As the title of this post insinuates, I believe that we may be on the verge of another Real Estate market crash, despite the down market. Our own fear or apprehension to participate in the market may end up being the cause. Let me explain:
A brief history lesson
Up until the mid 20th century, US Dollars were backed by commodities such as gold and silver and, therefore, had a finite supply. Money could not be printed at will since it needed to be backed by these commodities which were finite. The investors that withdrew all of their money from the stock market during the crash that caused the Great Depression were simply holding on to it rather than reinvesting and so the cash basically dried up. The depression was caused by the fact that no money was being spent, and therefore, no money was made by the manufacturers to pay their employees. Now, President Richard Nixon signed a bill in 1971 which ended the backing of US currency by gold and created a new system where the Dollar was backed by debt. This is what causes the value of our currency to decline over time, also know as inflation. This also means that there is no limit to the amount of money that the government may print in order to stimulate the economy or bail out banks or large car companies from their imminent demise, they may print at will.
More recent history
The stock market, as we all know, began to bubble in the 1990s due to the DOT COM craze. It grew to it's largest point in history due to speculation in all these new companies and reached it's peak in and began to decline in March of 2000. As a result of the declining market, many investors began pulling their money out which caused the market to fall even more and caused even more investors to exit the declining market. This mass hysteria caused the stock market to crash and lost many investors money that took their entire lives to save.
As a result of the stock market crash, the government decided to lower interest rates in order to stimulate the economy and keep it afloat. They had learned their lesson from the crash that caused the Great Depression back in the 1920s and 1930s when the problem wasn't the value of the US Dollar, it was the absence of the Dollar. The lower interest rates caused many people that couldn't afford a home prior to this period in time to suddenly qualify and the buying began. The banks, motivated to write as many new mortgages as possible, began allowing many very questionable buyers to qualify with interest only mortgages, adjustable rate mortgages and other loans with great starting terms, but unforseeable destructive terms later on, which is partly what caused the current recession. Investors, seeing the feeding frenzy, began doing what they do best, taking advantage of the demand, and began buying up properties to flip. With the motivation of buyers desperate to buy a home, demand was soaring and, therefore, prices soared. When the bubble finally burst, many a homeowner found themselves upside down in a home worth half of what they had paid for it and an unmanagable mortgage payment. Banks began to foreclose, prices dropped even further in response and we found ourselves in our current market situation.
The crystal ball
Now, why do I believe that we are in for another crash? Well, since the market is extremely slow right now, prices have stabalized and we are flooded with foreclosures that noone is buying, Real Estate investors are buying them all. They can't resist the deep discounts that are available and the potential millions to be made from a population either too afriad to buy or waiting to buy because they think prices will fall further, and are therefore renting. Now, as we discussed above, the government has flooded the economy with bailout dollars that didn't exist prior to the recent market crash and is currently in negotiations to raise the defecit ceiling to provide more money for the budget. The resistance of the House of Representatives will cause the government to seek out other forms of funding, one of which will likely be income from raising interest rates. When the interest rates bagin to climb, we who were waiting patiently for prices to fall further will make a mad dash to buy a home while they can still secure a 5 or 6 percent rate as the rate continues to climb. Who will we be buying these homes from? You guessed it, from the same investors that bought them all during the recession, who will now be setting the prices and creating a new bubble. This bubble will inevitably burst causing another crash, quite possibly worse than the one that we're currently in.
Will this new crash occur? I believe it will, but I also believe that it can be prevented. Participation in today's housing market will help to clear off the inventory of distressed property currently available and will help to stabalize the reeling economy. Interest rates will likely still rise, investors will likely still sell, but the impact can be far less if buyers are already happy and secure in their deeply discounted property aquired through taking advantage of the current down market.
Visit my Website: http://nathanhosier.lnf.com/Default.aspx
Follow me on Twitter: http://twitter.com/#!/NateHosier
Wednesday, July 6, 2011
Friday, July 1, 2011
Homepath: Fannie Mae's gift to investors
I've been a bit reluctant to post about this particular topic. I was informed shortly after I received my Real Estate license that, as a licensee, I'm no longer eligible to participate in this loan program, and thus it's been a sore subject for me. The fact remains, though, the Fannie Mae Homepath program is a godsend for investors in a period when most banks won't even talk to us, let alone underwrite a loan for an investor property. I'd like to take a few minutes and summarize the benefits of using this program to buy a home.
The Homepath mortgage and Homepath Renovation Mortgage are loan programs backed by Fannie Mae as a VA or FHA loan are backed by the VA or FHA. None of these entitys actually issue loans, they merely guarantee the money for the loan to the banks that underwrite them for the benefit of a qualifying debtor. Fannie Mae properties, those foreclosed upon and which are now being sold by Fannie Mae, can be found on the Homepath website for just about every area in the US. Not only are most of the homes listed here being offered at extremely great discounts, but some also qualify for Homepath financing either with a Homepath Mortgage or with a Homepath Renovation Mortgage. For the average consumer, one can receive a great deal with terms such as (copied from the Homepath website):
Agents, whether we are working for an investor buyer or for an average consumer buyer, we are doing our clients a disservice if we're not checking this inventory for a deal for our clients with a great mortgage to go along with their new home. Furthermore, a $1,200 bonus is available to selling agents who submit an initial offer on or after June 14, 2011, and close on the HomePath property by October 31, 2011. Just remember, selling agents must request the agent bonus at initial offer submission in order to receive it.
So, in summary, whether you're an investor or a first time, second time or so-on home buyer, push your agent to check this inventory for a property for you, you could end up with a better deal than you could have imagined and the loan that you receive will likely beat anything you could have found on conventional terms. Once again, the Homepath website has tons of great information and will allow you to search their inventory. Check it out!
Visit my Website: http://nathanhosier.lnf.com/Default.aspx
Follow me on Twitter: http://twitter.com/#!/NateHosier
The Homepath mortgage and Homepath Renovation Mortgage are loan programs backed by Fannie Mae as a VA or FHA loan are backed by the VA or FHA. None of these entitys actually issue loans, they merely guarantee the money for the loan to the banks that underwrite them for the benefit of a qualifying debtor. Fannie Mae properties, those foreclosed upon and which are now being sold by Fannie Mae, can be found on the Homepath website for just about every area in the US. Not only are most of the homes listed here being offered at extremely great discounts, but some also qualify for Homepath financing either with a Homepath Mortgage or with a Homepath Renovation Mortgage. For the average consumer, one can receive a great deal with terms such as (copied from the Homepath website):
- Low down payment and flexible mortgage terms (fixed–rate, adjustable rate, or interest–only).
- Down payment (at least 3 percent) can be funded by the borrower’s own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer.
- No lender-requested appraisal.
- No mortgage insurance; ask your lender for cost details on loans without mortgage insurance.
- Expanded seller contributions for closing costs allowed.
- Available for primary residences, second homes and investment properties.
- Many condo project requirements are waived; ask your lender for details.
Agents, whether we are working for an investor buyer or for an average consumer buyer, we are doing our clients a disservice if we're not checking this inventory for a deal for our clients with a great mortgage to go along with their new home. Furthermore, a $1,200 bonus is available to selling agents who submit an initial offer on or after June 14, 2011, and close on the HomePath property by October 31, 2011. Just remember, selling agents must request the agent bonus at initial offer submission in order to receive it.
So, in summary, whether you're an investor or a first time, second time or so-on home buyer, push your agent to check this inventory for a property for you, you could end up with a better deal than you could have imagined and the loan that you receive will likely beat anything you could have found on conventional terms. Once again, the Homepath website has tons of great information and will allow you to search their inventory. Check it out!
Visit my Website: http://nathanhosier.lnf.com/Default.aspx
Follow me on Twitter: http://twitter.com/#!/NateHosier
Monday, June 27, 2011
POW! Right Between the Eyes!
I finished a great book this morning. Playfully titled, "POW! Right Between the Eyes! Profitting From the Power of Surprise," by creative genious, Andy Nulman, this noble tome is quite possibly the best book that I've read on the subject of marketing. When I began reading two days ago, I don't think that I was halfway through chapter two before I had the creative juices flowing and my mind flooded with ideas for personal marketing. Among the many, there are about two or three that I'm going to pursue a bit further to see how they work. I'll make sure that I update the Blog with results as soon as I have them.
In a bonus surprise, a well placed page at the end of the book contained a message from Andy, with the comment that it is only contained in a select few First Edition copies of his book, congratulating me for finishing the book and letting me know that there is an ending to the story beyond the end of the book. A special surprise, sorry I won't give it away, was referenced and I participated in the terms. Surprise was a complete understatement! Needless to say, this experience made my day and has truly driven home the message of his book, which I highly recommend!
Andy Nulman's Blog: http://powrightbetweentheeyes.typepad.com/
Visit my Website: http://nathanhosier.lnf.com/Default.aspx
Follow me on Twitter: http://twitter.com/#!/NateHosier
In a bonus surprise, a well placed page at the end of the book contained a message from Andy, with the comment that it is only contained in a select few First Edition copies of his book, congratulating me for finishing the book and letting me know that there is an ending to the story beyond the end of the book. A special surprise, sorry I won't give it away, was referenced and I participated in the terms. Surprise was a complete understatement! Needless to say, this experience made my day and has truly driven home the message of his book, which I highly recommend!
Andy Nulman's Blog: http://powrightbetweentheeyes.typepad.com/
Visit my Website: http://nathanhosier.lnf.com/Default.aspx
Follow me on Twitter: http://twitter.com/#!/NateHosier
Saturday, June 25, 2011
The Folly of FSBO
For Sale by Owner, or FSBO, has become a fairly common factor in today's Real Estate market. Any Realtor can likely think of at least one FSBO that they've passed recently while showing other homes in the area. Just a few years ago, homes were entering and leaving the market so fast that after taking a listing, a Realtor could easily have 10 offers on the home before they were even able to get a sign in the yard. The bravest of homeowners could put a FSBO sign in their front yard and could be fairly confident that the home would sell pretty quickly. They may or may not have found their buyer with the help of a Realtor, but they definitely had the market activity to do it without.
Today, the market is extremely congested with foreclosures and short sales. The average seller, at least in my neck of the woods, has so much competition that, unless they have the luxury of spending every day advertising their home and the money available to spend on the marketing, will not stand a chance without someone to represent their interests. Furthermore, the far fewer active buyers are working with Realtors, in most cases. Where are the Realtors seeking out the properties to show to their buyers? I'd be willing to wager that they aren't driving them around looking for FSBO properties. With our responsibility to our buyer-clients, we'd be doing them a disservice if we weren't relentlessly searching our local Multiple Listing Service or Foreclosures.com or Homepath.com for the best possible house at the lowest possible price. Unless one is paying to advertise in every media resource available, a FSBO likely has only the traffic passing by each day, mostly neighbors and their houseguests, to actually see that the property is for sale. If you live on a dead-end street, you can imagine the additional hardship. Unless one owns their home free and clear, is offering it for sale at a huge discount, and has the advertising available to attract attention, a FSBO is a hard property to sell.
To quote one of my favorite writers, "Pay your brokers well... If they are truly professionals, their services should make you money." I like to add my own extension to Robert Kiyosaki's phrase, mine being specifically geared toward the current market, "Their services should either make you money or save you as much as possible." I add my extension since many homes are being sold short, meaning that they are being sold below the actual mortgage balance owed. A Realtor should be able to point you in the right direction to find the advice necessary to negotiate with the bank and reduce the amount of the difference that you will end up having to pay by as much as possible. Furthermore, a Realtor earns their commision for marketing your property in whatever way necessary to get it sold in the shortest time for the best price. This includes not only advertising your home for sale and listing it the MLS, but also negotiating on your behalf and with your instructions when offers come in. I could go on and on about the benefits of the lockbox that a Realtor might put on your home, depending on the area, so that your home can be shown while you're at work or on vacation or otherwise occupied and unavailable to show yourself, as you would be in a FSBO situation.
Bottom line: the market has changed drastically and what worked a few years ago doesn't work as well today. This is a challenging time for a seller and the assistance of a Realtor in getting a home sold may mean the difference between a sale and a long and stressful process that ends in disappointment. If you want your home sold, I advise that you at least speak with a Realtor and learn what services they have to offer. If you are steadfast in your goal to sell your home FSBO, I would advise speaking to a Realtor and exploring the possibility of paying a flat fee to get your home listed in the MLS to at least improve your pool of potential buyers. If you choose option number 2, make sure that you or someone else is available at all times to answer calls and make the property available when buyers come to look. I wish you luck, I do truly hope that your property sells, as it will improve the market in it's own way.
Visit my Website: http://nathanhosier.lnf.com/Default.aspx
Follow me on Twitter: http://twitter.com/#!/NateHosier
Today, the market is extremely congested with foreclosures and short sales. The average seller, at least in my neck of the woods, has so much competition that, unless they have the luxury of spending every day advertising their home and the money available to spend on the marketing, will not stand a chance without someone to represent their interests. Furthermore, the far fewer active buyers are working with Realtors, in most cases. Where are the Realtors seeking out the properties to show to their buyers? I'd be willing to wager that they aren't driving them around looking for FSBO properties. With our responsibility to our buyer-clients, we'd be doing them a disservice if we weren't relentlessly searching our local Multiple Listing Service or Foreclosures.com or Homepath.com for the best possible house at the lowest possible price. Unless one is paying to advertise in every media resource available, a FSBO likely has only the traffic passing by each day, mostly neighbors and their houseguests, to actually see that the property is for sale. If you live on a dead-end street, you can imagine the additional hardship. Unless one owns their home free and clear, is offering it for sale at a huge discount, and has the advertising available to attract attention, a FSBO is a hard property to sell.
To quote one of my favorite writers, "Pay your brokers well... If they are truly professionals, their services should make you money." I like to add my own extension to Robert Kiyosaki's phrase, mine being specifically geared toward the current market, "Their services should either make you money or save you as much as possible." I add my extension since many homes are being sold short, meaning that they are being sold below the actual mortgage balance owed. A Realtor should be able to point you in the right direction to find the advice necessary to negotiate with the bank and reduce the amount of the difference that you will end up having to pay by as much as possible. Furthermore, a Realtor earns their commision for marketing your property in whatever way necessary to get it sold in the shortest time for the best price. This includes not only advertising your home for sale and listing it the MLS, but also negotiating on your behalf and with your instructions when offers come in. I could go on and on about the benefits of the lockbox that a Realtor might put on your home, depending on the area, so that your home can be shown while you're at work or on vacation or otherwise occupied and unavailable to show yourself, as you would be in a FSBO situation.
Bottom line: the market has changed drastically and what worked a few years ago doesn't work as well today. This is a challenging time for a seller and the assistance of a Realtor in getting a home sold may mean the difference between a sale and a long and stressful process that ends in disappointment. If you want your home sold, I advise that you at least speak with a Realtor and learn what services they have to offer. If you are steadfast in your goal to sell your home FSBO, I would advise speaking to a Realtor and exploring the possibility of paying a flat fee to get your home listed in the MLS to at least improve your pool of potential buyers. If you choose option number 2, make sure that you or someone else is available at all times to answer calls and make the property available when buyers come to look. I wish you luck, I do truly hope that your property sells, as it will improve the market in it's own way.
Visit my Website: http://nathanhosier.lnf.com/Default.aspx
Follow me on Twitter: http://twitter.com/#!/NateHosier
Friday, June 24, 2011
A few words about my fellow Bloggers...
I'd just like to take a few moments today and write about how wonderful I feel right now due to some of my fellow Bloggers. Steve Harney http://kcmblog.com/ and Amanda Wilson http://www.amandajwilson.com have both given me the great honor of quoting a comment that I made and reposting my first post, respectively.
I'm so very touched that others have found what I say interesting enough to repost on their websites, as I am that those of you following my Blog have decided to do so. I highly encourage all of my followers to also follow these two individuals, they have very interesting things to say themselves about our Real Estate Market and how to improve our current situation. Thanks to everyone, please watch for more quality content coming soon!
I'm so very touched that others have found what I say interesting enough to repost on their websites, as I am that those of you following my Blog have decided to do so. I highly encourage all of my followers to also follow these two individuals, they have very interesting things to say themselves about our Real Estate Market and how to improve our current situation. Thanks to everyone, please watch for more quality content coming soon!
Wednesday, June 22, 2011
The current Real Estate Market
When I talk to people about buying or selling a home these days, most react with an involuntary shudder followed by some comment about how only a fool would think about getting involved with Real Estate these days. We are, after all, right in the middle of a nationwide recession, and we do, after all, have an extremely high number of foreclosures occuring.
If you know even one Real Estate investor, ask them about the market. They'll very likely tell you that the market is great! There is no better time to buy! You can find deals for fifty cents on the dollar compared to home prices just a few years ago!
The fact is, your investor friend is absolutely correct. We are in the middle of a recession, which lowers prices, and makes homes affordable for individuals that couldn't afford to buy a few years ago when the bubble was still intact. With the inventory of short sales, bank owned and foreclosed homes that we have at the moment, many home sellers are desperate to get out of their mortgages. This makes them very negotiable when it comes to seller assistance for closing costs, seller-bought home warranties, and making repairs to otherwise inconsequential items that a buyer may have accepted as is just a few years ago, such as needed paint, carpet or windows.
Furthermore, we are, after all, in a recession. The way that we improve the economy and get out of the recession is buy participating in the economy. An article I read a few days ago by a financial analyst stated that we have an inventory of about two to three years of foreclosures and bank owned properties, and that the number will grow over the next two years.
Most of this is due to the fact that too many people bought far above their price range due to the relaxed qualification criteria causing banks to write loans for just about anyone that had a job. Now, Mr. Jhonny Homeowner has a home that he payed $350,000 for that has returned to it's appropriate fair value of $175,000. The adjustable rate, interest only mortgage that he got at a great starting rate has changed it's terms and his $1200 payment just went to $2200 and has caused him to default. The bank will take his property and either auction it or advertise it for sale. Knowing that they will never get the $350,000 that is owed to them, and also that they will likely never get the $175,000 that the home is worth, they will write off the loss and offer it for a bit (sometimes quite a bit) less. Now, Mr. Smart J. Homebuyer can buy this $175,000 home for a huge discount, gain instant equity, have most if not all of his closing costs paid, get a home warranty out of the deal and settle into his new home with his 4% Fixed APR no-money-down FHA backed mortgage with an $800 payment, $400 less than he was paying to rent his two bedroom one bathroom apartment.
My final thoughts for this post: We're in a Buyer's Market currently and many, many people are going to find incedible homes at incedible prices with incredible terms. We will, as always, have those that were left behind and will continue to dream of owning a home because they stayed afraid of the current market without really understanding what it was that they were afraid of. The government will continue to come up with bright ideas and create programs intended to fix the economy and improve the market, but it will be a slow and long process. The only way to kickstart the economy and raise us up out of this recession is to participate in the market and clear out the inventory of discounted property flooding the housing market. Get out there, do your part and buy a home. If you already own one, buy another to rent to one of our friends who are afraid to buy and create an income from it. It begins with action, go out and make it happen!
If you know even one Real Estate investor, ask them about the market. They'll very likely tell you that the market is great! There is no better time to buy! You can find deals for fifty cents on the dollar compared to home prices just a few years ago!
The fact is, your investor friend is absolutely correct. We are in the middle of a recession, which lowers prices, and makes homes affordable for individuals that couldn't afford to buy a few years ago when the bubble was still intact. With the inventory of short sales, bank owned and foreclosed homes that we have at the moment, many home sellers are desperate to get out of their mortgages. This makes them very negotiable when it comes to seller assistance for closing costs, seller-bought home warranties, and making repairs to otherwise inconsequential items that a buyer may have accepted as is just a few years ago, such as needed paint, carpet or windows.
Furthermore, we are, after all, in a recession. The way that we improve the economy and get out of the recession is buy participating in the economy. An article I read a few days ago by a financial analyst stated that we have an inventory of about two to three years of foreclosures and bank owned properties, and that the number will grow over the next two years.
Most of this is due to the fact that too many people bought far above their price range due to the relaxed qualification criteria causing banks to write loans for just about anyone that had a job. Now, Mr. Jhonny Homeowner has a home that he payed $350,000 for that has returned to it's appropriate fair value of $175,000. The adjustable rate, interest only mortgage that he got at a great starting rate has changed it's terms and his $1200 payment just went to $2200 and has caused him to default. The bank will take his property and either auction it or advertise it for sale. Knowing that they will never get the $350,000 that is owed to them, and also that they will likely never get the $175,000 that the home is worth, they will write off the loss and offer it for a bit (sometimes quite a bit) less. Now, Mr. Smart J. Homebuyer can buy this $175,000 home for a huge discount, gain instant equity, have most if not all of his closing costs paid, get a home warranty out of the deal and settle into his new home with his 4% Fixed APR no-money-down FHA backed mortgage with an $800 payment, $400 less than he was paying to rent his two bedroom one bathroom apartment.
My final thoughts for this post: We're in a Buyer's Market currently and many, many people are going to find incedible homes at incedible prices with incredible terms. We will, as always, have those that were left behind and will continue to dream of owning a home because they stayed afraid of the current market without really understanding what it was that they were afraid of. The government will continue to come up with bright ideas and create programs intended to fix the economy and improve the market, but it will be a slow and long process. The only way to kickstart the economy and raise us up out of this recession is to participate in the market and clear out the inventory of discounted property flooding the housing market. Get out there, do your part and buy a home. If you already own one, buy another to rent to one of our friends who are afraid to buy and create an income from it. It begins with action, go out and make it happen!
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