I just finished reading Ryan Hinricher’s article on The Week In Housing, as I typically do every Monday. By show of hands, who else likes to see this report?

Ryan provides a nice synopsis of some key housing trends that only takes a few minutes to digest. One of the first thoughts that echoes in the back of my mind as I read his reports stems from all of those REALTORS® before me who preached,  “real estate is local!” So why even bother taking a macro view of the housing market?

Real estate is local, but mortgage rates aren’t.

Mortgage rates vary only slightly from State to State, so Ryan’s view of mortgage interest rates is just as valid in Tallahassee, Florida as it is in his home State of New York. When rates go down, affordability rises, and the opposite is true when rates rise. I concur with Ryan that rates will most likely remain near historical lows for the remainder of the year.

Real estate is local, but the economy typically isn’t

Unlike mortgage interest rates, it is possible for the national (global) economy to be in the tanks, and yet your local economy could be thriving. If you have a large employer that is in an industry that is doing well, your local economy could be jamming. From what I read online however, communities that are bucking the economic trend these days are few and far between. Is there a community in the US whose primary industry is Bankruptcy filings?

Economic conditions play havoc on the real estate market. Even when people are doing well, fear of change often times leads to constriction and a tightening of the purse strings at home. Of course, the opposite was true in 2004 through 2006, when everybody felt they could afford to buy everything.

If I had everything, where would I put it? – Comedian Steven Wright

Real estate is local, but most markets follow the national trend

The national reports are good market intelligence, even if you only plan on owning real estate in a singular market area. No area is immune to the ingress and egress of the relocation market, so the outside world will play some role in the viability of your current housing market.

Because Ryan tracks the national statistics, he has to wait a little bit longer for them than I do for my local report. When I looked at our year over year pending home sales report, I saw that we gained in January, but fell in February. It’s not unusual for the Tallahassee market to lag the rest of the Country.

In the graph above, year over year home sales are plotted in purple, with gaining months graphed above the 0% line and declining months graphed below.  The monthly change (non-year over year) is graphed in yellow.

Regarding the national year over year pending home sales report, Ryan wrote:

I saw weather impacting this number more than anything in January. Year-over-year the number is down though the home buyer tax credit was in place last year. While the decline may be disappointing, I expect to see it climb when February is reported.

I wish I were as optimistic as Ryan. I believe the number of first-time homebuyers in the market today is significantly lower than at the same time last year. As we progress closer to the April 30 anniversary date for the end of the tax credit, I think we will see the year over year pending home sales decline to an even greater degree.

It is my belief that the credit did not create “new buyers,” rather it pulled future buyers (like those that would be buying now) into the tax credit period. The market is now absorbing those that got “fired up” prior to the deadline.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Real Estate Is Local (Except When It Isn’t)

The world has been watching Canada this year. Not because the winter Olympics were here, but because Canada escaped the global economic crisis with minor cuts and bruises while many other countries are still being hit hard. We’ve become the example for other countries to learn from. And some of the world’s most influential economic thinkers and leaders have been visiting Canada to learn about our financial sector and our banking industry.

For years, my husband and I didn’t feel like the example to behold. As we offered up our proverbial first born child to get a mortgage we cursed our stringent banking rules and challenging lending climate while watching our American neighbours get mortgages with as little as proof of a pulse. It was tough to appreciate our banking system in those days. But today we are now grateful for those rules. The discipline and regulation our banks operated under largely kept our economy out of the big troubles felt in many other parts of the world.

While many smart people are expecting the tough times to continue for the US housing markets, and while the economies in many European countries collapse Canada has, for the most part, emerged from the recession. Houses that had dropped in value in 2008 have begun to recover and in some markets, surpass their previous peaks. Rent rates are beginning to climb up again and the banks continue to lend money to home owners and real estate investors – albeit even more cautiously than before.

I don’t think it’s all good times ahead for every housing market in Canada but there is another compelling reason for US investors to consider putting some Canadian property in their portfolio: the Canadian Dollar. The Canadian currency continues to gain strength against the US dollar and could provide some shelter against the inevitable challenges the US dollar will face in the coming years.

While many of my Canadian investing colleagues head south in search of deals, we’re content to continue investing in our own backyard because we watch the indicators and see some very positive signs. So if you’re considering putting some money into Canadian houses what do you look for? Well it’s not any different than what you’ll look for in any other part of the world but I will share a few key indicators to learn and give you some resources to research that information.

Good Indicators a Canadian Housing Market is Looking Good for the Future

1. Employment levels:
   As a real estate investor, it doesn’t matter where in the world you’re investing, if people don’t have jobs they aren’t going to have money to pay rent or to buy homes. In other words, there will not be much of a foundation to support a strong rental and housing market if it’s full of people without sustainable income. So before you put your money into any market figure out where people are currently working, where they are likely to work in the future (any changes in the major employers in that area) and whether there are likely to be more (and better) paying jobs in the future or not. Most city websites have pretty good breakdowns of where people are working in a city and any major infrastructure development plans for an area (which will be a good source of jobs during and after development usually). Just do a quick search in google for “city of _____” and you’ll usually get directed straight to an official city website with lots of great local information.
2. Population Levels:
   Determining whether an area is increasing or decreasing in population is pretty important but even more important than that is understanding why that number is trending the direction it’s trending in. You want to make sure an increasing population is sustainable and not just temporary for an event as big as the Olympics for example. If it’s because a new major company has relocated to an area, or transportation in and out of an area has been dramatically improved that influx of people might hold steady and possibly continue to increase in the future. And that is a very good thing for the future health of the housing economy because people need places to live. Unfortunately population is a tougher number to learn about because census data is only collected every 4 years or so in Canada and is almost always out of date before it’s even released but you can watch the trends and sometimes get more specific City information from local city websites.
3. Health of the Housing Economy
   Look at:
   • Total home sales,
   • Active listings,
   • Average days on the market, and
   • Trend of the average sales price.

   What direction are these indicators moving? Good signs include increasing sales, decreasing listings, decreasing days on the market and increasing sales price. But keep in mind that the trend line can vary depending on what season it is. For example, it’s not uncommon for active listings to go down in January but that is not because a whole bunch of houses sold and there’s a sudden demand it’s because most people take their house off the market for Christmas time unless they really need to sell. So look at the trends over a period of time to really try to understand what direction it’s heading overall not just because it’s July and house sales always drop in July because people are more interested in summer vacations than buying a new house. Then you want to look at rent rates and vacancy rates. The best resources for this data in Canada for home sales are found from realtors in the specific market areas but you can get some stats from the Canadian Real Estate Association. For vacancy rates and rental rates CMHC has some pretty good and current market information. Local property managers can also give you a very good idea of the specific rent rates for smaller market areas within a city and the general vacancy rates for basement suites vs. entire homes because numbers like that will vary from the data collected by CMHC.

There are certainly many other factors to consider before you invest in a market but these three big ones will give you a good comfort level with the health of the area you’re looking at. If an area continues to have employment strength, attract new residents and show many positive signs in its rental and housing economy then it should be well poised to handle whatever storms the world economy will throw it’s way.

But like any investment consideration I really believe you need to go and check out the area you’re looking at buying in. Walk the streets in the neighbourhood where you might buy property, speak with the local experts including real estate agents and property managers, and get a feeling for where the local residents work, send their children to school and what they do for fun. And trust me, there is no better time to visit any part of Canada than right now! The sun is shining and the people are smiling. Summer is a gorgeous time in Canada – and with the sun peaking out from behind the clouds on our economy as well, it might be a great time to leave some of your money behind in our country for some safety and security in the coming years.

Image Credit: Istock Photo Ulga

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Maybe It’s Time to Invest in Canadian Real Estate

Crunching the recent Pending Homes Sales Index (PHSI) numbers revealed the home buyer credit extension worked.  The extension proved not to have diminishing returns as the index nearly matched the recent high set in October, 2009 (110.9 vs. 112.4).  This is short term good news for the economy as the extensions have helped the real estate market  find a bottom just as foreclosures are 6 months out from peaking.

The Pending Home Sales Index (National vs. Regions):

Looking at the data for each region, the story shows a sharp increase in the Northwest in April vs. the South (the only region where the number actually decreased).  The South showed a big increase a month earlier.   The South seems to be picking up overall (eclipsing October more than any other region).  The West is the only region showing substantially less pending home sales than October.

Many thought the extension would indeed have diminishing returns and it probably did somewhat as the housing crisis is another 6 months in the rearview mirror than it was in October.  Each month that goes by, the media seems to be mentioning it less, which certainly has some impact on consumer confidence.

I pulled the number of news articles on Google showing mentions of the “housing crisis” and found that it’s dropping significantly.   The number of articles also dropped significantly for “foreclosures” despite the peak coming in or around December of this year.

News Articles Referring to "Housing Crisis" (via Google)

News Articles Referring to "Foreclosures" (via Google)

My theory here is people (and the media) are honestly tired of these subjects and are mentally moving on.  This is translating somewhat into the Pending Home Sales Index as although it is seasonally adjusted, I’m not sure how it could be adjusted for confidence.  Confidence is returning somewhat in the real estate market due to property prices looking unbelievably low.

What’s next?

Thinking out for the remainder of the year, we can expect a pretty steep drop in PHSI over the next month if you consider the recent news by the Mortgage Banker Association showing the lowest number of applications submitted since 1997.  The owner-occupants are certainly taking a post-tax credit break.

The question in my mind is;  will the investors (YOU) step back in and fill the void they did when the crisis first started?

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Home Buyer Credit Extension Does Its Job, but what’s next?

My all time favorite axiom was taught to me by Grandma one day at their Art Shack in Temecula. It was during summer vacation, I was about 10 or so, and it was HOT. Grandpa was in the middle of one of his signature paintings of the Grand Canyon, when without warning he stopped, put his brush into a can of something smelly, and said “Let’s eat!” We had some of Grandma’s homemade beef and vegetable soup, another post altogether. I asked Grandpa why he didn’t wait to finish the whole painting before eating. Whereupon Grandma smiled at me, and gave me my favorite axiom.

BawldGuy Axiom: ‘Bout the time the farmer got the ol’ mare to work without eatin’? She died.

Grandpa needed to eat. Also, much to Grandma’s chagrin, he began braying with glee, followed by his well known belly laugh which rocked the shack. Ah, good times.

Real estate investors in formerly huge growth markets like San Diego (Palo Alto is another great example.), still want their capital — equity, if you prefer — to work for them as well as it has the last couple generations. Problem is, that equity simply isn’t being fed by appreciation the way the investor had so easily become accustomed. Yet they’re flummoxed by how seemingly dead in the water that equity is — and has been now for quite some time.

This is something flippers who’ve kept some of their best properties for long term benefits can profit from also. Take San Diego — please. Badda booom! An astute flipper can still make some impressive short term gains here, and many are. The intelligent ones can easily recognize which ones to keep. They can then carry out the strategy of applying cash flow to the loan balance, creating more capital growth without the outside help of appreciation.

Let’s look at that a second.

You’re a smart cookie, experienced in buying property in need of rehab, at distressed prices. One of ‘em is a very well located home you snatched up for $250,000 in a pretty desirable San Diego neighborhood. After performing your rehab magic, at a cost of $30,000. you happily learn it will now rent for around $1,900 monthly. (It cost you $55,000 to close the purchase.) Also, it’s market value has settled in at about $350,000. The loan balance is roughly $200,000 with an interest rate of 5%. The monthly payment is $1,075 or so. You’re able to add give or take $325 a month to your payment. Here’s where you are in about a year.

Though you’ve gained maybe $7,000 in loan reduction, what you’ve really done is added a couple options to your menu. First, since you’ve owned it for over a year now, if you sell it, the taxes will be based upon long term capital gain, not ordinary income — a definite plus. Primarily though, you’ve also created the opportunity to trade that equity out of moribund San Diego into a real growth market.

If you sold for $350,000 paying 8% for commission/closing costs, you’d net close to $130,000. This will allow you to acquire a couple very well located duplexes in excellent neighborhoods in the Dallas/Fort Worth MetroPlex. (Though it could be any proven growth region with which you’re comfortable.)

Your cash flow would go from $4-6,000 annually to $7,500-10,000. Your tax shelter will rise from $7-8,000 to 10-12,000 a year. You produced this with your original $55,000 acquisition costs + $30,000 rehab — about $85,000 or so. You’ve now generated more cash flow and tax shelter, with a significantly better chance for future appreciation than if you’d remained in San Diego. Apply the cash flow to loan reduction as mentioned above, and in a few short years you’ve generated a fairly decent capital growth rate — without counting on appreciation for one second. None of this requires a degree from M.I.T.

The real benefit though, is how you created another basket for yourself. Just last week Jason Hanson made this point eloquently.

It’s one thing though to keep what began as a flip, and quite another to hold it hostage in a market in which it will languish. Yeah, you can do the loan reduction thing anywhere, and with the same predictable results. No argument there. But if you can do it in a better region, with 50-100% more property, with an end game resulting in far and away more retirement income, tax shelter, and equity in terms of dollars, why wouldn’t you do that?

The new paradigm in which we find ourselves has also removed much of the need for us to make use of the more sophisticated strategies and/or tactics. For example, I now advise clients to buy as much property as they can prudently afford, use the cash flow to rid themselves of the debt, enjoy the cash flow in retirement — OR — trade it to more or higher quality or more tax sheltered income — or all three if possible.

It’s entirely doable for most folks to acquire income property, free and clear it in 8-15 years, and either then, or somewhat earlier as circumstances allow/dictate, trade it to property(s) that will significantly and immediately improve their position.

Nobody has figured out how to keep plowin’ the field without eatin’. Remember this the next time you think one of your keepers might do better in another region. Chances are you’re right.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Is It Time For You to Get Outa Dodge? From Flip to Keep to See Ya!

Make room for Mom.

A growing number of home buyers are looking for extra space to accommodate multiple generations of family, according to a recent Coldwell Banker survey of real estate agents.

Almost 40 percent of the agents who responded noted an increase in home buyers looking to purchase homes to accommodate more than one generation of their family. Nearly 70 percent of the agents surveyed said multigenerational buying is only likely to get hotter in 2010 given the economic landscape.

The grim financial environment is the main driving force behind the new attention on garage apartments and mother-in-law suites. But health care (29 percent) and those good old family ties (6 percent) were also cited as factors, according to the survey.

“While saving money is certainly an incentive for buying a home that accommodates multiple generations, the benefits go beyond just financial reasons,” Diann Patton, Coldwell Banker Real Estate Consumer Specialist, said in a news release. “With two or three generations living under one roof, families often experience more flexible schedules, quality time with one another and can better juggle childcare and eldercare.”

Real estate professionals have a burgeoning opportunity to seize on this expanding niche and highlight properties with these kinds of offerings. Any home with bonus space could be a candidate for a multigenerational buyer who’s planning to bring an ill or out-of-work family member back into the fold.

Image: fotographix.ca

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Multigenerational Home Buying Gaining Momemtum

On the 5^th of January, the National Association of Realtors released its latest Pending Home Sales Index (PHSI), showing a 16% decline over October.  Almost immediately the media seized these numbers and outlets like MSNBC reported “Housing Industry May Be Headed for Double Dip”.  Of course any decline anywhere in the economy right now is a concern, but economic recoveries don’t happen overnight.  I thought I would invest some time in reviewing the numbers and while doing so, I learned there was more of a story to tell.

First, by definition the PHSI is just what it sounds like.  PHSI is an index of “pending” home sales which is a barometer to future sales.  A home becomes pending when a seller accepts a contract on the property and it’s changed to pending in the Multiple Listing Service.  According to the National Association of Realtors, this data comes from over 100 MLSs and 60 large brokers which is only about 20% of all the transactions.  New home sales, FSBOs (including Trulia, Zillow, and Craigslist FSBOs), lease purchases, and anything else which is creative are excluded from these numbers.  However, of the 20% slice of the market 80% end up closing, offering a good future housing market indicator.

What the media is not giving much emphasis to is that this number is up 15% over November of 2008, showing the market is much healthier than it was 12 months ago. The PHSI for November also is higher than June, 2009 (seasonal peak home-buying time), well above the 2008 average, and roughly the same as the 2007 average.  The slowdown was the first decrease in PHSI in 9 months.  Economic recoveries don’t show perpetual increases.  Also wouldn’t you expect a downturn in November?   I looked over prior years and noticed there is always a downturn in November, usually around 5%.   What makes this November’s drop so large is expiration of the first-time buyer credit.   Of course this is cause for concern as the tax credit impact on the market has been significant.  With the extension now in effect until May and expected to have much smaller impact, the real estate market must stand on its own in the 2^nd half of 2010.

Here’s a visual of the raw data, courtesy of the National Association of Realtors:

So a quick recap:

• Pending home sales up 15% over November 2008
• Down 16% over November, considering the first  tax incentive for first-time buyers expired
• First decrease in 9 months
• 4^th highest pending home sales month in 2009
• 10% higher than 2008 average
• Roughly equal to 2007 average
• West is only slightly down over October with huge increase over last year (West Coast is usually seen as a leading indicator of the overall economy)

Prognosis

Although we will likely see interest rates rise in 2010 and anemic recovery in the housing market, the data shows the market overall is doing better than it was 6 months ago.  Most other sectors of the economy such as factory orders and transportation are improving.   Retail sales have stabilized as well, pointing to the worst being behind us.  So although we’ve seen a sharp decline month-over-month the overall real estate trend is up, including PHSI.  The PHSI is likely to be volatile in the near term and the true indicator will be 2^nd half 2010 when government programs expire.

As an investor, you have to dig deep when you see media reports signaling economic trends based on short term statistics.  A more accurate picture can be derived from looking at overall trends.  One month is not a trend.  By definition economic trends are periods of 2 consecutive quarters.  As they say there are “lies, damned lies, and statistics”.  Passive landlords should keep accumulating via investment property purchases at prices unseen in many years, seeing their profits over the long-term.   Wholesalers and realtors will continue to deal with lower transaction volume, shifting their focus to FHA buyers or renovated properties with rental-guarantee incentives for investor buyers.  The overall trend is recovery but as an investor you need to buckle-up and prepare for the bumps.  Investigate the economic numbers as you should when buying investment property, with caution and skepticism.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Investigation into Pending Home Sales Reinforces Recovery

If you read the headline that shouted, November new home sales sink 11 percent, without knowing your local market, you could easily believe it was aimed at you. On one hand, it certainly could apply to your area but, on the other hand, it certainly may not. By now, you probably understand the simple real estate fact that markets vary a great deal by region. Hence, what is true here is not true there.

This naturally brings me to state the obvious. Performance of the national housing market is much less important than the dynamics of your local market. Yes, the markets are related but the facts show sales and pricing trends vary a great deal from one area to the next. You have to be a mental midget not to realize this trend will continue ad infinitum unless the government nationalizes the real estate industry.

Some Good Advice

Right off the bat, you have to understand if you are interested in buying real estate next year, you can’t just read the national headlines. I hope you are as blessed as I am. We have several good blogs that cover the local housing market. Find them and read them. The beauty of a blog is you can almost always make contact with the writer(s). Get to know them and don’t be afraid to ask questions.

I’d also do some homework on real estate agents. I’ve mentioned this in previous posts but finding an agent with experience in your area could be worth its weight in good deals. Couple this advice with visiting open houses and you should have a darned good feel for your market.

Don’t forget to check out online listings as well. My mind tells me every area in the country has online listings, so it shouldn’t be too much of a problem to find them. What are you looking for? Pricing and inventory trends. I admit you have to follow the listing for a period of time to get a good grasp on pricing and trends, but if the site has an archive, bingo, you may have just hit the jackpot.

Another Unlikely Source of Good Real Estate Deals

I’ve written about loan modifications in previous posts and said we’d have to wait to see if they are working. Guess what, the results are in. The success rate is even more bleak than expected. The same people who were sinking before they received a loan modification are back in the soup.

I can’t find any published reasons why this is the way it is but I have a guess. Assuming they didn’t lose their jobs, I believe they also didn’t lose their poor financial management skills. I say this with over 20 years of experience in the eyeball to eyeball financial arena.

In my stock broker days, I interviewed over 2000 people face to face. Of the 2000, approximately 10 had a clue about personal financial management. As an active insurance agent, I am still amazed that the stock broker days ratio is still alive and well.

That is just my opinion. Yours may, and probably will, be different.

Having said all that, you can probably guess the unlikely source of which I speak. The in-place loan modification programs aren’t much help for borrowers struggling to stay in their homes as the result of a job loss. Around these parts, the rickety labor market is a key factor behind rising delinquencies.

For example, two large retail chains are closing a total of four stores in this area. That raises the unemployment pool by about 500 people. Some of those people may have loan mods. Ugh!

Another problem with the loan mod plans is they do not sufficiently address the issue of negative equity. Obviously people owing more on their home loan than the property is worth is going to increase foreclosures. This means that the current modification programs not addressing negative equity are destined to fail. How, and if, this problem gets addressed is up to local law makers.

This part of the post isn’t about fixing loan mod programs, it is about locating a good deal. I think this pool of foreclosures may offer good deals. Again, you live in your local area so get savvy about the local loan mod program(s).

Happy Holidays

Whether you celebrate it or not, today is Christmas. I want to extend best wishes to one and all and say I am truly proud to be part of this blog. Josh found a need, filled it and helped make all of us a bit smarter and wiser.

Have a great day.

Photo: Henry Brett

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

National Headlines & Local Realities: Finding Great Real Estate Deals

It seems that in these past two weeks, we have experienced a tremendous increase in relatively negative news regarding the real estate market.  Usually I just chalk up all this negativity to the media working hard to score a few extra bucks.  However, this time I am choosing to not be so hard on the media and the bad news.

Why?

Several reasons.

Is Housing Overheating?

The biggest reason is that I believe that the housing market in general is in danger of becoming overheated… again.  As evidence, just look at who the buyers are:

1. First-time homebuyers getting loans that for some consume almost 50%of their income
2. New investors with little cash and less knowledge rushing into the market because they see the “opportunities”
3. Seasoned investors buying everything they can… because the prices are just too good to be true.

While I could spend a considerable amount of time discussing each item above, I would like to focus instead on the second item: “new investors with little cash…”

New Investors Jumping In Too Soon – Unprepared?

Much of the news these past 10 days has either discussed the extreme number of foreclosures in the past 3 months or the fact that housing prices will continue to decline for the next several years.

Consider this article in the Miami Herald that indicates that housing prices will decline another 30%, and that is already on top of 48% declines since 2006. 

Or this article on DailyFinance that talks about every bubble following the same trajectory on the way down that it did on the way up.  The chart in the article tells it all.

Most experienced real estate investors know how this works.  They understand that old mantra, “You Profit When You Buy,” and purchase their deals accordingly. Making sure their deals reflect projected value trends which they factor into their purchase price.

Where it is more unsettling for me, at least regarding the new crop of investors, (did you know some gurus estimate that there is a 50% churn rate of noobs into real estate investing every year?) is that these investors just see low prices and without knowledge of or consideration to long term trends they jump in and ultimately end up getting slaughtered. 

Bottom line, the overall housing market has a long way to go before things return to normal, whatever normal is at that time.   Don’t be lured into deals that look too good today, because depending on your market, prices have not yet bottomed out. 

If you doubt this statement just ask someone who purchased a $40K property in Detroit last year, what it’s value is today.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Is The Housing Market Overheating . . . Again?

First of all, I should tell you that I do not have the faintest notion why those dudes stole the freaking salmon from a fish hatchery in Kennewick, Washington! I can only tell you that, according to the Kennewick website, the dude allegedly stole the entire salmon. Doesn’t say if he was hungry or trying to sell the fish on the black market (is there a black market for salmon???) or whether he was, perhaps, romantically involved in some way with the big fish. Look, we are talking about Kennewick, Washington, so anything pretty much goes.

Now what brought me to the official Kennewick website in the first place, you may ask? (That’s okay. If you didn’t ask it, I just did.)

I’ll get to that in a minute. But first…for those not familiar with Kennewick, Washington (and I’m guessing that’s like 99% of you, right?) it is a city of almost 66 thousand people (and an unknown number of salmon I’m guessing) that is about a three and a half hour drive from Seattle.

In the winter, the temperature rarely drops below 44 degrees and in the summer seldom climbs much above 88. Except when it does.

The city is in Benton County which fits very nicely into the southeastern portion of this northwestern state.

And, did I tell you that Forbes ranks it number two in job growth for the entire United States? (Suppose that could mean it has just added two new jobs!)

Now I am getting to the interesting part.

Bucking the National Housing Trend

I looked up all this stuff about Kennewick, Washington because right there, smack in the middle of a CNNMoney.com story about how national home prices are now forecast to actually go down another 11 percent–guess which metro area is bucking the trend big time?

Oh come on….this is easy. YES….Kennewick, Washington of all places on Earth.

Says the world’s most self-important network: ” The biggest winner will be the Kennewick, Wash., metro area, where home prices have ramped up 8.9% over the past three years and are expected to increase another 3.4% by June 2010.”

Now, of course, CNN, being CNN, doesn’t bother exploring why this might be? Why Kennewick, Washington?

But I have this feeling it all has something to do with the theft of that stinking salmon. Well, the salmon was probably not stinking yet…but probably still smelled like a fish right off the bat, wouldn’t you think?

I mean, I started thinking: what would motivate someone to steal a salmon in the first place? And, more important, why would that “news” make it to the city’s website????

Damned if I know. But I do know this: Anyplace that can make a big deal about a swiped future dinner course, can probably live with the fish tale that it is THE place to invest in real estate. Now, pass the tarter sauce, please.

Photo Credit: bugeaters via Flikr

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Kennewick, The Stolen Salmon & Why Real Estate Is Booming There

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 © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Why Exercising Could Make You a Wealthier Investor

Last week, I started looking into the Washington, DC Metropolitan Statistical Area (MSA), which consists of the District of Columbia, Northern Virginia and parts of Maryland.  Given the growth in the federal budget over the last few years, I wasn’t surprised to see that the DC MSA was “the most educated and affluent metropolitan area in the United States,” according to Wikipedia.

The District of Columbia itself has made great strides in recent years, including greatly reducing the rate of violent crime.  You may recall that it was known as America’s murder capital during the crack-filled 1990s.  However, the city’s unemployment rate is actually fairly high, at 11.1%.

Maryland and Virginia, on the other hand, are very prosperous.  Both are among the most economically successful states in the country.

Maryland’s Doing Pretty Well…

Maryland, DC’s (mostly) northeastern neighbor, has seen fairly consistent population increases and has a well-below-average unemployment rate of 7.2%.  It actually has the highest median household income of any state, although this can be deceiving – the cost of living is also very high there.  (The second highest median household income is in New Jersey, which is not currently an economic paradise.)

However, Maryland has many advantages.  It is a transportation hub, has (as you would expect) many government agencies, and also employs many people in biotech.

Maryland unfortunately also suffers a business climate that is 34^th in the nation according the Pacific Research Institute.  It ranks 43^rd in fiscal policy, 28^th in regulatory policy, 47^th in judicial policy, 26^th in size of government and 19^th in welfare spending.  This should be considered slightly below average, and as seen by Maryland’s otherwise excellent economic performance, is not enough of a burden to cause major problems.

As in DC, Maryland’s real estate value has diminished over the last few years, but at a relatively slow rate.

But Northern Virginia’s Doing Better!

Northern Virginia is at the perfect storm of economic success.  How do we know?  One of the major issues in the upcoming VA governor’s election is transportation planning.   Northern Virginia (also known as NoVa)’s current system of highways and public transit simply can’t cope with the extraordinary number of people moving to the region.  And why do people want to move to NoVa?

One reason is unemployment that is well below average.  Virginia as a whole currently has 6.5% unemployment.  That’s not great in normal times, but fabulous compared to the national current average of 9.7%.

That very low unemployment is driven not only by federal government employment, but by an outstanding business climate ranking of 9^th from the Pacific Research Institute.

Even better for Virginia, all neighboring states have much lower rankings.  That means that many businesses that could settle anywhere in the area around Virginia will probably choose the Old Dominion.

Virginia’s population has increased by at least 10% every decade since 1940, and is now three times what it was in 1940.  It also includes the nation’s fastest-growing county, Loudoun County (population up 59% from 2000-2006).

In short, everything is perfect in Virginia.  What could go wrong?

Well, the state has had a nice little bubble bust.  In Loudoun County, for example, prices have dropped about a third since the 2006 peak.  Fairfax County has lost about 25%.  Prince William County, about 40%.  Those are some big drops.

In Virginia’s case, however, I’m going to call this a feature instead of a bug.  Consider other states that have suffered real estate busts that, almost by themselves, caused terrible unemployment.  (Florida and South Carolina, I’m looking at you.)  Much of their employment was based on construction, which meant they had a continual need to keep growing.  That’s not the case in Virginia because of the terrific business climate and diversified industry.  I see the state coming out of this recession fast and strong – and recommend it.

I can see one major possible problem for Virginia in the future (other than the transportation mess, which is going to get resolved one way or another).  That is the possibility that the real NoVa real estate bubble might still be ahead of it.  In other words, people who buy now might be looking at some major declines down the road.  However, it remains an excellent choice for long-term investors.

bunkosquad via Flickr

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Maryland and Virginia Real Estate Markets Show Promise

Note to readers: I’ve been criticized for some blunt statements about real estate markets in the past.  You can disagree with me, but I ask that you not doubt my integrity.  I have no real estate interests outside New Hampshire and am not representing anyone.

When I started researching the Washington, DC real estate market, I was impressed by the stability of institutional markets in general and astonished by the growing disparity between federal government and private industry employment.  Put bluntly, the federal government has become the best employer in America.  It is the most stable, with a headcount that grows annually and essentially guaranteed salary increases.  It also offers the best benefits and salaries, except for the very top (the government’s CEO, President Barack Obama, makes $400,000 per year – a nice paycheck, but lower than that for almost any CEO in the Fortune 500).

As you might imagine, having the biggest employer in the country in your back yard is a good thing.  When that employer can always be counted on for a raise, that helps.  Partly as a result of that, the DC real estate market is looking pretty darned good.

The Washington Metropolitan Statistical Areas (MSA) is best understood as three separate areas: southwestern Maryland, the District of Columbia and northern Virginia.  I use DC, the District of Columbia and Washington interchangeably, as they really are the same.  The three areas are very different and present different challenges to investors.

In this post, I’m just talking about the District itself.

The population of DC has actually declined significantly since the 1950s as residents have moved out to the Virginia and Maryland suburbs.  Unemployment in DC is also fairly high, at 11.1% compared to 9.7% nationally.  Almost all job losses have been in the private sector.

That’s the bad news.  The good news is that DC is improving in several ways.  One big one is the rate of violent crime.  Everybody “knows” that Washington, DC is the most crime-ridden city in America.  It’s not true!  CQ Press, using data from the FBI, ranks DC 21^st among cities.  Rates of all forms of violent crime, in particular, have decreased sharply since the 1990s.  That’s not to say that Washington is a safe city – the violent crime rate is about three times the national average.  That is still lower than Orlando, Cleveland, Memphis, and even Minneapolis.

Many DC neighborhoods, particularly in the western part of the city, have been gentrified and experienced fast-rising property values.  These are the “cool” neighborhoods where young professionals like to live: Columbia Heights, Adams Morgan, Mount Pleasant and others.  I have no doubt that many DC investors are currently on the hunt for the next “cool” neighborhood.

Understanding DC’s business climate is a bit tricky because many studies don’t include it.  However, the tax climate is somewhat worse than average – residents have a bit higher than average state/local tax burden and corporate taxes are significantly higher than average.

DC real estate has declined in value over the last few years, but relatively slowly, as seen in this chart.

I think DC’s future looks bright.  The reduction in crime is one of the great under-reported stories.  The city is beautiful, and as noted before, the biggest employer isn’t going anywhere.

Image by Willscrlt via Flickr

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

How is the Washington, DC Real Estate Market?