The stock market suffered a sudden drop in the early trading this morning due to  data released by The Commerce Department. The department announced housing starts fell 12.8 percent to a seasonally adjusted annual rate of 458,000 unites, the lowest on the records dating back to 1959.

New building permits, which projects a sense of future construction, dropped 3.3percent to 494,000 units, the lowest since records started in 1960.

For the amateur investors who do not devote time to consider a wide range of data and news may see the above announcement as catastrophic. The seasoned investors who follow and analyze current market data from all around would simply understand the announcement was within expectation and not a cause of great alarm.

The well informed investors are well aware that although the US real estate market may be showing a faint heartbeat for recovery, but the excess inventory in unsold homes of over 2.5 million units and the ever increasing number of foreclosure property would discourage cash strapped home builders  from attempting to build more new homes in the foreseeable future. Hence the drop in decline in New Home Permits is logically.

This graph from Freddie Mac clearly illustrates the volume of excess unsold homes alone would take more than several months for this weak market to digest. Government incentives and slightly improved mortgage liquidity will take its time to deliver any effect on this never been before crisis.  

The New York Post reported the Chinese Ministry of Commerce will be bringing 400 executives to the U.S. and Canada next month to shop for distressed assets. Any significant buying by Chinese investments would further bolster Beijing’s presences in the US economy.

While it remains unclear which specific companies might be targeted, but it looks like the Chinese have strong interest to take advantage of the weakened North American auto industry.

Last month the “U.S. Real Estate Investment Expo” in Beijing attracted thousands of serious potential private investors looking for discounted real estate in the US. Although the first quarter export figures of China dropped more than 10% in the first quarter of 2009, but its GPD remains stronger than most other countries in the world.

This could be a sign that smart investments are sensing the timing to enter the U.S. real estate market is coming sooner than some economist many predict.

Industry experts and our Central Showplace spot poll results are consistent as many conflicting opinions still exist:

 DONALD TRUMP

“It’s one of the best times to buy real estate”, said Donald Trump, chairman and president of the Trump Organization.

“It’s an amazing time to buy,” Trump said. “This is the best time I’ve ever seen to buy both real estate and probably other things. This is one of the great opportunities.”

SAM ZELL

Billionaire investor Sam Zell made what is acknowledged to be one of the best-timed investment decisions ever by selling his real estate empire at the peak of the market in February 2007.

Zell, sold his holdings in the U.S. office market by selling Equity Office Properties Trust to Blackstone Group LP for $39 billion including debt in the biggest leveraged buyout at the time. The sale earned Zell approximately $900 million.

Zell, chairman of Chicago-based apartment REIT Equity Residential, said there are signs the housing market may be starting to recover.

The single-family housing market is starting to “bottom out” and “this summer we’ll see equilibrium,” he said.

MARK FLEMING

“We expect home prices to continue to decline into 2010 as economic conditions and excess housing inventories dampen prices,” Fleming said in the report. “Decreases are now being driven by rising unemployment and a high volume of distressed home sales.” Mark Fleming, the chief economist for First American CoreLogic Inc.  in Santa Ana, California.

The percentage of all U.S. homes empty and for sale, known as the vacancy rate, fell to 2.7 percent in the first quarter. It hit an all-time high of 2.9 percent in the first and fourth quarters of 2008, the Census Bureau said.

 DANN ADAMS

More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom.

Dann Adams, president of U.S. Information Systems for Equifax, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.

He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year.

“I’m trying to find optimism in these numbers, but I’m pretty hard pressed to do that despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner” Adams said.

 SPOT POLL RESULTS

Central Showplace Spot Poll Results seem to reflect this optimistic but cautions outlook:

With the slow down of the US economy and the strength of the Canadian Loonie, it is a good time for Canadians to buy US Real Estate?

63% - Yes, now is a good opportunity to buy.

27% - Yes, but I’m waiting for prices to fall more.

10% - No way, it’s a bad time to buy.

The decline of Real estate values across America has affected the price of homes in virtually every city in America. Homes in many areas are now being offered at prices that have not been seen for years.

Stories about the bursting housing bubble look for an explanation. These stories point to the lack of available credit that has in turn resulted in a lack of financing for real estate, they point to a faltering economy with major job losses being announce every month, they point to a lack of buyers and describe a real estate market that was overbuilt and over priced that was spurred by easy credit and over-zealous buyers and sellers. Whatever the reason, the simple fact is, there has been a serious erosion of value.

While the market might be priced right for buying that second home in the US, it is still important to realize that looking for the house that fell the most in value may not be the right path to finding the best value. In fact, you might find that the home with best value is not in an area that has been crushed.

“The three most important words in real estate are; location, location and location!”
Will Rogers

This is sage advice and it still holds true today. The very first thing that you should want to determine in your search is the location for your second home. We receive calls every day from people that simply say; “I want a place in Florida.” Well, Florida is a pretty big state and has a lot to offer so it is important to be able to narrow that search down to at least a city and then to at least a neighborhood.

“It’s how you live!”
Artist - Point of Grace

Almost everyone will agree that where you want live is important, but how you want live will eventually weigh heavy on your final choice. When you are looking for that second home, you should be able to list the amenities and activities that are important to you.

“If it sounds too good to be true, it probably is”
Quote: Almost everyone you know!

There are not that many things that actually reflect their true value like real estate does. The value of real estate is constantly in flux and determined by a cocktail of influencing factors. There are indicators that are easy to find that will report on the market; like amount of time it will take for the current demand to absorb the current number of homes that are being offered for sale, the average number of days that a home is staying on the market before it is sold and the relationship between the asking price and the selling price of the home. There are other factors like the actual price of the home, the availability of financing and the total monthly cost of ownership that also influence the demand and eventual value of a home. The condition of the local economy will also influence the value of a home. Is the local economy creating jobs or losing jobs and what kind of paycheck is associated with the jobs that make up the work force? There is a lot to take in.

The bottom line is that just because the price of a home has fallen to an all time low does not make it a great buy. Location is still the most important factor when you are searching for that second home

By: Harold Green

Central Showplace

The Pending Home Sales Index in the South rose 8.5 percent to 93.2 in March and is 7.7 percent above a year ago. In the West the index increased 3.9 percent to 93.1 and is 1.7 percent higher than March 2008. The index in the Northeast fell 5.7 percent to 59.5 in March and is 24.1 percent below a year ago. In the Midwest the index slipped 1.0 percent to 82.3 but is 8.2 percent higher than March 2008.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in March, rose 3.2 percent to 84.6. February’s pending home sales index was slightly revised down to 82.0 from 82.1. Compared to the same period a year ago, pending home sales rose 1.1 percent.

First-time homebuyers looking for bargains snapped up about half of all homes sold last month. Much of this is attributed to first-time buyers taking advantage of favorable affordability conditions, including an $8,000 tax credit.

“Homes are more affordable than they’ve been in years and mortgage rates are near record lows”, said Lawrence Yun, the National Association of Realtors chief economist. “We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around,” said Yun.

The median sales price in March was $175,200, higher than February’s median price of $168,200.

The National Association of Realtors (NAR) estimates that distressed sales have accounted for 45 percent of existing home sales in recent months, which is one reason why prices have fallen so sharply. The combination of falling home prices and lower mortgage rates has made home ownership much more affordable. The NAR Housing Affordability Index has surged more than 50 points over the past 6 months and is at an all-time high.

In Florida, nearly two-thirds of all sales are foreclosures and short sale properties, many of which are not counted by real estate agents since they are sold at auction or by banks directly to home buyers.

A study conducted by the National Association of Realtors (NAR) for the Realtor Association of Greater Miami and the Beaches (RAMB) provides a profile of homebuyers in Miami-Dade and Broward counties.  The 2008 Profile of Home Buyers and Sellers provides a comparison of the current state of the South Florida real estate market, and how it compares to the rest of the state and the nation.

• A significantly higher number of South Florida home buyers were born outside the U.S.  44 percent of South Florida buyers were not born in the U.S. compared to 17 percent in Florida and 9 percent in the U.S.
   
• The median age of South Florida homebuyers is 41 compared to 43 in Florida and 39 for the entire U.S.  For first-time homebuyers, the median age in South Florida is 34 compared to 32 in Florida and 30 for the entire U.S. 
   
• The 2007 median household income of homebuyers in South Florida was $74,000 compared to $68,500 in Florida and $74,900 in the U.S.

The U. S. Sunbelt states have a well-known history of attracting large numbers of domestic and international tourists along the U. S. coastline.

Tourists have several available options when it comes to their choice of accommodations, ranging from hotels and motels to the luxury condominiums and resorts.  For families, providing accommodations over a extended vacation, hotels and resort daily rate cost become significant. A growing trend is to choose Short Term Vacation Rentals.

Short Term Vacation Rentals typically offer accommodation by the week or by the month and are generally located in the heart of vacation destinations which have access to local amenities and attractions like the beaches that line the coast of the Carolinas or the Gulf Coast as well as the vacation hot spots like Orlando’s Disneyland Resort or Galveston’s Moody Gardens.

Instead of renting a hotel room for mom and dad, a room for the kids and a room for the grand kids, the extended family rents a three or four bedroom vacation home.  When you do the math for three or four hotel rooms, diners out and add a collection of rental cars, it is easy to see how quickly the costs jump up and how attractive a $3,500 a week vacation home can become.

THE VACATION RENTAL MARKET

The future for Short Term Vacation Rentals is bright. 

The Recent Vacation Rental Management Association (VRMA) has compiled research that confirms that the vacation rental industry is in fact growing and becoming more professional and competitive as more and more products are brought online to provide more and more opportunities for vacationers find that vacation home for the family.

VRMA also reports that the inventory of short term vacation homes that are being offered for rent is increasing every year.  As more second homes are purchased, more short term leasing opportunities are being created.  Obviously a second home owner will not want to enter into a long term lease, so their only opportunity to benefit from owning a second home is to rent it for a short period of time.

There is data confirming the fact that more and more of the second homes are being purchased for use by homeowners and that these homes are also being rented out or used as investments.

As a result, there is a growing market of second homeowners that are seeking out properties that have quality vacation rental management firms that can provide rental services and property management in place.

When you research the second home and the Short Term Vacation home industry, it is pretty easy to confirm this trend.  Almost all of the data you will find will confirm that the inventory of short term rental homes is continuing to rise in many of the destination vacation real estate markets where second homes are being purchased.

VRMA also reports that the income from vacation rental operations is continuing to rise as the Short Term Vacation Property become a more recognized and sought after alternative.

MANAGED OWNERSHIP SOLUTION

Owning a well located, professionally managed, short term furnished vacation property provides an excellent opportunity for Canadians to enter into the US Real Estate market.  The fact that the lease term is short and that the stay is being compared to hotels and resorts increases rents to a point where properties can break even when they are only rented out half a year or so.

This is the ideal situation for a Canadian that would like to rent out their property in the summer in the high season and vacation down south in the winter avoiding the sleet and snow of our winters.  They will quite often be able to manage a scenario where they will be able to stay for a few months for free.

Central Showplace is featuring buying opportunities of short-term rental properties of two, three and four bedroom furnished condominiums and homes that are located in the heart of tourist hotspots and that are ideally suited for families who want to vacation together. 

Harold Green

Central Showplace

Sarasota Association of REALTORS Press Release:

*The following press release was sent to local media on April 16

The Sarasota real estate market saw sales rise to the highest level of the year in March 2009, besting the previous month by 33 percent. In addition, the median sales price for single family homes rose after steadily declining since late last year, indicating a potential sign of the bottoming of the local market.

The overall sales level of 481 was the highest since June 2008, and nearly equaled the level of 504 sales reported in March 2008. Of those sales, 353 were single family homes while 128 were condominiums.

The good news also extended to pending sales, which once again rose in March 2009 to 817. The last time pending sales climbed over 800 was in March 2006, when pending sales also were reported at 817. The total of 817 was 21 percent higher than the 679 pending sales reported in March 2008.

According to statistics from the Mid-Florida Regional MLS for members of the Sarasota Association of Realtors®, 645 single family homes and 175 condominiums went under contract in March 2009, compared to only 471 homes and 208 condos in March 2008.

Pending sales have now exceeded the 500 level for the 15th consecutive month, and the statistic bodes well for the next two or three months, when many of these pendings will become closed sales. Pending sales reflect contracts executed by buyers and sellers during the month. The report continues to reflect a steady, strong pattern, and indicates buyers are more active in the Sarasota market even in the face of difficult economic times.

“We believe the current climate of historically low interest rates, major incentives for first-time homebuyers, and the many other government programs designed to stabilize the economy and the housing industry is all having a very positive impact,” said 2009 SAR President Bill Geller. “Every downturn is followed by an upturn - we know this to be true historically. We’ve been through a difficult time in the real estate industry, and hopefully we are seeing the beginnings of a new, dynamic era.”

The recently enacted first-time homebuyers’ tax credit of $8,000 will likely continue to boost sales this year, Geller said. Those who meet eligibility requirements and purchase a home this year prior to Dec. 1 are eligible for a tax credit of up to $8,000, and unlike the 2008 tax credit, this one does not have to be repaid.

The median sale price for single family homes rose to $152,125 in March 2009 from $142,000 in February 2009 - a 7 percent increase. The median sales price for condominiums fell to $166,750 in March 2009 from $198,000 in February 2009, for a 15 percent drop.

The median price of all single family homes sold in the last 12 months was $217,000, compared to a median of $299,900 for the 12 months ending in March 2008. For condominiums sold in the last 12 months, the median sales price was $256,000, compared to last year’s figure of $295,000.

Another important market tracker - the absorption rate of properties on the market - continues to track lower than last year at this time for both single family homes and condominiums, as inventories have declined. Absorption rate is the number of months it would take to sell the entire remaining listed inventory in a particular category, based upon the sales for that particular month.

For March 2009, the absorption rate for single family homes stood at 17.1 months, compared to 24.1 months the previous month and 25.1 months in March 2008. For condominiums, the absorption rate was at 21.2 months, lower than the 28.5 months in the previous month, and much lower than the 34.1 months reported in March 2008.

*A 12-month rolling median price is not as susceptible to the volatility that can occur within any particular month, which sometimes results in drastic statistical swings up or down from one month to the next.

Download the full report

A U.S. real estate investment expo held in Beijing, China April 10th - 12th had a great turn out as Chinese buyers took advantage of the discounted U.S. real estate. The Chinese economy is far less affected by the current crisis compared to the U.S. combined with the high savings rate of Chinese households, puts the Chinese buyers in a great investment position. Chinese buyers flocked to the expo to finds ways to take advantage of the situation and buy discounted U.S. real estate.

Exhibitors showcases new developments from all over the U.S. as well as discounted resale and government auction solutions. Central Showplace interviewed buyers show particularly strong interest in Florida and Texas. One Texas developer used China’s own Yao Ming to draw crowds of attention and making front page of a local newspaper.

The three-day event concentrated on investment potential of U.S. real estate. Despite the strong Chinese economy buyers were interested in diversifying investments. While other were drawn by the investment U.S. green card opportunities available though the EB5 program. Investors say this is a great time to participate in an investment immigration U.S. green card because the underlying property is so heavily discounted.

More images from the China-USA real estate expo visit our photo gallery

The frenzy is consistent with comments by Lawrence Yun, National Association of Realtors chief economist, “A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas, with a smaller portion of new homes in the sales mix.”

Many analysts believe that the U.S. government plans are starting to turn around the U.S. real estate market. “Over time, lower mortgage rates should help to improve conditions in the housing market, whose persistent weakness has had a major impact on economic and financial conditions more broadly,” Bernake said.

Forecast by the mortgage bankers’ group raised its 2009 home-loan originations by $800 billion to $2.78 trillion last month. Refinancing will increase to $1.96 trillion in 2009 and purchase originations will total $821 billion. This is evidenced by a surge of refinancing and low interest rates sent homeowners to apply for new loans.

For foreign investors the interest shown by the Chinese buyers is definitely a sign that this is the right time to take advantage of the U.S. real estate discounts.

More images from the China-USA real estate expo visit our photo gallery