construction spending

by Chris McLaughlin on February 2, 2009

Real Estate News & Commentary by Chris McLaughlin, February 2, 2009
http://www.shortsalesriches.com/welcome.html

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Recession Proof Real Estate Investing …

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Now, on to our real estate investing section…

President Barack Obama signaled in his Saturday radio address that lower mortgage rates should be coming. The new President said that his administration would be “reviving our financial system that gets credit flowing to businesses and families. We’ll help lower mortgage costs and extend loans to small businesses so they can create jobs. We’ll ensure that CEOs are not draining funds that should be advancing our recovery.” And in good news for real estate investors, Mitch McConnell, the Republican Senate Minority leader, has put forth a plan to bring mortgage rates to 4%. So a compromise to bring lower rates looks to be in the works! Let’s just hope they figure it out soon, so fence sitters will jump off the fence!

In other news, Americans are tightening their belts. The Commerce Department reported today that personal consumption spending dropped by 1 percent in December, which was a lower than the .9% analysts had expected. And Americans increased their savings to 3.6% of their net income, the 2^nd highest rate since tax refund checks were mailed in May. Finally, the Department reported that overall construction spending declined 1.4% in December for a total of 5.1% for the year, due in large part to the 27.2% plunge in home building construction.

Exponential Growth: What’s it All Mean?

You have heard about exponential growth related to the explosive increase in debt but the same type of growth is taking place all around you if you know and understand where to look and how to identify it. Why should you care? Because those that are able to identify the beginning of the “next big thing” are those who buy in at the beginning of the exponential growth curve; that dramatic rise straight upward that reflects increasing momentum and the point of no return. It can either work for or against every real estate investor; learning how to distinguish the signs and inevitable outcome is the stuff that fortunes are made out of.

For instance, the current economic crisis has created a situation where the money supply is going exponential. As more money is created the resulting rise in fiat currency is likely to create inflationary pressures that will not be seen for several years – but will nonetheless be very real once they pass the point of no return.

Other exponential growth is taking place in the number of elderly leaving the stock market in preparation for retirement. Simultaneously there is another ‘echo boom’ generation which will not reach their high productivity years for at least another 20 to 25 years. What does that mean?

In simple terms, the largest segment of the population is retiring while the next major demographic wave won’t be prepared to take up the slack in the stock and bond market for at least a generation; savvy investors will realize the likelihood for low rates of returns from traditional financial instruments for years to come. Indeed, demographic researchers and financial guru’s alike are calling for nothing short of a complete fiscal melt-down on Wall Street due to demographics alone. Combined with the current economic crisis and you have a recipe for catastrophe’ for those vulnerable enough to listen to the media pundits.

However, notice that the same demographic trends actually help short sale real estate investors; ultra low interest rates combined with an echo boom generation that will need affordable housing en mass means future housing shortages, higher rates of inflation and very real rates of return. But, that isn’t the end of the exponential growth curves taking place. Immigration is yet another factor that must be considered.

Whereas most college educated Caucasians have a lower than “replacement” reproductive cycle, minorities and immigrants reproduce at much higher rates, more than compensating for their own replacement values plus some. In fact, this trend is so pronounced that within the next 20 years the historical “WASP” (White Anglo-Saxon protestant) will actually become a minority. During the same period it is estimated that Hispanic speaking citizens will become the largest minority population with African American’s falling to third position. Female headed households are expected to continue their exponential growth curve as nearly 2 of every 3 African American children are now born outside of the traditional marital arrangement.

Taken together, the exponential growth from each of these seemingly disparate demographic trends presents a strong short sale investing strategy:

The stock market is likely to continue a long term stagnation especially adjusted for inflation.
Aging Caucasians are expected to invest in the “fun and sun” states as they plan their golden years and seek safe returns to carry themselves through retirement.
Minority populations –especially those headed by single women with children – are likely to become a pre-dominate force in the need for affordable housing as they rear the new echo boom generation.
Working women with children seek low maintenance lifestyles; minimal yard word, safe schools, quick commute to and from work or shopping. Think “ease and convenience.”

See you at the top!

Chris McLaughlin

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

P.S.

Sign up right now to ensure your reservation! The amazing Recession Proof Real Estate Investing webinar will be held this coming Tuesday night at 8:30 PM EST, 5:30 PST! There will only be 50 spots available for this webinar, so jump on this now:

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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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Construction Spending Drops, Black Friday Shoppers Solid

by Chris McLaughlin on December 1, 2008

Mid-Day Market News & Commentary by Chris McLaughlin, December 1, 2008
http://www.shortsalesriches.com/welcome.html
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It isn’t about what the economy is doing … it is about how you respond to it! Can you imagine that there’s a way to actually make tons of money in this market, literally a recession-proof investment strategy? Yes, you don’t need capital. You don’t need good credit. You just need a plan. And we’re gonna show you that plan, on Tuesday night. But there are only 50 spots available, so grab yours now:

Recession Proof Investing Webinar (Tuesday, 9 PM EST, 6 PM PST):
http://www.recessionproofinvestingwebinar.com
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The financial markets were jittery this morning after the Institute of Supply Management index of manufacturing activity dropped to 36.2 in November from the reading of 38.9 in October. The drop represented the lowest reading in 26 years, spooking investors who for the most part were pleased with reports that holiday shoppers were buying.

ShopperTrack RCT, a firm that tracks sales for over 500,000 retail outlets, indicated that sales rose 3% to $10.6 billion compared to the Black Friday in the year ago period.

Around noon the Dow Jones Industrial Average was off 371.40 to 8457.64 and the Nasdaq was off 79.14 to 1,456.43.

The U.S. Department of Commerce announced today that construction spending dropped 1.2% for the month of October, a larger decline than the .9% many analysts had expected. Housing construction dropped by 3.5%, a larger drop than the decline of .5% in September. Most analysts attribute tightening credit as the leading factor causing the declines.

And in good news for drivers…national gas prices are now $1.82 a gallon, a price not seen since January 2005. This “energy dividend” is likely to assist many companies that were struggling with higher fuel costs. But for those interested in real estate, let’s hope this doesn’t mean buyers want to drive around to even more homes!

And finally, for the political junkies reading this…Senator Hillary Clinton officially was nominated by President Elect Barack Obama to be his Secretary of State. Obama is keeping Defense Secretary Robert Gates and nominated retired Military General Jim Jones to serve as National Security Adviser.

Now, on to our real estate investor education section…

Indicators and Indices: Information You Need to Know

There are two types of investors in this world: those that follow the masses and those that remain independent. Guess which type typically makes the most money? While many investors that go against the common trend of the day are considered contrarian investors, a more apt description may simply be “informed”. Given the recent melt-down hitting Wall Street and Main Street, only those that have a true understanding of current events will have the stamina, rational and readiness required to profit while others panic.

To that effect, one bit of information every short sale investor needs to know is how to “read” these common indicators and indices. While no single index is able to provide a full picture of current events, taken together the information is useful to demonstrate trends in the market. Here are a few lesser known indices to keep an eye on in the coming months:

Barron’s Confidence Index. Experts tend to think of bond investors as a bit more sophisticated and savvy than stock traders (in general) and therefore able to identify stock market trends earlier. This weekly indictor is not as well known to the common investor but eagerly tracked by “those in the know”. The index divides Barron’s 10 top-grade corporate bonds by the yield on the Dow Jones 40 bond average. Because top grade bonds have a lower yield than lower-grade bonds the index is always below 100 with an average range between 80 to 95; this week – the end of November 2008, it sits at 46.4 as compared to 78.8 only a year ago.

Tip: Most analysts believe there is a “lag-time’ between Barron’s Confidence Index and what stocks will be doing in 3-6 months. Expect the “flight to safety” to continue into early next year and keep an eye out for future reversals.

OFHEO Price Index. The Office of Federal Housing Enterprise Oversight publishes data of major interest to every short sale investor or real estate professional. The most recent data released on November 25th, 2008 shows home prices continued to slide during the past summer by an average of 6.0. However, since the cost of other goods and services increased by 6.7 percent, the inflation adjusted rate of decline actually approached 13 percent over the past year. Despite this dismal news, some states actually showed an increase including North Dakota (4%), South Dakota (3.9%), Texas (3.2%), Alabama (2.8%) and Oklahoma (2.8%).

Tip: The OFHEO utilizes Fannie and Freddie data to derive its data; obviously, given the recent government intervention into these programs the data may be skewed and does not reflect transactions outside of these quasi-governmental programs.
Index of Bearish Sentiment.

Although this index not housing specific, it can provide a useful tool for tracking trends in the general financial and/or economic environment. In a nutshell, this index provides a means of tracking reversals of official recommendations; ie, when the investment advisory service recommends a specific action then it is time to do the opposite.

So for example, if there are 200 total investment advisory services and 100 are bearish then the index would show 200/100 = 50%. This index is used to track the future trends of investors by using a contrarian perspective. When 42 percent or more are bearish then the market will go UP. When 17 percent or fewer are bearish the market will go DOWN.

Tip: Real estate investors can use this as a quick gauge to measure contrarian sentiment in their own markets or as a sub-set of REIT’s, builder stock etc…remember, investor advisory services follow trends rather than make them since by definition, they tend to report on what has happened in the market.

Obama Wants Lower Mortgage Rates

Construction Spending Drops, Black Friday Shoppers Solid

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