Tuesday, October 27, 2009

Shadow .... market of homes

I know I have suspected that there are more foreclosures to come.

Really good write up on this topic in the Wall Street Journal.

"So where’s that long-awaited deluge of bank-owned homes that is supposed to flood the U.S. housing market? This “shadow” inventory has..."

It has been keeping a few buyers on the sidelines looking for a deeper bottoming out to the real estate in the local market. Reality Check. Buy if you find the one that works for you long term. Especially if you plan on living in it.

Now in the Income Property side. Revenue dependability is what we have most here in the West Los Angeles area. That reduces risk.

If you want money to be available for a dependable retirement cash flow... We should talk. There are some good options in the marketplace.

Keith L.

Monday, October 26, 2009

Details... financing is the "Devel in the Details"

THE DEVIL IS IN THE DETAILS... Or so the famous saying goes. And when it comes to really understanding the various reports and events unfolding in the economy, it's important to take a look at the details - not just the headlines. Here's what we know...

On the inflation front, the Producer Price Index, which measures wholesale inflation, unexpectedly fell due to a drop in energy prices. While that seems like good news on the surface, keep in mind that next month's number could climb higher again, as oil and natural gas have both been on a tear higher lately.

In housing news, Housing Starts and Building Permits both came in a bit below expectations, but this may be a sign that builders are exercising some caution - particularly in the face of the $8,000 tax credit for first time homebuyers that is presently set to expire on November 30th. Existing Home Sales came in better than expected - and a whopping 45% of those homes were sold to first time homebuyers - rushing to move in on that credit. Recent studies have shown that many who qualify for this tax credit aren't even aware of it...so please let me know if you or someone you know needs more information - the clock is ticking!

Additionally, the level of existing homes inventory shrunk to a 7.8 month supply, down from a recent high of 10.1 months in April.

In other news, 3rd quarter earnings season continues, where companies report their status as of the end of September. While many companies are beating expectations, it's important to realize that many of those companies achieved better earnings by cost cutting and layoffs, not from increased sales. This is a big disconnect between Wall Street and "Main Street". Stocks are rocketing higher based on these "positive" reports, but the cost cutting and job cutting measures can only go so far...you can't simultaneously grow the ranks of unemployment - and then grow your business, hoping for increased sales to those same people who are without jobs.

Last week's Jobless Claims numbers seem to confirm this as Initial Jobless Claims rose more than expected. In addition, the number of individuals continuing to receive unemployment benefits fell to the lowest level since March, but this is likely the result of people's unemployment benefits expiring, without them having been able to find jobs.

Also worth noting is the news that ratings agency Moody's lead analyst, Steven Hess, said that the US needs to cut its deficit or it could lose its "AAA" rating in the next 3 to 4 years, which we have maintained since 1917! Think of all we've been through - two World Wars, the Depression, three Wall Street collapses and major terrorist attacks... yet our credit quality has maintained that AAA rating, allowing us to issue debt at the most favorable rates. Hess went on to say that if the US doesn't "get the deficit down in the next 3-4 years to a sustainable level, then the rating will be in jeopardy." And just like on a mortgage when the credit rating gets reduced, interest rates move higher. This will definitely be something to keep an eye on in the months ahead.

After all the week's action, Bonds and home loan rates ended the week slightly worse than where they began. How much longer will we have good Interest Rates is a good question.

If you have a Crystal Ball and see the next moves on the market... Hit comment and tell us where you think it is going.

Keith L.

Thursday, October 22, 2009

"Finding Common Ground" Forum

Dear Friends,

Thank you so much for helping to make yesterday’s Housing Forum a success! We are excited that so many of you took time from your busy Wednesday to join us in the spirit of understanding and cooperation.

Please take a few moments to answer these questions for us so we can learn and improve future programs for the public. Your feedback is VERY important to us!

1. What were your overall impressions of the event?
2. What were your favorite parts? Why?
3. What things would you change or improve? Why?

Thank you again for your time.


Deborah Freeman, Legal Assistant
Santa Monica City Attorney's Office

Dear Deborah,

Thank you for the event at the Annenberg Community Beach House today. It was a nice venue and a nice idea to have a beginning of dialogue about actual compromise and meeting of those who are most polarized in this city. Some compromising may eventually come of it. There were opportunities for sharing that may lead to more understanding and useful compromises in the future.

I frequently work hard to find common ground with my tenants (customers really) by listening and trying to learn what they really need or are on about. And in return managing their expectations of what I can do for them. Housing providers are not the everything solution to all the ills of the world in which we live. And some in the community feel we are the worst thing and use a term like Landlord with all the old worst connotations that they can attach to it. As if all landlords are a Charles Dickens character.

And therefore the “Landlord” term may make finding common ground hard for those who do not trust that a Housing Provider is a professional businessperson who does have good intentions to live up to the business relationship with the tenant.

In overview… One or two questions that were posed to the panel may be the hot items that you deal with on a regular basis but are not ones that landlords ( I prefer Housing Providers) are able to help solve. In many cases the smoking issue is one that we cannot regulate. And the common complaint about noise is often beyond the pale of our control. The only item in the post seminar discussion panel questions section that seemed on point was the one related to maintenance. And of course as asked – relating to a new owner – it was about giving the owner a chance to effect repairs and communications going back and forth so that the tenants know what to expect and what the new housing provider will be working on first. The opinion of one fellow property manager in attendance was that 3 of the 4 questions posed were absolutely useless to the property owner side of the issue. After fully reviewing your web site I see that those are the items that were most important to the Consumer Affairs division but not necessarily related to "Finding Common Ground" between landlord and tenant.

I hope that in the long term these meetings can work on problems that we (Tenants and Owners/Management) have to deal with and will actually make a difference. The difficulty to be overcome was evidenced by one of your lead speakers. It was said by the City of Santa Monica elected official who spoke, that he did not believe there was room for compromise on this issue. It is not just the Housing Provider side that must be brought to the table with an understanding of what effective and beneficial thing can come of this.

Such Polarization and refusal to deal with issues is very tough for us. My expenses are up. Much of it is due to new city fees and city taxes. Yet there was not an appropriate place in yesterday’s meeting to review that. The Housing Providers are not able to be the solution to all of societal ills. Smoking or bad behaviors between neighbors are just the tip of the iceberg.

I look forward to future meetings like this where there are more insights to each other’s side in the future.


Keith Lambert

Monday, October 19, 2009

Heat is rising on the financing side

"THE HEAT IS ON." Glenn Frey. While cooler temperatures are beginning to descend on many parts of the country, Bonds and home loan rates are feeling the heat and pressure from several fronts. Here are some details...along with why it's important to act soon to take advantage of current home loan rates, as they may never be seen again.

Last week, the Core Consumer Price Index (CPI) was reported higher than expected, indicating that inflationary forces may already be underway. Remember, inflation erodes the value of the fixed return that a Bond provides - therefore, inflation is harmful to Bonds and home loan rates. Just the hint of inflation can cause home loan rates to worsen, which is what we saw last week.

And here's a very interesting and important note - when looking at these CPI numbers, it is important to understand the effect that the "Cash for Clunkers" program had on this index. The Cash for Clunkers program was very "creatively" accounted for as a reduction in the sales price of automobiles, which had to have a dramatic effect on lowering the CPI that was reported. Imagine how much higher CPI would have been had this "creativity" not been used. As even more inflationary fears creep into the economy, home loan rates will continue to rise.

Also adding pressure to Bonds and home loan rates is the Fed's plan to ration out their remaining purchases of Mortgage Backed Securities. The Fed has purchased around $950B year-to-date out of the $1.25T allotted for the program, which is now set to expire March 31, 2010. This means the Fed will be averaging about $14B a week in purchases, a lot less than $25B or so they had been doing up until recently. And anytime demand for an item slows down...including Mortgage Backed Securities...the price goes down. And in this case, it means that home loan rates will move higher.
The bottom line is that the heat is on...and home loan rates are starting to rise already. While home loan rates are still incredibly low, it is clear this won't last much longer - and we may not see rates at these levels again in our lifetimes.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

If you have the ability to get qualified and a suitable down payment to purchase, you are at the right point in time. The right property to invest in is not that hard for a professional agent to find. Give me a call if you want to discuss your own investment plans.

Keith Lambert

Tuesday, October 13, 2009

Federal Reserve Chairman Ben Bernanke - We are listening

"LISTEN TO WHAT THE MAN SAID." And those aren't just the words from Paul McCartney's hit song of the same title...they're also words of advice for anyone who's considering buying a home or refinancing.

Last week, Federal Reserve Chairman Ben Bernanke said that as the economy heals, the Fed will be very vigilant to protect against inflation. While inflation is not a problem at present...it will most certainly become a problem down the road. So why does this matter if you are considering purchasing or refinancing? Because inflation is the arch-enemy of Bonds and home loan rates, and just the knowledge of it coming has been causing both Bonds and home loan rates to worsen in recent days. Along with the fear of inflation, the Fed's purchasing program of Mortgage Backed Securities is already slowing down, with the end of their buying in sight - and the reduced demand for these Bonds is also driving home loan rates higher.

Bottom line: home loan rates are already on the rise, and we won't likely see these low historic levels again.

Interest rates are still very near historic lows - George Washington couldn't have gotten a better interest rate - and the opportunity these low rates present is huge for homebuyers. But the Qualification process is harder and Longer.

So get in line with all your paperwork and tax returns and save up a real deposit. No easy qualifiers or no money down loans exist today.

On the topic of inflation - Gold has been on a tear higher of late, reaching a record high of $1048 an ounce. Remember that Gold is seen as a "safe harbor" or hedge against a falling Dollar and inflation - as Gold is not likely to lose much value in periods of rising prices. Again, fears of future inflation are pervasive, particularly in light of the massive economic stimulus that has been injected into the US economy...and inflation will drive home loan rates higher. The latest spike in Gold is more likely attributable to the Dollar's recent decline, but both factors are somewhat at play.

There are deals out in the real estate market. I like Income Real Estate as a Safe Harbor investment. But it is not as liquid as gold or bonds. Investing in Residential Income properties is more long term and inflation resistant than most other investment vehicles. And as it matures and pays down the mortgage it can become a Cash Cow to retire on the cash flow. Not just a Sell it All proposition.

Hit the comment button and tell me the Safe Investments you like in today's market.