The media reports of late are all “doom and gloom” focusing on foreclosure numbers, price declines, and inventory levels. One might start believing real estate as an investment class is a bad pick and could stay that way for a long time.

Don’t believe it for a second…but before I make my case, let’s start with a Warren Buffet quote,

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Everyone is “fearful” of real estate investing right now. Buffet is saying, “Now’s the time to get greedy…and buy.” So the more reports the media prints about the “worst real estate market since the Great Depression” the better it is for real estate investors.

The time to be afraid was back when every idiot with a Charlton Sheets DVD under his arm could get a a stated income loan to buy his first investment home with nothing down. Without fear and overflowing with greed, they plunged into the real estate investment world driving up prices due to the irrational belief the real estate market was bullet-proof.

Today even with the negative media reports, one can find data to support a return to real estate as an investment:

The foreclosure crisis has been contained now to about 4 states, California, Nevada, Arizona and Florida. We couldn’t say that a year ago.

The Case-Shiller housing price index is showing month over month price growth in about half of the 20 cities it covers.

The rental prices in most cities (the underlying real value of a real estate investment) is climbing.

Inflation in our future is about the only thing economists can agree on right now and we all know what happens to rents and home value during an inflationary economy.

So, get out there and buy…get greedy while everyone else sits in the corner scared to death.

You’d better hurry or I’ll beat you to it!

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Tags: bubble, Foreclosures, Housing, mortgage crisis

It’s NOT over yet! In fact, it may have only just begun?

We have already seen the economic destruction wrought by the so-called sub-prime mortgage crisis, as foreclosures escalated in many parts of the country, contributing greatly to putting the credit market in a tailspin from which it has yet to recover and may not for some time to come.

So this is not exactly the best of times to be confronted by the very real possibility that–as they say in show biz–”you ain’t seen notin’ yet!”

A New York Times article this week begins with a paragraph that should make your skin crawl : “The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.”

That’ll take your eyes off your morning corn flakes for sure.

Even The Good Die (Default?) Young!

The article is talking about homeowners who have good credit ratings and how they are rapidly and in “growing numbers” starting to fall behind.

Says the paper as proof: “The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.”

The paper points out that a key reason for more defaults ahead will be that monthly payments are going up fast–while, at the same, time, the value of home prices keep dropping like a lox that slid off a deli counter in Queens.

Says Thomas Attenberry, president of First Pacific Advisors, “Subprime was the tip of the iceberg.”

Up, Up and Away!

Meantime, as they like to say in Dark Knight comics, the nation’s inflation rate has come alive with the energy of a dozen hungry pit bulls munching on a postman’s leg.

Consider this: “Consumer prices jumped at the sharpest rate in more than a quarter centuryduring June and consumers coping with soaring costs received their smallest income gain in a year,” reports Reuters, quoting a newly released government report.

Now what?
Now that is one damn good question, ain’t it? Now what?

The other day, while driving through a well to do Los Angeles neighborhood, I lost count of the number of for sale signs on the front lawns of well taken care of homes. Not all are in foreclosure I am sure, but many no doubt are. And this is a “good” part of town.

My guess is, many of these signs will still be out there weeks and maybe even months from now since people can’t get credit to buy at a time when price bargains are surely to be had.

That housing “rescue” plan passed by Congress last week and signed into law by Bush is not likely to have any impact –if at all?–for many more months because it just takes time to get things of this sort rolling. In the meantime, the defaults and foreclosures keep mounting.

And out there, beyond the horizon remember, is that second, bigger wave silently approaching.

Tags: bubble, Housing, housing, mortgage bubble, real estate, real estate crisis, Real Estate Market

I’m a bit short on time today, so I’ll share with you a few of the headlines that stand out to me regarding the economy and housing . . .

How Housing is Affecting the Economy

Dollar Drops to All-Time Low Against Euro on Weak Economic News From Washington - “The dollar fell to a new low against the euro on Thursday after the 13-nation European currency broke through the $1.43 mark on reports from Washington that growing economic weakness was boosting jobless claims.” ^{Source: Yahoo Business}

Credit Crunch Fears Back On Housing, Financiall Firms’ Outlooks - “Housing woes are getting worse, and spreading beyond builders and lenders to tech firms and the broader economy. September housing starts dived 10.2% to an annual rate of 1.191 million, a 14-year low, the Commerce Department said Wednesday. Permits for future building slumped. Economists don’t see any sign that the drop will end soon, and some see it intensifying in the coming months.” ^{Source: Investor’s Business Daily}

Housing starts skid, inflation flares - “Groundbreaking for new U.S. homes and permits for future building both hit a 14-year low last month, reviving worry about a deepening housing slump and prompting investors to boost bets on interest-rate cuts. Housing starts tumbled 10.2 percent to a 1.191 million unit annual rate, the slowest since March 1993, the Commerce Department said on Wednesday. Economists had expected starts to slip, but the sharpness of the downturn took them by surprise.” ^{Source: Reuters}

How Housing is Affecting Lenders

Washington Mutual’s profit sinks 72 percent, sees more housing slump - “Washington Mutual Inc (NYSE:WM), the largest U.S. savings and loan, said on Wednesday third- quarter profit fell 72 percent, hurt by mounting mortgage losses, and said it sees no end to the U.S. housing slump. The thrift, which is also one of the nation’s biggest home loan providers, nearly doubled its forecast for full-year credit losses.” ^{Source: Reuters}

GMAC home-lending unit to cut 25 percent of staff - “Residential Capital LLC, the home-lending arm of GMAC Financial Services, will announce that it is cutting its work force by about 25 percent today, the Wall Street Journal reported on Wednesday. GMAC Financial, the General Motors (NYSE:GM) financing arm that was sold to a consortium of buyers including Cerberus Capital Management last November, is suffering from slowing loan demand and tightening credit in the lending unit, the paper said. The unit, called ResCap, is expected to cut about 3,000 of its 12,000 employees in addition to the 1,000 that were to be cut by the end of this month, the paper said.” ^{Source: Reuters}

Anyone have any thoughts???

Tags: bubble, commerce, Economy, Housing, housing, lenders, mortgage mess, wamu

According to the Star-Telegram, lenders in Southern California are scooping up foreclosed properties at a rate much faster then they can get rid of these homes. “At some point — maybe this fall, maybe in 2008 — the lenders’ inventories will grow so large that they will have no choice but to cut prices aggressively, many agents and analysts predict. That, in turn, will put more pressure on individual sellers, who will have to reduce prices if they want to find a buyer. As values fall, more people could lose their houses, which will swell the lenders’ inventories even more.”

Has all of the predicted doom and gloom in housing become a reality?

I’ve been saying for years now that this overheated market simply cannot sustain itself. I’ve shared with you stories of policemen and others buying million dollar homes in the Los Angeles area, which they had no business doing. This has been happening around the country, and these stories have all been warnings that the perfect storm was on its way.

It looks like we’re in the heart of the storm!

I hope to cover over the next few weeks and months how people can best deal with this market, and what, I believe, has led to the current financial crisis. This housing market will hurt many people, but you don’t have to be a victim! We’ll help you learn to get out before it is too late. We’ll help you profit from the massive explosion in foreclosures. We’ll help you become a contrarian investor that makes sensible decisions that will not only help you save your credit, but that will potentially save your financial future as a whole.

Stay tuned . . .

We’re not going to leave you out there on your own through this impending housing (and possibly economic) crash.

Tags: bubble, debt, Economy, federal reserve, Foreclosures, Housing, housing, housing-crash, Interest Rates, mortgage crisis

In the current housing bubble, hundreds of thousands of people, if not millions got themselves into risky mortgages. Often times people will not realize that they cannot afford their home until it is too late! If you’re having problems paying your mortgage and you want to refinance, do it before falling behind or making that late payment.

According to The Mortgage Blog, “banks really look at whether or not you can handle a mortgage payment responsibly. If you’ve been late on your mortgage more than 30 days, what we call a 30 day late, that counts against you.”

That’s a tip we should all keep in mind!

Auto Loan Refinance lower your monthly bill

Tags: bank, bubble, housing, late, lender, loan, mortgage, refinance, toxic

CNBC is reporting this morning that US Housing Starts declined in October 14.6% to the lowest level in 6 years, while building permits were down a whopping 6.29%. Guests on the network, James Wilson and Jan Hatzius (Goldman Sachs Economist), predicted that housing will be a drag on GDP in ‘07. Hatzius attributed the problem to bloated inventories and weakening sales from the home builders. Wilson predicted that builders will start marking down prices significantly, and that the worst is yet to come in the housing market. “The bottom has not hit yet.” He predicted that the Fed will keep interest rates steady until summer, when they will likely start easing.

Bloomberg reports, “Builders broke ground on 1.486 million new homes at an annual rate, down 14.6 percent from September’s 1.74 million pace, the Commerce Department said today. Building permits dropped to a 1.535 million pace, a record ninth straight decline and the lowest since December 1997.”

For those looking to buy a home, this is nothing but good news. The irrational exuberance that has been plaguing our housing market has finally really started to dissipate. With builders quickly dropping prices on their new homes, and previously owned homes staying on market for longer and longer, it is finally starting to look like a buyers market once again. Don’t get too excited yet, though. With thousands, if not millions of people in homes they can’t afford thanks to risky loans, it looks like the market will only continue to decline until foreclosed homes have truly hit a feverish pace. We need to see everything balance out before we’re close to the bottom of this giant real estate bubble. Buyers will likely be rewarded if they can continue to show patience.

Tags: bubble, builders, construction, estate, fed, foreclosure, homebuilders, housing, interest, rates, real

The National Association of Realtors today reported that the median home price in the US fell in August to $225,000 down 1.7% from August of 2005. This is the first time a year over year decline in median home prices has occured since April 1995.

According to The New York Times: “David Lereah, chief economist of the association, said he expects prices to continue to fall. “We do expect an adjustment in home prices to last several months, as we work through a buildup in the inventory of homes on the market,” he said in a written statement. “This is the price correction we’ve been expecting — with sales stabilizing, we should go back to positive price growth early next year.”

At the end of August, there were enough unsold, previously owned homes on the market that it would take 7½ months to sell them all at the current sales pace. The association said that was a bigger backlog than at any time since April 1993.”

Hear that? That quiet hissing sound you’re hearing seems like the beginning of a deflating bubble . . .

Tags: association, bubble, home, median, national, prices, Realtors