“HOUSING MARKET STUMBLES”

I love it when I read these types of headlines. I always get a chuckle and say “So, what did you expect?” The $ 8,000 home buyer credit was not renewed. FHA, Freddie Mac and Fannie Mae have tightened lending requirements. The “BIG BANKS” are imposing their own ridiculous rules on top of the government rules. And you expect the housing market to thrive. To quote a cartoon character, “DOH!”

Here are some of the particulars in the story: The U.S. Census Bureau reports single family housing starts in June fell by 0.7% to a seasonally adjusted annual rate of 454,000. The U.S. started 1.47 million in 2006 before the bubble burst. The article goes on to claim that a variety of factors have led to a flagging confidence including a sluggish labor market, global turmoil and falling stock prices.

I find it amazing that these so called experts in Washington and New York are clueless as to why we are in trouble on all fronts. Let’s take the labor market. I’m no economist or Harvard scholar but I can sure figure out why the job market is in such turmoil. How about the constant barrage of criticism, rules and regulations that keep CEO and the local business owners guessing “what’s next”

Over the past 4 years the auto industry, banking, financial, and insurance industries have been terrorized by Washington and special interest groups. They have to explain everything from CEO pay to why they’re not being green enough for the environmental groups.

Don’t get me wrong, Wall Street and the banking sector went on a GREED spree like none in history. But with that said, all of the banking and financial sectors have been placed under government rule with all kinds of draconian regulations that have stifled creativity and confidence. Washington has taken their typical reactive and not proactive stance.

Now let’s take business, especially big business. They have tax incentives to take jobs overseas. Does it make sense to anyone for businesses to be laying off people here and exporting jobs elsewhere? Obviously it makes good business sense. The biggest complaint is that taxes overseas are better than and not as high as the U.S. This might be the case but I have seen some reports that show most major companies pay very little federal income tax and most get a major credit. So, is it really taxes, or could it be something else? Cheap labor in some third world country may make the quarterly P and L look good for stock holders but eventually that catches up to you when no one here has any money to buy your product.

Global economic turmoil and falling stock prices are all a factor of Governments around the world becoming so big and cumbersome they stifle growth. In some countries the retirement age is 55 and then people live off the government dole for the rest of their lives.Tax rates in some countries are in the 80% range to pay for all the government social programs and an ever increasing portion of the population doesn’t pay taxes at all (sound familiar?). And you wonder why Europe is on the verge of collapse. Is this a model we want to follow??

Back here in the US all we hear from our leaders is negativity. Words matter and you have to understand they say them more for political reasons. A scared population is a compliant one that will agree with your political ideas. And this has worked well: think 9-11, war in Iraq, TARP Stimulus 1 2 or 3 (I forgot, they keep adding them on), saving GM ‘for America’, and the list could go on. In all of these events our leaders increased the fear factor to new heights making people believe if they did not go along all hell was going to break loose and we would all be out on the streets. Americans and most of Europe are paralyzed with fear escalated by our elected leaders. The job market and the housing market won’t turn around till Main Street starts to feel good about its future.   

So what does this mean for Real Estate investors? You need to pick your markets very carefully. The criteria I use is my Three Tier marketing system which was published in my September 2009 newsletter. Here is the link:  http://http://archive.constantcontact.com/fs050/1101755221758/archive/1102703583402.html.

The best markets may not be where you are investing now. For example Florida, my home state, is very anti business. The Government seems to go out of its way to discourage business from moving here. They want tourism, service jobs and retirees. That is living in the past. We need high paying good quality jobs if Florida is to survive and thrive in the market place.

On the other hand, just to our north, Georgia is grabbing every job that brings in good pay, health care and is a asset to the community and the State. Companies from all over the world are signing lease contracts and purchase contracts and plan to hire tens of thousands of Georgians. Both states have housing problems and job losses but one is being proactive and the other is sitting on South Beach having a cold one and taking in the sights!!!Which state will improve faster?

All over the country this is being repeated, with some states fighting for every job while others are living in the past. There have been a number of articles in national publications that more and more companies and people are moving to Southern and Mid Western States. Don’t believe it’s because of the weather. Northern States and Western States are still living in the 50’s and 60’s mentally when government was supposed to know what was best for the people and the business community. They are all super high tax states and still not able to see what their problems are. They are all on the verge of bankruptcy   and they blame everyone but themselves. Think California, New York, New Jersey and any one of the New England states. So as an investor you must really do your homework before you invest in an area especially if you are not from that area. What was a good bet in the past might not be safe any longer.

Due diligence is more important they ever. Take the extra time on this part of your Real Estate business and big profits will come your way. Because the rest of the world is scared to death and can’t or won’t make decisions so profits are there for the taking. You just need to have courage to go where others are afraid to. 

                              Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

http://www.pauljdacosta.com

mailto:paul@pauljdacosta.com

Since the housing crash there have been a number of articles and talking heads lamenting homeownership. The opinion is that it’s just not a good investment anymore and for some people homeownership is just not in their best interests.

Let’s look at this from a long term prospective. Owning a home adds pride for the home owner as well as the neighborhood. You can drive down most streets in most any neighborhood and tell which homes are rented and which are owned by the people living there. Home ownership adds stability to the community and to the tax base. Crime is always less in communities where the majority of homes are owned instead of rented. And let’s not forget about a home’s value. Pride in ownership translates into taking care of the property, adding stability and possibly even increasing its value. Think back to your grandparents or another family member. They bought homes, worked in the community and stayed there till they passed on. Either the surviving spouse or the heirs sold the house and in almost all cases they made a large profit. My own grandparents bought a house, lived there for 35 years and then sold when my grandmother moved to Florida with us. My grandmother was shocked when the house sold for $75,000; they bought it for $ 6,500.00.  

I know you’re going to say times are different; people don’t stay in one place anymore. Yep, you’re right, but in most case they still are better off owning instead of renting.

Some ‘experts’ have the opinion that homeownership is dead. Housing values have plunged and people are losing their shirts. Yes people did buy in the heat of the market. And now the crash has caused their values to plummet. I know you’ve heard this over and over, but it happens to be the brutal truth: for a large number of those deals the people should have never have been allowed to buy the homes, and ‘creative financing’ should have been suspect. No money down deals, loans such as pay option ARM’s  (where you paid a smaller payment with the interest charges adding to the balance on the back end) seemed too good to be true. No one listened.  Even worse, people making 100K were buying a house that cost 700K with no money down with loans that guaranteed failure. ‘No document’ loans were really popular (where buyers were saying they made twice as much as they did and agreeing to 5K a month in payments plus taxes and insurance). And let’s not forget investors who bought homes that they never saw in towns they couldn’t even find on a map. In my town of North Port, Florida I have talked to people who did not even know where North Port was when they bought 2 or 3 houses no money down  and thought they were going to make killing on each one. Well, they know where the city is today, that’s for sure.

How about the people who bought their homes in the late 90’s or early 2000’s and saw the value of the homes double? They went from a low 30 year fixed mortgage to a higher rate 2 year ARM with cash out so they could buy that new truck or a couple of vacations.  That low 2 year mortgage payment doubled when the loan readjusted and now they could not make the new payments.  Add that to the poor economy, job losses, property tax increases, insurance costs increasing and you have the real estate disaster we see. But does all this really justify not owning a home?

In my opinion the cynics are wrong, wrong, WRONG! Not in my lifetime have people been able to buy a home at such great prices and at such low interest rates. If the banks would loosen up the financing to people who could actual afford the home purchase and FHA would stop putting silly requirements (such as the 20% 90 day rule) and banks stop adding their own inane rules we could actually work our way out of this mess.

In my home market here in North Port, and on my own street you can buy a 3 bedroom 2 bath 1780 square foot home for about $100,000. If a buyer were to put 10% down ($10,000) and borrow $90K at 4.75% (30 year fixed mortgage) the payment would be $ 469.48 plus taxes and insurances. The couple next door to me rents this exact house and pays $925.00/ month. Even if taxes and insurance are $350.00/ month it’s still better to own than rent. We will eventually have equity increases when our market gets back on its feet. The interest and property taxes are a write off as well. (But I’m not an accountant so check with your CPA as to your taxes).

In some markets you can buy houses in the mid $50’s to high $70’s and if they qualify for FHA with 3% down the payment would be less than rents in that same market. Let’s look at the payment: $ 70,000 loan amount 5.0% interest 30 years payment=$375.78 plus taxes and insurances.  

What needs to happen is a rational discussion about homeownership and the responsibilities that come with it. People need to understand that when they buy a home they hold its future value in their hands. If they let the place go or keep it up, they control the results. Also people who buy a home must feel secure about their jobs and life in that community. But all we hear is America’s best days are behind her and we are all doomed. This sells news stories (like any bad news) but it just adds to the angst of buyers and they become afraid to make the decision. If the market is going to improve buyers and sellers must realize home prices have changed and it’s one of the best times to buy. Or if you’re a seller and you’re holding out for a better offer you need to really look at the deal you have and how much it is going to cost you to hold on to the house until ‘better’ deals come your way.

The bottom line: for most people owning a home is better than renting in the long run. You must have the courage to look past the cynics and gloom and doom people. You must have the patience and the faith to know that the market will recover. Make the decision for yourself not letting someone else make that decision for you.

          Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com                                                      paul@pauljdacosta.com