Housing Recovery?

Interesting points regarding the U.S. housing market, the recovery, and housing regions where real estate should fare well.

Housing Market - A Different View from the Bus but Same Ole Extremes

Can anyone remember a time when you couldn't make a decision fast enough? If you didn't pull the trigger by putting in an "over the asking price" offer within hours of your future dream home being listed on the market, it was going to the next eager home buyer. Perhaps you felt left out if you weren't buying. Gee, what's all the fuss about?

Forget about the financing, that was a guarantee. Too high debt to income ratios? Not enough income? Poor credit? Perfect, we've got just the right product for you. In fact, your interest rate will only be 2.5% and if you really want that $500,000.00 home, go for it, we can make it work. Don't you worry.

Now, the bus tours are back. The only difference, the views. Before, it was jovial discussions with your fellow investors, everyone pondering how much the homes would appreciate in the next two months. "What do you do for a living?" "I'm a real estate investor." "I'm looking to buy a couple of homes today, how about you?" "I'm a real estate investor too and I'm looking to buy two, maybe three homes today! In fact, I quit my job yesterday to do this full time."

Fast forward to 2008. "I love this home, it sold for $500,000.00 in 2005, now it's selling for $225,000.00." The obvious question follows, "You're going to buy it right?" The response, "No, there's probably a better deal around the corner."

These behaviors are predictable and are never going away, neither are these cycles. Oftentimes, these reactions cloud our judgment and lead us to making poor financial decisions. Part of having success is learning these behaviors.

We always seem to learn our lessons of the past until we get drunk on the good times and the promise of a better future, always forgetting that for every action, there is a reaction.

Why do we always choose to live in these worlds of extremes? How come most people fail to realize that this behavior gets them what they've always had .... financially speaking, not much?

Bank of America To Kick Off A Loan Modification Party

Bank of America announced that it will begin modifying loans for distressed borrowers. The plan is touted as being a strong measure that will go a long way towards helping to curb the amount of future homes heading into foreclosure.

"The program, scheduled to start in December, will be open to distressed borrowers who signed up with Countrywide Financial between January 1, 2004 and December 31, 2007. Countrywide was acquired by Bank of America (BAC, Fortune 500) in July." - (CNNMoney.com)

If the plan is successful, there's no doubt that the adjustments will have an impact on preventing a certain percentage of foreclosures. As foreclosures begin to subside, inventory levels will begin to normalize. Housing stability should follow in line.

It's hard to deny that drastic measures need to be taken in consideration of the continuing U.S. housing decline and "depression" like economic conditions. Nonetheless, there seems to be quite a few Americans crying foul as they are keeping up with their mortgage payments and are not eligible for any such relief. Some ask, why are we being punished for paying our mortgage and not overextending beyond our financial means?

Is this a valid complaint? Will we see other banks follow suite? Perhaps it's all just a matter of perspective. Nothing seems overly fair right now.

The Sky’s Falling!

Just when you think it can't get any worse. Just when you think the government throwing more money at it will fix the problem. Just when you think .... oh well, what's the point, we all know it's a disaster out there.

Are you starting to wonder if anyone has a clue as to what's going on and what needs to be done to get this problem fixed?

Our economy is deteriorating and doing so frighteningly fast. The Dow is off nearly 40% over the past year, losing over 2,271 points, or 20.1%, during the last seven sessions of trading. The Nasdaq is down more than 40% over the past year as well. Housing has been bruised and battered beyond belief. We could go on and on and ...

It seems like the sky is falling but if you look really close, far off in the distance, you will see what looks to be a light. Yes, that's right, a light. It may be hardly noticeable but make no mistake, it's there.

Do I need to remind you to take notice of how low housing prices are with stocks not too far behind?

Remember when you thought housing prices would stretch to the moon but you forgot that little thing called a cycle? Don't forget about Mr. Cycle. Just when you think he's gone, he has a mysterious way of showing up again. Shortly to follow are the endless cries, "If I only ...", "I should have ...", "I didn't realize ..."

Yes, this will cycle too.

Pending Home Sales Rise Significantly

According to the National Association of Realtors "Pending Home Sales" report, pending home sales surged significantly for the month of August up 7.4% from July to August nationwide.

The western region led the charge with a reported rise of 18.4%. The index for the western region is up 37.8% from a year ago. The southern region showed the smallest gains in the pending home sales index up merely 2.3% from July 2008 but down 2.1% from a year ago.

We believe the stark differences in numbers between the western and southern regions can simply be explained by a transition of home equity. The southern region, in large part, was the recipient of a spill over effect.

As home prices surged significantly in the west during the housing boom, a large influx of equity from investors and relocating home buyers spilled over into the southern and midwest regions bolstering, to a an extent, their housing markets.

Initially, the run up in California spilled over to areas (amongst others) such as Boise, ID, Phoenix, AZ, and Las Vegas, NV. Next and last in line to receive the spill over effect during the housing market boom were areas such as Charlotte, NC, Kansas City MO/KC, and Nashville, TN.

Even though there have been positive indicators, especially in the western region, there is not enough positive data to call this a trend. However, we do believe the bleeding is slowly coming to an end.

The Fed Cuts Rates: 1/2 Point!

The Fed, in a globally concerted effort, cuts rates by 50 basis points. The target rate has now been lowered to 1.5%. The rate for the Fed's discount window was lowered 50 basis points as well bringing the rate to 1.75%.

The move was done in coordination with central banks worldwide.

For real estate investors using equity loans and equity lines to finance their real estate investments, your money just got cheaper again. On $100,000.00 investment, you are now paying $500.00 a year less for that money.

Since the Fed's started cutting rates, the rate has been lowered from 5.25% to 1.50%, a 3.75% drop. On $100,000.00 investment, you are now paying $3,750.00 a year less for that money.

With each cut, real estate is becoming more attractive. A home just got cheaper without having to drop the price. Your cash flow just improved even though you, as a real estate investor, are collecting the same rent check.

Fundamentals, fundamentals, fundamentals!

The Fed, Global Markets, and The Impact On Real Estate - Should We Expect A Rate Cut Before The FOMC Meeting?

Renewed rally cries for an intermeeting, globally concerted effort, rate cut by the Feds before their two day meeting at the end of the month (October 28th and 29th). Bernake signals a cut may be on the way.



The drumbeat only got louder as the DOW dropped over 500 points in today's trading session. Today's loss pushed the DOW to a 5-year low.

If the Fed does cut rates again, what does that mean for real estate? If you have home equity, car loans, business loans, or any loan tied to the fed funds rate, your money will get cheaper.

In regards to real estate, the cheaper cost of money will spur more real estate investors to begin looking at real estate as a viable investing option again.

In consideration of the numerous monetary policies being implemented, I think one has to wonder if the housing bottom is just around the corner.

The Fed Steps Into The Commercial Paper Market

The Fed announced this morning, October 7, 2008, that they will enter the commercial paper market:

"... Fed will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers"

The Fed hopes this latest round of measures will help to liquidate the frozen business credit markets as many small businesses are increasingly feeling the pain of not being able to obtain business credit.


The short-term effects of the myriad of measures taken by the Fed over the past six months will undoubtedly begin to filter into the market over the next year. What will the long-term effects of pumping this unbelievable amounts of liquidity into the market?

Real Estate, The Credit Crunch - There’s No More Money!

The frozen credit markets are now widely impacting many markets. As if we weren't already feeling the crunch, it looks like economic conditions will continue to deteriorate.



You could say that real estate, your home, and many local housing markets are no strangers to these credit problems as real estate markets have been deteriorating in many locales for three plus years now.

Businesses are now widely beginning to feel the pain too. These additional ripples will continue resound the loudest (now even louder) in our pocket books!

Ahwatukee, AZ - Home For Sale ... Now Pending!

Our Ahwatukee, AZ home is now pending! We have had the home for sale (listed on the MLS) for roughly 12 days. The original contract came in roughly 8 days after the home had been listed.

The "Buyers" have scheduled the home inspection for this Friday, 10/3/2008. Originally the "Buyers" were going to use FHA financing but we were able to work together with them to negotiate a deal for them to use "conventional" financing in return for additional financial concessions made on our end.

I believe both parties are happy with the deal that has been agreed to for the sale of this Ahwatukee, AZ home!

Our Tempe, AZ Rehab Home Is Now Complete!

Our Tempe, AZ real estate investment rehab / flip home was finished today, 8/31/2008:



717 W. Manhatton Dr.
Tempe, AZ 85282

This house has been staged and is ready to be listed on the market. We're currently reviewing market comps to determine the list price (most likely 250k) for this home.

Please find links to pictures of the finished project below:

Click Here To View The Pictures!

Our thanks to Joyce Hazen with Chariot Home Staging!

Joyce Corsi Hazen,
HSR Certified Professional Home Stager & Redesigner
Chariot Home Staging, LLC.....Your Home Staging Coach Expert
Tel: (602) Chariot (242-7468)
www.ChariotHomeStaging.com

Update September 9, 2008: We listed the home for sale at $250,000. Despite the higher price point associated with this house, we have had modest interest in the home. Home for sale in Tempe, AZ!

Phoenix, AZ - Real Estate Investment Home

Today we purchased another residential real estate investment house in the Phoenix, AZ metro area. This home is in the sought after "Ahwatukee" neighborhood.

"Ahwatukee (formally "Ahwatukee Foothills Village") is an L-shaped neighborhood of Phoenix, Arizona bordered on the north by South Mountain Park and Baseline Road, on the east by Interstate 10 and the cities of Chandler, Guadalupe, and Tempe, and on the south and west by the Gila River Indian Community. It is the southernmost of the city's 15 urban villages. As of 2000, the 35.8 square-mile (92.7 km²) village has a population of 85,000." - Ahwatukee Information Source: Wikipedia

14863 S. 46Th St.
Phoenix, AZ 85044

As with the Tempe, AZ house, this home was purchased at the public Trustee's auction as well.

The budget for this house is roughly 15k and we will be looking to resell the home for near 250k.

Nearing Completion - Tempe, AZ Investment Project (Update)

Our Tempe, AZ real estate investment rehab / flip project is nearing completion. Construction clean-up will be taking place this evening, Thursday (8/28/2008). Upon completion, we will be listing the home for sale!

On this rehab, we expanded the budget and the renovations to make this a higher-end remodel. As a result, we are having the home professionally staged to create a strong visual presence for potential buyers!

Coming Soon - Tempe, AZ home for sale!

Tempe, AZ - Real Estate Investment Home

We just purchased (8/14/2008) another real estate investment home in Tempe, AZ from the public Trustee auction:

717 W. Manhatton Dr.
Tempe, AZ 85282

Before listing this Tempe, AZ home for sale, the house will require a light rehab (landscaping, interior painting, new bathroom counter tops, and updated fixtures) and is currently in the process of being rehabbed.

The project, if it remains on schedule, should be completed before September 1st, 2008. The budget for this home is roughly 15k, plus Realtor commissions, auction fees, utilities, and holding costs. Upon completion, we will be listing the remodeled home for resale within the next two weeks!

We will be looking to resell this property for roughly 250k. Updates will follow!

St. Louis, MO Project Update

Per our second Engineering Inspection today (8/22/2008), the two small cracks in the basement wall ended up being a structural issue requiring a minimum of 10k worth of work, if not more, to properly repair the problem. As a result, we terminated our agreement with the bank in regards to purchasing the home.

With the high inventory levels, there are still too many opportunities available for it to make sense for us to take on this complicated project even if the bank was willing to compensate us for the necessary work to shore the foundation.

On to the next one!

St. Louis, MO - Real Estate Investment Rehab / Flip Project

We have been working to purchase a residential real estate investment rehab home in the general St. Louis metro area. We have an accepted offer on a home and are completing our due diligence during our five day inspection period.

There is one item that may be a potential deal killer ... two small vertical cracks in the basement wall. We're having an engineering inspection today, 8/20/2008, to assess the problem to determine whether this is a major or minor foundation issue. Depending upon their recommendations we may have to terminate our contract or attempt to renegotiate terms with the bank.

What Real Estate Markets Are You Investing In And What Strategies Are You Using?

Share with us the different real estate markets that you are working in and why. Let us know the different real estate investing strategies that you are having success using.

We are currently focusing efforts on light rehab projects in the greater Phoenix, AZ market. Due to large inventory levels, values are becoming increasingly attractive and, aggressively priced, these homes are attracting buyers.

Update August 24, 2008: We purchased another real estate investment home from the public Trustee auction. This rehab project should be completed and ready to be listed by September 1, 2008!

In the near term, we believe real estate investment opportunities will continue to exist in the greater Phoenix, AZ area since there are many bank owned homes and foreclosures still to work through. As a result, this continued pressure will force sellers to be aggressive with their pricing especially if their home needs work.

We also believe that the sharp price declines that have been occurring over the past year will begin to slowly equalize. Take your time finding the right investment opportunity. They're definitely out there!

Update September 21, 2008: We continue to believe, despite the current financial crisis, that the sharp price declines will continue to slow. We also feel that you should continue to take your time looking and evaluating real estate investment opportunities as the markets try to workout the turmoil. There are great opportunities but there is no need to rush as strong opportunities should continue to be widely available over the next year!

The Fed’s Dilema

I believe the Fed will indeed hold tight, neither raising nor lowing rates, since they are caught between inflation and further economic pressures to control a steadily weakening US economy.

Update August 24, 2008: It now looks like real estate is going to remain challenging in many markets through the remainder of 2008 and through at least the beginning of 2009. Fannie and Freddie are at all time lows in regards to their price per share. With the current economic challenges and an election year upon us, I still believe the Fed will not adjust the Fed Fund's Rate leaving it at 2.00%.