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Monday, October 13, 2008
Main Street and Wall Street - Fact, Fiction, and Exaggerations
By Marylyn B. Schwartz
RISMEDIA, Oct. 13, 2008-Eric Tyson has every right to be opinionated about the media’s treatment of the current market conditions both on Main and Wall Streets. Tyson is a former management consultant to Fortune 500 financial service firms and has successfully invested in real estate for more than two decades. He earned his Bachelor’s degree in economics from Yale and his MBA at Stanford Graduate School of Business.
He might be more recognizable to the real estate community through his authorship and co-authorships of the very successful Real Estate Investing for Dummies, Home Buying for Dummies, Taxes for Dummies and Personal Finance for Dummies. With his insight and candor relative to what we should, and perhaps should never, be doing, we had quite a lively conversation.
Marylyn B. Schwartz: Eric, it’s tough to turn on the TV or pick up a newspaper without feeling like we are all lemmings ready to plunge into the abyss. To hearken to the pundits, this Wall Street mess is going to be the undoing of America as we know it.
Eric Tyson: I could not agree more. Listening to all the hype would lead people to believe that it was nearly impossible to get a home loan. It is harder to get a loan, but hardly impossible. There is a great deal of misinformation. The fact is, real estate is ‘on sale’ now as is stock. While I have no crystal ball about whether we have hit bottom, we are close. It is my contention that this is an excellent time to invest. We all know that buying low and waiting for things to return to more ‘normal’ circumstances is an excellent way to make money. Consumers with good credit will have little trouble finding lenders to write a mortgage. It is a fact that the volume of foreclosures and short-sales are slowing things down, and the fear of the credit crunch has added to the malaise. What we are seeing is a market correction, plain and simple. After the orgy of irresponsible lending by Fannie Mae and Freddie Mac, this was inevitable.
MBS: People are scared that their investments are at risk. When house values have declined significantly in many markets and nest eggs, if small, have all but disappeared, how can we assure people that they need to hang in, not panic and not act without careful guidance and counseling?
ET: We all need to avoid hasty decisions. We cannot afford a 9/11 type mentality. That is, experiencing a crisis and reacting in the short term rather than sitting tight and letting the dust settle. After the tragedy of 9/11, we had economic woes that lasted many years. However, people who invested in real estate then made back their initial investments many times over. Selling a depressed investment is never wise. Fifteen years from now, we will be looking at this time and shaking our heads. However, this economy is a great deal tougher if you are close to retirement. You need to be sure that you are not invested in high-risk markets. One way to measure your portfolio for its level of risk is to take 110 and deduct your age. The result is the percentage of your portfolio that should be in long-term growth assets …stocks, real estate, bonds, etc. These may or may not fit the cautious-investment criteria dependent upon the history of their performance.
MBS: What do you think the biggest misconception is relative to the spin the media places on the financial mess?
ET: This is not the Great Depression. We have to stop comparing the two times in our history. If facts are compared, it is not difficult to determine that where we are today is not where we were in 1929. The stock market decline of 700 points was a result of people listening to the media, panicking and selling off assets or liabilities as they saw them. The next day, the market rebounded significantly, and these same people are wondering if what they did was right or wrong. During the great depression, we had 50% foreclosures as compared with 2.5% or so today. We are suffering with 6% unemployment, yet back eighty years ago unemployment hit 25%. The bailout bill was grossly misrepresented by the media. They failed to liken present-day challenges to other times in recent history when we were in economic crisis. The Resolution Trust Corporation (RTC) that was formed by the US Government in 1989 to liquidate primarily real estate-related assets (including mortgage loans) belonging to savings and loan associations. These assets were declared insolvent by the Office of Thrift Supervision as a consequence of the savings and loan crisis of the 1980s. Between 1989 and mid-1995, the RTC closed or otherwise resolved 747 thrifts with total assets of $394 billion. Many who invested wisely in the consolidation and distribution of these assets realized profits down the road. Instead of it costing the taxpayer 450 billion as initially proffered, it ultimately cost closer to 75 billion. The key point is that we successfully weathered a seemingly insurmountable crisis with far less pain than the media would have had us believe.
MBS: Tough logic to swallow for people who are now having trouble buying food and providing shelter. While in the long run things will right themselves, it is the dark span between crises and leveling that scares most of us. We’re uncertain that we will come out the other end remotely whole…
ET: I understand that. It is in the ‘trenches’ where the pain is most palatable. However, as an economist, it is incumbent upon me to look at every aspect of our economy and determine where, and if, there are reasons to be optimistic. We do have a few strong economic indicators. Exports are up. The weakening of the US dollar aided that segment of our economy. As a result, our GDP grew. We are a resilient economy. We were entering a recession in 2001, and then we saw economic growth bolstered by the strong real estate market. Now we are seeing an adjustment for reasons mentioned earlier. I liken these adjustments to sausage making. While it is an ugly process to watch, the end product is quite palatable. There is far too much ‘daily noise’ that we have no control over. Research shows that the more negativity a person exposes himself/herself to, the more upset and out of control he/she feels. We must do our homework, balance the hyperbole with the facts and hunker down. There is simply no effective way to speed up the pains of an overdue economic correction.
MBS: There are many who are watching this correction with a high level of anxiety. There is ‘skin in the game’ all the way around, and no one wants another misstep no matter how slight. The American public is already reeling from the magnitude of this correction. Let’s hope that the bright spots you have identified continue to grow into a new day.
Marylyn B. Schwartz, CSP, is an expert in real estate and corporate sales training/management and team development. She is president of Teamweavers and a trainer for Leader’s Choice.
For more information, visit [1] http://www.marylynbschwartz.com/, or e-mail [2] teamweaver@aol.com.
RISMedia welcomes your questions and comments. Send your e-mail to: [3] realestatemagazinefeedback@rismedia.com.
Wednesday, July 23, 2008
Taking Advantage of SHORT SALES
Friday, July 4, 2008
Senate Bail-Out Bill - What the New York Times Says About It
- The Senate is expected to consider a bailout bill after the July 4 recess. That bill would allow banks and borrowers to refinance troubled adjustable-rate mortgages into 30-year fixed-rate loans backed by the government. Lenders would lower each loan amount to 85 percent of its current value while borrowers would pay a 1.5 percent annual mortgage insurance premium, and any gain in value would be shared when a home is sold.
- An estimated nine million homeowners currently owe more than the market value of their home. To qualify, borrowers would have to demonstrate that they can’t afford their current mortgage payment but have the financial wherewithal to make payments on a new loan with new terms.
- Critics of the proposal suggest that the real estate market will correct itself without Congressional intervention, and that a weak economy, rising unemployment and higher mortgage interest rates could derail the usefulness of the program, which would be managed by the Federal Housing Administration and funded by the mortgage insurance fees, a 3 percent lender fee, and a tax on Fannie Mae and Freddie Mac.
To read the full story, please click here:http://www.nytimes.com/2008/06/29/washington/29housing.html?_r=1&th=&adxnnl=1&emc=th&adxnnlx=1214794471-1wPUSlKP4CUyMb8ECvTjAg&oref=slogin
Historically the United States has had its good economic times and its not so good economic times. This too will pass, and many of us will be stronger for it, though not wealthier! Most of our great-grandparents would roll over in their graves to see the spending habits of our generation, and this current real estate climate is a giant wake-up call for many who have thought of home equity as an ATM machine.
Panic and fear will drive the economy down fast. It is important to realize that this, too, will pass. It is time to revert to thrifty economizing as our grandparents and even our parents did. We will all get through this!
Wednesday, May 28, 2008
Housing Affordability Best in Four Years!!*
Saturday, May 24, 2008
Columnist Confronts Data, 'Zillow Bogeyman'
Zillow is in business to make money, which isn't a bad thing - we are all in business to make money. The Multiple Listing Service, though it does indeed make money, is supported by real estate agent's yearly fees, which are substantial! The use of Zillow by consumers and by real estate agents is free, unless you choose to advertise your business. Zillow makes it's money with advertising dollars, so it is important for them to keep their name in the forefront. The MLS makes it's money from agents, who input specific data to get specific answers on a specific home at a specific time period, etc. Our comparisons don't lie.
Zillow is good at what it does - draw consumers to check on the value of their home. But please do not take their values as gospel. Call us and let us use the same criteria your lender will use and the buyers who are looking for homes will be using! That is why we pay the MLS the big bucks! Read this link!
http://web03.echomail.com/remax/l.asp?t=H30&e=zvxrjvyzref~lnubb.pbz&c=8521a3db6892b7166
Monday, May 19, 2008
April Sales Highest In Eight Months!
"Quite a few more buyers stepped off the sidelines last month to snap up homes at substantial discounts relative to the market's short-lived peak," said Marshall Prentice, DataQuick president. "It's no surprise, given the magnitude of the price declines in inland areas and the fact sales have been so amazingly low for so long. We continue to look for evidence of a sales bounce in the mid-priced and higher-end markets along the coast. If the higher conforming loan limits are making a difference in those areas it's certainly not a large one, at least not as of the end of April."
All we know is that we are happy to see our first-time buyer clients finally being able to shop for a HOME!
Wednesday, May 14, 2008
San Diegans: CONSIDER YOURSELF WARNED!
Sunday, May 11, 2008
Happy Days Are Here Again!
So, is anyone out there buying or are they all waiting for more declines in prices? Well, SOMEBODY is buying because we have put in countless offers for buyers and EVERY SINGLE ONE has been joined by multiple offers! This holds true for bank-owned and for short sales. (Most sellers who are not selling short or facing foreclosure are still priced out of the market and seem to be holding out hoping for that one buyer to fall in love and buy their home rather than go through the hassle of buying foreclosures and short sales.)
If you are a buyer who is looking for a long-term investment, waiting for the bottom is risky. Once we KNOW we've hit "bottom," the prices will already have begun to rise. Better to shop now while inventory is up and there are less buyers hitting the market. Good luck!
Friday, April 25, 2008
Many Looking for a Good Deal!
According to to article, first-time homebuyers that have so long now been priced out of the market because of the "frenzied 2001-2005 market" are the buyers that are among those most attracted to real estate today. This is something else we are seeing with our own clients. Happily, we currently have at many first-timers who are talking to our wonderful mortgage broker, Jeff Merritt of Granite Mortgage in La Mesa, California, to see what they can qualify for! If we are happy, these buyers are jazzed and ready to roll!
In "November 2007," the article goes on to say, "39 percent of buyers were first-timers, up from 36 percent in 2006, according to NAR. The key impediment to buying? Meeting tighter bank qualifying criteria." But is that so much of a bad thing? It is excruciating for our clients to go through a short sale (in other words, they are upside down with no other way out but bankruptsy and/or foreclosure). The tougher criteria will help these new buyers not to end up in that unenviable position. Better to rent and save as much as possible than to jump the gun.
Interestingly, USA Today reported that "international buyers increasingly are looking at opportunities in the U.S. real estate market. Declines in the value of the dollar against other currencies and lower prices translate into a discount of up to 30 percent for some foreign buyers.
Investors from other states also are seeking bargains in those markets hardest hit by the real estate downturn. Some are even buying properties sight-unseen for conversion to rentals until the market heats up again – a risky proposition, according to some observers." Just today a loan officer at the bank where we were opening up a new account told us this very same thing! The good news about this, according to this loan officer, is that this international interest will stimulate the real estate economy. That is a good thing!
by Debbie
Wednesday, April 23, 2008
Multiple Offers? Now?
This year, each and every time one of our buyers has offered on a property, there have been multiple offers. This goes for condos under $250K and for homes under $450. This has been true for short sales or bank repos. Our buyers get frustrated. Leah, our buyers agent, has put in 7 offers for one of her buyers, and each time they have been outbid! They're still looking.
Granted we're all wanting that great buy. But what this tells us is that despite all of the doom and gloom about the economy and the real estate crisis, there are A LOT of people out looking for bargains, and that is a very good thing! So though we are definitely slower this year, we are encouraged by all this competition and will keep on keeping on!
by Debbie
Thursday, April 10, 2008
Forbes.com Says San Diego Prices May Rise Over Next Half Year
Subprime still matters, as do the concentration of adjustable rate mortgages. Transaction volume, however, especially over the next 12 months is becoming an increasingly important gauge of a market's health. This month the National Association of Realtors reported that sales volume of existing homes was up 2.9%, the first such month-to-month rise since July.
In cities like San Diego, one of five major metros where transactions rose, that's good news, assuming it's sustained. What makes transaction volume a good indicator is that it shows how easy it is for people to get loans and how much confidence there is in the market. If mortgages are available and buyers have some faith in the value of the home, they're more likely to buy.
San Diego's present conditions suggest that over the next half-year, prices may start to rise. That's because "there's usually a three- to six-month lag between when transactions go up and prices go up," says Jonathan Miller, president of Miller Samuel, a Manhattan real estate appraisal firm.
Another good sign for the coming year? Increased credit availability.
We took into account increased Fannie Mae and Freddie Mac (GSE) loan limits. The new legislation will open up credit in markets such as Sacramento and San Diego by boosting the GSE loan limit by 125% of the median price. That's a huge deal for San Diego, where 18% of the market will see improved lending conditions, based on projections by Radar Logic, a New York-based real estate research firm.
http://www.forbes.com/2008/03/31/homes-risky-property-forbeslife-cx_mw_0331realestate.html?partner=email
Friday, March 28, 2008
And the Survey Said...!
What does that mean to you?
National surveys such as these are useful in measuring broad macroeconomic trends but are of marginal value to the individual consumer in the process of buying or selling a home. That’s because real estate prices are set at the local level and can vary dramatically from market to market, neighborhood to neighborhood, and home to home based on a variety of factors.
NAR on Tuesday reported an increase in sales nationally for the first time in seven months. This gain is encouraging because increases in sales were not expected until the second half of the year.
According to a C.A.R. report, February sales volume in California was up 9.5 percent compared with January, marking the fourth month in a row that figure inched higher
In the market here in East County, falling prices have recently stimulated sales as buyers (including us!) take advantage of the downturn. As inventories of homes are drawn down, prices should begin to stabilize.
Monday, March 24, 2008
The California Economy according to Bloomberg
What this means for you, the consumer:
- Prospective borrowers worried about the foreclosure crisis should obtain pre-purchase homeownership counseling. A Harvard University analysis found that borrowers who received classroom and individual counseling were, respectively, 23 percent and 41 percent less likely to become 60 days delinquent than equivalent borrowers who did not undergo counseling.
- Calling the market low is a difficult task, and it's most often spotted in the rear-view mirror, according to MSN. While prices in many markets may have not yet hit their lowest point, the bottom may be near. And in other areas, only the pace of sales has been affected; prices have held firm or increased. Waiting for the absolute bottom puts consumers at risk of missing the best prices and getting caught up in a market on the upswing.
Making sense out of the news is just another way I serve East County as Your Personal Realtor!
CNBC Reports: "S&P sees end to subprime mortgage writedowns"
What this means for the consumer:
- S&P's statement gave a boost to financial stocks and helped Wall Street indexes pare losses.
- The purging of bad loans in the subprime market through foreclosure or refinancing ultimately will strengthen everyone's ability to obtain mortgages.
- Fewer foreclosures mean fewer vacant homes, which may make a neighborhood a more desirable place in which to live. That, in turn, could increase the demand for housing.
Making sense of the news is another way I serve East County as Your Personal Realtor!
Friday, March 21, 2008
The Wilmers Jump In!
The catch, of course, is that these properties need help. We were looking for what we called a "screamin' deal." The screamin' deals are, well, messy! The homes need TLC. Paint, flooring and landscape are necessary to appeal to this market's pickier buyer or renter, depending on the investor's plan. We aren't positive what we will do with our investment yet. If we can make a profit, we will resell it after we get it spiffed up. If prices have dropped lower at that time, we know we can rent it and cover our costs because it is in a great neighborhood.
We are excited about this new venture for us! We have been wanting to invest in real estate for many years but prices have kept us from taking the plunge, other than owning our own home. We believe that now is the time. We'll keep you posted on the results.
Friday, March 7, 2008
Has the Market Bottomed Out?
Buy Low, Sell High We have been taught this for years, and business people like Donald Trump, Warren Buffet and others have become masters at speculation.
How much lower will home prices go before the recovery begins? There is no magic formula, scientific equation, or even a good way of guessing when the market will begin it's upswing.
Please understand this one thing ... There is no Crystal Ball. As a matter of fact, since there is no crystal ball there is absolutely no way of speculating that we are at the bottom or not. This means that when the media announces things like "we are not at the bottom" or "we have another year of this," please understand that there is no way of knowing this.
Here is what we all must realize. We must realize that there is only one way to know that it was the bottom. That way is simply by "missing it" or when it is now behind us.
Let me state a simple fact. When America believes we are at the bottom, we will at that very moment be at the bottom. Because when America believes we are at the bottom and this is the best deal they will receive, they will act. Actions create demand and demand will create an uptrun in the industry.
As long as we pay closer attention to the media than we do our own common sense, we will not be at the bottom. The media preaches that we are not at the bottom and when we listen, we confirm that. We keep waiting, and that keeps the perpetuation of the downturn in motion.
I recently heard of a Real Estate Office that had a big sign outside on its front window that simply said "Smart People Are Buying Real Estate Now." That pretty much says it all.
Here is a great question for any potential buyer out there. Would you rather buy now and have prices go down another 5% before beginning to recover or wait and buy when you have missed the bottom and prices are already on their way back up?
We must understand that the moment we feel we are at the bottom, we will be. When investors think the best deals are now, they will be. However, when we listen to those who keep stating that we are not there yet and believe them, we will make them right.
Action fixes everything. So, if you are a buyer who still feels like the market has lower to go, tell your realtor how much lower you think it will go and then have him "Write An Offer" using that number. Don't wait another minute. Action creates demand and demand creates the upturn we are all waiting for. It will not be magic, but it will be action that begins the recovery.
Take action before the end of this day!
(A special thanks to Dennis Volz, State Farm agent extraordinaire, for this article!)
Friday, February 29, 2008
WHAT CONSUMERS SHOULD KNOW ABOUT THIS MARKET
• With more homes on the market for longer periods of time, buyers have more choices when it comes to selecting a home today.
• The foreclosure crisis has motivated the government to create more consumer protections against predatory lenders than previously existed.
• A temporary increase in the conforming loan limit means consumers should soon be able to borrow at lower interest rates for higher-priced homes. Prior to the increase, the conforming loan limit was $417,000. The spread between jumbo, or non-conforming mortgage loans and conforming mortgages is about 1.2 percentage points.