Real Estate News & Commentary by Chris McLaughlin, March 3, 2009
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We’re down to just under 10 slots left for our Recession Proof Real Estate Investing webinar tonight. Jump on this now to claim your spot:
https://www2.gotomeeting.com/register/834885107
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Wow, that was just plain ugly yesterday, wasn’t it? The Dow Jones Industrial Average plunged to a level not seen since 1997. It was the focus on the financial sector, and struggling insurance giant AIG, that spooked everyone. Today the market is essentially flat at 12:30 PM but had traded lower earlier in the day.
Let’s talk about some real estate investing news now…
The National Association of Realtors’ Pending Home Sales Index dropped 7.7% to 80.4 in January from a revised 87.1 in December. This marks the lowest level the index has ever been at since tracking began in 2001. Lawrence Yun, NAR’s chief economist, stated: “Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales … We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit.”
In positive news, NAR’s Housing Affordability Index jumped 13.6% in January to 166.8, a record high. This index indicates that the relationship between home prices, mortgage interest rates and family income is the best that it has ever been since the index began in 1970.
Citigroup announced that it would lower payments for those now suffering unemployment. The bank, which is now 36% owned by the federal government, established the Homeowner Unemployment Assist program, which will modify those who are unemployed and are 60 days behind on payments to an average payment of $500 for three months. Customers must have a loan that is owned and serviced by CitiMortgage to participate in the program.
Now on to our real estate investor education section…
Set Point Theory and Short Sales
Set Point theory basically states there is a point beyond which things tend to gravitate toward the norm; radically alter the environment or prevailing conditions and a new norm will be established as quickly as possible. The underlying assumption is that most things tend to normalize or maintain a level of homeostasis; whether the human body, markets or even the environment there is an ever present tendency toward normalization.
Savvy short sale investors can learn a lot about the current real estate market and corresponding buying opportunities by applying the basics of set point theory to their own current environment. Let’s explain by using a common metaphor; weight gain and loss.
The human body inherently attempts to maintain homeostasis or a point of balance; when there is little available food or nutrition the body reduces caloric needs by decreasing energy levels. Likewise, when there is abundant food, the body tends to store a reserve in the form of fat. In much the same way, during lean economic times, buyers reduce expenditures often by eliminating long term profit potential. During affluent economic periods buyers tend to spend more than necessary on items of excess – building up the economic equivalent of “fat.”
Unfortunately, the body and markets both self correct. Exercising discipline – in eating or investing – results in tremendous gains but allow too much or too little to enter the cycle and the results can be devastating. The body naturally tends to store a little additional fat rather than allowing the body to return to its former norm; instead, it creates a new norm from which it expects to operate at from that point forward. Anyone that has ever attempted to lose that last ten or twenty pounds when dieting understands this tendency all too well. The same situation takes place when investing; when it comes time to shed unnecessary expenditures there is a strong tendency for people to measure everything from the recent high rather than former high.
During a real estate bubble like that of 2006 or times of rising unemployment like that taking place during the beginning of 2009, it is easy to lose perspective. The reality is unemployment has been higher – much higher – in the past and the nation recovered…eventually. The 1970’s experienced double digit inflation combined with rapidly escalating rates of inflation that rapidly doubled and then tripled the cost of purchasing a new home within just a few years. Those investors able to keep their wits were able to purchase real estate for pennies on the dollar then reap the rewards for years to come.
Today, a similar scenario appears to be presenting itself for those willing and able to take the plunge. Low interest rates, tax incentives and once in a lifetime buying opportunities are here for the taking. Now ask yourself…are you willing to act on the information or sit on the sidelines and wait for Big Brother or Uncle Sam to take care of you and your family?
Make sure you jump on our webinar tonight to take action:
https://www2.gotomeeting.com/register/834885107
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com/welcome.html
P.S.
Don’t miss this great video testimonial about short sale coaching:
http://www.youtube.com/watch?v=CFp0ylr3mQI&feature=email
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 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
* On twitter: http://twitter.com/mclaughlinchris
* On facebook: http://www.facebook.com/addfriend.php?id=709199143
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