Princess Margaret of Denmark was the fifth child of Prince Valdemar of Denmark and his wife Princess Marie of Orléans. Extensively connected to European royalty, she was a cousin of Queen Elizabeth of England, as well as rulers of Russia, Greece, Hanover and Orléans. She married Prince René of Bourbon-Parma, with whom she would have four children. The couple resided mostly in France but were forced to flee the Nazis during World War II. Escaping through Spain to Portugal to New York, the princess worked making hats while her husband worked at a gas company and her oldest daughter as a shop clerk to make ends meet until the war was over and they were able to return to Paris.
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The Côte d’Azur estate where Princess Margaret and René made their home has recently been listed for sale at a no-reserve auction on May 16th. Overlooking the French Riviera, the one-of-a-kind residence is known as La Carriere. It dates back to the 1920s, a majestic manor house built into the stone walls of a fortress. The stunning villa melds rustic charm with modern luxury, while the walls provide the ultimate in privacy and security. The list price, prior to auction, was $12 million.
Arched windows-and-stone accents give the villa a unique and enduring style. Warm colors on the walls provide an inviting atmosphere. Antique high-beamed ceilings and a majestic fireplace add grandeur to the living room. Five bedrooms and six bathrooms offer plenty of room for family and guests. A spacious kitchen and gorgeous formal dining room are perfect for entertaining. Multiple terraces offer generous views of the Riviera, the Villefranche Bay and the impressive local Cap Ferrat, plus the turrets and ramparts of the castle-like surrounding fortress. The rooftop deck includes a built-in Jacuzzi. The landscaped grounds include lush lawns, mature trees, beautiful gardens, plus a pool surrounded by a stone grotto. The pool complex includes a detached studio.
Côte d’Azur refers to the coastline of the Mediterranean Sea in southern France. One of the world’s first resort areas, it has long been a summer destination for Europe’s royalty, world celebrities, and artists, including Pablo Picasso and Henri Matisse. About half of the world’s super yachts visit the region every summer. With over 310 days of sunshine per year, the 71 miles of coastline and beaches are home to 18 golf courses, 14 ski resorts and 3,000 restaurants.
La Carriere is located in the town of Villefranche-sur-Mer, nestled between Nice and Monaco. In addition to sunny beaches and sparkling waters, the village is known for its well-preserved historic downtown and thriving arts scene marked by numerous galleries, museums and events. Despite all the historic charm and natural beauty, Côte d’Azur international airport is only fifteen minutes away. Other celebrities with nearby villas include Bill Gates, Elton John and Bono. Princess Margaret died in 1992.
Photos courtesy Concierge Auctions. Photos with media permission available at http://bit.ly/toptenmedia.
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SAN FRANCISCO, May 2, 2023 — B+E Director Spencer Henderson is one of commercial real estate’s top retail influencers, as named by GlobeSt. Real Estate Forum.
“These professionals have become experts at handling lease re-negotiations and developing new innovations for touchless environments, while at the same time working tirelessly to ensure that retail properties serve and revitalize their surrounding communities,” said GlobeSt.
“These individuals have had a significant impact on the business as commercial real estate’s Influencers in Retail Real Estate.”
Spencer Henderson
Spencer Henderson is a Director at B+E who specializes in retail net lease sales and 1031 exchanges. Spencer previously worked in various commercial real estate fields with firms such as Sansome Pacific Properties. Before his time with Sansome, Spencer worked for a direct lender, performing due diligence on projected investments from seed funding to the growth stage. He is a licensed real estate salesperson in California.
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Spencer is an active member of ICSC and holds a Bachelor of Science in Business and Managerial Economics from the University of California, Davis where he played Division 1 baseball for four years.
B+E is a modern investment brokerage firm, specializing in net lease real estate. The firm helps clients buy and sell single tenant real estate. Founded by deeply experienced brokers, B+E redefines trading through an intuitive end-to-end transaction platform consisting of user-friendly dashboards and an AI-driven exchange — all leveraging the largest data set in the net lease industry.
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Complementing senior talent with exceptional technology, B+E’s proprietary process affords greater speed, unrivaled transaction efficiencies, and stronger asset value. With offices in New York City, Chicago, Atlanta, Tampa, Charlotte, Orange County, San Francisco, and Dallas, its brokers trade property for clients across the US. B+E allows virtually anyone to confidently trade net lease real estate.
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Joseph V. Scorese National Sales Director [email protected] (215) 290-5108
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Why are you just searching for listed properties for sale when the number of distressed, vacant, and “shadow inventory” homes is almost 33 times larger than the national home listing inventory supply?
How is this possible with my 33 number claim? First, upwards of 16 million homes were listed as “vacant” or shadow inventory in the fourth quarter of 2022, as per the U.S. Census Bureau, National Association of Realtors (NAR), and other groups. A vacant home can be defined as a vacation home, unsold new home building inventory (near record levels of new single-family homes and multifamily apartment buildings being built in 2023), distressed or pre-foreclosure properties, or homes held by billion-dollar corporations like BlackRock, Blackstone, or State Street for the long-term that just sit there with no intent to rent it out at present.
Second, there are at least a few million distressed mortgages (FHA loans, especially) currently in forbearance agreements in order to delay the lender’s foreclosure filing actions to bring the total to more than 18.5 million properties. Frankly, I think that the number is closer to 20 million after counting VA, conforming, non-QM, and private money loans, but we’ll just focus on the 18.5 million vacant or distressed home number.
Since 1934, FHA (Federal Housing Administration) has insured more than 40 million loans nationwide. Today, a relatively high percentage of homebuyers still rely upon FHA to purchase their homes partly due to the much lower interest rates and easier loan qualification guidelines such as loan programs which allow FICO credit scores as low as 500, debt-to-income (DTI) ratios up to 50% or higher, and loan-to-value (LTV) options near 96.5% to 100% LTV.
As of March 2023, the national home listing inventory was listed at 562,565 by data provided by the Federal Reserve Economic Data and the NAR. Let’s do the math as follows:
18.5 million distressed or vacant homes / 562,565 listed homes = 32.885 times
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Distressed FHA Loans & Continued Forbearance Extensions
There are three to four times as many delinquent FHA mortgage loans nationwide as compared to the entire national home listing inventory with somewhere near at least a few million distressed FHA loans.
February 8, 2023: Today, the U.S. Department of Housing and Urban Development (HUD) Secretary Marcia L. Fudge announced that, thanks to Federal Housing Administration (FHA) programs, approximately 2 million homeowners with FHA mortgages were able to stay in their homes from the beginning of the COVID-19 pandemic in March 2020 through December 2022 – when doing so was often a matter of life and death. During this period of time amid the pandemic, FHA borrowers whose ability to make their mortgage payments was impaired by the pandemic were able to obtain either a COVID-19 forbearance or a more permanent solution such as a loan modification that allowed them to avoid foreclosure. Source: HUD Secretary Announces Major Milestone of Assisting Nearly 2 Million Homeowners Stay in their Homes
With a few million distressed FHA loans that they admit to and is probably undercounted, it’s no wonder why the federal government wants to keep offering FHA forbearance extensions.
Details of FHA’s COVID-19 Forbearance
Important information about FHA’s COVID-19 Forbearance:
To be eligible for the COVID-19 Forbearance or forbearance extension in the table above, you must request this relief from your servicer on or before May 31, 2023.
You can request a FHA COVID-19 Forbearance for up to 6 months. If needed, an additional 6 month extension may be requested. If you began your initial forbearance on or after October 1, 2021, you are only eligible for the additional 6 months if your initial 6 months forbearance will be exhausted and expires on or before May 31, 2023.
Additional forbearance options may be available to you after May 31, 2023. Your mortgage servicer may provide for a temporary pause or reduce your monthly mortgage payments to allow you time to overcome your financial hardship. An extended forbearance period may be provided to you if you are unemployed and actively seeking employment.
No extra fees, penalties, or interest will be added to your account during the forbearance period.
There are also a significant number of distressed VA and conforming or conventional loans nationwide which are held by Fannie Mae or Freddie Mac in the secondary market that aren’t really being “officially” counted with the most up to date numbers. FHA and VA mortgage loans have both consistently represented close to 10% each of the annual national funded loan market. As a result, these government-backed or insured loans, which typically average close to 0% to 3.5% down payments for FHA, VA, and conforming, are something to keep a close eye on as the economy continues to soften.
The 40-Year Loan Modification Program for FHA Borrowers
Good news: National mortgage delinquency rates dropped 15% in March 2023 while reaching 2.92%, which was a new all-time record low.
Bad news: Millions of distressed mortgages are not being counted as “delinquent” once they enter forbearance agreements with their lender (FHA loans, especially). The national FHA loan default rate reached 12% in February and will likely continue to rapidly increase. Distressed FHA and VA loan investments are some of the best deals out there because they usually have the lowest mortgage rates that you can take over by way of creative seller-financing techniques.
A forbearance agreement is when the lender or mortgage loan servicing company agrees to postpone or delay their foreclosure actions with the delinquent borrower. Sometimes, these foreclosure postponements may last months or years.
On March 8, 2023, HUD issued their Mortgagee Letter 2023-06 with details described as the “Establishment of the 40-Year Loan Modification Loss Mitigation Option” with a stated purpose noted as “This Mortgagee Letter (ML) establishes the 40-year standalone Loan Modification into FHA COVID-19 Loss Mitigation policies.”
Several mainstream media analysts mistakenly described this new 40-year loan proposal offered by FHA as a purchase loan as well. Yet, this is not correct because it’s only for the refinance of currently distressed 30-year FHA loans into longer 40-year loan terms in order to reduce the monthly payments for borrowers. There is no published word about whether FHA will later consider offering 40-year purchase loans for borrower prospects.
Housing and Family Trends
Real estate is a people business, first and foremost. The #1 most important factor for housing trends is related to population trends and household formations for families especially. Without people, there’s no need for housing regardless of the affordable financing offered.
One of the main reasons why people purchase single-family homes is because they’re trying to either build a growing family or the need to house two or three generations of the family under the same roof. You can’t spell “single-family homes” without family in it.
The U.S. has the highest percentage of one-person households in the entire world. A few years ago, one-person households surpassed all other household formations in Canada.
In 2022, only 24% of U.S. households had at least one child under the age of 18. In 1965, upwards of 42% of households had a child under the age of 18.
The Decline of Family Households
Here are some of the published data numbers from sources such as the U.S. Census Bureau, the National Center for Health Statistics (NCHS), Pew Research, and numerous other data sources in regard to individuals and family structure trends:
National overall divorce rate in the USA: 50%+.
The California divorce rate is 60%.
The Orange County, California divorce rate is 72%.
41% of first marriages nationwide end in divorce.
60% of second marriages end in divorce.
73% of third marriages end in divorce.
The average length of a marriage in the U.S. that ends in divorce is 8 years.
There is one divorce every 36 seconds in the U.S. on average; 2,400 divorces per day; 16,800 divorces per week; and 800,000 to 900,000 divorces per year.
The percentage of American men between the ages of 20 and 39 who are now married has fallen by half (35% of men are married as of 2017) since the early 1970s (70% of men were married).
Unmarried parents who live together are more likely to break up than married parents, per the Brookings Institute.
Per the CDC in 2016 through at least 2020, U.S. fertility rates were the lowest ever recorded as fewer couples are having children these days. Each consecutive year over the past five or six years reached all-time record lows.
78% of all households in the U.S. contained one married couple in 1950. Today, married households are below 48%.
In 2010, the Pew Research Center reported that 44% of Americans polled in the 18-to-29 year old age range believed that “marriage was becoming obsolete.”
Divorce rates for people over the age of 50 have doubled between 1990 and 2015, per Pew Research Center.
In 1956, roughly 5% of all babies were born to unwed mothers. Between 2008 and 2016, babies born to unwed mothers were closer to the 40% range.
Upwards of 50% of children in impoverished regions of the U.S. live in homes without fathers.
46% of children live at home with a mother and father who were in their first marriage together.
The average American woman in 1970 had her first child at 21.4 years of age. Today, the woman is near 25.6 years of age.
The U.S. has the highest teen pregnancy rate in the industrialized world.
More than 50% of children are born to unmarried women under the age of 30.
Saving Equity or Creating Newfound Wealth
What are your options as either a homeowner with an ongoing forbearance agreement in place with your lender, a struggling business owner, a commercial property owner and landlord with incredibly high vacancy rates, or as an investor seeking new opportunities if and when the economy suddenly pivots and we enter a more clearly visible deeper recession? If home values are more likely to be higher today than later this year, is it now a good time to sell? If so, where will be your next destination for a home?
Generally, loss of income is the #1 reason why homeowners lose their homes to lenders or mortgage loan service companies in foreclosure. The #2 reason why homeowners walk away from their home is when the mortgage debt exceeds the current market value and it’s upside-down or underwater. This is when short sale options become more prevalent.
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The real risk associated with homes purchased in recent years is related to the relatively low down payment averages for first-time buyers and others that were leveraged between 96.5% and 100% loan-to-value at the close of escrow. Effectively, these homebuyers were upside-down with negative equity at closing when factoring in the potential 6% to 8% closing costs to resell the homes after paying real estate brokerage commissions, title, escrow or attorney’s fees, transfer taxes, third-party inspection reports, and possible seller credits towards the buyer’s closing costs.
In 2022, first-time homebuyers represented 34% of all home purchases across the nation, as per the NAR. During the fourth quarter of 2022, purchase loans comprised 78.6% of all FHA mortgages funded. With a high percentage of FHA borrowers reported as first-time homebuyers, their average down payments were likely close to 3.5% or below. What happens if home values fall 5%, 10%, or more in value over the next year?
If you’re currently in a distressed mortgage situation as a homeowner or investor or are searching for discounted off-market listings as a buyer with very creative and flexible financing solutions, I can show you effective ways to save your equity or create newfound wealth with my mortgage and investment business named Realloans (Real Estate Loans and Creative Sales) and my real estate group linked here: So-Cal Real Estate Investors.
Rick Tobin
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
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Mortgage rates are rising again, causing the average homeowner to pay $800 a month more than they would have just a year ago, according to REALTOR.com.
The interest rate for a 30-year fixed mortgage is 6.54%, while the rate for a 15-year fixed mortgage is 5.75%, per Mortgage News Daily. Even Veterans Administration (VA) loans aren’t getting much relief, with the 30-year fixed rate coming in at 5.95%.
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While these numbers aren’t as high as they were in November 2022, they still present significant financial hurdles to would-be homebuyers, REALTOR.com reported.
Because prices are high, people need to borrow more money than before. Hence, people who could ordinarily buy a home are choosing to rent instead; this is good news for real estate investors.
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The last time mortgage rates were this high was 2008. With housing prices 42% higher than they were before the COVID-19 pandemic, this is a serious situation for many aspiring homeowners.
Investors and traditional buyers alike are encouraged to shop around for concessions, special programs, and to explore multiple lenders. However, some investors believe that the state of the economy will once again cause mortgage rates to increase.
Stephanie Mojica
Stephanie Mojica, writer of How One Writer Shifted From Settling for $12 an Hour to Prospering at Over $90 an Hour and shorter books such as Quick Answers to Frequently Asked Credit Questions, is an award-winning journalist with publications such as USA Today, The Philadelphia Inquirer, San Francisco Chronicle, and The Virginian-Pilot, among many others. She helps executive coaches, business consultants, business owners, attorneys, and other decision makers generate more money online and become the go-to expert in their field by guiding them step by step through the process of writing and publishing a book.
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The entrepreneur world has grown massively in the last 5 to 10 years. As someone who’s been in the field a long time, I’ve learned that there are so many ways to grow as an entrepreneur online. Something that I do is help entrepreneurs write their books in order to market themselves and their services.
A well-written book can dramatically increase the number of people who say yes to your product or service as an entrepreneur — and licensed agency brokers fall into this category.
A published and popular book can be huge for marketing in your field, because you can have the financial joy of standing out as an expert in your field rather than just being another number in the crowd. There are many reasons why entrepreneurs should write books. But I’m going to go over some of the most important reasons you should as a business owner.
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Clients Get to Know You
As an avid reader, there have been many times that I’ve discovered someone new in the entrepreneur world simply by picking up their book in the store. By writing a book, clients can get to know you before your pitch. They hear your story and come to see how your expertise can help them achieve what they want in life. Being a published author helps create trust between you and your potential client. In the long run, writing a book will help you have a great return on investment.
Expert in the Field
Social media is where entrepreneurs go to sell their services and market themselves as the experts in their field, but this can be altered and manipulated. However, having a book can help really set you apart in your field because it shows you care enough about the topic to write about it. This again creates trust between you and your potential client, because it shows you know what you’re talking about and you actually have the expertise and knowledge to back it up.
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Visibility in the Crowd
There is a whole world out there in the book and publishing community that might not be on social media, and this is where you can find a whole new crowd of clients. Writing a book in your field can be very beneficial, because there can be so much good marketing for you. If the media ever needs an expert on a topic like yours, they will come to you because they trust experts who write books. By having a book in your name, getting media marketing can be so easy.
Get a Book Coach
If you’re looking into writing your first book as an entrepreneur and are not sure where to start, check out some of my amazing resources as a book coach. Having a book coach makes it easy to get started and get organized for your future successes!
Stephanie Mojica
Stephanie Mojica, writer of How One Writer Shifted From Settling for $12 an Hour to Prospering at Over $90 an Hour and shorter books such as Quick Answers to Frequently Asked Credit Questions, is an award-winning journalist with publications such as USA Today, The Philadelphia Inquirer, San Francisco Chronicle, and The Virginian-Pilot, among many others. She helps executive coaches, business consultants, business owners, attorneys, and other decision makers generate more money online and become the go-to expert in their field by guiding them step by step through the process of writing and publishing a book.
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In a Move to Increase Proceeds and Accessibility, Osage County Moves to Virtual Foreclosure Auctions
Bid4Assets, a leading online marketplace for distressed real estate auctions, has been selected by the Osage County, OK sheriff’s office to conduct the state’s first-ever online mortgage foreclosure sale. The sheriff’s office has cited maximizing excess proceeds for defendants and eliminating long travel times for auction bidders as the reasons they chose to transition from in-person to online auctions.
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“Osage is the largest county in the state, which creates a challenge when it comes to our foreclosure auctions. Some bidders have to travel an hour to the courthouse if they want to participate,” said Osage County Sheriff Eddie Virden.
“With our move to a virtual auction format, all citizens can now place their bids from anywhere, on any computer or mobile device. We want bidders to feel confident in this process, so we selected a veteran of the industry with over 20 years of experience. We recommend bidders use the links we provide on our sheriff’s website to ensure you’re on the correct platform.”
Bid4Assets collaborated with sheriffs and foreclosure attorneys to pass Senate Bill 976, which was signed into law by Governor Kevin Stitt on May 25, 2022. The bill gave Oklahoma sheriffs the option, but not the mandate, to conduct foreclosure auctions online. Several other sheriffs’ offices are preparing to move their foreclosure sales online following the bill’s passage. “Online auctions increase participation and sale proceeds by opening the process to more bidders,” said Bid4Assets President Jesse Loomis.
“Virtual sales are more efficient, will scale with rising foreclosures and come at no cost to counties. We have several other pending contracts in Oklahoma and expect virtual sales to quickly become the new normal.”
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When sheriff’s sales have strong bidding, excess sales proceeds are used to pay off the entire debts associated with a property and the defendant can claim those excess proceeds. In other states like Pennsylvania, sheriffs who have transitioned online with Bid4Assets have expressed a significant increase in excess proceeds to the benefit of their communities.
Bid4Assets began the process with Osage County working alongside Captain William “Willy” Hargraves, who was involved in a fatal car accident before the project could be completed. Those wishing to donate to Captain Hargraves’ family can do so via a GoFundMe.
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Many fear a recession looming in the coming months that will negatively affect real estate prices. In a typical recession, house prices usually drop. According to the Joint Center for Housing Studies at Harvard University, housing prices dropped in four out of five recessions that have occurred since 1980. During those recessions, house prices dipped on average about 5% for each year the economy remained down; However, in the Great Recession in 2008, the average price dropped by nearly 13%.
During the recession of 1980, inflation started to skyrocket, much like we have been experiencing in this past 12 months. However, there are vast differences between the recession of 1980 and the possible one to come. First, the population in the United States in 1980 was just over 226.5 million people. Today, there are over 333 million people according to the US Census Bureau. Everybody needs a place to live, and supply has not kept up with demand. Many cities have dissuaded builders by imposing large fees as well as taking too long to issue permits. This could be due to downsizing of government staff, but another phenomenon that was not as prevalent in 1980 as compared to today is that neighbors have a lot more say in what goes in their neighborhood. When there are too many roadblocks, many builders shift to fix and flip.
In addition, there is still a large supply chain issue left over from Covid. Also, costs of materials and labor has substantially increased. Lastly, finding qualified trade workers has been quite a challenge for builders.
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One of the major differences in the early 1980s as compared to today is the interest rate on mortgages. By 1981, mortgage rates were as high as 19%. Although current rates at 6% seem incredibly high [since they bottomed out in the 2+% range during Covid], they are still less than a third of what they were in 1981. It is true that house prices have substantially increased since 1981, but so have wages.
Some factors that affect the demand side of home purchases are that millennials are coming into the market in droves. These same millennials witnessed their parents’ difficulties during the Great Recession, but enough time has passed, and millennials are now in positions of starting families as well as becoming a strong impact in the workforce.
Probably one of the most overlooked area of why demand should at least come close to supply [to keep residential real estate prices relatively stable] is that there were millions of homeowners who refinanced when rates were very low. These homeowners will not be able to replace their current mortgage rate for the foreseeable future.
Thus, there has to be a compelling reason for these people to sell their house. Currently, the Fed is trying to tame inflation by raising interest rates. This has started to work, albeit slow and not strong enough. Anyone buying groceries will say that true inflation is closer to 15% rather than the 6% the government is touting.
Raising the interest rates usually causes a recession, as costs of production are impacted. If a recession then causes interest rates to decline [due to lack of demand and falling inflation], we may see the refinance market pick up again and more mobility of home buyers driving up demand again. So far, there has been a slowdown in sales volume. This, in combination with slower refinances, has caused many mortgage companies to lay off workers. For the private lending industry, this should cause volume to move in their direction.
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Private lending use to be the last resort for many borrowers, as the costs were higher for these borrowers; however, with the smaller pool of lenders due to the layoffs as well as mainstream banks making it harder for borrowers to qualify due to the uncertainty of the economy, private lenders have moved up the chain with regard to the choice of lenders for those needing to borrow. In addition, we may likely see more bank regulations due to the downfall of Silicon Valley Bank and Signature Bank.
The Fed wants to exude stability in the market, so they will probably clamp down on what banks are allowed to lend on as we saw the Great Recession produce new regulations via Dodd-Frank.
There may be a drop in real estate prices over the coming months, but it most likely will not be what we saw in the Great Recession, as that was a credit issue, where the banks were too lax in giving loans to borrowers who may not have had the income to repay. Current regulations make lending much stricter, so borrowers have to show the ability to repay the loan. Thus, even a coming recession should not see a tremendous drop in real estate prices.
ABOUT EDWARD BROWN
Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company.
Additionally, Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.
Edward Brown, Host The Best of Investing on KTRB 860AM The Answer on Saturdays at 8pm and Sports Econ 101 on Saturdays at 1pm on SiriusXM channel 217 21 Pepper Way San Rafael, CA 94901 [email protected]
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Did you know that the median Southern California and statewide home prices have fluctuated between the $750,000 and $850,000 range over the past year? Generally, the housing price-to-household income for California has varied between 8x to 10x (times or multiplied) for home prices as compared to the qualifying household income. For example, a home with a purchase price of $800,000 is 10 times (10x) the combined household income of $80,000.
While California is usually one of the most expensive places in America to own or lease a property, it’s still “affordable” in comparison to these Top 10 most expensive home price-to-household income locations on the planet which are as follows:
#1 Shanghai, China – 46.6x #2 Beijing, China – 45.8x #3 Hong Kong, China – 44.9x #4 Colombo, Sri Lanka – 43.7x #5 Beirut, Lebanon – 41.3x #6 Shenzhen, China – 40.1x #7 Manila, Philippines – 37.6x #8 Guangzhou, China – 37.3x #9 Mumbai, India – 36.6x #10 Ho Chi Minh City, Vietnam – 34.5x Source: Numbeo – Property Price Index 2023
The Top 10 priciest home regions have both skyrocketing home prices and annual wages that are extremely low which makes California and the rest of our nation seem reasonably priced when reviewing home price-to-income ratios.
The California economy is now the 5th largest economy in the world. Our economy is on a growth pace that may soon make it the 4th largest economy if our state surpasses Germany. We attract investors and new residents from around the world such as from Asia, Europe, Mexico and Latin America. In fact, there are more Hispanics or Latinos in California as of 2015 than any other race or ethnicity.
The Southern California (So-Cal) region within our state consists of upwards of 24 or 25 million residents located in 10 counties which include: Imperial, Kern, Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, San Luis Obispo, and Ventura.
1. Home values over the next year could fall, be flat, or even increase if the Fed is forced to pivot and start rapidly cutting rates again. Be prepared for any and all investment possibilities and opportunities.
2. Home equity represents the core wealth: The bulk of a homeowner family’s overall net worth comes from the equity in their primary residence. The average US homeowner at retirement age has approximately 83% of their overall net worth tied up in the equity in their home and pays monthly expenses from the remaining 17% of overall net worth that’s held in checking, savings, or pension accounts.
3. Riverside-San Bernardino-Ontario, CA Metro Area (March 2023)
Home Value: $542,000
Median Household Income: $77,095
Home Price to Household Income Ratio = 7.03x (5x is national avg.)
Home Value Growth (Year-over-Year or YoY): 3.0%
For Sale Inventory: 7,511
Sales Inventory Growth: 71.1% YoY
Price Cut Share of Listings: 16.8%
Rent for Apartments: 2,494/mo.
Monthly House Payment: $3,426 (PITI)
Rent for Homes: $3,243/mo.
Monthly Difference Between Home Mortgage and Rent: $183
Listing Inventory as % of All Homes: 0.5% Sources: Realtor.com, Zillow, and US Census Bureau
“The difference between monthly mortgage payments and rents hasn’t been this big since 2006, around the peak of the housing bubble that led to the Great Financial Crisis, according to the National Multifamily Housing Council. Assuming a 10% down payment, the group found that a monthly payment on a 30-year fixed-rate mortgage was $1,176 more than renting an apartment up to the end of 2022. The buy-to-rent premium hasn’t been this steep since the third quarter of 2006.” – Business Insider
The exception to this current massively widening mortgage payment-to- rent trend is Riverside Metro with only a $183 monthly price difference.
4. Lack of a sufficient down payment is the most common reason why an individual or family can’t qualify to purchase a home unless they can qualify for a VA loan or even FHA loan with $0 down after factoring in seller credits and gift money. There are at least 311 down payment assistance (DPA) programs available to California residents and upwards of 2,300 DPA programs available nationwide, as per the Down Payment Resource group. Yet, many people are only familiar with the California Dream DPA program that had $300 million already committed to buyers in just the first 11 days before it shut down. Originally, the plan was for California to offer first-time buyers up to $500 million, but the state had to use $200 million of those earmarked funds to cover other budget deficits.
5. Short-Term Rentals: Coachella Valley had the highest March/April 2023 ADR (Average Daily Rent) of the top 50 short-term rental markets partly due to the Coachella and Stagecoach music festivals; U.S. short-term rentals earned over $62 billion in revenue in 2022, which was a 25% year-over-year increase; San Diego was the most profitable Airbnb metropolitan region in the world in 2021; Big Bear City was ranked #8 in the entire world for highest-grossing Airbnb revenue in 2020; and Moreno Valley was the most profitable Airbnb city in the U.S. in 2019.
Investors can qualify with as little as 15% cash down using DSCR (Debt Service Coverage Ratio) programs where the current or proposed rents cover the proposed monthly mortgage payment (PITI and HOA, if applicable) on an EZ-Doc type of basis.
Flipping homes or paper: With even shorter term real estate options that may be be completed within hours or days, you can either flip properties or paper such as lease-options, wholesale purchase contract assignments, seller-financed notes or deeds, or partial income streams from beneficial or lender interests in the promissory note (“IOU for debt”) or trust deed.
6. Distressed mortgage and rental property data from 2021. Today’s 2023 numbers are probably significantly worse and rarely published.
An estimated 15 million people lived in households that owed more than $20 billion in unpaid rent as of July 2021.
7.43 million rental property units were not current.
5.95 million owner-occupied housing units weren’t current.
8.71 million lived in owner-occupied homes where the homeowners have little or no confidence in their ability to pay their mortgage.
12.71 million lived in rental properties where the heads of household had little or no confidence in their ability to pay their rent.
Serious mortgage delinquencies were up 20% in July from June and were the highest recorded since 2010.
By mid-August 2021, 3.9 million homeowners were in active forbearance, which represented 7.4% of all mortgages nationwide and $833 billion in total unpaid principal.
An estimated 11.6% of all FHA and VA loans were in active forbearance. Sources: U.S. Census Bureau and Black Knight Mortgage Monitor
7. 2023 Consumer Debt Data and Trends: It’s claimed that upwards of 15,000 cars are repossessed every single day here in the U.S. alone. Mortgage and all consumer debt and payment rates and fees all just hit record highs at the same time. Average DTI (debt-to-income) ratios for existing mortgage borrowers reached an all-time record 44% DTI and FHA defaults reached almost 12% in February 2023.
Average interest rates (March ‘23): – Credit Card: 24.5% – Used Cars: 14.0% – New Cars: 9.0%
Meanwhile, we have record levels of debt: – Total Household Debt: $16.5 trillion – Auto Loans: $1.6 trillion – Credit Card Debt: $986 billion – Student Loans: $1.6 trillion
The interest on student loans has been suspended since 2020 due to Covid, but is set to resume later this year. How many defaults will happen?
8. Understanding Credit: FICO scores range from 300 to 850. The higher the score, the better the credit grade. The three main credit bureaus or credit reporting agencies (CRAs) include Experian, TransUnion, and Equifax. The credit scores are derived from the following factors: ● Payment history—35% ● Amount owed—30% ● Length of credit history—15% ● New credit—10% ● Types of credit used—10%
New Credit Score Models: The average American has a FICO credit score near 690. In October 2022, the Federal Housing Finance Agency (FHFA) announced the approval of a new credit score rating system named FICO 10T and VantageScore 4.0 for use by Fannie Mae and Freddie Mac. FICO 10T and VantageScore 4.0 will consider payment histories from rent, utilities, and telecommunication bills. Yet, a rental payment history can be very bad for tenants on Covid moratoriums with years of no payments.
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9. Generational Home Purchase Trends: Between 2015 and 2022, the Millennial generation was ranked #1 overall as the largest generation of home buyers and tenants. Now, Baby Boomers (born between 1946 and 1964) take back the lead as the #1 home buyers partly due to having more cash and equity available from other properties. Senior housing and reverse mortgage opportunities are rapidly increasing as well.
“Baby boomers now make up 39% of home buyers – the most of any generation – an increase from 29% last year. Generation Z now makes up 4% of buyers, with 30% of Gen Z moving directly from a family member’s home into homeownership. When relocating, all generations are moving farther distances, with younger boomers (ages 58-67) moving the greatest distance at a median 90 miles away.” – National Association of Realtors
10. Ballooning Commercial Loans: $270B of commercial real estate loans are set to mature in 2023, which is an all-time record for loan maturities. An estimated $900 billion in commercial property loan debt may come due within just the next two years. If so, upwards of $630 billion dollars’ worth of commercial loans may come due in 2024 which would be 2.333 times the all-time ballooning commercial record loan set this year. How will this potentially affect commercial property value trends?
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details.
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