PROFESSIONAL SUPPORT SERVICES Blog

First time buyers today are a timid bunch.  If they weren’t on the fence before, they sure are now. All the doom and gloom media hype does nothing to instill confidence in first time buyers.

At an early summer BBQ dinner the other night I ask a friend who was disgruntled with his losses in the stock market what he would invest in as an alternative to earning 1 to 3% in some money market account. His quick answer was, “real estate”.  “You can’t lose” he said.  

In my thirty-five years in the business world I’ve never met any one that was an unsuccessful real estate investor; unless however they got greedy and over-leveraged themselves.  Long term, conservative real estate investors have always made good money.

Here are some things to consider if you want to get into the game.

1. Don’t buy if you’re not in it for the long term.

If you can’t commit to remaining in one place for at least five few years, then owning property is probably not for you. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it gets even worse.

2. Start planning to buy by shoring up your credit.

Since you most likely will need to get a mortgage to buy property, you will need to make sure your credit history is as clean as possible. Long before you start house hunting, obtain a copy of your credit report. Make sure the facts are correct, and resolve any problems you discover.

3. Agree on a price range you can really afford.

The old rule-of-thumb says you can buy housing that runs about two-and-one-half times your annual salary. You’ll do better by using one of many calculators available online.  It also takes your gut feeling to know how your income, debts, and expenses affect what you can afford.

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TIME Magazine’s cover story, “The End of Excess” by Kurt Anderson provides a telling look at how factors in the US economy brought us into our current Great Recession.  Living large seemed like a reality for many more Main Street Americans but the bubble finally burst.  It’s back to reality folks; only the richest of the rich will go unscathed this time around.

I miss the 1950’s.  While I was very young in the late 50’s, I still remember this simpler time.  We had everything we needed, a house in the suburbs, television, all kinds of time saving electric appliances that produced an abundance of leisure time.  Amusement parks were built, America was prosperous and most lived within their means.  Young folks today probably don’t realize that credit was largely unavailable for the masses. You could get a mortgage on a house and extended credit on things like cars, furniture and large appliances, but that was it.  If you need a new suit or dress, you paid cash.  Credit cards were a thing of the future; largely unheard of in the 50’s except for one.

Most people think that Visa or Mastercard must have been the first credit card company, but in truth the concept predates both companies by a decade. Diners Club actually produced the first credit card.  It was introduced in 1949 by Frank X. McNamara, head of Hamilton Credit Corporation.  Members paid an annual fee in exchange for a cardboard card that they could use at member restaurants and nightspots in Manhattan. The company made its money in fees and enticed more and more restaurants into accepting the card by showing how it would increase repeat business.  The concept was so popular that by 1951 the company had already signed up 20,000 members.

The rest of us who weren’t frequent Manhattan diners had to wait until the early 1970’s before Visa and MasterCard became widely available (I got my first MasterCard in 1974), yet our parents had everything we needed to grow and prosper.  We had a roof over our heads, a family car, food on the table, clothes on our backs and most of us attended school every day.  The Birthday and Christmas gifts we usually received we practical things like underwear and socks.  New shoes were purchased only when the old ones were unrepairable.  Young boys rarely had more than one pair of shoes.  If we did, the second pair were cheap canvas tennis shoes like PF Flyers.

How do we go back to those days of fiscal responsibility?  Since we’ve discovered that the average American cannot be counted on to responsibly manage their own finances with credit card debt soaring nationally, we need to tighten up the standards.  Unsolicited multiple credit card offers to folks that are already under water just doesn’t make sense.  Our banking system is in my opinion largely responsible for the mess we are in today.  Credit should be a privilege; reserved only for those with the best credit histories.  If you can’t manage it, you shouldn’t have it.  It’s as simple as that.   

That’s my opinion.  What’s yours? As always, your comments good or bad are welcome. Just click on “Comments” below to let us know what you think.

First, if you can keep your mortgage current, do so; NOW!  Don’t play games with your lender and hope someone will bail you out.  If you find however that you are unable to make your mortgage payments, you might qualify for a loan workout program. Check with your lender NOW to see what options may be available.  Some options may not apply to your loan if it is not insured by FHA.

Are You Having Temporary Cash Flow Problems - Call your lender to discuss these possibilities:

• Reinstatement: Your lender is usually willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option.
• Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with reinstatement when you know you will have the funds to bring the account current by a specific time. The money may come from a hiring bonus, and investment that’s maturing, an insurance settlement, or even a tax refund.
• Repayment plan: You may be able to negotiate an agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up.

If your situation is long-term or will permanently affect your ability to bring your account up-to-date - call your lender to discuss these options:

• Mortgage modification: If you can make payments on your loan, but don’t have enough money to bring your account current or you can’t afford your current payment, your lender may be able to modify the terms of your original loan to make the payments more affordable. Your loan could be permanently modified in one or more of the following ways:
  
  • Adding the delinquent payments to the existing loan balance.
  • Lowering the interest rate, possibly converting an adjustable rate to a fixed rate.
  • Extending the term of the loan.
• Partial Claim: If your mortgage is insured, your lender might help you get a one-time interest-free loan from your mortgage guarantor to make your account current. You might even be granted deferred repayment of this loan. You qualify for an FHA partial claim if:
  • Your loan is between 4 and 12 months delinquent.
  • You are able to begin making full mortgage payments again.

When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must sign a promissory note, and a lien will be placed on your property until the promissory note is paid in full.

The promissory note will be interest-free and is due in full when you pay off the first mortgage or when you sell the property.

As always, your comments good or bad are always welcome. Just click on “Comments” below to let us know what you think. 

Here’s one opinion from a housewife from New Jersey. This is one ticked off lady!                        

“Are we fighting a war on terror or aren’t we? Was it or was it not started by Islamic people who brought it to our shores on September 11, 2001?

Were people from all over the world, mostly Americans, not brutally murdered that day, in downtown Manhattan , across the Potomac from our nation’s capitol and in a field in Pennsylvania?

Did nearly three thousand men, women and children die a horrible, burning or crushing death that day, or didn’t they?

And I’m supposed to care that a copy of the Koran was “desecrated” when an overworked American soldier kicked it or got it wet?..Well, I don’t. I don’t care at all.

I’ll start caring when Osama bin Laden turns himself in and repents for incinerating all those innocent people on 9/11.

I’ll care about the Koran when the fanatics in the Middle East start caring about the Holy Bible, the mere possession of which is a crime in Saudi Arabia.

I’ll care when these thugs tell the world they are sorry for hacking off Nick Berg’s head while Berg screamed through his gurgling slashed throat.

I’ll care when the cowardly so-called “insurgents” in Iraq come out and fight like men instead of disrespecting their own religion by hiding in mosques.

I’ll care when the mindless zealots who blow themselves up in search of nirvana care about the innocent children within range of their suicide bombs.

I’ll care when the American media stops pretending that their First Amendment liberties are somehow derived from international law instead of the United States Constitution’s Bill of Rights.

In the meantime, when I hear a story about a brave marine roughing up an Iraqi terrorist to obtain information, know this: I don’t care.

When I see a fuzzy photo of a pile of naked Iraqi prisoners who have been humiliated in what amounts to a college-hazing incident, rest assured: I don’t care.

When I see a wounded terrorist get shot in the head when he is told not to move because he might be booby-trapped, you can take it to the bank: I don’t care.

When I hear that a prisoner, who was issued a Koran and a prayer mat, and fed “special” food that is paid for by my tax dollars, is complaining that his holy book is being “mishandled,” you can absolutely believe in your heart of hearts: I don’t care.

And oh, by the way, I’ve noticed that sometimes it’s spelled “Koran” and other times “Quran.” Well, Jimmy Crack Corn and-you guessed it-I don’t care!!

If you agree with this viewpoint, pass this on to all your E-mail friends. Sooner or later, it’ll get to the people responsible for this ridiculous behavior!

If you don’t agree, then by all means hit the delete button. Should you choose the latter, then please don’t complain when more atrocities committed by radical Muslims happen here in our great Country!

And may I add:                   

“Some people spend an entire lifetime wondering if they made a difference in the world. But, the Marines don’t have that problem” — Ronald Reagan

I have another quote that I would like to add AND…….I hope you forward all this.

“If we ever forget that we’re One Nation Under God, then we will be a nation gone under.” Also by.. Ronald Reagan

One last thought for the day:

In case we find ourselves starting to believe all the Anti-American sentiment and negativity, we should remember England ’s Prime Minister Tony Blair ’s words during a recent interview. When asked by one of his Parliament members why he believes so much in America , he said: “A simple way to take measure of a country is to look at how many want in.. And how many want out.”

Only two defining forces have ever offered to die for you:

1. Jesus Christ

2. The American G. I.

One died for your soul, the other for your freedom.

YOU MIGHT WANT TO PASS THIS ON, AS MANY SEEM TO FORGET BOTH OF THEM. AMEN!

Speculation abounds and everyone from expert economists to Realtors like me seemingly need to weigh-in on when the housing market will finally hit bottom.  Here’s my take….

From what I see, too many indicators still point to more serious problems ahead for our economy. Falling home prices simply put a hugh drag on the broader economy.  On top of higher prices for food and gasoline, further home price declines will weigh more heavily on household finances, according to top economists.

Continued weakening of home prices that continue to push down the value of homes are putting millions of homeowners underwater.  As of November, 8 million houses have negative equity.  If home prices fall another 10 percent as expected, we are going to see as many as 16 million people with negative equity. This fact along with the corresponding job loses from the bleak sales picture mean that a much bigger chasm between us and a healthy recovery lies ahead.

The Fed just today pointed out that:

• Overall economic activity weakened across all Federal Reserve districts.
• Among the main drivers were a deterioration in vehicle sales, weak consumer spending, further contraction of lending and a noticeable decline in manufacturing activity.
• Retailers are preparing for a “relatively slow holiday sales season,” as consumers shy away from big-ticket purchases amid the weak economy.
• Falling home prices took a toll on real estate markets in most areas, but weak home sales remained at stable levels.
• Credit conditions remain tight, with several districts reporting increases in loan delinquencies and defaults, especially in the real estate sector.
• Commercial real estate weakened broadly, worsening from declines reported in October. Widespread reports indicated that commercial real estate projects were being postponed or canceled, citing tight credit conditions.
• Labor market conditions remained weak, with heavy reports of current and future layoffs.

Still, you can protect yourself. Here are the Top Five Strategies from experts at MSN Money to help you in the down economy.

#1: Don’t panic

Stock-market gyrations can give even the hardiest investors a case of the jitters.

However, converting all your investments to cash is likely to do far more harm than good, says Joe Baker, a certified financial planner and president of Alcus Financial in Mount Pleasant, S.C.

“People are scared,” he says. “They’re asking, ‘Is the economy crashing? Should I move my 401(k) to a money market?’”

Baker answers: “Please do not, unless you need the cash tomorrow. You’d be making a huge mistake.”

Unless you need the money soon — say, within two years — it’s best to remind yourself that good and bad times pass. Historically, the market’s made up its losses fairly quickly.

Since 1945, there have been 11 recessions as defined by the National Bureau of Economic Research. The Standard & Poor’s 500 Index ($INX) — the index of widely held stocks used as a barometer for the overall market — generally has hit bottom six months into the typical 10-month recession, according to Sam Stovall, chief investment strategist at Standard & Poor’s.

After that point, the market typically starts to regain its footing.  If you include the very worst meltdown, when the S&P 500 lost more that 145% of its value, it took 19 months for investors to recoup their losses.  But exclude the huge losses, and you find that it’s actually taken just eight months, on average, for the index to bounce back.

“The reason the market peaks before recessions start and troughs before they’re finished is that investors are anticipators,” says Stovall. “They’re willing to become more optimistic once the bad news is out.”

Stovall’s advice to today’s worrywarts is direct: “Don’t freak out.”

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