Barbara Corcoran comments on foreclosure market on CNBC

According to Barbara Corcoran on CNBC this week 1 in 30 homes in Stockton are in foreclosure - this is causing lots of problems with vandals stealing from the homes, and vagrants moving into them and camping out.

Sacramento is one of the top cities for homeowners with the highest density of debt which is driving the foreclosure market there. Both Stockton and Sacramento are included as two of six cities across the country with these outstanting features. (The other include two in Michigan, one in Florida, and on in Illinois).

Click on the link below to watch the video.

http://www.msnbc.msn.com/id/21134540/vp/24839477#24539239

Creative Financing - the new game on the block!

Freddie Mac has changed their guidelines for loan qualification (which would go into effect on Aug 1, 2008) and this will impact investors - previously we could qualify for ten loans (20 per couple in some cases) now we are limited to four per family - yikes! Most of us have four loans already...What do we do now? Essentially this means that creative financing will have to be a major part of our investing strategy going forward. These include but are not limited to the following:

1. Buying subject to the existing financing
2. Owner Financing
3. Lease Option purchase
4. Sell on a wrap
5. Equity share

These are all topics we will be exploring over the coming months at the SJREI - understanding these are key to your success over the next couple of years investing in CA. In the meantime start reading up about these different ways to creatively finance properties.

Click on the link below summarizing the Freddie Mac changes.

http://www.freddiemac.com/sell/guide/bulletins/pdf/bll042208.pdf

Mid-Peninsula Meeting

We had a very informative panel present at our meeting on Tuesday evening last, and learned lots of interesting tidbits about creative financing, and getting investor loans. We included the top 10 items to keep in mind for investors as they apply for loans.

Top 10 Do’s & Don’ts during a loan process by Raffi Soghomonian

Included also is Raffi's Power Point Presentation in a PDF format for your review.

Check these graphs out for information on numbers of homes for sales in Santa Clara versus sold or pending. Compare sold price versus list price and the average days on market. The third graph addresses the months of inventory based on closed sales.

Facts and TrendsTM by Nomita & Jagi Shahani Alain Pinel

Foreclosure Rising Locally

According to an article in yesterday's Mercury News forecosure are on the rise in CA - 1,000 were put on the auction block each weekday in April. In Santa Clara there were 500 such sales in April, things are hearing up that is a 47% month over month change in the foreclosure numbers, and a whopping 585% increase over last year's numbers.

Number of foreclosures surging in South Bay, throughout state

Business Week noted recently that no U.S. Metro had slashed home prices more in the past year than Sacramento - no surprise then that investors are flooding that market which is beginning to see multiple offers again. Is it better to burn through surplus inventory - this lead to a quicker recovery. Is Sacramento is seeing the bottom - I believe the the entry level houses are looking good right now especially if you can get them where they become close to cash-flowing, but the higher end homes have a way to go.

Recipe for Disaster

Investing is a business - when one is over-leveraged and completely out-of-step with the direction the market is headed this is a recipe for disaster. The article below gives some insights on this from an investors perspective. I have heard many stories like this except the ending is not so upbeat - this investor is still married with a new baby moving back home to start over. Bankruptcy, divorce, foreclosure, pain is what most often happens in situations where people invest blindly and lose their shirts. REI (real estate investing) can be very profitable with hard work, understanding the market fundamentals, multiple exit strategies, and having money in the bank for the hard times. Real estate is cyclical and the hard time inevitably come so being prepared for those is key to your longevity as an investor.

California man losing nine homes in mortgage mess

Economic Indicators

How do I time the market? This is a question that I am frequently asked. It is not necessary to get in at the bottom of a cycle and out at the top, but there are ways to simplify your ability to correctly analyze and anticipate future market trends. By understanding the five vital signs for the real estate market - you can track develop a clear picture on where the market is headed. Here they are:

Existing home Sales

• Buyers play a dominant role when existing home sales decline, buyers lose interest in the market, and prices decline

New home building permits

• Real estate construction is the largest single industry in US, and homebuilders are keenly aware of the demand for housing
• When demand falls, price reductions and loss of profits are likely to follow

Mortgage loan defaults

• When mortgage loan defaults go up, the economy goes down, and unemployment rises

Foreclosure sales

• When foreclosure rise, demand for real estate goes down
• Foreclosure sales are far more likely to help market watchers buy low than to sell high

Interest rates

• The higher interest rates climb, the greater the downward pressure on prices

Cited from "Timing the Real Estate Market" by Robert Campbell

Market Update

According to the most recent data released from C.A.R., (California Association of Realtors) the median price of an existing home fell 26.2% in February compared to the same period last year. More interesting is the fact that the median price of exiting single family homes for February 2008 was $409,240, a 4.8% drop from January's median price.

Some locals in the Silicon Valley feel that we will not see significant declines in the local real estate market particularly in the most desirable areas, yet we are seeing some dramatic price reductions in certain zip codes - I believe that is it just a matter of time until we see a larger impact. Further, a couple of years ago it was difficult to find anything in the $500,000 range, that has changed and there are lots of houses to choose from in this price category currently. In a recent conversation with a broker, he shared that a local two bedroom condo that he sold 2.5 years ago for $450,000, sold just recently for $260,000 further highlighting how condo prices rise in an appreciating market, and decline rapidly in a deteriorating market. A simple strategy to build wealth may be to buy a condo or two at the bottom of the market especially if it cashflows. How do you determine the bottom of the market? There are key indicators that indicate the direction the market is headed, more on that to follow.

Volunteer Opportunity

We have been blessed at the SJREI, and would like to continue to give back to our local community. Hence, we are joining forces with Rebuilding Together - this is an non-profit organization offering home repair and modification in the Silicon Valley to families or individuals who cannot for one reason or another complete the work themselves. We will rehab a San Jose home with them, it will be a full day project followed by a barbeque after the work is complete. This is scheduled for July 26th, and we already have several volunteers signed up to participate in that, and the barbeque efforts that will follow. All of the materials will be provided so only your hard work will be required. Please send an email to gerbarry@earthlink.net if you would like to participate- this will be a fun and fulfilling event, so mark your calendars!

6th Anniversary Celebration - Big Hit!

We had a wonderful meeting last Thursday with our 6th anniversary celebration - thank you for all of your support with making the SJREI the thriving organization that it is. Additionally, we had a very insightful presentation from Dr. Glenn Mueller, real estate professor - in case you missed that meeting you can find the handout from that presentation on our website.