WIAcademy EducateBlog

A recent article on CNNMoney.com titled “Real estate insiders go bearish in blogs” supports the opinions of the industry experts that the real estate market boom is over and the market is setting itself up for a correction. Although there are varying degrees of opinions about the current market, the common denominator is that none of the bloggers were singing the praises of the current market.

The article goes on to say, “NAR, chief economist, David Lereah, is on record predicting price appreciation will drop to the mid-single digits.” And NAR spokesman, Walter Molony, thinks we’ll see a balanced market this year. He says, “There has been a steady rise in inventory since last fall, but, broadly speaking, it’s still a little tight.”

If you read some of the blogs discussing the current market situation, you’ll find this article to be on target. There are a variety of opinions about the market, but the general consensus is that the market has slowed in virtually every part of the country. One of these posts also quoted David Lerah as saying, “The air is coming out of the balloon. The bubble is not bursting.” What this means is that investors will need to adjust their strategies to a slower market not a market in crisis.

I found it interesting that strategies are even being as reported in a recent MSNBC.com article. This article found that some builders were looking at the current market as “an opportunity to build market share.” Other builders want to “decrease their exposure and wait out this wave of uncertainty in the market right now.”

If you live in a market where the builders are continuing to build inventory while the market remains slow, there will be opportunity ahead.

So what is the pulse in your market? Has your market slowed? Are you ready to take advantage of the opportunities to come? The news articles, blogs, and industry experts keep talking about the change in the market, the slowdown, the bubble, and even the leaking balloon.

This brings us back to the subject of foreclosures since this is the next big opportunity waiting for the educated real estate investor. Of course with any discussion of foreclosures comes a lot of negative reporting and foreclosure myths.

Posted 01:33 PM | Permalink | Comments (0)

As I’ve mentioned in previous posts, some housing markets like Naples, Florida; Medford, Oregon; and Atlantic City, New Jersey are currently overvalued and poised for a correction. Of all the overvalued markets nationwide, California and Florida have had the largest number of local markets with soaring prices resulting in overvalued properties. However, many other states have also experienced large increases and overvaluation.

Even in states where home sales may have been flat or undervalued in 2001, prices have soared. For example, in Wilmington, North Carolina prices have gone from the $120s to over $200,000. Portland, Maine had an average price of $143,500 in 2001, and at the end of 2005, it was $217,000.

There are markets that have remained flat like those found in Ohio. In Texas, some markets are even undervalued. There are also undervalued markets found in the Midwest, including markets in Michigan and Minnesota. However, these undervalued markets are not to the extreme like the overvalued markets.

According to CNNMoney.com, “Naples went from 72 percent to 76 percent overvalued” by the end of 2005. The lowest undervalued market in this article is El Paso, Texas, which is undervalued at 25%. Thus, the markets that are undervalued are undervalued by a slight percentage as compared to the extreme percentages seen in the overvalued markets.

What does all this data tell us? That most of the country has experienced rapidly increasing prices during the past five years. So what can we expect next?

In the overvalued markets, we can expect a real estate slowdown of sales combined with reduced prices. In markets that are flat, the prices may remain steady, but a slowdown in sales will still occur. In the undervalued markets, the prices may level off and even increase slightly in some markets, but the slowdown of sales experienced in the other markets will also occur.

Regardless of the market you are in, get ready to start looking for bargains. The overvalued properties will fall back in line with value-prices and many will reach that bargain price level. The flat and undervalued markets may already be bargain priced and ready for the foreclosure fallout. Increasing foreclosures in all these markets will produce an abundant supply of bargains for the educated investor to find.

Posted 06:44 AM | Permalink | Comments (0)

With an increasing number of foreclosures in all real estate markets, an abundant supply of bargains will soon be available for the shrewd shopper. So how do you find these bargains? I agree with most experts that it takes determination, research, and hard work to find the bargains. You may have to look at fifty or more potential properties to find the one bargain that will yield a substantial profit.

Is it worth it? Absolutely! Since foreclosures are cheaper to buy than other types of property, diligence will pay off in the long run. You can find foreclosures in the legal section of your local newspapers, by calling your local county clerk’s office for a list of lis pendens, or by searching the Internet for foreclosure listings with HUD, the VA, and other such web sites. Realtors are also a good source to find foreclosures and even pre-foreclosures. Developing good relationships with a few Realtors will be one of the important strategies you need to be successful in the world of foreclosure investing.

Just remember, however, that finding the property is only the first step. Once you find the property, how do you calculate the cost? You need to know all the costs, including those for repairs and loans, in addition to the purchase price to calculate the actual cost.

Even after you’ve made your initial assessment and calculated the cost, you have to determine if the property is most profitable to you as a short- or long-term investment. In other words, will you rent it out to create monthly cash flow? Or, will you fix it up and sell it for a onetime profit? Also, if you sell it for a onetime profit, will you take the profit only from the sale of the property or will you also create cash flow by providing owner financing to the buyer?

Posted 04:16 PM | Permalink | Comments (0)

As Steve McLinden wrote in a recent bankrate.com article, “foreclosure buying is a very competitive game right now,” so you have to arm yourself with education to take advantage of buying foreclosures.

First, you should know the definition of foreclosure. Investor Dictionary.com defines foreclosure as “A legal process by which the lender seizes property of a homeowner, usually due to the homeowner not making timely payments on the mortgage." In other words, if you fail to meet the obligation of your payment schedule, the lender can use a legal process to take the property from you.

This legal process is determined by whether or not the state you live in is a judicial or non-judicial state. If you live in a judicial state, the lender may choose to take the property back with a deed in lieu of foreclosure or use court proceedings to foreclose on the property. If you live in a non-judicial state, the lender will follow foreclosure procedures established by state statute without court proceedings.

How do you know if your state is a judicial or non-judicial state? You should be able to find the answer at your county clerk’s office. If the civil division of the county clerk’s office has procedures for mortgage and lien foreclosure sales, then you are in a judicial state. With the popularity of the Internet, many local government agencies will have this information readily available online. If not, call your county clerk’s office to get the information.

Once you know what a foreclosure is and what legal process your state uses to foreclose on property, you’ll be ready to take the next step.

Posted 08:17 PM | Permalink | Comments (0)

One of the biggest fallouts from a deflating housing bubble is foreclosure. If you’re in a market where real estate prices have recently increased rapidly and are now starting to fall, the bubble is deflating and there will be foreclosures in your market.

Senior Vice President and Chief Economist for National City Corporation, Richard Dekaser, looks at housing prices in 299 metropolitan areas in his House Prices in America report for the fourth quarter of 2005. In this report, we can see a dramatic change in overvaluation percentage since the fourth quarter of 2001 in the following three markets:
• Naples, Florida (2001 – 2.5%; 2005 – 96.3%)
• Medford, Oregon (2001 – 6.8%; 2005 – 69.7%)
• Atlantic City, New Jersey (2001 – 0.2%; 2005 – 59.6%)

Since real estate moves in cycles, this means that prices fluctuate up and down on a continual basis, even though the real estate market overall continues to rise steadily over time. If you look at individual properties in the above overvalued markets, you can actually see the dramatic increase in prices during this past five-year real estate cycle.

For example, Zillow.com shows a home on 22nd PL SW in Naples, Florida with a value of approximately $101,000 in January 2002. The value of this same property was $290,725 in January 2006. And, it is located in a zip code where median prices in January 2006 were $302,225. Additionally, the market value change in the past five years is 185% for this home as compared to an average 174% for all the homes in the same zip code.

With rapidly increasing prices and value changes at 174% plus over the last five years, properties located in this market, overvalued at 96.3%, are poised for a correction, and prices will begin to fall. When this happens, foreclosures in this market will increase.

According to RealtyTrac, the ratio of new foreclosures to households was 1:1,117 in January 2006 and that pace is expected to increase. Most analysts agree that up until January of this year, the foreclosure rate was largely due to job loses or risky loans with high interest rates. However, when you add the homeowners that bought at the high side of the market with an adjustable rate mortgage, and the higher adjusted rate kicks in, the number of foreclosures also increases.

“Why?” you ask. Adjustable rate mortgages were all the rage a couple of years ago when both rates and home prices were low. Now, however, if you have an adjustable rate mortgage and that rate increases when the market pulls back, you end up making higher mortgage payments on a property with negative equity. Some of these homeowners will now be overextended and unwilling to continue payments on a property with negative equity. Many will simply let their house go back to the bank, thus increasing the number of foreclosures. This may already be taking place in some of the markets with extreme overvaluation.

Posted 10:07 AM | Permalink | Comments (0)

Let’s say that you looked at your local market and you’ve determined that your market is indeed in a bubble. “So what?” you ask. What you need to recognize is that this bubble isn’t the source of great concern, the market correction or pullback that follows this euphoric housing bubble is. So if prices where you live have recently increased rapidly and are now starting to fall quickly and the talk among realtors and investors has shifted from a seller’s market to a buyer’s market, the bubble is deflating.

How do you react to the deflating bubble? Experienced real estate investors and industry gurus recognize that the real estate market moves in cycles and prepare for them accordingly. In the March & April 2006 edition of the AARP magazine, economist Richard Dekaser provides a sample list of overvalued and undervalued markets. At the high end of overvalued markets was Naples, Florida at 84%.

When the market pulls back in Naples, Florida, there will be opportunity for some and tragedy for others. Think about it. If the market has increased rapidly and then starts falling quickly, there will be those that bought at the high side of the market and end up with what “Wikipedia” calls negative equity. Some of those will ultimately also end up in foreclosure. Because educated investors know the real estate cycles, they will be ready to start implementing foreclosure strategies as soon as the bubble begins to deflate. Will you be ready?

Posted 08:10 PM | Permalink | Comments (1)

With all the talk recently about a housing bubble, doesn’t it make you think? What is a housing bubble? And, are we in a bubble right now?

The first question is easily answered using Wikipedia, the free internet encyclopedia, that describes a housing bubble as “…a type of economic bubble that occurs periodically in local or global real estate markets.” It goes on to say that the “…rapid speculative increase in the valuations of real property followed by decreases can result in many owners holding negative equity." In other words, the price of housing increases rapidly then falls sharply, leaving behind opportunity for some and tragedy for others.

Are we in this so called bubble? That depends on who you talk to and what you read. For example, Mike Swanson wrote in a recent article in the WallStreet Window Newsletter that “Yes, there is a housing bubble!” In the March 12th edition of the Miami Herald.com, you’ll find an article titled “Real estate market sends mixed message on prices.” And, on March 17th, a RealtyTimes news article headline reads “Boom Not Over: Census Determines Fastest-growing Counties.” I think a large part of the country has experienced record growth in the housing market recently, but whether or not there is a bubble still depends on where you live.

So with all the conflicting reports, how do you know if your specific market is in a bubble? The quickest way to find out is to get to know your local market. Are news reports focused on recent substantial growth in your area? Have prices risen quickly?Are local realtors and investors talking about a seller’s market so strong that buyers are even willing to pay above the listing prices? Are there multiple offers at prices higher than the asking price for the same property? If you answered yes to these questions, then I would say your market is in a bubble.

Posted 08:03 PM | Permalink | Comments (0)