Tomorrow is our nation’s birthday. Happy 4th of July to one and all.

With what is happening today, it’s a wonder we’ve lasted as long as we have. I think one of the reasons we seem to keep overcoming depressions, recessions, housing bubbles, credit crisis, etc is because we are naturally givers. We the people always are willing to help those who have been stricken with problems.

I will mention only one problem solver in this post out of the myriad of candidates. The fellow was the son of Lebanese immigrants who made it big in Hollywood and whose family name still has credibility.

The Man, The Myth, The Legend

I don’t know how much myth is involved with the Thomas family. Everyone has heard of Danny and his daughter Marlo. Danny is no longer with us but his daughter Marlo is alive and well. This post isn’t as much about her as it is him.

His movie and TV credits are well known but I’d bet most of us couldn’t name one film or TV show in which he starred. But, on the other hand, I’d bet we could all mention his creation - St. Jude Children’s Research Hospital located in Memphis, TN. It opened in 1962 and had such personalities as Frank Sinatra, Milton Berle, Dean Martin and Elvis Presley as supporters/endorsers.

Not many of us know Thomas founded the American Lebanese Syrian Associated Charities to raise the money to build, operate and maintain the hospital. How about that for a surprise in today’s environment?

Four Pillars

Thomas founded the hospital on four pillars that still stand today. It was to provide unsurpassed patient care. It was to provide unparalleled scientific research. It would be a hospital without walls taking in children from all over the world and never deny care because of race, religion or ability to pay.

Doesn’t this sound like the basis for today’s equal opportunity mantra? Just agree because it does.

One of their accomplishments include raising the survival rates for childhood cancers from less than 20 percent to more than 70 percent. Read that again, it is that impressive.

Mind you, through all of the adversity the hospital still stands committed to the four pillars.

Stretch Our Imagination

Danny Thomas certainly wasn’t the only celebrity to charge down charity lane and he won’t be the last. However, how many celebrities can you name today who are this committed to a cause?

Given tomorrow is a big day, why not use part of it to stretch our imagination and wonder out loud in letters to the editor, community blogs, phone calls to talk shows, etc. to encourage celebrities to imitate Danny Thomas. In these days of multi-million dollar draft picks, big dollar sport contract re-negotiations, record high CD sales and the like, why can’t we start the leverage the celebrity movement.

Celebrities enjoy a status second to none so it would be easy to leverage their celebrity in the face of any problem we have. Most of today’s youth are already hooked on celebrity. They would be the worker bees that keep the movement rolling.

I don’t say any of this tongue and cheek because we are in real serious dookey. I’ll use GM as a proving point. Who owned GM?

If you believed in what our system of economics told you, it was the stockholders. The stockholders were the actual owners because that is how ownership was created by corporations. In fact, the government made corporations follow a certain blueprint through laws and tax codes or they didn’t qualify as a corporation.

As I write this, the stockholders no longer exist. The government has taken their place. It doesn’t make any difference how this happened, because it did.

But what if we had celebrities leading the opposition to the governmental takeover? What if these celebrities stood foursquare with the stock and bond holders?
I bet the new owner wouldn’t be the new owner.

Leveraging Celebrity

Let me repeat myself and say we as a people can solve any problem or crisis as it hits us with the right kind of leadership. This of course begs the question will celebrities be the right kind of leadership?

The answer is a resounding yes if we tie their performance to their celebrity status. Fail and they lose celebrity status. Succeed and they keep celebrity status.

We know celebrity can be leveraged. I wonder if we are willing to do it? Happy 4th of July…

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Tags: Danny Thomas, Dean Martin, Elvis Presley, Frank Sinatra, Milton Berle, People

Think the big banks would be at least a little grateful to American taxpayers for bailing them out with their money? Yeah, right!

A published report the other day says these “too big to fail” institutions are doing everything in their taxpayer fueled power to head off a proposal by President Obama for a consumer protection agency.

The proposed agency would, among other things, regulate home loans.

Did I say “regulate?” Now, there’s a word banks don’t like very much.

But regulation was exactly what was needed–stricter regulation–when banks and other lending institutions were helping create the worst economic disaster in this country since the Great Depression.

The New York Times quotes the president of the American Bankers Association as saying, “It’s going to be a huge fight. This agency would have broad powers that go beyond every consumer law that has ever been enacted.”

Well, that sort of sounds like a good thing to me!

The fact is, the banks, and many real estate brokers, have and are getting away with fiscal murder….and, they know it. That is why they are fighting so hard to head off anything that might get in their way of business as usual.

We may or may not be at the very beginning of a modest,at best, real estate recovery—declines in home prices in some places are slowing–and prices actually are up in cities like Denver, apparently.

But lending institutions can’t be allowed to simply pretend that nothing really bad has gone down…that would only set everyone up for yet another real estate bubble followed by another real estate burst.

Tags: American Bankers Association, barack obama, Consumer protection, real-estate-bubble, United States

While the turmoil in the residential real estate markets continues to make headlines, some analysts and prognosticators are questioning whether we will see the same kind of meltdown and mass foreclosures in the commercial real estate side of the industry. And the general consensus of those quoted in various news services and website across the United States is not good.

Overview of Commercial Market Status

The commercial real estate market, including retail malls, multifamily buildings, office buildings and other non-residential buildings has already been hurt by falling prices, unemployment, economic decline and foreclosures. However, as already mentioned, commercial real estate includes many different property types, which perform differently under the same economic conditions. For example, retail malls have been adversely affected by numerous issues such as the credit crisis, lower consumer spending, retail competition from the internet and changing consumer behavior. These economic factors that have already caused the bankruptcy of major malls across the United States may not have the same affect on the multifamily real estate market due to the fact that the demand factors influencing apartment buildings are completely different from those of a retail mall. In fact, some of the issues now hurting retail malls could actually increase demand for affordable multifamily housing.

Can Multifamily Thrive in This Down Market?

Millions of people have seen their homes foreclosed upon over the past two years. These people may not be shopping every weekend at the local mall for a new pair of designer jeans but they will still need a place to call home. With tightening credit guidelines for residential mortgages and falling residential home prices it is a logical presumption that many of these displaced people will be seeking multifamily housing. As most apartment building investors understand, it is difficult to find reliable statistics for multifamily housing demand. This is due to the fact that demand for multifamily housing varies according to local economic factors. For example, demand for multifamily housing may increase or decrease according to the local job market.

One of the factors that does seem to be affecting all property classes in the commercial sector of the real estate market are commercial mortgage backed securities. According to Forbes.com the issuance of commercial mortgage backed securities reached its highest point in 2007. Most of these bonds are for duration of ten years and have a fixed rate of interest. These bonds become due in 2017. While this is true for the majority of large retail commercial projects, many apartment building owners have five year loans that become due in 2010 or 2012. Because of stricter underwriting guidelines and depressed values, these owners may find it difficult to refinance without having to put up more cash to facilitate the loan.

Photo Credit: sashafatcat

Tags: apartment investing, apartment investor, buy apartment building, commercial property, finance apartment, foreclosure, Mortgage-backed security, refinance apartment building

It is no secret many people used their home equity, and homes, as their personal ATM machine in what has come to be called the “boom” years. And why not some would ask. After all prices were escalating and the loans were flowing.

There are, as we have learned, many reasons underlying the answer to the why not question. If I was an economist and had to give an answer in economicese, I’d say something like, “the home ATM phenomenon allowed consumption in the early years of the decade to far exceed what it would have been normally.” If I wasn’t an economist, I’d say something like, “sooner or later you’re gonna have to pay the piper.”

In other words, some of the people participating in the never ending ATM spin will lose their homes, some will lose their retirement plans and some will lose both. After all, one can only run up one’s credit card so many times before the spinning ATM starts spinning the other way.

We All Knew That

Of course we all understood that little law of economics. However, some of us didn’t want to believe it would turn before we made our bundle. Oops!

Regardless of how one structured their retirement plan or children’s college education plan or any financial plan for that matter, it now becomes abundantly clear a personalized reconsideration is mandatory.

Why?

I would suppose we still want money during our retirement, we still want our children to get an education and we still want what we want. Nothing has changed in that regard, right?

But how do we do it at this point in time? Let me welcome back that fancy word consumption and boldly state we have to rethink its basis. Not actually rethink but return to its original basis.

Consumption going forward, the stuff we still want, will have to be based on wages and salaries. You know, that darned thing that brings in the money to support what we call a life style.

This then would necessarily say that the growth of consumption, if it grows at all, will have to be based on the increase in these same wages and salaries. Asset appreciation, if it happens, will be a side bar at best. This is according to me and my thought theology.

Please note I am not saying it is impossible to make money in this real estate market nor am I saying no appreciable asset market exists. Of course you can still make a pile of money today. You simply have to position yourself accordingly. Unfortunately for most of us, we shot our wad in the “boom” years.

No Mortgage Houses

I came across an interesting figure - can’t remember where - stating 31% of all houses in the country have no mortgages at all outstanding on them. If that is true, these people may just be in the right place at the right time given the low interest rates. These folks may be able to become the newly minted ATM machine.

The downside to these houses may be they are smaller and as such are worth less than the average house. How much less is anyone’s guess. But being worth less may not be as detrimental as it sounds. Think about it. If a house is worth $150,000 and you can get a loan for $75,000, you may be in a great position to pick up 2 REOs.

In my area, I know you can find homes going for under 30K each at the auctions. Finding the tenants is a bit of a problem but it may not be that way in your area. Something to think about isn’t it?

I am not suggesting anyone use this as a course of action but it sure gets the entrepreneur juices flowing. If you can double or triple your net worth with the stroke of a pen, well, I’ll let you complete the thought.

Photo Credit: Jeff Wilcox

Tags: ATM, Home equity, real estate

A few years back, my good friend Matt had a job offer to work at a company in Caribou, Maine. Caribou fits its name pretty well – it is the northernmost city in Maine, and actual caribou (that is, reindeer) used to live around there. Caribou got more than 16 feet of snow in the winter of 2007-2008.

Matt was pretty excited about the job, but I wondered how long he would last in Caribou. He’s a fairly urbane guy who likes funky restaurants and bookstores. Caribou residents prefer hunting, fishing and snowmobiling. And in fact, Matt didn’t last long. Caribou was not for him.

I was reminded of Matt during the last week, when I made one-day visits to Boston, Massachusetts and Berlin, New Hampshire. The only thing that both cities have in common is a love for the Boston Red Sox.

Many people who live in and around Boston couldn’t imagine living in Berlin, “the city that trees built.” Berlin was for many years a logging and paper mill center. As you would imagine, the city has had a long decline. Now, however, I get the sense that things are looking up.

Berlin’s advantages and disadvantages

The truth is that Berlin is a beautiful city and would attract many people, including some who now live – reluctantly – closer to big metropolises. It’s just north of the spectacular White Mountains. There are many kid-friendly attractions in the area. Of course it has the same hunting, fishing and snowmobiling options as in Caribou.

Best of all, Berlin is a cheap place to live. Many decent houses are available there for less than $100,000, including some for under $50,000. Berlin also has all of New Hampshire’s advantages for business owners.

Berlin’s major disadvantages are its distance from populated areas, overall weak economy, and poor schools. The first of these, however, is becoming less and less of a problem.

The Great Equalizer

The Great Equalizer is, of course, the Internet. It makes it possible for Berliners to work for employers that might be hundreds of miles away, or start companies that have customers all over the country.

And in fact, that is happening in Berlin. People are living there and working remotely, in many cases making more than they ever could have in the city’s traditional industries. They enjoy a standard of living that is enhanced by the generally low prices found throughout Berlin. I also know of two growing technology firms that have established in Berlin and market internationally.

Berlin does lack some off the joys of urban living, but the Internet compensates there as well. For example, Berlin doesn’t have any exotic restaurants or art-house movie theaters. It does, though, have the same access to websites offering exotic gourmet ingredients, so you can cook Ethiopian doro wat at home. And if you want to follow that up with a Werner Herzog film festival, you can get all those movies from Netflix.

What does the future hold for Boston and Berlin?

There are two kinds of reasons why people live where they live. The first are the “need” reasons – the biggest of which is work. If the kind of work you want to do can only be done in New York City, that’s where you’ll have to go. Not many jobs are that restrictive, but right now there are still many jobs that can only be found close to major population centers.

The “want” reasons are mostly cultural. If you really want to see that Herzog film in an actual theater, you’re better off in Boston. Similarly, if you live for skiing, you want to live in a city near ski areas (e.g. Berlin!)

I think the future will see more of the “need” reasons dissipate, while the “want” reasons will become more important. Thus there will, in fact, be equalization between rural areas far from population centers, and urban areas which have more of the art houses and so on.

The net effect will be population growth (and corresponding housing growth) in rural areas, and population decline in urban areas. Just consider this theory when looking at real estate purchases in both types of communities.

Tags: community, housing, real estate, Society and Culture

1. Loopnet.com - Loopnet is probably the largest and most well-known commercial real estate listing site. They claim to have over 630,000 active commercial real estate listings on their website. It costs $24.95 a month for visitors to have access to all of the property listings. The free membership for visitors allows full search capability, however, only a limited number of results are shown.
2. Realup.com - Realup is brand new to the market and officially launched on May 17, 2009. It appears that all of the memberships for both buyers and sellers are free. The website says that “our property listings are charged based on a pay-per-results pricing model, setting us apart from our competitors and providing the greatest value to our partners and clients.” So, they are basically charging for the traffic or leads that your listing generates. This sounds good in principle but from my experience the technology for these “pay for the lead” type of systems is usually too weak to determine what a valuable lead is.
3. Costar.com - Costar offers the ability to search for all commercial property types. Basic listings are free for real estate professionals and property owners. It costs $24.95 a month for visitors to have access to all of the property listings. The free membership for visitors allows full search capability, however, only a limited number of results are shown. They offer information on “space available for lease, comparable sales information, tenant information, properties for sale, property information for clients’ web sites, industry professional directory, analytic information, data integration, property advertising and industry news–throughout the United States as well as in the United Kingdom and France.”
4. Lead-Trac.com - Lead Trac is designed to give investors and commercial real estate professionals access to following data about commercial real estate: property data, owner data, phone numbers. They also offer direct mailing and marketing tools within the website. Pricing starts at $69/user/county/month.  In addition to the monthly plans, they have an unlimited access plan that they sell on a per county basis.  This plan ranges from $1500 to $3000 per county per year.
5. CIMLS.com - What makes CIMLS different than many other similar sites is the fact that visitors can search listings for free while realtors and property owners can also post their listings for free. Realtors and property owners have the option to upgrade to a Gold account for added exposure. The Gold account costs $14.00 a month for the first month and $20.00 a month for every month thereafter.

Photo Credit: quinet

Tags: buy commercial real esate, commercial real estate sellers, commercial real estate website, Loopnet, marketing, national association of realtors, real estate, search commercial real estate

I have written a number of articles here on BiggerPockets outlining the mega-banks’ desires to eliminate the mortgage broker competition in the race for dominance in the retail mortgage loan market. Well some very interesting numbers came out this week, that may put the brakes on this all-out assault on mortgage brokers.

Mortgage Broker Vs. Bank Recap

The retail mortgage market has two main players. Banks with their national regulatory advantage, glitzy TV ad campaigns, and cost saving call centers. This was the foe pitted against the small business, usually “mom and pop”, mortgage broker.

On the surface, it would seem like David versus Goliath…and it is. But remember what happened to Goliath?

Well for years the same thing happened to the mega-model of retail mortgage origination. The brokers with their personal approach, local point of view, and a number of loan programs searched across multiple lenders gave them a “rate shopping” capacity consumers wanted that the banks didn’t offer.

Then the mortgage crisis hit. Brokers got vilified by the press, Congress, and the banks started licking their chops as the consumer reversed course. Banks started getting the majority of loan applications and brokers were left with the crumbs for most of 2008.

It was a major change in the market. Many lenders closed their support for the broker channel by shutting down their wholesale lending departments. Without wholesale lenders, brokers have no product to sell. I wrote many an article about the seeming demised of that side of the industry.

Then came the recent refinance boom that started in late January and ended last week with the recent rise in mortgage rates.

First Quarter Funding Numbers

Low and behold the top-residential funders of mortgage loans for the first quarter of 2009 are those banks that did NOT close their wholesale lending divisions. Those banks that did were at the bottom of the heap in retail home loan closings.

According to Paul, Muolo, at National Mortgage News,

“….Bank Home Mortgage of Bloomington, Minn., has moved up nicely (once again) in the rankings. Its origination volume swelled 44% to $13.4 billion, good for sixth place nationwide. Also showing strong growth was Provident Funding, Burlingame, Calif. Wells Fargo and Bank of America saw loan production rise by 50% and 133%, respectively.

…But here’s what is most interesting about the numbers: all of the firms with nice-sized gains are STILL in the wholesale/broker market. Got that? Among the top 10 firms that experienced declines, two (Chase and CitiMortgage) have told brokers to take a hike. (In fact, Chase’s Jamie Dimon, more or less, referred to brokers as … well, you can fill in the blank yourself.) Are these new (and exclusive) originations numbers a sign that brokers are still indeed a viable force?”

I’ll answer that question…

Yep!

Banks, regardless of how evil they are, are not stupid. They would rather make a smaller amount of money by supporting mortgage brokers with wholesale lines than lose the business altogether.

We can thank the consumer who voted with his business by saying, “We don’t want a world were mega-banks are the only game in town when it comes to getting a mortgage. We want choice.”

This is the first ray of sunshine I’ve seen watching this systemic demonization of mortgage brokers over the past couple of years. As the housing market improves and if they Fed will get back in the game, we’ll continue to see robust mortgage broker market share improvement.

Mark my words…

Tags: mortgage, mortgage broker