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.

Have you checked out Fortune or Money magazine lately?

Take a look at the June 2010 Money Magazine…specifically page 82…”Stock up for more Income”. Or, the June 14 2010 edition of Fortune Magazine, specifically page 82 “Our 2010 Retirement Guide: You Can Still Win”.

Let me summarize…Its all about investing in “Funds” and it is all about being satisfied with marginal investment gains…apparently less than 5% if you are LUCKY!

Fortune magazine even goes so far as to suggest “asset class diversification” …but sadly stops short at anything other than publicly traded Funds. (of course that is where the big $$$ are, especially when  it comes to fueling advertising for these financial rags.)

True diversification should also include “alternative assets” , such as Real Estate, and look toward specialized niche sponsors that can offer greater returns with minimal risk.

Just how can you find out more about how to take advantage of these opportunities? May I suggest you first become knowledgeable of your retirement options. Look to these websites for easy to understand content about self-directed retirement.

Pensco Trust Co.

The Entrust Group

U Direct IRA Services

Lots of good info…and when it comes to a good investment opportunity, specializing in real estate, contact me at

john@mymarketadvisors.com

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 Invest in Condos…

Interesting how a great majority of real estate investors shun investing in Condos during this fantastic distressed property extravaganza. I wonder how well thought out their investment portfolio strategy might be when investing in foreclosure real estate?

Here are some points to consider when comparing condo product to typical single family.

• Price per sf  in todays distressed market averages 30% less.
• Investor competition is minimal.
• HOAs provide a wealth of information on product condition, amenity condition, restrictions and HUD compliance before you buy.
• Monthly assessments are competitive to insurance, maintenance, and services required for a typical single family.
• You can insure against unforseen special assessments.
• Gross rents per sf are superior.
• Remodel costs are less.
• Optimizes Buy/Flip or Buy/Hold strategy.

These are just some of the reasons why I prefer Condos for my Buy/Flip and Buy/Hold strategies.

Real Estate Rants

Today Case Shiller released its 1st Quarter 2010 report on home prices, so lets sum it up… “Housing prices rebounded from crisis lows, but recently have seen renewed weakness as tax incentives are ending and foreclosures are climbing.”

As an active real estate investor it is of no surprise to me that housing is soft again. When will we learn that short term government stimulus programs are just that?…short term.

When will we learn that real improvement in unemployment will lead to a sustained housing recovery?

When will we learn that investors should be given incentives to put more money to work in real estate, rather than impede their profit?

When will we learn that overly strict lending guidelines are a constraint to the housing market recovery, rather than a  remedy to the cause of the foreclosure crises?

What will save the housing market, and where can an investor put money to work?

Quite simply “Jobs” will save the housing market overall, and in todays market an investor should put money to work in properties that offer real value and savings to a prospective buyer…meaning  “You can own this house for less than rent”.

I am putting my money to work in properties like these…check it out http://mymarketadvisors.com/deal.html

Cheap Money…Stupid Decisions

As of yesterday the latest headlines from the commercial real estate markets…”Commercial Behemoths Tishman Speyer and Blackrock WALK AWAY AND HAND OVER THE KEYS from their $5.4 BILLION 11,400 unit apartment project in Manhattan”

Yes, it is the confirmed trend, not only in residential but in major commercial to simply hand over the keys to properties, rather than fight it out.

Tishman and Blackrock paid $5.4 billion with $4.4 billion in debt for the project at the peak of the bubble. Now it is worth maybe $2 billion. The answer….walk away.

Hmmmm…now you know why BIG BANKS are not lending money. Because Creditors do not value their assets.

My question, however, is not yesterdays action by these two major developers…it is why did they buy this project in the first place at the peak of an obvious mega bubble, when all, obvious market momentum indicators were pointing to SELL SELL SELL?

The answer my friends….TOO MUCH CHEAP MONEY MAKES FOR STUPID DECISIONS.

So, here is my pitch to Tishman and Blackrock…Hire us to implement our Market Advisors Method momentum analytics for your projects. Your Investors will get the benefit of clear BUY and SELL signals which makes money for your Investors…NOT LOSE IT.

The Financial Crisis Inquiry Commission!

Did you know we have launched a commission to study just what it was that brought our financial system to its knees in 2008?  Maybe greed had something to do with it!  Anyway, I found this report in an article published last week in the UK Daily Mail.  This commission is a prototype of the Pecora Commission, the Senate committee that investigated Wall Street abuses in 1933-34.

The commission has pledged that it will make “a full and fair inquiry into what brought our financial system to its knees”.  They further say they will “explain it in a way the American people can understand”.  Now that would be a switch!  The Commission started off by interviewing high profile financial leaders such as: Goldman Sachs’ Lloyd Blankfein, J.P.Morgan Chase’s Jamie Dimon, John Mack of Morgan Stanley and Bank of America’s Brian Moynihan.  As a group these leaders all tended to apologize for their risky behavior and poor decisions during the turmoil of  2008 but to a man they all justified their current compensation decisions.

The general “party line” seems to be, as expressed by Brian Moynihan, that “the vast majority of our employees played no role in the economic crisis’ and therefore do not deserve to be penalized with lower compensation.  Of course we all know that B of A paid their Bailout money back early and most analysts believe they did that so they wouldn’t have to follow the Obama guidelines to lower high bonuses.  I for one sincerely hope this commission will uncover just how these institutions actually were able to generate the fast profits used to make their early Bailout payoffs.  If they do, I think we will all find out that it was a combination of manipulating “free” government money for high profits and implementing changes in accounting and reporting standards – to favor the banks balance sheets of course.

Anyway, you should check out this article for yourself and I will try to find out what the US media has to say about these commission hearings (if anything!) as well.  I’ll report on what I find in a future blog.

Paul Davis, Market Advisors LLC

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.

Resolution Time! My Retirement Checklist…

Happy New Year! Time for me to check up on my retirement strategies going in to 2010.

I want to make sure my strategy is built on a simple foundation (a foundation that I can understand)

• Place as much of my investment power (this is my war chest…my investment dollars and collateral) as possible in tax-advantaged accounts. For me these are: HSA (Health Savings Account if you don’t have one of these you should), ROTH (convert my IRAs to ROTH just too damn good), SoloK (awesome because I am self-employed), Defined Plan (benefits me and my company).
• Make sure I control the choice of investments I make. I want to be flexible, I like to make my own investment decisions, I prefer to write my own checks. I LIKE BEING IN CONTROL.
• Invest in Real Estate…Simply take advantage of one of the best historical BUY opportunities.
• Work with Experts to facilitate my strategies.

HAPPY 2010

More Flexible Accounting Rules for Banks!

This is one of those stories that kind of gets “swept under the rug” but I think it is important enough to bring to your attention.  I also know that if you don’t have an accounting background then this might seem a bit esoteric but believe me it is important.   According to Floyd Norris in a December 8th NY Times article, Robert H. Herz, the chairman of the Financial Accounting Standards Board (FASB) is facing political pressure to abandon “fair value” accounting for banks.  This “political pressure” wants Herz to “decouple” bank accounting rules from normal accounting standards.

Here’s how Morris explains it:  His proposal would encourage bank regulators to make adjustments as they determine whether banks have adequate capital while still allowing investors to see the current fair value — often the market value — of bank loans and other assets.

Wow! What a coup for the banking industry.  You see FASB is responsible, in coordination with the SEC, for setting Generally Accepted Accounting Principals (GAAP).  These GAAP guidelines are what all CPA’s must follow in order to audit public company’s books.  It’s these audited financial statements that the SEC requires all public companies to publish in order for the public to see how the company is doing.  This change will allow banks to legally book their asset values at false levels as compared to current market thus making them look like they are doing better (on paper) then they really are – the same practice that would send private accountants to prison!

Herz justifies this proposal by saying: “Handcuffing regulators to GAAP or distorting GAAP to always fit the needs of regulators is inconsistent with the different purposes of financial reporting and prudential regulation.”

This is just another “smoke and mirrors” problem for our economy and for the value of real estate that is being held by Banks.  How this might effect our recovery is only a guess at this point but I don’t think it will be good.

Paul Davis, Market Advisors LLC