No BS Real Estate – 2008 October

Commentary

Six to nine months from now, you’ll wish you invested. Appreciation, though, won’t be quick and won’t be excessive. Now is the time for “cash flow” investing. Over history, 76% of wealth has come from owning (not selling) real estate. And in this market, flipping in short durations is not going to produce much profit. Now is the time to seize monthly cash flow with the eventual appreciation being the indicator for your exit strategy. Yes. All investments should have a known exit strategy BEFORE you enter.

We are still seeing increases in demand which provides some resistance at bottom. Median prices decreased more sharply because the banks are not emotionally attached to price. We are beginning a seasonal change that typically comes with a decrease in supply. However, since the banks are currently selling most of the inventory with a pipeline of more coming, supply may not be an issue for this fourth quarter. New law is requiring banks give a good faith effort before filing default and auction notices.

My analysis can be used for any commodity. Understanding the market is necessary even when buying or selling your family’s shelter, not an investment property. This is a speculator’s tool to predict future movement. Explaining history should be done but it’s your NEXT action that makes a difference. Refer to this month’s charts and note where the Momentum indicator crosses it’s zero axis (red axis & typeface) — it has been a predictor of the change in actual volumes. Specifically:

  • Existing Home Sales — Momentum fell below zero Aug 2005 pointing to the Sales drop in Jan 2006. Momentum hit bottom Dec 2007 indicating the Sales spike in Mar 2008. Momentum is still positive. The Media scares some buyers, but not all.Major-Sales-2008-09
  • Permits — Momentum exceeded zero first in Apr 2002, spiked with the last big builder push, and has stayed at or below zero since Sep 2004. Builders are not in a hurry to build new homes.Major-Permits-2008-09
  • NODs — Momentum exceeded zero in Nov 2005 which points to the increased in NODs in the first quarter of 2006. Momentum peaked in Aug 2007. The recent housing bill is requiring lenders to give a “good faith effort” to work with borrowers before filing a Notice of Default. This went into effect in August and may explain the sharp drop in September NODs.Major-NODs-2008-09
  • REO Sales — Momentum exceeded zero in Jan 2006 pointing to the rise in volume in Apr and May 2006. Momentum is positive. REOs will dominate for the coming months.Major-Distressed-2008-09
  • Rate — Momentum went below zero in Aug 2007 pointing to drop in rates from Oct 2007 through May 2008. Momentum is negative but intraday changes can wreak havoc on your monthly payment. Be in touch with your lender on a daily basis.Major-Rate-2008-09
  • Median Price — Momentum peaked in Feb 2005 which points to Price peak in Aug 2005. Momentum fell under zero in Nov 2006 and Prices really started to fall in March 2007. Momentum is still negative. We are at April 2002 prices.
  • Major-MedianSA-2008-09

What is YOUR NEXT ACTION?

  • If you think we need change, no candidate will do it. YOU can!
  • If you are a Buyer — Investors are getting a lot of attention. RETIRE on your passive income. Make your FIRST offer your best offer. If you are a “move-up” buyer, this is a great market for that movement.
  • ACTION PLAN: Hire me. Discuss and decide on strategy. Save cash. Determine your buying power. Understand your wants/needs so I can build you a custom website. Eliminate homes you won’t consider. Resale or new, let me help you find the home you desire. Make offer(s). Go into contract. Settle all disclosures, inspections, and conditions. Sign, buy, and move!
  • If you are a Seller — Wait a year and ask again. REO listings are attractive. Be realistic about the price. Check your emotions at the door. That’s what your competition is doing. If you are in dire straits, call me immediately.
  • ACTION PLAN: Hire me. Discuss and decide on strategy. Stage your home. Keep home clean and available. Market, market, market your home. Consider offer(s). Go into contract. Settle all disclosures, inspections, and conditions. Sign, sell, and move!

Whether you are buying or selling, my service commitment to YOU is unequaled. If you know someone who is looking for a great Realtor and would appreciate the same service I would give you, please give me their name and number and I’ll follow up. You know you can trust me.


 

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