Market Update

What is inflation?  Many economists feel that it is a hidden tax.  The best way to pay back a deficit is to make the value of the dollar in the future higher than the dollar is now.  This will make paying the amount back cheaper since your money is worth 20-30% more than present value. The rise in the value of the dollar by tightening the amount printed in circulation makes the value higher, thus raising not only the cost of that dollar, but all things associated with it like all goods produced.  This protects any Congress, who see rising costs, rather than rising taxes, protects them from liability.  They can say it is the fault of business, rather than something they may have been a part of.   Commodities, which are natural resources, do not typically fall into this category since they are not artificial.  Rather their value is based on what is available, rather than what humans can create.   Oil is different however, since the price of reserves is tied to the value of the U.S. Dollar.  When our monetary value falls, in relation to other currencies and oil demand around the world, the value of oil in barrels goes up.   Much of this is speculation, based on world demand, environmental factors such as weather, natural and unnatural such as the oil spill we are dealing with as we speak.  Gold has been rising, from 780 in 2008, to almost 1050 this year.  The dollar has risen 23% in just the last six months.  These two generally work inversely with each other.   You can expect one to pull back within the next six months.   Currency and gold have never risen lock step and barrel  with each other this much since the 70’s.   Just like when stocks generally fall in value, bonds benefit, and vice versa.   The debt crisis in Europe, has reminded the Global community that America is still the best game in town.  This would be the only true argument for why the dollar has been rising in value.  Gold is and has been seen as a hedge when paper currency is risky.   Out of control deficits, and lackluster economic growth to keep up with both a rising world population and aging population in the Western world, are what will drive inflation for the next 20 years.   A fear of limited resources, such as oil, copper, and or corn, are what drives up commodity prices.   As for businesses, many are choosing to take their profits now due to a perception tax rates will rise by the end of the calendar year.   This is by no means bad news.  Any profits shown, regardless of the motivation, revitalizes confidence by investors and small businesses, and hopefully lending institutions. 

        Remember when your parents told you, things were a lot less expensive back then? Well they were, and they were not.  Some things in life have gotten more expensive, such as a car, and a house.  That has more to do with the rise in the ability  of financing the cost (credit) and hence leverage, which is what drives up prices. Material and labor costs also play a role.  When all costs are tied to down payment and collateral brought to the table, the prices remain very low.  As we turned our hedging away from gold to interest rates, which began in the 30's, and finished up in the 70's, we saw a dramatic rise in prices for homes, cars, education, and health care.   We went from tying our money to a real asset like gold, to a real debt like interest rates, which were controlled not by environmental and geological factors, but rather by human money mechanics.   From 1900-1965, the average cost of a home went from 2000 dollars in many areas to about 6000.   From 1970 to 2005, that number went from 7000 to almost 275000!  If you were in California, that number went from 11000 to 480000!  That translates to a national increase of almost 4000%, in 35 years, as opposed to a 300% increase in the 65 years prior.   There are other factors that can offset like the rise in personal income, and the availability of a new source of capital and: credit.  In 1980, consumer credit was just over 17 billion, and by 1999; the number was over 1.3 trillion dollars.   This now became a new source of down payment for everything, and offset a flattening of income in many sectors.   Then there is the true question, is it that things are more expensive or do we have more expenses?   Cell phones, multiple vehicles, day care, computer, video games, cable, boats, golf, and other items that either did not exist when your parents were growing up or where once only available to the wealthiest.  These luxuries are now considered necessities and are now available to the middle class.   Most people I know who own a boat, a car, a snowmobile, and a four wheeler are not rich.  Our perception of what rich is different as well.   If you have to work to make money, you are not rich.   If your  assets and income exceed your debts, now that is another story .   If you can retire today and live comfortably, and own a system, rather than being owned by a business, then you are that 2% people strive for.

     Here is the final dilemma; we are in a debt problem.   Right now 85% of the nation's high income and tax payers are baby boomers (1946-1964) who are at or close to their absolute peak in earning and paying most of our income taxes.  47% of people did not pay taxes last year either through deductions or credits.  20% is the real underemployed number when you count part-timers and self employed who went out of business. As the first baby-boomer just hit 65 this year, what will happen when they all stop working and begin their spending/retirement phase in the next 20 years?   We are already in a debt crisis with them working, what happens when they decide it is time to start living?   This is why your job as a real estate professional, attorney, tax and financial advisor is so important.   Handling the issues these people and their parents, most of whom are still around and deciding how to divide their estate will all need your help.  

Short sales, which last month surpassed foreclosures in percentage of total sales for the first time since the crash in July 07, How versed would you say you or your business contacts are in this arena?   What if I told you that many economists predict 50% of all sales will be short sales within five years?   In Illinois, where the average turn time to take back a home is 2.1 years, this presents both a challenge and an opportunity for those who use that slow process to get both a favorable term for the seller who is looking avoid a foreclosure on their record, and a buyer who wants a good price in a good neighborhood,, but prefers a walk in ready to move.  For attorneys, especially those that do or know bankruptcy attorneys, this is time for you to shine.   If you are a banker or estate attorney, tax preparer, and or financial advisor, are you doing reverse mortgages? 73% of homes owned by people 65 or older are paid off.   The majority are equity rich and cash strapped.   They are depending on social security (insolvent in 10 years), and or pension (70% underfunded), which means they need your help.   There is currently is no estate tax (yet to be renewed as of Dec. 2009), and 91% of investment clients say they are unhappy with their advisor.   Most say the reason is no communication or update on current events.   As for short sales, if you are an attorney, look to network with a good real estate professional, who see the end game rather than the hourly billing you are accustomed to.  I say this with the upmost respect, you are trained to think hourly, these cases can take months and are not costs effective.  Having a good realtor on the other hand, who looks at the transaction from a closing commission basis makes them more effective from a patience/mindset perception.

     As for mortgage professionals, rates have remained low.   The issues with Europe and sluggish retail sales here have made bonds a safe haven.   Pay attention to municipal bonds, which have no direct affect on treasuries but are linked in that they have the second highest credit rating.  This is due to the ability of the issuer to raise taxes, yet not print money.  Any bond defaults presents a pressure for government bonds, since bailouts become a concern.  Some states, and many cities, are facing receivership and bankruptcy respectively.   Illinois, California, New York, are three to look out for.   If the U.S. was to bail out California that would be the equivalent of Europe having to bail out France (not Germany, since they are the equivalent of the U.S. government for the Euro. )   Fannie and Freddie recently became delisted in the stock exchanges for both common and preferred.  What does this mean?  Maybe they are becoming 100% government owned, and thus would no longer need to be traded publicly.  This could lower the spread between 10 year treasury bonds and Fannie Mae bonds, which currently are at 1-2 points.  This would translate to a lower rate when yields are at 3-3.5.  An example would be a 3.5 yield translating to a 4.0 coupon for Fannie.   which would mean on conforming would have  par pricing at 4.4.5% for you.  This could also mean Fannie and Freddie no longer wish to disclose the amount of funding they are getting from the government.  For many lenders,,  85% cash out with private MI will be available this year for correspondents,  USDA got their funding,  jumbo reverse is back in many states,  float down are being offered, and some lenders are now offering Fannie Mae Home Path and portfolio, which care less about the amount of homes owned. With all the changes for FHA and spot approvals, Conforming Condo guidelines are now back to 95 with private MI.  The new NMLS rules make it much more expensive and time consuming just to get licensed.  Many will have a tough decision to make,   either your a full-time originator or you will  need to seek other employment.  This will lessen the amount of loan officers,  but will increase the quality of business sent in, which will reduce turn times.   These are all good signs of a slow climb up.   Get ready for the ride, good luck!


 Ron Granado

Account Executive                                                              

Plymouth Title Guaranty                                        

C) 708-476-3142 

O) 630-300-3900

F)  630-300-3901 

06/23,2010 Posted to Illinois Title Insurance , Title Insurance , real estate title insurance , realestateloans.com , real estate loans home loans

Comments (0)


Poor Public Administration is Ruining the Global Economy

The European Union is debating how much they are willing to pay when it comes to bailing out five nations (Spain, Greece, Italy, Ireland, and Portugal).  Greece has a population of roughly 10 million people with a price tag of 140 billion, add another 121 million in population from four other nations and do the Math.  That is 1.6 trillion Euros to start.  What makes it challenging is when you have a membership, where everyone benefits and are required to follow a set of rules, yet still have their own monetary and fiscal policy, you have a recipe for problems.  The IMF, which American taxpayers fund 21% of the bill, will be adding to the bailout for Greece, and other nations that may soon follow.  What this means is for now the bond market in the states has strengthened greatly, as the U.S.  is by the far the best game in town.  The dollar has been beating the Euro, and when you add inflation there, our purchasing power is still much higher by comparison.  What is ironic, and I say this not to take sides, is the unique similarity between Greece and Chicago.   They have unfunded pensions and salaries they cannot sustain.  They have a cash economy from small businesses they cannot tax.  They have an aging population taking out faster than the replacements are putting in.  They have sold off their money  making entities to Germany like their tolls, their parking meters, and even the revenue rights to their disastrous Olympic festival, which they split the bill but took all the loss in 2004.   Chicago was all in to get the same festival that pushed Greece’s  debt spiral over the edge.  We need to look at these issues other nations are facing and learn from their mistakes, rather than wait to make our own and reflect. 

 

                Europe is required to import the vast majority of the resources they need to survive and strive.  We do not have this issue here, and never will unless we cut ourselves off from our own supplies.  Asia, China and Japan specifically, are the biggest competitors to the U.S., with Russia potentially being a dark horse in the race.  What will the economy look like in 2011 and beyond?  You can expect higher taxes, program cuts, across the board ranging from medical, public, and even projects not already allocated or paid for.  You can also expect to see an inward shift back to the states for capital investment.   I say this to remind people that business may not necessarily come to the Midwest.   The South east and Plains look much more favorable than high cost states like the whole upper east coast, California, or Illinois.  What it will do however, it stabilize the real estate markets and make the problem more localized, rather than the nationwide crisis we have been dealing with for almost three years.   Once prices are aligned with inventory, income, and the perception of limited space, values will rise.  As they do, banks will lend, they want to make money.  There is an estimated 1.2 trillion in excess reserves by private investors just sitting in the bank or  somewhere else collecting dust.  They are waiting some sense of where tax rates are going to be, regulations are going to be, and then be able to adapt to real expected returns.   I am all for rules in the game.  What I do not want is to have to play against the referees for victory.   Even in this economy, new capital is being expended in many sectors for new business inventories.   Bonus structures are now becoming the norm for every job title not in the public sector.   Rates, and programs look to be much more aggressive in the following areas:   USDA has now added funding for loans.  Continue to push this product as the population migrates into more rural areas for cheaper living.  Suburban Sprawl is next.   203k loans.   When you have a foreclosure, some banks are more eager to expect offers when they know an “as is” property has a 203k contract.   Reverse mortgages.  With 30% of the population over the age of 65, and over 80% of to transfer within the next 15 years, prepare to be bombarded with business for estate planning, tax deferral, annuity and insurance products, and reverse mortgages.   Good luck!

 

Follow us on Twitter! www.twitter.com/PlymouthTitle

Ron Granado

Account Executive                                                              

Plymouth Title Guaranty                                        

C) 708-476-3142 

O) 630-300-3900

F)  630-300-3901 

05/13,2010 Posted to Illinois Title Insurance , Title Insurance , real estate title insurance , realestateloans.com , real estate loans home loans

Comments (0)


Plymouth Title Market Update

The economy has been dealt another blow:  The job forecast has seen little light at the end of the tunnel for at the least the short term horizon.  Although unemployment has dropped to a six month low, many have given up altogether looking for work, and have dropped off the unemployment figure.  You also have to take into account the people who have run out of unemployment benefits altogether. Furthermore many companies have decided it not the best time to hire.  Some feel the sales are not stable enough to warrant an expansion which may later result in layoffs and unemployment insurance if business slows in the not-too-distant future.  Some others feel that taxes, inflation, and regulations will make business so expensive that the thought of hiring lasts as long as that planned European vacation you have been talking about for ten years but never get around to do.  Then there is the permanent elimination of jobs due to automation, outsourcing, and over-extension and efficiency of the current workforce.  Remember firing is the last thing small to medium sized companies do when business slows.  The reverse is also true;  Hiring is the last thing companies do when business activity resumes and stabilizes.  In a bad market,  business has picked up for BK's, foreclosures, payday loans, collection agencies, loss mitigation and modification companies, rehab companies for REO resales, and accountants and financial professionals who along with estate and corporate attorneys seek to advise clients on how to defer, offshore, minimize costs, and maximize their ability to protect their assets.  In any society, its not just what you make, but what you keep.  Giving handouts to people on the side of the road is one thing, giving them to the city, the state and Uncle Sam who are all in line trying shake you down is another.  Taxes, fees, paperwork, waiting periods, and thin margins have everyone taking pay cuts and wondering when happy days will be here again.  As baby boomers , who make up the highest percentage of population in any 15 years group up to 100, begin to near their withdrawal phase, many opportunities will begin to open to those that get ahead of the game.  Our economy is not nearing the beginning of the end, rather the end of the beginning. Here is why we will rebound, and why all those nations that are looking at emerging markets will come running back to the U.S sooner than you think.  
 
    Resources.  The top ten economies in the World have eight located in Europe and Asia, and only two in the Western Hemisphere.  In two nations alone, India and China over 43% of the World's population reside, while making up less than 7% of the land mass.  The top three nations in regards to resources are as follows;  Brazil, U.S., and Canada.  Everything from food, to fuel, to  raw materials can be found on our side of the earth, and someday will put us in a trading advantage.  Gold and money are great, food and fuel is better. Population density is very small here. In the U.S., we have less than 90 people per square mile.  In Canada, that number is closer to 9. Less than 8% of the land here has even been touched.  You find that hard to grasp, especially when you live in a big city.   Look at any of the top ten large states here, and you will find nothing but space once you get away from the ocean.  At some point, the resources we have been importing will put us in a position down the road to become the exporter, since we have been saving our fuel, food, and raw materials for a rainy day.   Europe (except Germany), Japan, even Russia have to import alot of food,especially when you look at the population densities there being much higher, and the terrain less favorable.  We will be in a position to call the shots, and, natural gas, nuclear, hydro-electric , geo-thermal, and bio-mass are all forms of energy we have access to and can turn on at any time. 
 
  Technology.  You name it, from engineering, to IT to  anything remotely related to science still comes from here.   That tall building in Dubai, which is a full 1000 feet higher than the Sears Tower, was the work of an architectural group from Chicago.  The one in Taipei(2nd Tallest),  is from Chicago as well.  We may have issues in our school system, where our average test scores fall short from Japan, Singapore, and South Korea, but our top ten percent still have the highest test scores of any school children in the world.   We push excellence here and it means that some will rise to the top,  others fall to the bottom, and most will stay in the middle.  Having an average child does not mean he or she will not do extraordinary things. 
   
    Education.  From private schools, to public ones, to universities, to specialized training, higher learning here is second to none.  The opportunities to get secondary education are there for those that choose to walk through the doors that open to them.  Grants, and scholarships are always available, even in this economy. Too often many do little research to see what they qualify for, and as a result never take that first step. For those that do however, the quality is higher, and even though college degrees have become very saturated, make no mistake, showing an employer you can finish school or training in a trade of labor exemplifies your commitment to attaining long term goals.
   
    Entrepreneurs. This includes competition as well. They say we make bad employees.  In a recent poll among American businesses, we actually ranked below the top ten when it comes to working for others in  regards to loyalty, and efficiency. I disagree with this notion because our average hours worked is still 152 hours more than the next industrialized nation, Japan.  Now when it comes to being the employer, here is where we have the edge.  Competition and the ability to own one's ideas and time is stressed more here than anywhere else, and the ideas that come out of here from Americans every single day never ceases to amaze me.   You show me something as arbitrary as paperclips, and I'll show you someone making millions doing it.  Competition is why we have the things we have.  When companies fail, those that can make the cut, which is less than 2% after 5 years, have been able to budget, market, and operate in a manner that kept them going when their competitors could not.  The result is a better product and service to the consumer.  You eliminate that, the quality, the service, and usually the product itself goes away. 
 
    The Dollar is still the best game in town.  Yes, we have a high debt in relation to GDP (10.5%).  Having said that, our currency is still the highest in purchasing power overall.  I know some will say the Euro is worth more, and it is in trading exchange power overseas, but this comes in handy only when they are spending that money outside of Europe.  Our lower dollar has decreased our trade deficit spread, and as we speak four nations (Spain, Portugal, Italy, Greece,) are on the verge of BK. This could threaten to bring down the Euro as those nations would have to pull away from the monetary policy of the Euro and all its restrictions and start up their old currency again.  This would reduce the overall reserve and GDP output of the Euro by 20%. Then there is the cost of living in Europe.  Inflation is very high, Food is generally double, clothes are triple, gas is triple, and space is five times more.   This seems to be a major reason why opening a business and getting up from the ground floor can be a daunting task there.  If your not already in, good luck trying to join the club.
 
    Open society.  I wish I did not have to keep repeating this one.  Our constitution is the oldest breathing document in the World still being used as a basis for laws and government in any nation that recognizes borders from her neighbors.  Even in our most heated debates, great points become validated.  Your argument, no matter how strongly you feel about it, is valid only because of someone else's opposite view.  That opposing view creates a balance, a justification of facts and figures, and a moderation in application.  To take that view away, by choice or by force, automatically brings down the credibility of your point.  To force one's views without listening to others no longer makes it a view, rather a law enforced by quiet contempt. In other words, your views are only as justifiable as the ones you argue against.  Through this debate,  better ideas are formed, honesty and integrity is maintained,  and progress continues.
 
Laws.  We are a system of laws.  We would rather let nine guilty people go free than convict one innocent one.  Our laws have protected people's rights, their property, their businesses, their names, even their legacy far after death.   We give more rights to non citizens and illegals than most nations give natural born citizens.  This is a testament to the rights we choose to give humans, and in our worst of times (9-11) we still seek out the ability to give the worst in society their day in court.  These laws will give always businesses and employees time to grow, adapt, and overcome.  Our laws, and those that fight to argue them, help protect the little guys, and the big guy.   Make no mistake, the power is not in the money, but in the control.  As corporate takeover and anti-trust can be dangerous, so can populism.  Both parties need their rights to maintain balance.  You hear this battle cry "give it to the people!"  Companies, no matter how large they are, are made up of people.  To tear them down, just like forgetting to help the man on the street who is starving are both equally as damaging to our economy, and our sense of well-being.  Never apologize for being great.  When you succeed, it lifts us all up, if even for a second.
 
    Charity.  Americans seem to give, not only to themselves, but to anyone around the World who needs the help.  Stop believing the hype that we are hated everywhere, it simply is not true.  I believe in Karma, and the fact that Americans are the first in line to give money, time, their homes, and even their lives, is a testament that when people are given the freedom to be the best that they can be, most will use that success to share it with others.  When money comes from you, rather than a forced deduction on your check, you are much more likely to make sure it is well spent.  We give because deep down inside we are grateful, even in our toughest times.   We know its tough, and we want to see others succeed, mainly because we know it can be done.
 
I apologize for not giving financial facts on this email but sometimes we need to remember the basics, stay positive, and good luck out there!
 
 
 
 
 
Ron Granado
Account Executive                                                              
Plymouth Title Guaranty                                        
C) 708-476-3142 
O) 630-300-3900
F)  630-300-3901 
 
For online ordering, please visit: WWW.PLYMOUTHTITLEINSURANCE.COM
 

02/16,2010 Posted to Illinois Title Insurance , Title Insurance , real estate title insurance , realestateloans.com , real estate loans home loans

Comments (0)


Market Update Plymouth Title

The American economy has already begun to see a rise in both the service and manufacturing sector.   For those that say we don't produce anything anymore, our GDP in the manufacturing side alone was over 4.5 trillion in 2009, which would make it the 4th largest economy in the World behind Japan, China, and Germany just by itself..  Having said that many jobs have been outsourced, mostly in unskilled labor, or automated labor, with the hopes they might some day return.  Once high paying union jobs have now been replaced by lower paying non-union jobs in right to work states with laws that favor employers, rather than employees.  Unfortunately many are still waiting for those jobs to come back to their respective states. The question now remains: what can we as Americans do to in source jobs? One idea is we have to be more competitive and less cumbersome than our European/Asian counterparts when it comes to regulations, taxes, licensing, and overhead.   Regardless of how we want to slice it, we are married financially  to China and Japan.  They own half our debt, we buy half of the products they manufacture.   Some see it as a deal made with the devil, others see it is the best way to keep the peace worldwide, as the now the largest superpowers have each other’s interests at heart.  For those that prefer we keep the jobs here, which I agree with, must first be willing to pay higher prices for goods made in America.  Quality over price is the only way to ensure future jobs stay, otherwise, get used to the layoffs

As for foreclosures, the overall nationwide percentage is at just under 2%.  That number is expected to jump by more than 1-1.1.5% this year as banks now see the time to foreclose on those that have been non-paying for over two years as beneficial and more cost effective than short selling.  I say this to illustrate that short selling still has been proven to save the banks more than 10% more than outright foreclosing.  Over 71% percent of all foreclosures in the last five years occurred in five states (Florida, California, Nevada, Arizona, and Michigan.)  
 

       As 2010 rolls along, you can expect a few things to happen, government programs will be cut, taxes will go up (social security, top rate and medicare tax), and the cost of living will rise, especially in high coststateswith underfunded budgets.  You can also expect a slow shift in population and employment migration to states in the southeast, southwest and plains.   As new job opportunities open, and they will, cities with rising population numbers and growing demands for college graduates will see an influx of transients from larger cities.  For years it was common for a brain drain to occur when smaller towns and cities lost their graduates to larger ones.  The kids would go to college, then instead of moving back to their home town, they would leave for good. An example would be in the 90’s almost half of all Ohio State graduates moved to Chicago for work. Now that trend has seemed to reverse a little.  

            Will new businesses continue to open?  Every month, in Cook County alone, over 7000 businesses open. I ask myself, how could someone open a restaurant here in Chicago?  Don't we have enough food?  Over 150 opened last month alone in the metropolitan area. There is always a risk taker who cares little of what is going on, but rather of what needs to be accomplished.  For every industry destroyed, it will be the job of competition itself to create new ones.  Government has spent all they could, and rather than continue to push further legislation, they would better spend time enforcing the laws we have on the books. One law they could bring back is Glass Steagall, which used to prevent banks and insurance/investment companies from commingling..  The question is when will the stability of the companies that will be affected be strong enough so that they can withstand a forced dissolution? When will these companies be able to conduct business in a more centralized niche format that solely focuses either on savings and loans, or insurance and securities, but not both?  Will energy be the new construction job of 2010 and beyond?  Is Nuclear the way to go?  When will banks stop acting like the people that refuse to use them and start leveraging again? 

        Are you doing buy downs (2-1, 3-2-1)?  This program allows first time buyers to qualify at lower rates for the first couple of years, which as we all know, is the scariest and riskiest time of default for home buyers.  This also allows the seller, whether its a builder, or a private individual to keep the sales price at or near where they want to sell, and they can use the money to buy down the rate, rather than reduce price. Keeping the sales price higher stabilizes the overall real estate environment and brings an uptick that is much needed to our economy. This helps by making the payment more attractive rather than focusing on value.  There is also a tax deduction in doing this on behalf of the seller.  You combine that with the tax credit the buyer gets, up to 8000 for first time, or 6500 for current owner (at least last 5 years), and the purchase market has alot of inventory they can now move.  In 2009 alone 75% of homes bought where either first time buyers or investment and second home purchases.    Bankruptcy filings, although up from 2008, were still way down from their high in 1999 and 2001 when over 2 million were filed each year respectively.   That may have something to do with tougher BK laws limiting how much you can write off in a BK depending on median income and previous BK history.  It may also signal people would rather struggle forever than call it quits and start fresh.  If this is true that may be a positive sign depending on who you ask.

        Reverse mortgages.   There is an estimated 10-15 thousand people a day who will be qualifying  for a reverse over the next ten years without pause.  Yes these programs are expensive, but they fulfill many needs: for one they allow someone who can't sell their current home and who wish to up or downgrade, take care of current liquidity issues.  They will get money upfront if there is enough equity, and they will not have to make a monthly mortgage payment back.  If you are currently in a foreclosure, you can still qualify.   These programs are good for people who solely rely on SS or a small pension, are disabled and need home assisted care.  Reverse also can assist someone who lives in a high cost state where taxes, utility and food costs are rising at a rate faster than their fixed income can adapt to.  This program is great for networking for it gives the estate attorney work to do if no will or trust is set up, it gives the accountant work to do as it addresses any tax issues in estate transfers and gifts to children while still alive. It gives the broker a loan, it can even give a realtor a loan since some reverses can be done on a simultaneous purchase with a reverse at closing.  But most of all, it gives the chance for the parents to live mortgage free and get some income out of their home, which currently pays them nothing. They say when you die, you can’t take it with you.  If an equity loan is what the parents wish to get, remember it is hard to qualify when they are on a fixed income, not to mention prime is at historic lows and will go up, as those types of loans are not fixed.  If they have no high interest rate money market or annuity that keeps up with inflation, that rising payment will be a problem. If the kids are a hassle, their are certain term policies that can address those needs to pay off balance once both parents pass so that qualifying for a new mortgage or selling will not become an immediate concern. The cost is low if there are two people being insured, since the claim only gets paid at the passing of the second insured. The death benefit can pay off any remaining balance, leaving a free and clear property. The heirs have twelve months to do so anyway so long as they ask for an extension after 6 months. 

   

 Commercial real estate, although seeing its bubble just beginning to burst, can present many opportunities for financial professionals.   Banks, especially local ones who did not get any TARP money, have been quietly trying to get commercial paper off their books. These loans are harder to sell on the secondary market, although the returns are much greater, due to the quicker repossession process and higher than market rates and fees charged.  These loans need to be refinanced so that the banks capital reserves become higher, and their outstanding serviced debt can become much lower.  This presents a chance for Refi's, hard money, non-traditional financing, Mez financing, as well as other banks and investors who may see that loan the current servicer does not want to do as a gem.  In the next three years, over 2 trillion in commercial paper will come due.  Vacancy, debt service, and the credit quality of both the business and personal guarantor are looked at with much more stringency than before.  Whereas the property used to be the star of the show, now the current situation presents its own sets of challenges as banks try to figure out the mindset and outcome of the borrower. This is a crystal ball no one has access to.  Having said all that, someone needs to help these people, and you can be that person. Typically owners of these mortgages have higher than average net worth, they are more concerned with monthly cash flow, liquidity, and overall liability protection., rather than with just rates and fees.

    This nation will prevail.  The nature to compete and excel is not just an American quality, it is a human one. Through our daily attempts to succeed, we put ourselves in a position to help others, and through that achievement, whether it is a financial one , or recognition and acceptance from our peers, we all take one step forward.   Make no mistake, blaming others who are doing well does nothing to bring us up, it only drags everyone down.   I have yet to meet someone who has turned down a pay raise, and look at those making it through this tough time  with admiration, and not envy.  This is not measured in dollars, rather it is measured in humility and persistence.   These people learned to live on cash, stuck to the basics, put family and community first.  They bought a home they could afford and lived in.  They invested in things they understood.  They found more than one way to bring in a check.  They never bought more when things were too good, or sold too much when things went bad.  They always saw things in themselves that others may have not seen.  A true game plan is sticking to something despite all the bad things that surround you, and sometimes come at you.  I look at it like driving in this bad winter weather, I may have to drive slower, pay more attention to the road and others around me, avoid my own distractions like a cell phone, radio, texting, even road rage.   I may even take side streets, but regardless of how and when I get there, I find a way to my house.  Find your game plan and stick to it.  If you love or hate your job, do not be ashamed to say it for fear it may bother others who currently are having a hard time finding one.  People need to hear a good story if and when there is one to be told.  Success only becomes believable to most when they can speak to the person going through it first hand. Your life is short, and the opportunities come around more than you think, so keep your eyes open and your mind focused.  Guess what, times will get better, and they will get worse again, so trying to figure out how long the ups and downs last is a waste of time itself.  The best thing you can do is the right thing, the 2nd best is the wrong thing, but the worst you can do is nothing.  Good luck in 2010!


 
Ron Granado
Account Executive                                                              
Plymouth Title Guaranty                                        
C) 708-476-3142 
O) 630-300-3900
F)  630-300-3901 
For online ordering, please visit: WWW.PLYMOUTHTITLEINSURANCE.COM

01/11,2010 Posted to Illinois Title Insurance , Title Insurance , real estate title insurance , realestateloans.com , real estate loans home loans

Comments (0)


Plymouth Title Market Commentary

The state of Illinois has become an example of what is wrong with over-spending on any level..  We are currently operating at a multi-billion dollar deficit, and boy is it growing.  The federal government can print money and tax, the state can only tax.  It is easier to force people out of state then it is to force people out of the country.  Most here have no plans to leave, and why should they? Moving out of Illinois on the other hand, nothing more than a half hour drive. In a move that could force the state to pay an estimated $69 million more per year in interest charges, one of the nation's major financial forecasting agencies downgraded the state's credit rating Tuesday. Two other major bond rating firms also put the state on a credit watch, saying Illinois' precarious financial position should be a caution for investors. The downgrades come as the state is about to nearly double its outstanding debt by selling $10 billion in pension bonds to help pull the state budget out of its $4.8 billion deficit.

.         As far as banks is concerned, there is now pressure form the White House, to push these banks, especially the ones that received TARP help and FDIC assistance to buy other banks, to lend out money in both the business and private sector.  As one bank was quoted; why should we lend and take the risk if we cannot foreclose?  Another one quoted: (we will take a second look at loans we turned down.)

The government still is guaranteeing billions of dollars in bank assets, which along with debt guarantees from the Federal Deposit Insurance Corp., amount to ongoing subsidies that may mask the condition of the financial markets.  We truly don’t know what kind of money is lost and gained, since much of it is deferred to either be a true non-performing asset, or sold off for a profit in the future.   Our road to recovery will take years, especially in states where the highest number of people are underwater and little industry is truly in place.   You have to ask yourself when you buy a house what is the affordability there?   Is the median income in line with the taxes, cost of housing, food, etc.?  In Illinois for instance, 80% can fully qualify for a mortgage a debt to income under 50%.  In California, on the other hand, that number is closer to 28%.  This number has to become more reasonable for the inventory in those states to come down.  Only so many investors can buy all these homes and hold them, some have to buy these and live in them themselves.  Without that high number of owner occ’s, communities suffer, since no one is in it for the long haul. In other words, for a community to be stable, the mentality of the people living there has to be communal, and long term in nature.

 Mortgage rates have seemed to stay low, in large part due to a continue purchasing of guaranteed investments by the US government, who have securitized these loans as Ginnie Maes, then in turn selling them off on the secondary, and thus replenishing the billions in TARP money back into a commercial line of credit.   Inflation, which seems to be on everyone’s mind, seems to be some time away.   Here is why, many nations who compete with our currency on the futures market, still have yet to see their recovery see full steam.  China, relies mainly on the consumption demand of Americans who see their labor as low enough to translate to those cheap products you are currently buying online, in your malls, or in any local department store.  The stock market, which has grown way beyond analysts expectations, seems to be more dependant on speculation rather than true earnings.   Most companies are operating as private equity firms, which means they are slashing everything from inventory to personnel, which although profitable, is putting more and more people out of work.  This is hurting the consumption side of things, which makes up 70% of our economy. Those that are working are overextended, unhappy, and productivity is higher, but may peak at some point.  This is preventing many people from moving and relocating, since they who own homes are waiting for sales to go through.  Their companies are much less reluctant to buy their homes and sell it for them. 

The problem isn't just a soft job market - it's an oversupply of graduates.. In 1973, a bachelor's degree was more of a rarity, since just 47% of high school graduates went on to college. By October 2008, that number had risen to nearly 70%. They're looking for people who can do jobs that can't be outsourced, he says, and graduates who "don't require a lot of hand-holding.   The need for specialized schooling will someday replace the need to just get a college degree.  Those that wish to get into business, or liberal arts, or communications, and marketing, are much better off going to a short term training program, with a certification such as a series license in securities, rather than an ongoing 4-5 year school that has too many general electives, and does more to prolong and delay the work experience rather than supplement it.  If you’re a doctor, an engineer, or anything that puts multiple lives in your hands, please go to school as long as necessary.  On the other hand, if you operate in the gray, and need to fail, in order to succeed, stop studying and start working.  We spend a lot of time talking about big oil, and big insurance, but do little to refer to “big” school.  Colleges and universities have seen their tuitions grow at a rate five times ahead of inflation. The professors are making double what they did twenty years ago, the schools are generating millions more due to sports contracts with TV and merchandising, and yet the average income earned by a college graduate the first year out is 28k. This is coming from a person with a graduate degree who has just applied for a doctorate.  I love education, but it has to involve practice, rather than theoretical ideas never brought to an application format.  Having said all that,  there are many positive signs too look for, and some other reasons why the economy is shifting to put things in perspective for you. 

 The first is there is a new shift or migration back into the south and plains.    States like Tennessee,  Nebraska,  Texas, Utah, and Oklahoma, have seen their populations rise well over 20% in the last five years.  This will continue to increase as seniors look for better weather, lower population density, and lower cost of living as a desirable place to live out their final days. Unemployment in these states are under 7%,  Affordability is at 90%, and foreclosures  are well under 1.5%.  

What is an indicator an economy is growing?  For one new business filings. The next thing to look at, is there a diversity in jobs being created.  There has to be a good mix of blue and white collar jobs, as well as small business filings.   As we all have learned with Detroit, if you have too many eggs in one basket, and you lack competition, no one can be saved.  Protectionism did not work prior to NAFTA, and the question we need to ask ourselves is not how do we bring jobs we lost back.  Working two jobs may be the norm.  The days of great benefits with one company are gone for now.  Hey few have loyalty to the place they work, so why expect them to be loyal to you?  We need to become a resource based economy, we need to in-source jobs.  How can the U.S..  compete in the outside market for employment and business? The first is to rely on itself for resources.    Many of the construction and labor jobs we lost can be made up in energy creation here such as in the nuclear, natural gas, and solar and wind.   We must become more dependant on our own land for natural necessities like food, energy, and basic labor.  

          Offering further signs that the recovery was gaining momentum, a separate report from the Mortgage Bankers Association showed demand for U.S. home loans rose last week to the highest level in about two months.   As inventories drop, prices will stabilize.  A moderation in the rate at which businesses are drawing down inventories contributed to economic growth in the July-September period, the first expansion after four straight quarters of decline. Analysts reckon slower inventory liquidation and restocking will support the economy's recovery in coming quarters.  Much like a diamond, if everyone has one, what is it worth?   When space is limited, and jobs are in high demand, than the price of space will go up.  These prices rise and fall due to the transient nature of the people that occupy them.  The flip side is when suburban areas that have too much space, but rely heavily on schools and access to highways see their prices drop, and people wonder why.  This is in large part due to the lack of commercial influence, you ask yourself, how did prices in such a spacious area get of out control? 

Don’t panic!  Our economy was set to go through a decline.  With overinflated stocks in the 90’s, which had little to no earnings on behalf of the companies they represented, we had an overinflated housing sector with little to no earnings on behalf of the owners of those homes.   Real estate values doubled in ten years, while income only increased by 8%.  Our manufacturing sector, as well as many other jobs in retail, too many jobs in financial services and banking, and too many contractors in real estate, this all made for perfect storm in jobs that may now be permanently eliminated.  You coupled that with the height of the tech boom, and your left with a growing population trying to maintain work in an era where many machines were able to replace them. 

All you can do as a professional is to adapt and overcome.  More millionaires are created in a recession than an upturn.  The reason why is when making money is easy, people become careless.  For this reason, it never lasts.  We take the work, study, and careful financial planning it takes to become financially independent very serious.  Unfortunately in a great market, many treat the money they earn as a lottery ticket.  What percentage of people who win the lottery declare Bankruptcy in five years?  45%! Money not earned means no one has yet to learn.  In a tough market, where credit and money are at a premium, the decisions made by those who invest become more long term, more patient, and more forward thinking.  At this point we stop thinking like hunters and begin farming again.  We also work more honestly, smarter, and take our relationships in business and personal lives more serious.  We also value our time on this earth as it should be, like our ability to live, and not just earn, especially in America, is the true lottery ticket we have all been given.  Have a great holiday and good luck in 2010!

 Ron Granado

Account Executive                                                              

Plymouth Title Guaranty                                        

        C) 708-476-3142 
        O) 630-300-3900
        F)  630-300-3901 
        For online ordering, please visit: WWW.PLYMOUTHTITLEINSURANCE.COM

12/17,2009 Posted to Illinois Title Insurance , Title Insurance , real estate title insurance , realestateloans.com , real estate loans home loans

Comments (0)