Today’s news seems to bring us a tale of opposites every time they report on the real estate market as it exists at this point in time. For example, an article by the AP just the other day said “the pace at which people fell behind on their mortgages slowed during the summer for the third quarter in a row. The bad news is the overall delinquency rate hit another record.”

I don’t know about you but a guy could go goofy if he just took what he read at face value. On the other hand, if a guy looked at these reports and decided to sift out the silver lining he could get by although be it at a slower pace.

TransUnion Adds To The Clutter

TransUnion plucked some numbers out of their database (total of 27 million consumer records per them) and said that mortgage delinquencies remain highest in the four states where the crisis has hit the worst:

• In Nevada, the rate reached 14.5 percent, up from 7.7 percent a year ago.
• In Florida, the rate was 13.3 percent, up from 7.8 percent last year.
• In Arizona, the rate hit 10.4 percent, up from 5.5 percent in 2008.
• In California, the rate jumped to 10.2 percent, from 5.8 percent last year.

TransUnion added the opinion they expect delinquencies to rise. Of the 50 States, they expect Nevada to reach 16 percent. Since I live in Nevada, I can fish for the silver lining to my heart’s content if TU is correct.

By the way, TransUnion also stated that the states with the highest delinquency and foreclosure rates will likely continue to see depressed housing prices. That sounds obvious but yet needs to be stated especially if fishing for the silver lining is your current means of finding real estate values.

Because TransUnion has a basket full of numbers, they also proffered that for the three months ended Sept. 30, 6.25 percent of U.S. mortgage loans were 60 or more days past due. According to them, that’s up 58 percent, from 3.96 percent, a year ago. Being two months behind is considered a first step toward foreclosure, because it’s so hard to catch up with payments at that point.

If that is anywhere near true, the silver lining becomes easier to find. I don’t know what that silver lining is for you in your market, but it could be a variation of the loan called a bridge loan. In this case, instead of the usual meaning of bridge loan, you make the delinquent party a loan for their two months mortgage payments. For collateral, use your imagination. Personally I wouldn’t make it the house. I’d use another object. But that’s me.

Another Time Frame

The government tells us we are climbing out of the mess. However, number crunchers like TransUnion tell us they don’t expect the figure (late payers) to start declining until the middle of 2010. Who to believe, right?

That is a good question but we do know two things must get better before mortgage delinquency rates start reversing themselves. We need the unemployment picture to improve, i.e. more of us go back to work. We also need home values to improve.

This may sound like a tall order given both are more macro than micro. On the other hand, if more of us started looking for the silver lining and get busy with our piece, maybe, just maybe, we can use the micro to manage the macro.

Photo: lamentablemente

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Foreclosures and Mortgage Delinquencies: A Tale Of Opposites

Washington, D.C.; San Francisco; Austin, Texas; Boston and good old New York top the list of five projected top real estate markets for 2010, according to The Urban Land Institute.

Washington, says the report from ULI, is where “…major insurers and big banks have taken a long term view and are actually providing financing for new deals.”

In San Francisco, the ULI says “an expanding regional tech industry” should help fuel the sales of apartments, offices and other commercial spaces.

Austin, says the report, will continue to enjoy low state taxes and a pro business climate.

Boston’s apartment vacancies, says the report, are well under 10 percent while “condo/house pricing ‘remains stiff.’”

And, in New York, midtown availability rates, says ULI, are “predicted to skyrocket from mid single digits into the mid-teens…”

Predictions being predictions, who is to say if most, any or none of this will come to fruition? But considering the otherwise bleak real estate landscape out there in many parts of the nation, isn’t this, at least, a pretty cool potential gift to all investors in the year to come?

Happy New Year!

Photo: treasuresthouhast

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

The Hot Real Estate Spots For 2010

The funny thing about bubbles is that sooner or later they burst.  Once again I get to be the master of understatement.  What fun!

After having survived these past 2+ years as each of us has watched the housing bubble burst in most parts of the country and deflate everywhere else, we are being told that the worst is over.  We can come out of hiding and start to resume normal activity.

Hmmmm… I’m not buying it!

Consider the chart below, that reflects that housing is still overpriced relative to the affordability index; also consider that housing prices in general still have a way to travel, downward, before they are in line with the public’s ability to pay to own them.

In other words . . . all of the air isn’t out of the bubble!

What isn’t apparent in this chart is the fact that the Government is continuing to prop up the housing market with things like the $8K credit, loan mods, etc. As an investor I love this stuff.  But as a pragmatist, wanting to get all of this crap behind us . . . it drives me nuts!

Impacts of Further Housing Price Declines

1. Instead of inflationary pressures we could be poised to see real deflationary tendencies across the broad spectrum of our economy.  If you think the last year of trillions in dollars of lost wealth was tough… the next round could be even worse.
2. Banks, you may recall, are still holding the majority of their bad/foreclosed loans at their original values (thanks to changes in Mark-to-Market rules) and if housing prices continue their decline to parity with affordability, bank balance sheets will be hard pressed to recover if they ever can.
3. Bank failures are not stopping.  Nor will they, as their real estate assets continue to decline in value.  In fact there are predictions that we will see another 500 to 800 more failures before this is over.  This may seem like a small number compared to all of the banks still in existence… but remember the FDIC is now out of money.

This sounds like dire stuff.  And it is!

Surviving as a Real Estate Investor…

The great news is that we provide a product that is one of the basic human needs.   Food, clothing, shelter!  People will always need a place to live.  Good news for us.

Our Challenge…

Our challenge is to not become a part of the unbridled enthusiasm that seems to be sweeping the housing market… again. This means:

1. Sticking to the fundamentals. 
2. Not counting on appreciation to give you your profit.  And…
3. Not being over confident and ensuring that you buy at prices that won’t leave you exposed to further declines.  

As I have heard said… Be Careful Out There!

As always your comments and thoughts are always welcome.

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Has The Housing Bubble Burst Completely?

I get asked the following question from time to time:
Winston what is the best time of the year to buy or invest in real estate? 

I have been in real estate sales and finance since 1995 and I would usually say that towards the end of the year was the best time of the year to purchase a property. Why do I say this?

• Less competition
• Less competition
• Less competition

I never had the hard stats to prove it but you could just get a feel for it based on market conditions. Towards the end of the year I would get less activity from:

• advertisements
• listings
• referrals
• etc etc

I got to thinking and so I came across this section in Google called Google Trends. Google Trends lets you see what people are searching for over a selected period of time. I found an interesting trend for the search for “real estate” in the United States.

Analyzing “Real Estate” Trends on Google

As you can see in the graph below I did a search for the term “Real Estate”. Since 2004 till present you can see a pattern in the way people search for real estate. You can see that right around October it really starts to wane off till it bottoms out around the holidays. Then right immediately after the holidays it spikes straight up.

You can see in the graph below for 2008 how around October it wanes off until after the holidays then pow!

Same thing for the graph below in 2007. Not so much of a spike but the rise is there after the holidays.

2006 saw the same thing of a drop from October then a spike after the holidays.

Based on my observation it is safe to say that the best time of the year to be out there searching for a home to purchase for yourself or to invest is:

• October
• November
• December 1-25

Your offers are more likely to be accepted because of less people out there making offers. Take advantage of the fact that everyone is tied up with Halloween, Thanksgiving, Christmas and Hanukah. While they worry about the holidays you are out there mining the field clean.

Good luck in all you do America!

P.s. So when is the best day of the year to list a house?  Dec 26

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

The best time of the year to buy real estate is…

I hate running. I pretty much hate any form of exercise. I have no problem doing my real estate work, but when it comes to working out, I’ll admit I’m very lazy and lack discipline.

I remember many of my mentors telling me how important it was to exercise on a daily basis and how exercising was often the first thing they did in the morning. I’ve also read the same thing in many books written by successful people. I recall one successful entrepreneur/writer saying that no matter what, he does three things every single day: 1) He writes 2) He promotes his business 3) He exercises.

This is What Happens When You Get Older

I’ve heard this advice for years and I just ignored it and didn’t think it had anything to do with success. Well, I must be getting older because a few weeks ago I started feeling run down and I didn’t have as much energy as I used to. Come 9:00 at night I’d be ready to pass out, even though I had just sat at my computer all day and hadn’t had a stressful or rigorous day.

I was talking to one of my friends about my lack of energy (who happens to be a personal trainer) and of course she told me it was because I didn’t exercise and because I didn’t eat well. So… what did I do? Two weeks ago I decided it was time to start running every day. Now, I don’t really care about the health aspects (even though I should.) But I care about having more energy so I can be more productive and make more money.

How Long I Run and How Often

I now run from 6:00am to 6:45am every morning, Monday-Friday. It’s only been two weeks but I am amazed at how good I feel. Really, it’s almost unbelievable. During the time I’m running I dislike it, but as soon as I’m done I feel great. Plus, I have so much more energy at night. At 9:00pm I’m no longer ready to pass out. I’m able to work until 11:00 if I need to and I feel fine.

Also, my mood is much better and I don’t seem to get irritated as easily from sellers who drive me crazy, or perhaps from a tenant that’s going to be a little late with rent.(I feel like I’m doing an infomercial right now… “And what do I owe this amazing energy increase to? Well, the XYZ super-duper, magic exercise pill sells for only $19.95… but if you order now, I’ll give you three bottles absolutely free.)

You Need To Add This To Your Daily “TO DO” List

Anyway, my point is, if you’re like me you want to be an incredibly successful real estate investor who makes a ton of money. To help you accomplish this, I would encourage you to start adding to your daily “to do” list to exercise for 30-60 minutes. It could be one of the smartest business decisions you’ve ever made.

Now my next goal is to start eating right… however, one thing at a time… baby steps.

Photo Credit tangywolf via Flikr

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Why Exercising Could Make You a Wealthier Investor

A couple of weeks ago I posted an article that included a chart that showed that there are still a boat load (over a million) Adjustable Rate Mortgages that will reset between now and 2011. You can re-read that article here.

Many experts believe the Fed Rate will hold steady through most of 2010 and therefore, the number of mortgage resets may not see huge jumps. Many of these mortgages are tied to properties that are upside down, meaning the property value is less than the mortgage, and that will be the primary reason for increased defaults — or it will at least make these properties prime candidates for short sales.

Real estate investors can attest to how hard it has been to get lenders to let go of their inventory, and if you specialize in short sales, you know that at times, waiting for a short sale response from a lender is a lot like watching grass grow.

Relief May Be On The Way…

In the article U.S. Treasury set to finalize home “short sales” plan,Reuters suggests that there may be some help on the way. It seems that the Government sees the looming train wreck and also knows that if they don’t get these short sales moving through the pipeline by incentivizing the lenders, the number of predicted foreclosures (on top of the countless others that are currently out there) will become a reality.

So, what does this mean to investors?

I sure hate to go out on a limb, but perhaps this will be just what is needed to get lenders to open the flood gates and start to move some of their inventory.

Will it happen? We’ll see.

For all of you specializing in short sales, keep us posted.

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

Short Sale Relief: Fact or Fiction?

The other day, I was preparing to check my email when a headline on Yahoo!’s homepage caught my eye: Tough Times for Blockbuster. As a fan of Blockbuster’s, I felt compelled to learn why so many of its beloved stores (between 810 and 960!) were closing. As it turns out, several of its stores were becoming unprofitable money pits, no doubt due partly to the success of online rental goliath Netflix and newcomer Red Box—the rental box company taking the nation by storm.

Needless to say, Blockbuster has had to implement several changes necessary to stay competitive in this ever-changing market. Like Netflix, Blockbuster has launched an online, mail-service component. Blockbuster has even started distributing rental box dispensers much like Red Box. The question remains: is this too little too late for the former movie rental giant?

What does this have to do with real estate?

The Blockbuster Saga illustrates how important it is for real estate professionals and investors alike to stay on top of current trends and innovations in the real estate realm. Real estate professionals run a business, and they must treat it as such or risk getting left behind in the dust. The internet and social media marketing provide access to an almost unlimited number of potential clients and investors—but everybody and his mom knows that. The trick is to find out who your target demographic is… and target your marketing efforts there. Of course, that is easier said than done. There certainly is a trial and error aspect to this process. That is why it is imperative that you document where and how you’re getting your leads. How else will you know where to utilize your time, money, and energy to most effectively target your clients? Too often, real estate professionals rely on gut feel rather than statistical evidence—don’t make the same mistake.

Investors, like real estate professionals, have a wide variety of tools at their disposal to make informed decisions. They can check out a real estate company’s track record at the Better Business Bureaus’ website, or right here at BiggerPockets.com. They may look up a wide variety of statistical evidence at Reis.com, or scour investment properties on LoopNet. Keep in mind, however, that everyone else has access to the same resources, so be diligent!

Don’t rely exclusively on the internet

Checking out a property, or its neighborhood, online, is no substitute for physically checking out a property. A ten-minute drive through a property’s neighborhood will tell you more than several hours worth of research on the internet. Investing in a property without truly understanding its market—neighborhood, trends, economic situation, future developments—is like investing in a stock when all you know is its 5-year high/low prices and its most recent closing price. You might be making a good investment, but you don’t really have any substantial evidence to back it up. Without knowing the company’s business plan, looking at its financial statements, or understanding its recent acquisitions, how can you truly be confident in the stock you’re purchasing? The same principles apply to real estate investing. A properties operating numbers only tell a part of the story. You must dig deeper to truly understand what you’re getting yourself into.

This Article is Copyright © 2004-2009 BiggerPockets, Inc. All Rights Reserved.

What Blockbuster Can Teach Us About Real Estate