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Encore tonight:
The Short Sales Riches program for 2010 … all new concepts that give you the ability to do more deals than ever before!
The encore begins at 8:30 PM ET, 5:30 PM PST, click here to RSVP: https://www2.gotomeeting.com/register/167308795
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WSJ – time is right to buy
Brett Arends of the Wall Street Journal has an interesting argument he pulled together using the latest Case-Shiller data, and double checked against Census data. In short, now is a good time to buy a home. Real estate has now fallen 30% from its 2005 peak, at the same time as mortgage rates have also plummeted. In 2006 you had to pay an average of about 6.4% on a 30-year fixed loan, according to the Federal Reserve. Right now you can get deals for about 5%. On average, buying a home now is as cheap as it was in the mid-1990s, when houses were an absolute steal. But what about waves of mortgage resets coming in the next two years? What about all the unemployment? And the foreclosures?
Arends says these are all valid arguments for refusing to buy homes when they are expensive, or even averagely priced. But the whole point about markets is that they adjust. Prices are now cheap. They reflect this bad news, and more. If you have a stable income, and you can get a 30-year mortgage at 5% or so, and you are willing to drive a hard bargain on a home in this market, this is your time. Arends continues: “Over and over again, history suggests that the best investments are the ones no one wants–gold when it was $260 an ounce, Amazon.com when it fell below $10 in 2002, Hong Kong shares during the SARS “crisis” in 2003, and so on. If an investment feels comfortable, it’s should make you nervous. If it makes you really nervous, that’s probably good.”
GM to get more moolah?
According to the Wall Street Journal, GMAC Financial Services is close to receiving a third round of bailout funds from the U.S. Treasury Department. The paper says the announcement is expected within days, and that the auto and mortgage lender will collect $3.5 billion of additional aid on top of the $13.5 billion already received since December 2008. Supposedly, the new money is intended to return Detroit-based GMAC to profitability in the first quarter of 2010 and allow GMAC to avoid placing its home lending unit, Residential Capital, into bankruptcy.
“As we have previously stated, GMAC has been conducting a strategic review of its business and evaluating options to address the challenges at ResCap and the mortgage operations,” said GMAC spokeswoman Gina Proia. “Critical objectives in the process would be to take actions that position GMAC for improved financial performance and to repay the U.S. government.” If GMAC receives the additional taxpayer money through the Troubled Asset Relief Program, it will be the first big injection to a single company in several months, and will increase government stake and control of GMAC. At present, the government owns a 35.4% stake in the company.
More foreclosures in 2010
Experts agree that more foreclosures are likely in 2010 because the employment market is weak and prime-market homeowners have adjustable-rate mortgages with rates set to skyrocket nest year. “The turnaround in home prices seen in the spring and summer has faded, with only seven of the 20 cities seeing month-to-month gains,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s in New York. In the latest Case-Shiller report, home prices in the Chicago market tied with Atlanta in showing a 1 percent decline. The largest month-over-month decline of 1.6 percent was in the Tampa, Fla., market.
Chicago previously had seen five straight months of home-price increases, including a 1.2 percent rise in September from August. Markets with the biggest price gains were Phoenix, up 1.3 percent, and San Francisco, up 1.2 percent. “Some of the cities have been volatile. I wouldn’t put a lot of weight in a single month’s numbers,” Blitzer said, noting that one month doesn’t make a trend. Genie Birch, president of the Chicago Association of Realtors and a broker associate at Koenig & Strey GMAC, said Chicago hasn’t seen the boom-and-bust cycles of Las Vegas and Phoenix, but she conceded that people fear losing their jobs and that adjustable-rate mortgage time bombs still exist.
Less tax nationwide
According to the U.S. Census Bureau, state and local governments reported another drop in overall tax revenue yesterday. General sales tax, individual income tax and corporate income tax were all down in the third quarter of 2009, resulting in an overall 6.7% drop in total tax revenue, compared to the same quarter in 2008, and the fourth consecutive quarter in which tax revenue collection has fallen. Total taxes collected in the third quarter were $266.5 billion compared to $285.6 billion during the same quarter in 2008. 29 states enacted revenue hikes for fiscal 2010, which began on July 1 in nearly all states. Personal income tax hikes accounted for the largest portion, some $10.7 billion. Corporate levies declined by $202.2 million. But wait! You mean raising taxes DOESN’T help corporations pay more taxes? Who woulda thunk it? Just wait for cap and trade.
TARP had a negative effect according to most banks
A bank survey completed by the Bank Administration Institute (BAI) found that while larger financial institutions completed full repayment of the Troubled Asset Relief Program (TARP), as is the case with the $45bn repaid last week by Citi and Wells Fargo, only 12% of respondents feel the program positively impacted their operations. The BAI & Finacle Bank Executive Index tracked the opinion of banking executives from the top 100 financial institutions in the United States.
The executives, who staff commercial and savings banks, as well as credit unions, filled out an online survey regarding questions on the overall health of the economy as well as factors that improve customer satisfaction. While respondents feel negative towards TARP, 87% of those surveyed said the government’s action to raise FDIC insurance to $250,000 helped drive confidence in consumer bank deposits. Additionally, new regulations are increasingly offsetting any gains being made through expanding the retail side of the business. However, only a quarter said their firm is creating clear strategies for near-term innovations. And only 11% felt they better understood client’s needs and wants when compared to six months ago.
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Axioms Aren’t Always True
Some things are repeated frequently enough they become accepted as common wisdom but closer inspection (not to mention recent history) often portrays a completely different understanding. Savvy short sale investors would do well to take a look at these axioms that aren’t always true.
Axiom #1 – Housing prices always rise. Just a few years ago this headline seemed to be stealing the show as fevered buyers stood in line to snap up condo’s and bidding wars drove home prices well above the initial asking price. Of course, those days are now long gone and with it the age old wisdom that housing prices always rise. But before tossing the entire idea out, take time to fully understand the basis for the original axiom; historically housing prices have risen and fallen but they do eventually reach higher and higher nominal values as a whole. In part, due to inflationary pressures. Since real estate is a tangible asset, it tends to retain value during inflationary periods of time. Because capitalistic economies count on a regular rate of inflation (roughly 3 percent), hard assets will tend to rise in value over long periods of time. That may be little consolation to those that purchased real estate at the height of the boom expecting it to rise even farther but should likewise provide tremendous consolation and encouragement to current short sale investors.
Axiom #2 – Safety in Numbers. When it comes to investing, this may be one of the most dangerous axioms still in existence. While there may be support for safety in numbers when it comes to purchasing a stock that has enough daily volume in order to sell at a later date, that is about the extent of it. Remember, to make money in any investment requires others to give up their money or new wealth must be created. Plain and simple, investors want to be the exception to the rule – not the rule. Contrarian investors tend to do well if they understand the fundamentals of value, wealth creation and the tax structure currently in operation.
Axiom #2 – Buy & Hold is the best strategy. Although buy and hold is certainly a viable strategy, it isn’t the only game in town. A fast flip can often jump start a sluggish portfolio or bring in enough funds to generate more meaningful gains. Even those that adopt a long-term investment strategy should not simply “buy and hold” but rather buy, hold and rebalance based upon new tax information, depreciation schedule and other individual circumstances. Just as one size doesn’t fit all when it comes to investing, the same applies to each property purchased; one parcel may be perfect for a quick flip while another may generate long term profits with a buy and hold strategy.
See you at the top!
Chris McLaughlin
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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 of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
400 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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