Someone asked me why rental home REITs (an investment trust) have soared 14% over the past few months (investors pumped $22 billion into them this year already). It's simple: they're betting on Obama's housing white paper to deter home ownership.
Here's the logic: $269,900 (average U.S. home price) x .20 (required 20% down payment under Obama's new FHA guidelines for "Qualified Residential Mortgages") = $53,980 + $7,500 (average closing cost) = $61,480 (required cash-on-hand to buy a home unless you take private money (which come with astronomical interest rates; you'll pay an additional $200,000 in interest over the life of the loan))... so if you don't already have a home, you'll likely be renting for the next 15 years (time it takes to save $61,480 on average household income)... if you do own a home (it's unlikely to sale for a return on investment, you'll lose your equity with shortage of buyers in a "buyers market," and likely turn upside-down on the mortgage resulting in a REO/Foreclosure and opportunity for the REIT to purchase the property for 30% of its true value and put it on the rental market as well). I hope that makes sense.
Monday, June 20, 2011
Friday, June 17, 2011
Thursday, June 9, 2011
Don't Blame Homeowners for Today's Housing Crisis
The first thing I read this morning was a featured ActiveRain.com blog post titled “The McMansion Extra Value Package: Is it REALLY the Bank's Fault You Can't Afford Your Home Now?”
Well, I disagree with the premise that all home buyers who took advantage of low-down and no-down loans to buy a home in the early 2000's were greedy. There were a lot of responsible people who purchased homes well within their means that have been hurt in today's real estate market. I don't believe it's entirely their own fault if they and others are in a financial crisis now.
Sure, there were some naysayers predicting a housing collapse, but plenty of experts shunned that idea. To be fair, I think we have to go back to those so-called “bubble years” and remember what the housing market was 5 or 6 years ago: (1) home buyers qualified for loan programs that were widely available, (2) most people felt secure in their jobs, and (3) there was no reason to expect anything other than continued growth in property values. Level off, maybe... but, home prices never went down before. We all knew that declining home values might be possible in theory, but it seemed unlikely based on decades of real estate history in this country – certainly in the D.C.-Baltimore-Annapolis triangle.
It's easy to sit in an ivory tower now, point fingers and, in hindsight, sweep all those home buyers with a broad brush labeled “greedy,” but it’s just not fair or accurate. Responsible people used low-down and no-down loans to purchase an average home - a 2 or 3-bedroom townhouse with an hour-long commute to work or a modest 40-year old split foyer in the D.C. suburbs that needed updating - NOT a McMansion. People felt they had to buy “now” - before home prices went any higher and completely out of reach in their lifetime. They anticipated re-financing in a couple of years, as home prices continued to escalate and their equity grew.
Are you really going to blame them for accepting near-uniform professional advice?!?
(Full credit to M.Woda & ActiveRain for this blog post; edited by ML)
Well, I disagree with the premise that all home buyers who took advantage of low-down and no-down loans to buy a home in the early 2000's were greedy. There were a lot of responsible people who purchased homes well within their means that have been hurt in today's real estate market. I don't believe it's entirely their own fault if they and others are in a financial crisis now.
Sure, there were some naysayers predicting a housing collapse, but plenty of experts shunned that idea. To be fair, I think we have to go back to those so-called “bubble years” and remember what the housing market was 5 or 6 years ago: (1) home buyers qualified for loan programs that were widely available, (2) most people felt secure in their jobs, and (3) there was no reason to expect anything other than continued growth in property values. Level off, maybe... but, home prices never went down before. We all knew that declining home values might be possible in theory, but it seemed unlikely based on decades of real estate history in this country – certainly in the D.C.-Baltimore-Annapolis triangle.
It's easy to sit in an ivory tower now, point fingers and, in hindsight, sweep all those home buyers with a broad brush labeled “greedy,” but it’s just not fair or accurate. Responsible people used low-down and no-down loans to purchase an average home - a 2 or 3-bedroom townhouse with an hour-long commute to work or a modest 40-year old split foyer in the D.C. suburbs that needed updating - NOT a McMansion. People felt they had to buy “now” - before home prices went any higher and completely out of reach in their lifetime. They anticipated re-financing in a couple of years, as home prices continued to escalate and their equity grew.
Are you really going to blame them for accepting near-uniform professional advice?!?
(Full credit to M.Woda & ActiveRain for this blog post; edited by ML)
Wednesday, June 8, 2011
Editorial: Wind vs Water - Round Two
Which came first, the wind or the water? Six years later, we still don’t know. I guess it’s just a trick question, some sort of mystery, or just a sickening legal loophole.
Who remembers this? This was the multibillion dollar dilemma after Hurricane Katrina. USAA didn’t pay because according to them, “your home policy doesn’t cover damage caused by flooding.” Meanwhile, State Farm denied your claim because according to them, “your flood policy doesn’t cover damage caused by wind, which technically came before Katrina’s water.” In the aftermath of this hellish tug-o-war, there was no shortage of politicians promising insurance reforms. Dozens of wide-eyed ‘06 midterm election candidates pimped Katrina’s pain with promises of change for votes. Well, lucky for them, 2006 was a great red herring (H1N1 spreads across the globe, North Korea got nukes, Italy stole the World Cup, and Saddam was hung)… we forgot to hold them accountable.
Six years, and more than 46.7 million dollars in political contributions from insurance companies later, Congress still hasn’t fixed anything. No legislation, no amendments, not even a simple floor speech. In fact, Congress just reauthorized the federal flood insurance program with no mention of wind damage. I wonder if they know the Mississippi river is currently flooding and Hurricane season just started…
Who remembers this? This was the multibillion dollar dilemma after Hurricane Katrina. USAA didn’t pay because according to them, “your home policy doesn’t cover damage caused by flooding.” Meanwhile, State Farm denied your claim because according to them, “your flood policy doesn’t cover damage caused by wind, which technically came before Katrina’s water.” In the aftermath of this hellish tug-o-war, there was no shortage of politicians promising insurance reforms. Dozens of wide-eyed ‘06 midterm election candidates pimped Katrina’s pain with promises of change for votes. Well, lucky for them, 2006 was a great red herring (H1N1 spreads across the globe, North Korea got nukes, Italy stole the World Cup, and Saddam was hung)… we forgot to hold them accountable.
Six years, and more than 46.7 million dollars in political contributions from insurance companies later, Congress still hasn’t fixed anything. No legislation, no amendments, not even a simple floor speech. In fact, Congress just reauthorized the federal flood insurance program with no mention of wind damage. I wonder if they know the Mississippi river is currently flooding and Hurricane season just started…
Monday, May 30, 2011
BBQ Sauce and Business Development
Father's Day, the First Day of Summer, and the 4th of July are all around the corner and many of us will be hosting business clients and their families. The next thirty-five days are opportune for business development, so if you're not planning a barbeque then you're probably not prepared to close (just kidding). If your client or SOI is too busy to join you, homemade BBQ sauce in a Mason jar makes a wonderful gift during summer months (just flip over a business card, write a word or two and then tape it to the jar).
I have posted my personal barbeque sauce recipe below. But don't worry, I won't claim it to be the procuring cause of your client's business. This recipe comes from my upbringing in the BBQ Capital of the World... Kansas City! Its concept is based off the Gates family sauce recipe. For the meat, I'd highly recommend smoking pork baby back ribs, but with this sauce it really doesn't matter; you could brush it on canned Vienna sausages and folks would ask for second servings.
1-3/4 cups apple cider vinegar
1/4 cup of white wine vinegar (if not available, substitute w/ ACV)
2 quarts ketchup (Hunt's)
1-1/2 teaspoons of liquid smoke (hickory)
1 teaspoon lemon juice
1-1/4 cups brown sugar
1/4 cup salt
2 tablespoons celery seeds
2 tablespoons ground cumin
2 tablespoons ground red pepper
2 tablespoons garlic powder
1 tablespoon chili powder
1/2 tablespoon ground black pepper
Combine the sugar, salt, celery seeds, cumin, red pepper, garlic powder, black pepper and chili powder in a small bowl. Mix the ketchup and remaining ingredients in a large bowl, then stir in the dry ingredients. Transfer to large pan and bring to simmer over medium-low heat for 5 minutes. Remove from heat, cover to cool and then funnel into Mason jars. Enjoy.
If you have other recipes you'd like to share or photos of your meals with the sauce, I'd love to see them – marcusleach@gmail.com.
I have posted my personal barbeque sauce recipe below. But don't worry, I won't claim it to be the procuring cause of your client's business. This recipe comes from my upbringing in the BBQ Capital of the World... Kansas City! Its concept is based off the Gates family sauce recipe. For the meat, I'd highly recommend smoking pork baby back ribs, but with this sauce it really doesn't matter; you could brush it on canned Vienna sausages and folks would ask for second servings.
1-3/4 cups apple cider vinegar
1/4 cup of white wine vinegar (if not available, substitute w/ ACV)
2 quarts ketchup (Hunt's)
1-1/2 teaspoons of liquid smoke (hickory)
1 teaspoon lemon juice
1-1/4 cups brown sugar
1/4 cup salt
2 tablespoons celery seeds
2 tablespoons ground cumin
2 tablespoons ground red pepper
2 tablespoons garlic powder
1 tablespoon chili powder
1/2 tablespoon ground black pepper
Combine the sugar, salt, celery seeds, cumin, red pepper, garlic powder, black pepper and chili powder in a small bowl. Mix the ketchup and remaining ingredients in a large bowl, then stir in the dry ingredients. Transfer to large pan and bring to simmer over medium-low heat for 5 minutes. Remove from heat, cover to cool and then funnel into Mason jars. Enjoy.
If you have other recipes you'd like to share or photos of your meals with the sauce, I'd love to see them – marcusleach@gmail.com.
Editorial: Homeownership and Military Families
Memorial Day has arrived, and I encourage you to spend it in honor of those who made the greatest sacrifice for our country and way of life. As real estate professionals, we are in a position to counsel and support surviving spouses and military families to better realize the American dream in terms of home ownership.
According to the U.S. Department of Housing and Urban Development, 67% of Americans are homeowners. In comparison, however, only 27% of military families own their own home. Service members choose to live on-base rather than purchase a home for economic reasons. The benefits for on-base housing are of greater value than allowances for the civilian housing market and those funds are recycled back into military coffers rather than entering the civilian economy. At first glance, this might appear as a win-win situation. But as friends and family of service members, we should be that third voice and encourage home ownership when feasible.
Junior service members, unfortunately, make the decision the live on-base without consulting real estate professionals out of the belief their housing allowances are insufficient for home ownership. We should highlight that while accepting on-base housing rather than off-base allowances might offer short term benefits, the building of home equity while in service will ease the inevitable transition into civilian life and provide long term stability for military families. The loan assistance programs, tax benefits, professional support networks and opportunities in real estate for active duty service members and veterans are far too numerous to list. Our military does a superb job of training our soldiers to defend us and our way of life. We cannot, however, expect them to find time to properly educate our service members on a individual basis regarding home ownership, their local market, and financial options available to them.
With the National Association of Realtors raising dues and likely increasing their political presence and contributions this year, I believe we should encourage them and politicians to: (1) support increasing housing allowances for service members to make them equivalent in value to on-base housing; (2) expand the Homeowner Assistance Program for upside-down military families forced to relocate in service of their country; and (3) make the 2009 Homebuyer's Tax Credit permanent for military families (as many of you are aware, it expired last month). There is nothing more admirable than serving your country. Lets make it a personal and community goal to get military family home ownership up to 40% by 2015.
According to the U.S. Department of Housing and Urban Development, 67% of Americans are homeowners. In comparison, however, only 27% of military families own their own home. Service members choose to live on-base rather than purchase a home for economic reasons. The benefits for on-base housing are of greater value than allowances for the civilian housing market and those funds are recycled back into military coffers rather than entering the civilian economy. At first glance, this might appear as a win-win situation. But as friends and family of service members, we should be that third voice and encourage home ownership when feasible.
Junior service members, unfortunately, make the decision the live on-base without consulting real estate professionals out of the belief their housing allowances are insufficient for home ownership. We should highlight that while accepting on-base housing rather than off-base allowances might offer short term benefits, the building of home equity while in service will ease the inevitable transition into civilian life and provide long term stability for military families. The loan assistance programs, tax benefits, professional support networks and opportunities in real estate for active duty service members and veterans are far too numerous to list. Our military does a superb job of training our soldiers to defend us and our way of life. We cannot, however, expect them to find time to properly educate our service members on a individual basis regarding home ownership, their local market, and financial options available to them.
With the National Association of Realtors raising dues and likely increasing their political presence and contributions this year, I believe we should encourage them and politicians to: (1) support increasing housing allowances for service members to make them equivalent in value to on-base housing; (2) expand the Homeowner Assistance Program for upside-down military families forced to relocate in service of their country; and (3) make the 2009 Homebuyer's Tax Credit permanent for military families (as many of you are aware, it expired last month). There is nothing more admirable than serving your country. Lets make it a personal and community goal to get military family home ownership up to 40% by 2015.
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