Saturday, January 31, 2009

Germany is going to nationalize Hypo Real Estate

By Sidney Perez.

Germany was moving closer today to nationalizing troubled property lender Hypo Real Estate Holding AG as the government said details are still being discussed.

The government has “no final answer” to proposals that have been made on the lender’s future, Torsten Albig, Finance Minister Peer Steinbrueck’s spokesman, said at a government press conference. A solution will be “very complex.”

The government may buy as little as 70 percent in Hypo Real estate and could also end up taking over the company entirely, two lawmakers that help control SoFFin, the body that manages Germany’s 480 billion-euro ($615 billion) bank rescue fund, said. They were speaking on condition of anonymity after a meeting attended by Axel Nawrath, who heads SoFFin’s steering committee.

Hypo Real Estate Chief Executive Officer Axel Wieandt backs the government taking a stake in the lender and wants it done quickly, he told Sueddeutsche Zeitung in an interview published today. Hypo Real Estate could pose “grave risks” for the entire financial system, he said.

Click to read more

Friday, January 30, 2009

Renting vs. Buying: Which One is For You?

By Yulun Hung

When it comes to whether you should buy or rent a house, it is almost always better to buy. This is because renting, you are just "throwing your money away", while you can build equity when you buy.

Base on this simple explanation, why do people rent? There are some common reasons to why people are better off renting than buying a home. First, some people do not have enough capital to buy a house. Second, renting gives people more financial freedom to invest their money in somewhere else, such as stocks and bonds. Third, renting is a simple and quick process that might be good for some folks. For example, a family who wish their kids to attend a good public school might rent an apartment in a district that offers good education. Once their kids graduate, the family will move to somewhere cheaper.

If you have enough money to buy a house, it is always a good idea to take buying into consideration. There are a lot of wealthy people that made their fortune through real estate, such as Donald Trump. Our economy might look bad right now, but real estate market will bounce back sooner or later. Once it does, you can sell the house for profit. Plus, there are tax advantages on selling your home in most states. Tax advantages also apply to various mortgages. Lastly, buying a house gives you the pride and freedom to do what you want to the house.

Real Estate Going Green

Yulun Hung

By Tara E. McLaughlin

The future of real estate development will grow greener as more clients will demand environmentally sound projects, according to an Urban Land Institute expert.

“Whether you believe in global warming or not, get over it, because it’s coming and it’s going to shape our world,” said Tom Murphy, former Democratic mayor of Pittsburgh and senior resident fellow ULI/Klingbeil Family chairman for urban development.

Within five years, class A commercial space, meant to be the highest quality real estate, will be synonymous with green certified buildings, he predicted for a group of about 140 developers, architects and others at the half-day Urban Land Institute Southwest Florida District Council’s Winter Institute at the Hilton Naples Thursday.

Click here to read more.

Wednesday, January 28, 2009

Home Price Index Fell Again in Nov.

Keun H. Maeng
By Jack Healy

Battered home values in 20 of America’s biggest metropolitan areas fell even farther in November, according to a widely watched measure of housing prices released Tuesday.

Home prices in November dropped 18.2 percent from a year earlier, not quite as bad as economists had expected, according to the Standard & Poor’s Case-Shiller Home Price Index. Prices in 11 of the 20 metropolitan areas surveyed fell at record rates, and 14 areas reported double-digit declines from November 2007.

The 20-city index for November fell to 154.59, its lowest point since January 2004.
“The disappointing news is that the declines are still accelerating,” said Adam York, an economic analyst at Wachovia. “It emphasizes just how much stress the housing market is under.”

How the housing crisis happened?

Housing Crisis

Written by: Liwin Troy Lee

The most prominent players in the Housing Crisis were the real estate agents, lenders and the unqualified buyers. The problem was real estate agents who showed and sold homes to unqualified buyers. In order to close the deal, they referred these buyers to lenders. The loans were offered at low interest rates at first and later on the interest rates increased. As a result, with higher interest rates, buyer could no longer afford to pay the money back. Furthermore, it did not help when the prices of the houses feel and the buyers wound up having to pay more for the homes than they were worth.

The end result is the homeowner has to go into foreclosure, which is when the buyer cannot pay the moment back to the lender and the lender, usually a bank sells the home. Going into foreclosure hurts the credit of the buyer and make the lenders lose money. The reason being lenders cannot sell the home in a weaker housing market. Investors also lose money when they do not get a return on an investment they thought was low risk.

The best way to prevent another housing crisis in the future is inform the buyer of the interests rate of the loan and lenders should not lend money to them if they think the buyer cannot pay them back. Investors also need to be inform about the buyers ability to pay back and should get more return if there is a high risk of buyers not being able to pay back.

2009 Real Estate. A wise investment?

Written by Keun H. Maeng

Admit it. Our world is in fear with the current economy. Amazingly, even with the poor economic issues, there are hopes in the real estate market. Perhaps the solution to our financial crisis could be investing in real estate: the virus and the cure of our economic failure.

As our housing market slowly begins to rise, investors are gathering up in places like Washington D. C. to seek opportunities in the commercial and residential real estate markets. But keep in mind that home prices are expected to fall another 20% before they even begin to recover. Additionally, one factor that real estate investor must keep in mind is to understand the importance of cash flow. According to the records in the IRAs, numerous investors use their self-directed retirement plans to purchase lands. This keen investment had outstanding returns. Therefore, it allows them to sell or rent at a later date and allowing them to cash flow.

With the help from our government’s proposal of $1 trillion wave government spending, there is still hope for survival in the world of real estate. If you are fortunate to invest, do your homework. For those who are struggling to get a loan from the bank, quite frankly, keep in mind that you should buy a home when you can afford it. Fortunate or not so fortunate, let’s not worry too much about the market.

Only Time Will Tell: Real Estate and a New President

By Mike Hughes

How will the real estate market fair under new president, Barack Obama? Obama’s plan to swiftly enact a new economic stimulus package; plus continued rock-bottom mortgage interest rates, low inflation and improving consumer sentiment could begin to have a positive effect on the real estate market. Consumer confidence rose a couple percentage points this past month, which is a likely result of the inauguration of President Obama, although this cannot be directly tied. Additionally, there’s a “tax credit with teeth, nonrepayable and with a use-it-or-lose-it deadline,” which can result in additional sales. According to estimates, sales may number around several hundred thousand over the next year.

In terms of numbers, mortgage rates remain under 5%, inflation is close to zero, the CPI urban index dropped to seven tenths of a percent, and the energy index is down by 8.3%. The positive rise of home sales due to affordability is overshadowed by a price drop of 35%.

President Obama’s plan to improve housing in the United States begins with his $825 billion dollar economic stimulus package, which includes a $7,500 home purchase tax credit. In addition, the administration is working on reforms and new uses for the second half of the Troubled Asset Relief Program, which was the $700 billion financial rescue fund that Congress approved last year.

Furthermore, Obama has several high priority items to help benefit the real estate market. First is foreclosure relief, which encourages lenders to reduce delinquent borrowers' principal balances and payments in exchange for a federal guarantee that they'll acquire no added losses. Second, Obama plans to pass legislation to allow bankruptcy judges to step in to prevent foreclosures by reducing monthly payments, interest rates and principal balance for owners who file for bankruptcy. Third, Obama wants to implement last year's higher mortgage limits for high-cost areas around the country. This would greatly benefit borrowers, Realtors and builders in California and along the East Coast. Finally, the Obama administration is expected to consider reforms for the federal financial regulatory agencies further down the road.

Although the low price of housing is a downfall for sellers, it is truly a buyers’ market for anyone looking to purchase real estate. The great condition of the housing market, paired with the success of President Obama’s plans to improve housing could potentially improve our nation’s real estate. All in all, it is safe to say that only time will tell if the Obama administration will be capable of reviving the real estate market.


Real Estate Outlook: Obama Effect
Washington Report: Expectations for Housing
Obama Lobbies for $825bn Plan

Good Time To Buy a Vacation Home

By Broderick Perkins

Posted by Mike Hughes

In seaside Ocean City, MD, where 91 percent of the homes are vacation home properties, owners were buoyed by the prospect of reduced property taxes after assessed values dropped 36 to 45 percent over the last three years, according to county officials.
Scouting the slopes in Colorado's ski resort areas of Aspen, Beaver Creek, Steamboat and Vail will uncover some home prices in the toniest areas still holding steady, but overall sales are down by about 40 percent, according to a University of Colorado's real estate center.
In Maui, both home prices and sales are down about 25 percent each, according to the island's real estate association.
And don't forget California's resort areas. Home prices in the Golden State are down by 50 percent or more in many locations.
That's only the beginning. Lower prices and less competition are the tip of the iceberg-sized list of factors that make it a good time to consider a vacation home buy.

Housing Market Predictions in 2009

Jin Zheng

By Elizabeth Rhodes

Summing up the 2008 housing market, Glenn Crellin, was succinct:

"Challenging at best," said the director of the Washington Center for Real Estate Research at Washington State University. "We clearly have a situation where consumers have exited the market, rightly or wrongly, on the presumption that housing prices are going to fall precipitously and they'll be able to get tremendous bargains if they wait."

Will they?

Truth be told, that's too simple a question. Too many things that affect housing are in play for there to be a simple answer. Foremost among them are the deepening recession, the condition of the mortgage market, and the new administration's plans to stimulate the economy.

Here's a look at what 2008 brought and 2009 may bring.

Click here to read more.

Lawyer speaks about foreclosure crisis

By: Xavier Guerrero

Why are we facing a serious financial crisis? Real Estate is not the only guilty.

By Sidney Perez

Everybody knows that the economic situation is bad in America. The unemployment rate has been growing and growing since 2007 (7.2% for December 2008) and it will keep increasing.
Furthermore, US consumption decreases a lot and everybody seems afraid of what is going to happen again. Some used to compare this crisis to the 1929 crisis and then the whole capitalistic system is questioned by many specialists.

But, can we really say that all the problems we face are only due to the "poor" real estate crisis?
I think it is not so easy.

We have to take into consideration that our system needs to be regulated a minimum in order to avoid excesses.

Even if speculation cannot technically be forbidden in a free market, I think that the countries (especially the USA) made a big mistake by letting the banks lending money to people who were clearly not able to reimburse their loan. I am from France and I can tell you that our system is totally different. A bank in France will never give a loan of more than 20,000 dollars to someone who has no resources and no job. It is very clear and it can explain that the French banks were not as much affected as the American banks were except the fact that we live in a global economy and then what affects America (unfortunately) also affects the world.
Thus, firstly the legal environment was too weak to prevent this crisis.

Furthermore, the role of the media is also important. They keep showing us disasters, and repeating us that the situation is bad and sometimes worse than ever. They just forgot that during the crisis of 1982, some people told me that when they went to their bank, the office was just closed and there was no way to see your cash back mainly because of the failure of "Penn Square Bank".
People feel even worse when they see this situation showed on TV as insurmountable and then the crisis becomes even deeper.
I think that we do not learn good lessons from the history and even the very recent history like the Internet bubble in 2000. Investors experienced the dangers of speculation but continued the same thing with Real estate without being disturbed by anyone but encouraged.

Indeed, the prices of housing in Miami and Los Angeles increased 175 % from 2000 to 2007. In 2005 and 2006 you could see some advertising campaigns saying : ''Are you missing the real estate boom?'' or "Why the real estate boom will not bust?"
So, let's learn lessons from the history, let's be optimistic about our economy and let's have good ideas which really create value.

The election of Obama may be a new hope for a lot of people but we must act in order to change this bad situation.
Sources :
3) (sorry it is in french...)

Right opportunity for real-estate investment in Abu Dhabi

By Sidney Perez

The Abu Dhabi Real Estate and Investment - IREIS 2009 remained in full swing as it went into its second day after attracting a large number of visitors.

Experts and company executives said the show, in which more than a 100 companies are participating, appeared to be a good opportunity for real estate investors to finalize deals and see the latest developments in this fast growing sector.

According to Antoine Georges, Director of Dome Exhibitions, which is organizing the show, the strong presence by major property developers from the UAE and other countries gives a strong push to the event and attracts many people wishing to get acquainted with the latest real estate developments or those who want to invest in this sector.
"The investment atmosphere in this sector is still very encouraging and the strong presence at this show proves that all those concerns are merely psychological factors that have nothing to do with the real economic situation in the country," Georges said.

Developers believe most major speculators have exited the real estate market because of the global financial crisis and that the market is now dominated by medium and long term investors, which will contribute to stabilizing the market and eliminate the state of fear.

Experts said demand for property in Abu Dhabi has remained strong as it exceeded 20,000 units last year while it is expected to peak at 70,000 units in the next three years.
Around 50,000 units are expected to be delivered and this will keep demand very high.

Click to

What you will pay this winter for heating

By Michael Boshnack

This is what you can expect to pay for heating your house or apartment this winter so plan accordingly.

"If you use natural gas, you will pay, on average, $1,010 this winter -- $155 more than last year, an 18 percent increase.

If you stay warm using heating oil, you'll need to come up with approximately $2,388 this winter -- an additional $449 over last year, up 23 percent from a year ago.

If you have a propane system, expect to pay about $1,861, or $188 more this winter, up 11 percent from last year.

If you depend on electricity to run your heating system, the EIA predicts that you'll pay $947 this winter, $89 more than last year, up 10 percent. "

To read more click on this link below:'Scorching'-Winter-Heat-Bills

Where and How Can a Buyer Get a Deal and What Can Sellers do to Get the Best Deal for Themselves

By Michael Boshnack

I bet you would be surprised to hear that one of the most unaffected real estate markets by the economic downturn is not Los Angeles, Boston or New York, but Syracuse. Don’t get to excited that doesn’t mean the demand is necessarily increasing for Syracuse real estate, what it means is that prices in Syracuse never went up like the rest of the country in the early 2000s, thus they did not have much room to go down. This has also been the case for Pittsburgh, Buffalo, Little Rock and El Paso. Major cities like not Los Angeles, Boston and New York have been the “strongest” meaning that they rode the bubble a few years ago and with respect to the rest of the nation their prices have fallen the least.

So with all of these price changes throughout the country how good of a deal is out there? “For many people who once only dreamed of a $1 million home, today a $500,000 home is looking pretty good”. (Gopal) Originally the economic downturn affected mostly lower class homes as the subprime mortgage crisis effected this socioeconomic class. As the hurting has spread throughout the country many highly paid workers have been laid off by major corporations. This has opened up the market for cheap luxury homes for two reasons. One, many of these types of people are looking to sell their homes to avoid foreclosure even if the value of their house is less then the outstanding loan amount, and secondly this is not a viable option for everyone so many people with luxury homes are forced to foreclose their homes.

So what can you do to help increase your homes value in a time when people are looking for discounts? Kelli B. Grant says there are five important things to consider.
1. Paint, a little paint job can go a long way in the eyes of the buyer
2. Basic Maintenance, a paint job will be overlooked if the sinks do not work
3. Energy efficient upgrades, this is huge for homebuyers as the upgrades are inevitable anyway.
4. Install new fixtures, this will bring an updated look to your home
5. Landscaping, help make that good first impression


Tuesday, January 27, 2009

The answer to unreasonable Mortgages

By Sarah Horner

Over the past couple of years, yes, it has turned from months to years, the real estate market, like the rest of today’s economy has been facing some hard times. With the recession that has befallen the United States, new heights in unemployment and lay-offs, many people are struggling to pay their mortgages. The question on everyone’s mind is, what is going to happen next?

President Barack Obama recently took office and has a number of plans in mind to stimulate the economy, but what is the best strategy in order to fix this mortgage issue. An article from entitled, “Fight building over judges redoing mortgages,” discusses one viable option.

One plan that has been under discussion lately, and has the backing of president Obama is to allow these homeowners to declare bankruptcy and let judges dictate new, more manageable mortgage terms. This is a nice solution for the people paying the mortgages, however lenders are disagreeing. The article from MSNBC, argues that in the end, this would only lead to higher interest and bigger down payments for new homebuyers.

It is difficult to know what the best option for dealing with such a large-scale problem such as this might be. However, something must be done and it must be done soon. It will be interesting to see what plan of action Obama takes in the next few months.


Rich and Famous = Poor and Homeless

By David Norton

The financial news over the past year or so has been daunting to say the least. Day after day we turn on CNBC (or whatever news source) and see red across the board, almost unanimously throughout the worlds markets. In addition, unemployment is at 7.2%, our financial system is painfully crumbling in front of our eyes, and those hundred year old American conglomerates are begging for handouts. But even through all of this, some still say things aren't that bad.

Being a finance major looking for a job, I see the difficult times as a setback. However, I'm in no position to complain as I'm not the unemployed banker with kids and a mortgage. Even Ivy league MBA graduates are getting laid off in this environment as we see those qualified and once wealthy individuals being forced to tighten their belts. It seems as though no one is "recession safe" with the uncertainty of today's markets.

Usually economic downturns do not affect the upper echelon of American society, but in this economic state, their fall is quite evident.

New York City's high society playground, the Hamptons, has seen a downturn with staggering numbers. Just last year, average home prices fell from $800,000 to $690,000 or a 14% loss in value. Sales of homes dropped 41% and existing inventory rose 19%. Apparently those recession proof individuals with high net worth are fallible after all.

As real estate sales struggle throughout the country, the Hamptons proves to be no exception. For investors looking to turn a profit, this could be a time to buy says some experts. Unfortunately, no one has the available capital, or the nerve to take a chance in this high end market.

The Real Estate Market Turnaround

Real Estate Markets Most Likely To Rebound
It's tough all over, but some say these 10 cities have the best--and worst--chances for speedy recoveries. 

By David Norton

Monday, January 26, 2009

What are Subprime Mortgages?

By Jin Zheng

Subprime mortgages are loans given to individuals with bad credit. For the first couple of years, the interest rates will be low but after that, the interest rate gets raised to a higher percentage. Financial institutions began to use these subprime mortgage loans as financial products and manipulated its value to convince investors to invest it in their pension funds and hedge funds.

The financial product compiled of subprime mortgage loans follow the idea of asset-backed securities. The way it works is that home mortgages were grouped together into one package that collects individual mortgage payments. The money will used to pay investors a coupon on the investment. This creates asset-backed securities with the homes that individual own being collateral. Credit rating agencies gave these securities 'AAA' and 'A+’ ratings, informing investors that it is safe to invest in these asset-backed securities. This became so profitable that mortgage lenders began to overlook basic qualifications for mortgages such as proof of income and down payment. The fact that the real estate market was booming only encouraged this to frequently occur because the value of real estate was increasing at a rapid rate.

As the value of the homes kept going up, the average American’s income stayed the same therefore it became too expensive for them to afford the high prices. This led to people defaulting on their mortgage payments. As more people default on their mortgage payments, it increased the supply of available houses on the market. The over supply and under demand of housing caused housing prices to drop.

Soon, mortgage companies began to file for bankruptcy because individuals and big financial institutions who brought the AAA rated mortgage securities thought that these securities were equivalent to putting money into saving accounts. Banks demanded cash from financial institutions. This caused the institutions to sell stocks and bonds to raise capital. This resulted in the decline of the stock market as the pressure to sell was increasing. The risk of the securities came out and its value decreased substantially causing investors and financial institutions, such as Lehman Brothers, to lose a lot of money and end up filing for bankruptcy.

Foreclosures increased because the mortgages were pooled together into securities, sold and resold to investors. It became difficult to find out who owned the mortgages so it was difficult to prevent the foreclosures from occurring. As a result, banks were unable to work with individuals to derive at a method for them to pay back the loans.

New rules for Fannie and Freddie

By Sarah Horner

This article presented by, discusses some of the new rules and regulations Fannie Mae and Freddie Mac will have to follow. The article discusses the issues that these two companies have faced in the past months as well as where they are headed.
An excerpt from the article details what the companies have faced, "But as the mortgage crisis unfolded over the past two years, the federal government has leaned more heavily on Fannie and Freddie to keep the housing market afloat. With investors shying away from buying mortgage-backed securities, the two companies are essentially the only players in the arena nowadays. Regulators lifted the portfolio caps last March.
Fannie and Freddie, however, continue to suffer as delinquencies rise. On Friday, Freddie announced it would ask the U.S. Treasury for up to $35 billion more in assistance as it anticipates losses in its fourth-quarter results. The company has already drawn down $13.8 billion of the $100 billion in federal funds made available to it when it was placed into conservatorship in September." To learn about the upcoming changes these companies are facing click here.

Sunday, January 25, 2009

Flood of foreclosures

By: Xavier Guerrero

The United States is currently facing many problems: the sub prime problem, mortgaging problems, and as of late, one problem has been underestimated and under measured: Foreclosures. In 2008, banks took back around 860,000 homes, which was more than twice than 2007, and the number of homes that are currently filing for foreclosure has hit a high of 3.1 million. This flood of foreclosures may be positive for those who have taken advantage of the current housing prices for their personal benefits, but the amount of houses under bank possessions only helps to increment the problem of there being more supply than demand in the housing market. To worsen the situation, new reports are informing that one third of the houses that are filing for foreclosures aren’t listed in foreclosure databases. In conclusion, the housing market will only see a greater supply of houses being foreclosured, which will inevitably lower the price of the other houses already owned by banks, not helping to stimulate the economy and only creating a larger deficit, and since banks are being slow at listing the repossessed homes in their databases, the whole scope of the problem will only be able to be seen entirely in the grim future that is to come for the housing market.

For more information on the problem of delay time on houses appearing in databases, click on the link:

Saturday, January 24, 2009

He saw the Housing Bubble Coming

Posted by: Liwin Troy Lee

Some forecasters were prescient; financial leaders weren't.

The current economic crisis is raising many legitimate questions about the failure of economists and financial analysts to foresee the housing bubble and warn of its collapse.

There were, in fact, many warnings dating back more than seven years--but in the euphoria of rising home prices, no one listened. As time went by and no crash occurred, many of those doing the warning lost credibility or decided that perhaps they were wrong and moved on to other issues.

Click here for more

Wednesday, January 14, 2009

The Housing Bubble Explained

John Smith

Last week, President-elect Barack Obama's "Yes We Can" slogan became, "Maybe We Can," when it comes to fixing the economy. That seed of doubt should force the incoming president to re-evaluate his economic stimulus package before pushing it through Congress.
The Obama stimulus package reads like a political compromise giving Republicans and Democrats the two things each holds most dear: tax cuts and spending increases. The rest looks like a retread of campaign policy papers repackaged as a boost to the economy. After all, anything the government does will be good for the economy, some believe.

Suze Orman Talks about Personal Finance on CNN Money