I believe the reason that it is perceived as a bad thing is part of the core of the financial problems we have in this country.  The reasoning is this.  If rental rates increase, and housing prices decrease, then it creates a great environment for buyers, “but only for prospective buyers who can afford the downpayment and qualify for a mortgage.”

I apologize if I’m completely out of my mind, but what kind of buyer do we want?  Do we want to encourage people who cannot afford a home to buy a home?  And what about cash buyers?  There’s no mention of them, and they do exist, in droves.

As a real estate agent who doesn’t believe borrowing money is part of a sound financial plan, I have a hard time with the topic of mortgages.  There are great deals out there, but we shouldn’t be waiting until someone wants to take advantage of a good deal to counsel them about the principles of money…mainly saving, which is what’s required to build up a down payment.  If you haven’t figured that out by now, then you might want to consider re-signing your lease until you do.  If you’re thinking about buying a house, know that a down payment is going to be part of the equation.  Plan your life around a 20% down payment and your long term costs will be much less than if you go with a more “creative” financing plan.

As my financial coach Dave Ramsey always says, “creative usually means too broke to buy a house.”

I suppose they could make a difference to someone who doesn’t know the difference, and in some industries they do matter…but I can tell you from personal experience, there are two things that realtors seem to hold dear to their hearts for no good reason.  1)  The brokerage they are with, and 2) the little letters that follow their name.

In this business, the experience you bring to the table, and the trust relationships that you build with your clients is what matters.  I don’t need a four-letter designation trailing my name to prove I can do what I do.  I also can’t condone putting a designation behind my name that represents a few hours of video conferences and the ability to answer 50 questions on a fairly simple test.

Designations are proof of one thing.  They are proof that the person holding them paid someone else to tell them they’re important.  It frustrates me to no end that someone can take a little test and claim they are a short sale expert when they haven’t completed a single short sale.

If we want designations to carry more weight, we should make them much more difficult to attain, and require apprenticeship under a seasoned veteran.

All but one of the homes that I have sold in the past 2 years has been under water.  I also haven’t placed a buyer in a non-distressed home (short sale or foreclosure) in the same time frame.

Some said that we would be out of this mess by now.  Reality dictates otherwise, and it’s been that way for a while.  We can continue down a road of denial steeped in a bog of irresponsible optimism, or we can open our eyes and see the housing market for what it is.

If you’ll recall, when the market shot through the roof sporting unsustainable prices, it was a direct result of lenders offering incentives (free money) to people who weren’t in a financial position to buy stamps, let alone a house.  When you give money away, you are effectively stealing future business from the marketplace.  In other words, millions of people who would have otherwise not purchased a home until a future date were lured into buying.

The consequences of those purchases resulted in a surplus of homes, and if you know anything about the laws of supply and demand, when there’s too much supply, the price of the product naturally falls because the suppliers (home sellers) are forced to compete against each other, which means lowering their prices to be competitive.

Many economists share the opinion that the free market can take care of itself without intervention.  One example of intervention is minimum wage.  Minimum wage is an example of a price floor.  In other words, we artificially set a price for the supply of labor regardless of the demand.  It’s manipulation of the basic laws of supply and demand, and it doesn’t work.

In the real estate market, we recently went through a period where the government offered $8,000 to anyone who entered into a purchase contract to buy a home before April 30th.  Sound familiar?  By offering money to people who would have otherwise not purchased stamps, let alone a house (see the pattern?) we have yet again borrowed from the future to acquire buyers to buy now.  Naturally, when the dangling carrot is revoked, sales fall off, and the market begins to correct itself.  Unfortunately, like any swing, it will over-correct by swinging past the balancing point, and this will lead yet again to more foreclosures, more short sales, and more unemployment.

It’s 2010.  We are nowhere near recovering.  In fact, we are in the midst of a wave of mortgage rate resets that are going to devastate the 2nd batch of unsuspecting home-owners who had no idea what type of loans they were getting themselves into back in 2005 and later.

So what makes me think there’s a problem?

Option ARM mortgages.  These are miserable products, and there are billions of dollars worth of Option ARMs (Adjustable Rate Mortgages) that are resetting over the next 2 years.  Option ARM mortgages have a very low rate of interest in the beginning, and even allow for the borrower to go negative on their mortgage.  In other words, their payment can be so low that the balance of their loan increases instead of decreases as they may payments.  What a bargain!  In the midst of declining market values, your loan balance is going up.

The risks of an Option ARM place you on a very slippery slope akin to betting your life savings on one company’s stock.  Most borrowers will suddenly be hit with “payment shock” as their payment is reset after a period of time has passed.  Option ARMs can negatively amortize up to 110-125% of the home’s appraised value at the time of purchase.  Once this happens, it caps, and the payments are amortized based on a normal 30 year period, or other similar terms.  Either way, most mortgagors (home owners) suddenly see their payments skyrocket to an unaffordable level.  That means distressed home-owners, which leads to loan mod applications, short sales, and foreclosure (in that order.)

What’s the Solution?

It’s time to get real about your money.  It’s time to get real about the future of our economy.  In the most uncertain economic times that we have known, with speculation that we’re entering the Greater Depression, and being witness to some of the most heinous fiscal decisions our federal government has ever considered, it’s time to get to work.  It’s time to start going without those little luxuries that you’re accustomed to.  Adjust your lifestyle to fit a greater vision of how you see yourself in the future and save your butt off.  Stop spending other people’s money with the justification that “it’s a low rate of interest,” or “it’s only $7.00/month extra,” or “I’ll just pay it off the next time I get paid.”  You may not get paid again, and then where will you be?

Don’t be fooled by what the optimists are saying.  We are not out of this mess yet, and it will be a long while before we ever see what we used to know as “normal” appreciation in the real estate market.  Bottom line?  This is going to hurt, for a while.

The “Cash For Clunkers” plan that Congress has approved is an absolutely stupid idea.  Sure, it sounds nice.  Bring your gas guzzling vehicle to a dealer and they’ll apply a government issued voucher for up to $4,500.00 which would be applied towards the purchase of a more efficient vehicle of 22MPG or higher according to the Associated Press and Foxnews.com.

Why Is This Stupid?

Cars go down in value, and the program is going to entice people to drive their perfectly good vehicle, which in most cases is going to be paid for, and has already lost most of its value, to the dealer where they’ll get sucked into financing a newer vehicle.

THIS IS GOING TO TEMPT PEOPLE TO GO DEEPER INTO DEBT by investing their money in a consumable product that goes down in value, not UP!  Not a good plan.

Why Is This ULTRA Stupid?

The dealerships must agree to destroy the “clunker.”  Are you serious?  Who are these people!?  For those who have “clunkers” that work just fine, the market for resale to people who are a bit smarter with their car purchases is eliminated.  All of those people who would love to buy a used car won’t be able to.

Let me explain what a smart car purchase is.  Save, pay cash, then save, then upgrade with cash.  Repeat.  Let’s say you bought a car for $2000.00 cash.  Sure, it wouldn’t be luxurious, but it would get the job done.  Then, for 10 months, you saved on average $300/month and put it into a car fund.

“How am I going to save $300/month?” You dummy!  How are you going to afford $300/month for a car payment?

After 10 months, in a car that has already lost most of its value (someone else took that hit, hopefully) plus $3000.00 (10 months X $300.00) you are able to trade your $2000.00 “clunker” in for a $5000.00 “clunker.”

Do this for another 10 months and you can upgrade to an $8000.00 car.  Another 10 months and you’re in a PAID FOR car for $11,000.00.  Another 10 months and you’re driving a fairly nice 2-3 year-old car worth about $14,000.00 and it’s only taken you 40 months to get there.  AND IT’S PAID FOR.  That’s a little over 3 years.

Buy a new car, and you’re stuck with $300.00+ payments for at least 60 months.  As Dave Ramsey says, “stupid tax.”

The amount of gas that you’ll save by upgrading from your SUV to a newer, more efficient car will be all but wiped out by the loss of value you’ll incur with the car you borrow with your $4,500 voucher.

Shredding perfectly good older cars that someone might treasure for the sake of luring someone who can’t afford a more expensive car into debt is a stupid and very wasteful plan.  Besides, WHERE IS THE MONEY COMING FROM?

A deficiency is the amount that you still owe the bank after the bank forecloses.  If you are selling your home short of what you owe, or you are about to experience a foreclosure, then this information is important for you.  As always, please seek professional legal council when it comes to your particular situation.  I can help you sell your house, but I’m not an attorney.  We leave that up to the legal experts.

Arizona’s anti-deficiency laws are changing effective September 30, 2009!

The change is designed to limit the type of borrowers that will qualify for anti-deficiency treatment. Set forth below is a general outline of Arizona law regarding when a borrower may be subject to a deficiency action or sued on its note following a foreclosure or short sale. However, borrowers must understand that these are only general rules — every situation must be analyzed carefully based on the specific facts – consult with a professional at all times to determine your rights and obligations in connection with a foreclosure or short sale.

1. In Arizona, if a borrower fails to pay its loan, a lender can foreclose its Deed of Trust lien either judicially per A.R.S. § 33-721
2. If the foreclosure price does not pay a lender what it is owed, the lender may generally seek a deficiency against the borrower for the difference. However, certain states, including Arizona, have what are called anti-deficiency laws that bar a lender from seeking a deficiency in certain situations.
3. In determining if anti-deficiency rules apply, the first step is to confirm what law applies to the loan, particularly the lender’s remedies under the Promissory Note. The applicable law should NOT be assumed. Read your Promissory Note and other loan documents carefully and understand their terms.
4. Assuming Arizona law applies to the lender’s rights under the Promissory Note, Arizona’s anti-deficiency laws are found in 2 places – in A.R.S. § 33-729(A) (regarding judicial foreclosures), and A.R.S. § 33-814(G) (regarding trustee’s sales).
5. In both judicial foreclosures and trustee’s sales, anti-deficiency rules apply only if the property being foreclosed meets the following criteria: (a) 2½ acres or less; and (b) limited to and utilized as a single one-family or single two-family dwelling. However, on July 10, 2009 Governor Brewer signed into law a change to A.R.S. § 33-814(G) which will take effect September 30, 2009. In addition to the above requirements, the trustee’s sale statute will also require that: (a) the trustor has lived in the property for at least 6 consecutive months; and (b) a certificate of occupancy has been issued. Until September 30, 2009, there is NO requirement that the trustor use the property as a residence – residential investment properties satisfy the anti-deficiency criteria. Effective September 30, 2009, investment properties sold at trustee’s sale will NOT qualify for anti-deficiency treatment if the trustor has not lived in the property for at least 6 consecutive months. Commercial properties and loans secured by residential homes being developed for sale but never used as dwellings don’t qualify for anti-deficiency treatment. In addition, a deed of trust that is a lien against more than one property will not be subject to anti-deficiency rules — the deed of trust needs to be a lien against a single trust property.
6. A.R.S. § 33-729(A) also requires that the loan be a purchase money (“PM”). However, the trustee’s sale statute, A.R.S. § 33-814(G), does NOT require that the loan be a PM loan. A PM loan doesn’t lose its PM nature when it is refinanced. However, cash out refi’s raise interesting issues.
7. In a judicial foreclosure, only a PM lender on qualifying residential property is prevented from seeking a deficiency; a nonpurchase money (“NPM”) lender is not – it can obtain a deficiency following a foreclosure or sue the borrower on the note.
8. In a trustee’s sale, both PM and NPM lenders that foreclose on qualifying property are prevented from seeking a deficiency and from suing directly on the note.
9. Junior liens extinguished by a 1st position foreclosure may be able to sue on the note. The issue is whether the junior loan was a PM or NPM loan – if it was a PM loan on qualifying property, the lender can NOT sue the borrower on the note following the foreclosure; if it was a NPM loan, the lender CAN sue the borrower.
10. If a lender can not seek a deficiency, then the lender can NOT waive its security and sue directly on its note. This means that a lender under a PM loan on qualifying property will NOT be able to sue the borrower on the note. This rule also applies to short sales. Note there are gray areas regarding cash out refi’s. Other Lender claims are also not barred – e.g. mortgage fraud.
11. Even if anti-deficiency rules apply, a borrower will be liable to a lender for any diminution in value of the trust property due to voluntary waste. In other words, don’t damage the property, take fixtures, A/C units, etc., or let the Property go to waste.
12. Real property taxes are NOT an owner’s personal obligation, but only a lien against the real property. However, HOA assessments ARE an owner’s personal obligation and if not paid can result in credit damage, lawsuits and other collection efforts.
13. Last, but not least, consult with qualified tax professionals BEFORE deciding to do a short sale or foreclosure. 1099 income, gains, losses and other tax consequences may result from foreclosures, short sales and loan modifications. Know what tax consequences you will face and plan accordingly.

I cannot tell the future, but I can see when there’s a break in a pattern, as you will also see indicated in the graph below. Whenever a market corrects, it usually over corrects to a comparable intensity of the original inflation. Prices were so overinflated, and people have SO overreacted, that the low prices in the valley are deflated and can be considered as artificially low as they were high.

Average Monthly Sales

If I base my opinion simply on the pattern in this graph which outlines average monthly sales in the Greater Metropolitan Phoenix Market, then we are on track to recover, and we will bounce back. Since Arizona is a national leader in real estate trends, we should see a healthy recovery. Again, I cannot predict the future.

It was towards the end of 2003, beginning of 2004 that things started to exponentially bloat, soaring to ridiculous heights, and absolutely crashing as quickly as a 747 filled with solid lead.

In August of 2005, my neighbor bought the same unit I purchased in 2003 for $200,000.00 more than I paid for mine. They are still there. Oops.

The market’s plateau began in approximately June of 2006, rose a bit more, and then decidedly burned in flames at about January of 2008, through March of 2009. The number of homes sold began to increase in May of 2008, but the price continued to drop.

What would have happened if we had continued to grow at a normal, typical rate of 4% per year?  Perhaps the following, showing a line drawn at about a 4% increase over the same period of time.  This shows that a starting value of $175,000.00 would over the time represented in this graph, grow to approximately $244,000.00.

Average Sales with Assumed 4% Annual Increase

One could argue at this point one of two possibilities.  Either a) the market will quickly correct, over correct, and bounce back and forth over the next 8 years or so to find equilibrium along that blue line, or b) the blue line must be adjusted down, erasing all of the growth in this millennium.

If that’s the case, then the home you’re living in, which is now worth what it was pre-Y2K, will not be worth what it should be worth for as long, if not longer than it takes to re-write the entire first decade of this century.  To reach home prices that we should be at, we’re looking at roughly 10 years of steady growth at a “normal” rate.

The problem is that nobody knows what normal is anymore BECAUSE OF THAT GIANT HUMP in the middle of the chart.  Who’s to blame?  Many people think it was the government forcing the banks to lend to people who couldn’t afford it which drove them to “get creative.”  Dave Ramsey calls “creative financing” “Too Broke to Buy a House.”  I tend to agree.

Either way, it will be interesting to see what happens, and ultimately, it appears as though we’ve experienced the beginning of the bottom of this roller coaster ride.  Which means one thing…

If you haven’t bought a house yet, it’s time to buy.  There’s blood in the streets and the street sweepers (the investors) have been very busy recently.  Don’t miss out.

Supply and Demand

When a supplier (people selling homes) floods the market with too much product (houses) the buyers tend to take longer to choose what they want.  As a result, sellers who are tired of waiting will lower their prices to spur the buyer into taking action.  This is a natural movement that many sellers miss because they don’t understand the LAW of supply and demand.  When the supply is low, buyers climb over themselves to bid on what product is available which drives the price up.

The red line represents the supply.  The green line represents the demand.  The point at which they cross is the market value or market equilibrium.  This is the price that we aim for when we price a home.

The graph can be interpreted as such.  On the demand curve (green) when the price of the product is $1.00, the number of units sold will be 100.  When the price is $10.00, the number of units sold will be about 14.  It’s the economists challenge to set the price of his product as close to market equilibrium as he or she can whereby the most money is made for the least amount of production.  100 units sold X $1.00 = $100.00.  14 units sol X $10.00 = $140.00, but 50 units sold at a price of $6.00 each is $300.00.

Shifting Curves

This is the important note for supply and demand.  When supply is increased, the entire red curve shifts to the right by the number of units produced.  Assuming demand remains the same, the point at which the lines cross will naturally fall and the price will naturally fall.  If the price is not adjusted, the product will not sell.  If demand increases at the same rate as the supply increases, then the price will remain the same because market equilibrium will simply follow along.  True, more product will be sold, but the price will stay put.  Remember, when supply and/or demand increases or decreases, the entire line shifts left or right.  For example, if demand suddenly dropped off for a given product like homes, and there was an excess of supply or a surplus such as we have now, the price point would fall dramatically.

Buyers Market

In Phoenix, we have a surplus of homes.  Nation wide we have a shortage of buyers because of tightened lending.  In many cases, the buyers are really still there, but they’re just afraid to move forward and/or they don’t realize they actually can get a home loan.  While the buyer’s market exists, it means the influence of movement on the supply and demand curve has shifted to the demand curve.  Buyers can ask for more, and have more to choose from than ever before, so why not wait it out?

On the contrary, if it’s a buyer’s market and there is blood running in the streets, take advantage of it because you won’t want to be buying in a seller’s market.

…and the bad news continues.  “HOME PRICES POST A RECORD DECLINE.”

…yeah?  And?

Here’s the bottom line.  If you owned a home before 2004, or you bought in 2004, then you’re probably exactly where you should be.  I purchased my town home in 2003 for $115,000.  In August of 2005, my neighbor purchased the same floorplan for $319,000.  That’s a disgusting increase in value.  It’s unheard of.  It’s 177% in 12 months (15%/month).

No market can sustain this type of abnormal growth and when you have record artificial growth you are bound to have a record decline.  Thanks to the media, most people look at their 401K, their wallet, their job, and they freak out when they see that “even the media says” that things are bad.  These things are all relative.

There is money for qualified buyers.  That is who should be buying a home.  If you don’t have to sell right now, then don’t sell because you’re not in control, the buyer is.  Stop listening to the media and start listening to we who are in the trenches every day working out the numbers, talking to the lenders, keeping it real.

Circuit City is closing who knows how many stores.

Ann Taylor – 177 Stores Nationwide are being closed.

Lane Bryant, Fashion Bug, and Catherine’s to close 150 stores nationwide.

Eddie Bauer is closing 27 stores, and even more after January.

Cache will close all stores

Talbots closing all stores

J.Jill, closing all stores

The Gap – 85 Closing

Footlocker will close 140 stores and more after January

Wickes Furniture, closing.

Levitz is closing remaining stores.

Bombay, closed.

Whitehall, closed.

Piercing Pagoda, out of business.

DISNEY!!!! Closing 98 stores.

Home Depot, 15 Closings

Macy’s to shut down 9 stores after January

Linens and Things, out of business.

Movie Galley, closed.

Pacific Sunware, closed.

Pep Boys, 33 stores closing.

Sprint / Nextel, 133 Stores closing.

JC Penney, closing a number of stores.

Ethan Allen, 12 stores closing.

Wilson Leather, all stores closed.

Sharper Image, closing all stores.

K B Toys, closing 356 stores.

Lowe’s and Dillard’s, closing down some locations.

I was shocked to read some of these, and although I haven’t personally verified each one, my source is reputable.  What’s amazing to me is the number of chains that are closing that have been around long enough to be considered “just part of the landscape.”  These economic times are completely re-shaping the face of our retail environment, opening up opportunities for more prosperous companies to take the place of some of these.  It will be interesting to see what happens over the next few years.

Starbucks Is Not Invested In You

…but that doesn’t seem to make it easier to stop paying them.  You see, when we’re talking about cutting costs by spending less on things that don’t have emotions or families to support, it seems as though we have a harder time doing so because nobody is depending upon us.  Why after all would you feel obligated to tell your cup of coffee that you can no longer afford it.  Your expense goes unseen by most and you may even enter into denial about how much you’re spending every day on it.  Make your coffee at home, or cut your consumption in half if not eliminate it completely.

There’s A Hole In The Bucket Dear Liza, Dear Liza

I look at finances like a Hole in the Bucket, dear Liza. Money comes in and money goes out.  The amount of money that goes out is directly proportionate to your expectations of lifestyle and the habits you have developed, which are all subject to change according to your priorities.  In this economy, your priorities may be to cut costs and spending as much as possible to make it through.

I get a kick out of the song that we’re all familiar with from Sesame Street because one thing is overlooked.  There’s not just one hole in the bucket.  There are two holes.  One with which to fill, and one with which to drain.  Liza never thought of asking Henry one important question.  “Is the bucket draining faster than it is filling?”  If it is, fix the hole.  If it isn’t, then you might not be in as much financial trouble as you thought.

When you become comfortable with a routine, it becomes very difficult, sometimes impossible it seems, to break the pattern.  But, when you do break that pattern, it will allow you to take control of your money and follow a few simple healthy behaviors that will surely set you on the right track.

A Spending Plan

When we look at our spending in terms of percentage of income, it gives us a stronger boundary by which we can live.  If we look at our spending in terms of dollars without knowing what percent of our income we’re spending on each obligation or indulgence, we lose perspective of how much we’re hurting our financial future.  We also find ourselves saying things like, “I’ll start giving when I can afford to.”

Affording something is a matter of perspective, and prioritizing what we love to do.  One may say that they cannot afford something when in fact, they can, but they’ve misappropriated funds to something else that they believe they can afford but in fact cannot.

It’s critical that you design a set of basic rules, rules that can bend and change according to your situations, but that can be consistently applied to any income situation you are experiencing.  This builds a foundation that can be applied whether you make $10.00 per hour or $500.00 per hour.  One percent is one percent no matter what.  Over all, we need consistency in both income and spending in order to reach our life long financial goals.

The only thing that stands between you and owning a home is whether or not you have the cash flow every month to make your payments on all of your financial obligations.  Set aside your worries about credit scores and focus on whether or not you can pay your bills.  If you can, and you have a good job, and you can prove solid income with a low debt to income ratio, then you can buy a house.  Quit listening to what the media is telling you and start consulting with those who know ( ) what’s really going on.

Does buying a house mean taking on more responsibilities?  It can, but the key in these economic times is to just buy something.  Buy a condo, buy a townhome, just buy something.

Dave Ramsey recently read a letter from a listener in which he stated…

Why is it that when stores put items on sale everyone runs to get the best deals, but when stocks are on sale, everyone runs for the exits?

To that Dave responds with enlightening information (as though we don’t already know this) about how stocks and real estate are on sale.  They’re on sale everyone!  SALE!  The market reflects pricing from 2004 and the slight downward over correction we’re seeing on that pricing is normal.  Over time, these prices will increase.

Pricing this low means one thing.  Homes are at a bargain discount right now and you need to take advantage of that.

According to a recent article released by the National Association of Realtors, Lawrence Yun, chief economist for the NAR said the following:

“What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region,” he said. 2 “The improvement also reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.”

Rather than shopping for a bargain while prices are low, people are retreating from any major purchase, cowering in a corner and proclaiming ridiculous statements like

“Well I hope the President has a plan to fix this…”

Guess what…fat chance.  The only person who has control over your financial future is you, and if you’re smart about managing your money, you’ll start shopping for a home now, because one year from now it will cost you more to get in.

Yun also states that

Following national declines of 5 to 8 percent in 2008, home prices are projected to increase 2 to 3 percent next year.

The 30-year fixed-rate mortgage will probably average 6.1 percent in the fourth quarter and rise gradually to 6.6 percent by the end of 2009.

Now is the time to buy that single family detached home you’ve been afraid of purchasing.  There are thousands available on the market, and many of them are in the extremely affordable $125,000 – $200,000 range.  A mortgage of this size will cost you around $750 – $1200 /month.  I would bet you’re paying that in rent and when you rent, you’re losing it all.

It’s more clean than ever.  It’s time to get in while the getting can be gotten.

Call me about buying a home today.  (602) 312-3262

Here’s the problem we face.  Most of the time we act in haste on feelings and forget that the feelings are a result of something that has already happened.  It’s at this point when we face the most difficult challenge of choosing the best response to our fear, anger and sadness.  In times where things seem desperate, or uncertain, remember not to react in an unhealthy and damaging way.  Take inventory and make a healthy, rational decision about what you’re going to do.

I recently created a poll on my website, www.RealScottsdaleLiving.com which asks you whether or not you believe that the United States is headed for a 2nd Great Depression.  Of 18 votes in the past 12 hours, 16 people’s opinions indicate that we are.  I’d love to know what you think about these economic times.

What about the banks?  Ahh yes, what about the banks…

The American Bankers Association says that most banks who are considered to be in trouble return to profitability without intervention, and you won’t know about it, so you won’t know if your bank is going to fail.  So let’s say your bank does fail…does that mean that you won’t have access to your money?  That depends.  If nobody buys your bank’s assets and deposits, and/or there’s no new company formed to handle the funds (usually occurs between Friday and Monday) then your money would not be accessible.  If your bank is purchased, then you most likely would not see an interruption of service.  If your funds are not accessible, on the Monday following the failure, the FDIC would begin to send you checks in the amount of your deposits.

What about the stock market?

This is where the impulsive selling could plunge you into a panic causing you to pull the trigger and sell.  If you’re financially independent and you’re not still working towards building your life’s nest egg, then you can get out of the market.  Most of us are not there yet, and the stock market has proven to be the highest return on investment over the long haul than any other investment vehicle.  Stick with it and don’t sell off just because you’re afraid of losing.  Remember, you don’t actually lose your money in the stock market until you sell.  If you’re concerned about a particular company, do your homework and move your funds somewhere else.

What about real estate?

Well, they aren’t building any more land.  The Earth has only so much of it, and since we are creatures who crave community, it’s not likely that you’ll be interested in purchasing a plot of land in the middle of nowhere unless you like that sort of thing.  Property also goes up over the long haul, and with interest rates as low as they are, and thousands of short sales and foreclosures saturating the market, as a buyer, you are in a position to reap a huge reward down the road.  My advice to you, if you have money sitting around doing little or nothing, is to buy a house.

There’s no crystal ball in any economy.  All we have are patterns of the past, and the patterns show that we grow, consistently, without fail.  We are getting smarter, more innovative, and there are more of us.  The economy has nowhere else to go but grow.  The question for you is whether or not you’re patient enough to let it happen.

Today, in afterhours trading, Freddie Mac is currently going for $2.04.  Your little $259.00 investment on the 16th would now be worth $2040.00.

There’s really no point in looking back on events like this other than to dream about what could have been, which is living in regret.  Do you have an opinion about the market conditions?  Leave a comment today!

The housing crisis is not the root of the troubles that we are facing today.  A combined effort between greedy lenders and reckless buyers is what led to the housing mess we’re in.  I don’t see any way to point the finger at anything more than greed.  We in America have set aside all common sense and have extended ourselves way beyond what we know we can handle.  Being in debt is being in prison.  The more money you spend that you don’t have, the longer it will take to get out of where you’re at.

There is, in my opinion, a healthy way to become a home-owner.  Spend less than you make, create a budget, and save.  If you don’t agree with me, that’s okay, but I will lay out a quick and simple example of what I think a healthy distribution of your income could look like based on a $3000/month net income (after taxes.)

$3000.00

$-300.00.  10% giving back to the community in some way, shape or form, whether charitable contributions or to your church or through donating your time and resources.

$2700.00 Balance

$-300.00.  10% tucked away in a 401K or other savings plan.

$2400.00 Balance

$-1000.00 or 1/3 of your income to cover housing costs (rent/mortgage).  This puts you in a home around the $120,000 mark if you plan to purchase.

$1400.00 Balance left over for the rest of your living expenses, auto, insurance, etc.  Some of this is discretionary and some of this is not.  Whatever you have left over, contribute towards a down payment fund and save, save, save, until you have enough to begin owning a home.

This model assumes you have no debt.  If you have debt with interest rates that are higher than the investments you currently have, eliminate the debt and get on the right track, because even though you may think you’re saving, you’re actually losing money in the long run.  Credit card debt is a cancer and will destroy your financial future.

I’m not a financial planner, but I do try do employ common sense when dealing with my income.  Since I am in the sales industry, my income depends on each sale.  If I don’t sell a home, I don’t eat.  In this unique market where you, the buyer, hold the negotiating chips, with interest rates as low as they have been since before the housing crisis became a common topic, it’s time to buy and I can help you.

Please contact me today for more information about becoming a first time home buyer or about selling your current residence and moving to another location.