By Joel Persinger
YourRealEstateDude.com
Like almost every morning at the Persinger home, this morning was a study in chaos. The phone was ringing, the kitchen was bustling, my daughter couldn’t finder her favorite jacket, my son was rushing around the house with his backpack hung over his shoulder, his basketball gear in one hand and a half-eaten “something” that nobody could identify in the other. My wife was threading in and out between the children trying to get ready for work and I was just doing my best to stay out of the way. When all was said and done, the house was quiet once again. My wife was on her way to work, my kids were both in school and I had settled into my office with a hot cup of tea and a chance to check out the financial news before starting, what was certain to be, a very fast and furious day.
Two cups of tea and two hours later, the day was beginning to take shape. I had accomplished a few key tasks, put out three small fires and taken a look at the financial news. As usual, the financial news was bad. Citigroup was going down the tubes, like so many other financial institutions, a government bailout using your taxes and mine was in the works, and home sales were down again by about 3.1%. When you consider that news of that sort is a daily occurrence at present and that the majority of our clients are folks who are forced to sell their homes because of financial woes, the weight of the economic news can be almost too much to bear at times.
I was thinking about that fact and working on my third cup of tea when the phone rang. It was one of our clients who had just been informed that her house had finally closed escrow. She and her husband had been forced to sell for less than what they owed and it had taken nearly four months for the lender to approve the sale. The lady had just lost her home and did not receive a dime from the sale of the property, yet she thanked me for getting it sold and spoke of how grateful she was that she and her family would be moved into their rented home before Christmas.
That conversation reminded me that we live in the greatest country on the face of the Earth. Sure, people are losing their homes to foreclosure. No matter how you slice it, that is a sad thing. But, in my office alone, we have sold or are currently in the processes of selling a great many pre-foreclosure properties and not one of our clients has missed a meal or been forced to sleep on the street. Every one of them is simply moving from one house to another.
As I write this, Thanksgiving is only a few days away and I cannot escape the feeling that the client who just called me has set a shining example of what it means to be thankful. She is thankful for what she has, even though it may not be what she wants. Here’s hoping that you and I will do as well. Happy Thanksgiving!
Monday, November 24, 2008
Monday, November 17, 2008
Frustrated With The Short Sale Process?
By Joel Persinger
YourRealEstateDude.com
A large percentage of the homes currently sold in San Diego County are either pre-foreclosures (also called “Short Sales”) or foreclosures (also know as REOs). That being the case, the average buyer will run into a ton of these properties and likely make offers on many. While the REOs can be frustrating because the banks that own them are difficult to deal with, the short sales can be challenging because of the length of time it takes to negotiate them to a successful conclusion.
When a property is being sold for less than what is owed to the lender, the term that is used to describe it is, “short sale.” Short sales require that the lenders agree to take a loss on the sale of the properties. Consequently, homeowners do not have much control over whether their properties actually sell. The control is in the hands of the short sale lenders. Some lenders are easier to deal with than others. But, it is fair to say that all lenders hope to mitigate their losses by selling the properties for as much as possible.
Buyers approach short sales because they want to get a deal and lenders sell properties short because they want to get as much money out of the house as possible. They know that if they foreclose, they will receive far less. The parties often do not agree. So, the negotiations go on and on until the two parties come to some agreement that meets both of their goals. This process can take months and many buyers simply do not want to wait.
I checked with one of our clients the other day to see how her search for a new home was going. She is working with one of my agents in North County. When I spoke with her my first question was, “How is my agent treating you.” She said, “We’re doing great. I’m just frustrated with the short sale process.” A few questions later and I discovered that she was mostly frustrated by the length of time it takes to get a short sale transaction to close escrow. Still, she is hanging in there because it is very likely that she will get a terrific deal on the house.
If you are thinking about buying a short sale property, you must be prepared for the fact that the process is confusing, lengthy and challenging. You should also prepare yourself for the reality that you may work on a short sale purchase for months only to have it fall apart and never get the house. I have one client currently who has been attempting to buy the same house for about a year. It should be noted that in that particular case the house and lot are one of a kind! Still, long negotiations and long escrows are the norm for short sales. You need to know that before you get involved in one.
On a positive note, some of the best deals you will find are short sales. This is because many buyers don’t try to buy them because they’re difficult. That leaves you to take advantage of the situation by being one of the few buyers who will hold out long enough to succeed. As my grandfather used to say, if you want to be successful, find out what everyone else is doing and then do the opposite.
YourRealEstateDude.com
A large percentage of the homes currently sold in San Diego County are either pre-foreclosures (also called “Short Sales”) or foreclosures (also know as REOs). That being the case, the average buyer will run into a ton of these properties and likely make offers on many. While the REOs can be frustrating because the banks that own them are difficult to deal with, the short sales can be challenging because of the length of time it takes to negotiate them to a successful conclusion.
When a property is being sold for less than what is owed to the lender, the term that is used to describe it is, “short sale.” Short sales require that the lenders agree to take a loss on the sale of the properties. Consequently, homeowners do not have much control over whether their properties actually sell. The control is in the hands of the short sale lenders. Some lenders are easier to deal with than others. But, it is fair to say that all lenders hope to mitigate their losses by selling the properties for as much as possible.
Buyers approach short sales because they want to get a deal and lenders sell properties short because they want to get as much money out of the house as possible. They know that if they foreclose, they will receive far less. The parties often do not agree. So, the negotiations go on and on until the two parties come to some agreement that meets both of their goals. This process can take months and many buyers simply do not want to wait.
I checked with one of our clients the other day to see how her search for a new home was going. She is working with one of my agents in North County. When I spoke with her my first question was, “How is my agent treating you.” She said, “We’re doing great. I’m just frustrated with the short sale process.” A few questions later and I discovered that she was mostly frustrated by the length of time it takes to get a short sale transaction to close escrow. Still, she is hanging in there because it is very likely that she will get a terrific deal on the house.
If you are thinking about buying a short sale property, you must be prepared for the fact that the process is confusing, lengthy and challenging. You should also prepare yourself for the reality that you may work on a short sale purchase for months only to have it fall apart and never get the house. I have one client currently who has been attempting to buy the same house for about a year. It should be noted that in that particular case the house and lot are one of a kind! Still, long negotiations and long escrows are the norm for short sales. You need to know that before you get involved in one.
On a positive note, some of the best deals you will find are short sales. This is because many buyers don’t try to buy them because they’re difficult. That leaves you to take advantage of the situation by being one of the few buyers who will hold out long enough to succeed. As my grandfather used to say, if you want to be successful, find out what everyone else is doing and then do the opposite.
Thursday, November 13, 2008
How does loan modification work?
By Joel Persinger
YourRealEstateDude.com
The problems in the housing and lending markets have caused the births of several new “industries” designed to help struggling homeowners address their financial woes. One such approach is called, “Loan Modification.” This is a process by which a negotiation is undertaken with the lender, usually by an attorney, for the purpose of renegotiating the terms of the loan. It should be clearly stated that the overwhelming majority of successful loan modifications DO NOT include a reduction in the amount of principle owed. The figures I have been quoted from a number of experts indicate that less that 2% of loan modifications include a principle reduction.
The loan terms are generally what are modified. For example: the lender may agree to reduce the interest rate, change the loan from an adjustable to a fixed rate of interest, lengthen the overall life of the loan (from 15 years to 30 years, for example), wave any late fees, tack the amount of late payments owed onto the end of the loan and so on. But, the one thing the lenders are least likely to do is reduce the total amount of principle you owe.
I’ve mentioned the principle reduction a couple of times because this is precisely what scam artists promise. The crooks understand that distressed homeowners are looking for a way to owe less on their homes. So, they promise to get the lenders to reduce the principle in order to entice the homeowners into the scam. As I was writing this column, I received a call from a homeowner who had been referred to me for a loan modification. She was shocked when I told her the truth about principle reduction. “I just spoke to some guy who told me he could get my loan amount down by half,” she said. “He told me to write him a check and he would get it done, guarantied,” she told me. After she had calmed down, she expressed her utter amazement that people take advantage of struggling families in that way. Unfortunately, I was not amazed.
On November 3rd, the California Attorney General announced the arrests of three members of a fraud ring who preyed on desperate Southern California homeowners by falsely promising to renegotiate their home loans. Instead these scam artists ripped them off for thousands of dollars while their homes fell into foreclosure. Among the other things these folks are accused of, is telling their victims that their mortgage loans had been renegotiated when they had not been. They told the homeowner that the lenders needed a “good faith” payment to secure the new accounts. Homeowners made payments to accounts under business names such as “Reinstatement Department” or “Resolution Department” that made it appear as if the payment had been applied toward the loan. According to the California Association of Realtors who reported the story, Bank records indicate that more than $700,000 was stolen from homeowners who fell victim to this scheme.
Loan modification can be a wonderful opportunity and it should be explored by struggling homeowners who wish to remain in their homes and avoid a short sale or foreclosure. Still, it is important to do your homework. There are some wolves in sheep’s clothing out there and the last thing I want you to be is their victim.
YourRealEstateDude.com
The problems in the housing and lending markets have caused the births of several new “industries” designed to help struggling homeowners address their financial woes. One such approach is called, “Loan Modification.” This is a process by which a negotiation is undertaken with the lender, usually by an attorney, for the purpose of renegotiating the terms of the loan. It should be clearly stated that the overwhelming majority of successful loan modifications DO NOT include a reduction in the amount of principle owed. The figures I have been quoted from a number of experts indicate that less that 2% of loan modifications include a principle reduction.
The loan terms are generally what are modified. For example: the lender may agree to reduce the interest rate, change the loan from an adjustable to a fixed rate of interest, lengthen the overall life of the loan (from 15 years to 30 years, for example), wave any late fees, tack the amount of late payments owed onto the end of the loan and so on. But, the one thing the lenders are least likely to do is reduce the total amount of principle you owe.
I’ve mentioned the principle reduction a couple of times because this is precisely what scam artists promise. The crooks understand that distressed homeowners are looking for a way to owe less on their homes. So, they promise to get the lenders to reduce the principle in order to entice the homeowners into the scam. As I was writing this column, I received a call from a homeowner who had been referred to me for a loan modification. She was shocked when I told her the truth about principle reduction. “I just spoke to some guy who told me he could get my loan amount down by half,” she said. “He told me to write him a check and he would get it done, guarantied,” she told me. After she had calmed down, she expressed her utter amazement that people take advantage of struggling families in that way. Unfortunately, I was not amazed.
On November 3rd, the California Attorney General announced the arrests of three members of a fraud ring who preyed on desperate Southern California homeowners by falsely promising to renegotiate their home loans. Instead these scam artists ripped them off for thousands of dollars while their homes fell into foreclosure. Among the other things these folks are accused of, is telling their victims that their mortgage loans had been renegotiated when they had not been. They told the homeowner that the lenders needed a “good faith” payment to secure the new accounts. Homeowners made payments to accounts under business names such as “Reinstatement Department” or “Resolution Department” that made it appear as if the payment had been applied toward the loan. According to the California Association of Realtors who reported the story, Bank records indicate that more than $700,000 was stolen from homeowners who fell victim to this scheme.
Loan modification can be a wonderful opportunity and it should be explored by struggling homeowners who wish to remain in their homes and avoid a short sale or foreclosure. Still, it is important to do your homework. There are some wolves in sheep’s clothing out there and the last thing I want you to be is their victim.
Home Sales are Picking Up!
November, 3 2008
By Joel Persinger
YourRealEstateDude.com
Just because the media is all up in arms over the economy, doesn’t mean that everything is going badly. The economy is having a tough time, but in the real estate world, things are beginning to look up.
The California Association of Realtors recently reported home sales figures for the month of September. According to the Association, “Home sales increased 96.7 percent in September in California compared with the same period a year ago, while the median price of an existing home fell 40.9 percent. Statewide sales in September edged past the 500,000 threshold for the first time in more than two years, rising 2.3 percent compared with August and 96.7 percent compared with a year ago.”
C.A.R. President William E. Brown said, “This dramatic increase in sales owes as much to market weakness a year ago in the early stages of the credit crunch, as it does to the growth of sales in September this year. Similar increases occurred in the early 1980s when the market was climbing out of a comparatively steep downturn in sales.
It is true, that much of the increase is due to the terrible condition of the market the previous year, but we should not forget that this year’s market could be just as bad as the previous year’s, but its not! On the contrary, real estate sales are showing the kind of gradual improvement that can be expected when recovering from the damage done by the disintegration of the mortgage market. It may not be anything worth throwing a party over, but its one solid step in the right direction and some believe it is a harbinger of things to come. Association President Brown said, “We expect the market to register significant year-to-year percentage gains in the coming months as current sales are compared against extremely low numbers that prevailed during the fourth quarter of last year.”
Nobody can state definitively that the housing market is on the rebound. There simply is not enough data available to tell. Still, a year over year increase in sales of almost 100 percent in September is unquestionably good news. If nothing else, it tells us that sales are increasing and that the San Diego real estate market, while injured, is not dead!
By Joel Persinger
YourRealEstateDude.com
Just because the media is all up in arms over the economy, doesn’t mean that everything is going badly. The economy is having a tough time, but in the real estate world, things are beginning to look up.
The California Association of Realtors recently reported home sales figures for the month of September. According to the Association, “Home sales increased 96.7 percent in September in California compared with the same period a year ago, while the median price of an existing home fell 40.9 percent. Statewide sales in September edged past the 500,000 threshold for the first time in more than two years, rising 2.3 percent compared with August and 96.7 percent compared with a year ago.”
C.A.R. President William E. Brown said, “This dramatic increase in sales owes as much to market weakness a year ago in the early stages of the credit crunch, as it does to the growth of sales in September this year. Similar increases occurred in the early 1980s when the market was climbing out of a comparatively steep downturn in sales.
It is true, that much of the increase is due to the terrible condition of the market the previous year, but we should not forget that this year’s market could be just as bad as the previous year’s, but its not! On the contrary, real estate sales are showing the kind of gradual improvement that can be expected when recovering from the damage done by the disintegration of the mortgage market. It may not be anything worth throwing a party over, but its one solid step in the right direction and some believe it is a harbinger of things to come. Association President Brown said, “We expect the market to register significant year-to-year percentage gains in the coming months as current sales are compared against extremely low numbers that prevailed during the fourth quarter of last year.”
Nobody can state definitively that the housing market is on the rebound. There simply is not enough data available to tell. Still, a year over year increase in sales of almost 100 percent in September is unquestionably good news. If nothing else, it tells us that sales are increasing and that the San Diego real estate market, while injured, is not dead!
Fixing the Housing Market
October 17, 2008
By Joel Persinger
YourRealEstateDude.com
There is an old saying that goes like this, “Lord help us when the day comes that a politician can outthink an entrepreneur.” Over the last seven or eight weeks I have given this saying a great deal of thought. Bank after bank has failed, the stock market has been riding a rollercoaster that has frightened most everyone and politicians everywhere have been promising to fix everything, even though in large part, they helped create the problems in the first place.
All of this turmoil has given rise to an election year in which throngs of people seem to be gravitating toward more and bigger government. But, can the government really fix things? Are politicians truly adept at solving the very problems they bring about? The simple and direct answer to these questions is, “No.” The actions taken by politicians are in direct proportion to the number of votes they feel might be gained or lost as a result. Thus, such actions are generally calculated to make voters happy rather than to offer real solutions. After all, the problem being solved is political damage control.
By contrast, entrepreneurs are always looking for ways to provide solutions to problems in order to make a living by doing so. This means that the solution MUST address a real problem and provide a real, workable solution in order to be a success. This is precisely why there has never been and will never be a politician who can outthink an entrepreneur, and this is precisely what is great about this country. We are a country of inventors, a nation of entrepreneurial thinkers, a people who love a good puzzle and have the talent and skill to solve it. Our forefathers new this and had the good sense to stay out of the way. They knew we needed a government, but they also understood how oppressive governments can be. So, they rebelled against the tyranny of the English aristocracy and created a governmental structure meant to support free thinking and the free flow of the inventive and entrepreneurial spirit that is America.
So, if we fast forward to 2008 and compare the solutions to the problems in our current real estate market, we find that government solutions don’t work any better now than they did when the country was formed. Government, at all levels, has floundered in its attempt to address the issues affecting the real estate market. In fact, while more than one “government bail-out” has been implemented, none have accomplished the goals set out for them. Worse yet, none of these government solutions are self-supporting. They all spend money that the government doesn’t have.
In the meantime, free thinking business folks have hammered out real solutions that work, make money and create jobs. Here are just two examples:
Loan modification: One new company with a mission to negotiate the restructuring of home loans on behalf of homeowners who cannot make their mortgage payments is Debt Advisory Alliance. They are a private company which, by all reports, is having significant success in helping their clients stay in their homes by negotiating a modification of the terms of their home loan directly with the lender. My staff and I attended a meeting with this company last week and we were very impressed!
Short sales: Some enterprising real estate brokers have made a science out of helping people by negotiating directly with the lender in order to get their homes sold for less than what is owed. The key is that some brokers have become experts at this and are quite successful at negotiation away much of the bad consequences that would normally afflict the homeowner after the sale. Such things include, negotiating away the lender’s option to chase the homeowner for the balance of the money owed. Since we work with an investor who buys short sales, this is a good chunk of the business that we do in my office. So, I know that it works.
While nobody has a perfect solution for the problems that face the real estate industry, it has been my experience that quick thinking entrepreneurs will end up providing the answers, while quick talking politicians will only manage to get elected or re-elected. Keeping that in mind when you’re looking for someone to help you or when you’re heading to the ballot box could make finding real help a whole lot easier.
By Joel Persinger
YourRealEstateDude.com
There is an old saying that goes like this, “Lord help us when the day comes that a politician can outthink an entrepreneur.” Over the last seven or eight weeks I have given this saying a great deal of thought. Bank after bank has failed, the stock market has been riding a rollercoaster that has frightened most everyone and politicians everywhere have been promising to fix everything, even though in large part, they helped create the problems in the first place.
All of this turmoil has given rise to an election year in which throngs of people seem to be gravitating toward more and bigger government. But, can the government really fix things? Are politicians truly adept at solving the very problems they bring about? The simple and direct answer to these questions is, “No.” The actions taken by politicians are in direct proportion to the number of votes they feel might be gained or lost as a result. Thus, such actions are generally calculated to make voters happy rather than to offer real solutions. After all, the problem being solved is political damage control.
By contrast, entrepreneurs are always looking for ways to provide solutions to problems in order to make a living by doing so. This means that the solution MUST address a real problem and provide a real, workable solution in order to be a success. This is precisely why there has never been and will never be a politician who can outthink an entrepreneur, and this is precisely what is great about this country. We are a country of inventors, a nation of entrepreneurial thinkers, a people who love a good puzzle and have the talent and skill to solve it. Our forefathers new this and had the good sense to stay out of the way. They knew we needed a government, but they also understood how oppressive governments can be. So, they rebelled against the tyranny of the English aristocracy and created a governmental structure meant to support free thinking and the free flow of the inventive and entrepreneurial spirit that is America.
So, if we fast forward to 2008 and compare the solutions to the problems in our current real estate market, we find that government solutions don’t work any better now than they did when the country was formed. Government, at all levels, has floundered in its attempt to address the issues affecting the real estate market. In fact, while more than one “government bail-out” has been implemented, none have accomplished the goals set out for them. Worse yet, none of these government solutions are self-supporting. They all spend money that the government doesn’t have.
In the meantime, free thinking business folks have hammered out real solutions that work, make money and create jobs. Here are just two examples:
Loan modification: One new company with a mission to negotiate the restructuring of home loans on behalf of homeowners who cannot make their mortgage payments is Debt Advisory Alliance. They are a private company which, by all reports, is having significant success in helping their clients stay in their homes by negotiating a modification of the terms of their home loan directly with the lender. My staff and I attended a meeting with this company last week and we were very impressed!
Short sales: Some enterprising real estate brokers have made a science out of helping people by negotiating directly with the lender in order to get their homes sold for less than what is owed. The key is that some brokers have become experts at this and are quite successful at negotiation away much of the bad consequences that would normally afflict the homeowner after the sale. Such things include, negotiating away the lender’s option to chase the homeowner for the balance of the money owed. Since we work with an investor who buys short sales, this is a good chunk of the business that we do in my office. So, I know that it works.
While nobody has a perfect solution for the problems that face the real estate industry, it has been my experience that quick thinking entrepreneurs will end up providing the answers, while quick talking politicians will only manage to get elected or re-elected. Keeping that in mind when you’re looking for someone to help you or when you’re heading to the ballot box could make finding real help a whole lot easier.
FHA’s New “Hope for Homeowners” Program
October 14, 2008
By Joel Persinger
YourRealEstateDude.com
With all the news about the recent Wall Street bail-out, you may have forgotten the Federal Housing and Economic Recovery Act that was signed into law by President Bush earlier this year. As a quick reminder, this Act was designed to provide ways for struggling homeowners to stay in their homes and avoid foreclosure. One of the key components, which became available this month, is the FHA Hope for Homeowners program.
Hope for Homeowners is a program designed to provide homeowners a way to: reduce the amount they owe on their homes, refinance their existing loans into FHA-insured mortgages, stay in their homes and avoid foreclosure. For lenders, the hope is that this program will provide another viable option for mortgage lenders wishing to avoid costly foreclosures. But, make no mistake, the lenders will take a hit.
Among other things, the program requires mortgage lenders to write off a portion of what is owed to them. This amount could be significant since the program requires the property to be re-appraised. The original lender is then required to “write down” the current loan to a maximum of 90% of the home’s new appraised value. For example, if a lender is owed $500,000 on a home which has been dropped in value to $400,000, the lender would be required to accept 90% of the $400,000 (or $360,000) as full satisfaction for the debt. That means the lender would have to agree to take a $140,000 loss in this example. This may sound ridiculous, but given the losses lenders are currently taking in foreclosure, participating in this program may make good business sense.
At the end of the day the lender at least receives some payment, foreclosure is avoided and the homeowner gets a new, FHA-insured mortgage for around 90% of the home’s current value. Many homeowners may find that this program will work for them and allow them to stay in their homes while reworking their home loan into a much more manageable payment. However, this program will not work for everyone and it does have other requirements and drawbacks.
Among the things homeowners should know are these: only 30-year fixed rate mortgages are offered, the home loan the borrower wishes to replace must have been originated on or before January 1, 2008, the home must be owner-occupied and the original lender must agree to take the loss. In addition, the homeowner must agree to share any current or future equity in the home with the federal government. That means, when the homeowner sells, Uncle Sam is going to take his cut.
For more information on this program, homeowners can call the Hope Now Alliance at 888-995-HOPE or visit the U.S. Department of Housing and Urban Development website at http://www.hud.gov/.
By Joel Persinger
YourRealEstateDude.com
With all the news about the recent Wall Street bail-out, you may have forgotten the Federal Housing and Economic Recovery Act that was signed into law by President Bush earlier this year. As a quick reminder, this Act was designed to provide ways for struggling homeowners to stay in their homes and avoid foreclosure. One of the key components, which became available this month, is the FHA Hope for Homeowners program.
Hope for Homeowners is a program designed to provide homeowners a way to: reduce the amount they owe on their homes, refinance their existing loans into FHA-insured mortgages, stay in their homes and avoid foreclosure. For lenders, the hope is that this program will provide another viable option for mortgage lenders wishing to avoid costly foreclosures. But, make no mistake, the lenders will take a hit.
Among other things, the program requires mortgage lenders to write off a portion of what is owed to them. This amount could be significant since the program requires the property to be re-appraised. The original lender is then required to “write down” the current loan to a maximum of 90% of the home’s new appraised value. For example, if a lender is owed $500,000 on a home which has been dropped in value to $400,000, the lender would be required to accept 90% of the $400,000 (or $360,000) as full satisfaction for the debt. That means the lender would have to agree to take a $140,000 loss in this example. This may sound ridiculous, but given the losses lenders are currently taking in foreclosure, participating in this program may make good business sense.
At the end of the day the lender at least receives some payment, foreclosure is avoided and the homeowner gets a new, FHA-insured mortgage for around 90% of the home’s current value. Many homeowners may find that this program will work for them and allow them to stay in their homes while reworking their home loan into a much more manageable payment. However, this program will not work for everyone and it does have other requirements and drawbacks.
Among the things homeowners should know are these: only 30-year fixed rate mortgages are offered, the home loan the borrower wishes to replace must have been originated on or before January 1, 2008, the home must be owner-occupied and the original lender must agree to take the loss. In addition, the homeowner must agree to share any current or future equity in the home with the federal government. That means, when the homeowner sells, Uncle Sam is going to take his cut.
For more information on this program, homeowners can call the Hope Now Alliance at 888-995-HOPE or visit the U.S. Department of Housing and Urban Development website at http://www.hud.gov/.
The Bail-Out Passed! Are The Problems Fixed?
October 6, 2008
By Joel Persinger
YourRealEstateDude.com
By late morning on Monday San Diego time, I had received three telephone calls from folks lamenting the fact that the stock market had taken an almost 800 point dive. This, in spite of the fact that the much touted government bail-out plan had actually passed both Houses of Congress just days before. Although I desperately wanted to say, “I told you so,” I decided to wait a bit longer to find out if the markets would level out by the end of the trading day. All things considered, it was worth the wait. By the end of the day the Dow had climbed back up a bit, but still closed down some 328 points and below the 10,000 level for the first time since October 2004.
What this means for real estate in San Diego County remains to be seen. But, what it teaches us about government bail-outs and market reactions would fill volumes. The financial markets react to most things one way or the other and overreact to just about everything. Many thought that passing the bail-out plan would spur Wall Street to new heights based upon a new found confidence in the American and worldwide economies. No such result has materialized. Some seemed to feel that government intervention was a panacea that would cure the ills of suffering homeowners across the nation. I suspect that this will fail to come to pass as a direct result of the bail-out as well.
The unfortunate fact is that government, in most cases, is not the answer to what ails us. Even in the rare instances in which government is the answer, any effect government action such as the bail-out may have doesn’t typically materialize for quite some time. However, there are three things that are fairly certain to come out of such government intervention: Politicians can brag about having done something, money will be skimmed off by the wrong people and probably not get to the right people, and the very practices which got us into this mess in the first place will remain unchanged and unaffected.
If you disagree with my thinking, consider this; the same Congressional leaders who legislated and leveraged us into a high risk system in which borrowers who could not pay the money back were given loans, are still in power today. If that isn’t enough, those same leaders have just been given almost a trillion dollars more to waste. Still, they are only half of the problem. The same average Americans who took out crazy loans so they could use their homes like ATM machines or who lived off of the equity in homes they should never have been able to buy in the first place, are going to have their actions validated and be officially dubbed “victims” by a political process all too eager to buy a vote. Thus, they will not only be allowed to repeat their actions, but will most likely be encouraged to do so once more.
So, if you want a prediction from a fellow who knows real estate, here it is. If you were thinking about buying because prices are low and there are hundreds of distressed homes for sale, have at it. The situation is not likely to change any time soon.
By Joel Persinger
YourRealEstateDude.com
By late morning on Monday San Diego time, I had received three telephone calls from folks lamenting the fact that the stock market had taken an almost 800 point dive. This, in spite of the fact that the much touted government bail-out plan had actually passed both Houses of Congress just days before. Although I desperately wanted to say, “I told you so,” I decided to wait a bit longer to find out if the markets would level out by the end of the trading day. All things considered, it was worth the wait. By the end of the day the Dow had climbed back up a bit, but still closed down some 328 points and below the 10,000 level for the first time since October 2004.
What this means for real estate in San Diego County remains to be seen. But, what it teaches us about government bail-outs and market reactions would fill volumes. The financial markets react to most things one way or the other and overreact to just about everything. Many thought that passing the bail-out plan would spur Wall Street to new heights based upon a new found confidence in the American and worldwide economies. No such result has materialized. Some seemed to feel that government intervention was a panacea that would cure the ills of suffering homeowners across the nation. I suspect that this will fail to come to pass as a direct result of the bail-out as well.
The unfortunate fact is that government, in most cases, is not the answer to what ails us. Even in the rare instances in which government is the answer, any effect government action such as the bail-out may have doesn’t typically materialize for quite some time. However, there are three things that are fairly certain to come out of such government intervention: Politicians can brag about having done something, money will be skimmed off by the wrong people and probably not get to the right people, and the very practices which got us into this mess in the first place will remain unchanged and unaffected.
If you disagree with my thinking, consider this; the same Congressional leaders who legislated and leveraged us into a high risk system in which borrowers who could not pay the money back were given loans, are still in power today. If that isn’t enough, those same leaders have just been given almost a trillion dollars more to waste. Still, they are only half of the problem. The same average Americans who took out crazy loans so they could use their homes like ATM machines or who lived off of the equity in homes they should never have been able to buy in the first place, are going to have their actions validated and be officially dubbed “victims” by a political process all too eager to buy a vote. Thus, they will not only be allowed to repeat their actions, but will most likely be encouraged to do so once more.
So, if you want a prediction from a fellow who knows real estate, here it is. If you were thinking about buying because prices are low and there are hundreds of distressed homes for sale, have at it. The situation is not likely to change any time soon.
Subscribe to:
Posts (Atom)
