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December, 2009
Happy Holidays.
First the further bad news -- and then I'll get the Mistletoe out and give you some very good news.
BAD NEWS: This winter could be more devastating for Desperate Sellers than anything we've seen so far. The number of 'good people' who may be pushed to the edge in the coming months could be staggering. The culprit? Equity loans.
Banks aren't lending on 'equity' much anymore -- and they're demanding that expiring 'equity loans' be paid off. Those of us who got used to fueling our lifestyles with these sorts of loans -- counting on rising real estate prices to cover us -- have faced a harsh reality over the past year. THAT reality is about to get even harsher.
Worse news lies in the commerical market. Banks want little if anything to do with commercial lending, right now, unless you can prove to them beyond a doubt that you have such deep pockets, you really don't need the loan.
This is going to be a huge, huge drag on the market, this winter UNLESS a government-backed program emerges that assures investors their 'risk' will be guaranteed. I know, I know -- there's a number of you out there who scream "let the market work, let the chips fall where they may!"
It's not that simple. The result would be a very quick return to a world of the haves and have nots. Banks would lend only to the surest of clients -- the wealthiest of wealthy. Investors would likely stop investing. The middle class would go poof overnight . . . and history tells us the losers would soon enough work up a thirst for revenge and 'justice'.
So . . . I like the idea of free markets probably more than anyone you'll ever meet -- but the complicated world of lending is far, far beyond that right now.
If a government backed program DOESN'T emerge, look out. The fall in commercial prices between the loans being called and the inability to secure new financing will be breathtaking.
Ready for some good news?
There is so much opporunity out there it's almost impossible to see it. The whole market's on sale!!!
The real, real key is interest rates.
-- January, 2000 . . . a $200,000 mortgage cost $1535 per month.
-- July, 2006 . . . a $200,000 mortgage cost you $1315 per month.
-- Today, for $1315 per month, you can borrow $252,000.
-- Today, for $1535 per month, you can borrow $294,500.
Your purchasing power has gone up almost 50% since 2000!!
I know that real estate prices have fallen. But the rise in purchasing power has actually more than offset the fall in your house's value.
When was the last time you heard anyone say THAT???
It's not all rosy for those affected by job loss or salary cutbacks. But when it comes to real estate -- it's so, so much rosier than the idiots writing the headlines would have you believe.
Did I say 'idiots'? Now, that's not very Holiday-like. I apologize. Let's call them MORONS.
Best part is -- the sale of a lifetime continues . . . and there's a lot of wealth that will be created in the coming months for people who take advantage of the opportunities.
Happy Holidays. Enjoy your family and give the gift of random kindness to the world (even headline writers). These dire times will pass. They always do.
Jack |
