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Posts Tagged ‘real estate markets’

The new year, out with the old, in with the new!  Many people are glad to see 2008 go.  It was the year where a bad housing market turned into a freefall rout.  Where many lost their jobs.   So you can’t blame folks for having a lot of hope for a 2009 that is better than 2008.

With the new year comes economic outlooks and predictions.  I recently listened to an interview with Harry S. Dent, an economist known for accurately predicting the Japanese decade long recession, and the DOW hitting 10K, back in the 80s.  According to Harry Dent, we are just in the beginnings of another great depression.   While 2009 might see a short lived rally in the stock and housing market, overall we are in for several more bad years according to Dent.

Harry Dent will be speaking at Wealth Summit Live, an event in Orlando on January 24th and 25th, featuring a number of well known speakers geared towards helping people succeed despite the dour economy.

If you invest in real estate, I would recommend listening to the interview with Dent.  Even if you don’t completely agree with him, his knowledge of trends and how they impact the economy is a message any investor should listen to.  You can access the interview for no cost by registering at the Wealth Summit Live site.   Maybe I will see you in Orlando!

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Happy Black Friday!  For those of you with money, all sorts of assets are for sale at rock bottom prices.  Go forth and buy!

  • In many parts of the country you can scoop up houses for less than the cost of building them.   A friend of mine is buying houses in Florida for $25,000 when just a few years ago they were selling for over $100K.   I challenge anyone to be able to build a home at $25,000 (mobile or pre fab homes don’t count).
  • Stocks are for sale, Warren Buffet is reportedly on a buying spree.  And why shouldn’t he be?  With his knowledge of what constitutes a good company (my guess is that no or low debt on the balance sheet is one criteria) he can get good company stock for cheap.

So those of you with cash that are sitting on the sidelines, buy an asset!  It is almost hard to go wrong.  Invest for the long term and be prepare for prices to dip more .. but if you have the long term view you will be ok.  To me real estate seems more like a sure thing than stocks, but it depends on what you know best and your willingness to manage your asset (stocks don’t stiff you for 2 months rent and then leave a mess to clean up).

And, if on this Black Friday, you insist on being a consumer rather than an investor, you still have great bargains awaiting you.  New cars are selling for thousands less than they did just recently.   The settlement on a wrecked 2006 Prius was enough to buy a brand new 2009 in one case.   Dealers are so desparate that there are buy one and get one free deals out there.   Anyone up for two Dodge Rams for the price of one?

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Loan modifications are becoming a popular alternative to foreclosure.  A loan modification, sometimes called a workout, is where the lender changes the terms of the loan, such as the interest rate, the amortization type, or even the principal balance (dropping  the principal balance is still not common but it does happen). The idea is by changing the terms of the loan to lower the payments the borrower can continue to make payments on the loan and prevents loan from becoming non performing.

Here’s what I have heard so far on loan modifications:

  • They are not working with investors
  • They won’t talk to you unless you are behind on your payments
  • The customer service folks won’t help you, you have to talk to the actual decision makers

Of course this is all hearsay.  However I do believe there is some truth to the buzz I’m hearing.  Navigating the bank hierarchy to get agreement on a loan modification is hard.  That is why there are a number of companies that will help you do just that.

According, to the Loan Modification Handbook the first step is to draw up a hardship letter and a budget. What can you afford? And why do you need a loan modification? Banks are numbers businesses and if you can show them that the new numbers make sense you might have a good chance of getting a loan modification.

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Ah, nothing like sitting down with a cup of tea and reading the morning news.  And if you follow the financial sector, it continues to be bad news after bad news after bad.  This morning’s shocker was the spectacular failure of WAMU.   I just recently wrote about WAMU a few weeks ago.    They offered me a loan modification that I gratefully took.  Maybe it was a desperate move on their part (although I still think it worked out well for them).

This opens up some speculation.  Since I’m not in a strong position to weather this crisis forever, could my lenders become more pliable in the future?  Maybe I should monitor their health and swoop in in their waning days and offer to keep paying the loan, on my terms.  With the way things are going, with so many walking away from their houses, people who are actually paying their mortgages could have negotiating power.   Now or in the future.

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I been struggling to think of some witty post for this blog. To post some upbeat story that gives a glimmer of hope for this awful market which threatens to stretch on for years and bankrupt a lot of people. Then it hit me, I’ve got tons of material to write about. Just none of it is very fun.

I really hate it when people don’t return phone calls. When a rent check doesn’t show up in the mail, I call. And I get really irritated when I have to call again and again, leaving voicemail that is never returned.

Ok, so what to do? Well the next step is to figure out how to evict a tenant that doesn’t pay rent and doesn’t return phone calls seeking an explanation. With the internet, it was really pretty easy to find out. In Florida, before you can begin an eviction you have to serve a 3 day notice to pay up or to cede possession of the property. There are numerous downloadable pdfs on the web you can use. I used this one from a CSEU course.

Pay attention to the fine print, it’s only 3 days if you hand deliver the notice and the tenant can pay the rent at a physical address. The 3 day notice starts when the notice reaches the tenant, and you may need to allow for snail mail time for the rent to reach you. And you can not count weekend days and holidays. So in the end the time period ended up being 2 1/2 weeks. If you mail the notice you need to use certified mail w/ return receipt requested. Make sure to make three copies of the notice for use in the next step (the actual start of the eviction) if the 3 day notice expires without payment or possession delivered to you. You might want to read this article about how you can get tripped up by the details by a tenant lawyer.

Before the notice period was up, I received the rent in the mail along with an explanation. I am sympathetic to my tenants plight as one of them is really sick, but my mortgage company is not sympathetic at all.

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I like to walk. Each neighborhood I move to I walk around checking out the views, the gardens and the architecture .. and of course the for sale signs.

My new neighborhood is rather understated compared to tony Pacific Heights. But there are still some beautiful properties. Today I discovered a secluded area with a creek and a blocked off road. The section blocked off is a one lane road that hugs a very steep hillside that slopes down to a creek. It’s a beautiful treed area. The city of Oakland has some plans for it, they want to open the road and install guardrails. The neighborhood has launched an aggressive campaign against this plan. There are little green postings everywhere with headlines such as “do you want to have to jump out of a way of a car?” and even “what would you prefer: a nice walk or a short trip in a car?”. I must admit it would be ideal to have such a nice walk closed to car traffic. But I missed the deadline to write to the city.

But I digress. When I first moved here, I noticed there were very few for sale signs. It’s an upscale enough area that the homeowners are probably smart enough not to sell in such a poor market. But there are a lot more now. Up the street there is a pending sale, according to the neighbors the house was owned by a man who lived there for 40 years and recently died.  Yours for only $599K.  The one just two houses down from me is listed for $740K.   Of course it has 3 bedrooms rather than two.

I’ve noted the website addresses from the various signs and when I got home I typed them in. Boy these realtors do a lousy job of online marketing.   In 2 of 3 cases I could not find the house on the site. You would think they would do a better job.  Fortunately google helped me out.

The one I did find is interesting (by typing in the website). The possible one foreclosure or fixer in the neighborhood, it’s boarded up. And it’s a steal, only $349K. Here’s the link to it, note the “real fixer upper, needs everything!” comments.

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I must admit I’ve been far too busy to keep up with the media.  But when I walked into a convenience store last Friday and saw this headline screaming up at me from a stack of San Francisco Chronicles I took note.

Up to this point, the inner San Francisco Bay Area seems to had a teflon coating against the declining RE market.  Yes the outer Bay Area is bad for a while, lots of foreclosures and huge price drops.  My personal opinion is that the severe downturn in the outer bay has been hastened by the high cost of energy.  Many in the outer Bay Area commute many more miles to get to places like San Francisco and Silicon Valley where the housing prices have always been higher.   At some point the commute stops making sense.  And let’s not even talk about further out into the central valley, where Stockton is ground zero for foreclosures, driven by speculation gone bust and really not much in the way of jobs.

But the inner bay has been immune, or so I thought, severe building restrictions, an awesome climate, great culture and high paying jobs has always kept prices high and competition for houses intense.  When I bought in 2000, I was incredibly lucky to be the one picked out of 14 offers.  But the cancer of the housing market has spread inward and yes even San Francisco has suffered a double digit decline (11%). 

What’s dragging down prices?  The large inventory of bargain priced bank owned properties.  The individual owners don’t really have much of a chance unless they have something really special that the right person will want.

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