Bail or Fail
For the better part of last week I was out of town in Las Vegas, where reality is at best altered. Not watching the
news or even paying much attention to anything other than my immediate Blog World Exposition schedule, I didn’t learn about the Big Bailout proposed by the U.S. Government until my return. When Larry clued me in, it was to say the least frightening.
This week I’ve been paying catch up on the proposal, what it means and searching for an understanding. One thing I found, watching the talking heads on TV gave me none of understanding I was searching for. Finally today while getting ready to work, the thought came to me, “the government isn’t assuming debt without security. The government (that’s you and me) are assuming assets, albeit poor performing, but assets just the same.
I remember the first time I purchased a home and with it homeowner’s insurance. The insurance representative told me he couldn’t insure my home for it’s full purchase price! OMG! I thought I had bought a “pig in a poke” of a bad house. But then he explained to me even if the home burned down, I would still own the land, which had value.
OK. I got it then.
Listening to the talking heads on TV makes me want to have them call my insurance rep. He’ll straighten them out on assets and liability!
So how I see the $700 Billion Buyout is this: The U.S. Government is buying a business and for that money we the government will receive some homes in varying condition and a whole lot of land. Not every home is in perfect condition but at the very least it will sell for land value. Most homes will be worth more than land value, significantly more.
Right now the market is constipated. Gross analogy, but right on. Homeowners want to sell and buyers want to buy. Problem is they can’t.
Mortgage money is tight and tough to get. Without mortgage money the market is limited to the few who have cash.
By spending $700 billion to “correct” the system, the act alone will improve confidence in consumers and investors all around the world.
When confidence goes up, interests will come down and money will flow. The market will assume a positive track and THAT FACT ALONE WILL HAVE POSITIVE BENEFITS ON THE NON-PERFORMING ASSETS owned by the U.S. Government.
or
The alternative is to do nothing. Let the lending institutions take the hit they deserve and bite the dust. We can all point fingers at each other (Elephants and Donkeys) and say “It’s your fault.”
Homeowners who cannot pay will be escorted to the street by the sheriff. Businesses that depend on real estate and all the other industries supported by it will shut their doors, one by one.
Those they feel they are safe from this will soon realize they too are affected. Home values will drop and equity eroded over the course of time. No one knows how long it will take to recover.
I prefer to take action to INVEST in the U.S. and the economy. Let’s pass this bailout and start looking for a better, safer way to lend money.
The road to recovery always begins with understanding and education.
Who volunteers to educate the talking heads?
Want a good resource for understanding the situation read, The Economy, The $700 Billion Answer
Grab an Opportunity
There is a silent feeding frenzy going on in the Denver real estate market right now. Few people are aware while
others refuse to believe and the rest will never share their secrets with you. Since I’m a witness to the statistics and a recipient of their calls, I will tell. Besides no one has ever sworn me to secrecy.
Here goes; People are buying real estate for investment!
OK, so maybe that is not earth-shaking news to you, but it’s true. What you may find interesting is how many properties under the $100,000 mark are being sold. A quick look at last month’s statistics will show 15.37% of the sales in August were for properties priced under $109,999! Yes, these properties are single family homes.
Condos under $109,999 accounted for 32.65% of the sales in August.
How are these purchases being made?
Single family home financing looks like this:
- 57% Conventional financing
- 25% FHA financing
- 14% CASH (no financing)
- 3% VA financing
Condo Financing is very much in line with single family, it looks like this:
- 50% Conventional financing
- 26% FHA financing
- 22% CASH (no financing)
- 2% VA
What type of properties are investors buying?
Obviously the lower end market is hot right now. It is easy to get into for both first timers and the seasoned and savvy investor. First time home buyers who are just looking to say good bye to their landlords are also jumping in. They are buying value properties in need of tender loving care. HUD is offering (via a bidding process) many foreclosures in NE and SW Denver.
By “tender loving care” I mean these are homes that aren’t exactly ready to move into without work. The savvy investors have a system with a construction crew and a strategy to fix and flip these properties. Some actually fix and hold the properties renting them until the prices increase.
“Opportunities are never lost. The other fellow just takes those you miss.”
Watching the statistics of sales in the Denver metro area we now believe the “bottom” of our market was in April/May 2008. Of course we won’t know this for absolutely sure until next year, but then the time will have passed would be investors will have missed the opportunity.
As the stock market continues to shake and quake with big businesses failing in ethics of business practice, investing in real estate makes better sense. We may never be able to control the market, but owning a piece of dirt that is tangible and real makes sense to me. At least the dirt won’t dissolve into the ether.
We all know what Will Rogers said,
Buy land they aren’t making anymore of it!
In our market the opportunity is not limited to land, we have single family homes, condos, townhomes and multi-family dwellings for sale. If you would like to talk about opportunities that might fit your needs, let’s talk. I welcome your call.
Ax Your Utility Bill
A totally true saying in Colorado is “if you don’t like the weather, wait a minute.” This past week 
was proof positive as we have enjoyed temps from the 40’s to the 80’s with both sunshine and rain.
As luck would have it, my relocation assignment this week came from sunny California to our rainy Colorado. It only rained for 1 and 1/2 days, the entire time he was here. Now I’m not making any accusations, just saying it was a terrible coincidence. My client must have had our weather on the mind, because every house he had even a slight interest in, he wanted to know the average utility bill. Funny how seldom people think about the cost of utilities when buying a house.
Of course now that energy costs are sky rocketing, everyone should be more cautious. It was easy for me to oblige my soggy client, thanks to the 24/7 service Xcel Energy provides. With just a quick call to them (even at 10:00 p.m.) I was able to fulfill my assignment!
What did strike me as odd was the HUGE disparity in average utility bills. The range for approximately the same size homes ran from $95 to $262 a month! Now in all fairness the $262 a month housed a family twice the size of the $95 a month. We didn’t take into consideration other factors such as energy efficient windows and such. Certainly that will account for significant savings. Also I recall the $95 a month home was southwest facing with lots of natural solar properties. I bet that helps in normally sunny Colorado!
As energy cost rise I’m thinking all buyers should be considering the average utility bill before making a home purchase. The reality is a well-built home that uses all the right construction materials over a home that doesn’t should be part of the home buying decision. So many times buyers purchase with their HEART instead of their HEAD.
I do believe the times they are a changin’.
Note the photo! This too came my way just this today in fact. I was up in Conifer when out of the corner of my eye I noticed this amazing wood pile. Someone plans to be toasty warm this winter.
Wonder what a cord of wood costs? On second thought I betcha this one cost the cutter a few gazillon calories!
This site brought to you by Kristal Kraft, a licensed Colorado Real Estate Broker
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