Posts Tagged ‘distressed properties’
Is a Vacation Home Out of Your League? Not Necessarily…
Posted by Sibet B Freides in Real Estate Economics, Real Estate Sales, Real Estate Trends on April 26th, 2011
Have you been dreaming of a vacation home? Are you resigned to the idea that the current market is making your dream impossible? Think again!
Second homes/vacation/pre-retirement homes are priced right. If you were even remotely thinking of buying, there will probably never be a better time. Prices are reduced, and many distressed deals are being purchased at .30 cents on the dollar.
Conversely, beware when purchasing distressed properties because you won’t know the future of the project. Is there an active HOA to manage finances and other issues? What happens if an investor buys the project? How would the future inventory be priced? Unfortunately, along with affordable pricing comes a lot of unknowns.
At Idea Associates, most second home purchases we are seeing for our clients are cash deals. Anywhere from downsizing to Intown Condos to planned retirement housing in second home neighborhoods – many are bought with cash. The price is lower so buyers can afford to pay with cash, especially since most can’t get financing anyway with banks’ new stringent policies.
With the future so unsure, most buyers don’t’ believe they are making money in investments for these second homes, so they are choosing to buy something they want for the future instead.
Have you personally considered taking advantage of the prices and buying a second home? If you’re a builder, developer or agent – what are the trends you are seeing?
I want to share with you a quick excerpt about Federal Reserve Chairman Ben S. Bernanke. He spoke at the Economic Club of New York last week about the policy on commercial loans. Perhaps this will keep commercial real estate from dipping s far as residential did.
While I am on the topic of bank lending, I would like to add a few words about commercial real estate (CRE). Demand for commercial property has dropped as the economy has weakened, leading to significant declines in property values, increased vacancy rates, and falling rents. These poor fundamentals have caused a sharp deterioration in the credit quality of CRE loans on banks’ books and of the loans that back commercial mortgage-backed securities (CMBS). Pressures may be particularly acute at smaller regional and community banks that entered the crisis with high concentrations of CRE loans.
In response, banks have been reducing their exposure to these loans quite rapidly in recent months. Meanwhile, the market for securitizations backed by these loans remains all but closed. With nearly $500 billion of CRE loans scheduled to mature annually over the next few years, the performance of this sector depends critically on the ability of borrowers to refinance many of those loans. Especially if CMBS financing remains unavailable, banks will face the tough decision of whether to roll over maturing debt or to foreclose.
Recognizing the importance of this sector for the economic recovery, the Federal Reserve has extended the TALF programs for existing CMBS through March 2010 and newly structured CMBS through June. Moreover, the banking agencies recently encouraged banks to work with their credit worthy borrowers to restructure troubled CRE loans in a prudent manner, and reminded examiners that–absent other adverse factors–a loan should not be classified as impaired based solely on a decline in collateral value.