The Charleston Real Estate Search.com

Why now is a good time to buy

If the financial predictions are correct, 2009 will be a tumultuous year for our economy.  Duh! Who doesn’t know that. But here’s what you may not know. Analysts predict that prices will continue to fall slightly but interest rates are slated to increase. 

From my personal analysis and from those who are smarter than me, it’s better for the average buyer to buy before the rates go up.  Let me give you an example. 

You fall in love with a 3 bedroom, 2 bath home in West Ashley, currently priced at $200,000.00. With your good credit (720 and up) you qualify for an interest rate of 5.5%.  On a standard 30-year fixed mortgage (don’t even get me started on Interest Onlys or ARMs) your mortgage would be $1135.58 per month.

When that house price drops 10% as predicted to $180,000.00, the interest rates may be inversely effected and go up at least 1 point to 6.5%, meaning you would be paying $1137.72 for something that’s marketably less equitable.  Sure, maybe it’s only a few dollars a month more, but those few dollars aren’t buying you anything real.  You’re simply giving the mortgage company more profit.

Plus, you have to weigh the risk of waiting.  When houses sit on the market, they have a nasty tendency of still including appliances that break down, need maintenance, etc.  Just like a car, the longer they sit the more deferred maintenance they will experience. 

I”ve gotten a lot of feedback from buyers about waiting out the process.  If you’re doing it to increase your downpayment then by all means go for it.  But if you’re doing it just to get a better deal, think again.  The deal you get won’t be as sweet as it seems.

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2009 Financial Predictions by Money & Market

From Tony Sagami: 2008 has been a very difficult year for investors. And most are eager to put it behind them while hoping for a better 2009. I don’t have a crystal ball. But I believe there are five powerful trends that can destroy or enrich your portfolio next year …

Powerful Trend #1 –
The U.S. Stock Market Is Headed Lower.
A Lot Lower …

I don’t believe we’ve seen the last of the exploding, financial time bombs. What’s more, I expect:

• Real estate prices will continue falling,
• Unemployment will continue rising,
• Our economy will continue contracting, and
• Our stock market will reflect the deterioration of those long-term, systemic economic woes.

The Dow Jones Industrial Average is below 9,000. And I believe the Dow could lose SEVERAL THOUSAND more points before it finally bottoms.

Your opportunity: Selling on strength is my #1 recommendation for 2009. That means taking advantage of rallies to pare back your U.S. stock holdings.

Powerful Trend #2 –
The U.S. Dollar Is Headed Lower.  A Lot Lower …

The cost of bailing out our county’s financial institutions alone will be at least $5 trillion. And that’s just the beginning of the trillions of dollars in loans, grants, guarantees, and other programs being cooked up!

So our politicians have a whole lot more spending to do. Those humongous spending plans, combined with our already swelling budget deficits, make the U.S. look like an irresponsible spendthrift to the rest of the world.

Smart international investors do not want to hold what will become devalued dollars. And one of the best moves you can make is to diversity into non-dollar denominated assets.

Your opportunity: Consider international bonds funds, such as the Prudent Global Income Fund (PSAFX) or the T. Rowe Price International Bond Fund (RPIBX).

Powerful Trend #3 – Interest Rates Are Headed Higher.  A Lot Higher …

Inflation always has been, and always will be, a monetary phenomenon where too many dollars are chasing too few goods.

Our national debt is $10.6 trillion and going up by $3.49 billion a day. That’s $34,723 in debt for each and every U.S. citizen. To pay the interest on this debt and finance even more massive bailout plans, Hank Paulson will order the Treasury Department to crank up its printing presses to an unprecedented speed.

The consequences: At some point in the near future, the flood of newly created dollars is going to send inflation and long-term interest rates to the moon.

Your opportunity: Consider inverse bond funds that actually increase in value when interest rates are rising, such as the Rydex Inverse Gov Long Bond Strategy Inv Fund (RYJUX) or the ProFunds Rising Rates Opportunity Fund (RRPIX).

Powerful Trend #4 –
Commodity Prices, Including Energy, Will Be Higher 12 Months From Now …

I used to spend $100 filling up my full-size SUV. So I appreciate falling energy prices as much as anybody. But I don’t expect low prices to last for long. The growing emerging market economies and the other supply/demand factors that sent oil prices to $150 earlier this year are still in force today. Perhaps not at the previous gangbuster pace, but certainly at a pace that is enough to steadily push commodity prices higher over time.

Your opportunity: The price of natural resource and energy stocks are down – way, way down. And companies with solid, tangible assets will be among the best performing stocks to own in the coming years.

That’s why this is the time to start accumulating shares in commodity kings like Barrick Gold (ABX), Archer Daniels Midland (ADM), CNOOC Ltd. (COE), BHP Billiton (BHP), and Cameco (CCJ).

Powerful Trend #5 –
Asian Markets Are Headed Lower.  But Will Bounce Like A Superball …

I don’t care what part of the world you pick – Europe, North America, South America, or Asia – the short-term outlook is not good. The long-term outlook varies greatly around the globe. And right now, it’s the brightest in Asia in general, and China in particular, where I expect the rebound to be very powerful.

The Chinese economy is a multi-decade story. And there will be plenty of ‘ten baggers’ to be found amidst the beaten down diamonds.

Your opportunity: Take advantage of any dips to add quality Asian stocks – like New Oriental Education (EDU) and China Mobile (CHL) – to your portfolio.

The bottom line of my end-of-the-year message: Success in 2009 will require both caution and guts …

Caution to keep your portfolio intact and to raise cash whenever possible. And the guts to buy when things seem the worst.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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Monday morning quarterbacking

Denial is our weakest link

It’s Monday morning.  That means it’s time for hindsight quarterbacking.  Turn on any channel and chances are you are going to witness analysts attempting to make sense of what has already happened. In my inbox this morning I read no less than twelve different blogs on the economy.  

Each had a different spin but all were of the same general opinion.  We are heading into a economic depression.  Despite the patches that our government is attempting to use to hold our economy together, there are too many factors in need of assistance to patch them all. Something has to give. Don’t get me wrong.  I want the government to do something to help but I also realize that it wasn’t just the government that got us into this mess.  It’s our greedy addiction to debt-spending coupled with our Pollyanna attitude that someone will always be there to bail us out.

When things go wrong it is our natural inclination to want to blame someone else but a truly evolved person must ask themselves the inevitable question.  What part did I play in all of this?

Oddly enough, you will never hear this question on television.  Ratings would plummet and the fear is that people would turn elsewhere for their daily dose of propaganda.  But in my house, we speak the truth, even if it doesn’t feel good. Because we speak the truth, we don’t spend what we don’t earn or borrow what we cannot repay. I am not embarrassed to tell someone I cannot afford something.  I only wish Washington and the talking heads would do the same.

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What good is a nest egg if you don’t have a nest!

Death becomes her

Much to my dismay, I walked out this morning to discover that all of my giant spiders had died.  Of course most people would rejoice but I love these big girls.  They cover my porches from April until now, creating seemingly endless entertainment for me and my friends. I even know people that feed theirs by throwing Palmetto bugs up into the webs.  The upside is that (1) I can finally power wash my porch before the holidays and (2) I know that the egg sacs have already hatched full of baby spiders that will remain inside until next Spring.  Just the same it was sad to see the old girls hanging there devoid of life.  As I stood there examining her 5 inch body, I heard my mother say “This too shall pass.” Another voice added, “and a new generation will burst forth from the old.”

Given our current state of economic upheaval, I couldn’t help but see the metaphor.  I hope that some of you have heeded my advice and moved some of your riskiest accounts to Treasury-only securities or guaranteed interest savings accounts. Remember the key right now is a return of your money not on your money!  

What good is a nest egg without a nest!

For those of you are still building your nest egg, please keep in mind that you have to have a nest in which to place that egg. That means keeping your credit clean and paying down as much debt as you can.  When the market rallied on Monday, the news didn’t report that the Bond Market crashed. How that will play out is anyone’s guess, but my sources are telling me that it will mean changes to your credit card statements, possibly in the form of increased minimum payments, late payment penalties, over limit fees, etc. and/or decreases in credit limits. 

For more information, please go to www.moneyandmarkets.com

Until then, take care of your cash and keep your credit clean!

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Calm Advice during the Storm

Surviving the waterfall

On this soggy day, I decided to take the opportunity to sleep in and get some much needed rest.  Personally I wish the markets would do the same. I don’t know about you but I’m getting a little tired of “financial experts” screaming at each other on television in an effort to aggressively make their point.  All the screaming in the world only accomplishes three things:  it makes people angrier or it turns people off completely. It also creates a desire for short term fixes that may cause long term rebounding failures. Many of my friends and clients are tuning out completely, trying not to look as things get worse and worse. Although I worry about that response, I also understand it.  How much bad news can you handle at one time? 

My preference: calm, understandable explanations about the market and how to hold onto what you have.  Think about the current financial crisis as a burning building – any normal person would take only what they could carry and get to safety.  The government’s response: keep throwing solutions into the burning building. If you’ve noticed, whatever actions they take, they continue to need more to correct it, like a domino effect.  Rather than let weak funds fail and then clean up the aftermath, they continue to try to save a weak building.   Read the rest of this entry »

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Mass Exodus on Wall Street – What about Main Street?

Nature's Mass Exodus

Good morning. Or is it?  For many of you, today is a day of anxiety as we collectively await the news of the Federal Bail-out. Wall Street’s mass sell-off yesterday is expected to continue until something gives?  Chances are that something will be your 401-K plan. Most of us, no matter how diversified we are will feel the pinch this quarter, and the bruise will probably last through next quarter. Can the House salvage the bill or put forth a better plan?  Will it even make a dent in the panicked market anyway? Only time will tell and I do not have a crystal ball.  What I can tell you is that now is the time for calm, faithful composure.  A time to stop and think about where your priorities lie.

Of course, that’s always easier said than done.  But I truly believe that most of us will weather the storm intact. Sure, we’ll probably see a major drop in our overall asset value, but we are still so much better off than the average person on the planet.  Most of us will still have our primary residences, our jobs, our families and our savings accounts.  For those who survive on dividends, you will get hit hard and may need to curtail spending or find an alternative source of income. Perhaps this will be the impetus we need to reapply our long-unused skills.  Remember, America was born on the entrepreneurial spirit.  

For others, the mortgage crisis may keep you from buying your first home until you save more on the down payment.  I’ve got news for you:  that’s how it should be.  If you ask the average person over 50 about their first home, chances are 90% of them will tell you that they scrimped and saved for a long time and still wondered how they were ever going to afford the payments.  They did afford them, through good old fashioned hard work and prudent spending habits.  They didn’t have everything they wanted and therefore valued what they did have.  Somehow, we’ve lost that sense of work ethic.  It seems like these last ten years have seen Americans adopt a credit-ethic in place of a work ethic.  Why work and save when you could charge it instead?

As Americans our biggest hurdle will be our pride. I urge you not to let that stand in your way.  Do not be ashamed to ask for assistance or get another job. Don’t be afraid to move your money into safer accounts, or spend less on Christmas presents. Remember the best things in life aren’t things. Besides, sometimes it is the exposure of our vulnerability that eases our burden and helps us begin the healing process. 

Keep the faith. If I can be of any assistance, please call on me.

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The Deluge, weather and the economy

Heavy rains separate the weak from the strong

Braving the deluge this morning, Jack and I ventured out to take pictures.  Getting soaked to the bone I couldn’t help but think that I must be crazy.  I would much prefer to stay warm and snuggly inside with hot coffee and a sweet danish.  As I snapped away I noticed the way different leaves responded to the downpour.  Some leaves were curled over barely surviving the beating while others seemed to welcome the moisture.  Others till seemed born for heavy rains allowing the water to just stream down in large beads.

It reminded me of how people respond to heavy circumstances.  In these days of economic concern, when it’s difficult to predict what’s coming the pike, many of us are tempted to fold, take our losses and get out of the market.  Others are getting ripped to shreds because they are not financially prepared for such risks, too exposed to the foul weather of a down market.  And then there are the bellwethers, those against whom the market is an opportunity to wait and take advantage of great buys. 

Caladiums

To those of us who are somewhere in the middle, advise from my mother:  When in doubt do nothing and the answers will appear. My interpretation of that advice:  Make sure you are somewhere in between, i.e. diversified.  Make sure your bank accounts are spread out among several institutions if you are lucky enough to have over $100,000.00 to worry about.  Call your financial advisor to check on the status of your 401-k or other retirement accounts.  During a downpour, the safest place to be is under a shelter.  It’s the same thing during an economic deluge.  When the market is going down,  that is the time to let go of the highest risk accounts/stocks and hold onto your strongest investments even if they are temporarily in the tank.  Letting go may mean taking a loss but sometimes it is better to take a big loss upfront than suffer a slow and painful loss over time. 

My suggestion to all real estate investors, Charleston investment property should be averaging an 8% return per year over a 10 year period.  Do the math or I’ll do it for you and see if that’s where you are.  Don’t just look at the last 2-3 years.  Real Estate investments should be a long-term commitment.  The days of quick flips are over right now, to return at some future date, but not for at least 3-5 years. If you are thinking about scooping up deals as a bottom feeder, proceed with rental investment income in mind.

If you are trying to sell and it seems like it will never happen, it’s time to re-examine your commodity.  In a bull market, houses need two important elehas sold ments to sell, price and condition.  It has to look nicer than the other 150 houses in your competition to get noticed and it has to be priced better than all the others as well. 

If you are desperate to sell, it’s time to talk auction.  Don’t let the bank take your home without giving this a serious consideration.  Auctions have gained popularity in the last year for good reason. Everyone loves a bargain and despite what the news is telling you, there are lots of folks out there with cash to burn who would rather put it into a tangible asset like real estate.  I have a great auctioneer on my team who can guide you through the process painlessly.

If you don’t need to sell, don’t.  Wait it out, let the inventory get absorbed and revisit the market next Spring.  Remember that heavy rains allow the weakest things to get washed away, making room for the stronger to survive and flourish.  I want you to be on the strong side. 

If I can be of any assistance during this period, feel free to call me.

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Protecting your Money – Bankwatch

Last week I wrote a post about the current volatility of the financial sector.  So many of you wrote to me and asked me for more information that I decided to post this follow up. As a Realtor, I consider myself a trusted advisor and make myself available to help my clients understand the Real Estate market conditions and the trends that swing the proverbial pendulum.

 As an investor, I rely on other trusted advisors to help me navigate through the world of savings and investing. In both situations, I also do a great deal of research to keep myself updated so that I can ask the right questions.  You should too.  I suggest that you take the information below and formulate your own questions.  Then take those questions to your personal financial advisors. If it’s a Real Estate matter, my team is at your service.  For investment advice, don’t just take my word, ask your advisor. 

That said, I wanted to share a recent report from the experts at Weiss Research, Inc. who put out the MoneyandMarkets.com newsletter available at www.TheStreet.com. Their experts used the FDIC’s Call Reports and the OTS’ Thrift Financial Reports to rank all U.S. Banks.

Their recommendations for the current financial climate:

• Avoid bank stocks in the current market
• Keep your deposits under $100,000 per institution
• Avoid weak banks regardless of their size. If you have money in banks with a rating of D or E, consider moving your money.

A weak bank is considered to be rated lower than B-.  Just like elementary school, you want to aim for the honor roll.  To see their list of strongest and weakest banks click here: The X-List Report

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Weathering the Financial Storm

Pre-1965 silver - always a good investment

I got a call at 5:45 this morning about Lehman Brothers going under.  I’m sure it will only be the first of many calls today as clients and friends ask me the most important questions on their minds.  What does this mean for me, for the housing market and for my retirement accounts?  My short answer: a major drop in value.  My long answer: an incredible opportunity to buy the best deals of your life and restructure your portfolio.

Before I go into opportunity let’s talk about safety.  As banks go under, get bought out by other big players and money shifts fund managers, be aware that most banks will secure your accounts up to $100,000.00 per account holder and $200,000.00 for joint accounts.  There are also IRA’s that are insured up to $250,000.00 and special accounts called CDARS (cedars) that can allow accounts over $100,000.00 to be insured by using an intermediary that helps two institutions share the burden.  In plain English, that means that you don’t need to do a run on the bank.  You just need to make sure that you are diversified.  Most of our local banks aren’t going anywhere and even if they do, the FDIC has you covered up to $100,000 per name.

To use a weather analogy, what’s happening right now in the financial sector is like the first bands of the storm.  We have yet to see the eye.  It’s going to get scary before it’s over, but it will pass over and the strongest institutions (and the most prepared individuals) will be left standing and poised to restart in the aftermath.  

Banks – Banks left standing will be the institutions that have already tightened their credit policies, did away with IO’s, interest-only loans, and high risk balloons or never offered them in the first place. They are also the institutions with in-house securities (their own private assets), like Guaranty Bank, our Mortgage company who beat investors estimates for this past quarter. First Federal, Carolina First, Bank of America and BB&T all seem to be holding strong.

Mortgage Companies – Although I’m not smart enough to know all of the companies that will fold,  my guess is that most of the online mortgage companies will be gone.  Have you noticed how few commercials you’ve seen for Ditech, Countrywide, HomeLoans USA? According to MSNBC analysts, there are over 10,000 different banking institutions across the country.  Most of these are well insured and well secured.  In fact, stock prices of the bank industry as a whole climbed in the last quarter.

Non-Financials – Next to restructure will be non-financials like insurance companies.  You’ve probably already heard the news about AIG.  These secondary financials are heavily leveraged in mortgage securities so they are suffering the consequences of their indulgence.  Credit Card companies will also be hit hard and you can expect higher interest rates on the cards that fatten your wallet. 

Stocks & Investments – Depending on how well diversified your portfolio, ride it out rather than take a big loss.  Call your investment manager and ask them to assess where you are and how well you’ll handle the crunch. If you thinking about putting money in, treasury bonds are king today. If you’re old fashioned like me, solid commodities rule.

Real Estate –  It’s never been a better to time to buy.  I know it sounds like I’m wearing rose-colored glasses, but truth be told, there are absolute bargains like never before.  If you have the cash or the credit!  That’s the issue that plagues America right now.  Most people don’t have the cash and have allowed their credit to fall short.  For those who do have the funds, now is the time to look for solid high ground on which to stake your future.

Sellers – You have three options: rent it out for income, hold tight and improve your credit score, or lower your expectations on profit.  There are too many houses on the market to hold prices.  If you have no option but selling, now is a good time to think about a price reduction or an absolute auction.

My Charleston Real Estate Search Team is available to help you any way we can as are many good agents out there.

As my mother loves to say, this too shall pass.

Keep the faith.

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