Home prices heading for triple-dip

Read every bit and enjoyed it all. This pie is enough for all of us. We just have to take a bite, and feel the energy.

Sandra

Great post. Like you said it is a local game. We as investors must realize that strategies we hear about may work 50 miles away but don't work where we are. We must adapt our strategies to the very neighborhood we are looking at.
Just look at Florida in the article you provided. Massive appreciation here, depreciation there. Know your market place!! It is critical in the coming years. Opportunities are out there that is for sure!

Thanks again,
Michael Mangham
MD Home Acquisitions LLC

good article...
definitely need to be aware of what's going on out there... thanks for reminding us to do our due diligence!

Valerie

if some homeowners 'thought' they were underwater, this may actually drown them

Looks like another roller coaster ride, and the markets are down too!

It smells opportunities! I just happen to read Dean's book in the first chapter and he wrote bad news & opportunities. I hope everyone here see what I saw here "the pie just get bigger". I can't wait to do something about it.

I am not saying it is easy, but if it is easy, what is the fun in it? Just enjoy the journey and focus on your goal. You will get there.

Sometimes when you see light at the end of a tunnel, it's just the light of an oncoming train.

good one Bill!

many of us investors are also homeowners... so it's not just all opportunities... it can also be a journey no one will enjoy.

Valerie

Bill you blew the light optimistic side right out of the tunnel!!

I certainly believe this is a great time of opportunity. It has been for me and I suspect it has for others as well. But simply because prices are down doesn't mean they can't go down farther. This is the most confused market that I have ever been in (since 1981) and I think my experience helps me reduce my enthusiasm. I am watching all sorts of indicators that tell me that our economy (and country) is in a world of hurt. The old days are gone. The banks and Congress have given us the short side of the stick. Sure, there are deals all over the place; but if you are new at this, how are you accurately judging what is a good deal? I'll be honest and tell you that I am having a hard time. Is it a flip, a hold or a pass? Some days they all blend together. But the things that are on my side are experience and funding. A lot of the new investors have neither and they are just rolling the dice hoping they win on their first deal. That is a recipe for disaster.
However, I believe that to be successful that you have to take risks. It's what business is all about. But you have to be smart. Read 10X the amount of stuff that you think you should read. Visit some Craigslist homes to get a feel of what is out there. Visit a couple of Open Houses. Go to REIA meetings if you can. Promote yourself like hell so people know what you do. (If you are unwilling to do that please stop now and save yourself a lot of wasted money and time) Get some simple business cards and a dedicated phone line (Google, Accessline, Ringcentral, Halloo, etc) Be someone that others want to work with. This is a great time but you must be prepared or you will get your clock cleaned. Lastly, investigate your deals. There are "investors" out there that will sell you a bunch of crap. Try to buy local so you can see the property. Work a minimum 50 hours a week diligently for a year and you will increase your odds of being successful. Remember you are competing with thousands of other investors doing the same thing as you. Be better than the others and you will rise to the top. It can be done but not by anyone that does not have the drive. Just be honest with yourself and ask if you have what it takes. If not, that's okay. Find something else that works for you. Simple. Hope this helps.

I made more money in July thru October of this year than I made in all of 2010 so I know it can be done. But remember, I've been doing this for a very, very long time.

for the words of wisdom. What you've proved is that you CAN make money in this business IF (and probably only if) you do it correctly. That's why we are here, to learn how to do it correctly.

I'm part of that struggling FL market. Houses are for sale but DEALS are hard to come by. The rumor that FL is on sale just applies to certain areas. I haven't found them yet and I am covering a big area. I want to succeed in this biz so my search continues.

Thanks again for keeping us informed.

Andy Sager
DG's AndyS

appreciate the info Bill.

Just to add to what Bill has posted, here is an article I came across on Military.com. We are still going to see corrections in the market.

http://www.military.com/money/content/home-ownership/buying-a-house/expe...

Expert: Double-Dip Housing Recession Has Begun

Military.com| by Christopher Maag, Credit.com

The number of people falling behind on their mortgages increased over the last quarter for the first time since 2009, according to a new report by the credit bureau TransUnion.

And while the news surprised many people, it came as no surprise at all to some mortgage experts, who have known for years that a wave of wildly risky mortgages written in the waning days of the mortgage boom would come back to haunt the American economy in 2011.

That means the mortgage market meltdown that began in 2007 is headed for a double-dip, and likely won’t get resolved until 2015, says Dr. Joseph R. Mason, a banking professor at Louisiana State University and a senior fellow at The Wharton School.

“These loans are the worst of the worst of the worst,” Mason says of some of the riskiest sub-prime adjustable interest rate loans, many of which are now resetting. “These loans never should have been underwritten in the first place.”

Mason asserts that these loans are tied to the recent troubling mortgage numbers. The national delinquency rate of borrowers going 60 days or more past due on their mortgage payments increased to 5.88 percent during the third quarter of 2011, the first increase since 2009, TransUnion found. The rise in late payments came after six straight quarters of decline.

“We expected that trend to continue given recent, relatively more conservative lending policies and the apparent stabilization of both home values and unemployment,” Tim Martin, chief of U.S. Housing for TransUnion, said in a press release.

The company blames the increase on a variety of factors.

Click here to find out more!
“In the third quarter, the consumer was hit with several unanticipated shocks, including the U.S. credit rating downgrade, stock price declines, European debt concerns, stubbornly high unemployment, more downward pressure on home values and low consumer confidence,” Martin said.

Sure, none of those things helped. But according to Mason, the real cause is much simpler than all that. Pure and simple: It’s the loans themselves. In 2006 and 2007, lenders had largely run out of qualified borrowers to buy homes. But banks and other lenders were still making lots of money from fees generating by selling mortgages to individual homeowners, and other fees from bundling those loans together and reselling them to investors.

To keep that pipeline of cash flowing, many allege that banks threw lending standards out the window (economist Kathleen Engel covered this trend in her book “The Subprime Virus“). Some of the riskiest loans were called pay-option ARMs. In this case, “ARMs” stands for “adjustable rate mortgages,” in which the interest rate fluctuates over time. There’s nothing necessarily risky about that.

The risk comes in the “pay-option” part, Mason says. Typically, these loans gave borrowers the option to make minimal payments at the outset of the loan. Not only did they not have to pay toward the principal, they didn’t even have to pay all the interest as it accrued. This “teaser” period usually lasts five years.

The practice helped people get loans they couldn’t actually afford, Mason says, adding that many such borrowers were spending 40 percent of their incomes to pay down credit cards and other forms of debt before they ever bought a house.

“These loans were already defective right from the start,” says Mason.

After the teaser period is over, the loan resets. All the principal and interest payments that were deferred during the first five years get added to the total price of the loan. Only now, instead of 30 years to pay it off, five years have elapsed. That means the borrower has just 25 years to pay the entire balance.

The result, Mason says, is that monthly payments can jump by 300 percent.

In this case, the math is simple. If pay-option ARMS took off in late 2006, then of course those borrowers would begin having trouble making their payments beginning five years later, which means right now. Just under $24 billion worth of pay-option ARMs were expected to exit their teaser periods in October 2011 alone, according to a projection made in 2009 by Credit Suisse.

“You don’t even need to go to the economics,” Mason says. “Because in no state in the world can these borrowers handle that level of payment.”

This increase in late payments is only the beginning of the bad news. Most borrowers with pay-option ARMS have yet to actually default, and the homes will go through foreclosure after that, which will take another two or three years.

All of which means these bad loans will continue hurting the mortgage market, and putting a crimp in home values and sales, through about 2015.

“The good news is we’re getting all this behind us,” Mason says. “But it takes time.”

Bill,

Right on!!

I am STILL seeing falling values here in VA....don't know WHEN it will bottom. If you THINK its a deal and the values keep falling by 1% a month, where do you end up?Getting your clock cleaned!

Right on with having the drive, if you dont have the drive, move on to something else.

Study/read 10X as you think you need is a MUST. Knowledge + Action, but you should have the Knowledge b4 you take Action and end up looking like an idiot.

Great post as always Bill...Thanks