The End is Near - or so say Economists

Everyone is looking for the "perfect" time to buy; when real estate is at an all time low and rates are even lower. The problem is, we realize the low 90-180 days after the fact.

I submit that the worst year we had in terms of sales volume was 2007. Since then the number of sales per month or day has been increasing steadily.

I know that in my property values, I saw an increase in 2008 over 2007 but that is not true in all areas. Now here are two economists that also believe the end is near:


DSNews.Com Default Servicing In Print and Online - Formerly REO Magazine

The country's recession is the longest and deepest in 60 years, but it will rebound in 2009, according to two economists at the Comerica Bank Economic Forecast Conference in Santa Clara, California.

Comerica Bank's chief economist Dana Johnson told approximately 600 Silicon Valley business leaders, “We should see at least a 6 percent increase in gross domestic product in the third quarter. I don't think it's at all a stretch to say that once the economy picks up steam, it will be really impressive.”

Another economist at the conference, Stanford University's John B. Shoven, agreed, but said he believes the rebound will happen in the fourth quarter of 2009.

He added as soon as investors realize the economy will strengthen in 2010, “the stock market could start to rally in the second quarter,” several months ahead of the recovery.

They both credited the economic stimulus actions taken by the U.S. Government from preventing disaster.

Johnson said, “We came within an eyelash of a catastrophic failure of our financial system.”

The economists said while President Barack Obama has surrounded himself with a strong team of economic advisors, the government won't be able to do much to prevent the unemployment rate increasing to 9 percent by mid-year.

However, Johnson said, “The federal fiscal stimulus headed our way beginning this spring...will do an enormous amount to get this economy going.”

Are the TARP Funds helping?

Everyone wants the pain in the economy to lessen - and I think things have eased somewhat. Rates are awesome! Below 5% but, it's still very difficult to get a loan done. Underwriting guidelines are tough. Properties have declined so much that there isn't any equity and PMI money is limited if available at all.

The first round did ease things a bit. I am hoping we see a little more light with this second release.


Second Batch of TARP Funds Released
Austin Kilgore | 01.16.09

The U.S. Senate has voted to allow the release of the second batch of $350 billion in Troubled Asset Relief Program funds.

The vote wasn't necessary for the Treasury department to have access to the money, but it does block any attempt by the House of Representatives to stop the release of the money, because the legislation that created the program requires both houses of Congress to vote against releasing the money.

The vote is also the first legislative win for President-elect Barack Obama, who had lobbied Congress to not block access to the money.

The vote comes a day after senators voted against a resolution that would have prevented the release of TARP funds.

“I know this wasn’t an easy vote because of the frustration so many of us share about how the first half of this plan was implemented,” Obama said in a statement after the vote.

Obama has committed to setting limits on executive salaries for companies that receive TARP funds, as well as provide loans to small businesses and help stem the foreclosure crisis.

Congressional critics of the program said the government didn't do enough to keep track of the funds and hold the banks accountable for how they spent it.

Louisiana Republican David Vitter, who introduced the Senate resolution to block the release, criticized the “complete lack of accountability in the TARP program.”

“If we don’t pass this resolution of disapproval, nothing will change in the TARP program,” he said, according to a Bloomberg report.

On the other side of Congress, House Democrats are focusing their energies on getting Obama's $825 billion economic stimulus package to Obama's desk.

The plan includes an income tax break for Americans who make less than $200,000 a year, and billions for state Medicaid spending and education, both on the school district and public college levels.

Reader Email Regarding Investment Property

Got this inquiry about income property and thought you'd like my response:

Hey Miguel,

That's so great that you're from San Jose. I grew up in San Jose and have an office in Campbell and in Dallas. One segment of my business is cash flow houses in Dallas.

My clients have done really well in Dallas. We have typical returns in the 12-14% range - and that's just on cash flow. We aren't hoping that the properties double in value - because they don't here.

Austin has been a good market, their cap rates are a bit lower because they are betting on appreciation, but the key for an out of state investor is your property manager. I just had a client the other day that had paid their property manager $8,000 to rehab a rental and he couldn't figure out why the property was sitting vacant. Turns out the work was never done.

I also have an acquaintance from the gym that bought new duplexes in Forth Worth. It was cheap - $250K - and the projections looked really pretty. Turns out they bought in a sea of new duplexes. Remember vacant rental property is NOT an asset, it's a LIABILITY. In the end the property sat vacant for EVER, they finally rented it well below their payments and they are stuck in it. Last time I talked to her she was considering walking away.

I have a million stories like this - unfortunately.

So, Miguel, three things. 1) You need 25%+ down for non owner occupied money; ie; income property. 2) Crunch the numbers. As a rule of thumb, your $125K rental should rent for $1250 in order to cover your payments, taxes, property management and return. You may still have repairs to do on top of that. 3) You have to manage your property manager. They are your employee which means that you'll need to "stop in" every once in a while.

Investing in real estate is not PASSIVE income. It's work and it's your money.

Ok, off my professor box! Good luck to you.

Lastly, if you want professional representation and management in Dallas, I am always here to help.

Rebekah
408-378-5569
DallasForeclosureFinder.com
SanJoseForeclosureFinder.com
RebekahOwen.com

Real Estate Pain

Was I talking about this yesterday??!!

 I said I thought it was the 'loss of wealth" that made people kill themselves when the markets are off. This morning, as I walked with my dog,Rebel, I realized that that was probably a bit too shallow. Today I am thinking it's the people we've affected, or maybe the uncertainty, that makes life seem too difficult to continue.

I'm not the expert on this, I just notice a pattern. I have done the same thing. I plan things to be a certain way, I do my projections, budgets and everything I can to take the risk out of the equation. My due diligence is meticulous. I move forward and the market changes. Everything falls apart and I think I should have known better. I've been through this before.

The way I think about myself now, at the bottom of the crest, is different than when I was at the top.

I like the top better.

I remember the last time the bottom fell out for me. I went from 6 figure mortgage broker to homeless waitress within a year. It took me 4 years to pull out of that one. When I did I had a college degree and an MBA and a husband.

Maybe it's my experience riding the roller coaster that helps me not jump out. We may be at the bottom now but I remember how to keep my head up and look for the next top.

Some days I am better at this than others.

Today I am saying a prayer for a man that won't see the next top and for the family that is feeling a horrendous loss.

CHICAGO, Illinois (CNN) -- One of Chicago's most well-known real estate moguls appears to have shot himself to death, police said.
Steven Good was found dead of an apparent self-inflicted gunshot Monday, police said.

Steven Good was found dead of an apparent self-inflicted gunshot Monday, police said.

The body of Steven L. Good was found in his Jaguar on Monday. The car was spotted in a parking lot of a wildlife preserve in Kane County, Illinois, just outside Chicago, authorities said.

No note was found, and police say they do not know how long the 52-year-old had been in the vehicle.

Good was the chairman and chief executive officer of Sheldon Good & Co., a major U.S. real estate auction company.

Real Estate Is My Life

My Yahoo!

(CNN) -- German billionaire Adolf Merckle, one of the richest men in the world, committed suicide Monday after his business empire got into trouble in the wake of the international financial crisis, Merckle's family said Tuesday in a statement.

Merckle, 74, was hit by a train in the southwestern town of Ulm, police said.

His family said the economic crisis had "broken" Merckle.

He was number 94 on the Forbes list of the world's richest people. He had fallen from number 44 on the Forbes 2007 rich list as his fortune declined from $12.8 billion to $9.2 billion in 2008.



And so it begins - He only had 9 Billion so his self worth was so low that his only option was to kill himself.

In real estate we have that little saying " real estate is my life" - these people take that literally.

Whenever the market tanks we see these things. We've been seeing it in real estate for the last year - the top producers killing themselves as the market declines.

This last year has been a re-setting of value. The folks that don't re-invent themselves, or are over extended, are hurting right now. The hummers, the big houses, the multiple investment properties - they are all gone now.

The market comes and goes, as do the properties and vehicles, please don't let the cycles of today become a "permanent" mistake.

This too shall pass.

Loan Mod Updates

It was only a few weeks ago that I read the statistics showing that the majority of borrowers that were given modified loan terms in order to keep the owner in the home were delinquent within 12 months of the modification!

I really thought that was the end of loan mods. I mean, if they don't work then why spend so much time and energy on them. After all, it's not really the loan terms that are the problems, it's that the borrowers were ill equipped to be home owners.

Perhaps they use some sort of "new logic", kinda like "new math" down at Fannie Mae because here's the latest article today from the LA Times:

More lenders allow “early workout” loan alterations

Borrowers with loans owned by Fannie Mae no longer have to be behind in payments in order to qualify for a loan modification. Borrowers facing financial difficulty, such as losing a source of income, now can apply for an “early workout” loan alteration. Under Fannie Mae’s program, borrowers who qualify will enter into a trial period of reduced payments, usually for four months. If the reduced payments are made on time each month during the trial period, the modified mortgage terms may become permanent.

I'm thinking I would do a better job with that bailout money...