Real Estate Investing in 2008: Are You Crazy – Well Maybe Not!

The latest data from the real estate industry shows a marketplace in steady decline and no bottom in sight. Residential home sales are in freefall mode with an expected 25% decline in the total number of home sales in 2007 versus 2006. Additionally, homes sales are currently off by more than 35% from the record year of 2005 when over 7.0 million homes sold.

Industry analysts estimate that we're on track to sell only 5 million houses nationwide for the entire 2007 year, which is the slowest pace since 1999. Equally sobering is the fact that at any given time there are about 4.4 million unsold homes for sale. Based on the number of available houses, it would take about 10.5 months to sell all the houses on the market right now.

It's not just the number of homes sold that is falling; it's also the sales price. The median, or average, home sales price is expected to dip below $211,000 for the year, which represents the first time since records have been kept that the year-over-year price of a home fell.

While home sales are plummeting and sales prices are falling, the only thing that seems to be rising is the number of foreclosures. During the first ten months of 2007, the foreclosure rate nationally surged by about 94%, which puts about 573,000 homeowners at risk of losing their homes.

As bad as things are right now, we might just be at the tip of the iceberg, because more than 2.2 million home loans are going to reset in the next year and a half as introductory and teaser rates end. Homeowners are faced with payments that are considerably higher than they had banked on – or budgeted for. Bush’s new homeowner bailout plan will save some, but will excluded most of the homes that are close or already in the foreclosure process.

Aright enough of the doom and gloom. With all financial bubbles there are many losers but a few big winners. Despite all of the above, now is the time to consider real estate investing. With prices down and motivated sellers everywhere real bargains are popping up and the long term returns on real estate should be outstanding in the coming years. Much of the risk has been taken out of real estate investing.

The housing market has undoubtedly changed, but I still think real estate is one of the best long-term investments you can make. I also think if you know what you're doing, there’s a whole lot of money to be made right now by investing in real estate.

The key to this opportunity is the ability to raise cash or credit quickly to make low all cash offers. The ability to have a combination of cash, credit lines and access to private lending will allow you to make low and compelling offers. In many cases, buyer will forced to accept any reasonable offer.

If you do this, you'll discover that this is possibly one of the best times in more than a generation in which to make tens of thousands of dollars -- or more -- by playing your cards right and timing your real estate purchases in a way guaranteed to help you build a fat real estate portfolio.


About the Author:

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, Pa and creator of the Private Lender PowerPoint Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Real Estate Wealth Today or visit our blog at Real Estate Investment Blog.

Technorati Profile

Home Prices Down 6.1% in Past Year!

Home prices in 20 major U.S. cities were down 6.1% on average in the past year as of October, according to the Case-Shiller price index released Wednesday by Standard & Poor's.

Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3% in April 1991.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, chief economist at MacroMarkets LLC and co-developer of the index.

Eleven of the 20 metro areas posted a record low annual growth rate, and six of the metro areas posted double digit declines. Also, all 20 metro areas declined from the prior month.
San Diego posted the largest decline of 2.6%.

Miami sustained the largest drop over the past year, with a decline of 12.4%. Next came Tampa, with a drop of 11.8%; Detroit, with a drop of 11.2%; and San Diego, with a drop of 11.1%.
Home prices are going to decline "considerably further" in coming quarters, likely reaching a double-digit pace on a year-over-year basis, according to Joshua Shapiro, chief economist for MFR Inc.

"Given conditions relating to mortgage financing, and the number of unsold homes that is piling up, all regions are likely to continue on a negative trend in the months ahead, and those with the greatest oversupply (at the bottom of the pack at the moment) will continue to fall by the most," wrote Shapiro in a research note.

Three areas -- Charlotte, N.C., Seattle, and Portland, Ore., -- were the only ones still experiencing positive annual growth rates in home prices, according to the report. Charlotte gained 4.3%, Seattle gained 3.3% and Portland gained 1.9%.

Both the 10-city and 20-city composites declined 1.4% from September -- their single largest monthly decline on record.

October's results mark the 10th consecutive month of negative annual returns, and the 23rd consecutive month of decelerating returns, according to the report.
Ruth Mantell is a MarketWatch reporter based in Washington.

The Top 10 Real Estate Sites for Novemebr 2007

These are the top 10 real estate sites for Novemeber 2007 and thier respective volumes

1. Realtor.com 6,915,000
2. Yahoo Real estate 4,847,000
3. MSN Real Estate 2,734,000
4. Rent.com 2,556,000
5. HomeAgain.com 1,997,000
6. Apartments.com 1,972,000
7. Zillow.com 1,827,000
8. HPC Interactive 1,688,000
9. Homes.com 1,640,000
10. Remax.com 1,429,000

Bush Signs Mortgage Tax Relief Into Law

President George W. Bush signed legislation into law on Thursday that will ease the tax burden for home owners who have had debt forgiven on a mortgage due to a foreclosure, short sale, or deed in lieu of foreclosure. The bill — Mortgage Forgiveness Debt Relief Act — has been supported by NAR since the 1990s.

"The president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home," said NAR President Dick Gaylord in a statement. "Today's bill will ensure that any debt forgiven on a mortgage secured for a principal residence will not be taxed. This is very significant legislation."

The tax code used to require a lender who forgives debt to provide a Form 1099 to the IRS stating the amount the borrower had been forgiven. If the property was sold at foreclosure or was sold for less than what was borrowed, that difference was considered income and subject to the tax.

"We have always believed that it is clearly an issue of fairness and of not kicking people when they are down," Gaylord said. "By making the forgiven debt taxable income, individuals in already unfortunate situations most likely faced IRS actions because they did not have the money to pay the additional taxes. This legislation will relieve that additional burden and may also encourage families to work with their lender to negotiate terms, knowing they will now not be subject to an IRS bill."

Other Legislation Making Its Way to the President

Also, this week, the U.S. House passed two other bills — which have already passed the Senate — that could have a big impact on the real estate industry.

The bills are:

• Mortgage Insurance Tax Deductibility. This bill makes mortgage insurance premiums tax deductible for all mortgages originated for the next three years. Mortgage insurer Genworth Financial estimates that this tax break is worth $350 to the average taxpayer who has purchased a home with less than 20 percent down.

• Terrorism Risk Insurance Act. Federal backstops for terrorism insurance, passed initially after the Sept. 11 attacks, have been extended for another seven years. The bill also expands the program's protection by including domestic terrorism. The insurance and real estate industries have pushed for an extension, saying federal guarantees to help cover catastrophic losses are crucial to stimulating the investment needed to spur economic growth.

Bush Housing Plan Summarized

The Bush administration Thursday unveiled a plan designed to slow a wave of mortgage foreclosures. The architects of the plan say it could help 1.2 million troubled borrowers hold onto their homes.

The initiative, put together by the Treasury Department and the mortgage industry, sets detailed terms to identify homeowners who qualify for aid.

Here's how it will work:

• The plan will focus on subprime, first-lien, adjustable-rate mortgages, and particularly once-popular 2/28 and 3/27 loans.
• Under such plans, mortgage rates were fixed only for the first two or three years of a 30-year loan.
• Loans originated between Jan. 1, 2005, and July 31, 2007, whose interest rates will reset for the first time between Jan. 1, 2008, and July 31, 2010, would be eligible for a five-year interest-rate freeze.
• Only owner-occupied homes would qualify for a rate freeze.
• The plan is not binding on all mortgage industry players, but would stand as a set of best-practices and guiding principles.
• Some plan provisions might be applicable to troubled prime and Alt-A loans, though not second liens.
• Plan says target borrowers should be contacted about the program four months prior to the date their interest rates are set to be increased.
• Borrowers must be making timely payments at present and not have missed two months of mortgage payments in the previous year to qualify for a rate freeze.
• Borrowers eligible for rate-freeze may have a loan-to-value ratio greater than 97 percent and must be facing an interest rate spike, typically 10 percent or greater.
• The Borrower must be current on all payments.
• The borrower can not have a FICO score over 660 to be eligble.
• Mortgage servicers will help borrowers refinance in a way that avoids costly pre-payment penalties for abandoning the loan early.

The program identifies three general classes of troubled borrowers according to their ability to pay, two of which potentially would be eligible for relief:

1. Strong borrowers facing a rate-reset. They will be shepherded into conventional, fixed-rate mortgages, such as those available under the Federal Housing Administration.
2. Borrowers who may be eligible for a rate freeze. A formula comparing a borrower's current credit score with a score assessed at loan origination will help determine whether a borrower can get a "fast-track" rate freeze. Borrowers with credit scores of less than 660 that have not increased by 10 percent or more since the origination of the mortgage will be fast-tracked for a modification. Borrowers whose credit scores have climbed may still qualify for a freeze if they meet other tests.
3. Struggling borrowers who are deemed not able to afford even a modified loan. They would face foreclosure

Please tell me what you think the plan will do - if anything

Paulson's reveals more details about a national mortgage-rescue plan

WASHINGTON — Treasury Secretary Henry Paulson revealed more details about a national mortgage-rescue plan and proposed Monday to help state and local governments issue tax-exempt bonds to pay for mortgage refinancing. He also confirmed that he seeks to freeze temporarily the rates of tens of thousands of home loans that are about to adjust to higher rates.

Paulson told a national housing forum that Congress should authorize state and local governments to broaden their tax-exempt bond programs temporarily. Currently, states have authorization to issue tax-exempt bonds only to aid first-time homebuyers in designated distress zones. Paulson proposed to expand this to allow state and local governments to issue tax-free bonds to help in mortgage refinancing.

He also confirmed that he's trying to craft a plan that would prevent massive foreclosures when roughly 1.5 million adjustable-rate mortgages, or ARMs, reset to higher monthly rates next year. The affected ARMs involve subprime loans — those given to borrowers with weak credit histories.

The Treasury Department hopes to target holders of subprime ARMs who aren't yet behind on their payments but could be next year after their loans reset to higher interest rates.

Paulson stressed that there would be no government subsidy to borrowers or lenders.

The approach assumes that lenders will go along with making less money than they would have once the adjustable-rate mortgages reset — if borrowers were able to pay the higher rates.

The same holds true for investors who purchased the loans on the secondary mortgage market, where they were bundled together with other loans and sold as mortgage bonds.

The incentive for lenders and investors is to keep troubled loans from falling into foreclosure and to come up with an industry-wide plan that will keep losses at a minimum and allow the slumping housing sector to recover.

Paulson's plan seeks to rescue from ARM resets the borrowers "with steady incomes and relatively clean payment histories who could afford the lower introductory rate but cannot afford the higher adjusted rate," he said.

Just who these borrowers are and how they would be identified is still under discussion. It's a thorny issue because as lending standards deteriorated in late 2005 and 2006 at the tail end of a nationwide housing boom, many borrowers took out "no doc" loans — no documentation — for which they didn't reveal their income or inflated their stated income.

Speaking at the same forum, sponsored by the Office of Thrift Supervision, the heads of Countrywide Financial and Washington Mutual Inc., which have among the largest exposures to problem mortgages, publicly supported Paulson's plan.

Foreclosures Skyrocketing! Now is the Time to Get into the Real Estate Game

According to RealtyTrac, foreclosures have skyrocketed during the first ten months of this year by almost 94%, and if the current trend holds true it's possible that up to 2 million homeowners stand to lose their homes in the next year and a half. That's bad news for the homeowners, bad news for the economy, and a devastating reality for the banking industry that must take back all these homes.

Imagine Banks Having To Own And Maintain 2 Million Homes!

Does this create opportunity? Savvy real estate investors have the potential to realize unprecedented profits if they play their cards right by investing in bank owned properties commonly know as Real Estate Owned (“REO”). As banks continue taking more and more homes back into inventory, their level of desperation is rising. The truth is, they can't afford to keep these houses on their books indefinitely. They need to move these houses and they need to move them quickly. This is where you come in!

A lot of people make the mistake in assuming that they are out of luck when trying to negotiate with the bank, because banks typically bring in their own appraiser. Banks also try to stipulate that the house must sell for more than “fair market value”.

Too many investors with limited experience negotiating REO sales with banks decide to walk away from the table at this point with the mistaken assumption that there is no way the bank would accept their offer. A savvy real estate investor knows that this is when things are just beginning to get interesting!

You can win the REO negotiation game with the bank, but you have to sell the bank on why it makes sense for them to accept your offer. As part of your offer package to a bank, be sure to include a list of low comparative sales that fully support your offer price. There may be other higher sales in there area, but you are not required to included these in the list of comparable sales. Remember the bank can do its own homework, but you must present real sales that support your offer price.

Another really good way of getting banks to accept your offer is by providing them with a complete list of the extensive and costly repairs required to the house to bring it up to “sellable” condition. By casting the house in its most negative light, you dramatically improve your chances of getting the bank to accept your offer.

Another key to getting your offer accepted is to offer all cash and close in 30 days or less. The last thing the bank wants is to agree to a sale with you and then have to do the same thing over again because you could not get a mortgage. Banks are generally very motivated to get things off their books before the month ends so they can show their bosses and boards how good they are at moving real estate owned and solve the bank’s problems. So an offer that closes within the month is viewed very positive by a bank

In today's market, it's relatively easy to get a lender to go along with a REO sale for a discount of 15% to 30% off of fair market value. If you're a new investor and have limited cash and capital, this may be an outstanding way to buy at below market prices.

You can pick up a house at a good price, make a few repairs, and flip it pretty quickly for a pretty good profit or hold long term as a rental.

If you have a large line of credit with ready cash, or can plug into a network of private investors or hard money lenders, you can buy blocks of REO directly from the bank – I’m talking about 10, 15, or even 20 properties at a time – and get them for about $.50 on the dollar. You can see how quickly a good investment can turn into a great investment.

The unprecedented number of homes going back into inventory has banks scrambling to unload these properties as quickly as possible. By having access to cash you can grab as many of these money-making REO as you can get your hands on before they’re all gone.

Regardless of what route you take, there’s never been a better time to buy a property at a steep discount. If you're ready, willing, and able to do what it takes to capitalize on current market conditions, you can make a lot of money investing in REO.

About the Author:

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, Pa and creator of the Private Lender PowerPoint Presentation Kit. This kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your business. To learn more about this powerful step-by-step kit and to receive your FREE Real Estate Wealth Newsletter go to www.RealEstateWealthToday.com.

How to Use Post-it Notes to get Sellers Calling You

Dear Guys:

I was having lunch today with an associate and he was complaining about there being "no deals" anywhere and was frustrated he could not find profitable real estate deals. I was stunned to hear this when most of our students are doing very well and deals are everywhere - so I thought I take a moment and show everyone one of the best ways to get sellers calling you with real deals.

Post-it Notes are the answer

One of the top ways of getting really motivated sellers to call is to use post-it notes - if you are not familiar with these they are the small yellow sticky notes that 3M puts out in packs of 50 or
100 and people use for small notes or to book mark pages of book - but most people do not know that you can get post-it notes preprinted with your sales message on them for a very reasonable price - usually about 2 or 3 cents per page - you then get kids or friends to stick them on the doors of neighborhoods where you want to buy houses - they can typically put out 200 per hour if they are moving good - get two people for four hours and you have 1600 pieces delivered to 1600 homes - we typically pay about 10 cents per delivered post it note - total cost is about 12 to 15 cents per post-it note - that is about $200 to $250 dollars.

Now you may get as high as a 1% response rate or about 16 calls for $250 - now imagine getting just one deal for this amount and netting $5,000 to $15,000 - these are the kinds of numbers you should be getting.

This is one of the best ways to get sellers calling and is very targeted to the exact neighborhoods you want to buy in or even the exact street. I have attached two samples of post-it notes we use and you can modify for your purposes - once you have it adjusted to fit your needs simple go to Goggle and type preprint post it notes and select a printer - most of them you can upload your file for them to print onto the post it notes.

Please try and you will be amazed at how powerful this method is.

Also if you any marketing that is working and you want to share with the groups please email back to me and I will include a summary of it a future newsletter.

Thanks
Mike Lautensack
http://realestatewealthtoday.com/

Housing Prices Down 4.5% - Where is the Bottom??

Here is article about the continued drop in prices - where is the bottom?

WASHINGTON (MarketWatch) -- U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday.

Home prices fell in September in all 20 major cities covered by the Case-Shiller price index, even in cities that had been holding up before the August freeze in mortgage markets, Standard & Poor's reported.

"There is no real positive news in today's data," said Robert Shiller, chief economist at MacroMarkets LLC, and the co-developer of the index. Shiller said it's nearly impossible to forecast when the market could turn around.

For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index.

For the first time in this housing cycle, prices in all 20 cities dropped from the previous month, with the biggest declines in the former bubble cities of Miami, Phoenix, San Diego, Las Vegas, Los Angeles and Tampa.

For the 20 cities, prices fell a record 4.9% year-over-year.

Meanwhile, prices were down 5.5% year-over-year in the original 10-city index, the largest drop in the 10-city index since 1991.

The last time prices fell so much, it took more than eight years for home prices to return to their peak level.

"We judge the recent decline in home prices to be the beginning of an extended decline," wrote Drew Matus, an economist for Lehman Bros., who said prices would probably fall 15% from peak to trough nationally.

"With supply overhang growing and mortgage financing tougher to obtain, home prices are going to soften considerably further in the quarters ahead," wrote Joshua Shapiro, chief economist for MFR.

The Case-Shiller index, which tracks multiple sales of the same homes, is considered by many observers to be the best gauge of national and metropolitan-area real-estate values.

Falling prices make it more difficult for homeowners to tap the equity in their homes or refinance their mortgages. Millions of homeowners who took out adjustable-rate loans in 2005 and 2006 face sharply higher mortgage payments this year and next, with foreclosures having already soared as the result of payment resets.

"It is surprising that the weaker housing market so far has had such a limited effect on U.S. household spending," wrote Gabriel Stein, an analyst for Lombard Street Research. "However, if house prices do continue to fall at their recent pace, it would be astonishing indeed if this did not badly hit consumer confidence and hence spending."

In a separate report, the Conference Board reported a sharp drop in the consumer confidence index in November, largely because of worries about the near-term outlook for energy prices and the stock market.

Plunging home prices will also be felt on Wall Street, where banks and other money managers have leveraged untold billions in complex securities based on increasingly risky mortgages.

Boom goes bust

Former boom towns in Florida and Southern California have now passed Detroit for the dubious honor of having the largest price declines in the past year. Prices are still up in the Pacific Northwest and in areas of the South, but they're rising at a slower pace.

Fifteen of the 20 cities tracked in the index have seen prices fall in the past year, led by Tampa, Fla., with an 11.1% decline, followed by Miami with a 10% loss and Detroit with a 9.3% loss.

Indeed, eight of the 20 cities recorded their largest-ever year-over-year price declines in September.

On a year-over-year basis, prices were up in five cities, led by Seattle and Charlotte, N.C., with 4.7% increases. After adjusting for inflation of 3.7% in the past year, real prices were up in just two of 20 cities.

Here are the year-over-year nominal price changes for the 20 cities covered by the index:

Tampa, down 11.1%; Miami, down 10%; Detroit, down 9.6%: San Diego, down 9.6%; Las Vegas, down 9%; Phoenix, Ariz., down 8.8%; Los Angeles, down 7%; Washington, D.C., down 6.6%; San Francisco, down 4.6%; Minneapolis, down 4.5%; Cleveland, down 4%; New York, down 3.6%; Boston, down 3.2%; Chicago, down 2.5%; Denver, Colo., down 0.9%; Dallas, up 0.2%; Atlanta, up 0.4%; Portland, Ore., up 2.2%; Charlotte, up 4.7%; and Seattle, up 4.7%.

Another Way to Invest in Real Estate

Guys:

In addition to buying and selling hosues, I follow the general real estae market very closely and have rcently started to buy home builder stocks - I am slowing adding to my holdings of the ITB iShares index which trades at around 18 to 20 now - this is down from a high of 45.
This is high risk stuff but I beleive that the hosuing stocks have been so beaten down thier downside is very low.

I do beleive that housing prices probably have another 10-15% to fall on average before this cycle ends. I bet there will be more bankruptcies among homebuilders before all of this is done.

When the cycle is done I thick we see many of the following signs:

• Surviving builders trade at 50-75% of written-down book value.
• Earnings are negative, but no longer getting worse.
• Early value investors will have given up on the sector.
• Old standards will return for loan underwriting.
• Financial magazines will talk about prudence in borrowing against residential real estate, and how it is not a “one way ticket” to riches.
• Inventory levels decline 20% from their peak levels

This is an interesting additional way to play the real etate market

Thanks

Mike

Investing Secrets in the Post-Bubble Real Estate Era

Attention Real Estate Investor: Learn the New Investing Secrets in the Post-Bubble Real Estate Era

You would have to be living in a cave or tucked away on a deserted island somewhere in the middle of the Pacific Ocean not to know that the American real estate market has effectively fallen apart. Real estate investing techniques and strategies that have worked so well and for so long are no longer effective. If you want to continue making money in real estate today, you'll have to adjust your strategies accordingly, or risk being left behind in today's post-bubble market.

One such strategy is the short sale.

A short sale is nothing more than convincing the lender to accept an amount less than the current loan payoff amount as full payment for a property. Because real estate as we know it has changed so dramatically so quickly, banks are more motivated than ever to quickly unload these properties and get them off their books as soon as possible. The reason for this is really quite simple: Most banks are required to maintain cash reserves of up to six times the retail value of each real estate owned (“REO”) on hand. Because an REO is actually a liability and not an asset – and there are so many of them – you have an unprecedented opportunity to simultaneously help a friendly banker as well as yourself.

Here's how it works.

Once you've located a distressed property owner and have convinced them that letting you solve their real estate problem is in their best interest, you'll need to prepare a real estate sales contract (signed by you and the homeowner) reflecting the amount you wish to offer the bank.

In addition, you’ll also need some additional documentation for the bank’s Loss Mitigation Department: A cover letter that fully explains your offer and the reasons why you simply can’t offer full price for the property. If you’ve properly done your homework, the accompanying documents will help build your case. I’m talking here about area comp sheets, photos of the property that highlight the negative aspects of the property, a hardship letter from the property owner explaining the severity of their current financial situation, as well as a HUD-1 net sheet showing the lender exactly how much money they’ll be left with after all expenses – closing costs, taxes, etc. – have been paid.

One last item you’ll fax to the lender is critical to your offer. You need to send them a list detailing all needed repairs – and the associated costs – to help your offer seem even more practical. You don’t have to tell the lender that the property is falling down. The estimate will do that for you.

Keep in mind: the lender doesn’t want property back. You’re doing them a favor by taking it off their hands. Because they’re in business to make money from interest and not owning real estate, they’re not going to try to get as much money as they possibly can from the property. Banks are far more interested in getting REO’s off their books and freeing up the cash reserves requirement.

While the bank could conceivably finance the property for you, don’t count on it. So be prepared to provide your own financing source either through your own bank or an alternative lending source that you’ve already lined up.

The new reality in real estate is that there is plenty of money to be made by investors who are prepared to seize the opportunity. Short sales are a great way to do this. As long as the foreclosure rate is rising faster than gas prices, you stand to have an almost unlimited profit potential. You can capitalize on these opportunities when they present themselves by lining up a ready supply of private lenders that are able to provide the cash you need at a moment’s notice. Then you can truly build your American Dream.

About the Author:

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, Pa and creator of the Private Lender PowerPoint Presentation Kit. This kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your business. To learn more about this powerful step-by-step kit and receive your FREE Real Estate Wealth Newsletter go to http://www.realestatewealthtoday.com/