Wall Street’s Woes Grow Greener Pastures for Residential REI
It has taken some time for me to digest all of the financial news I’ve been gobbling up over the past couple of weeks. And frankly, I could use an Alka-Seltzer. But I can’t kelp but think about how the $900 billion in Wall Street bailouts so far issued by the Fed still buys a lot of “plop, plop, fizz, fizz” in our nation’s new market economy. Buy will it buy relief? Only time will tell for certain. But there are some signs that Wall Street’s struggles will improve conditions for many of us who are dedicated to making real money in real estate.
Sure the news on Wall Street is bad. But it seems the worse the news on Wall Street gets, the higher the ratings are likely to go for the news channels that profit more from banking on fear these days than anyone can with the U.S. Dollar. The impact of toxic news reporting should not be overlooked by those of us who are following these events.
There’s fair and accurate reporting and there’s also panic mongering in the feeds. I’ve read, watched and listened to a seemingly endless torrent of news about Wall Street’s dramatic takeovers, bailouts, buyouts, merger plans and restructuring efforts from AIG to Wachovia … and what a horrific rollercoaster it’s been. For none has it been worse than for the thousands of employees who have lost and will loose their jobs as a result of this unnatural disaster.
Focus on the Single and Multi Family
Today however, I’m writing as a real estate entrepreneur who sees more great opportunities than ever before to invest in real estate. And right now, the natural question is “What does all this bloodletting on Wall Street this mean to real estate investors?”
Over the long term, that’s a tough one to call. And if I’m lucky, I’ll have that dream again tonight where I know all the magic answers to our economic woes. Of course, during waking hours, the person who had those answers likely would make Warren Buffett’s portfolio look like a “nice try.” (Check out this article on why Buffett didn’t save Lehman.)
Real Estate Gets a Grip
To real estate entrepreneurs trying to gain perspective on how recent developments will likely affect us in the short term, there’s some encouraging news. All of these “adjustments” on Wall Street are likely to result in lower interest rates, even as investors take whatever is left of their money and run away from the giant equity brokerages and into the most attractive alternatives they can find. Today, gold futures rose nearly 10 percent to $870.90 per ounce.
Private Money: “Gimme Shelter!”
But precious metals aren’t for everyone, especially now that prices are reaching for the heavens. And that may help send a lot of private money-lenders into real estate markets soon.
Compared to what many of these investors have been through on Wall Street, many are likely to be attracted to the greater control and relative long-term stability that investing in real estate provides. They’ll also gravitate to real estate because if they still have their money, they likely know a real bargain investment when they see it.
Buyers Want to Believe
It may sound outlandish to say, but there are a lot of qualified and motivated buyers out there who knew better than to get involved in purchasing a high-priced property at a high interest rate. Many of those who are carefully looking at all the numbers also have been sitting on the fence waiting for plummeting property values to stabilize before committing to a purchase.
Due to the housing bubble’s impact on many of the largest metro markets, it makes more economic sense at the moment for many folks to rent rather than buy. So finds an intriguing report that examines 100 of the most densely populated metro markets for equity-earning potential.
The same report also examines ownership vs. rental costs for homes priced below medial levels. (Check out the “Ownership, Rental Costs and the Prospects of Building Home Equity” study from the National Low Income Housing Coalition and the Center for Economic Policy and research for details. It’s a refreshing, eye-opening read.)
Proof Now Required in Mortgage Application Pudding
According to the Mortgage Bankers Association’s seasonally-adjusted index, mortgage applications to purchase or refinance loan jumped 33.4 percent, the most activity since May. This is an encouraging sign that the action is picking up in many markets. Couple this with the solid potential for even greater reductions in interest rates and it seems like there is light at the end of the tunnel in terms of market recovery, inventory reduction and overall price stabilization.
Reality Bites for New Mortgage Terms
Still, it’s worth noting that mortgage qualification has reverted to real-world requirements that usually include a minimum of 5 percent down have, demonstrable income and assets that are consistent with the loan amount and credit scores above 700. While these requirements are necessary, they may present some challenges as jobless rates continue to rise and the overall economy appears to have all but stalled.
Always a Catch-22
Despite lower interest rates and spikes in loan applications, there is no guarantee of a speedy recovery for battered housing markets. Keep in mind that with all the lay-offs and power shifts in the industry, we can expect bureaucratic delays in everything from loan applications to foreclosure processing and short sale negotiations. These delays are likely to last until well after the after dust settles on Wall Street.
Lenders Need to Really Tackle Loss Mitigation
All eyes are on lenders and they must know they’re looking pretty bad to most folks these days.
Eventually, lenders will have to find a way to respond more quickly and efficiently to pre-foreclosure and short sale deals. After what they’ve been through in recent weeks, their enthusiasm for the bundles of cash they save by avoiding foreclosure is likely to pique.
New Doors Open Wider for Educated Investors
Another upside to all this mess is that smart real estate investors will have awesome opportunities to capitalize from developing relationships with embattled mortgage brokers and real estate agents who are facing new challenges in this Brave New World of Real Estate. Developing these relationships will open new doors leading to fantastic deals for those of us who are persistent and consistent in our follow through.
There, things aren’t really looking so bad for us, are they? Though Wall Street is a totally different story. Still, we must maintain a clear vision of our businesses, avoid toxic speculation and feed our senses of humor through these confusing and harsh times. Some of us also may pray that Alan Greenspan is correct in his assertion that weeks like these occur only once per generation.
What Do You Think?
Please drop me a line and let me know how you’re reacting to all these developments and tell me what impact you foresee it having on your real estate business.
Free Webinar with Sales and Marketing Master Dan Doran
If you missed my virtual “Fireside Chat” with Dan Doran tonight, you’re in luck! You can catch the replay Thursday at 1:00 p.m. EDT and its free! For details of how Dan and I cut through fear and confusion to talk about building titanium-strength real estate investment businesses, check out my blog post: “REI Fireside Chat with Dan Doran to Show Entrepreneurs Options Well Beyond Wall Street’s Burning Embers”
You also can follow this direct link to register. Remember, to receive all the great bonuses, you have to attend the call. Talking with Dan always is a treat, and I suggest that you check out this Webinar because there just aren’t many chances to hear his golden words of wisdom for free.