September 2016

Thus Summer fun is over. School is back is session.

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What is new in the Real Estate world?

“Home Prices Are Down, Yet Existing Home Sales Are Slumping” says, reflecting July 2016 sales data.

Sales volume fell 6.7% annually comparing July 2016 vs. 2015. The price of a median existing home was down slightly, 1.4%, from all-time high registered in June. Seasonally, prices peak in June and slow-down in July / August. Nationally, Q2 sales prices were up 5.6% over the previous year. Sales volume has slowed down, but prices have continued to appreciate around historic averages. Most of the appreciation came from the West Coast, Oregon topped the list at 11.7%, Washington 10.3%, Colorado 10.2%, Nevada 9.6%. On the East Coast, Florida has done the best at 10%.

Mortgage affordability is lingering near historic best. Housing demand is slowing down seasonally as the school year has started. However, somewhat slow sales over the Summer should provide carry over demand into the Fall. Election year uncertainty is impacting the high-end housing market. That is one segment of the residential housing market that is showing signs of the weakness. This election cycle is particularly unsettling. Both major party candidates have very heavy unfavorable ratings. The country is bracing for the elections where we get to choose “lesser of the two evils”. Most people don’t defer their house buying decisions based on election results, but there is definitely a degree of concern.

What is the Worst Real Estate Investment you can make?

Timeshare(s). Most deals are overprices “scams”, with pushy heavily commissioned sales people. The moment you purchase it, the value of your investment drops 50% or more. Many of these investments are highly illiquid or liquidity costs you a fortune.

There are a few other high risk investments that can become really bad investments unless very well understood and managed:

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  • Negative Cash-flow Properties. These could be “Gem in the rough” if you know what you are doing, but it might take you years to get the value out. Few examples: Luxury high-end properties make bad rentals, typically. Heavily distressed properties often sell cheap, but the amount of work to re-develop them might be much more than one understands.
  • Development or re-development deals. These could look to be very lucrative on the surface, but there are a lot of risks associated with them. Leveraged deals could go south quickly, and promised profits could turn into massive losses quickly.
  • Deals with partners that don’t perform. “Choose your business partners carefully”, says an old-saying. The same is true in real estate. Your partners could run out of money, or change their mind, or just stop performing and leaving you with a big headache to deal with.

Kind regards,
Mike Zlotnik
TF Management Group, LLC

Recent Deals Examples

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  • Florida
  • Purchase Price $110,000
  • After repair value $170,000
  • Loan Amount $125,000
  • Funded September 6, 2016

Why We Say Won’t (Instead of Willn’t)

Contractions in English are obvious: they are = they’re; is not = isn’t. Put two words together and shorten. What could be easier? But that isn’t the case for “will not” which becomes “won’t” instead of “willn’t.”

pic-3Why does “will” change to “wo”?

In Old English there were two forms of the verb willan (to wish or will)…wil- in the present tense and wold- in the past.

Over the centuries, “will” varied as wulle, wole, wool, welle, wel, wile, wyll, ull, and ool.

But there was less variation in the contracted negative. The preferred form was wonnot, from “woll not,” and sometimes the expected willn’t. In the end, “will” became our present tense, but “wonnot” stuck as the negative, and contracted further to “won’t.”

Free Consumer Report

Self-Staging Secrets—to Use whether You’re Selling or Not

After staging, home sellers often say, “My home looks so nice now, I wish I had staged it when I was still living in it.” Why not?
This report has some interesting pointers that science-based stagers recommend. If you’re selling, you can use them to get a better offer. But if you’re not selling, you can use them now and enjoy the fruits of your labor while still living in your home.

“Dress shabbily and they remember the dress; dress impeccably and they remember the woman.” ~ Coco Chanel

2017 Home Prices Will Stabilize, Fall, or Rise, Depending on Who You Ask

Depending on which economist you listen to, the 2017 real estate market is either heading for another recession, flattening, or steadily rising.

Even though the advice is contradictory, we can use it to be better-armed real estate consumers by looking beyond the conclusions to the indicators being used:

According to some analysts, incomes are not rising at the same pace as real estate prices. Eventually (2017), this will cause downward pressure on prices. The caveat is that if businesses invest more in growth, we could see greater employment and higher wages, which would keep real estate prices pitched upward.

Worldwide, interest rates are predicted to rise, which could bring affordability crashing down. If that happens (in 2017), prices will start to fall. The caveat here is that if interest rates rise incrementally along with rising employment and wages, the rates themselves won’t have a huge impact. House prices would remain stable, possibly growing very slowly.

A glut of people who had been holding back, living at home, waiting for the right moment to buy has now mostly cleared. That means demand may drop off (by 2017), which could bring prices down.

A drop in demand, combined with higher rates and lower wages, could cause home prices to fall. It’s for this combined reason that most 2017 predictions are that the housing market will slow or fall.

As with all predictions, variables can change the outcomes. For instance, local demographics can result in the opposite effect, actually raising values in some area.

Story: The Fly

On a particular afternoon as I was visiting my elderly aunt, a fly landed in my tea. I must have registered a look on my face, because immediately my attentive aunt said, “What’s wrong?”
“It’s nothing,” I said, not wanting to make her uncomfortable. She took great pride in the cleanliness of her home, and I felt it would embarrass her. So I thought I’d just find a discreet moment to empty my tea in the kitchen.

But my aunt was not naive, and she prompted me. “I can see that something is wrong.”

“Oh, it’s nothing,” I said, laughing lightly to soften the situation. “Just a fly landed in my tea.”

“Oh, my,” she said.

“It’s no problem,” I assured her, putting my cup down.

But she rose and peered inside. “Oh, dear,” she said, shaking her head. I began to be embarrassed for her.

She stood up and grabbed my cup. “I’ll take care of it and be right back.” She took my cup to the kitchen, and returned after several minutes. I assumed she was making a new cup, but when she came back, she was empty handed. I raised my eyebrows questioningly, wondering about the tea.

Seeing my look, she sat down and patted me reassuringly on the knee, “He’ll be all right, dear. I got him dried out and he flew away.”

Google Blows $1 Billion, Just Playing Around

pic-5In just one financial quarter this year, Google “wasted” close to a billion dollars. But they weren’t spending it on new search algorithms. Instead, parent company, Alphabet, was spending it on “moonshot” ideas that may or may not pay off in the future.

The futuristic projects include seawater gas, internet-beaming balloons, and solar-powered contact lenses. According to Astro Teller, head of Google X labs (great name!), “We try to steer X to be ‘responsibly irresponsible’ as we develop new products.”

In this way, Alphabet is following in the footsteps of old-time technology companies who used to devote significant budget to new and exploratory ideas, not simply incremental ideas that would make them more money in the short term, as many companies do today.

Those efforts in the past played a role in creating some of the 20th century’s most significant innovations. For instance, Bell Labs invented the transistor. And Xerox pioneered the graphical user interface (GUI) that allows us to navigate our computers visually, rather than typing in coded commands.

Just for Fun: How Fast Can I Learn?

A martial arts student went to his teacher and declared that he wanted to learn as fast as possible. He asked the teacher how long it would take to become a master. The teacher replied: “Ten years.”

But the student was impatient and dissatisfied with the teacher’s answer. “I want to go faster than that. If I work very hard, practice 10 hours or more per day, how long will it take me then?”
The teacher replied: “Twenty years.”

The student bowed and said, “Then let’s go at your pace, master.”

Help for Slowing Alzheimer’s

Scientists searching for causes of and cures for Alzheimer’s disease may have discovered a source of protection. A Scandinavian study followed 271 people ages 65-79 for seven years. They periodically tested blood levels for a marker of vitamin B12, as well as an amino acid called homocysteine.

At the beginning of the study, none of the participants showed signs of dementia. Over the following seven years, 17 of the 271 participants were diagnosed with Alzheimer’s. The researchers found that study subjects with more homocysteine had a 16% higher risk of developing the disease, while those with more B12 (which is associated with lower levels of homocysteine) had a 2% reduced risk of Alzheimer’s.

The indications seem to support the use of vitamin B12 in slowing the onset of Alzheimer’s. Vitamin B12 can be found in eggs, fish, poultry, and other meats, and is best consumed through a balanced diet, rather than through
vitamin supplements.

My Advice

“Am I approved or only pre-approved?”

In the past (before 2006), borrowers could make offers on houses with nothing more than a note from their lender stating they’ve been pre-qualified. That meant the lender spoke to them and thought they were a pretty good bet. Later, lenders began to pre-approve borrowers. That meant they’d gone beyond a friendly chat and actually pulled the buyer’s credit report and looked at their loan application. But a pre-approval was still just another way to say that someone looked like a pretty good bet.

Fast forward to today, and many borrowers are being encouraged to be fully approved before going house-hunting. A full approval means that the lender has already sent documentation (tax returns, etc.) to the underwriting institution, and has confirmed that a buyer will get the loan…as long as nothing changes at the last minute and they can find a house. The real advantage to the borrower is that being fully approved makes them almost as good as a cash buyer.

Call me for the name of a mortgage advisor who will help you get your approval letter in hand.