Real Estate News & Commentary by Chris McLaughlin, May 28, 2009
http://www.shortsalesrichesturbocharged.com
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High-end housing market is still languishing
According to the National Association of Realtors (NAR), home sales rose 2.9% in April from March. While sales in the low-end properties segment have risen, the market for high-end properties is still sluggish. Sherry Chris, chief executive of Better Homes and Gardens Real Estate, says, “We’re looking at a dual market right now.” Mortgage for expensive properties is getting difficult to obtain on account of lenders tightening their lending standards. The government controlled mortgage companies such as Fannie Mae and Freddie Mac cannot purchase loans above $730,000, which are commonly referred to as “jumbo” loans. Jumbo loans which accounted for 17% of the mortgage market two years ago, now account for just 5%. In most places, there is no significant interest for properties over $1 million. Ben Coleman, owner of Century 21 Hartford Properties, says, “That’s where we’re really feeling the pinch.” Lawrence Yun, chief economist at NAR, has urged the Federal Reserve to buy up jumbo loans in order to restore liquidity in the high-end mortgage market.
Lack of financing in the commercial real estate market
Financing for commercial real estate has declined drastically in the past few months on account of downturn in the economy. The Federal Reserve introduced programs such the Term Asset-Backed Loan Facility in order to give a fillip to asset-backed lending, last November. Some analysts believe that these efforts are not succeeding in reviving the market, which collapsed in 2007. Joel Ross, who manages the Citadel Realty, an investment bank, says that the “prices are down 25%-40% from 2007, and those prices aren’t coming back.” The government is concerned about the situation. A Congressional Oversight Panel will hold a hearing this week to assess the effectiveness of government plans to revive the markets for commercial loans. Developers say they are in need of help from the government. Commercial mortgages to the extent of $178 billion are due to mature in 2009. Banks and other lenders are likely to feel the pressure on account of refinancing requirements.
Property taxes may drop due to declining property prices
With property values declining, can homeowners expect to pay lower property taxes? Yes, in some cases. Property values are reappraised by assessors in cities and counties annually or biannually. The reassessment happens on the basis of recent sales of comparable properties in the neighborhood. Property taxes could drop in areas where there has been a significant drop in property prices. Rick Auerbach, Los Angeles County Assessor, says, “Assessors have been flooded with requests from homeowners to reassess their home values.” Reduction in appraised values may not automatically lead to a property tax cut since governments may raise tax rates in order to make up for the drop in tax collections. However, raising rates is not an easy option for governments. Ken Wilkinson, the property appraiser for Lee County in Florida, says, “In most places there’s a statutory limit to rate increases. In Florida, they can’t be raised more than 10%.”
Mortgage debt is still uncomfortably high
House prices have returned to 2002 levels after 3 years of decline. However, home mortgage debt which was over 75% of the gross domestic product (GDP) in 2006 and 2007 dropped by just 2% to 73% of gross domestic product in 2008. According to some analysts this figure is too high for comfort, just as the economy looks to get out of recession. In the 1990s, the ratio of mortgage debt to GDP was a “normal” 46% on an average. From the current level of about $11 trillion, the mortgage debt should drop to $6.6 trillion to reach the normal level. The government’s initiative to inject liquidity into the economy has done little to resolve the problem of mortgage overhang. Dean Baker, an economist at the Center for Economic and Policy Research, says, “I don’t think that there is any magic to the ’90s debt levels. The point is that with higher debt levels, people will be consuming less.” Less consumption means lower economic growth.
Changes in banking regulation
The banking sector is currently regulated by a patchwork of regulatory agencies including the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The Obama administration is planning to bring about significant changes to the powers of the regulatory agencies. This includes introducing a single regulator for the banking sector. Some policymakers have called for merging the Office of the Comptroller of the Currency, which regulates the country’s largest banks, and the Office of Thrift Supervision, which regulates mortgage-related financial firms. The Obama administration is also evaluating the idea of creating a financial regulatory advisory council, which would comprise the heads of major financial regulators. Scott Talbott, a senior vice president with the Financial Services Roundtable, which represents large financial services companies, said, “It is important to modernize the system to prevent the financial crisis from happening again.”
Now on to our real estate investor education tips section…
How to Stop Making Excuses and Start Making Money with Short Sales
One of the biggest predictors of success isn’t the amount of money in your bank account or who you know but rather the ability to stop making excuses and get down to business. If you are serious about the desire to change your life for the better, it’s time to get control of these destructive behaviors and replace them with a mindset of success.
Procrastination – One of the biggest excuses for not getting started in short sales is “timing”. Plain and simple, short sales are a lot like other big events in life (getting married or having children)…sometimes you just have to take the plunge. If you wait until everything is absolutely perfect – you will never get around to it. Life isn’t perfect and neither are you…but that is okay – success comes to those that take action not those that have perfect lives.
Rationalization – Ever hear the saying a little information can be a dangerous thing? Well it certainly holds true when it comes to real estate investing – especially in short sales. Rationalization is another commonly encountered type of excuse that can be tough to break because it’s based upon knowledge. Nobody likes to come across dumb or naïve and short sales are no place for the un-informed however, rationalization isn’t purely about information – it’s built upon a bias. Expand your horizons by examining case studies of success from short sales and learn from others.
Quit the Blame Game – Accept responsibility for your own success. Once you understand and truly believe that you are responsible for your own destiny – not your family, the government or anyone else…you are well on your way toward building a better future. People have a tendency to live in the past; especially if there have been hurts or pain it can be tough to let go.
However, you must decide what is more important…validating your pain or moving forward and making a profit while building a better tomorrow for yourself and family.
Apply the Effort & Admit It – Some people have been trained to only accept what comes easily in life; while that is all well and good when it works there are some things worth putting forth a bit more effort than usual. It’s not a weakness or other character defect to want more out of life – it’s also not immoral, greedy or self-serving. In fact, according to Maslow, self fulfillment is a vital and healthy component of a life well lived.
All or Nothing Mentality – in short…lose it. Short sales are about business and profit – not an ego game. While it can be fun to win, don’t refuse to play the game simply because you don’t have the biggest portfolio in the room. Everyone must start somewhere. If you are truly so insecure that you can’t deal with the stress of being a “little guy” for awhile, take it to the gym or do business under an LLC…find some way to channel that excess energy until your competitive nature drives you to the top of the pack.
Accept NO Excuses – The final – and often most difficult – step to stop making excuses and start making profits is to simply accept no excuses…only action. Set specific goals and start taking steps to implement than RIGHT NOW. Not this later today, not tomorrow…right now. Just one simple step starts the ball rolling toward fulfilling your short sale goals.
See you at the top!
Chris McLaughlin
http://www.shortsalesrichesturbocharged.com
PS:
It’s LIVE! The Launch of the Year has begun .. find
out tonight what all the fuss is about at 8:30 PM ET, 5:30
PM PST:
https://www2.gotomeeting.com/register/696056994
Copyright Loss Mitigation Institute 2009.
All Rights Reserved.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner and Supervising Broker of one of Florida’s
largest Real Estate firms, running 4 different
offices, supporting nearly 450 agents, uniquely
positioning him to help thousands of investors
make money in the biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
* On twitter: http://twitter.com/mclaughlinchris
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