Wednesday, January 4, 2012


Well, gee, let me get out my crystal ball and take a look... No it isn't meant to be a completely flippant statement, but at this point, everyone is guessing, if they're honest about it. But we can make some pretty good calculations, and estimations based on what's actually happened and inventories. First of all, you must remember that home ownership is about a whole lot more than a cash investment. Yes, it's a hedge against inflation (more on that below), and yes, it's the only investment where you can leverage your cash on such a large transaction. Those points alone should make real estate attractive. But houses were never meant to be ATM's, as many have sadly discovered, and they were not meant to be flipped as fluently as trading stocks, which still others have discovered. But for the long term buy and hold mentality, it's hard to beat real estate. And, that philosophy was just discussed by 3 economists in the New York Times in the December 31st Business section. But home ownership is much, much, more. It is where you raise your family, it is your sanctuary, and it is a quality of life embedded in your investment. But maybe most importantly, it's a way to protect your housing dollar from ever rising again...EVER. To find out what next year will look like? Read the whole newsletter, and you should get a pretty good idea. A summary statement might be, look for the beginnings of the turnaround, for prices to bottom out by 2nd quarter, interest rates to stay killer for at least 6 months, and the overall economy to do its part, as it's projected to grow about 4% this year (last year was approximately 2.7%).


This column is not about to make serious predictions, but there are some indicators worth noting. First of all, the slough off of foreclosures last year due to moratoriums and fraudulent robo signing issues should be off the radar and allow foreclosures to ramp back up. That should mean more competition with the short and equity seller, as well as some pent up listing activity of people who didn't want to list during the holidays. The first and second quarter is always when you see the most listing activity. Following are 4 brief statements by various entities about spring pricing. Zillow believes we not see a bottom in prices until the first quarter of 2012. Standard and Poor thinks prices will drop 5% in the next few months. JP Morgan Chase believes prices will depreciate 6% to 7% over the next 6 months. Barclays says prices will fall 7% by the end of the first quarter of 2012. One thing everyone seems to be in agreement on: housing prices will bottom out by mid-2012 and then stay flat, bringing this down market to an end. A long recovery may be in the offing, but it will be hard for buyers to stay on the sidelines with current pricing and interest rates. Don't be fooled by a house that MAY decline another 2%-3%, but be stuck with a higher interest rate on the loan that more than eradicates any savings on the housing price.


The silver lining in real estate is always the future: because the future is where the pent up demand is heading. If you think this overly optimistic, think about the following...
Trulia conducted a survey with Generation "Y", trying to determine future buying trends. One of the questions asked was whether or not they believed in home ownership as part of the American Dream. A staggering 65% said "Yes!" In fact, it was integral to their future plans for family and investment. So where are they? Many are living at home, saving money, and waiting. In fact, the number of young people living with parents in 2003 was approximately 4 million. By 2007 that number had increased to 4.7 million. This year that number is 5.9 million. That's a lot of people who intend to buy, when you figure out 65% of that number. That doesn't include move up buyers of Generations "X" and "Y" who are already in the market. And it doesn't consider the retiring of the "Boomers" and the transfer of wealth. As this year progresses, there will likely be ups and downs. But we planning for an optimistic year ahead. Why not?

Thursday, November 17, 2011


This headline was posted by the KCM Crew, authors of a blog for a real estate website called, "Keeping Current Matters." It's a great name for a blog, because in real estate, keeping current does indeed... matter. The above mentioned article randomly addresses the many negative articles regarding real estate, many of which have been published in local southern California papers. This newsletter, although not political, strongly disagrees with scare tactics and negative ploys designed solely to sell papers. After numerous recent articles all playing on the word, "scary", a pun on the Halloween holiday, let's level the playing field with some real numbers and let you, the discerning and intelligent reader, make up your own mind.

Local papers would have you believe that the sky is, in fact, falling; real estate will never recover and will never be the same. More on that later, with some real numbers that are a little sobering. But first, homeownership itself; is it dwindling? Is it, "on its way out?" Hardly. In fact, pick up a copy of the recently released Fannie Mae 2011 3rd quarter National Housing Survey. Both Generation Y (birthday mid-1970's to mid-1990's) and Generation X (mid-1960's to mid-1970's) have stronger beliefs in the importance of homeownership than those of the general population... yes that would be the boomers, and boomers have loved real estate. It seems clear that as the economy improves, so will housing demand.


In fact, local associations of Realtors and Multiple Listing Data indicate that inventory is quite low. Part of the reason sales have slowed is there simply isn't enough saleable product out there. In this type of market, there will always be properties on the market that are technically available inventory, but simply have too many problems to overcome. They need a particular type of buyer. These properties can make it appear there is more inventory than is actually "saleable." Frankly, it is surprising that people who can buy, have chosen to back away from the market because of predictions of a triple dip. It's a "cost vs. buy" analysis. If you believe in home ownership, its tax deductions, its features of durability and stability for yourself and your family, then prices coupled with interest rates should make for a fairly attractive picture. Yes, prices could go down, but what it actually costs you, may never be better. Also loan programs could change and availability could change, since lending has been very volatile. But what won't change is the historic and undeniable return on investment that occurs in real estate every 10 years. Sometimes the cycle is shorter; sometimes the downturns (such as this one) are annoying. But check on a property, any property, and see what it sold for in 2000, and what its value is today, in the midst of our worst downturn. REMEMBER THE PROMISE OF MORE ON THE TOPIC, "REAL ESTATE WILL NEVER RECOVER?..."


DOW +6.7% S&P -12% NASDAQ -30% REAL ESTATE +43%


Well, both are true. October 31st, CNN Money reported: "Home prices headed for triple dip." Fiserv (a financial analytics company), has predicted a 3.6% fall in prices on a national basis by next summer. Now remember, southern California is a very different place than Las Vegas or Florida. But still, nationally it means that the Case-Shiller Home Price Index is going to fall to 35% below its peak in 2006. But what Ken Johnson, Ph.D. (Florida International University and Editor of the Journal of Housing Research) points out, is that the dip depends on circumstances being in place to lessen the impact that market anxiety causes. What circumstances? According to Johnson they are sometimes referred to as "housing affordability measures, and some of them are: 1) Price of income to the house 2) mortgage payment to income 3) buy versus rent analysis for various markets that encourage buying. Did you know that the payments to income ratios are at a 30-year low in all 50 states? Why haven't the local papers reported that? The downturn in prices will bring more affordability factors into play for more people, especially the Gen Xers and Gen Yers, which is where the pent up demand is going to come from in the first place.

Also of interest locally to southern California is the best prognosis for recovery you can have: skilled labor, desirable location, and economic resiliency.

Tuesday, September 13, 2011


There is no easy way to inform you all of what's happening in today's real estate market. No one has a crystal ball that big, to handle all the variables. But a few things we do know. It was hard to miss the news of the downgrade from AAA to AA +, and it certainly rocked the stock market. But what about real estate? That's a very good question, because although investors could run to gold and many did with its all time high of $1,700 plus per ounce, it seems like you might be selling low and buying high. What might make more sense is real estate. Investors bought, in Orange County alone, 174 properties at trustee sales. There will be more numbers in a subsequent paragraph, but what does that number mean? Well, those are the transactions that we know for sure are all cash, because they are required to be so by the Trustees running the sale. But there are many other all cash transactions happening right now. California real estate is the cheapest it's been in a generation. But the last time it was this cheap, interest rates were 7 1/2%. What are they today? You can't quote them, because they change every 10 minutes, but there are rates in the high 3's to mid 4's as of early August. There is little happening right now that will change that anytime soon. All of this makes real estate look very attractive, because you can sell your stocks or whatever, and buy lower than it's been for years. Remember, anytime you look at a 10 year return spreadsheet on real estate, it outperforms all other investments when you add the tax benefits and leverage of your money. All that being said, prices continue to skid along the bottom with some decreases in certain segments, primarily the upper end, still continuing. The question should always be, "is right now the correct time, in light of my own circumstances to buy or sell?"


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Short Sales vs. Foreclosures

A SHORT SALE will allow you to walk away from the debt and get a fresh start at life.

As part of the negotiation process, in most cases the lender agrees to release the homeowner for any future deficiency.

Once the short sale is completed successfully, all that will show on your credit report will be the last payments to the lender(s) of record and the statement settled for less than full amount due. The score may only be affected by as little as 50 to 60 points.

If an individual completes a short sale they should be able to purchase a home after 2 years.

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