How to vote for your favorite Lifestyle Correspondent

I have started to promoted my video on Twitter today, and have received many questions on how the voting process works. Through an extremely successful day of tweeting, retweeting, facebooking, IM’ing and emailing, my video generated over 1000 views in its first day! However, that resulted in only 30 votes. I think confusion is partly to blame, as well as confirmation emails getting lost in voters’ spam mailboxes.For the benefit of not only my voters, but all the other voters, I created this educational screencast. I hope you find this helpful and vote for your favorite applicant (me of course! Please let me know if you have any questions or feedback.Have a very Goode Day!Cheers!Maria

more about "How to vote for your favorite Lifesty…", posted with vodpod

We are moving the blog

Hello readers,

We are launching our site, MeetMOJO.com, and this blog is getting integrated into the site. The new blog can be found on http://meetmojo.com/blog. So all of this pre-existing content is now available there. And new content will be added to the new site, so please update your RSS readers.

Sincerely,

Maria, MeetMOJO

Making sense of home prices

Every so often, we read headlines about housing prices (seems like every other headline is about housing prices these days), and they all seem to contradict each other. Why is it that while NAR numbers say we are flat-to-mildly-decreasing, the Case-Schiller index states that we are decreasing? Which numbers do we trust, and why are they so different?

To start, there are 3 major indeces:

1. OFHEO (Office of Federal Housing Enterprise Oversight – they regulate Fannie Mae and Freddie Mac)
2. S&P / Case-Shiller index
3. National Association of Realtors (NAR)

1) OFHEO looks at existing home sales and excludes new home purchases. In addition, it only looks at conforming loans, ignoring transactions that are not guaranteed by Fannie and Freddie. Homes with non-conforming mortgages are seeing larger price declines than the homes that OFHEO tracks. So this means that the numbers that OFHEO reports are not as volatile as the rest of the indeces. To make matters even more complicated, OFHEO also considers appraisals that are generated when people refinance their homes, which is almost always different from the purchase price, and is a truer indication of market value.

2) Similar to OFHEO, Case-Shiller looks at existing home sales and excludes new home purchases. Although there are actually three Case-Shiller indeces (monthly 10-city survey,  monthly 20-city survey, and a quarterly report that looks at all nine U.S. Census regions), the one that makes it to headlines most often is the monthly 20-city survey. In addition to already being more volatile than OFHEO, this survey can be even more misleading as a proxy for the national situation, as it looks at only 20 metropolitan statistical areas.  It just so happens that these areas include some of hardest-hit areas as far as price declines, such as Detroit, Las Vegas, Los Angeles, Miami, Phoenix, San Diego and Washington, D.C. Additionally, Case-Shiller can miss trends in micro-markets, as it doesn’t consider sales of condos and co-ops. So, next time that you are tempted to get worked up over Case-Schiller numbers, don’t. Especially if it’s the monthly survey.

3) NAR’s methodology is much more straightforward.  It looks at sales of existing homes listed by MLSs, and reports median home prices.  As we know, there can be a disconnect between a sales price and a home value. In addition, NAR considers median prices only, reducing the impact of price volatility in upper price ranges.

Case in point: Freddie Mac home-price index indicateed that housing in New York state fell just over 4 percent in value in the past year. Meanwhile, the Case-Shiller index tells a different story, indicating that New York’s home prices are down roughly 15 to 16 percent from their high.

Source: To make sense of the home price indeces, I used a very well written analysis written by Matt Carter for Inman News

New Plan for Freddie / Fannie

found this fantastic video by reading this post in Noah Rosenblatt’s Urban Diggs blog (great blog about NYC real estate that I read quite a bit). Bill Ackman is proposing a new plan to solve the Freddy / Fannie problem and bring liquidity back to the market. This solution is not via a government bailout, but rather proposes a balance sheet restructuring (basically converting their debt to equity, in order to affect the crazy D/E ratio – currently at 129:1 – Yikes!!!).  I am not going to rehash Noah’s post and the video – they both do a great job explaining it. Check it out!

Video: http://www.cnbc.com/id/15840232?video=793726867

Mortgage Mess and Real Estate Investing

I bet it would be impossible to find a real estate blog that didn’t post anything about the mortgage mess today / over the weekend. It’s not that the credit crunch / mortgage industry collapse hasn’t been on everyone’s mind since a year ago. But a new wave of panic is sweeping us today, after IndyMac failed on Friday, and Freddy and Fannie are so unstable (after a precipitous slide in their stock price) that they need to be propped up by the government. So naturally, I ponder what that means for the real estate investor.

First of all, let’s take a step back. Why did IndyMac fail? Well, because like other banks in a similar situation, a large portion of their business was subprime loans. If you make loans to people who can’t afford the house, as long as they say they can and state that they make enough money to buy it, which part of this approach is sound strategy, exactly? Unfortunately, the mortgage markets weren’t too concerned with the future.

So as the market started crumbling and the bottom fell out from under, why did the banks still refuse to do short sales?  (A short sale, for those who don’t know, is a deal that a buyer (retail buyer / investor / etc) negotiates with the bank, for a sale of the property for less than what’s owed on the property).  This was a very necessary step, in my opinion, as values had dipped under the amounts that were owed.  If only banks worked with these buyers to do these short sales, along with mortgage workouts, it would have largely mitigated the mess, and banks would be straddled with a lesser inventory of houses. And as we all know, banks need liquidity, not houses, to exist. The idiotic thing is that these same properties, if no one buys them, get foreclosed on (huge expense for the bank), get seized and get auctioned off for less money than the proposed short sale. If I have an outstanding loan of $10, wouldn’t I rather take $7 from a buyer today, than sell it for $5 tomorrow?  Duh! Instead the banks made it so difficult for an investor to do these short sales, with the process dragging on for months. With such an abundance of foreclosures and deals to be had, no wonder so many properties end up going to auction. From my personal interaction with real estate investors, the frustration with the banks’ loss mitigation departments (those who end up working out the short sale deals) has been palpable. I spent some time perusing blogs and blog comments written by investors, who lamented that IndyMac exhibited many of the same behaviors. IndyMac had a chance to recoup some of the money they ended up losing due to the bad paper, and they squandered it. I am not, in any way, suggesting that short sales are a cure-all. I believe that it was important to pursue all avenues, one of which is short sales, one is mortgage workouts / loan modifications, and other steps. Hopefully, the next bank straddled with foreclosing properties, will be a bit better at short sales.

So now that IndyMac failed, and other banks with similar patterns are likely to fail, for the same reasons as stated above, the credit problem is only going to get worse, and the panic is going to get out of control.  Which concerns me as an investor and as a technology entrepreneur building a web-based resource for investors. If there are no funds available for investors to buy investment properties, the investment industry is going to go the way of the mortgage industry.  But not so fast! Investors, the good ones at least, are extremely creative, nimble and entrepreneurial ; they find opportunities at times when everyone runs and screams that the sky is falling. The deals are abundant. And yes, prices will likely keep decreasing, especially as the mortgage mess shrinks demand (many homebuyers who were in the market for a house, now will have to go back to renting, because they can’t get a loan). However, an investor who is good at doing the short sales, and other such strategies, can max out the deal anyway by getting it at very low prices. To finance these properties, a creative investor will look to non-traditional avenues, such as seller financing and private money. As far as my business, MeetMOJ,O is concerned, we are going to do just fine, as we extend our matching model to private money lenders and other alternative sources of capital.

So next time someone asks me what I am doing, and I answer “I am building a web-based community for real estate investors”, and that person looks at me like I am insane, I am going to insist that this is a great time to be an investor. If you know what you are doing, of course.

Be careful where your investing advice comes from!

Real Estate investing has historically been fraught with so-called late-night infomericial “gurus”. “If you only pay us $10,000, we will show you how to get rich in 1 month, and you will never have to work a day for the rest of your life.” Yeah, right! Few things in life are this easy, and there are no shortcuts to a solid real estate investing education. I came across this video today, and was appalled at the advice given to the poor woman in the video by Russ Whitney. He and his instructors recommended to flip the investment property. Well, anyone with half a brain can see that today’s market is fit for anything but flipping.

And yes, real estate conditions vary from state to state, city to city, and even neighborhood to neighborhood. Per my neighborhood real estate broker, my neighborhood in Jersey City only experienced a 5% drop in prices, while the less affluent parts of the city and Bayonne have dropped about 10% (of the new listings there about half are in foreclosure). But still… Even in Manhattan, the hotbed of real estate activity, unsold inventory is starting to build up, making a flipping decision tantamount to financial suicide.

Check out this video! (unfortunately, I am having technical issues embedding the video, so you will just have to click on this link)

Enjoy!

Top U.S. Cities for Real Estate Investment in 2008

HomeVestors (the “We Buy Ugly Houses” folks) has named the top 10 cities for real estate investing and 10 junior markets for real estate investing in the first quarter of 2008 (Junior markets are cities with a population of 150,000 or more). They are as follows:

1. Dallas, TX
2. Houston, TX
3. Atlanta, Ga
4. Fort Worth, TX
5. St. Louis, MO
6. Philadelphia, PA
7. San Antonio, TX
8. Denver, CO
9. Minneapolis, MN
10. Phoenix, AZ

Top 10 Junior Markets

1. Columbus, GA
2. Panama City, FL
3. Springfield, MO
4. Brevard County, FL
5. Greensboro, NC
6. Lubbock, TX
7. Columbia, SC
8. Ft. Walton Beach, FL
9. Kent/Sussex Counties, DE
10. Michigan City, IN

These findings are based on the number of houses bought in each market by HomeVestors in Q1 of quarter of 2008 (source http://www.homevestors.com/inthenews)

As the Dallas-based franchise company specializes in buying, rehabbing and selling single-family houses and rescuing homeowners from ugly houses and ugly real estate situations, the current downturn in residential real estate makes for a fantastic acquisition environment. As I mentioned in a previous blogpost, this climate of falling prices, inventory oversupply, and resulting homeowner desperation to get rid of their houses, is a prime time for smart investors to go heavy on property acquisition. As long as your exit strategy is to buy and hold, and not to flip (which is going to be very very difficult in today’s climate), and as long as you can afford to hold the property for at least 5-7 years, you should definitely take advantage of these conditions.

I have to admit that I don’t completely trust this data. I mean, I do not doubt that these are the areas where some of the best bargains can be had: HomeVestors does enough volume to observe significant trends. But there are so many other factors that make a city a hot investment market, which can not be ignored; the HomeVestors press release doesn’t address those factors explicitly. For example, the city’s economic development plans, jobs growth outlook, and other macroeconomic factors must be considered. Also, the rental outlook must be considered. As you buy a property, the low acquisition price is only one factor that determines whether you will see positive cash flow (or at least break even). Rents must also be strong and in demand. Overall, there is strong rental demand right now across the nation, as many homeowners lose their homes to foreclosure and many other hopeful homeowners can’t get a mortgage due to tougher standards. But some cities are definitely hotter rental markets than others. If people are fleeting a city due to lack of jobs, rental market will suffer. The HomeVestor list seems to be very TX-centric. By a sheer coincidence, the company is based in Dallas. Hmmm….. I would be very interested in hearing from our readers what they consider to be the top cities for investing.

Another question for the readers: would you consider investing away from home? What are some factors that you consider whether or not you feel comfortable with investing away from home? What resources do you use? Do you work with another local investor to show you the ropes? We are working on a tool that can connect investors to each other, based on area of interest, as well as other investing goals. As various areas of the country may become attractive to investors than their own home turf (Gulf Region GO Zone, for example), we see more and more people venturing outside of their own backyard. And we would love to help investors make the process a smooth one.

DC Urban Development

Last weekend, I attended a networking event in DC, at which Neil O. Albert spoke about the city’s urban development projects coming down the pike. Mr. Albert is the Deputy Mayor for Planning and Economic Development (DMPED). The event was held at Hotel Monaco in the MCI Center / Chinatown area of the District (the hotel itself if gorgeous; a visit to the website reveals that it’s an historic all-marble building that is a Registered National Landmark). I came into the area via New York Ave from the north. I hadn’t been to this area of the District in a little over a year, and I was blown away by all the new construction that was happening. Huge office and residential complexes, shiny and new. As I found out later at the talk, this is part of the NoMA (North of Massachusetts) revitalization plan, which is one of the key initiatives of the DMPED. There is a whole lot more development planned in that part of the NE, making it a mixed-use community, with office, residential and retail assets (check out this blog entry and this release from the DMPED).

At the heart of the DMPED revitalization strategy is the utilization of existing transportation assets, i.e. existing Metro stations. This is an approach that makes a whole lot of intuitive sense, as the underlying infrastructure is already established. In addition to NoMA, DMPED plans to invest in revitalization of Anacostia (including Anacostia Metro station and Ballpark District, which will revolve around a new baseball complex for the Washington Nationals). Bringing this huge project to Anacostia (SE) is a great initiative, as it will bring jobs to the area which has been economically depressed for decades. All in all, $10 billion will be spent on this area over the next two decades! However, my concern (and I am sure a lot of others are concerned about it as well) is whether or not there will remain affordable housing for the area’s current residents. Also, knowing from living in the DC Metro area, how saturated the DC Metro area is with condos, I hope that this new development doesn’t stick the city with a lot of unsold inventory. On the other hand, by the time this construction is finished, we will probably be in an “up” real estate cycle. Having spoken to several real estate folks at the networking session afterwards, there seems to be a lot of exciting development and investment in the area, and most of it doesn’t seem to be hit by the real estate meltdown (at least not as much as the suburbs). Their view is that the demand for real estate within city limits of DC is still strong. We will have to see if this remains true, as the down cycle progresses.

The Beginning of the End?

Is it the beginning of the end for the U.S. real estate downturn? Mark Zandi, Chief Economist from Moody’s Economy.com certainly seems to think so (CNN interview aired earlier this week). This discussion comes on the heels of the NAR report stating that existing home sales have actually improved from January to February 2008, but the median price is more than 8% down vs. last year. Methinks that inflection point is happening right now, because prices are finally low enough for people to get back into the market.

Zandi points to this latest increase in sales as the point where homes are starting to stabilize, putting us at the beginning of the end of the downturn, a process he still predicts to be very long. Home sellers are now “capitulating”, lowering listing prices to be in line with the market, and making the deals more attractive for the buyers. Additionally, the mortgage rates are low enough to stimulate homebuying activity. Finally, after decades of home prices outpacing salary growth, homeowners can somewhat afford to get back into the game. According to Zandi, “prices have been declining for two years. I think we’ll see another year worth of declines. We are down 10 to 13 percent from their peak. I think they’ll decline another 5 to 10 percent between now and the spring ‘09 selling season. So it’s not over. We’ve got a ways to go. “

So here you go. There is one good year left of rock-bottom housing prices, after which they should continue to climb back up. We as investors haven’t had an opportunity like this in several decades, to get into a property at a price low enough to produce positive cash flow. This is an opportunity not to be missed. I would like to re-emphasize from my recent blog post, that this real estate environment is a perfect time to acquire a property that you hold for the long term and rent out, and not designed for a short-term flip.

Great Health Solution for Self-Employed / Entrepreneurs

As a self-employed entrepreneur, I currently do not have health insurance (I am working on a solution, no worries). I got a little sick a couple of weeks ago and needed some medical attention.  So I did a search on the web to find an alternative to a doctor’s visit.  I pretty much knew what the issue was, and just needed to confirm with a test and get a prescription.  But I didn’t feel like paying an arm and a leg for a 10-minute visit.  I also didn’t feel like sitting in a free clinic waiting for service all day.

My research turned up this wonderful place called the Minute Clinic.  They are basically little mini-offices staffed with nurse practitioners.  The services that they provide are, of course, limited.  But if you just need a quick, cheap visit for a common cold, flu, strep throat, and some others, this is the place!  It is, indeed, very affordable for someone without insurance.  Each visit is $59, and there may be a nominal charge for extra diagnostic tests. For example, a test for strep is $10.  So the whole visit comes out to a whopping $69!  And they even take insurance, if you have it.

This little facility lives up to its name for sure. It was the fastest doctor’s visit I ever had.  There was nobody in line in front of me; I just signed in, and my name got called within a couple of minutes.  Which is always great when you are sick and are running a fever.  You just want to go in and right back out, and back home to cuddle up with a cup of soup.

Just as impressive as the speed and the price was the sign-in process.  You go up to an automated touch-screen kiosk.  You fill out your name, address, and some other data points, click on a couple of allergies and ailments, and you are done.  When you are done, it tells you your place in line.  When you are called into the office, all the information you filled out gets transferred to the nurse’s computer.   What a great use of technology! No messy paperwork or anything of the sort!  I have never seen this in a doctor’s office.   I was truly impressed.  The only drawback is the sparsity of these facilities.  They are located inside select CVS stores, and I had to drive 30 minutes just to get to the nearest facility.  I am sure their plans include building this facility out to be placed inside more pharmacies.

In this day and age, with skyrocketing healthcare costs and broken insurance systems, it’s great to see someone creating an easy, affordable solution to the problem.  Minute Clinic is not a cure-all, but rather a beginning, a baby step. This baby step is definitely in the right direction.