maintenance budget is more than $20 billion. A 2009 government audit showed that 14,000 of these properties are vacant and another 55,000 are not used to their potential.

Planned Savings

The Obama administration hopes to save $3 billion with the sale. Commercial real estate experts, however, do not expect the government to meet that goal. Industry sources expect several properties will not be in prime locations. Even well-located sites might not sell for top price. Last summer, a federal building in Bethesda, Maryland, sold for $1.5 million less than the asking price and the opening bid was only $100.

Maintaining Value

Real estate veterans suggest that maybe the government should be looking in another direction. Probably the administration could take a long term approach. Industry sources say that the government must focus on maintaining the value of their assets.

It can prove challenging to sell federal buildings. Part of the challenge is the diverse real estate needs of federal agencies. For example, military branches might need only part-time access (for months at a time) to buildings.

White House has plan to increase sales of vacant, underused federal buildings

Do You Agree With The Proposed Sale Of Federal Buildings?

Image courtesy of laist.com

Feb 26

A Week in Real Estate – Mortgages & Mistakes

by Mary Teresa Fowler
Real Estate Statistics - National Association of Realtors

The Wall Street Journal has released its latest 'real estate chart of the week' and the stories revolve around mortgages and mistakes. Obviously, we would expect talk about mortgages in a regular analysis. Do consumers expect mistakes in the real estate industry to be the news of the week? Well, possibly, yes!

The industry is not that far removed from the breaking news about the flawed foreclosures. In that fiasco, lending officials appeared to be "robo-signing" (signing without knowledge of details) foreclosure documents. This blog discussed - "Living with Flaws." Apparently, more mistakes surrounded the industry than buyers and sellers suspected at the time.

Mistake of the Week

Home Sales Data Doubted
Realtor Group May Have Overstated Number of Existing Houses Since 2007

Consumers have trusted the National Association of Realtors (NAR) to release reliable statistics. They put out a popular monthly estimate of previously owned homes. Now the group is "examining the possibility" that it over-counted U.S. home sales as far back as 2007. Of course, a statistics mix-up might not seem so strange to the readers of our blog. A while ago, we discussed – Confusing Real Estate Statistics.

Wrong Count

The NAR reported that there were 4.9 million sales of previously owned homes in 2010 - down 5.7% from 5.2 million in 2009. According to CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., there were just 3.3 million home sales last year - a drop of 10.8% from 3.7 million in 2009. CoreLogic's numbers suggest that the NAR could have overstated home sales by 20%.

Re-examining Data

The NAR are re-examining their data. Lawrence Yun, chief economist at NAR, did not reveal how much the revisions could reduce reported sales. As well, he raised the possibility that the CoreLogic estimates have understated the number of home sales.

"This is a very important issue, and we are looking at it carefully right now," says Lawrence Yun, chief economist at NAR.

Things are still up in the air until NAR takes another look at its data. Consumers can take comfort that mistakes are discovered and issues are examined to find resolution. Yet it would be even more comforting if the NAR could say confidently that a nationally-recognized group is not releasing wrong statistics.

Of course, these mistaken statistics are a different ball game from flawed foreclosures. Mistakes can happen – although vigilance is a must in all jobs especially when they affect an entire industry. Yet signing a foreclosure document – when you have not read a word of the document – falls into a different category. Wrong statistics, however, can still cause turmoil.

Revised Statistics

Revised statistics will not affect reported home-price numbers. Yet new numbers could show that the housing market faces a "bigger overhang in inventory" given the weaker demand. Although the revisions will not affect individual home owners, they would have consequences for the industry. Thomas Laler, an independent housing economist, explains how a NAR mistake could affect the real estate industry.

"Any revisions wouldn't have an impact on homeowners, but it could have consequences for the real-estate industry. Downward revisions would show that "this horrific downturn in the housing market has been even more pronounced than what people thought, and people already thought it was pretty bad," ~ Thomas Laler – housing economist

For example, in December 2010 NAR said that it would take 8.1 months to sell 3.6 million homes listed for sale at the current pace. Yet if sales are revised down, it would mean that it took longer than 8.1 months to sell that number of homes.

Do You Trust Real Estate Statistics?

Image courteys of movessmartly.com

Feb 22

Buying a Home – Basic Steps

by Mary Teresa Fowler
Buying a Home - Basic Steps

Buying a home is a big decision and step-by-step process. Real estate agents can handle the details and see if a purchase suits your needs. Yet ultimately, this house will be your home so you should prepare yourself for the process. Be ready to invest the necessary money, time, and effort. The investment is well-worth taking the time to follow a few careful and considered steps.


Buying a home should not be one of those 'spur of the moment' times in life. These spontaneous times have their place but not when it comes to purchasing a home. A huge commitment requires careful consideration of various issues.

Do you have your finances in order? Can you access the necessary funds for the entire process – down payment, purchase, closing? Can you handle the commitment beyond the closing including maintenance and mortgage payments? The decision to buy a home has to be right for you.

Of course, home ownership has advantages but the buyer has to be able to handle all aspects of the commitment. Home ownership has benefits including building home equity and receiving tax benefits. If buying a home suits you at this time in your life, it has an advantage over renting in that the monthly payment goes towards your mortgage.

Real Estate Agent

A reputable real estate agent will be one of your most valuable resources throughout this process. Choose carefully from excellent sources. Try to find an agent that you feel comfortable working with through these important steps. Actually, finding a real estate agent whom you feel at ease with should not be too much of a problem. Reputable agents will treat you with the utmost professionalism and have your interests as their priority.

They have a valuable and varied role to play in this purchase. Agents will let you know about the market, discover your preferences, and find a property to match your needs. They are familiar with the neighborhoods and prices and have a whole list of professionals they can draw on for any reason. Real estate agents should have expert negotiating skills and be diligent about checking documents and dealing with any issues in a timely manner.


Buyers must be able to get the necessary financing. In order to receive funding, you have to find a lender, submit an application, and get pre-approval. There are various financial steps to go through before you own your dream home. Figuring out manageable payments and loan options, forwarding an accepted purchase offer contract to your banker, appraisal, title commitment, and money for closing – all are examples of financial-related steps in buying a home.

Pre-approval should be square one for home-buyers


Obviously, you need to have a fixed idea about your preferred neighborhood. You do not need to know from the start about the exact street for your perfect home. Yet you do need to know your general preferences for the area such as near schools or public transporation.

Home Inspection

A home inspection done by a professional who will look for hidden problems in a house is an invaluable service for homeowners. The living room might look fashionable but it will lose its appeal quickly if you move in and discover a faulty foundation. Every step in the home buying process exists for a reason. Don't try to rush, bypass, or ignore any significant details in this monumental purchase – your new home.

Do You Have Any Tips To Offer About Buying A Home?

Image courtesy of realestatecare.co.uk

Feb 17

Hot U.S. Real Estate Markets

by Mary Teresa Fowler
Hot Real Estate Markets

Looking for a hot U.S. real estate market? Everyone is – especially those living through a cold and stormy winter. Buyers in a wintry climate might be looking literally for 'hot' U.S. real estate.

Hot Market

Of course, realtors in sunny climates recognize the plight of winter-weary potential buyers. Savvy real estate agents rev up their advertising campaigns to attract homeowners tired of shovelling snow. So, the 'hot' markets like Florida are popular with U.S. home buyers.

Manhattan Market

Manhattan is a historically-sound and hot real estate market. Even hotel properties are flying off the shelves in New York City. According to a February 16 report by Jones Lang LaSalle Hotels, the Big Apple will see double the volume of hotel deals in 2011. This report does not include the expected volume of residential transactions.

Probably, most people are not surprised about tropical climates and dynamic centers like New York City rating as hot real estate. Yet more than a few buyers are surprised by the Bloomberg News announcement about a very hot U.S. real estate market. After all, not all U.S. regions are in their peak period. One specific sector, however, is doing better than expected as the country comes out of a recession.

Growing Market

According to Bloomberg News, farmland in the middle of the country's agricultural belt is a hot real estate market. On February 15, the Federal Bank Reserve of Kansas City said that fourth quarter farmland prices in the US are up the most in two years. Keep in mind that potential buyers must be interested in these properties considering the effort they make to arrive at auctions.

Bidders will not be flying first-class to a tropical paradise to view this type of real estate. Interested parties will be travelling over snowy and icy roads to look at the properties. Recently, bidders took that trip to bid on one of the most coveted properties in the U.S. Midwest - 120 acres of farmland in Greene County, Iowa.

Winning Bid

The winner of a January auction in Jefferson offered $8,200 an acre (about $1 million) for land in Scranton Township. According to Iowa State University data, that price is 44% higher than the $5,701 per acre estimate for average values in the county. Residential and commercial properties in these areas sell for low prices.

Reason to Bid

Losses of manufacturing jobs have caused economic stress in this region and resulted in a drop in housing prices. Yet farmland is a different story. As commodity prices increase, farmers and investors are bidding at farmland auctions. Farmers are buying for the long term and investors recognize a potential profit.

Rising Values

During 2010, values in Iowa rose 16 per cent. Iowa is the largest corn-and-soybean-growing U.S. state. If commodities stay at current levels, values in Iowa might increase an additional 10 per cent. It looks like more investors might be travelling over icy roads to farmland auctions.

Farmland Boom Provides Boost to Slumping U.S. Midwest Real Estate Market

Would You Be Interested In Buying Farmland In Central USA?

Image couretsy of bloomberg.com

Feb 15

Housing Plan – Will Middle Class Miss Out?

by Mary Teresa Fowler
Obama Mortgage Plan

Congressman Dennis Cardoza (D-Merced) believes that the new proposal from the Obama administration will end the American dream of home ownership for the middle class. The plan points to the eventual end of Fannie Mae and Freddie Mac. Now this initiative does not go into effect tomorrow. The changes have to pass through Congress. Actually, it could take several years for certain modifications to be in place.

Proposed Reform

Cardoza admits that there are problems with both government-sponsored enterprises (GSEs). He would agree to reforming them but opposes eliminating the GSEs. Cordoza insists that Fannie Mae and Freddie Mac have helped a huge percentage of middle class homeowners to buy homes. In fact, he mentions his own state of California, its high housing costs, and the fact that almost every mortgage is backed by the GSEs.

A former realtor, Cardoza points to the pre-Fannie and Freddie days. At that time, homeowners needed a 50% down payment and repayment time was five years on average. Presently, he is seeking support for his own legislation - the Housing Opportunity and Mortgage Equity (HOME) Act, H.R. 363 – a bill capitalizing on market-based solutions to keep people in their homes.

Cardoza is not shy about expressing his opposition to getting rid of Fannie Mae and Freddie Mac. He was invited to speak at a think tank panel discussion - Underwater Housing and Recovery - sponsored by the Third Way. Cardoza'a Congressional district in California's Central Valley is in the midst of a serious housing crisis. Modesto, Stockton, and Merced have some of the highest rates of foreclosures in the country. Three out of five homeowners are 'underwater' carrying loans more than the value of their house.

"In America, homeownership is at the core of middle class prosperity. In fact, it is the American dream. If the government withdraws assistance to the GSEs that make this dream accessible, average working Americans - teacher, plumbers, and journalists - will no longer be able to get a mortgage to buy a home. We will become a rental society, instead of an ownership society." ~ Congressman Dennis Cardoza

Cardoza: President's Plan the "Most Irresponsible Housing Proposal Yet"

Private Sector

More representatives than Cardoza see problems with the GSEs. A few people even hoped that the administration would abolish the GSEs. Yet Obama's latest proposals were still a shock to many individuals and groups. Part of the new proposal plans a housing-finance system that would rely almost exclusively on the private sector.

Currently, Fannie Mae and Freddie Mac back private mortgages. Consumer advocates worry about the proposed changes. If the government does not get behind these mortgages, maybe more lenders could back away, and consumers will have fewer options. Of course, it is not advisable to help people get into houses if they cannot afford a home.

Balanced Approach

The past housing crisis is evidence that a situation can get out of control. Yet government must provide a balanced approach. Often people need a helping hand. There is a promise, however, that this new proposal will not eliminate all help for low-income families. Apparently, there will be programs to help with housing even if they are not the familiar Fannie Mae and Freddie Mac.

Why You Should Buy That Home Now

What Do You Think Of Obama's New Housing Plan?

Image courtesy of stopfreclosure.com

Feb 12

First-Time Home Buyer – Fix Up or Move In

by Mary Teresa Fowler
First Time Home Buyers

Do first-time home buyers prefer to buy a "fixer-upper" or a "ready to move in home?" Obviously, the choice will vary from buyer to buyer. Yet it is an interesting topic to explore on different levels.

Fix Up or Move In

On the average, do today's first-time buyers respond differently than a generation ago? Do urban buyers make different choices than rural buyers? Does modern society encourage home owners to want 'instant' results – the perfect home right from the start – no "fixer-uppers."

Starting Out

The traditional perception of the 'first-time buyer' is the newly-married bride and groom just starting out in life. Of course, in our enlightened world, we don't (or shouldn't) put limits on our definition of couples. Yet still, many of today's first-time home buyers are young couples who are just setting up their first home together. Others might have lived previously in apartments as a family.

First-time home owners, however, are not always couples. Three friends could purchase a home. Individuals could even just pool their resources together and buy a home as an investment. Obviously, people must exert caution in all steps of such a major transaction.

First-Time Home Owner

Regardless, buying a home for the first time is a new and 'starting out' experience – whether you are 20 or 40. Remember that not every first-time home buyer is just a few years out of high school. First-time home owners can be nearer middle age. Many people rent for years before buying that first home. Actually, for the purposes of qualifying for the expired Federal First-Time Home Buyers' Tax Credit, home owners could be real first-timers or people who had not owned a principal residence for three years.

First-Time Survey

The results of a recent Coldwell Banker Real Estate survey shed a little light on the contemporary first-time home buyer. In many housing markets with low prices, first-time buyers can afford to pick and choose, and they do not have to select that home in need of renovation. If prices were higher, maybe first-timers would make a different choice. For example, young families could be carrying a heavy financial load. Probably they would go for the 'fixer-upper' in a market with more expensive houses.

With affordable prices, however, starter homes with imperfections get left behind for a more 'ready to move in' type of home. According to the Coldwell Banker Real Estate survey, first-time buyers are not even searching for homes in need of repair. Eighty-seven percent of home owners who purchased their first home in the past year mentioned that a move-in-ready house had mattered to them.

Almost all of the 300 first-time home owners in the survey said that they had been pleased with the purchase price. The new home owners found that they could stretch their dollar and get a home to suit their lifestyle. Sixty-seven percent said that market conditions allowed them to buy a home sooner than their original expectation.

Half of the home owners found homes in a better neighborhood than they expected and 61% bought a home at a more affordable price. Many home owners (40%) said they got more space for their dollar and 43% of respondents locked in a lower mortgage rate. According to this survey, first-time buyers do not have to fix up before they move into their new homes.

First-time buyers forgo starter homes: survey

Do You Prefer A "Fixer-Upper' Or A "Move-In-Ready" Home?

Image courtesy of house2uonline.com

Feb 5

Commercial Real Estate - Fall or Recover

by Mary Teresa Fowler
Commercial Real Estate Recovery

Industry analysts predicted the collapse of U.S. commercial real estate but it never materialized in reality. Of course, the market is just coming out of an economic downturn. Recently, a Federal Reserve executive told a congressional committee that commercial real estate was close to bottom.

Yet an even greater crisis had been predicted by many observers. It was believed that commercial real estate would fall, drag the economy back to a recession, and cause a catastrophe in the banks. Indeed much to the surprise of many people, commercial real estate is on the rebound.

Overall Recovery

Although the positive trend can be seen across the country, it picks up steam in major centers like New York City. Overall, the commercial real estate market looks promising but there are pockets of distress. As well, the market is far below its 2007 peak.

Underlying market fundamentals are reaching a stabilized state. At the end of 2010, vacancy rates were not increasing in office, industrial, and retail sectors. Although vacancy levels were elevated to varying degrees (13%-16%), sales of commercial real estate improved in every quarter of 2010.

CB Richard Ellis in Los Angeles, the world's largest commercial property brokerage, reported double-digit fourth-quarter gains in all its global business lines except real estate development services. Bricks & Mortar Capital President, Craig Silvers, explained that improving economies in the United States and Asia have more companies taking action on real estate matters. In fact, Silvers suggests that companies are trying to "lock in real estate leases or buy property before prices get out of control."

Commercial real estate due for upswing?

Financial Stress

If lenders concentrated their efforts in commercial real estate, they may feel more than a little stress. Keep in mind that $3.4 trillion is outstanding on real estate loans. Plenty of defaults will mean a ton of foreclosures. Almost 1,300 small banks nationwide hold a considerable number of commercial real estate loans.

Yet a top Federal Reserve official, Patrick Parkinson, played down any worries. He believes that bank struggles will not be as grave as earlier predictions. Commercial real estate will not be the downfall of U.S. banks.

Future Issues

It is possible though that there could be difficulties in the future. Present loans will mature and need rolling over, therefore, putting banks under strain. Most commercial mortgages have shorter maturities (three-ten years) than those offered by banks for residential loans. In addition, commercial loans are structured so that they are 'rolled over' instead of being repaid during the life of the agreement.

No Threat

Commercial loans are not a huge threat to big banks. No doubt, the market is dragging a little. A few financial institutions hold large portfolios of mortgage-backed securities. Yet already, they have taken huge write-downs on them.

"While we expect significant ongoing CRE-related problems, it appears that worst-case scenarios are becoming increasingly unlikely," says Patrick Parkinson, the Federal Director of banking supervision and regulation.

U.S. Commercial Property Recovery Spares Economy

UPDATE 2-US commercial property loans a drag, not huge threat

Do You Have Confidence In The U.S. Commercial Real Estate Market?

Image courtesy of onesourcemetro.com

Feb 1

2011 – Year of the Landlord

by Mary Teresa Fowler
Year of the Landlord

2011 is shaping up to be the "Year of The Landlord." As many people face the winter winds, we are reminded of a wise old saying.

"It's an ill wind that blows no good." ~ John Heywood (1497-1580)

In the case of the winds of change in real estate, falling house prices and slow sales have challenged many sellers but benefited more than a few apartment building landlords. More people are choosing to rent but others can find no suitable alternative to apartment living. Everyone has their own reason for deciding to rent property rather than buy a home.

Rent or Own

Sometimes renting is the best choice for an individual. Indeed, many renters prefer the apartment lifestyle. After all, renting a luxurious NYC condo does not seem like such a bad deal. Even renting any apartment has its perks such as more flexibility in relocation and less maintenance responsibilities.

Of course, other renters would sooner own a home. Often foreclosure forces homeowners to become renters. Sometimes potential first-time buyers discover that they cannot afford the financial commitment of a home. The Federal First-Time Homebuyers' Tax Credit is no more and not everyone has an "angel investor."

Whether people choose to rent or have no other choice, landlords are gaining tenants. Banks and lenders are also smiling – especially if the apartment building owner had been previously under financial duress. Borrowing has become less expensive with low interest rates.

This effect is noticed with commercial real estate of all types. The low rates have a positive effect on borrowing for office buildings, retail outlets, and company warehouses. The apartment market, however, is the healthiest of the commercial categories – mainly because of cheap financing.

Investing in Apartments

Obviously, investors are interested in apartment buildings. Actually, 'flipping' properties is coming into vogue again. The practice of reselling quickly for profit is somewhat prevalent at all times.

Yet 'flipping' is as popular now as in earlier thriving economic periods. This practice can have its place - if done responsibly for the right reasons. Illegal flipping, however, is a different matter. It involves scams, disregard for others, and a goal of profit at any cost.

Higher Values

Apartment building values have risen to levels not seen since the middle of 2007. According to the brokerage firm Marcus & Millichap, values of apartment buildings rose 16% in 2010. Green Street Advisors, a research company tracking REITs, say that present values are now within 10% of their 2007 peak value.

Of course, apartment values in major centers such as New York and Washington, D.C., have shown signs of recovery since 2009. Currently, increasing apartment values can be seen in additional markets including Los Angeles and Seattle as well as other U.S. cities. At the end of 2010, TIAA-CREF paid $62 million for the 261-unit Newbury Commons in Stamford, Connecticut. According to Real Capital Analytics, this sale price was 65% more than the amount paid by Seaboard Properties in February 2009.

Apparently, even Las Vegas is seeing the high values. Keep in mind that Las Vegas was affected greatly by the economic downturn. Yet in December 2010, the Croix Townhomes complex in the Las Vegas Henderson suburb sold for nearly $20 million - $143,000 for each unit – a price even far above the national average. The 'apartment advantage' might be the start of the next big trend in investment property.

Housing Woes Fuel Apartment Surge

Will 2011 Continue To Be The "Year Of The Landlord?"

Image courtesy of architecturelist.com

Real Estate Predictions

Most likely, the majority of real estate predictions fall somewhere in the middle - based on more than a crystal ball and less than empirical research. Maybe there might be one or two people who put predictions out there without any thought. Yet most real estate predictions are the result of studying trends and statistics.

Accurate Predictions

Apparently, a few of these predictions can have a high accuracy rate. For example, the Globe and Mail has tallied the score for predictions made by Neil Downey, RBC Dominion Securities analyst. Downey offered five predictions for 2011. Before the end of January, three predictions have become reality.

The Globe and Mail's story is titled – "The real-estate crystal ball." Probably, careful observations are responsible for these impressive results. No crystal ball here; maybe though a little luck, too!

Which Correct Predictions Did The Analyst Make About Canadian Real Estate?

  • Richard Baker, the New York investor who bought Hudson's Bay Company, is ready to close a $2-billion deal bringing Target Corp. into Canada.
  • RioCan Real Estate Investment Trust is looking for funding of its acquisition plan as well as refinancing for outstanding debt. Recently, REIT hit the market with rate reset preferred shares and senior unsecured debt.
  • Canada's commercial mortgage-backed securities market is making a rebound. Two major real estate companies are tapping the market for $206 million – the first deal of this type since 2007. 

As well, Downey predicted more TSX-listed REITs at the end of 2011 than the beginning and less equity raising activity. The Globe and Mail is waiting to see if these two predictions will come to light.

Core Predictions

Real estate predictions are a serious business. The real estate industry is at the core of an economy. Home buyers account for a huge percentage of economic activity. Commercial real estate involves three main categories - retail (stores, malls), industrial (factories, warehouses), and commercial (offices, multi-dwelling buildings).

Real estate transactions are handled by brokers and agents. Certain agents offer property management services to businesses. When entrepreneurs are doing well, real estate transactions experience an increase. In a poor economy, realtors help businesses to find the best location and affordable facilities.

Empirical Research

Empirical research (such as Plotkin 2002) has been conducted about the role of real estate in an economy. The "first major empirical nonfinancial ratio business success versus failure prediction model" was applied to the real estate industry in New England. The purpose of this study was to develop and test a nonfinancial model that would predict real estate business success or failure using the Lussier (1995) prediction model.

'Lussier' was selected for the study because it had been published in more journals than any other model. The study suggested that similar methodology be used to conduct studies in other parts of the US as well as in other countries. Real science here – far more than a crystal ball!

A Success Versus Failure Prediction Model for the Real Estate Industry

How Have You Arrived At Your Real Estate Predictions?

Image courtesy of adrworks.com



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