who are you listening to? George Soros one of the most successful investors in the world, and President Obama have both said publicly that higher interest rates are coming. Only Realtors, Financial Advisors, and other thieves and liars say that it's not happening. Write this down, 12-15% mortgage interest rates by the end of 2011!
http://finance.yahoo.com/news/Soros-predicts-stopgo-economy-rb-3788173021.html?x=0&sec=topStories&pos=4&asset=&ccode=
Tuesday, June 30, 2009
High end, get ready your turn is next . . .
Click on article title or cut and paste link below to see new article discussing where the high end markets are headed.
As the low and mid range markets continue their respective corrections, the high end is just now getting into gear. In some higher end markets we have seen prices drop 25% or more just in the last month as lenders have apparently raised all the capital necessary to meet federal requirements and are poised to begin dumping higher end assets. (Gee, I wonder who shared with clients that once mark to market was suspended so that capital could be raised based on totally fraudulent balance sheets, we would then see lenders dump assets thereby driving down their own share values as well as real estate values?!? What would have happened if some of this newly raised capital was used to short the very financial institutions that are now dumping assets? hmmmmm)
Commercial real estate values are just starting what will prove to be a 50-60%+ correction from the peak. Residential markets will most likely approach a bottom between late 2014 and mid 2015. Commercial markets on the other hand are more likely to bottom closer to 2018.
http://finance.yahoo.com/tech-ticker/article/271957/Next-Segment-of-the-Housing-Market-to-Crash-1-Million-McMansions?tickers=dia,spy,hd,len,kbh&sec=topStories&pos=7&asset=&ccode=
As the low and mid range markets continue their respective corrections, the high end is just now getting into gear. In some higher end markets we have seen prices drop 25% or more just in the last month as lenders have apparently raised all the capital necessary to meet federal requirements and are poised to begin dumping higher end assets. (Gee, I wonder who shared with clients that once mark to market was suspended so that capital could be raised based on totally fraudulent balance sheets, we would then see lenders dump assets thereby driving down their own share values as well as real estate values?!? What would have happened if some of this newly raised capital was used to short the very financial institutions that are now dumping assets? hmmmmm)
Commercial real estate values are just starting what will prove to be a 50-60%+ correction from the peak. Residential markets will most likely approach a bottom between late 2014 and mid 2015. Commercial markets on the other hand are more likely to bottom closer to 2018.
http://finance.yahoo.com/tech-ticker/article/271957/Next-Segment-of-the-Housing-Market-to-Crash-1-Million-McMansions?tickers=dia,spy,hd,len,kbh&sec=topStories&pos=7&asset=&ccode=
Monday, June 29, 2009
It's different here . . . Mercedes v Kia
Every time I start working with a new consulting or coaching client I hear the same old story, "You don't understand it's different here . . . blah, blah, blah." Having lived, worked, coached and consulted people in every conceivable market in the US and many in Canada, I have always believed that if your market had houses and people, it was EXACTLY like every other market.
I was wrong, it is different here. I now accept that the higher end markets are filled with people who have significantly larger egos. Those egos repeatedly get in the way of making logical, sound, even savvy business decisions. I constantly hear "I can afford to _____________ ." Yeah that's great, and at 6+ ft tall, approx 225 lbs in decent shape, I can afford to get in the ring with Mike Tyson. I may even last a round or two (assuming I don't lose an ear!) But just because I can "afford" to do it, would you recomend that I do it? Or would you be far more likely to tell me it's stupid? Doing something just because you can afford to is usually stupid. Egos cause people to do stupid things. What stupid things are you doing right now?
In discussing this point with a client in Laguna Beach CA recently, we discussed the differences between Mercedes and Kia. My contention was that Kia was more popular. Upon researching sales figures we found that not only does Kia outsell Mercedes, significantly. We also learned that many Kia dealers are having record sales, right now in 2009 while Mercedes sales are off by staggering amounts. Hmmm, I wonder . . . what does that tell us about high end vs low end???
I was wrong, it is different here. I now accept that the higher end markets are filled with people who have significantly larger egos. Those egos repeatedly get in the way of making logical, sound, even savvy business decisions. I constantly hear "I can afford to _____________ ." Yeah that's great, and at 6+ ft tall, approx 225 lbs in decent shape, I can afford to get in the ring with Mike Tyson. I may even last a round or two (assuming I don't lose an ear!) But just because I can "afford" to do it, would you recomend that I do it? Or would you be far more likely to tell me it's stupid? Doing something just because you can afford to is usually stupid. Egos cause people to do stupid things. What stupid things are you doing right now?
In discussing this point with a client in Laguna Beach CA recently, we discussed the differences between Mercedes and Kia. My contention was that Kia was more popular. Upon researching sales figures we found that not only does Kia outsell Mercedes, significantly. We also learned that many Kia dealers are having record sales, right now in 2009 while Mercedes sales are off by staggering amounts. Hmmm, I wonder . . . what does that tell us about high end vs low end???
Wednesday, June 24, 2009
The market keeps falling why should I buy now?
Over the past few weeks we have seen interest rates (read this as “the cost to borrow money”) increase on all sorts of loans. For comparison sake, let’s look at a 30 year fixed rate loan. Less than a month ago you could lock in a rate in the mid to upper 4% range. Today that same loan is over 6%. Now 6% is obviously still a GREAT rate historically! But let’s take a look for a minute at what this means to an “average” US home buyer. Sellers read on - there is information for you too!
Let’s use a loan amount of $200k
@ 4.625% your monthly P&I (principal and interest) would be $1028.28
@ 6.125% your monthly P&I has now jumped to $1215.22
This is an increase of $186.94 or 18.2% in your payment (did housing prices in your marketplace drop 18.2% over just the past few weeks?)
This means you will pay an extra $2,243.28/yr or an extra $67,298.40 over the life of the 30 year loan
Well, maybe we should wait for rates to come back down . . .Ok, that might make sense. Let’s take a look at what we know about interest rates . . .
Interest rates are the reward or return and investor/lender receives for the risks associated with making a loan. How do you think most lenders are feeling about the risks associated with mortgages right now as each month the # of defaulting loans goes up and up?
If you don’t remember what has happened in the past when unemployment rates rose, when there was trouble in the financial markets, when prices on commodities (things like oil) rose, and when there was global political unrest. Ask someone where interest rates went in the later parts of the 1970’s and 1980’s (I’ll give you a hint: mortgage rates hit double digits and the first digit wasn’t a “1”). Do we have any of those factors happening today?
So what is the lowest mortgage rate you have ever heard of? I’ve heard of fixed rates down into the high 3’s and low 4’s.
So what is the highest mortgage rate you have ever heard of?
Based on your answers to the last 2 questions, which direction can rates move more?
When do you think you should be locking in a rate and buying???
Ok sellers, it’s your turn.
Let’s assume your house was the one we used in the example above with the $200k mortgage. If no one was willing to buy it when the payment was $1028.28/mo how likely are they to buy it with a higher monthly payment (read this as “less affordable?”)
How much do you think the payment would have to drop to get someone interested?
Let’s pretend you said that you thought a 10% drop would be enough, ok?
$1028.28/mo – 10% ($102.83) = $925.45
In order to get to the $925.45/mo payment that someone might actually be willing to commit to for your house, with rates now at 6.125% they would now only be able to borrow $152,309.74 – Can you say OUCH?!?
Want to know the even worse part?
Let’s assume that when you sell you are moving up to a home where you will have a $300,000 mortgage payment. If you had sold and bought when rates were at 4.625% your payment would have been $1,549.42. BUT you didn’t, so now if you adjust your price, get it sold and lock in rates at 6.125% your payment will only be $1,822.83 or $273.41/mo higher.
Of course that’s only $98,428.18 over the life of that 30 year loan – Can you OUCH and then OUCH again?!?
I’m curious, which do you think is more likely to happen over the next year as the world no longer is willing to accept the risk associated with buying the USA’s debt, interest rate go from 6 to 9% (a 50% increase in the cost of money?) or prices drop another 35-50% ???
Let’s use a loan amount of $200k
@ 4.625% your monthly P&I (principal and interest) would be $1028.28
@ 6.125% your monthly P&I has now jumped to $1215.22
This is an increase of $186.94 or 18.2% in your payment (did housing prices in your marketplace drop 18.2% over just the past few weeks?)
This means you will pay an extra $2,243.28/yr or an extra $67,298.40 over the life of the 30 year loan
Well, maybe we should wait for rates to come back down . . .Ok, that might make sense. Let’s take a look at what we know about interest rates . . .
Interest rates are the reward or return and investor/lender receives for the risks associated with making a loan. How do you think most lenders are feeling about the risks associated with mortgages right now as each month the # of defaulting loans goes up and up?
If you don’t remember what has happened in the past when unemployment rates rose, when there was trouble in the financial markets, when prices on commodities (things like oil) rose, and when there was global political unrest. Ask someone where interest rates went in the later parts of the 1970’s and 1980’s (I’ll give you a hint: mortgage rates hit double digits and the first digit wasn’t a “1”). Do we have any of those factors happening today?
So what is the lowest mortgage rate you have ever heard of? I’ve heard of fixed rates down into the high 3’s and low 4’s.
So what is the highest mortgage rate you have ever heard of?
Based on your answers to the last 2 questions, which direction can rates move more?
When do you think you should be locking in a rate and buying???
Ok sellers, it’s your turn.
Let’s assume your house was the one we used in the example above with the $200k mortgage. If no one was willing to buy it when the payment was $1028.28/mo how likely are they to buy it with a higher monthly payment (read this as “less affordable?”)
How much do you think the payment would have to drop to get someone interested?
Let’s pretend you said that you thought a 10% drop would be enough, ok?
$1028.28/mo – 10% ($102.83) = $925.45
In order to get to the $925.45/mo payment that someone might actually be willing to commit to for your house, with rates now at 6.125% they would now only be able to borrow $152,309.74 – Can you say OUCH?!?
Want to know the even worse part?
Let’s assume that when you sell you are moving up to a home where you will have a $300,000 mortgage payment. If you had sold and bought when rates were at 4.625% your payment would have been $1,549.42. BUT you didn’t, so now if you adjust your price, get it sold and lock in rates at 6.125% your payment will only be $1,822.83 or $273.41/mo higher.
Of course that’s only $98,428.18 over the life of that 30 year loan – Can you OUCH and then OUCH again?!?
I’m curious, which do you think is more likely to happen over the next year as the world no longer is willing to accept the risk associated with buying the USA’s debt, interest rate go from 6 to 9% (a 50% increase in the cost of money?) or prices drop another 35-50% ???
Tuesday, June 23, 2009
future of interest rates . . .
What happens when unemployment goes up, the economy is weak, commodity (oil etc) prices go up and there is global political unrest? Not sure . . .look at the late 70’s and late 80’s want a chart showing 30-Year FRM Rates 1971 - 2009? email kirk@kirknace.com and request the visual
Keeping it simple . . .
"At the end of the day, there are four things about people that
drive our economy. How many people there are, what age they
are, what they are buying, and where they live or are moving."
— Harry S. Dent, Jr.
drive our economy. How many people there are, what age they
are, what they are buying, and where they live or are moving."
— Harry S. Dent, Jr.
Friday, June 19, 2009
Business Week tells us what our houses will be worth in 2012
The people at Business Week believe they know where prices will be 3 years from now. So take a look by clicking on title above or cutting and pasting this link:
http://images.businessweek.com/ss/09/06/0618_house_worth_2012/1.htm
While these are the most realistic projections I have seen thus far from main stream media, I disagree greatly with their assertion that these levels will be reached partially due to a rebound in 2012. By 2012 we will begin to see the peak of the foreclosures starting to come back on the market, this massive distressed supply will lead to greater downward pricing pressure for at least a few years beyond 2012. So while this is more realistic than most, it stills leaves a lot to be desired.
http://images.businessweek.com/ss/09/06/0618_house_worth_2012/1.htm
While these are the most realistic projections I have seen thus far from main stream media, I disagree greatly with their assertion that these levels will be reached partially due to a rebound in 2012. By 2012 we will begin to see the peak of the foreclosures starting to come back on the market, this massive distressed supply will lead to greater downward pricing pressure for at least a few years beyond 2012. So while this is more realistic than most, it stills leaves a lot to be desired.
Thursday, June 18, 2009
Everything is all better, right?
The "experts" say it's over, we are done with the challenging economy and by the end of the year things will have turned around. Maybe . . . NOT!
take a look at these charts by clicking on title above or cut and pasting link below. Then you decide.
http://www.businessinsider.com/henry-blodget-tracking-the-second-great-depression-2009-6/tracking-the-depressions-world-output-1
take a look at these charts by clicking on title above or cut and pasting link below. Then you decide.
http://www.businessinsider.com/henry-blodget-tracking-the-second-great-depression-2009-6/tracking-the-depressions-world-output-1
Wednesday, June 17, 2009
That whole idea of supply and demand, good thing it's not a law!
what happens to the price of something when more and more of that thing are available (higher supply) and no one needs any more?
what happens to the price of something when a constant amount of it is available and people need less and less (lower demand) of that something?
what happens when supply goes up and demand goes down at the same time?
does this only apply when we want it to and in some areas, or is it a universal law, kinda like gravity?
in 1946 baby boomers started being born, by 1970 they were saving (investing) for retirement in all sorts of methods, means and manners. Stocks, bonds, real estate, you name it. for about 40 years lots of people have been buying investment products in one form or another.
by sometime in 2011 we will see the amount of money going into these retirement/investment vehicles be exceeded each month by the amount being withdrawn for "the golden years." what will happen to prices of all these things when more people want to sell than want to buy?
obviously, as the prices drop individuals will be forced to sell more and more of these things (stocks, bonds, real estate, etc) to continue receiving the same amount of income each month. as they sell more and more what will continue to happen to prices?
Ok so you get the law of supply and demand, now take a look at the attached article by clicking on the title above or cutting and pasting the link below. ask yourself . . . "where are we headed?"
http://finance.yahoo.com/retirement/article/107201/supply-and-demand?sec=topStories&pos=8&asset=&ccode=
what happens to the price of something when a constant amount of it is available and people need less and less (lower demand) of that something?
what happens when supply goes up and demand goes down at the same time?
does this only apply when we want it to and in some areas, or is it a universal law, kinda like gravity?
in 1946 baby boomers started being born, by 1970 they were saving (investing) for retirement in all sorts of methods, means and manners. Stocks, bonds, real estate, you name it. for about 40 years lots of people have been buying investment products in one form or another.
by sometime in 2011 we will see the amount of money going into these retirement/investment vehicles be exceeded each month by the amount being withdrawn for "the golden years." what will happen to prices of all these things when more people want to sell than want to buy?
obviously, as the prices drop individuals will be forced to sell more and more of these things (stocks, bonds, real estate, etc) to continue receiving the same amount of income each month. as they sell more and more what will continue to happen to prices?
Ok so you get the law of supply and demand, now take a look at the attached article by clicking on the title above or cutting and pasting the link below. ask yourself . . . "where are we headed?"
http://finance.yahoo.com/retirement/article/107201/supply-and-demand?sec=topStories&pos=8&asset=&ccode=
Tuesday, June 16, 2009
Inspiring thought and a question
I receive lots of quotes and daily inspirations from numerous sources. I read one today on, of all places, Facebook. It was on a friends page, I am assuming Kirk is Kirk Nace, it sounds like him. Seldom do I find something quoting 2 of my favorite thinkers in the same place, I hope you enjoy it . . .
"We must reset our sails to take advantage of these changing winds and prosper as a business and individual. You can make the most of this downturn and position yourself for the next boom that's going to follow." — Harry S. Dent, Jr.
“Have you accepted the changing winds or are you still battling them? What if you focused everyday on helping others?” --Kirk
"We must reset our sails to take advantage of these changing winds and prosper as a business and individual. You can make the most of this downturn and position yourself for the next boom that's going to follow." — Harry S. Dent, Jr.
“Have you accepted the changing winds or are you still battling them? What if you focused everyday on helping others?” --Kirk
Tuesday, June 9, 2009
Schiller sees housing prices falling through 2010 . . .
Click on article title above or cut and paste below into your browser. The most accurate high profile economist to date on the housing correction recently wrote the attached article for The New York Times. We stand by our projections from June 2 article found at www.smashedfeet.com. BOTTOM OF THE US HOUSING MARKET WILL OCCUR NO EARLIER THAN LATE 2013 - MID 2015, BOTTOM WILL BE EXTENDED AND REAL ESTATE VALUES WILL INCREASE ONLY SLIGHTLY FOR A FULL DECADE FOLLOWING THE BOTTOM
http://finance.yahoo.com/real-estate/article/107163/Why-Home-Prices-May-Keep-Falling?mod=realestate-buy
http://finance.yahoo.com/real-estate/article/107163/Why-Home-Prices-May-Keep-Falling?mod=realestate-buy
Tuesday, June 2, 2009
NAR - could you be any less honest?
NAR reported today that pending home sales have increased at a record pace. Of course, they include all short sale offers in that number. Everyone in the real estate business knows that all short sale offers eventually close right?
Is it any wonder that the public views Realtors as having no credibility, no integrity and no professionalism when the organization itself consistently publishes false and/or misleading information.
Nationally, the market is a minimum of 20-30% from a bottom price wise and that bottom is at least 4+ years out.
If you are a seller, get out sooner rather than later.
If you are a buyer and are financing it makes more sense to buy now at the currently available financing terms than wait for the cost of your money to continue to escalate.
If you don't understand why, post a response and we will address it for you!
Is it any wonder that the public views Realtors as having no credibility, no integrity and no professionalism when the organization itself consistently publishes false and/or misleading information.
Nationally, the market is a minimum of 20-30% from a bottom price wise and that bottom is at least 4+ years out.
If you are a seller, get out sooner rather than later.
If you are a buyer and are financing it makes more sense to buy now at the currently available financing terms than wait for the cost of your money to continue to escalate.
If you don't understand why, post a response and we will address it for you!
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