CONFUSING TIMES

by Michael Goodman

(August 2009) Last week, Fed Chairman Ben Bernanke was quoted as saying "the prospects for a return to growth in the near term appear good." The stock market has taken off on that "news". We've seen sales activity increasing in the real estate market and even seen small upticks in the month-to-month median prices in many areas. Bidding wars have returned for some properties. All this sounds like good news for those who hope the real estate market has bottomed out and is poised to rise again, right? But is it real?

Much of the positive statistics quoted by government analysts recently have been flawed, at best. While banks are still being closed at a record pace, some banks are reporting huge profits. Much of this is due to accounting changes that took place recently, reducing the need to increase their reserves, not from an increase in business or reduction in operating costs.

The auto industry has clearly been benefitting from the "cash for clunkers" giveaway that is ending today. Because of this, you can't put much stock in their sales figures for the last few weeks. The inventory of real estate properties has also been held down by government intervention in the foreclosure process, taking many properties off the market while they go through the loan modification process, usually to no avail. The only economic measure that seems real right now is the unemployment rate, which is the highest it's been in a very long time (11.9% in California!).

It's tough to get really excited about the prospects for a near-term economic recovery. At least not until we see some positive numbers that actually reflect real positive change. In the short term, we may see a new surge in foreclosures hitting the market, increasing inventory and holding down prices. We may also see an uptick in interest rates related to the massive amount of borrowing being done by the federal government (if all long terms debts of the U.S. government were reported the same way that a large corporation would have to report them, the National Debt of the U.S. is now larger than the GDP of the rest of the world combined!). An increase in interest rates would quickly cancel any recent gains in the housing market, all by itself.

Bottom line, should you try to sell your home right now? No. Not unless you absolutely must sell it. Should you try to buy a home right now? Yes, there is plenty of money available for "first time homebuyers" (which is anybody that hasn't owned a home in their own name in the last three years), interest rates are extremely low, as are prices. This is a very good time to buy a home to live in or to invest in. With prices and interest rates so low, it's a lot easier to generate positive cashflow from rental properties, especially if you buy in the hardest-hit areas. You can collect extra cash now, then sell in a few years when property values have finally gone back up.

(Call us and we'll help you get the most house with the least amount of money.)

"My previous experience with agents who represent auction properties had been that I do all the work and they get the commission. When I heard about Feng Shui Investments I jumped at the opportunity because the commission split sounded like a great deal. I just assumed the agent wouldn't contribute much other than handing me a check at closing but Kendra's agent really surprised me. She was very responsive to my requests working with both the bank and the escrow agency to keep things forward. She even had the foresight to have me apply for an extension of the closing date in order to keep me from being responsible for paying any late fees. I was more optimistic than her because I thought it looked like it was going to close on time and didn't see the point but I listened to her anyway and I'm glad I did because she was right. They did a great job of keeping my money where it belongs, in my pocket!"

Client Jerone Powell, Murrieta, CA