Archive for April, 2011


Tuesday, April 19th, 2011

     The Associated Press posted an article today concerning economic data coming out for the month of March that shows housing starts in the West are up 27.6%, you would think that is good news and to an extent it is.  But the bigger picture is that just the month before in February, housing starts were at a 5 decade low!  Even if housing starts were up an amount double the statistic, it is still woefully lacking to have any meaningful effect on the economy.  Housing starts are still at a lower point right now than during any recession in the 80′s and 90′s.

     Housing starts are an indicator of the economy that effects the Note business the most in my opinion.  If housing starts are up, that means in 6-9 months those houses will be hitting the market for sale.  Builders are looking to make their profits by selling homes and have forecasted that the market will be favorable for them.  Single Family Homes (SFR’s) are comprising about 80% of the new home construction, then condominiums and apartments comprise the rest, which were also up, but again still at a very, very slow pace.  Notes secured by Trust Deeds are carried back on real estate, most notes carried by private parties are on SFR’s.  The more housing starts, the more housing sales, the more potential for Notes from sales in general.

     Real estate construction can support jobs, for each new home built, it supports 3 new jobs for a year.  California has a big part of its economy based in the real estate industry.  Housing traditionally has accounted for 15-20% of overall economic growth, however in this post-recession period since 2009 on into 2010, housing only accounted for 4%.  This is saying much about the true nature of the slow recovery we are experiencing.   No true recovery can take place unless housing and real estate picks up.

     Millions of foreclosures have kept the real estate market down and continue to do so.  Most economists still predict that 2011 will be another year of slow housing sales, also prices to remain down, even slipping a bit more before a modest recovery takes hold.  

     Housing starts being up for the month of March can be a good sign, but only if the trend continues.  The banks are still in the midsts of filing so many foreclosures that the market for those new homes which will be completed in 6-9 months from now is likely to be not be as favorable as the builders are predicting, which may cause some builders to go bust and prices to remain depressed.

     If you are thinking of selling your seller-carryback Note in this environment, all the more important to have the note well secured by having the most cash down payment that your buyer/borrower can afford, at least 20-25% cash down and have your note be fully amortized, where the balance reduces each month as the payments are made, making the note safer as time goes on.  You might consider having the real estate tax payments impounded with the note payment as well, another safeguard to have.

     We can help you structure your note for the most protection in this market.  We can let you know how much your note is worth by just a simple call, or fill out our quote form and submit it, we will e-mail you back within a short period of time.