Richard Brody

How does one really know when to buy or sell real estate? There are many factors involved, and without a crystal ball, you can't be 100% certain! Every day, the media publicizes a lot of confusing information, and it is very difficult for the average person to know what it really means.

We all know that during all of 2009 and most of 2008, in most areas of the country, housing prices have fallen, in most areas by more than 20% since the height of the market. However, many people tend to forget that the real estate market has experienced these down cycles before, albeit usually not as severely. What is unique about this "cycle"is that the dramatic drop in prices has been accompanied by record low mortgage rates! While one would logically think that would create a buyers market, the combination of high joblessness and under-employment, combined with the lower stock prices, and extraordinarily tight credit market (making mortgage loans much more difficult to get), has caused buyers market pricing conditions but neutral market market conditions. The number of buyers has been inconsistent - especially the number of qualified buyers. Buyers realize that they do not have to act with the urgency that they did when the market was higher because there are very few bidding wars out there. It took sellers quite a while to realize, or at least accept the fact that they were not going to be able to sell their houses at the pricing when the market peaked, and thus many homes either did not sell, or sold only after numerous price adjustment (PC way of saying "price drops"), and the number of days a listed home remained on the market increased dramatically.

Qualified buyers - - those with good credit (credit scores of 700+), at least 20% to put down, and sufficient demonstrable income - - got some "great deals." Lending institutions received billions to "bail" them out, but very little of this money went to loosening credit. Most of that money simply made the banks more profitable. The typical American's credit score was "arbitrarily" lowered because of how it is calculated, and the impact that most credit card companies lower the vast majority of individuals credit limits. This caused the credit ratios to change, and thus credit scores to be lowered. This, in turn, tightened the mortgage market even further, because individuals with seemingly good credit, saw their credit scores lowered because of bank policy that had nothing to do with them specifically. The continuous of this "circle of circumstances" was that this policy created even fewer qualified buyers, thus causing additional havoc in the housing market.

The fear of the recession and the joblessness rate created many potential buyers to shy away from house hunting. The Federal first-time housing credit, combined with the extension and enhancement of the program to cover many that have held homes for more than five years, has helped bring out some additional buyers. Since this program is, however an expiring one, scheduled to expire in mid-2010 (must be in contract by Aprkil 30 and close by June 30), there is an added incentive to buy a home. The indication that the recession has or is close to coming to an end, has created somewhat of an increase in consumer confidence, as has the general feeling that the joblessness rate has or neared its top, and should come down during 2010, should increase home buyin g in the next few months. The government has also indicated that it will exert pressure on lending institutions to make consumer loans, including mortgages, more readily available, which should also be a plus.

Therefore, with record low mortgage rates, low home prices, and a slight easing of the mortgage loan availability, combined with the tax incentive, the next few months should provide a limited window for qualified home buyers to take advantage of a great circumstance. Obviously, as the economy increases, and mortgage rates rise, and markets stabilize, the cost of home ownership will increase. A serious home buyer should take advantage of these conditions, before we return to less favorable buying conditions. Remember that the real estate market is cyclical, and there may not be a better time to buy a house for many years than there is today!

HOW ECONOMIC DATA & THE HYPE CONFUSE

I am sure that many of you have heard that gold was a great investment, and that investors like gold as a hedge against bad economic news. Since gold is now experiencing its best year since its last peak in January 1980, it is a good time to review the reality. On December 3rd, gold reached a record high, exceeding $1,225 an ounce. A gold investor who purchased gold during the last peak at $850 an ounce, has seen a return of approximately 44 percent. To put that into perspective, if one reinvested dividends, the Standard & Poor 500 stock index multiplied approximately 22 times. Even Treasury vehicles rose more than ten times, and interest-bearing bank accounts (not including Certificate of Deposits) almost doubled! When one factors in inflation, gold investors are still VERY far away from breaking even on their investment! Am analysis of gold investing leads one ro realize that gold is NOT a good long-term investor, and that the security of owning something tangible for "peace of mind" can be very costly.
Similarly, the originally cost of the TARP bail-out has been recalculated because many banks have repaid the loans much earlier than forecast. The cost of the TARP bailout has therefore been recalculated downward by approximately $200 billion (over 10years). The Government has actually made money on many of the TARP loans repaid. Does anyone think they know why these companies are repaying early? Could it have anything to do with not wanting to have the government have the "leverage" over them?
Several months, the politicians and the media were celebrating what they referred to as landmark legislation regulating the credit card companies. However, the law that was passed would not take place for nine months after enacted. So what have the banks done? They've configure themselves to make significant moves ahead of the deadline, so they are in the most advantageous position possible. Many of the banks have raised their interest rates; many others have arbitrarily and across the board lowered credit limits. And to make the system even more ludicrous, the way credit scores are calculated, the banks lowering of credit limits causes many people's credit scores (FICO, etc.) to go down!
So, what did the banks do with the monies they received to bail them out? Wasn't the public led to believe that it was necessary to bail out the banks, so that credit would be available for purchases, mortgages, etc? Well, what most of the banks did was use the funds to make their own bottom line look better, while tightening credit more and more!
President Obama called a huge jobs summit, which appeared to accomplish less than a typical jobs fair! The President then made a speech that addressing jobs was a priority (then where does it go on the priority list with his other stated priorities?), but that it needed to be a combined government- private sector approach, because the government has to be mindful of the growing US deficit and its inherent problems, and that the government isn 't in a position to spend all the needed funds. Yet, if this is a priority, it must be treated as such! Since Mr. Obama took office, the U.S. deficit has grown from a ridiculously high $400 Billion, which he inherited, to over $1.4 Trillion today. We have been told that the Afghanistan surge will cost $30 billion (but that number is only the additional funds we are told will be spend over the next 18 months). Will anyone be surprised to see that number grow exponentially! On the Sunday morning shows, Secretary of Defense Gates and Secretary of State Clinton kept saying that basically there would be a slight first pull-out of some troops, beginning in July 2011! Haven't we heard before that there was "light at the end of the tunnel," as LBJ used to say?
Beware the jobless/ unemployment figures! I am always wary when the government produces "better than expected" figures, right before the President's big speech tomorrow night on jobs. Factoring in those that are counted, those that are working part-time instead of full-time, those that have given up looking, and those who have, out of desperation taken significantly lower paying positions, the joblessness and employment/ unemployment issues should the U.S.' number 1 priority! The U.S. must seriously address this issue for our economy to fully recover.
Are things a little better? Yes, I don't think we are getting worse, and I do believe there will be improvement. It is rumored that the Federal Reserve is already discussing when (not if) they will begin to raise interest rates. So, the one thing that any consumer who is in a position to - - who can afford to - - should do, is seriously consider purchasing real estate now! Mortgage rates are historically low, home prices are low, and qualified individuals with reasonable credit who can put 20% down, can get a mortgage on a properly priced home! Those considering it, but waiting are most likely going to be very disappointed when sometime next year, mortgage rates go up, housing prices begin to rise, and the Housing Credit expires! This may be the best real estate buying opportunity in some time!
Nobody can foresee the future, and nobody can pinpoint the precise low point of a market. Those than panicked and sold off stocks at their low, and did not step in when the Dow was about 8400 because they were waiting for the low, missed an opportunity to take some advantage. The ideal stock-buying strategy over time has always been dollar-cost averaging. That strategy has worked in up markets, down markets, and do-nothing stock markets. It takes dicipline, but averages out purchase prices so that the market swings are not catastrophes!
Patients, being wary of the hype, and understanding that all markets are cyclical is the best long-term strategy. Nobody ever makes a profit unless they sell, so one should be much more interested in a long-term, successful approach.

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30 Yr Mortgage Rates hit all-time low & other housing info

Freddie Mac stated today that the 30-year fixed-rate mortgage average hit a new low. The 30-year average declined to 4.71% (with an average 0.7 point) for the week ending Dec. 3 from 4.78% last week. This new 30-year average is the lowest since Freddie Mac began its weekly survey in 1971. Last year, the average was 5.53%. Remember that this is the average 30- year rate, which means that many lending institutions are offering even low rates. Frank Nothaft, Freddie Mac's chief economist stated, "Low mortgage rates and the cumulative decline in house prices have contributed to an extremely affordable housing market and helped spur home sales this year . . . For instance, total new and existing home sales in October were 36% higher than their January low on a seasonally adjusted, annualized rate, according to the U.S. Census Bureau and the National Association of Realtors."
So, there is improving news in the housing/ real estate markets. The combination of the Federal housing tax credit, low mortgage rates, lower home prices, and some improvement in consumer belief that the worst of the recession is over, has created this improvement. As we enter the Holiday season, real estate "shopping" historically cools off until after the holiday season. However, this kind of news is hopefully a fore-teller of a better 2010 housing market.
Another promising indication is that the President is finally convening a Jobs-related summit for tomorrow, and hopefully, that will addressed the major weakness in both the housing market as well as the overall economy. Let's hope that our political leaders have finally understood that joblessness is what's keeping our economy from really growing, and they will address some real solutions to that situation. Amongst my suggestions: (1) Incentives for hiring in "progressive" industries, such as alternative energy, technology, etc-- that will NOT ONLY put people back to work, but also support industries will be necessary for the US to reach the next level. As an Ecobroker, I believe that incentives in "green-related" building and renovations will boost the economy, help the joblessness situation, and make houses more sustainable for now and the future; (2) Make the joblessness challenge the #1 Economic Priority; (3) Create incentives so that progressive industries benefit by hiring people, than by the cost-savings side-effects of layoffs. Let's put America back to work again!

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The preliminary figures have been released regarding Black Friday, and depending on how you wish to view it, the numbers are either bad news, so-so news, or good news. Apparently more Americans purchased on Black Friday, but their average spending was down about 5-10% for the day, and the total retail sales were either flat, or slightly lower. Since today is so-called Cyber-Monday, we do not know yet what these numbers will show, but more retailers are offering Cyber-Monday sales than ever before!
So, what does that mean? Well, the good news is, that despite the ongoing recession, despite the high joblessness rate, despite the credit tightening (many of the larger banks have tightened, eliminated, reduced credit lines, and increased credit card interest rates charged, while changing their installment payment features, thus requiring higher minimum payments), despite the fact that merchants are being quite conservative about inventory-on-hand, more Americans are still buying gifts, and the total spent has not been reduced significantly. Also, many retailers began their promotions early or are stretching them out over a longer period of time, which makes the Black Friday numbers even more positive! Granted last year's holiday season was not a robust one for retailers, but considering the cost-saving measures many companies have implemented, I feel the overall indicators are positive ones.
I am guessing that the Cyber-Monday results will either parallel the stores, or be slightly better than the store results. These numbers might be slightly skewed also because of many sites stretching this sale period out over a longer period of time. I am of the belief that there will be a higher than usual number of last-minute shoppers this holiday season, but that retailers will have to be creative as well as use discounting to attract more shoppers. I also feel that consumers will still purchase for the holidays, but that the average spending per shopper will be somewhat lower than in the past.
Since many manufacturers are suffering like retailers and consumers, many manufacturers are offering discounts and/ or incentives to retailers at a much greater rate this season than in the past. That is also a factor in the lower consumer purchasing averages.
Having gone to a few stores, malls, and warehouse clubs both on Black Friday as well as on Saturday, it is obvious that this season is being kinder to some stores than others, and to some malls than others. On Black Friday, WalMart was packed for the Early Bird sales, butr much quieter the rest of the day. The store Friday afternoon looked like it must have been "packed and ransacked" in the morning, but was simply messy and not fully re-stocked on Friday afternoon. The warehouse clubs seemed to be doing business as usual on Friday! On Saturday, I went to two different malls, and while one mall seemed very quiet, the other was very busy. Some stores were obviously much busier than others. Yet, for example, the Apple Store at one mall seemed relatively quiet, while at the other mall was busy.
We need to start adopting the "half-full" instead of "half-empty" philosophy, or this recession will stretch out and linger longer than it would on its own. All too often, too many of the so-called "experts" analyze each piece of data independently, without trying to understand some of the many causes. Daily discussions of the prices of gold, oil, and the stock indexes. are as misguided as people looking for "quick kills" in purchasing stocks rather than long-term outlooks. Historically, investors who use "dollar-cost averaging" have out-performed most others, because they do not fall victim to normal and abnormal market swings. We all need to "sit back and chill out" and look at things through a broader window, and figure out the best long-term strategies.
Let's remember that when George Bush became President he inherited a budget surplus. By the time he left office eight years later, instead of a surplus there was a $400 Billion plus deficit. A little more than ten months after President Obama took office, the US deficit now exceeds $1.4 Trillion. We need to understand that deficit financing has long-term impacts and ramifications, and the US cannot simply keep spending without a plan for repaying it. That is why our dollar is so weak, even though the recession is a world-wide challenge, not just an American one.
Weak housimg markets, high foreclosure rates, high joblessness rates, etc., cannot and are not balanced out solely by spending and low interest rates. America must reconfigure our economy to make it stronger and more productive! We need to get people back to work, and keep them working. That should be the major thrust of our government's activities now-- on the Federal, State and Local Levels. Demand that from your government leaders!

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The most recent housing report showed that sales for October 2009 were up 10.1% over October 2008. While that is certainly promising news, it must be considered in light of a few factors. The first factor was, of course, that October 2008 numbers were so dismal that even with an increase, there is plenty of room for improvement. Then, we must remember that some closings last month occurred as a result of the First Time Housing Credit, and the uncertainty at that time over whether it would be extended (remember it was originally set to expire at end of November). The continuation of historically low mortgage rates has certainly also helped. In addition, while sales were up, the average price of a house sold last month versus a year before is down, so, in other words, houses are still selling for less than in the past.
The good news are indications are that the worst of the recession is probably past us, consumer confidence seems to have improved slightly, mortgage rates should remain low for the foreseeable future (and hopefully the government will apply pressures on lenders to lend!), home prices are more affordable, the Home buying credit has been BOTH extend and enhanced, and most economists are calling for the U.S. economy to improve somewhat throughout 2010. The less-happy news is the high joblessness rate, the uncertainty in the economy, less than stellar public consumer confidence, and a seemingly prevailing attitude that "there is no rush" to do anything, and the overall wait-and-see attitude.
We have gone from a decade of a "seller's market" in the housing market, to a mixed market, to a buyer's market (where unfortunately NOT enough buyers are taking advantage - - - either being unwilling, afraid, or unable to). The real estate market has always been cyclical, and this market is the same in that way. We are probably at or near the bottom of the market now, and 2010 should probably see the beginning of the recovery. Those in a position to take advantage should do so now, because the combination of tax advantages, low prices and low mortgage rates have brought the true cost of home purchasing down significantly.
The industry and those interested in having a sound and robust housing market should implore their elected officials to address the most pressing economic issues now --- joblessness (and job creation), consumer confidence, responsible economic policies, and continued incentives that benefits consumers instead of just large corporations!

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The most recent housing report showed that sales for October 2009 were up 10.1% over October 2008. While that is certainly promising news, it must be considered in light of a few factors. The first factor was, of course, that October 2008 numbers were so dismal that even with an increase, there is plenty of room for improvement. Then, we must remember that some closings last month occurred as a result of the First Time Housing Credit, and the uncertainty at that time over whether it would be extended (remember it was originally set to expire at end of November). The continuation of historically low mortgage rates has certainly also helped. In addition, while sales were up, the average price of a house sold last month versus a year before is down, so, in other words, houses are still selling for less than in the past.
The good news are indications are that the worst of the recession is probably past us, consumer confidence seems to have improved slightly, mortgage rates should remain low for the foreseeable future (and hopefully the government will apply pressures on lenders to lend!), home prices are more affordable, the Home buying credit has been BOTH extend and enhanced, and most economists are calling for the U.S. economy to improve somewhat throughout 2010. The less-happy news is the high joblessness rate, the uncertainty in the economy, less than stellar public consumer confidence, and a seemingly prevailing attitude that "there is no rush" to do anything, and the overall wait-and-see attitude.
We have gone from a decade of a "seller's market" in the housing market, to a mixed market, to a buyer's market (where unfortunately NOT enough buyers are taking advantage - - - either being unwilling, afraid, or unable to). The real estate market has always been cyclical, and this market is the same in that way. We are probably at or near the bottom of the market now, and 2010 should probably see the beginning of the recovery. Those in a position to take advantage should do so now, because the combination of tax advantages, low prices and low mortgage rates have brought the true cost of home purchasing down significantly.
The industry and those interested in having a sound and robust housing market should implore their elected officials to address the most pressing economic issues now --- joblessness (and job creation), consumer confidence, responsible economic policies, and continued incentives that benefits consumers instead of just large corporations!

FOLLOW ME ON TWITTER: @rgbrody (www.twitter.com/rgbrody
CHECK OUT MY REAL ESTATE SITE: http://tinyurl.com/pwlire
LEARN WHAT A CONSULTING PRO CAN DO FOR YOU: http://tinyurl.com/rgbcons
FOLLOW MY BLOG UPDATES (updated several times each week):
http://tinyurl.com/rgbstake