interest rates

http://www.shortsalesriches.com

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

************

Deals Done For You … Encore This Saturday!

Nathan J. Interviews Damian Lanfranchi on his

Deals Done For You System!

See the BIG Miss 96% of Investors Are Making When

It Comes To How-To Use The Internet To Get Deals

(You Can Literally Be Destroying Your Chances Of

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RSVP for this webinar Saturday at 3 PM ET, NOON PST: 

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************

Watchdog says existing programs are not enough

The Congressional Oversight Panel for the Troubled Asset Relief Program says that Government programs to fight the U.S. home foreclosure crisis look increasingly inadequate and should be reworked, expanded and supplemented with new ideas.  “Rising unemployment, generally flat or even falling home prices, and impending mortgage rate resets threaten to cast millions more out of their homes,” according to the report, which focused on the Treasury Department’s efforts to curb foreclosures.  “The panel urges Treasury to reconsider the scope, scalability and permanence of the programs designed to minimize the economic impact of foreclosures, and consider whether new programs or program enhancements could be adopted,” it said.  The report was sharply critical of the larger of the government’s two big programs designed to fight foreclosures, and concludes that they are not sufficient to deal with the changing nature of the foreclosure crisis.  “It increasingly appears that HAMP [and TARP] is targeted at the housing crisis as it existed six months ago, rather than as it exists right now,” it said.

Roubini sees 10% decline coming

According to leading economist Nouriel Roubini, housing prices may still fall more than 10 percent as demand from first-time home buyers fades.  Roubini said massive losses in commercial real estate loans will add to the problem, forcing banks to raise more capital.  “The stress is moving from residential mortgages that are still in deep trouble, to commercial real estate, where they are just starting to recognize that they’re going to have massive, massive losses,” Roubini told reporters.  The first-time buyer credit of $8,000, set to end on November 30, has kept housing activity moving this year and has helped reduce a massive inventory of unsold homes, but Roubini says that while the number of unsold houses may have bottomed out, prices are poised to fall further, increasing pressure on the economy again.  One of the main risks next year may be from losses on some $2 trillion in outstanding commercial real estate loans, forcing banks to raise more capital, the economist predicted.  “Half of this is in medium-sized and smaller banks, and even in the larger ones.  Most of these losses are not recognized because they’re keeping the loans at face value on their books,” he said.  Still, Roubini sees a greater chance of a U-shaped economic recovery in developed economies, with a 20 percent to 25 percent chance of a double-dip.

 Watchdog says existing programs are not enough 

The Congressional Oversight Panel for the Troubled Asset Relief Program says that Government programs to fight the U.S. home foreclosure crisis look increasingly inadequate and should be reworked, expanded and supplemented with new ideas.  “Rising unemployment, generally flat or even falling home prices, and impending mortgage rate resets threaten to cast millions more out of their homes,” according to the report, which focused on the Treasury Department’s efforts to curb foreclosures.  “The panel urges Treasury to reconsider the scope, scalability and permanence of the programs designed to minimize the economic impact of foreclosures, and consider whether new programs or program enhancements could be adopted,” it said.  The report was sharply critical of the larger of the government’s two big programs designed to fight foreclosures, and concludes that they are not sufficient to deal with the changing nature of the foreclosure crisis.  “It increasingly appears that HAMP [and TARP] is targeted at the housing crisis as it existed six months ago, rather than as it exists right now,” it said.

Interest rates at the bottom?

“It’s hard to imagine them going any lower,” says Greg McBride, chief economist at Bankrate.  “I think people need to be worried about them going up,” adds Mark Goldman, professor of real estate at San Diego State University.  These opinions are becoming fairly widespread, and there are even those who see a hike in interest rates as a stimulant:  “Higher rates will force people to buy,” says David Dessner, director of sales at Guardhill Financial, a mortgage broker firm in Manhattan.  “People will see current rates as historically low and see rising rates as a time to buy, thinking that rates will keep rising once they start up.”  Other analysts disagree:  “Higher rates put a damper on things,” says Chuck Whitehead, a real estate broker in California.  “That works even for the seller.  If rates go up then someone who qualifies for a loan now might not be able to with higher rates.”  With rates so low in a battered economy, the only way for them to go may be up.  A look at rates show how historically low they are.  The average for a 30-year fixed is 5.18 percent, while the 15-year fixed is 4.63 percent.  The 5/1 ARM is 4.21 percent.

Double-dip recession coming?

Nouriel Roubini may see only a 20 – 25% chance of a double-dip recession, but billionaire investor Carl Icahn says there is a real risk of a double-dip recession and the market is acting in a “schizophrenic” way, which could cause a “bloodbath” for investors.  “If you get a double-dip recession and they start coming down, it’s going to be a bit of a bloodbath,” Icahn said.  “The amateur investor is going to get hit badly again because they’re pouring money into these funds.  Some of these funds managers I do not think are experienced enough to handle some of the distressed stuff they’re buying and they’re going to get burned,” he said.  “I think that you have to be cautious.  It’s on a precipice right now and it could really go either way,” he said.  Icahn warned against seeing the recent stock rally as a sign that the economy has turned a corner.  “It’s a myth to say the market is a good indicator of the economy.  I think individuals are much more of an indictor,” he said.

Fed to tighten policies “at some point” 

Federal Reserve Chairman Ben Bernanke said on Thursday that while the U.S. central bank’s vast support for the economy will likely be needed for a while, the Fed will have to remove those measures as the economy heals to ward off inflation.  “Accommodative policies will likely be warranted for an extended period,” he said.  “At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road.”  Bernanke, in a detailed description of the bank’s balance sheet — which has ballooned from around $900 billion to near $2.1 trillion — said the Fed has the tools and the ability to pull back its flood of cash and loans to the economy and to raise interest rates when the time is right.  “When the economic outlook has improved sufficiently, we will be prepared to tighten the stance of monetary policy and eventually return our balance sheet to a more normal configuration,” Bernanke said.

Now on to our real estate educational section…

Keeping Up With Credit

Sooner or later most short sale investors find the need to obtain outside funds; whether you routinely obtain a mortgage or just need quick access to cash in the form of a personal signature loan keeping up with credit is essential.

Throughout the nation banks and credit cards are tightening lending standards, reducing credit limits and raising interest rates. Even those with a perfect payment history and outstanding credit histories are finding their credit score dropping without advance notice. Use these quick tips to help keep up with your credit and obtain the best possible rates:

1. Perform a free annual credit review. According to law, each and every person is allowed one free credit report annually. Take time to review for errors or inconsistencies. Research shows nearly one of every five have significant errors that could result in higher interest rates, increase insurance premiums or even denial of loans.
2. Watch credit limits carefully. Even those that carry a low balance or charge significant amounts each month may be shocked by how much impact reduced credit limits can have on their FICO score. Experts agree it is advisable to refrain from using more than 50 percent of your total available credit and/or more than 50-65 percent of available credit on any one give source.
3. Don’t cancel cards. There is a fine line between having too many cards and too few; another commonly used criteria is duration of credit. Think twice before canceling dormant credit cards. Instead, consider using them to make a small purchase then immediately paying in full.
4. Read those statements! Credit card companies are already hitting dormant cards with fees ranging from $20 to over $100 annually for failure to use the cards within the past 6 to 12 months. A dormant card fee combined with a late payment can quickly create credit problems before you are even aware there is an issue. Open all credit card statements and review promptly.
5. Bad Buys. Know that annoying fraud prevention feature that seems to pop-up at the worst times? Y’know the one…it puts your card on hold when you are trying to pay for an expensive dinner out of town or making an online purchase for delivery at another address. Well, another closely related tracking tool is increasingly making its presence know by reducing credit limits or raising interest rates after consumers make certain purchases. For example, trying to save a few bucks by buying “re-treads” on your teens ride could bump your rates up by far more than you saved. A few quick trips to one of those big box stores when your typically shop at Neiman Marcus may indicate a potential “red flag” of future economic problems. Don’t even think of paying for a family lawyer with a credit card…divorce is strongly associated with financial problems and likely to send a strong signal.
6. Keep options open. Savvy short sale investors will keep all their options open including the use of private funds, credit unions or other sources of quick cash when needed.

See you at the top!

Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

*************************************************

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 nearly
     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
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Add me on Facebook: http://www.facebook.com/mclaughlinchris
–

Current interest rates are not a hurdle for home buyers

Real Estate News & Commentary by Chris McLaughlin, June 4, 2009

http://www.shortsalesrichesturbocharged.com

Short Sales Riches Turbo Charged is SOLD OUT. We are still working through several orders with credit cards that declined. To place your name on a waiting list as we work through these to see if any products become available, please e-mail Peggy Harbuck your name, e-mail, and phone number to: lossmitigationtraininginst@gmail.com.

Current interest rates are not a hurdle for home buyers

According to Freddie Mac, the 30-year fixed mortgage rate jumped to an average 5.32% this week, from 4.91% last week. While refinancing activity has been hit by the rising rate, home purchases continue to rise. It looks as though home buyers are jumping in now, in case the rates rise further. Diane Saatchi, senior vice president with the Corcoran Group, says, “In the short run, there’s an increase in activity to lock in rates. We’re seeing a bit of a frenzy to buy.” A further rise in rates could slow housing recovery, but the current rates are not high enough to dampen home buyers’ interest. Greg McBride, senior analyst at bankrate.com, says the recent rise in rates is not a “barrier to affordability,” and home buyers “don’t need to panic,” as yet. “Down payments and the ability to sell existing homes are the main impediment for home buyers now,” said McBride. “There’s also the more stringent underwriting rules. If you can get past those, mortgage rates are not a problem.” It is important for home buyers not to lose sight of what they are trying to achieve when they shop around for the best rates and prices. “Don’t get caught in the trappings of the negotiations and lose the whole package,” says Saatchi. “People want a great deal and they forget about the house they’re trying to buy.”

Pump-priming benefits construction sector

The construction sector has been among the hardest hit in the current recession. According to the Labor department, about 1.74 million construction workers were unemployed at the end of April. The unemployment rate in the sector is double the national jobless rate of 8.9%. The government has allocated $140 billion for federal projects, mostly for work on highways and dams. The stimulus package is helping the sector reduce job losses. “Early reports indicate that the infrastructure piece of the stimulus is beginning to do exactly what was intended, to put construction workers back on the job,” said Ken Simonson, chief economist for the Associated General Contractors of America. About 85% of construction companies have indicated that they were scrapping layoffs or adding new employees because of the construction work created by stimulus funds. However, home builders are yet to see any significant benefit from the stimulus package, due to a glut in unsold homes and tight credit conditions. “I would be surprised if there are too many home building concerns that are hiring back workers that were laid off as a result of the stimulus package,” said Jerry Howard, president of the National Association of Home Builders.

Planned layoffs drop in May

According to a report released by Challenger, Gray & Christmas, a consultancy, planned job cuts announced by U.S. employers dropped 16% to 111,182 in May, from the 132,590 layoffs recorded in the previous month. The report states that job-cut totals have fallen by an average of 17.5% since January. Some analysts believe that job cuts may not decline for long. John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said, “Corporate downsizing may continue to remain slow during the summer months, but if the past is any indication, we could see the pace accelerate again in the latter half of the third quarter through the end of the year.” The government and nonprofit sectors continue to lead in job cuts by announcing 22,317 layoffs last month. The Auto sector is also expected to announce significant job cuts in the coming months, on account of bankruptcies and the resultant closure in dealer networks. This year, U.S. employers have announced 822,282 job cuts so far. This is more than double the 394,193 cuts announced at this time last year.

Bernanke urges the government to curb budget deficit

Ben Bernanke, Chairman of the Federal Reserve, has cautioned that the U.S. budget deficit, if left uncurbed, could endanger the economy’s long-term health. Bernanke, while testifying before the House Budget Committee on Wednesday, said, “”Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.” Economists estimate that the budget deficit will reach $1.8 trillion this year. The recession has hit tax revenues paid by people and companies. Bernanke said that the government intervention to tackle the financial crisis and stimulate the economy was “necessary and appropriate” even though it worsened the nation’s budget deficit. It is important to know how high is too high. Persistently high budget deficits may cause investors to lose their appetite for U.S. debt, which would drive up interest rates. Bernanke cautioned that higher interest rates could discourage spending and investment, hurting the economy.

Illness can lead to bankruptcy

Medical treatment in the U.S. is expensive enough to force individuals into bankruptcy. According to a research report published by a team of researchers from Harvard Law School, Harvard Medical School and Ohio University, in over 62% of personal bankruptcy cases in 2007, the cost of treatment was the main expenditure item. This presents an increase of 50% in just 6 years. The report states that over 75% of the bankrupt families had health insurance, clearly pointing to the inadequacy of insurance coverage. “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy,” said, Harvard’s Dr. David Himmelstein. “For middle-class Americans, health insurance offers little protection,” Himmelstein added. Steffie Woolhandler, an Associate Professor of Medicine at Harvard, said that only single-payer national health insurance can make universal, comprehensive coverage affordable by saving the hundreds of billions that are wasted on insurance overhead and bureaucracy. “We need to rethink health reform,” Woolhandler said. “Covering the uninsured isn’t enough.”

Now on to our real estate investor educational section…

Top Trends Every Investor Needs to Know for Short Sale Success

Like the Biblical story of Joseph interpreting Pharaoh’s dream in order to set aside grain for seven years of famine, every investors and politicians throughout history has attempted to make use of trends, insider information and even prophecy as a means to understand the event most likely to impact their lives. Today is no different. While we don’t claim to have the gift of dream interpretation, we are able to read the writing on the proverbial wall. Find out what the future has in store for your short sale and other investments with these top trends every investor needs to know:

Demographic Shifts. A great deal has been written about the coming storm of aging Baby Boomers but less has been written about the changing racial, language and other characteristics of the population. It is estimated that within the next 20 years the WASP (white, anglo-saxon, protestant) will be the smallest segment of the population. Although minorities will still individually remain smaller, combined their numbers are rising much faster than others. In many cities across the nation this trend is already in full force; for example, Orlando Florida has recently released information that minorities outnumber “Caucasians”. Changing demographics means changing lifestyle patterns – whether due to age, culture or other considerations.

Situational Learning & Continuous Quality Improvement. If your first response to this is “huh?” you are not alone. While this may initially appear to be more appropriate for a discussion on education rather than short sale investment, it’s really not. The underlying assumption is simple…there are no long term underlying assumptions that you can count on when doing business in the future. Already we have seen radical adjustments in policy and conduct from banks, the federal government and other cornerstones of society….these are likely to not only continue into the foreseeable future but actually increase in frequency and escalate in severity. The rules are likely to keep changing for everything from what makes an investment work to the tax structure and modes of financing – plan to stay prepared.

Digital. The world is growing and shrinking at the same time thanks in large part to the digital era. What impact does this have on short sales? Simple, while demographic changes are taking place, equally important transitions are pushing the limits of what we consider work, education and even healthcare. The result is a combination of movement toward the inner city (close to friends, family, work, health and other amenities) with a corresponding exodus to rural areas. Literally free to work, study, play and live without boundaries, the digital era continues to hold promise and potential for those that understand what this new breed of digital thinkers and prosumers expect.

Radical Religion. It’s no longer limited to the middle east or even Europe. With the advent of 9-11, America has been faced with the prospect of radical religious elements on a scale never expected or experienced. It’s a trend likely to continue well into the foreseeable future as neighborhoods increasingly consolidate by personality type, interest patterns, political influence and other commonalities – including religion.

See you at the top!

Chris McLaughlin

http://www.shortsalesrichesturbocharged.com

PS:

Short Sales Riches Turbo Charged is SOLD OUT. We are still working through several orders with credit cards that declined. To place your name on a waiting list as we work through these to see if any products become available, please e-mail Peggy Harbuck your name, e-mail, and phone number to: lossmitigationtraininginst@gmail.com.

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.reoempire.com

Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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
* On facebook:
http://www.facebook.com/addfriend.php?id=709199143

Real Estate News & Commentary by Chris McLaughlin, March 18, 2009
http://www.shortsalesriches.com/welcome.html

——–

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I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
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Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

 

And I can’t do it in an email.

 

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots
left:

https://www2.gotomeeting.com/register/995947853
———

Interest rates will stay low

 

Economists predict Fed Chairman Ben Bernanke and his colleagues will hold the lending rate between zero and 0.25 percent for the rest of this year and for most, if not all, of next year to combat the recession we’ve been in since December 2007.  Of course with a lending rate this low, the Fed is just about powerless in the face of recession, but that’s not stopping them from meeting to talk about it.  The options still remaining are:  1) buying long-term Treasury securities, and 2) boost its purchases of debt issued or guaranteed by mortgage giants Fannie Mae and Freddie Mac.  Both options would help depress mortgage rates.  Hopefully they won’t adopt the latest fad on Wall Street as option number 3 — voting themselves bonuses.

 

Homebuyer tax credit now law

 

The homebuyer tax credit, one is one of 10 key provisions of the so-called American Recovery and Reinvestment Act, was signed by President Obama into law yesterday.  The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence between January 1, 2009 and December 1, 2009.  Home buyers won’t have to repay the credit, which they can apply dollar for dollar against 2009 taxes, and if there happens to be an unused portion of the credit, it will be mailed to the purchaser. 

 

Inflation rears its head

 

The Labor Department says gasoline prices and clothing costs leaped the most in nearly two decades in February, driving a rise in consumer inflation of 0.4 percent in February.  Core inflation, which excludes food and energy, rose 0.2 percent in February, slightly higher than the 0.1 percent rise economists expected.  Can anyone guess what it’s called when interest rates stay low while prices go up?

 

Mortgage applications jump – sort of

 

Mortgage refinancing applications jumped 30 percent in the week ended March 13 as the borrowing rate dipped 0.07 of a percentage point to 4.89 percent, tying the record low reached in early January in a survey that dates to 1990.  Of course purchase applications only rose 1.5 percent.  Refinancing requests represented about 73 percent of all mortgage applications last week.

 

Foreclosures up

 

Foreclosure filings are up 30 percent from a year ago.  The states with the highest foreclosure rates so far are Ohio, Oregon, Georgia, Illinois, Michigan, Idaho, Florida, California, Arizona, and Nevada, where a whopping 1 in every 70 households are in foreclosure.  Viva Las Vegas!

 

Merrill Lynch on the hot seat

 

As if AIG wasn’t enough, now Merrill Lynch is under the gun for $3.62 billion in 2008 year-end bonuses.  Rep. Edolphus Towns (D., N.Y.), chairman of the House Committee on Oversight and Government Reform, in an effort to determine whether the committee had been misled about the bonuses, sent letters to Bank of America requesting records of the incentive payments.

 

Now on to our real estate investing education section …

 

Top Ten Foreclosure States & Investing In Short Sales

Getting started in short sales and real estate foreclosures doesn’t need to take months; with a little help from your friends here at the ShortSalesRiches.com blog you can be making an offer on your first property in less time than it takes to open a new bank account to stash all that cash and big profits.  But should you focus your efforts on foreclosures or short sales? Does it really matter? Maybe more than you think.

First, let’s take a few minutes to find out where all the foreclosures are taking place. While every state has its fair share of foreclosures and potential short sale properties, according to Forbes, the top ten foreclosure states are currently:

1. California

2. Florida

3. Arizona

4. Nevada

5. Illinois

6. Michigan

7. Ohio

8. Texas

9. Georgia

10. Virginia

Now, back to the main question; foreclosures or short sales? While both may offer a real estate investor major profit potential, short sales provide the unique perspective of less competition. Never underestimate the hype and hysteria that takes over an otherwise sane buyer in the heat of the moment or during an auction. Fear and greed plus a good healthy dose of competition can drive a would be cash cow into the ground when dealing with auctions and foreclosure sales. Bidding wars are not unusual so be prepared well in advance. On the other hand, short sales often rely upon individual negotiations where time is on your side.

Additionally, buying a property prior to foreclosures results in reduced prices since the lender hasn’t been required to deal with months of unpaid mortgages, vandalism, paper-work and other problems. In general, the sooner you claim a property the more is saved – savings that pass directly to you. Short sales can sometimes generate greater profit potential than foreclosures although there are exceptions to every rule…and trust me, I’ve seen plenty of short sales end up as REOs after stubborn lenders refuse to drop their prices, only to see the property eventually sell for $100k less than was offered as a short sale!   Lucky for us banks are getting a little smarter.  But notice I said a “little” smarter.  They are still pretty dumb.

 

See you at the top!

 

 

Chris McLaughlin

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

 

P.S.

 

Don’t miss out webinar this coming Thursday night at 8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/995947853

 

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com 
http://www.sixfigurebpo.com *************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…

http://www.shortsalesriches.com/blog

*************************************************

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

—

Mid-Day Market News & Commentary by Chris McLaughlin, January 7, 2009
http://www.shortsalesriches.com/welcome.html

——
You really can make a huge six figure income … even a 7 figure income … with no money out of your pocket in the deepest recession our country has ever faced.   Come to the amazing webinar on “Recession Proof Real Estate Investing” and learn the proven strategies to making wealth in 2009.

There are only 30 spots available, so jump on this now:

https://www2.gotomeeting.com/register/505377393

——

Happy New Year! As millions of Americans salute the beginning of 2009 with expectations of a return to a more traditional economic and investing structure, experts agree things are likely to get worse before they get better….a consideration for every short sale buyer but one that should also encourage potential investors to seek returns in areas outside of the financial markets; areas like short sale real estate. Even as hopes for a brighter financial future are likely to be conservative for most Americans the future never fails to bring change and change offers opportunity to those that understand how to take advantage of it. This week we will examine several changes of both direct and indirect interest to short sale investors beginning with the minimum wage laws slated to go into effect for 2009.

While many small business owners rue every small increase in minimum wage law, it is actually good news for most short sale investors. An increase in minimum wage translates into slightly higher eligibility requirements especially for first-time homeowners and others seeking affordable housing. Let’s take a few minutes to examine the basic eligibility requirements and sales prices to go into effect for 2009.

Federal Minimum Wages will increase on July 24, 2009 to $7.25 per hour but many states have already enacted higher minimum wage laws as of January 1, 2009. California, Illinois, Massachusetts and Vermont are each $8 per hour while Oregon is at $8.40 and Washington at $8.55.  Using the Federal rate of $7.25 results in $290 per week earnings or $15,080 annually. A single person making minimum wage at a 30 percent income ratio would only be able to afford $377 per month toward mortgage and interest payments or roughly a $65,000 home financed for 30 years at a fixed 5.5 percent interest rate. With interest rates projected to drop to 4.5 percent fixed later this year, the same individual would have a mortgage payment of just $380 per month on a $75,000 mortgage….well within the reach of a short sale starter home in many areas of the nation.

Now let’s take a look at affordability levels for a two income household with both partners only making the new federal minimum wage of $7.25. The combined annual household income of $30,160 at a 30 percent debt to income ratio would allow monthly mortgage payments of $754 per month. At today’s 5.5 percent fixed 30 year rates that equates to a selling price of roughly $135,000 or $150,000 at a 4.5 percent fixed 30 year rate.

Fortunately, short sale investors need not fear an increase in minimum wage laws; in fact, it is downright good news since it allows marginal buyers to qualify for more house than ever. Combined with historically low interest rates, nearly any household in America can afford an entry level starter home even on a minimum wage household income. 

News You Need to Know for 2009 – One More Option…

With interest rates expected to bottom out around 4.5 percent fixed during 2009, many short sale investors are considering the option of acting like the bank by holding a note when reselling a property. If history provides an example, this could be a potentially lucrative move for those inclined toward longer term profits. For example, let’s assume you purchased a $150,000 home via short sale and finance it for 30 years at a fixed rate of 4.5 percent. Monthly payments would be$760 per month. If you held the home until interest rates resumed their upward momentum then took a note at a higher rate the monthly difference would be yours to keep…without the hassle of taxes, insurance, maintenance or other out of pocket expenses….even if you sold the home for exactly $150,000 – taking NO profit on the sales price of the home!

So, let’s assume you sold the home for the exact same price but financed it at 9.5 percent fixed…you would enjoy $500 per month profit for 30 years…a total of $180,000 without making a penny more on the original purchase price of the home. As an added benefit, the buyer would be responsible for property taxes, insurance premiums, maintenance and other upkeep on the home. The home would act as collateral in the event of a default.

Of course, as inflation moves upward and prices of real estate resume their normal trajectory, it would be reasonable to expect to make a tidy profit in addition to the interest rate premium. There is a downside to holding a note; you remain responsible for your portion of the mortgage (unless it is paid in full) and not every lender allows this type of arrangement. Since the home itself acts as collateral for the loan the potential upside remains viable if the terms of your original loan allow for this situation. Oddly enough, one of the biggest threats to long term profitability is early payment of the loan by the buyer. Should the buyer refinance or pay the loan in full earlier than anticipated then it could severely impact your long term earnings.

Consider this; in the 1970’s interest rates peaked at nearly 14 percent fixed after a period of rapid inflationary pressures. Most experts agree, despite a temporary decline in prices of goods and services, the long term outlook for inflation remains high due to the unprecedented degree of stimulus currently being injected into the economy. How long it takes the economic stimulus to reach the average consumer is entirely up to debate but for those interested in holding a note for all or part of the purchase price of a home serious consideration should be given to the prospect. It is one more option to short sale investors interested in building a long term wealth solution.

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See you at the top!

Chris McLaughlin
http://www.shortsalesriches.com/blog

P.S.:

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