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Commentary

Commentary

The New Real Estate Niche

by Tom Koziol | September 25, 2009
Real Estate
Image by Thomas Hawk via Flickr

After you read this post you will realize the “new” is really the “old” but, in the end, who cares. At least according to me.

We’ve all seen headlines that read: Existing home sales dip in August or words to that effect. Truth is, those headlines aren’t news anymore. They used to be but used to be has become the norm or maybe I should say the numb.

To add more numb to this post, we all have read articles telling us real estate practitioners and investors are expressing frustration with what they consider slow action from banks. That is, banks aren’t releasing inventory fast to satisfy the demand.

My question boils down to what do they really expect from institutions that have moved, on a historical basis, extremely slow. It is merely business as usual.

On the other hand, given a red-hot market has poked its head out of the ground we should expect business not to be usual. We should demand those institutions with a home inventory to get off their duffs and start moving the product. A home is no different than any other retail product, other than the sales price. When demand flares up, release the inventory and satisfy the demand.

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Commentary

The Dramatic Increase In Mortgage Fraud: SubPrime Crisis Brings Out The Worst In People; Would The Death Penalty Stop It?

by Charles Feldman | September 23, 2009

WASHINGTON - SEPTEMBER 16:  Federal Bureau of ...If you harbored any notion that the current economic crisis would somehow bring out the best in people–as we all come together like one of those old, warm and fuzzy “I’d like to buy the world a Coke” commercials, I’m afraid I have some very bad news for you. Well, actually, the FBI has the bad news, but I will pass it along.

A few days ago, FBI director Robert Mueller told the Senate Judiciary Committee that mortgage fraud cases that are being investigated by his agency are up roughly 63% just from a year ago! That’s sixty-three percent!!!!!

“The scheme have evolved with the changing economy, targeting vulnerable individuals, victimizing them even as they are about to lose their homes, ” said Mueller, as quoted in a New York Daily News article.

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Commentary

Will Appraisers Stunt the Housing Recovery?

by Justin Pierce | September 20, 2009

appraiser HVCCAfter the financial meltdown last year lawmakers and regulators were determined to discover who was responsible for the debacle. Yes, the very people who drafted the laws governing mortgages and yes were also responsible for oversight of them went out to determine who was responsible for the melt down. The first culprit, of course, was the lenders. I think we all know how that played out. The next group on the chopping block was the appraisers. If they wouldn’t have appraised the homes then the lenders would not have lent on them, so goes the finger pointing. From that came sordid tales of realtors and mortgage professionals pressuring and even bribing appraisers to up the value of a property.

Home Valuation Code of Conduct – HVCC

After the scapegoats were identified the legislation followed. One prime piece of legislation aimed at appraisers was the Home Valuation Code of Conduct (PDF). The intent of the HVCC was to achieve more appraiser independence to reduce the amount of pressure placed on appraisers by lenders and Realtors. Well, if their had once been undue pressure on appraisers to inflate values it now pails in comparison to looming threat hanging over appraisers and it’s compelling them to keep prices down.

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Commentary

The Perfect Storm Continues for Real Estate and the Economy

by Peter Giardini | September 15, 2009

I am sure you recall the movie some time back entitled The Perfect Storm?  It was a great movie, about the interaction of several storms meeting up to create one giant storm.  For an old Navy guy and licensed Coast Guard captain… it scared the hell out of me!

perfect storm housing, real estate, economy

Throughout the past several years we have been experiencing this same situation – first with the housing market, and then starting at this time last year, with our financial markets: The perfect storm of over priced homes, rampant speculation, poor lending practices, and I am sure more then a little fraud.  Every one of the previously mentioned occurrences contributed to a complete crash and the current recession we are still in.

In a previous article written for BiggerPockets, I shared a graph that showed how Option ARMs are the next part of the storm to materialize.  You can revisit that chart by heading over to this link

In spite of the recent good news regarding sales (increasing in most areas) and prices (declining at a slower rate, again in most areas) we are about to experience the second wave… kind of like we are in the eye of the storm… and the backside is barreling down on us.

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Commentary

Government America vs. “Real” America

by Brendan O'Brien | September 14, 2009

Researching the Washington, DC real estate market, I came upon some facts that shocked me.  I started looking at federal government employment, knowing that the government is the biggest employer in the Washington Metropolitan Statistical Area (MSA). 

In fact, the federal government is the biggest employer in the country, with about 1.8 million civilian employees. While times get tougher for those of us who don’t work for the government, life for those in government continues to be pretty peachy.  In fact, things have gotten a lot better over the last ten years.

The growing discrepancy between the government economy and the “real” economy is causing many problems, but one is a growing disconnect between the government mindset and the private industry mindset. 

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Commentary

Las Vegas: Record Sales & Dwindling Supply – So Why Are Prices Still Falling?

by Richard Warren | September 14, 2009

Welcome_to_vegasThe economic law of supply and demand says that when demand increases and supply falls, prices are sure to rise. Apparently that law has an asterisk that says “except for Las Vegas.”

For months now I’ve been hearing about how brisk sales have been, especially in the REO, or foreclosure, market. Looking at the numbers you will see that the available supply has been steadily trending down and sales have been setting all-time records. A bank puts an REO on the market and within days there are multiple offers on the property. So why are prices still falling?

On The Street

One realtor that I know specializes in these REO properties. What he sees are a lot of cash buyers from other areas stepping in. That would seem to mean that investors are seeing the value while local buyers are still gun-shy. Are they missing a golden opportunity?

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Commentary

Our World Has Rolled Over

by Tom Koziol | September 11, 2009

I realize I am not the only guy on this planet who reads the “news” as presented both in the newspapers and on the Internet. Even if I didn’t read the news, I’d get a good dose of what people are calling reality. That dose comes from the mix of clients our insurance agency serves. Lucky me…

Here are two sentences taken from two separate news stories:

“The coffers of the Federal Deposit Insurance Corp. have been so depleted by the epidemic of collapsing financial institutions that analysts warn it could sink into the red by the end of this year.” – AP

“Pending U.S. home sales rose more than expected in July to the highest level in more than two years as first-time buyers rushed to take advantage of a tax credit that expires this fall.” – AP

Is it me or are these two sentences sending conflicting messages. If it is me, I apologize upfront. However, I don’t think it is me.

Failure Ahead

According to published reports, so far this year, 81 banks have failed. Last year only 25 went down the toilet while in 2007, if you’re counting, only three went south. These same sources project hundreds of more banks are expected to fall. The primary reason given is due to souring loans for commercial real estate.

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Commentary

A “New World Order” May NOT Be Good For Real Estate Industry

by Charles Feldman | September 9, 2009

real estate bailout mortgageAn article out of the McClatchy Newspapers group caught my eye today…in particular some numbers that may not bode well for a robust real estate industry recovery any time soon.

Bailout and Regulation Nation

The article, about how a new financial world order has emerged out of the wreckage of the sub-prime mortgage fueled disaster that exploded one year ago this week, explains why it may take many years to climb back even half way up that economic ladder most of us fell down from last September.

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Commentary

Home Prices “Turn Corner;” While Light At End Of Real Estate Tunnel Blinds Us!

by Charles Feldman | September 4, 2009

What’s that ahead? Is it….a corner? Is it…..THE corner? Are we about to turn it?
God, I hate cliches. But such is the case with a freshly minted Reuters dispatch headlined : “U.S. home prices turning the corner, up in 2010.”

I’m not sure if this differs from earlier reports that we were seeing the light at the end of the tunnel?

Actually, I sort of wonder whether the corner we are about to turn is right before we enter the tunnel, at whose end there is said to now be a light, or directly after we leave the tunnel, in which case ,wouldn’t that light at the end of it make it damn hard to see the freaking corner we are supposed to be turning?

Ok…this might be an academic question…but someone needed to raise it and it might as well be me.

Now, back to that corner we are turning.

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Commentary

My Entrepreneur’s Manifesto

by Justin Pierce | August 30, 2009

I am capable of limitless success. Success is within me. I will make no excuses nor accept them of myself. I am not at the mercy of other people. I am not at the will of random events. My only true impediment is that which exists at the end of my own resolve.

My resolve is determined by my enthusiasm and faith in a worthy pursuit. I will tap the unlimited well of passion and enthusiasm within myself through constant self education, and action which will lead to progressively larger victories thereby stoking my inner fire and fueling my progress. My self education will lead me first to my passion, then to my mission, and finally to a plan for success. My plan for success will illuminate my vision and measure my progress. I will be assured in my cause but I will always keep my eyes and mind open for new realities and different possibilities.

I know that the world is full of uninspired people and critics. I know there will be many people who will actively seek my failure and many more who will wish for it. I will strike down those miserable beings who seek to obstruct me out of pure jealousy and I will be indifferent to those less treacherous but like minded people who placidly watch me pass. I will be humble for I know I will take many lumps. I will not be discouraged by the lack of justice but I will be just. That is what will make me stand apart from the mob to be noticed by other proactive and honorable people.

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Commentary

How to Protect Yourself for the End of the World

by Jason Hanson | August 26, 2009

www.cachecoin.org/krugerrand.From many of the headlines and articles I’ve been reading lately, you really would think the end of the world is near. Now, I’m not that paranoid but there are certain things you need to do to protect yourself, specifically from the coming wave of inflation, thanks to the governments spending spree of trillions of dollars. If you don’t take the steps I’m about to share with you… you might find yourself with a lot less money.

First of course, is to continue to invest in real estate. Buy as many houses as you can while we still have these rock bottom prices. Most likely we won’t see these large of discounts for another 20 to 30 years. And when inflation finally kicks in, real estate is one of the best assets to own. There will be a run-up in prices in the next few years and the more houses you own, obviously the more money you will make.

Gold?

Second, buy some gold. Yes, I’m serious about this. Gold is another great hedge against inflation. As the value of the dollar erodes thanks to Uncle Sam’s spending, gold prices will have a huge increase. So where do you buy gold and what type? Personally, I like the South African Krugerrand. It’s one of the world’s most well-known gold coins, and each coin weighs one ounce of gold. So as I write this, gold is worth $954.10 per ounce. Which means each Krugerrand is worth $954.10. The best site I’ve found is kitco.com to buy these coins (no I do not have any affiliation with this site; it’s just based on a lot of research I have done).

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Commentary

Who Can Turn The World On With Her Smile? Would You Believe, A Real Estate Agent?

by Charles Feldman | August 26, 2009

She’s smiling again.

Now, grant it, this might not seem like much to you, but, trust me, this could be the biggest sign to date that the real estate market is finally starting to turn around…if only a bit.

She, is a real estate agent who has been selling units in my Los Angeles building for maybe five or more years now.

In recent years, since the recession set in, her visits, with possible buyers in tow, became fewer and farther between.

And, when she did show up, the expression on her face made her look as if she had just drank a powerful laxative for breakfast. Yeah, that bad.

She apparently wasn’t selling….but neither was anyone else. How she managed to even go to work in the morning is beyond me?

And then things began to change . . .

In recent weeks, though, I could not help but notice that she suddenly seemed to have a fresh glow about her. Her smile was there again and it looked like she may have even had a coating of sparkle surgically applied to her perfect teeth.

If she weren’t a real estate agent, I would have thought her glow suggestive of….well…..you know….we’re all adults!

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Commentary

Building Value vs. the Bubble Mentality

by Brendan O'Brien | August 25, 2009
United States housing bubble
Image via Wikipedia

One of my favorite economics bloggers, Megan McArdle, wrote a post recently on the Washington, DC real estate market, extended to the state of the market overall. It appears to her that the single-family residential market has bottomed out, while multifamily still has a way to go.

Megan also posed the question of when, and if, a boom will begin again. Possibly, in her view, there won’t be a boom. After all, the last nationwide (really, worldwide) boom was driven by a couple of unusual factors: historically low interest rates, and a big, competitive market for subprime loans.

Megan is one of the smartest economic bloggers, and a lot of what she wrote here makes sense. Still, the post bugged me, because it focused on macro-economics, which is not the world in which most of us live.

We know that real estate investing success comes from a million factors, only one of which is the boom-bubble-bust cycle. Outsiders don’t see a lot of difference between real estate investing and stock market investing, but there is a huge difference. In stock market investing, there are really only three factors:

  1. You decide which stock or mutual fund to buy
  2. You decided when to buy it (what price)
  3. You decided when to sell it (what price).

All those apply, in a sense, to real estate investing. You have to decide what and where to buy, pick one or more properties at what seems to be an appropriate price, and figure out when to offer them for sale, at what price. But there are also these factors:

Price Factors Exclusive to Real Estate

  1. What can you do to cut ongoing costs?
  2. How are you going to treat the tenants?
  3. How can you renovate the property to make it worth more?
  4. What can you add to the property to increase the income it generates?

You can probably think of a few more. The point is that in between the buying and the selling, most stock market investing is essentially passive. Once you own it, you’re waiting for the right time to sell it. You really have no say over how the company is run.

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Commentary

Your Reputation is at Stake. Will You Trust the Lowest Bidder?

by Joshua Dorkin | August 23, 2009

Using assistants to help you with your business is an incredible idea. Instead of putting your efforts into the mundane, day to day tasks, you can spend your time on the important things. Many of the gurus are promoting using virtual assistants for everything in real estate these days, but before doing so, proceed carefully.

Virtual Assistants and Social Media Marketing: A Match Made in Heaven or Hell?

One area of business that people are off-shoring to virtual assistants more often then not, is in social media marketing. I’ll contend that using any kind of virtual assistant for your social media marketing strategy is a risky move.

Of course you want to know why, right?

I was just clicking around the BiggerPockets forums and came upon a few posts from a well known national speaker, who is generally well respected. Of course, I was interested in seeing what they had to say, so I read through their contributions. What I read were posts that were poorly composed and full of grammatical errors. These posts added no value to the discussion, and in fact, were merely a distraction.

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Commentary

Social Security And Compound Confusion

by Tom Koziol | August 21, 2009

Seal of the United States Social Security Admi...I didn’t know the particular piece of information you are about to read until I read an article in which the writer’s social security number was compromised by none other than the Social Security Administration. It all happened because U.S. Territories issue their own social security numbers and a U. S. agency had made a loan.

In fact, the Federated States of Micronesia, the Republic of the Marshall Islands and the Republic of Palau all have their own Social Security Administrations. The only difference between the numbers is the mainland issues 9 digit numbers and the Territories issue 8 or 7 (Palau) digit numbers.

The fun starts when one of these numbers is entered into a computer. It appears mainland computers are trained – programmed – to add a zero or two zeroes to fill in the eighth and ninth spot. But it doesn’t put the zero(s) at the end or what we would call the ninth number. It puts it/them first.

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