Archive for June, 2008

What Does It Take to Make a Killing Out of the U.S. Foreclosure Market?

Published on June 16, 2008 in Uncategorized. 0 Comments

The U.S. foreclosure market is a great opportunity for real estate investors and new-house bargain hunters to get a foot in the door at great prices. Given the fact that foreclosures do represent a certain amount of financial pain and failed dreams it is, perhaps, a slightly hard-hearted thing to say.

Yet, as every savvy first-time house buyer and real estate investor knows foreclosures also represent opportunity. In the dark cloud of a U.S. housing downturn they represent a very silver lining which, properly utilized, can help the housing market recover.

How is this possible you’re going to ask? Well, think of this for a moment. The engine of real estate is new housing, or more precisely, new home owners eager to get their first home. Traditionally, this group is also important for the economy at large as they spend more, on average, on decorating their homes, furnishing them and improving their appearance.

The moment the real estate market experiences a slow down the economy experiences a slow down because none of this activity is really going on and because new home owners are not able to buy expensive homes.

This is just as bad at times when houses go through a steep price increase as it is when house prices stagnate and the market ‘freezes’ as has been happening this year and prospective new buyers are virtually locked out.

This is where foreclosures suddenly come into their own. Let’s examine exactly what a foreclosure is and why it happens: A home that’s been foreclosed on has been transferred ownership from its home owner to the lender. This has happened because the home owner has fallen behind on payments to the point that the collections department of the lender or their debt assessment have decided that it’s no longer viable to try and maintain the relationship they have with the borrower.

At this point they take possession of the house and try to get rid of it so they can recover at least some of the money owed to them. It’s a decision which is not taken lightly. A foreclosed house incurs costs to process and sell and for the lender it represents a loss as they will not be able to get back on it what the life-term of the loan agreement they had with the borrower would have allowed them to make.

It does, however, represent a bargain for a new home owner looking to buy above his reach or even a discerning real estate investor looking for a way to get a foothold in the market. It is precisely because of this that finding the right foreclosure home to buy can give you a huge impetus to making a killing on the real estate market.

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Consumer Confidence is Rebounding but Will It Save the Housing Market?

Published on June 13, 2008 in Uncategorized. 0 Comments

America is a place where consumer confidence, that fickle, ethereal almost, indicator of a market’s health, is closely linked to natural disasters and national crises.

Let’s look at 9/11 for example. Consumer confidence right across the US plummeted the day after the attacks and took more than eighteen months to recover, a period during which, much of the economy was driven through tourism and foreign income from Britain and Europe.

Hurricane Katrina had the same effect, though obviously, not quite to the same degree. Days after it had struck New Orleans and the surrounding area and the magnitude of the disaster became known it caused consumer confidence to plummet to new lows and it took months to recover (and this time there were no foreign tourists in sizeable numbers coming to help us with their money).

The foreclosure crisis hitting the US sub-prime sector of the market is having exactly the same effect. Across the US consumer confidence, at the beginning of the year, appeared to have taken a dip which only became more pronounced as the months rolled on and rumours if foreclosures turned into hard figures and public sob stories which were hard to refute and helped feed a certain sense of mass hysteria.

Why are we examining all this right now? Because, as the year is finally winding down and the dust begins to settle we have, again, a picking up of sorts as Christmas, a trading time that’s frightfully important to traders, banks, money institutions, companies and the global economy, begins to get under way.

The question here is if the number of foreclosures continues to rise will it dampen down the festive spirit and affect consumer confidence? Ok, as an expert in real estate and foreclosures I can say with a certain amount of confidence that this will really depends on two things, one factual and one not.

The factual thing is that consumer confidence will really depend on whether foreclosures rise and do not get sold off in which case lenders will panic, further clump down on credit during a very crucial trading period and that will, inevitably, affect the ability of consumers to buy anything from Christmas lights to foreclosed homes being sold at bargain prices.

The other thing it will depend on is entirely fictitious but totally real in its effects and it is the perception of what is happening as it is formed, shaped and fuelled by popular press stories and sensationalist journalism. If these stories continue to appear, particularly, at the wrong time, the impression they help form is just as real as the reality.

The result is that the market will then shrink as consumer confidence takes a tumble and foreclosures will increase indeed.

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The U.S. Housing Market Powers the Global Economy

Published on June 12, 2008 in Uncategorized. 0 Comments

They used to say, jokingly, that America sneezes and the world’s markets catch a cold. The news coming out of banking and money institutions across the globe are no laughing matter however and they indicate that the relationship between the U.S. housing sector and the global economy is both more direct and more convoluted than anyone would have thought.

The globalization of the money markets has made it possible for British money institutions and British Banks, like Barclays, which has a history that’s hundreds of years old, to invest a little more heavily in the U.S. sub-prime mortgage market than they should which means that their exposure in the U.S. is now affecting their profitability and ability to grow at home.

This is a really stupendous turn of events. Barclays has a balance sheet that looks a little like the U.S. Gross Domestic Product (GDP) and staff and branches that stretch across the globe. To say that it is now feeling a chill wind because of the number of foreclosures in the U.S. is akin to saying that the US economy is suffering because some corner store in downtown Boston has closed down and liquidated its stock!

While my exaggeration is a little extreme it certainly drives the point home beautifully and illustrates just how veritable financial institutions have become over-exposed in the U.S. housing boom. If, to take my example, the U.S. economy had invested heavily in the downtown Boston corner store, right now it would be facing a gaping hole in its finances which would be difficult to plug without making cutbacks in other areas.

Sure enough, as foreclosures in the U.S. market accelerate more and more banks and money institutions from Britain and Australia are having to tighten up lending practices and cut back on staff to meet their shortcomings over here.

The question, of course is: what does that mean for the average investor? Where there is change there is opportunity and if you are looking to invest in a home that’s sold well below its market value now is the time to do it.

Lenders, everywhere, are shedding homes they have called foreclosures on before prices tumble even further creating a strong buyer’s market of shorts. Choose well, pick the house, sort out your finances, make sure your line of credit is rock-solid and get ready to ride a bumpy ride which, however, I expect will lead us all to much better times than before.

The U.S. foreclosure market may be creating headaches for big-time investors and financial institutions but it’s nothing other than opportunities for the small investor in search of a bargain.
 

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If You Can Opt Out of the Rat Race, Would You Not Seize the Opportunity?

Published on June 11, 2008 in Uncategorized. 0 Comments

There is something about predictability that’s downright depressing. Perhaps it has something to do with the fact that if it’s predictable it is not new and if it is predictable it is not surprising.

As people, we are intrigued by the unpredictable and attracted by the new and it is exactly at this point and under this light that we must examine the real estate foreclosure market. The boom and bust cycle of real estate has been chronicled, in detail, since the very early 70s when post-war economy started building up everywhere and people who had gone through the deprivations of a post-World War II world sought to obtain both some kind of financial security, by investing in real estate, and buy a home of their own.

In the latter we, of course, see the vision of the American Dream, complete with a pretty wife, two kids and a white picket fence. Why are we going over all this? Because by looking at the past we can make some sense of the present and gauge both what’s new and what’s not predictable.

New and predictable create excitement and opportunity and both the sense of achieving something fresh and making good money in the process are enough to revitalize even the most jaded amongst us. All this is pertinent because the current spate of foreclosures offers both something new and unpredictable. In a market where existing housing is either remaining pretty steady, in terms of pricing or dropping slightly, but not enough to bring it within reach of those aspiring for a new home foreclosures play the vital role of filling a necessary gap.

That’s right. By releasing properties which are debt-mired and thereby locked back in the market at substantially reduced prices houses sold on foreclosure can present you with your first opportunity to own a home you would not otherwise be able to afford or your first chance to invest in real estate and start on your way out of the rat race.

The trick here is to know how to seize the opportunity. With RealEstateWebProfits.com we provide you with in-depth expertise and a guaranteed way to make money out of the real estate market.

The thing to remember is that real estate is the new gold standard. As gold was subject to fluctuations but always rose in value over a sufficiently long length of time so with real estate. It may seem like its’ bad news all the way but this is one cloud that has a definite silver lining. All you have to do is find the right seam and mine it all the way!

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Should Lending Practices Be Changed?

Published on June 10, 2008 in Uncategorized. 0 Comments

Money really does make the world go round. Everyone knows that and it’s money that drives the real estate market. The money that’s bought in (i.e. loaned by lenders to potential home owners) and the money that is made through the sale of houses and the speculation of property investors.

Without lending institutions which also have growth targets to meet it is entirely possible that the housing market will come to an end. No new houses bought, hardly any houses sold, people moving in only when they inherited. In terms of real estate this is total meltdown, real estate Armageddon.

Yet, here comes the bad news: A total of 72,571 Notices of Default (NoDs) were filed during the July-to-September period in the State of California, up 34.5 percent from 53,943 during the previous quarter, and up 166.6 percent from 27,218 in third-quarter 2006, according to DataQuick Information Systems of La Jolla.

It seems we have a problem. Make no mistake and the problem is too much of a good thing, too much lending under inappropriate conditions. The charge that’s being levied against some of our nation’s money institutions is far from unfounded. It does appear, upon close examination, that in the heady rush to meet growth targets many of these institutions failed to follow their own self-imposed rules regulating when and how they loaned money.

The result was an uncontrolled, almost, spate of growth in lending which made the real estate market overheat and has now precipitated the current credit crunch. Should we stop lending altogether? That is a patently unreasonable suggestion and to actually legislate and try to federally enforce lending practices across each State may be akin to using a sledgehammer to crack a nut, though the nut in question, in this particular case, is pretty large.

Lenders are hurting under the current run of mortgage payment defaults and the number of foreclosures they are being forced to serve so this may be lesson enough. Money institutions may be a little greedy at times but they are also very responsive to market conditions and truly capable of adapting. Left to their own devices with a little help from local legislature they are perfectly able of self-correcting their lending practices and curbing their targets so that they lend in a more responsible, realistic manner.

To the question of whether lending practices should be changed the answer has to be almost certainly. It is happening right now and it is happening faster than we think. This does not mean that the government should interfere and spend thousands or even millions of the taxpayers’ money enforcing what in the end is being applied voluntarily for very good reasons.

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Foreclosures happen when Home Owners Fail to Read the Fine Print

Published on June 9, 2008 in Uncategorized. 0 Comments

With the press full of more bad news about defaulting home owners and a rise in foreclosures the question most people ask me is: “Jeff, how do people get into that state in the first place?”

Being a real estate expert who has seen foreclosures close up I can tell you that a foreclosure is never the result of a single incident. It’s never, for instance, a case of a little bad luck, the loss of a job, a car accident or some ill health. These are deplorable situations to occur, to be sure, but on their own they are never enough to take a home owner who has purchased his dream property, down.

What usually happens is that home owners who end up facing the dreaded prospect of a foreclosure have consistently boxed themselves in closing their prospects and notching up debt through the consistent use of credit to finance debts. This is a case of “robbing Peter to pay Paul” and the scenario, all too familiar goes a little like this:

The home owner boxed into a financial corner, rather than thinking of how he can reduce outgoings and perhaps downsize his lifestyle until his financial condition improves he chooses to take out a second and maybe even a third mortgage and release equity stored up in the house.

Now there’s nothing wrong in doing anything like this. Equity stored up in a property could be released which means that it can, if used properly, save a house owner in trouble. The problem is that house owners forced to release the equity in their homes very rarely manage to use this facility properly. Feeling a certain sense of desperation, they leave it too late to shop around for credit, fail to look at the fine print and feel incapable of negotiating with the lender. As a result they get locked down into second mortgages which hit them with hefty interest rates after a brief honeymoon period which usually last between six months and a year.

The increased payments the home owner then has to make put him back into the same situation he was in before he took out the loan which means he then gets into a greater panic and is forced to take out another loan from an ever shrinking number of choices which leaves him in the worst possible financial bargaining state to be in and what will happen next is a story that’s pretty much foreclosed and inevitable.

The tragedy is that a little careful planning here could possibly have averted the worst as the fine print would have revealed it early enough for the home owner to either avoid getting the loan or making an adjustment in order to meet the higher cost. So the lesson is when it comes to credit the fine print is all important.

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