Chris McLaughlin

Nevada Leads in Underwater Homes with a Whopping 48%

Mid-Day Market News & Commentary by Chris McLaughlin, October 31, 2008
http://www.shortsalesriches.com/welcome.html

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The Wall Street Journal reported today that the state of Nevada led the country in having the most homes under water-the circumstance when the debt on the property exceeds its current value. First American CoreLogic, a real estate data company, estimated that a whopping 48% of all homeowners who own single family residences in Nevada are under water. This compares with an estimate of 18% nationwide. Home prices in Nevada have fallen approximately 36% since 2006.

Stocks were headed slightly lower this morning after the Reuters/University of Michigan Survey of Consumers showed that consumer confidence had its largest drop ever in October. The index dropped to 57.6 in October from 70.3 in September. The report noted that "consumers reported the most dismal assessments of their current financial situation ever recorded."

Yeah, we know it is tough out there ... but we're reminded of the good news, and that's that short term interest rates are now way down, with prime now at 4%. We're reminded that mortgage applications also jumped this week. And we're reminded that regardless of who wins the Presidential election next week, the honeymoon period that typically greets any new President will likely boost consumer confidence heading into 2009.

Now on to our real estate investor section...

Numbers to Know: Net Worth

Whether you are applying for loans or simply keeping track of where your time and energy are going, one number every short seller needs to know is net worth. It's a great tool for personal use but also an effective method of showing sellers why a short sale is a good idea.

Personal Use

Net worth is easy to calculate and makes a great way to track progress and productivity each year; best of all, high net worth individuals are eligible for plenty of additional perks ranging from "qualified" investment opportunities to premium banking services. Unlike other measures of wealth, net work doesn't penalize against those who prudently use leverage or debt to increase profits - making it the perfect measure for short sale investors to keep track of their growing empire.

Short Sale Use

Sometimes people need a reality check to realize exactly how serious their situation is and how long it could take to reverse it. It's easy to include a net worth calculator on a mail-out or use during the negotiation stage for a little extra motivation. It's simple but effective - give it a try!

How to Calculate

•1. Tally Assets. Make a list of all assets and put a current value next to each. Examples include homes, cars, cash, bonds, stocks, real estate, art, antiques, jewels or any other item of value.

•2. Tally Obligations. Make a list of all short and long term debts, loans and other obligations. Use the total balanced outstanding not the monthly charge. Common examples include car loans, student loans, mortgages, credit card balances, taxes, liens or other debt obligations.

•3. Subtract the total amount of obligations from the total amount of assets. If the number is negative then you have a negative net worth - not good at all! Unfortunately, nearly 10 percent of Americans have a negative net worth. This means they could sell every belonging they owned and still be in debt...not even counting the cost of late fees, judgments and commissions owed. If the number is positive then congratulations - that is the level of your current wealth.

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

Want to hear from a Realtor who made $30k last month helping investors sell short sales, but who never spoke to a bank and didn't spend 45 minutes on hold? Check out this YouTube video to learn about Jason Turk, Realtor from Tampa, FL:

http://www.youtube.com/watch?v=HuXicBom45o

P.P.S.:

And if you want a huge laugh, and can't wait to "flip" over how to flip short sales, be sure to check this new video out, too:

http://www.youtube.com/watch?v=fqV4CpBhKTs&NR=1

Existing Home Sales Up 5.5%

Mid-Day Market News & Commentary by Chris McLaughlin, October 24, 2008
http://www.shortsalesriches.com/welcome.html

The BEST fr'ee webinar that you'll ever attend on real estate short sales & wealth building in this market:

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Stocks continued their dizzying seesaw today, with the Dow Jones Industrial Average plunging more than 400 points at the open. The drop was due in part to nervousness over a possible severe global recession and the battering various stock markets had taken in overnight trading. In Japan the Nikkei dropped 9.6 percent as shares of Sony, the electronics manufacturer, slid more than 14%. Germany's DAX index slid 8 percent as Britain's FTSE 100 dropped 8.5%. At noon the Dow Jones had recovered a bit and was down 267.47 to 8,428.49, the Nasdaq was down 34.54 to 1,569.37 and the S&P 500 was down 26.96 to 881.15.

But some investors were pleased about the positive news from the National Association of Realtors this morning. Existing home sales rose 5.5% to 5.18 million from 4.91 million in August and were up 1.4% from the 5.11 million in the year ago period. Lawrence Yun, NAR chief economist, said a broader range of markets are seeing improvement over the prior year. "The sales turnaround which began in California several months ago is broadening now to Colorado, Kansas, Minnesota, Missouri and Rhode Island," he said. "The South was hampered by much lower home sales in Houston in the aftermath of Hurricane Ike."

Yun echoed the call by many Realtors and investors to remove the repayment of the $7,500 tax credit and bring more stimulus to help jump start housing. "Additional housing stimulus would stabilize prices more quickly, which in turn would bring faster stability to Wall Street. Removing the repayment feature on the first-time buyer tax credit and permanently raising loan limits would bring more buyers into the market and further reduce inventory," the economist stated.

Now on to our real estate investor education section ...

Back to the Future Part II

Yesterday we took a little trip down memory lane to look at how home prices have held up over the years. The results were impressive to say the least. Critics would argue that hindsight is 20-20 and it is impossible to predict the future. While that is technically true, it is also important to understand three things:

•1. Inflation is caused by the expansion of the money supply and we can track how much money is being created.

•2. Inflation can work for or against you. Those that put it to work for themselves can create millions. Those that don't will find themselves in the poor house at the end of their lives.

•3. Inflation has been constant for decades- it goes up or down but hasn't gone negative.

The evidence is obvious. A median priced home in 1973 sold for $28,900. By 2007 a median priced home cost nearly $220k. Gasoline went from 35 cents to $3.50 a gallon. Prices for other goods and services did the same. Short Sellers understand the ravages of inflation and how to use it to build wealth. Wish you had a way to predict what homes will cost in the future? You can get a good idea by using a little simple math:

•1. Determine the average rate of inflation. You can use the federal estimate for CPI but realize the limitations. A more reliable indicator is provided by ShadowStats which tracks inflation via historical measures rather than the new limited model. Today, the government CPI is an estimated 5.5 percent while the alternative measure indicates something closer to 9 percent.

•2. Use the rule of 72 to calculate the cost of goods or real estate in the future. The rule of 72 is typically used to determine how long it will take an investment to double at a specific interest rate but you can easily modify for your own needs.

•3. Take the inflation rate (for example 9 percent) then divide into 72 [72/9 = 8]. This means at the current rate of inflation prices will double in 8 years. Let's say you want to know an approximate value of a property if you held it for 16 years instead...the entire amount would double again. For example, if you purchased a short sale property for 100k then it could double to 200k in 8 years and reach 400k in 16 years. Of course these are estimates since some years go up much faster than others...

More next week-have a great weekend!

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

Interested in learning how to make over six digits a month flipping real estate short sales on autopilot? Join us next week on Tuesday, October 28th (Tuesday) at 9 PM EDT, 6 PM PST:

https://www2.gotomeeting.com/register/656685734

Spaced are limited ... log on now to claims yours!

P.P.S.: If you already have the system, are you ready to really take it to the next level? Go to http://www.shortsalescoach.com to learn how.

Mid-Day Market News & Commentary by Chris McLaughlin, October 21, 2008
http://www.shortsalesriches.com/welcome.html

The BEST fr'ee webinar that you'll ever attend on real estate short sales & wealth building in this market:

Join us TONIGHT, Tuesday, October 21^th (Tuesday) at 9 PM EST, 6 PM PST:

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Stocks were mixed in early trading after the Federal Reserve announced that it will begin purchasing commercial paper, primarily owned by money market mutual funds, by establishing the Money Market Investor Funding Facility (MMIFF). The Fed is attempting to bring further liquidity to the markets. "Improved money market conditions will enhance the ability of banks and other financial intermediaries to accommodate the credit needs of businesses and households," the Fed said in a statement.

In real estate and banking news, US Bancorp net profit dropped 47 percent to $576 million versus a profit of $1.10 billion in the year ago period. The Minneapolis-based lending institution reported earnings of 32 cents per share versus 47 cents per share in the year ago period.

The National Association of Realtors called on Congress recently to adopt its 4-point housing plan that included, among other things, expedited bank review of short sales and REOs. NAR further recommended that the government eliminate the requirement to pay back the $7,500 tax credit and to expand it to all buyers of primary residences, not just first time homebuyers. The Realtor association recommended that the government permanently prohibit banks from entering the real estate brokerage and management business.

Now on to our real estate investing educational section...

The Wonderful New World of Banking and Finance

"Something funny is happening down at the bank..."

Jimmy Stewart in It's a Wonderful Life

Borrowing a line from Jimmy Steward, short sale investors may have noticed something funny is happening down at the bank. It's not your imagination...we are in new and totally unprecedented territory when it comes to banking and finance. Here is what you need to know about some of the major changes coming soon to a bank near you...and the implications for how you do business today and into the future.

•1. Bank Closures. To date, only a handful of bank closures have taken place but experts expect more in the coming months. The average short sale investor shouldn't have much to worry about when it comes to bank closures, nearly all of which involve small local banks. In fact, see our former article about stalking sick banks or how to buy FDIC real estate assets and use it as a buying opportunity. If you have a short sale pending, some other bank will buy that loan for pennies on the dollar and then mitigate it ... so hang in there, but understand it might take more time.

•2. Recapitalized/Nationalized Banks. Big banks don't fail...they are recapitalized (and some would argue nationalized) by the United States government. In fact, recapitalization and nationalization of banking and financial assets is taking place on a global level via government intervention and ‘bailouts' designed to keep the economy going despite the most massive loss of wealth in the history of the modern world. Those investors that held paper-profits (stocks, bonds and other securities) have seen fortunes wiped away practically overnight. On the other hand, those holding tangible assets like real estate have a commodity with inherent - tangible value. So, wonder what recapitalization might mean to you as a short sale investor? Long wait times and less future inventory for one. Unlike banks which must show quarterly profits and report to shareholders, the government can (and has in the past) sit on its assets for years.

•3. Silent Bank Runs. Although few media outlets have reported on the rash of silent bank runs, the problem persists just the same. For example, Wachovia recently reported $5 Billion dollars of withdrawals in one day - a hefty sum to be sure as depositors withdrew their savings in a flight for safety. Expect more of the same and continued volatility in the banking industry as former investment banks offset their balance sheets with consumer checking accounts and Joe Six-Pack begins stashing cash under the mattress in order to pay the bills. Until things stabilize it is a good idea to have more than one checking account in order to make sure deals go through without incident. No need to jeopardize a great opportunity because your account was frozen.

•4. Getting short sales done. There is a lot of talk about what happens to short sales when the government comes in with a bunch of money. Folks, what happens is that they are more likely to get done! Right now some of these banks might not be properly staffed to even handle the amount of short sales coming down the pipe. Understand that FHA, a government program, actually has the most sensible approach to homeowners in distress and PAYS THEM to cooperate, up to $1,000, unlike the typical conventional lender. Why? Think about it ... ever heard the term "cash for keys?" Once the bank owns the property they approach the person foreclosed upon and tells them they'll pay them to move out willingly, as long as they leave the house in good condition. While I certainly don't think the government usually "gets it," in the case of FHA short sales they certainly get it more than those loss mitigators at other lenders...

More on Wednesday!

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

Interested in learning how to make over six digits a month flipping real estate short sales on autopilot?

Join us TONIGHT, Tuesday, October 21^th (Tuesday) at 9 PM EST, 6 PM PST:

https://www2.gotomeeting.com/register/196317932

RSVP early as spaces are limited!

P.P.S.: If you already have the system, are you ready to really take it to the next level? Go to http://www.shortsalescoach.com to learn how.

Impact of a Recession on Real Estate

Mid-Day Market News & Commentary by Chris McLaughlin, October 15, 2008
http://www.shortsalesriches.com/welcome.html

The BEST fr'ee webinar that you'll ever attend on short sales & wealth building in this market:

Join us this Thursday, October 15^th, at 9 PM EST, 6 PM PST:

https://www2.gotomeeting.com/register/945219328

RSVP early as spaces are limited!

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At midday investors continued to hold their breath, as the Dow Jones Industrial Average was down 317.24 to 8993.75. A government report released this morning showed that retail sales had dropped by 1.2 percent, which was twice as much as most analysts had been expecting. The report does not bode well for the upcoming holiday season, where many Americans are seen as tightening their belts.

JP Morgan Chase's profit dropped 84 percent to $527 million from the $3.4 billion in the year ago third quarter. "It's an unpleasant situation, and I don't want to underplay it. It's unpleasant for the country," said CEO Jamie Dimon. "I hope that the financial crisis, with the powerful moves made by governments around the world, will start to ease."

In other banking news, Wells Fargo fared much better than JP Morgan Chase. Its third quarter profit fell 25% to 1.64 billion from $2.17 billion in the year ago period. The company was successful in breaking up the proposed Citigroup-Wachovia merger and now Wells plans on merging with Wachovia. Citigroup has indicated that it will not stop the deal but does plan on extracting its pound of flesh in court for damages.

Now on to our real estate investing news arena...

Recession, Depression, Inflation, Deflation...What's it all About and How Does it Impact Real Estate?

Ronald Regan once stated "A recession is when a neighbor loses his job. A depression is when you lose yours." If we were to apply the same logic to the real estate market, then the nation has been in the midst of a recession for some time as people have been steadily losing (or walking away from) their homes. In fact, there is a great deal of recent debate on whether the nation is already in a recession and heading for a depression or whether the easy money economics of the Federal Reserve will prevent a depression at the risk of creating further inflation...or perhaps world-wide deleveraging will actually result in massive deflation instead. Let's take a few moments to examine real estate in each of the above scenarios'...

Recession. Unlike employment figures (or stocks), real estate doesn't act the same as jobs during a recession. When a worker loses a job the position may be completely eliminated (or the stock completely wiped out). When someone loses a house it reverts back to the prior owner, heirs, bank or local government. Short sale buyers realize the inherent value in the home or property and act like a middle man to obtain a percentage of that value for themselves in the form of resale, rentals or retained equity.

Depression. During a depression the entire economy may slow down so much that little to nothing is being produced. Job loss often runs rampant as prices drop below the cost of production. Unemployment drives labor costs down - creating a downward spiral as unemployed workers are unable to afford more than the basic necessities. Again, jobs and stocks alike may all but disappear during a depression but a house remains standing. Housing is a basic necessity and tends to take top priority even during the most critical economic crisis.

Inflation. Inflation tends to drive the price of all commodities and assets higher as the replacement cost rises; real estate is no exception. With the Federal Reserve practically printing money out of thin air, the ability to own or control physical assets with a fixed rate of interest is often the best way to preserve wealth during periods of escalating inflation. On the other hand, the increased cost of production and labor often leads to more work for less pay among employees.

Deflation. Falling assets prices and world-wide deleveraging tend to drive down the price of commodities and assets including real estate. However, short sale buyers are often purchasing property at or near the fully depreciated value. Even those who experience further price drops still have other options available to bridge the gap until the market recovers; rentals, owner financing and factoring may each help raise needed capital or reduce individual debt repayments until the property has regained full value.

More on Thursday...

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

Join us for our fr'ee Webinar this coming Thursday at 9 PM EST/ 6 PM PST that will reveal the Top 12 Strategies on Getting Rich with Short Sales:

https://www2.gotomeeting.com/register/945219328

P.P.S.: If you really want to get started building your wealth, now that recognize that your 401(k) isn't going to do it, what are you waiting for? Take action today! A journey of a thousand miles begins with a single step. Take that step right now by clicking here:

http://www.shortsalesriches.com/welcome.html

Mid-Day Market News & Commentary by Chris McLaughlin, October 8, 2008
http://www.shortsalesriches.com/welcome.html

LEARN THE 12 STRATEGIES FOR SHORT SALES RICHES ON OUR WEBINAR THIS THURSDAY:

Wow. We're doing it again. We messed up our scheduling and conflicted with the Presidential debate last night, but our Webinar was still packed! For those who couldn't make it, join us this Thursday at 9 PM EST, 6 PM PST:

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RSVP early as spaces are limited and it fills up FAST!

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Global markets were in a free fall early this morning, but a coordinated effort by 5 of the world's central banks to cut rates helped temper nervous investors. The United States Federal Reserve reduced its federal funds rate, the rate that lenders charge one another for overnight loans, by 50 basis points to 1.5%. This means that the prime rate will be pegged at 4.5%. The Fed also reduced the discount rate, which is the rate that the Fed charges its member banks to borrow directly from the Fed. The banks of China, Canada, Sweden, Switzerland, The Bank of England and the European Central Bank all reduced rates.

This month everyone's 401(k) suddenly began to look like 200.5(k)s. In the last year alone over 2 trillion dollars have been lost in American's retirement accounts, and in the last 5 trading days the Dow has lost over 1,400 points. And today at mid-morning it looks to be another crazy ride on the stock market roller coaster. Stocks plunged over 230 points at the open, despite news of the rate cut, because fear and panic are ruling the day. As this e-mail was sent out the Dow was down 160 points.

What does all this mean to a Realtor or real estate investor? First, short term borrowing is now cheaper, so consumers will receive reductions in their credit card interest rates as well as any rate that fluctuates with prime, which can mean home equity loans. Second, homeowners that might have rate adjustments coming up will also benefit from lower rates. Third, the current crisis in the equity markets has also led the 30-year fixed mortgage lower, with the rate now hovering around 5.82%. So this will bring more buyers as well as investors out of hiding.

So have these buyers come out of hiding, and are we near a bottom you wonder?

Well, if you reviewed the National Association of Realtor's Pending Home Sales Index you would certainly think so. The report shows a jump of 7.4% to 93.4 from July over August, the single best reading since June 2007. Lawrence Yun, NAR chief economist, said home buyers were responding to lower prices and lower interest rates. "What we're seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region," he said. "It's unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we're hopeful most of the increase will translate into closed existing-home sales."

I agree -- let's hope those pending sales do translate into closings!

Now for our real estate education section. Our question today: When Will Real Estate Values Rise?

Historically home prices have ultimately risen even after dramatic declines. Although there isn't any known method to pinpoint the top or bottom of any market, experts tend to agree that the following signs indicate a turning point.

•1. Real estate values stop declining and begin holding steady or selling side-ways. Although it may seem like common sense, determining the sales price of a home isn't as easy as it may initially appear. For example, the Case-Schiller Index tracks sale prices across the largest MSA's in the nation and while prices are still declining in the majority of cities surveyed, at least 20 metro areas experienced a recent price increase. Likewise, it is important to evaluate sale prices across different segments of the market - luxury homes continue to fall (and thereby lower the mean selling price of all homes in the area) while affordable homes have already showed signs of holding steady.

•2. Inflation. While inflation (the type often associated with excessive printing of new money out of thin air as demonstrated in the past several weeks) tends to hurt those on fixed incomes or who put money into savings accounts, it tends to help those who own commodities and hard assets like real estate since the price of goods and services tend to rise in relation to inflation.

•3. Lack of viable alternatives. One of the reasons real estate gained such a great deal of popularity and momentum in recent years was a lack of viable alternative investments after the technology or "dot-com" bubble. As investors seek new ways to obtain greater returns on their money - or simply keep pace with inflation - they will automatically gravitate toward that area which provides the best ROI or return on investment. Although real estate has experienced a major decline, so have all other forms of investment.

•4. Eased lending standards. The availability of credit and affordable low-interest rates is yet another major impetus toward creating rising real estate values however, it should be noted that for those who already own real estate (or have purchased short sales with considerable equity available), the ability to ‘act like the bank' and finance all or part of the sales price - at high interest rates- is a profitable endeavor to be considered. During the late 70's and early 80's as interest rates hit double digits, owner financed homes became a hot commodity as homebuyers bypassed the banks and worked out deals directly with the seller. Locking in a fixed 5, 6 or even 7 percent interest rate then re-selling a home at 10 or 12 percent interest rate results in immediate return without the hassle of taxes, insurance, maintenance or repairs.

More on Thursday...

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

Want to know how you can pull in six figures a month doing short sales on autopilot? Nathan is on track for another $100k month... Join us for our fr'ee Webinar Thursday night that will reveal the Top 12 Strategies on Getting Rich with Short Sales:

https://www2.gotomeeting.com/register/163012169

P.P.S.: If you really want to get started building your wealth, now that recognize that your 401(k) isn't going to do it, what are you waiting for? Take action today! A journey of a thousand miles begins with a single step. Take that step right now by clicking here:

http://www.shortsalesriches.com/welcome.html