Analysts report that the blockbuster rally in property stocks is beginning to sputter as investors grow increasingly concerned about such global events as the unrest in the Arab world and the recent earthquake and tsunami in Japan.

As of Tuesday’s close, the Dow Jones Equity All REIT Index had posted total returns of 4.6 percent for the year — an about-face from the last couple of years when REIT stocks routinely outpaced the overall stock market.

In the first quarter of 2009, investors began pouring cash into REIT stocks on account of their high dividends. Investors also reasoned that the values of commercial properties would gain as rents and occupancy levels climbed in the recession’s aftermath.

Now, however, more and more REIT investors are moving to the sidelines on concerns that global events could have a negative impact on future REIT profits. Hessam Nadji, managing director of research at Marcus & Millichap, says, “It’s not surprising to see this break in the outpacing of REITs” given the long run of past gains.”

It is interesting to note that hotel REITs were the biggest laggards in this year’s first quarter, posting returns of negative 1.24 percent. They were the top performers last year with gains of nearly 20 percent.

http://online.wsj.com/article/SB10001424052748703461504576230943313676276.html

The nation’s five largest banks met with government officials and state attorneys general on Wednesday to resolve allegations of wrongdoing in mortgage lending and lay the framework for new foreclosure rules. Both the banks and state attorneys general have come up with proposals in changes to mortgage servicing to help improve the system but now they must hash out a settlement.

The five banks participating in Wednesday’s talks were Bank of America, Wells Fargo, Citibank, Chase, and GMAC.

Scant details were released about what the talks on Wednesday centered on during the meeting, but one thing officials did say was that the settlement was going to take a long time.

“Obviously this is a very large set of issues, and it’s going to take some time to work through,” said Thomas J. Perrelli, associate U.S. attorney general.

Government officials and regulators have been seeking solutions to prevent future lending abuses after the “robo-signing” scandal set off last fall, which led to reports of foreclosures that were done without proper reviews of paperwork.

In proposals submitted prior to the meeting, regulators and state attorneys general have called for banks to include mortgage principal writedowns as part of the proposed settlement.

However, banks have argued that cutting the mortgage debt of foreclosed home owners would create a moral hazard and prompt more home owners to default in order to get a better deal.

“Principal writedown for people who could pay their mortgages? Yeah, that’s off the table,” JPMorgan Chase CEO Jamie Dimon told reporters after the meeting.

Analysts say lengthy negotiations could work in the banks’ favor.

“The banks’ strategy is to run the clock,” speculates Adam Levitin, a Georgetown University law professor. “The chances of a settlement that meaningfully reforms mortgage servicing and makes the banks pay an appropriate price for illegal conduct are rapidly slipping away.”

About two million households in the U.S. are in foreclosure.

Banks are expected to face fines and penalties following the upcoming release of a report by the Federal Reserve, the Office of the Comptroller of the Currency, and other banking regulators that is to further outline lending abuses. Any fines and penalties imposed would be separate from any monetary settlement that results the state attorneys general meetings.

http://www.realtor.org/RMODaily.nsf/pages/News2011033104?OpenDocument

By Robert Freedman, senior editor, REALTOR® Magazine

You often hear talk within real estate about the shadow inventory that looms over markets. These are the homes that are at risk of going into default or are already owned by the banks and that can come onto the market at any time. They pose a problem because a flood of these properties can put enormous downward pressure on prices as inventories rise far above what can be absorbed by demand. Of course, the properties tend to sell for quite a bit less than other properties, and that’s good for buyers, particularly investors who can scoop up properties in bulk. But the discount inventory isn’t friendly to sellers whose properties have to compete with them.

All this notwithstanding, there really isn’t a hard and fast rule of what properties actually comprise the shadow inventory. This lack of definition is important, because one analyst who reports a big, scary number in the news might be thinking something very different than another analyst who uses very different assumptions. So, whether 7 million properties are looming over markets or something closer to 2.5 million is an important distinction.

To get a handle on what properties NAR considers part of the inventory, I sat down with NAR Research Economist Selma Lewis. In our 5-minute video interview, she walked me through how she calculates the inventory size. She also talked about the pace at which banks appear to be unloading their properties.

What it all boils down to is opportunity. After getting off to a very slow start, banks appear to be looking at the short-sale portion of the inventory differently than they did before and want to get them done. You would know whether that’s actually happening in your market or not, but that appears to be the direction in which banks are heading now that the short-sale guidelines from the federal government (and Fannie ad Freddie) are in place.

So, with these and other shadow-inventory properties looming over markets and selling at a discount, there’s a place for you to help strapped sellers and hopeful buyers. But it helps to start with some concrete numbers on the inventory, and that’s what NAR Research has tried to provide.

http://speakingofrealestate.blogs.realtor.org/2010/06/29/shadow-inventory-how-big-what-opportunities/

The National Association of REALTORS^® today urged Congress to move cautiously when reforming government-sponsored enterprises Fannie Mae and Freddie Mac.
 
Reforming America’s housing finance market can only be achieved through a forward-looking, comprehensive approach that supports the housing and economic recoveries, 2011 NAR President Ron Phipps said in testimony before the House Subcommittee on Capital Markets today.

“As the leading advocate for home ownership, NAR strongly agrees that the existing system failed and that reforms are needed; however, redesigning a viable secondary mortgage model that will protect taxpayer dollars and serve the country’s home owners today, and in the future, can only be achieved through a methodical, measured effort,” Phipps said.

NAR is concerned that without a comprehensive plan for reforming the secondary mortgage market, proposed legislation to quickly constrain Fannie Mae and Freddie Mac before an adequate replacement secondary mortgage market mechanism is established will further disrupt the still fragile housing market recovery.

“REALTORS^® agree that increasing private capital in the mortgage finance market is necessary for a healthy market and for reducing the government’s involvement; however, proposed legislation that relies only on private capital to operate the secondary mortgage market will slow, if not stop, the housing and economic recovery,” he said.

Phipps testified that the pendulum on mortgage credit has already swung too far in the wrong direction and is hurting consumers and the economy. He added that quick decisions aimed at punishing certain market players will only punish the taxpayers by constraining their ability to access affordable mortgage financing, and that making it harder for those who can afford a safe mortgage does not further the goals of the recovery.

“Home ownership is a pillar of our economy. NAR research shows for every two homes sold, a job is created, providing needed revenue to both our state and local economies. This must be considered when debating the future of federal housing policies,” said Phipps.

He added that overreaching rules, like the qualified residential mortgage (QRM) exemption, could further curtail access to affordable credit and will only slow economic growth and hamper job creation.

“The QRM is likely to shape housing finance for the foreseeable future, and we believe that Congress intended to create a broad QRM exemption from the 5 percent risk retention requirement to include a wide variety of traditionally safe, well-underwritten products,” Phipps said. “Congress chose not to include a high down payment among the criteria it specified in the Dodd-Frank Act. A poor QRM policy that does not heed their intentions will only increase the cost and reduce the availability of mortgage credit.”

Source: NAR

http://www.realtor.org/RMODaily.nsf/pages/News2011033102?OpenDocument

Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.

A home under construction in Austin. The number of new homes in the pipeline nationwide is quite low.

From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”

Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company’s client list includes virtually every major homebuilder and bank — from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC).

The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory — the key metric in determining whether a market has a surplus or a shortage of new housing.

Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. “If we had anything like normal levels of buying, those houses would sell in 2½ months,” says Castleman. “We’d see an incredible shortage. And that’s where we’re heading.”

If all the noise you’re hearing about housing has you totally confused, join the crowd. One day you’ll read that owning a home has never been more affordable. The next day you’ll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it’s hard to know what to think. Even Robert Shiller and Karl Case can’t agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing’s future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: “The lack of new home building is a huge help that a lot of people are ignoring,” says Case. “People think I’m crazy to be optimistic, but housing is looking like the little engine that could.”

To see where real estate is truly headed, it’s critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled “Is the Housing Boom Over?,” this writer’s analysis found that the basic forces that govern the market — the cost of owning vs. renting and the level of new construction — were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals — only now they’re pointing in the opposite direction.

So let’s state it simply and forcibly: Housing is back.

http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/?section=money_realestate&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_realestate+%28Real+Estate%29