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

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.

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 Federal Government Now Needs $1.9 T To Pay Its Bill!

If you look back at the focus of my blogs you will see that my agenda has always been to keep up with what is happening in our economy and how it is affecting the foreclosure market.  Let’s face it; the Market Advisors Investment Fund depends on the foreclosure market for its continued success.  In addition, I feel our readers need to know what’s happening in that market for their own real estate investing as well, whether that be through our Fund or strictly on their own.

So, in this blog I am reporting on a January 20th Associated Press article by Andrew Taylor about our record setting deficit!  And this folks is the end result of all the Wall Street bailouts, fiat money, unprecedented government spending and “meddling” that our leaders have been doing to “fix” our economy.  All of this during a recessionary period when tax revenues have been drastically cut.  Interesting philosophy – revenues are down so let’s spend more!  The bottom line is the $1.9 Trillion dollars being asked for right now (bringing the national debt up to $14.3 Trillion!!) won’t even carry us through the year!  Here’s what the White House has to say about this record breaking increase:  the increase “is critically important to make sure that financing of federal government operations can continue without interruption and that the creditworthiness of the United States is not called into question.”

Believe me the credit worthiness of the US is already being called into question.  Some how, some way, we are just going to have to eventually “bit the bullet” and let the market take over.  Stop with the programs!  It will hurt but the only way to get rid of all of this over leveraged debt is to let the market move it through the system.  Yes, a lot of Wall Street “icons” will suffer and many will fold, along with a lot of banks, but it will force the “pig through the python” a lot faster then with all of this government manipulation.

These deficits in spending will not go away and we, the taxpayers, will have to pay for them.  So we need to stop the spiral.  It’s not a party issue – it’s a freedom issue.  How many more years of record deficit spending can we stand?  I say none – what do you think?

Paul Davis, Market Advisors, LLC

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

OUTLOOK 2010

I wish everyone a very happy and successful New Year. I am excited about the potential for some very juicy acquisition opportunities coming our way in the residential real estate markets.

Here are my top 3 factors contributing to the BUY opportunity in 2010.

1. Short Sales will become even more opportunistic with the prospects of actually closing deals better than ever as Banks choose the path of a kinder, gentler approach with their troubled borrowers.
2. (2) major contributing factors to increased foreclosure activity will be Unemployment and a large volume of  “reset” or “recast” activity on existing ARM and Pay Option mortgages.
3. Feds squeezing banks by upping the ante on capital reserves will push more REO inventory out onto the marketplace.

Our portfolio for Market Advisors Real Estate Fund LP  is anticipating acquisitions with upwards of 18% cash on cash ROI. For January I am releasing only 20 units to Investors at $25,000 each. These won’t last long, reserve yours today. You may contact me by e-mail john@mymarketadvisors.com

Thank You Mr. Obama! Both Freddie Mac and Fannie Mae Receive an Early Christmas!

Last Thursday the Treasury Department and the Administration announced that they would back both of these beleaguered government sponsored agencies for the next three years no matter how big their losses.  Wow, so our Government stands ready to take over all segments of the economy that are in trouble because of previous government intervention!  Corbett Daly reported on this announcement in Reuters last Thursday December 24th – an early Christmas present for sure.  It makes you wonder if the $200 Billion line of credit already established for these two agencies will be enough.  They have already used over $111 Billion of that and according to Corbett each company currently holds assets in the high $700 Billion range.  Here’s how Corbett describes the function of these two agencies:  Fannie Mae and Freddie Mac are congressionally chartered companies that buy up mortgages from banks and other originators to keep mortgage markets liquid.  Some of the debt is repackaged as securities and sold off to investors, and the government has been buying an increasing share. That’s where most of the $111 Billion has gone so far.

The bottom line is that housing in this country still needs a life-line and will this new policy be enough to provide it?  This reprieve was designed in part to avoid putting an added strain on the housing sector as the Treasury and Federal Reserve wrap up programs to purchase mortgage-related debt.  Will it work?  Who knows and as long as government keeps trying to manipulate recovery we might not ever know.

And right on the heals of this great news both Freddie Mac and Fannie Mae  announced $6 Million and $4 Million bonuses respectively for their illustrious CEO’s!  So, how was your Christmas?  I know I’m being a bit sarcastic here but can you blame me?  I suggest you hang onto your hat because we are in for a wild ride in 2010.  Check out all of Corbett’s article here.

Paul Davis, Market Advisors, LLC

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