Long Beach, Ca. Finally, Dave Avery, an honest real estate economist and head of the Los Angeles Economic Development Commission, discusses the State of Southern California Real Estate. Mr. Avery, recently gave an address on the way things are moving at the Income Property Lending Conference in Long Beach, California. In regard to the housing market, Mr. Avery was the first economist that I have ever heard talking about a housing "Depression."
This was refreshing since no other economist, to my knowledge, in a public forum has had the guts and fortitude to call a spade a spade, address the problem, offer some solutions, and get on with it. Mr. Avery detailed the current housing situation, and addressed the question, "How much further will prices fall?"
Between 15-20% more was his answer. Considering that since February of 2007 until April of 2008 the medium sales price in the five Counties in Southern California, including: Ventura, Los Angeles, Orange, San Bernardino, and Riverside has fallen from $505,000.00 to $375,000.00, it appears that an additional slide will be a boon for people interested in purchasing real estate.
Now, if Mr. Avery is right and the average property in Southern California goes down to between $300,000.00 and $320,000.00, it will be a great buying opportunity that only seems to come along every 15-30 years.
Consider this, that while food prices in the last year have gone up between 30% and 40%, and gasoline prices have gone up by almost 100%, that real estate is going down 20-25%. This is an amazing figure when you consider that this percentage in reduction does not include regular inflation. Remember that the government figures of 4% does is not a real number in that it does not take into account the aforementioned prices of gas and food stuffs. The truth of the matter is that the true inflation rate when these are included is between 10-15% a year. Add this inflation number to the current correction in housing prices and true prices are really off between 25% and 40% depending on what market you're in.
Also consider the fact that current interest rates for thirty year fixed rate mortgages are between 5.5%-6% and you get housing at the most affordable price in years.
Long Beach, Ca. In the current economy where Americans are strangled at the pump, squeezed in the grocery market, worried about finances, and trying to save every dime possible. It is with pleasure that I share with you how my personal family recently accrued an approximate savings of $285.00-$300.00 a month by changing our mobile phone service company.
In the old days, before mobile phones, every household had at least one hard land-line phone. Granted, if there were teenagers, an occasional second line was installed to handle the traffic. Nevertheless, telephone service was pretty straight forward:
one home+one phone=one bill.
Today in America Life, with the advent of mobile technology, mobile phones have become considered "essential." Phones are not just for talking anymore, they supply the tools for web access, photography and video, text messaging, video gaming and e mail not to mention contact management and calendar access, and emergency life line.
A simple 4" mobile phone has become a mobile Computerized World Access Portal(CWAP) and if we modify the letter "W" to an "R," we as parents can relate to what it is our children are spending their time doing with these devices besides using them for there best and most important use: Parent/Child communication. That said,
Unfortunately, the world is not as safe as it was when I was growing up and today, it is considered good parenting to make sure that your child has emergency phone access and a mobile phone is the best child locator tool. As long as it is monitored carefully, I agree with allowing youngsters access to a mobile phone, if not on a daily basis on a case by case basis. For example, if they are going on a field trip at school, a Sporting event, or some other supervised outing wherein it is convenient and smart to be able to communicate via a phone.
Meanwhile, the old formula of one home+one phone=one bill has morphed into:
one home+one phone(a land line)+internet service(DSL)+cable access+several mobile phones=multiple outrageously expensive monthly multimedia bills that can cost thousands and thousands of dollars a year.
Let's take a residential phone service at home that with taxes can cost a min. of $50-$100 a month, sometimes the DSL is provided by the same phone company, sometimes you have to pay for the internet access separately.
Cable television access that routinely runs between $50- $100 a month for a minimal plan. Again, you may be able to combine cable with hard wired internet access for an extra charge.
Then there is the litany of mobile phone service providers including: Sprint/Nextel, AT&T,Trac Phones, Cingular, Verizon, etc. Although, most of these have some type of family savings plans, I have to share with you the recent advent of Metro PCS in the Southern Californian Market Place and how it is saving my family a considerable amount of dough. Hopefully, without sounding too much like a commercial, for a limited time, Metro PCS is offering four lines with unlimited calls for $100/month. Although, the phones are limited in area coverage(not so good outside of Los Angeles, Riverside, San Bernardino, Ventura and Orange Counties, the service is inexpensive and meets most families needs.) Note that is $25/ month per phone with unlimited calling including local, text messaging, and long distance. Best of all, Metro PCS did not require my family to sign a contract.
If you are a business traveler, this system will simple not work for you. This is not as of yet, a nationwide company. The coverage is mostly local. There is no coverage as of this writing in Portland; however, Las Vegas in connected. Also, another draw back is as of today, this plan does not work with the Blackberry Phone.
The draw back for the plan is that you must pay for the phones up front and this plan does not include web access. But for $5/month more per phone you can add the web access.
Now, compare what I was recently paying at a competitor:
For unlimited web access and phone calls my old phone was $135/m.
I added a second phone for my wife which cost another $100/m.
My daughter was paying at least $50/m for her own service.
Our land line at the house is normally around $70/m.
Imagine putting out almost $400/m just to be able to communicate via mobile and home service.
This was costing us an average of $285-$300/m with taxes for just three mobile phones and an additional $70/ month for our home line! Imagine putting out almost $400/m just to be able to communicate via mobile and home service. Now, with Metro PCS's plan, we have increased the amount of mobile phones from three to four phones. We use one for my business, one for my wife, one is being used by our 17 year old daughter, which leaves a spare at the house for any of the other four younger children that might need it for a special occasion all for only $100/m.
Now, because of the unlimited long distance part of our plan,we can cut back our land line service to a more basic plan and save an additional $35/month. All together the total savings for my house hold by utilizing the Mobile PCS is between an astonishing $215/m-$250/m. Now that's a monthly savings of between $2500-$3000/year.
I see that my family members are going to be able to fill our gas tanks, after all this summer!
Long Beach, Ca. Every since the middle of last year, I have had countless brokers calling me trying to either off REO bulk packages or attempting to buy them. I would like to know if anyone of us 70000+ members have had any closings in regard to this market trend. I don't know about the rest of the Country but in my office, out of the last 15 sales, half have been either short sales or REO properties!!
See attached letter from a personal friend, I would like any comments or observations, thanks, ktm
Hi Kirk:
Good Morning! Okay, we are finally ready to go with the REO's/notes and are working directly through a contact who has lead us to a trader with Bear Stearns for note product. It is a tremendous connection. I am currently awaiting the step by step process they want us to follow and completion of a note ordering form today.
Also I had a separate call yesterday with a firm that has been closing REO deals. They are a large, well-known loan servicing provider who is supporting several banks in offloading their product. What I learned from the principal owner of this firm is our buyers must be ready to pull the trigger at a moment's notice on REO packages, which means we need to have our buyer's educated and well prepared. The REO process is truly a "bid" process and is extremely competitive so "newbie" buyers/investors to the game will have great difficulties in securing packages if they don't know "how" the deals work and are structured so that is where we come in.
I have a follow up conference call with this gentlemen today at 1:00 p.m. and he actually has an Orange County office and other offices with 82 employees on staff nationwide to support their banks and the loan servicing. He and his firm can actually assist large buyer's with an exit strategy post purchase if they do not have a solid exit strategy in place. This is also a tremendous contact and source.
Here are the primary elements we need to "prep" our associates and buyers with if we are to be successful in securing REO's/notes as follows:
The buyer/signatory MUST be identified upfront on the initial note order form or letter of intent. The seller's must know "who" they are potentially doing business with from the start because of the U.S. Patriot Act so if we can not get past this key buyer ID disclosure issue with involved broker's/consultant's, etc., we can not move forward. Buyer ID is crucial and the first step as the seller will check their "watch" lists for certain organizations, names and parties that they are prohibited from doing business with under law. Secondary to that critical item is the new "internal" watch lists the banks have in place due to the unbelievable level of fraud occurring in the arena so the involved parties requesting product for purchase MUST be disclosed.
Basically, this means we must have full disclosure. And we must also have a cohesive team of honest, knowledgable and professional experts who can work together in harmony for the desired end result for the client's benefit. We must all be willing to play fair for everyone to win and get paid. I believe we can do that together as long as the relationship with the end buyer is strong and we are all willing to be educated on what needs to occur to be successful. This is no different than any other real estate transaction only larger and more complex. It is simple; name the players!
Realistic buyers is a must. We need to ensure we are working with buyers who clearly understand the current market and price points. Much of the frustration occurs when large buyers with deep pockets puff out their chest and demand to get to the front of the line to dictate what the seller will give them and at what price point. They want high-end everything for little or nothing. Yes, we are in a correcting real estate market but buyer's must be realistic. This type of attitude and behavior will not fly with the banks and selling sources. These types of buyers/investors will never secure product and will likely get themselves blacklisted. This is one of the "hot" topics with bankers and private sellers right now. They are sick and tired of arrogant buyers and their uneducated broker's and consultant's. As professionals we need to be able to control this issue with our buyers and professionally facilitate these transactions. That's what we get paid to do right?
Exit strategy is crucial. Buyer's MUST have a reasonable and solid exit strategy post purchase. The selling banks and private selling sources are not high on "flips" because of downline liability tied to the U.S. Patriot Act i.e. know your customer's customer comes into play. Buyer's must be prepared with a solid business plan and exit strategy period. If there are two equally qualified buyer's competing for a "bid" on a REO portfolio and one has a solid exit strategy/business plan and the other doesn't guess who is going to secure the pool? It is our responsibility as professionals to ensure our buyers understand this key issue and make sure the seller's know they can perform and handle the product once they secure inventory.
Financial performance - last but not least is necessary. The buyer's MUST have their finances in order and be able to prove it. Cash is king and cash buyer's trump buyer's that use credit. However, solid credit options with credible financial institutions i.e. warehouse lines of credit, etc., with well know banks are also strong financing options. Hard money loans from shakey lending sources for newbie buyer's will not impress the sellers and will likely lessen the buyer's chance of securing a REO or note pool.
We all must remember at the end of the day the Seller decides "who" they will do business with period. They are selling/trading their assets and they can "choose" not to do business with certain buyers, brokers and consultants. Unfortunately, the buyer's and involved parties are not in the driver's seat on this one as there are more buyer's than seller's right now. So let's all be clear on that...the seller's are in control.
Whew! That was a lot to cover but Kirk please be certain your contacts and buyers understand these basic rules of engagement so we can move forward rapidly to have a solid and prosperous future together! As I will be a major and key facilitator in these transactions (as a former 20+ year banker) we need to ensure we can all be transparent and work together again, for ALL to win!
I will be in touch with you as soon as I can so get your buyer's ready to go! I will send you the note ordering form and instructions for the REO's, which will likely be a standardized Letter of Intent (LOI) as soon as I can. Off to meetings now. Sam Perez and I will keep you posted. Make it a great day!
Thanks so much,
Kirk Timothy Mulhearn
Broker/Owner
3728 Atlantic Ave.
Long Beach, CA. 90807
Telephone: 562-989-4091 Ext. 110
Facsimile: 562-424-4580
"Excellence is not an individual act but a learned habit." Aristotle
Long Beach, Ca. The United States Senate just voted in favor of passing an amended version of H.R. 5140, a $150 billion bill to jumpstart a sluggish economy through giving temporary tax breaks and raising the loan limits on conventional loans from $417,000.00 to $730,000.00. The bill also increases the size of the loans the Federal Housing Administration could insure.
Recently we wrote an article, How will higher loan limits acutally change California's real estae market?, that discussed what the effects would be if this bill passed. The question remains, "How will it affect the rest of America?"
Recently, I was in discussions with a tech friend who casually mentioned to me that the real estate market along with all of its related services only represent less then 4% of the GNP. If this is true, then the rest of the Country really is doing that bad afterall?....I don't think so.
Just start interviewing small business owners. Grant you that an extra $700-$1000 would be great to have in cash back from the government, but is this amount really going to effect the way America's true economic state. Let's admit to the fact that the average household is spending between $200-$400 a month on gasoline alone in Long Beach, California. Now add the fact that groceries are running a typical family between $500-$1000 a month. This tax rebate would definately help but seems to resemble more of a band aid rather then a cure to our current economical malaise...
Long Beach, Ca. Finally we sport fans have something "interesting to look forward to" regarding sport franchising and stadium building in Downtown Long Beach. After too many years, Long Beach has finally been offered up to the boards of both USC and NFL. Jeff Klein who just bought a 65 acre lease of the property next to the Queen Mary has made a daring and timely presentation to both of the aforementioned sports syndicates.
Being that I'm a proud grad of USC myself, I can tell you that this idea is profound. First of all, apparently, I'm like one of the only Trojan fans that actually likes to go to the Los Angeles Coliseum. I love the graceful old facility there. It reminds me of younger days when I was a student there and everything was possible! It is fun to go back to that smelly part of Los Angeles; Ok, maybe because I know that I'm only going to be there for four hours....
On the other hand, having a new Colliseum in Downtown Long Beach is ex-tremely desirable. Let's face it, it really would be one of the most colorful and scenic stadiums in the entire Country, just as long as they leave it open to the elements and don't close it off from the beautiful and scenic views of Catalina Island, the grand old Queen herself, and the beautiful vistas of downtown.
As far as the NFL is concerned, I also feel that since we Southern Californians lost the Rams and Raiders that there has been a gaping hole of emptiness for the lover of our traditional National Blood Sport and all. Of course, there is no money form the City Coffers available to shore up a team, but I do believe that Long Beach woud be a fantastic venue for any professional sports team.
Long Beach lot could turn into great beachfront lot for NFL, USC
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