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

In the late 1990s country music star, Trisha Yearwood, had a hit song titled Walkaway Joe. The title of that song would be an apt description of many borrowers today. These people invested in real estate by leveraging themselves as much as possible. Many of them bought homes with little or no money down.

The softening of real estate prices has left many of these investors owing significantly more than the house is worth. A lot of people decide to walk away from the homes rather than fulfill the obligation that they signed for. They make a business decision based strictly on dollars and cents rather than feeling any moral obligation to repay the loan.

There will always be people that are blindsided by some catastrophe in life that sends them into foreclosure. Perhaps a job loss or medical crisis has impaired their ability to repay. I hope these individuals find a way to get back on their feet and find a way to get on with their lives. They are not the problem.

Born to Be a Leaver…

The foreclosure crisis has resulted in a blitz of advertisements from bankruptcy lawyers and others looking to capitalize on this mess. The media has portrayed those who are walking away from their homes as victims. While unscrupulous lenders, real estate agents and others may have preyed upon some of them, most of them are victims of nothing more than their own greed. They should have known better. Now they are being told that it is okay, or that the government will bail them out.

One company that has sprung up is You Walk Away, LLC, located in San Diego. Their Website states that they can help you live in the home for as long as 12 months without making payments or being hounded by creditors. What happened to personal responsibility and the stigma of defaulting on a large debt? Insanity.

Destined to Deceive…

It’s not just the small time investors who are abandoning their obligations. Just last week on the TV show, Inside Edition, former baseball star Jose Canseco made a stunning admission. He stated that he stopped making payments on his $2.5 million mortgage and is letting the house go into foreclosure. According to Canseco, “It didn’t make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else.” In essence he just decided that he didn’t want to pay anymore.

Guess who pays for all of this? The irresponsible borrower gets a break while the responsible one gets nothing. We all pay in the end. We now have a situation where lenders don’t want to provide loans to qualified borrowers. Can you really blame the lenders? If the consequences of not living up to your obligations are so minimal how can they trust anyone?

We’ve become a nation of victims. It seems so few people have any sense of personal accountability. It’s like the four-year-old kid with cookie crumbs all over his face who claims that someone else raided the cookie jar.

Everybody wants to take responsibility when you win, but when you fail,all these fingers are pointing. -Mike Krzyzewski Duke University

Tags: Foreclosures, housing crisis, Jose Canseco, mortgage crisis, personal responsibility, real estate

I’ve decided to lie to you. At least, I’m being honest about it!

I have grown tired of reporting weekly, it seems, on the ever expanding, contracting global credit market and the resultant deep recession the U.S. currently finds itself on the cusp of.

Americans, perhaps more than people anywhere, love being in denial. We deny we are getting fatter and fatter by eating McDonald’s 15 pounders; we deny that our kids are getting dumber and dumber even if high school seniors often can’t point to the U.S. on a world map; and, we deny that we are in denial, even though we clearly are…about a lot of things.

So, why not be in denial about the alleged mortgage/credit crisis (note, I said, alleged!!).

Here Goes

Home prices are now actually at an all time high! I know, if you read “the news” you’ll be told that prices of existing single family homes fell another 2.6 percent in February for an annual decline of 12.7 percent.

Just deny it!

That’s right.Who is to say that “facts” have to screw up your day? Ignore “the news” and, take a page from George W.–just keep saying things are getting better and they will…for him.

What’s that? You say you read that consumer confidence has fallen to a five year low this month? Nonsense.

Just deny it!

It will go away. We don’t have to face any “fact” we think will make us loose sleep. Just keep telling yourself–and others–that consumer confidence is at a 175 year high!. There, doesn’t that feel better? Of course it does.

The cost of food, medical care and gas going up,up and away? No freaking way!!!

Just deny it!

In fact, convince youself food prices are lower now than anytime since the turn of the century–the 20th century; that everyone has health insurance that even pays for free liposuction; and, that Saudi Arabia has decided to donate a decade’s worth of free gas and oil to each and every American simply because they can!

Bet you REALLY feel better now!

Yes you do!!! Don’t deny it!

Tags: credit crisis, ecoomy, food prices, housing, mortgage crisis, real estate

As the never ending presidential debates go on and on and on and on and on and on — and on, it only seems fair to find out what the candidates think about the expanding subprime mortgage/housing/credit/banking/stock market/unemployment/recession crisis (or, SMHCBSMUNRECR, for short) we currently find ourselves in. But, since none of the YouTube questioners picked by CNN seemed to care enough to ask the questions about this (perhaps because none of them actually live in homes???), I have taken it upon myself to find out what the major candidates think about the SMHCBSMUNRECR and what, if any, solutions they might have.

Here are just some of their answers:

BARACK OBAMA:

I think we need to show the mortgage industry that we are one people, one nation. There are no Democratic foreclosures, or Republican foreclosures, or even Independent foreclosures–everyone gets kicked out of the homes they really can’t afford in the same way.

I am about change…I am about changing the old banking system. I am about changing the credit markets. I am about…..well, actually, I’m not really sure what I am about, but, know this, whatever it is I am about, it is about change.

Change is how we will fix this mortgage mess. Change is how we will repair the world’s credit system. Change—-does anyone have change for a five??

HILLARY CLINTON

It’s easy to talk about changing the nation’s mortgage system; but, talk is not action. I am about action…well, I am also about change, of course, but, mostly about action.

Bill and I know something about living in a house that was way beyond our means. Some of you may have actually seen this house. We called it the White House because, well, it’s painted white. Now, the mortgage on this house was enormous and , to be honest, when we moved in, Bill and I were in so much debt from the campaigns, we needed a subprime mortgage and a very low initial percentage. It was a Godsend…until, that is, the rates started to go up and up. Well, it got so darn expensive, Bill and I couldn’t afford it anymore so, before it went into foreclosure, Bill and I just moved out of that sucker and let it become someone else’s headache.

Only now, Bill and I really miss that old house and would like to move back in. Only, no bank in its right mind will give us a mortgage on it, so, we may have to settle for something a little smaller in not such an up-scale neighborhood.

JOHN EDWARDS

First of all, when it comes to fixing this mortgage mess, I agree with my good friend Obama. We are both about changing the mortgage system in this country. We are both about changing how lenders lend their money. And, Obama, I happen to have the change of that five you wanted. Now, Hillary and Obama will tell you they have a plan for getting us out of this housing crisis. But, we don’t need another plan. We need radical action. Now, I can’t exactly tell you what that action might be, but I do know we need action to fix it. And, my friends, if I keep talking like this, I just might end up being someone’s Vice-President someday. Does anyone know how much the Veep’s house goes for?

JOHN McCAIN

My friends . . . I say, get our troops out of Iraq and bring them back here to help people move out of the homes they can’t afford. I mean, a lot of good folk are going to get kicked out of their homes pretty soon and they are going to need help moving their belongings. Why not use our brave men and women in the armed forces to help do this work. America can’t afford to have all those people sitting out on the curb all night with their coffee tables and such.

Now, I always thought we should use our troops to help with this mortgage crisis. I still think it is the right thing to do. Now some people may not want to hear that and they don’t have to vote for me. Of course, in the end, I will have the last laugh because those people who don’t vote for me will all get kicked out of their homes if I become President. I swear to God.

MITT ROMNEY

First, let me say, when I was governor of that real liberal northeastern state that I’d rather we not talk about thank you, I was all for fair and low priced mortgages for everyone who wanted to live the American dream of home ownership. But, now that I am running for President, I say, to hell with them all. Let them live in shelters.

I actually felt that way when I was governor, I just couldn’t say it or all those Kennedy relatives living there would have kicked my ass. Now, however, I can speak the truth. The thing is, I am really, really,really rich. So, to be honest, I really don’t care all that much about this mortgage crisis because, heck, I’ll never be homeless.

One thing I do plan on doing , I can tell you, is to use my own personal money to buy up all those vacant homes and flip em real quick and pocket a fortune.

MIKE HUCKABEE

What mortgage crisis?

Anyone Else??

Tags: barack obama, hillary clinton, john mccain, mike huckabee, mitt romney, mortgage crisis

Here’s a quote that should make everyone feel better this holiday season. It’s from the chief domestic economist at Morgan Stanley and is in a report to clients as reported by the New York Times.

“A mild recession is now likely, with no growth for the year ahead.”

Great.

And, based on what the Federal Reserve just did–cutting a key short term interest rate another quarter of a point down to 4.25 percent–I’d say the Feds are finally getting as worried as most of the rest of us already are.

If that is not bad enough… there was disagreement among some Board members…one was not happy at all by the decision to lower rates. He thought it should have been lowered even more, a full half-point chop.

When Board members start arguing amongst themselves over how dire things really are and how much Federal intervention may be needed, you know it is time to start looking around to make sure you’re near a lifeboat before the ship sinks.

According to the Times report, both Ben Bernanke, the Fed chairman, and Donald Kohn, the vice-chairman, have, in recent days, “expressed concern that subprime mortgage problems might be making banks and other lenders reluctant to lend not only for housing but for other activities as well.”

Really? No kidding guys?

So, how bad are things in subprime land right now? For the last three months of this year, the growth of our economy appears to have sunk to maybe 1 percent. This is not good news, folks.

Want more bad news? Well, of course not, but you might as well get it anyway seeing as it’s your economic future that is at stake: Housing sales and prices are now down just about all over these united states–the subprime mess having grown like a cancer from a problem for the two coasts to a problem for us all.

But, perhaps the biggest indication of just how concerned the Fed is, is this fact: It has lowered the short term interest rate for the third time now in just about four months. Needless to say, after each reluctant cut, the Fed felt confident enough that it had done enough to keep the ship of state afloat. Guess what guys, the water is already over the deck and rising in many places and for many people.

We have also been “treated” to the great plan that President Bush said he had to help out many who face the real prospect of becoming homeless just in time for Christmas. Problem is, hardly anyone who has taken a closer look at the “plan” thinks it will work.

For one thing, hardly anyone will actually qualify to have his adjustable rate mortgage frozen for the next five years or so because the guidelines raise the bar so high, most people would have to cut their heads off and hold it with arms stretched skyward to reach it.

And then, there is this: The whole damn thing in all voluntary anyway. Meaning, no bank or lending institution has to do anything if it doesn’t feel like it. Great plan!

So,now what? The truth is, no one actually knows because we haven’t gone down this particular road before. That means you must take every “expert” opinion you read or hear with a boulder of salt. Wall Street doesn’t know what will happen next. The presidential candidates, Republican and Democrat alike, don’t know. Academics don’t know. The Federal Reserve doesn’t know. We may all be in this together, but sure would be nice if someone at least brought along a flashlight.

Tags: Ben-Bernanke, donald kohn, federal reserve, Interest Rates, mortgage crisis

That some in France can’t stand the U.S.–not news!
That many in the Middle East loath the U.S.–not news!
That certain Latin American nations (you know which one!!) suspect the U.S.–not news!
That Norway feels screwed by the U.S.–now THAT is news!

I mean, come on…Norway? Why would Norway be at odds with the U.S.? Fishing rights,perhaps, in international waters? Nope. Maybe she thinks our pop culture is ruinious to her young? Well, yeah, that’s a given. But, the cause of the Norwegian outrage is…take a guess.

Time’s up. If you said the U.S. mortgage crisis you win the prize. Okay, there is no prize, but read on anyway to find out what is going on near the Arctic Circle.

Apparently, the small town of Narvik (I know, I never heard of it, either) is getting a royal American screwing–along with some other cities in Norway.

We’re talking about $64 million dollars in securities investments that have taken a dive faster than a Depression era boxer in a mafia fixed fight.

“I think about it every minutes,” the town’s mayor, Karen Margrethe Kuvaas, told the New York Times. Good reason for that,too. The financial beating is having a real and serious impact on schools and nursing care for the elderly, sick and dying there. And, even city workers couldn’t get paid for lack of funds.

All this misery stems from investments created by Citigroup and channeled through a broker in Norway.

Three years back, a bunch of Norwegian cities and towns invested large sums of money in a vehicle offering a higher rate of return.

The investments,of course, went soar as more and more U.S. homeowners lost their homes or faced foreclosure because of the subprime lending caused mortgage/investment/credit crisis that has now wrapped itself around the globe.

The finance official in Norway, says the Times, has agreed that brokers there were misleading.

“When you sell something that is not what you say it is,that is a lie,” the Mayor told the Times. “We’re not especially stupid because we live so far in the north.”

While Norway faces doom and even more than the usual winter,sunless gloom, back here in the U.S.,a deal looks to be in the works to bail out thousands of homeowners who face mortgage defaults by freezing their current interest rates for several years—-like, till after President Bush leaves office, thereby putting off the inevitable housing/economic crash till someone else is in the Oval Office and can take the blame…..someone like, maybe, a Democrat??

The U.S. Treasury Secretary has told a housing conference that he is confident there will soon be an agreement with some of the bigshots in the mortgage industry. But, sadly, the fact is, it is almost a cruel joke since the homeowners who can’t afford the higher interest rates now, are not likely to be able to afford them any better in just a couple of years unless they win a lottery. So, we will only go through this all over again and it will be just as painful then as it is now.

But, back in Norway, any agreement to freeze rates in the U.S. won’t make one damn bit of difference because the damage has already been done and it is getting worse no matter what agreement may or may not be reached here at home to help shocked homeowners.

At this time of year, the sun doesn’t rise in Norway…but, when it comes to the true global impact of this mortgage crisis, it is we who are in the dark.

Tags: arctic circle, citgroup, karen margrethe kuvaas, mortgage crisis, narvik, norway, treasury secretary

Here’s just a very small sample of headlines from recent days about the economic doom and gloom being caused by the ever deepening mortgage crisis that started in this country but has now reached out its tentacles to squeeze the testicles of just about every European and Asian nation and threatens to plunge the developing world into economic chaos.

Think that’s rather strong, do you?

“Retail stocks slump as Black Friday joy fades”
“10-Year Treasury yield at 2 and a half year low”
“Citigroup shares below $30; first time in more than five years!”
“Markets plunge on credit woes.”

And those headlines are just a one hour slice of the 24 hour news cycle earlier this week.

Let’s take a closer look at these tidbits of terrible news shall we?

Investors worried about rising mortgage defaults and credit market losses, says Reuters, sent stocks tumbling Monday putting Wall Street “on the verge of its worst one-month slump in five years.”

Think that’s bad? Hold on and listen to this:

“On a points basis, the Dow is less than 200 points away from its worst monthly slide EVER.”
That’s “ever” as in, well, “ever!”

Investors seem to be fleeing risk faster than New England swimmers tried to flee the Great White in “Jaws.” They are seeking the higher and safer grounds of government bonds.

Citigroup is the largest U.S. bank by assets. But, that didn’t stop its shares from tumbling Monday, sinking below the 30 dollar benchmark set back in 2002….and, as a way to bring Christmas cheer to its embattled employees, it is reportedly thinking about what are being called “massive” layoffs that could mean as many as 45 thousand people flung out the door.

Why? . . . What do you think! “Mounting concern about mortgage losses…”

MOUNTING CONCERN???? MOUNTING??? I think we are way, way, way past “mounting”–unless, that is, you are using “mounting” to mean how all of us are being f—–royally?

The problem, of course, is that no one…and I mean no one…really knows where the bottom to this debacle really is: will we reach it next month, next year, next two years??? No wonder people are freaking out.

And, it is not just here in the U.S. The runoff from our subprime sewage is polluting the international waters, too. Britain is worried. France is worried. Japan is worried. Even India is worried and can you name the last time it was worried about anything?? Actually, I think I read that India outsources its worries.

Okay. I know this is starting to sound pretty darn dark. I know we all were brought up to believe that if you walk through a storm and keep your head held high (write to the Jerry Lewis telethon if you want the exact words to that song) things will work out in the end. But, suppose if you walk through a storm with your head held high, your head just gets really wet?

And, you know how when times are tough and the tough get going we are supposed to look for that light at the end of the tunnel? What happens if there is no light? What happens if the tunnel turns out to be a vault whose steel doors will shut behind us once we enter, leaving us to suffocate in our own subprime morass?

Oh, and Happy Holidays to all!!!

Tags: citgroup, mortgage crisis, stock market, subprime, u.s. treasury, Wall-Street