Mortgage/Housing Crisis Hits Latinos: The Press Spins it Again!The Associated Press just released a troubling article regarding the Latino community and the housing crisis. If you were to glimmer through the headline and a paragraph or two, you’d think that Latinos are helping drive the housing crisis as a whopping 9 percent happen to be behind in their mortgage payments.
Nearly one in 10 Latino homeowners fell behind in mortgage payments last year, and about 3 percent said they had received a foreclosure notice, a Hispanic research group reported Thursday.
The Pew Hispanic Center’s survey of Hispanic adults found that 9 percent said they missed a mortgage payment or made a partial payment during the past year.
We’re going to see article after article about this study, and the press will likely put their usual spin on the situation.
Sometimes Bad News is Actually Good News
What most people who see this and the other media pieces won’t get to is the part of the article that tells us that the Latino community is actually handling itself better than the US as a whole.
The strain felt by Hispanic homeowners seemed consistent with that of all U.S. homeowners. The Mortgage Bankers Association reported last month that a record one in 10 American homeowners with a mortgage was at least one month behind on payments or in foreclosure at the end of September 2008.
So, why is the press not pointing out the fact that there is a 1 percent gap between the rate at which Latinos are faltering and the rate that Americans in general are faltering? Obviously, if you remove the margin of error, there probably isn’t much of a difference in these rates, but why do we have to point out certain communities?
What is shocking is that despite being targeted with subprime and other exotic loans, this community is faring pretty well relative to the rest of the country.
How about the mainstream press write about that?
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Mortgage/Housing Crisis Hits Latinos: The Press Spins it Again!
How Speculators (Investors?) Dominate Real Estate Sales, and May be Blamed for Further Crashes
According to to Bloomberg:
As the U.S. housing recession enters its fourth year, there’s no sign of a recovery because speculators account for most of the rise in sales.
While the purchases are trimming the inventory of unsold properties, most of those bought by speculators will likely return to the market when prices rise again, hampering any recovery, said Nobel laureate economist Joseph Stiglitz and Yale University Professor Robert Shiller in interviews.
According to Schiller, “These speculators are preventing the market from crashing now, and when they get out it could fall again.” Note that in this case, speculators, more likely than not, refers to real estate investors, who are savvy enough to scoop up great deals in this distressed market.
Should Real Estate Investors be Blamed for a Future Worsening of the Housing Crisis?
This all presents a serious dilemma for our policy makers. Most policy decisions are short-sighted; the initial bailout and all following ones were intended to stop the bleeding. How can the politicians stop these “speculators” from dumping the homes for profit when things start to turn around?
I don’t have an answer. It would seem that it is perfectly in their right to do so, wouldn’t it?
If that’s the case, then is there a better way to solve this? Perhaps there is some way to get homeowners buying the properties instead of these dirty little speculators (sarcasm)?
Well, back to the Bloomberg piece:
“Regular homebuyers are excluded from the foreclosure market because the rules favor professional investors and that lack of competition is driving down prices,” Baker (Dean Baker, co-director of the Center for Economic and Policy Research) said. “This is a place where the government could step in and stop housing’s downward spiral by encouraging a more user-friendly process.”
Banks that have received federal bailout funds should be forced to sell foreclosures in a way that gives homebuyers a fair chance, said Stiglitz.
I don’t see this happening unless there is a complete change in the way foreclosures are sold. Homeowners don’t typically have the understanding of the dangers of buying foreclosures, and can get themselves into a lot of trouble by purchasing at the courthouse steps. Does the government plan on wiping out all liens on foreclosed properties to make this plan happen, in a similar vein as an REO? I don’t think the lending industry would allow that to happen, do you?
Any thoughts on this giant mess?
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How Speculators (Investors?) Dominate Real Estate Sales, and May be Blamed for Further Crashes
The Most In-Depth Real Estate Case Study-Part Cinco
One of my New Year’s goals was to continue to read multiple newspapers every day. I read the Washington Post, USA Today, Wall Street Journal and Investor’s Business Daily. Recently, Investor’s Business Daily has become my favorite paper. On page two or three of the paper, they profile a successful person every day and also cover a key trait to success.
Lessons Learned from Failure
A few weeks ago I read the fascinating profile about the guy who invented the Zippo lighter. He invented the lighter during the 1930’s. And, important to note is that before he started the Zippo Company he had multiple business failures (there’s an important lesson there, that your past does not predict your future. Just because you messed up on one of your first deals doesn’t mean you’re doomed to failure. On one of my first deals I lost $20,000).
Anyway, the Zippo Company took about 10 years to become profitable and that wasn’t until the company started selling the lighters to the military. The whole lesson in the article was that persistence is one of the major keys to success and that entrepreneurs have multiple business ideas and of course not all of them are going to work out.
On to My Search for a New Home (From an Investor’s Perspective)
Now, let me tell you where I’m at in the search for my new house. I was supposed to meet the seller last Wednesday, but then I found out that the owner’s wife would not be able to make the meeting. I told him we’d need to reschedule, because every smart real estate investor knows that you don’t go to a house and try and close a deal unless all of the decision makers are present. So, we rescheduled the meeting for Friday, however the owner thought I meant the next Friday, not the upcoming one. Long story short, we are meeting this Friday and I plan to negotiate and close the deal. If the owner is not motivated enough and I can’t close the deal, then I’m moving on. I’ve got a lot of other deals in the works right now and being that this is more for the “fun of it” I don’t have the time or patience to play games. Actually, truth be told, I never have time or patience to play games with anyone, whether its real estate related or not.
 Okay. Next week, I’ll hopefully have closed the deal on my new house and I will give you the exact details about the numbers, paperwork, negotiating tactics I used, etc. Ohh yeah. Now I remember why I brought up the whole Investor’s Business Daily thing. Besides the article about the Zippo Company there was another article about how the market is only going to get worse in 2009 (the sky is falling, the sky is falling). This put a huge smile on my face because it’s so easy to buy houses right now. Brand new investors have no idea how easy it is to buy houses in this market. When I started out about six years ago and the market was hot, hot, hot, it was much tougher to talk people into creative deals. So, please take advantage of buying as much as you can now, making sure it cash flows and making ridiculous amounts of money when the market picks up and you sell (buy low, sell high, become wealthy).
Photo Credit: Taras Kalapun
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The Most In-Depth Real Estate Case Study-Part Cinco
Real Estate / Financial Crisis Turns Deadly; Crisis-Related Suicides Expected To Rise
The subprime mortgage turned banking turned credit crisis has morphed, as expected, into a killer.
They may not be jumping out of Wall Street windows as some reportedly did after the 1929 crash, but they are walking in front of trains in Germany and slitting their wrists with box cutters in New York.
Of course, this current “near” depression ( I know, it’s supposed to be just a really, really, really bad recession–but, come on, after a time, it does get pretty depressing, doesn’t it?)has claimed countless jobs, mortgages, and futures large and small in the U.S., its foul smelling wave washing ashore around the world.
But misery in the abstract is seldom as revealing, or understandable, as misery in the specific,in the personal: it helps us gets our arms, and brains, around it.
So, two recent suicides, last month and today, help focus our attention on just what damage this economic maelstrom is causing.
Adolf Merckle seemingly had it all. A father of four. A successful businessman. The fifth wealthiest person in Germany.
100 thousand employees called him boss.
Tuesday, he decided to walk in front of an oncoming train, a suicide note apparently blaming the huge losses his empire suffered because of the financial crisis.
In December, in an otherwise nondescript Manhattan office tower, a Frenchman sat and then reached for box cutters, and went about the grim task of slicing into the veins just beneath the surface of his wrists.
Thuerry Magon de la Villehuchet would not see 66.
He was upset. Probably an understatement. He had lost $1.4 billion in client money because he happened to have had the misfortune, this otherwise fortunate billionaire, of having met, befriended and trusted Bernard Madoff whose fraud is described as “alleged” only to satisfy the legal departments of newspapers whose business reporters, like our government, should have seen this tornado coming from a million miles away.
A Reuters report states what would seem to be the obvious: “Psychologists and other mental health experts have said suicide rates could creep up as a result of the financial crisis.”
Guess that’s why they are called “experts!”
The same story has one curious line–re-stating apparently what German prosecutors had to say about Adolf Merckle’s demise: “There was no sign of anyone else being involved,” they said.
How wrong they are.
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Real Estate / Financial Crisis Turns Deadly; Crisis-Related Suicides Expected To Rise
More on Good Habits for Success in 2009On Saturday, I posted some good habits for success in 2009. I probably should make editing my blog posts a habit as well. If I did, I wouldn’t create posts that run well over a thousand words and need to be broken into multiple parts.
It’s never too early to start working!
 Good habits are the tools we use to achieve our goals. I cannot overstress the importance of making your goals reasonable. Bigger Pockets ‘ denizens typically are, or want to be, overachievers. And that’s fine - I’m with you! But if you set unreasonable goals, you may find yourself disappointed at the end of the year, even though you worked really hard and did really well.
Here’s the first half of “Good Habits”. Lets delve a bit deeper:
- Constantly evaluate everything you are doing
Develop the habit of constant awareness and evaluation. Always be thinking: is this the best use of my time? Is the best way I could be doing this?
- Do the most important task of the day first
This ties in with your daily goals, and with constant awareness and evaluation. The night before, you will know what you must do the next day. What is the most important task for the day? That is the first one you will tackle - with one caveat…
- Do a little work every day before you do anything else
This is more important to me than it might be to you. I always have my laptop in the bedroom, ready to go, before I go to sleep. When I wake up, my first act is to turn on the computer. But then I might get distracted by some game, or my personal email. If I do, I’ll be in trouble, because I could happily spend an hour fooling around. If I start the day with a work project - which has to fit in the window before showering, breakfast and so forth - I’ll be in a “worky” mood for the rest of the day.
Why is this an exception to the last habit? Because the most important task of the day might take a lot more than my early morning window for work. Also, the most important task of the day might have to wait if I have other scheduled interruptions such as appointments in the morning.
- Double- and triple-check every purchase
When I started in business for myself, I thought I was being frugal enough, but I wasn’t. Almost any other small businessperson has learned the same lesson. For any purchase, no matter how small, I have to consider: do I really need this? Is there a way I can get it for free, or cheaper? Can I use something else I might already have instead? These considerations apply for everything from a pack of gum to a car.
- Learn something every day
Some real estate gurus will tell you you need to be entirely focused on your business, 24/7. Some people can do this. There’s a word for them - “divorced.” I don’t want to be divorced, and I don’t want to become an obsessive crank. You should learn something about real estate every day, and Bigger Pockets is a great tool for that. But you also need to learn something that is not related to your business - maybe a musical instrument or a new recipe. Not only will this broaden you and make you more interesting to be around, it’ll also improve your mood.
- Do something every day for your core business
I learned this lesson from Steve Morse, a legendary guitarist who now plays with Deep Purple. He makes sure he plays a little guitar every single day. He might not have a gig or recording session that day - he might be on vacation with his family. Nevertheless, he always has a guitar with him, and he always plays it at least for a little while. Music is Morse’s core business and the every-day habit reminds him of this. Whatever your core business, there is always something you can do to improve it, every day.
On work days, of course, you’ll be doing a lot for your core business. Spending a half hour on work, on a work day, is not acceptable! But it’s good enough on a day nominally committed to non-work activities.
- Keep or get in good physical shape
We’ve all known out-of-shape people who were simply slobs - they didn’t care about anything, and so they let their bodies, and everything else, go to hell. But people like us are much more likely to get out of shape because we are so passionate about other things, we don’t spend a minute keeping ourselves in shape. You will pay a price for this. A half-hour of real exercise, every day, will get you or keep you in decent shape.
Photo credit: Things keeping me busy by jtbrennan
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More on Good Habits for Success in 2009
Mortgage Markets In Review : January 5, 2008Like the rest of the country, mortgage markets were on semi-vacation last week. The low trading volume led to wild rate swings.
After beginning the week vastly improved, and capped by a terrible late-Friday run, mortgage rates ended the week unchanged for the second week in a row.
This week, though, it’s anyone’s guess. Wall Street comes back to work in force and, in the time since they’ve left, there’s been a lot going on:
* Holiday sales were even slower than expected
* Consumer confidence touched an all-time low
* Gas prices spiked nationally — by as much as 40 cents in some areas
Ironically, Wall Street will likely position the bad news as good for the stock market. This is because negative economic data pressures Congress to pass larger, more sweeping  stimulus in 2009. However, what’s good for stocks is often bad for bonds and that’s the market from which mortgage rates are derived.
In fact, it was an exceptionally weak data point Friday that helped start the January 2 stock market rally that, consequently, caused mortgage rates to bulge.
This week, there’s only one high-profile data point to watch — Friday’s jobs report. Economists are predicting the another 475,000 Americans lost their jobs in December and that the Unemployment Rate reached 7.0 percent.
If the actual numbers are in-line or worse than the predictions, mortgage rates could rise on the same “More Stimulus” line of thinking.
If the jobs data shows strength, however, don’t expect that rates will fall. For now, markets are in a defensive stance about the economy and tends to work against rate shoppers and home buyers.
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Mortgage Markets In Review : January 5, 2008
First-Time Homebuyer Credit – Is It Really a Free Lunch?I was vaguely aware of the first-time homebuyer tax credit offered by the Government but never really paid much attention to it. I certainly wouldn’t  be eligible for it since I have owned my home for a long time and have a number of investment properties as well. My real estate holdings are, for the most part, single-family homes that I have rehabbed and rented but rarely sold. So for me the tax credit was never in play.
However, I was recently approached by one of my tenants about buying the home he was renting. I was definitely open to the idea of selling since I had a substantial profit and a sale would free up cash for other acquisitions. In the discussion the first-time buyer credit came up and I realized that I needed to learn more about it, as it could be a factor in the purchase. A tax credit has a much greater impact than a tax deduction. A tax deduction of $1,000 for someone in the 25% tax bracket is worth $250. A tax credit is a dollar for dollar reduction in the amount of tax owed, so a $1,000 tax credit is worth $1,000.
The Specifics
The credit was one of the provisions of the Housing and Economic Recovery Act of 2008. While it is called a first-timer buyer credit, it is available to anyone who hasn’t owned a home for the three-year period prior to the current purchase of a home. This means that people who have owned a home before can still qualify as long as they haven’t owned one recently. The credit is equal to 10% of the purchase price and has a maximum limit of $7,500. So a home purchased for $50,000 would result in a credit of $5,000, any purchase of $75,000 or more would receive the full $7,500.
The full tax credit has income limitations. Single taxpayers earning $75,000 or less and married filers earning $150,000 or less can receive the full amount. Those with higher incomes may qualify for a partial credit or no credit at all. The credit is available for homes purchased between April 9, 2008 and June 30, 2009. Unless extended, the credit will expire on June 30th.
The Catch
There really is no free lunch here. The tax credit is really nothing more than an interest-free loan. The credit must be repaid over a fifteen-year period beginning two years after the credit is claimed. So you receive $7,500 today but you will pay back $500 per year with your tax return for fifteen years. If you sell the home prior to that you must fully pay any amount remaining. However, if you do not have a profit when you sell any remaining amount owed will be forgiven.
So what’s the big deal? Well, for starters, the credit does make it easier for someone to buy a home by giving them additional money when they probably need it most. An interest-free loan is much better than adding that amount to a mortgage. A $7,500 mortgage for fifteen years at 6% would result in interest payments of $3,892, that is the true value of the credit.
Is It Worth It?
The real intent of the program is to make it easier for a first-time buyer to own a home. Encouraging home ownership is a way to help the troubled housing market to recover. If used correctly, the program can be a great benefit that allows someone who would otherwise be a renter to own a home of their own. Of course, you should consult with a tax professional to see how it would apply in your situation.
Governments tend not to solve problems, only to rearrange them. – Ronald Reagan
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First-Time Homebuyer Credit – Is It Really a Free Lunch?
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