Mortgage rates hit record low…again

Real Estate News & Commentary by Chris McLaughlin, May 1, 2009
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Mortgage rates hit record low – again

According to the Primary Mortgage Market Survey (PMMS) by Freddie Mac, 30-year fixed-rate mortgages (FRM) are down to 4.78 percent for the week ending April 30, 2009, from 4.80 percent last week. The 30-year FRM is now at the same record low set in April 7, 2009, the lowest ever recorded in Freddie Mac’s survey since it began in 1970. Last year at this time, the 30-year FRM averaged 6.06 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.80 percent this week, down from last week when it averaged 4.85 percent. This set another record, since the 5-year ARM is at the lowest it has been since Freddie Mac began tracking it in January 2005. A year ago, the 5-year ARM averaged 5.73 percent. “Rates for fixed-rate mortgages hovered at record lows this week as ARM rates eased further,” said Frank Nothaft, Freddie Mac vice president and chief economist. “In aggregate, borrowers who refinanced during the first quarter reduced their mortgage payments by about $2.5 billion over the coming year.” Oh yes, and not to feel left out of the good news gang, Nothaft added the obligatory: “The housing market may be edging towards a bottom.”

Chrysler, the saga continues

Chrysler’s first hearing in a New York courtroom comes today, and we’ll see whether President Obama is right that bankruptcy will create a leaner, more nimble company. The federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties as long as the company could build cleaner cars through an alliance with Italian automaker Fiat. Bankruptcy court Judge Arthur Gonzalez will hear the case’s first motions, which will typically allow the company to continue paying workers and basic utility costs as it restructures. Then comes the hard part – sorting out $6.9 billion in Chrysler’s debt. Four of the largest banks holding 70 percent of the debt agreed to a deal that would give them $2 billion, but a collection of hedge funds refused to budge, saying the deal was unfair and would only return a small fraction of their holdings.

Manufacturing shrinks upward

The Tempe, Ariz.-based Institute for Supply Management (ISM) said its manufacturing index contracted for the 15th month in a row, but improved for the third straight month in April. If this makes no sense, it’s because it’s the kind of silver lined statistic we’re getting used to hearing these days – things are getting worse, but not as fast as before. The manufacturing index rose to a reading of 40.1 in April from 36.3 in March, but a reading below 50 indicates manufacturing activity is shrinking. Economists had forecast a reading of 38.4, according to consensus estimates gathered by Briefing.com, so this is really good news, sort of. Norbert Ore, chair of the ISM’s survey committee, thinks so in any event: “This is definitely a good start for the second quarter.”

Consumer confidence up

All the sort-of good news we’re hearing from the administration must be having an effect – a Reuters/University of Michigan Survey of Consumers said its final index of confidence climbed to 65.1 in April from 57.3 in March. That was the highest since September 2008 and the biggest one-month increase since October 2006. Let’s be careful though – according top Richard Curtin, the director of the survey, most of the gain can be tied to consumers’ favorable assessment of U.S. President Barack Obama’s stimulus spending, so it’s a bit of a fabricated gain. Not to mention worries about inflation lurking out there in the jungle. The survey showed that consumers remain anxious about jobs, with 53 percent expecting the jobless rate to increase.

Now on to our real estate investing education section…

Are You an Emotional Investor?

Every investor needs to keep their wits but short sale investors often forge ahead based more on emotions than logic when it comes to buying real estate. In large part this is due to the unique position real estate holds in society as well as the importance placed upon it for provision of safety, shelter and satisfaction. Nonetheless, emotional investing is a sure-fire way to come out on the short side of a short sale. Find out how you rank in the emotional investment arena with this quick quiz:

Yes or No – Do you find yourself only making inquiries on houses you would personally be interested in living in? If so, stick to the numbers and only the numbers. Remember, everyone needs a place to call home and not everyone holds the same value system as you. Tremendous profit potential exists in even “ugly” properties.

Yes or No – Are you willing to walk away from every deal? If not, you have not properly established your performance objectives. Don’t get caught up in negotiations or other ego-centric exercises. Instead, set your goals and move on when a deal isn’t working. Remember, to some extent short sales are a numbers game…make sure the numbers work or keep going.

Yes or No – Do you find yourself seeking the approval of family, friends or associates? If so, set the ego aside and instead, reward yourself when you reach pre-established financial goals. Seeking external validation, especially from those who are not directly involved in short sales, often leads to buying properties designed to impress rather than those that actually cash-flow. It also increases the risk of engaging in self-defeating behavior when times get tough.

Yes or No – Are you subject to experiencing major highs and lows depending upon finding a new property, sales or other major milestones? While it’s only natural to feel good about making a profit or getting final approval for a deal, it’s important to keep it in perspective. Remember, short sales are a means to an end – not the final destination. Keep your priorities straight and stay focused on the end goal rather than just the game.

Yes or No – Do you find yourself having trouble sleeping at night? If so, ask yourself why then take steps to remedy the problem. Often sleep is the time when our minds decide to work through a problem or something that troubles us; don’t ignore the warning signs – instead, deal with them. Perhaps you are simply moving too fast and need to slow down a little or maybe you recognize signs of procrastination and need to take action. Whatever the reason, listen to the wisdom of the body and solve the problem so you can get back to a good night’s sleep.

Yes or No – Are you able to keep short sale investing balanced with the rest of your life? Anything can become addictive including short sales. Unfortunately, like most addictions the fun tends to turn to obsession and eventual burn-out if not addressed early. If family complain that you are unable to drive down the road without constantly stopping to view a property or friends refuse to invite you to dinner for fear or listening to endless short sale stories then it’s time to get a grip. Keep a proper perspective to create a long term road to real wealth rather than becoming one of the get rich quick or burn-out types.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

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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 flipping 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
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