The FHA not immune to defaults…FEAR on the rise.

I won’t begin to regurgitate all the details, however suffice it to say that the FHA is seeing more and more defaults on loans insured since 2008!! What? Yes, that’s right since 2008.  Review the entire article here by the way the article is well written by Keith Jurow of the Real Estate Channel.

My point is to make a claim, right now, and right here on our Market Advisors Blog…August 10,2010. “Market Momentum is still knee deep in the FEAR stage which will lead to further market price deterioration across all residential real estate markets in the US.”

Now when I deliver my seminars and workshops during the next year with Entrust and Pensco I can refer back to this published statement and say “Told You So!”

However, do not  get me wrong. I am a buyer at these “fearful” times. I have no problem investing in properties that deliver positive cash flow at over 12% return and a 5 GRM. With these real numbers I will be happy to “Buy/Hold” or “accumulate and wait”. With a less than 1% CD rate…plllleeease and thank you.

Foreclosures Good for the Economy?

Strange as it may seem there actually might be a consumer spending benefit to the economy due to increasing defaults on home mortgages.

WHAT ??!!

Yes, the latest rise in consumer spending numbers is juiced by the simple fact that as more and more Americans stop paying on their mortgage…that frees up cash which finds it way into retail coffers.

YOU HAVE GOT TO BE JOKING??!!

No, strange but true. Check out this latest report from CNBC and Realty Trac.

Though someone might seem to think this is good news, think again, Foreclosures, NODs and Short Sales are INCREASING at a record pace which is continuing in the 3rd year since the burst of the bubble. Home values continue to suffer.

Let’s not forget that the single most important asset to the average American family is the “HOME”, which is being wasted. What this country needs is a paradigm shift back to values, and Government needs to do all it can to support “HOME VALUE” by creating JOBS and stimulating (or rewarding) HOME BUYERS.

Why The TEAM Matters…

And YES this has absolutely nothing to do with the playoffs…

Today’s Blog has everything to do with improving your real estate investment results by joining the RIGHT TEAM.

I have been doing a lot of public speaking lately, the subject of which continues to be educating Investors as how important it is to assemble a TEAM that can improve your chances of success.

The fact of the matter is that it is difficult and time consuming to put together a winning TEAM…and…wouldn’t it be easier just to join a winning TEAM?

I am inviting you to join the Market Advisors TEAM; our expert bird-dogs who feed us property deals in choice markets, our phenomenal design team that can transform a wreck of an REO into a valuable property (Watch Foreclosure Makeover), the portfolio managers who maximize the value of our Funds assets, to our expert Preferred Advisors who can counsel our clients investment/retirement strategy, together with our continuous education (Webinars and Seminars) make for a priceless combination.

Why not supercharge your investment and retirement portfolio today! Contact Us and find out how you can join our TEAM.

Disaster strikes Haiti…where next?…do the right thing!

When cataclysmic tragedy strikes we, as fellow Human Beings, can empathize with those who are suffering. Certainly the events in Haiti are a reminder to all of us that everything we have can be lost in an instant. As fellow Americans we should be proud that we have organizations comprised of  people who jump to the call of need when disaster strikes, at home or abroad.

The organization that I am most thankful for is the American Red Cross. Do you realize how much this organization does not only at our community level, but for others around the world? I strongly suggest you take a look , here is their website, Red Cross

Now do the right thing;

Text 24357 with the message GIVE, this will send $5 to the Red Cross. Here is the link for the instructions Click Here

Now send the link to this blog to everyone you know to do the same.

Do the right thing.

John

TARP Money is Being Paid Back Early!

First it was Bank of America and then both Citi Bank and Well’s jumped onto the band wagon.  Now the latest among the list of TARP repayment companies is GM (yes, that’s Government Motors!).  Does this make any of you wonder what’s really going on here.  From my perspective this story has the smell of fish!  Where will these firms get that much money?  It will not likely come from eager investors.  Is it possible that the Fed is “buying” the new securities with taxpayers’ money?  If so, it is a bookkeeping trick to take the heat off Congress and the banks. You see the legislators want all this money for new spending projects instead of returning it to taxpayers.

This week I came across and excellent article by Kevin Hall in the Miami Herald entitles “GM Joins Rush to Repay Bailout Funds”.  Hall does a nice job of summarizing what all of these repayments mean and believe me it doesn’t mean that banks will now be lending more money.  In fact Hall points out that it probably means they will actually be lending less.  Here is an except from this article – it should give you pause to think:

So if companies are repaying TARP money, does it mean all is well and that lending will resume soon?

“I don’t view the TARP repayment as evidence that banks are healthier and now can do it,” said Vincent Reinhart, a former top economist at the Federal Reserve. “It’s rather that banks have an incentive to do it now because they see the stigma associated as even more significant than they had thought previously.”

Banks are still under severe stress, he said.

And what about those “toxic Assets” that the TARP Funds were supposed to resolve?  Well as Hall explains, they are still on the banks books but because of a relaxation of accounting rules (can we change the accounting rules in our businesses?) banks can now value those assets at their “expected future value” (what ever value they want!!) so they don’t have to book any loss based on current value.  This makes their balance sheets look a lot better and guess what – they are using their balance sheets, in part, to pay off this TARP money.  Are they healthier for it…….it’s not likely.  Stay tuned because we are going to keep following this process to see just how much it ends up helping (or hurting) the average citizen.

Paul Davis, Market Advisors LLC

Do you know who Meredith Whitney is? You should…

Meredith Whitney is the CEO Of Meredith Whitney Advisory Group, and is considered “The Analyst” to call the banking debacle before the meltdown in September 2008. If you don’t know her, you should, and take stock in her opinion and analysis of the direction of our nation’s banking system.

Check out her latest comments here.

I applaud Meredith, her astute and forthright analysis that the current Big Bank system and its business behavior is counter productive to a meaningful recovery. Just more evidence that 2010 will be “the best year ever” for buying real estate. After all one should be buying low and selling high…right?

If You Think the Housing Meltdown Was Bad…………

I recently read an article by Doug Hornig entitled “If You Thought the Housing Meltdown Was Bad……wait until you see what’s in the cards for commercial real estate”.  Now I’ve written about the pending commercial foreclosure crisis before but I’ll have to admit, I’ve been so caught up in the residential crisis and all of its permutations that I kind of let the commercial issue slip to the back of my mind.  So, Doug’s article definitely “snapped me to attention” again.  The breadth and depth of our current economic “upheaval” is more then just a bit too complicated for most of us to understand.  But, I think we can all agree that the mortgage lending industry is at the heart of the problem.  The failures in that market segment have extended their tentacles out and have touched every other segment of our economy – impacting building, manufacturing, professional services, consumerism, and ………….

According to Hornig, the next big problem is commercial real estate.  Here are the opening couple of lines in his article: “That’s right, the next train wreck will be in commercial real estate. Couldn’t be worse than last year’s residential market crash? That remains to be seen. But it’s coming soon, probably as early as the second quarter of next year, and there’s nothing that can prevent it.” Hornig derives a lot of his information from one of the most knowledgeable commercial real estate professionals in the industry, Andy Miller.

Miller, of the Miller Fishman Group of Denver, reports that two years ago commercial real estate carried a value of about $6.5 Trillion and that real estate was supported by about $3.3 Trillion in loans.  Well today the loan amount hasn’t changed much but the value has been estimated to be about half of what it was two years ago!  Oops!  The commercial market is “under water”.  That means writing down about half to two-thirds of these loans.  Now if the banks were to have to take that hit all at once, then, according to Miller, “there won’t be any banks”.

Adding to the problem is the fact that, like residential loans, these commercial loans were also bundled into exotic financial vehicles, called commercial mortgage-backed securities, which were sold and resold on Wall Street for great profits.  And who do you think purchased most of these exotic securities?  You guessed it – the banks!

So, here is the situation as it is described by Miller:”What happens to a property when its value drops way below the loan, a seller can’t get enough money to get out, a buyer can’t raise enough money to get in, and the bank can’t afford to foreclose? Simple. It just sits there, carried along on the bank’s books at some inflated “mark to fantasy” price that makes the institution’s balance sheet look passable.”

The bottom line is our financial economy is in for another major hit that –in turn – will effect all of us.  As this commercial crisis escalates the banks will do the same thing they did last year: “run to the government palms outstretched”.  Who knows how long it will take us to recover from this new set of pressures.  One thing is for sure, you can expect real estate prices to continue to drop for the near future.  Check out this article and see what you think.

Paul Davis, Market Advisors

Record Unemployment and the Alt-A / Option ARM Reset “Perfect Storm”

Here’s something to think about – if the broader measure of unemployment now stands at over 17% (and climbing) and if there are truly millions of Alt-A and Option ARM loans scheduled to re-cast in the next 2 years – what do you think will happen to our housing market when these two elements of our economy begin to collide in 2010?  It kind of makes you shudder a bit, doesn’t it?

I don’t think we can turn our backs on these facts and we can’t keep drinking the “cool-aid” being fed to us by the mass media and our government telling us that we are in recovery!  I came across two excellent articles this week that address this “collision” very realistically.

One article from the New York Times online, “Broader Measure of US Unemployment Stands at 17.5%” by David Leonhardt, reports that even though the October national unemployment figure is reported to be 10.2%, if we take into consideration; people who are recently unemployed; add to that people who have been out of work for over six months and have stopped looking; include those who have only been able to find part-time work, then the number rises to 17.5% – a new recorded high.  The previous recorded high for this “broader” measure was 17.1% back in December, 1982.

These are important numbers because I think we can all agree that no matter how high the DOW goes (it hit over 10,400 today!) until we see a sustained decrease in unemployment – we really can’t expect to see true economic recovery.  David also reports in his article that historically, in past economic crisis, it took about five years for unemployment numbers to maintain a sustained reduction.  That means we still have 2 years to go!  Of course most economists today are predicting that turn-around to start in mid to late 2010.  Either way, we still have a ways to go.

Now what does all of this have to do with the real estate market and foreclosures?  Well, as Bill Bonner points out in his article, “The Second Wave of Foreclosures Has, Perhaps, Finally Begun”, we are on a collision course with rising unemployment and a huge wave of Alt-A and Option ARM loans that are set to “re-cast” in 2010 and 2011.  So, here is what Bill has to say about this new “perfect storm”.

“Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,” said James J. Saccacio, chief executive officer of RealtyTrac. “While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A and Option ARMs are spreading the foreclosure flood to more metro areas in 2009”.

What do you think will happen when all of this new foreclosure inventory hits the market?  And what is going to happen with the huge back-log of “shadow inventory” that we know is being held back by the banks right now?  Our guess at Market Advisors is that it is all going to start hitting the market in 2010.  So get ready for some fantastic opportunities and as Bill quotes at the end of his article – “we’ll soon see real estate prices take another tumble” – a bit of an understatement in our opinion.

Paul Davis, Market Advisors

Why are we not maximizing our retirement portfolios?

I came across this article addressing the facts that most working Americans, especially ages 50 plus, have still not maximized their retirement savings to a level where they can simply “retire”.

In fact read the article here, before I go on.

The above mentioned article was derived from a survey Wells Fargo conducted targeting the health of retirement portfolios for workers ages 50-59. The results are staggering and I would hope for those of you who still feel “underfunded” to achieve a successful retirement…sobering.

Blame poor planning, late to the game, market fluctuations, or certainly bad investments such as mutual funds, ETF’s, etc. Regardless, the result is a large population of our country entering their “60s” with a definite need to continue working well into their 70s and beyond. I shudder to think about the economics of sustaining and providing, as an employer, for a significant workforce that is aged 60 and above.

At MyMarketAdvisors we strive to educate our clients, subscribers, and friends, to take ACTION NOW! Take control of your retirement portfolio and maximize its potential so you can ENJOY a real and sustained retirement on your own terms. BELIEVE IT!

California….Best Bet.

I want to share the latest TIME magazine cover article…

“Despite Its Woes, California’s Dream Still Lives”

by Michael Grunwald, October 23,2009.

Please read Mr. Grunwald’s article, you will be able to understand why Market Advisors is currently building its residential investment portfolio in select communities in California.

“It’s still a dream state. In fact, the pioneering megastate that gave us microchips, freeways, blue jeans, tax revolts, extreme sports, energy efficiency, health clubs, Google searches, Craigslist, iPhones and the Hollywood vision of success is still the cutting edge of the American future — economically, environmentally, demographically, culturally and maybe politically. It’s the greenest and most diverse state, the most globalized in general and most Asia-oriented in particular at a time when the world is heading in all those directions. It’s also an unparalleled engine of innovation, the mecca of high tech, biotech and now clean tech. In 2008, California’s wipeout economy attracted more venture capital than the rest of the nation combined. Somehow its supposedly hostile business climate has nurtured Google, Apple, Hewlett-Packard, Facebook, Twitter, Disney, Cisco, Intel, eBay, YouTube, MySpace, the Gap and countless other companies that drive the way we live.”

Read On !