In the 60s, Sonny & Cher (before Sonny crashed into a tree while skiing) had a big hit with the song “And The Beat Goes On”–or something like that. Now, in real estate, 2008, a good song title might be “And The Debate Goes On!”

The “debate” is whether or not this is or isn’t a good time to invest in real estate. There are those who argue that real estate is always a good investment (see “Gone With The Wind” Chapter 6, page 147, paragraph 4, sentence 7, Scarlett’s dad to Scarlett : “There is always the land, Scarlett.”) And, as we know, in the end, it was the land that Scarlett returned to after the South got the s–t kicked out of it by the North (okay, I’m from New York, so I am partial to this version of reality..which happens also to be …well…reality!)

Now, the cool thing about fictional characters is–they are fictional. They don’t really have to feed their families or save for retirement or worry about paying for their kids’ education. Heck, all Scarlett had to do was hope that Rhett would come back one day and wisk her away to an even better chunk of real estate.

Time To Get Real. This Ain’t No Novel

That’s right. This is the real world. No authors to help us along our way by dreaming up another chapter or another character to save the day.

In the real world, a bad investment–and, yes, there is a Santa and, yes, there are real bad real estate deals–can actually hurt you. The point being, if you are going to invest in real estate in the current climate, you had better do your homework and know what you are up against.

The economic picture is bleak and seemingly getting bleaker each day.

Just this week, The National Association of Realtors said sales of existing single-family homes tumbled last month by 2 percent,while the median price of a home declined 7.7 percent from a year before.

Yes, there are pockets in the country where this is not the case. But, that is the exception and most certainly not the rule.

What began as a subprime mortgage crisis has ignited an economic fire burning around the world and devastating all sorts of different businesses…from banks, to brokers, to airlines (three of the biggest U.S. airlines this week reported large quarterly losses pegged to soaring fuel costs), to automakers, to newspapers, to broadcasting, to resorts, to …..well, you get the idea.

No one…no one…really knows where this recessionary train is taking us and how many stops there might be till we get to the terminal?

Conventional wisdom…not so wise

The “conventional wisdom” is to buy real estate when there are bargins to be had. And, under normal times, this makes total sense. But, the point is—these are far from “normal” times.

When times are not “normal”–so-called conventional wisdom gets tossed out the window.

This is not to say that no one should invest in real estate at this time. Someone has to. But, as I said before, this is NOT the time to learn on the job.

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Tags: and the beat goes on, gone with the wind, home prices, median home prices, national association of realtors, real estate investing, Real Estate Market, recession, sonny & cher, subprime mortgage crisis

How is this for a blunt statement: If you are one of those who believes this subprime real estate debacle is going to turn around anytime soon, you are wrong! I’m not saying you are probably wrong. I’m not saying you may be wrong. I’m not even saying that more than likely you are wrong. I am saying…you are wrong! This is NOT going to get better soon and here is why:

What we are witnessesing is so far beyond a real estate/mortgage issue that it isn’t funny…and no one is laughing anyway.

This is about a lack of confidence in our financial institutions that have let us down; in our regulators who failed to regulate; in our politicial system that failed to act; in our collective greed which apparently knows no limit; in ourselves for being stupid enough to actually believe there is such a thing as a free lunch when, in reality, there isn’t even such a thing as a free cookie.

And now, we are all paying for it and will be for some time to come.

Look at the evidence and stop being dumb

I know I am sounding harsh. But, let’s face it folks, we’ve been pretty much living with our heads in the sand and the sand’s value is declining each year.

When one compares pending home sales to February of 2007, according to a real estate trade group, sales are down 21.4 percent. Let me repeat this number so it sinks in–21.4 percent–written out that would look something like this: twenty one point four percent.

One measure of the public’s economic optimism—generated by Investor’s Business Daily and TechnoMetrica Market Intelligence–shows a drop from 42.4 percent in March to 39.2 percent this month.

Retail Sales Weak

Because Easter came early this year, or at least that is the excuse, retail sales are hurting.

J.C. Penney Co says earnings for its first quarter could miss forecasts by as much as 38 percent, reports Reuters.

Wall Street is bracing for Thursday when other major stores are expected to report their Easter non-sales figures.

WaMu To Ax 3,000 jobs!

Seatle based Washington Mutual is (was??) the largest savings and loans bank in the United States. This week, it had to go begging for a $7 billion capital injection from a private equity firm and others because the mortgage crisis is expected to amount to a $1.1 billion quarterly loss for the thrift which will eliminate 3,000 jobs and shut down its 186 home loan offices.

Just since January, more than a dozen commercial and investment banks had to get cash bailouts after write downs of more than $200 billion mostly because of the housing and credit crisis.

Not since the Great Depression

What happened with Bear Stearns was the closest we have come to a run on the bank since the Great Depression…The 1929 market crash, contrary to what many believe, did not cause the depression–a run on banks over a protracted period of time did.

As we find ourselves in the middle of what has to be the world’s longest political campaign, there are those who foolishly believe that John McCain or Hillary Clinton or Barack Obama or Mickey Mouse will turn the world’s economy around.

Grow up people. Better still, take a course in American history. Or, economics. Or, both.

F.D.R did NOT get the U.S. out of the Great Depression–World War Two did. Wars force government to spend and print and spend and print money to keep them going. This causes inflation, to be sure, but, in the short run, wars actually help the economy. World War Two did, the Korean War did, the Vietnam War did and the Iraq war is doing!

I know, you’re saying, wait a minute! The Iraq war! Helping the economy?? It is sucking billions of dollars away from other causes.

Well, the problem with that thinking is, it is not the way the real world–or the Obama world–works. In fact, there has never been any evidence..not one ounce..that wars actually drain money from social programs or anything else for that matter. In other words, if we didn’t have the Iraq war, all that money being spent on it would not all of a sudden be freed up for education and housing and health care and whatever. It just wouldn’t exist!

The biggest dirty little secret

There are many reasons why the Iraq war is now in its fifth year…and one of them is, it is producing plenty of jobs in the so-called military-industrial-complex and enriching companies that are basically in the business of war and war support. Without the Iraq war, our economy would not be better, it would be worse! And, that is the dirty little secret that Washington understands and most people do not.

When will the economy turn around?

All this brings me back to where we began. The current subprime, mortgage, housing, credit, banking crisis is not going to end anytime soon. Some experts say maybe a year or two, some say maybe longer.

Will some people benefit from this? Of course. Some people will have the money to buy up those foreclosed houses at cheap prices and they will make the nightly news and we will read stories about how this is proof that people can take the bull by the horns. But, you know what? That is just bull. The reason why these people make the news in the first place is because their stories are unusual…they are not the norm.

If you don’t realize that, then you are probably one of those people who actually think a “Tall” at Starbucks is large, when it really is what used to be called—–small.

Tags: bank crisis, clinton, depression, Economy, federal reserve, housing, iraq, mccain, obama, recession, subprime, war

The economy is sinking faster than a mafia hitman wearing cement shoes in water; and, the mortgage/housing crisis is clearly to blame.

Wall Street was apparently totally shocked today when the Labor Department reported that 63, 000 nonfarm jobs were lost last month….As Reuters points out, the problem is that Wall Street experts had expected that 25,000 positions would actually be added. So much for experts!

Stocks Down

This news helped send stocks into a tailspin, closing at their lowest level in 19 months.

Reuters points out that this bad news came at the same time that “jumbo” mortgage lender Thornburg Mortgage was unable to meet demands from creditors for upfront cash. Not good.

More and more experts are now saying the U.S. is in a recession, official or not.

And, the worst is yet to come. There will be still more foreclosures this year…many more. The credit markets are getting tighter despite Fed action. And, consumer confidence continues to go down.

It is no longer accurate to refer to this as a subprime mortgage crisis. Let’s just agree that this is a financial crisis, period! Okay.

Tags: Foreclosures, housing crisis, labor-department, recession, stocks, subprime mortgage, thornburg mortgage, Wall-Street

Nothing like kicking off the new year on a positive note. And, I can assure you, what you are about to read is anything but “positive.”

In fact, when it comes to the ever expanding subprime mortgage fiasco,the fun, say some experts, is only about to begin.

Before 2008 slips into 2009, some 1.8 million homeowners are projected to go into foreclosure because their low interest rates, used to lure them into making a purchase they clearly are unable to afford, will morph overnight into much higher rate mortgages.

A counselor to President Bush is even saying, “There’s more to be done we think on the housing front to address the concerns people have about the housing markets,” Reuters quotes Ed Gillespie as saying aboard Air Force One.

Gillespie’s advocacy of more steps to be taken by Congress and the President comes at a time when just about all economic signs look bad.

The subprime mortgage crisis, remember, stopped being a subprime mortgage crisis a long time ago . . . We are now right in the middle of a credit crisis of global proportions causing more and more people to utter that word that dare not be spoken: recession.

Like all new years, 2008 gives us all an opportunity for self evaluation and motivation to take the bull by the horns and try and change things for the better.

This is an attitude that will come in handy, I predict, in the days,weeks and months ahead, as the nation and the world try to emerge from this credit debacle reasonable in one piece.

Good luck and Happy New Year!

Tags: Bush, congress mortgage crisis, credit crisis, homes, president, recession

Anyone living in California knows that it is the aftermath of an earthquake that reveals its true intensity, not the numbers generated by some graph at a university. An earthquake is really measured in dishes broken, windows smashed or, in the worst cases, houses destroyed.

And so it is that in California, the aftermath of a housing fiasco, is now being felt in lost revenue and painful decisions to slash state budgets—something bound to be repeated in other states as the aftershocks from the mortgage/credit crunch continue unabated.

California governor Arnold Schwarzenegger is now asking state departments to come up with plans for drastic spending cuts on the order of 10 percent and maybe more–this because of the housing market which, in California, is not so much a market as it is a cemetery of dead American dreams.

Education, transportation, health care, among the things to be directly impacted, says the Los Angeles Times.

And, reports the Times, economists are warning of more bad news ahead.

“We are among a handful of states that has a lot of exposure to the housing crash,” the Times quotes one former state economist who says that property, income and sales taxes are all off.

California prides itself on being in the vanguard of many movements–sadly, it is in the vanguard once again. But for once, it would probably prefer to be at the back of the pack on this one.

Tags: california, crunch, Economy, housing crisis, recession, Schwarzenegger

Looks like the news continues to get worse . . . I wonder what silver lining the Administration is going to spin this time?

U.S. home prices fell nationwide in August for the eighth consecutive month, offering little hope of a turnaround anytime soon, according to the S&P/Case-Shiller index released Tuesday. Things could get worse, said Yale economist Robert Shiller, who helped create the index.

Home prices as measured by the index have fallen by more every month since the beginning of the year. August is the 21st month of decelerating returns.

Notably, eight of the 20 metropolitan areas in the Case-Shiller index showed their lowest annual returns ever recorded in August. The report showed drops in Cleveland of 4.1 percent; Las Vegas, 7.6 percent; Miami, 7.8 percent; Minneapolis, 4 percent; Phoenix, 8 percent; San Diego, 8.3 percent; Tampa, Fla., 10.1 percent; and Washington, D.C., 7.2 percent.

Tampa surpassed Detroit as the worst performing city. Detroit had a 9.3 percent drop over last year.

Source: Yahoo Business

Tags: home prices, housing market, recession

Sales of existing homes plunged by a record amount in September as turmoil in mortgage markets added more problems to a housing industry in its worst slump in 16 years. The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.

Analysts blamed the bigger-than-expected slump on the turmoil that hit credit markets and mortgage markets in August as worries increased over rising mortgage foreclosures. Those worries resulted in a drying up of the availability of so-called jumbo mortgages, loans over $417,000, which are particularly important in high-cost areas such as California. ^AP

Inventories of unsold homes rose to 4.4 million units for the month of September, which, if sold at their current pace, would take 10 1/2 months to sell, which is another record. As inventories of homes climb and people begin to get more and more nervous about the housing market, prices will likely begin to come down further.

We’re on a momentum train right now, and it is heading in the wrong direction! While this provides plenty of opportunity for those people who are savvy investors, the average Joe is really starting to feel the pressure from the marketplace. Additionally, as I’ve said many times before, this will continue to pressure the rest of the economy, and is likely to help put us right in the middle of an ugly recession.

We’ll be here to let you know about any further developments in the housing market and how these things can affect you.

Tags: , Housing, housing, inventory, iraq, mortgage, recession