News
HARP2 saving small % of underwater mortgages
May 10th
The HARP2 program, combined with the $25B bank settlement (providing $20B in loan modifications), will save some underwater mortgages from foreclosure and help long-term market stabilization. However, part of the bank settlement requires banks to adopt standardized (and hopefully more efficient) servicing and foreclosure processing measures. I think better processing, combined with the sheer volume of underwater mortgages is going to keep the short sale floodgates open for quite some time.
According to researchers at CoreLogic, a leading analytics firm, 11.1 million or 22.8 percent of all residential properties in the United States were worth less than the amount their homeowners owed on the mortgages used to purchase them.
The federal government originally rolled out the HARP program in 2009 to help homeowners who were underwater or near underwater. However, the program was recently broadened to reach even more borrowers. Originally, HARP applied to 895,000 underwater borrowers; and now HARP II is expected to help up to double that amount. According to HUD, about 400,000 homeowners have taken advantage of the program since it launched in April 2012…that’s less than 4% of underwater mortgages.
HARP II allows underwater homeowners who are continuing to make payments to refinance their loan. The new program offers a number of advantages over the original HARP loans. First off, there is no loan-to-value or combined loan-to-value restriction on fixed-rate loans with terms of 30 years and under. In other words, it doesn’t matter how upside-down borrowers are on their mortgages. Previously, there was a cap that restricted borrowers who owed more than 125 percent of their home’s current worth from accessing the program. In addition, an appraisal may be waived if a value for the home can be automatically generated, and the borrower only needs to have a 620 FICO score.
There are three main components to qualifying for a HARP II refinance loan. The first requirement is that the loan must be owned by either Fannie Mae or Freddie Mac. Second, the loan must have been sold to Fannie or Freddie before June 1, 2009. Third, a HARP II refinance must benefit borrowers in at least one of four ways:
- Reduce the loan’s monthly principal and interest payment.
- Reduce the loan’s interest rate.
- Reduce the loan’s amortization term.
- Transition the loan to a more stable type of loan. (i.e. interest-only to fully-amortizing, adjustable-rate to fixed-rate, 30-year to 15-year).
Flat news at the USD Residential Real Estate Conference
Dec 15th
We attended this years 12th Annual Residential Real Estate Conference at the University of San Diego and here is a quick summary of the event.
For both California and San Diego, the forecasts for 2012 are predicting only a slight decrease in the number of distressed homes and flat prices due to
- Low consumer confidence
- Tough credit qualifications
- Lack of hiring by employers.
We are not yet at a long term equilibrium in home ownership rates and many more “strategic” defaults are in the pipeline for the banks & a higher % of distressed inventory is selling as short sales vs. REO. This strategy is helping banks minimize their losses and are processing the short sales in half the time.
At GII We can attest to all of this through our deals. It appears that not only will our single-family renovate and sell strategy fit the market conditions in 2012 it may be time to start buying and holding more properties.
Highlights from Fannie Mae chief economist Doug Duncan, PhD:
- New housing starts at long term rate for household formation by 2015
- 20% of us home values are underwater
- 0% growth in small business hiring in 2012
- 1.6% growth in US GDP in 2012
- Gdp is at prerecession levels but employment has not recovered and will remain at same level through 2012
- 75% of americans think economy is headed in wrong direction
- Reaching levels of historical % of ownership and rental properties
- Long term home ownership level expected to be 65%
Highlights from USD Assistant Professor Ryan Ratcliff, PhD:
- 12% unemployment rate in CA
- SD nonfarm unemployment increased 7% and has only declined 3%
- CA average resale home price down 5% year over year
- SD resale prices have only declined slightly year over year
- $100-300k is the price range of most distressed sales in 2011 in San Diego
- Best CA employment gains were in high tech and business services, worst sectors were manufacturing and construction.
Highlights from USD Associate Professor Alan Gin, PhD:
- Best SD employment gains were in health care services, admin. and support services, real estate and hospitality (theme parks)
- SD gained 24k jobs in 2011
- SD unemployment rate dipped just below 10%
- Gin’s local consumer confidence indicator is down 2% in SD
- Job growth in SD expected to be 15-20k in 2012
- 5k home and multifamily units authorized in 2011 – up from 3k in 2009 and 3.5k in 2010
- 2.5k of the 5k in 2011 were multifamily (comprised mostly from a couple big projects – this is up 128% from last year
Burnham-Moores Center Presentation Slides
Presentations from the 12th Annual Residential Real Estate Conference,
December 13, 2011:
- Doug Duncan, PhD, vice president and chief economist of Fannie Mae
- Alan Gin, PhD, associate professor at the University of San Diego
- Ryan Ratcliff, PhD, assistant professor at the University of San Diego
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GABHART INVESTMENTS COMPLETES MULTI-PROPERTY FUND AND RETURNS 24% ANNUALIZED TO INVESTORS
Oct 26th
For Immediate Release
SAN DIEGO, Release Date – Gabhart Investments Inc. sold the last property in its first micro fund, Gabhart Real Estate Opportunity Fund Series 1, LLC. The fund was invested in the purchase, rehabilitation and sale of multiple single-family homes over a 13-month period.
The homes were located throughout San Diego County with resale prices ranging from $250,000 to $500,000. All of the properties were bank-owned or short sale purchases with rehabilitation costs ranging from $30,000 to $100,000.
Gabhart Investments is currently managing three active funds focused entirely on 1-4 unit residential properties. “Our strategy with the funds is to minimize risk for our investors by purchasing multiple properties in each fund located in different sub-markets throughout Southern California. Investors benefit from an average of profits from several projects and they are also insulated from a lapse in one sub-market”, says Curtis Gabhart, CEO.
The investor partners in Fund 1 achieved a 22% to 26% (24% average) annual internal rate of return on their capital depending on their investment date. One of the many unique features of the fund is that as each property sells, investors receive a portion of their capital allocated to that project along with estimated profits. “This structure is attractive to our investor partners as it provides short-term cash flow and allows them to reinvest back into another fund or invest elsewhere,” says Nick Walsh, investment manager.
Gabhart Investments is currently partnering with multiple investors in their Series 5 fund. “We’re interested in working with partners that understand our current business plan and share our longer-term goal of expanding into new markets and investments. For example, we are in the process of creating a new fund to invest in first trust deeds within our niche market to provide investors with monthly cash flow and an alternative to our equity partnerships,” says Gabhart.
About Gabhart Investments Inc.
Gabhart Investments Inc., headquartered in San Diego, Calif., is a real estate investment and advisory firm specializing in the fundraising of micro funds for the investments of distressed single & multi-family residences in Southern California. www.gabhartinvestments.com
***The information within this site does not constitute an offer to sell or a solicitation of an offer to buy any securities. Financial results are un-audited company estimates only and are not necessarily indicative of future results which may vary substantially from those set forth herein.
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Esparta Fix and Flip workshop
Oct 24th
We invite you to join us for a free workshop at our newest completed project!
Saturday October 29th from 9am-11am at 9759 Esparta Ct. Santee, CA 92071
Our workshop series covers the 5 F’s of Residential Redevelopment: Finding, Feasibility, Funding, Fixing, and Flipping.
In this workshop we will primarily focus on what many consider to be the most challenging: Fixing!
Some highlights include:
- Our scope of work & budget and how it changed during the project.
- Challenges we encountered during construction.
- Permitting a garage and bedroom/bath additions with the city.
Space is limited, so SIGN UP HERE to reserve your spot!
All those in attendence will recieve a copy of our initial walkthrough packet which can be used to estimate construction costs on your projects.
Light refreshments will be served.
San Diego market & strategy
Jul 14th
The London Group are reputable economic advisors to the San Diego real estate community. Here are some hot points from their latest reports and interviews…along with what we’re doing about it.
-Invest in assets with promise, or those that are stable. Employ a conservative approach and don’t go for the home run just yet. (we are specializing in many small residential projects with a quick turnaround while keeping our eye on the multifamily market for bigger opportunities)
-Purchase in good metropolitan markets – those with diversified economies with limited potential for new supply, growing populations and good quality of life. (sounds like San Diego so we’re staying here!)
-Forclosures have not surged yet in San Diego due to more short sales occurring before property becomes bank owned. They estimate San Diego foreclosures in 2010 to be 10,000, down from peak of 20,000 in 2008. (we are starting to see and pursue more short sale opportunities versus REO)
-27% of all San Diego listings are distressed sales (this is still a large percentage but the key is building relationships with agents and banks to get the best deals before the competition)
-San Diego has added 10,500 jobs so far in 2011, representing a 2% growth rate. (home values are still bouncing around at the bottom because we are not creating enough jobs to give buyers the confidence to come off the sidelines – as a result we are focusing on quality and pricing aggressively for a quick sale)
For more: http://londongroup.com/2011/06/08/dont-let-doom-gloom-cast-shadow-on-housing-market/
