See the L.A. Daily News article on Report Hits Close to Home, posted in the Real Estate News Section of my website.
The San Fernando Valley had the highest number of foreclosures in L.A. area during April 2007. Twenty-three homes were lost to foreclosure and 289 properties were in some stage of the process.
And if you read the book Sell Now, by John R. Talbott, you get the feeling "you ain't seen nothin' yet". Talbott's expecting a huge wave of more foreclosures to come and he blames in part the rampant use (abuse) of Option ARMs. He's right in the context he's referring to, i.e., that people have been buying homes they could never have otherwise afforded, and never will. Now they're paying the piper. And by making the unaffordable artificially affordable, we've managed to inflate the entire housing market...artificially.
But don't throw the baby out with the bathwater! There's a right way and a wrong way to use an Option ARM.
You need to understand that you can't build a castle by eating away at it simultaneously. However, Option ARMs are very appropriate when your goal is to accumulate the principal outside of just handing it over to the mortgage company. In other words, if you use the savings of an Option ARM to still make your principal payments, but make them into something (i.e. a cash or other investment account) where you can control getting it back for emergency or investment opportunities, then you haven't really failed to make your principal payments at all, have you?
In fact, if you take a look at Doug Andrew's new book, The Last Chance Millionaire, and you read Chapter 7, Learn How to Become Your Own Banker, you'll see that this is actually a faster way of paying off a mortgage!
Believe it or not, we actually recommend to many of our clients to get an Option ARM -- IF they will take the otherwise payable principal, and save or invest it. Now you're off to the races!
That principal could buy other real estate, or be invested into insured investments which have a history of clearly outperforming the cost of the mortgage. That's how you use an Option ARM.
Monday, June 25, 2007
Wednesday, June 13, 2007
Last Chance Millionaire
See this AP Newswire Boomers Likely to Delay Retirement on the News Section of my website.
It says that Boomers have less kids, less retirement cash, and will retire substantially older than previous generations, or not at all.
In fact, apparently since Social Security was created 50 years ago, retirement age had been trending toward younger ages until about the 1980s.
Sure, we are living longer. Sure, I certainly don't plan on quitting work and being idle, a sure formula for an early grave. But to me retirement means financial independence. It means freedom to choose. So in that sense, it's important and I want it now.
What's overlooked with Boomer retirement is the enormous riches they've accumulated from about 2000-2006 by simply owning their homes. This could be the key to salvaging themselves from the brink of retirement failure if they just get a clue how to preserve and grow their most fortunate, if only inadvertent new wealth.
And if you look at the real estate news on my website, you'll see that they'd better act fast before that wealth disappears. It'll take precious years to not only recover the loss of their home equity values, but the additional growth they could have yielded if they had acted to grow and diversify that equity before the real estate market deflated.
Good new book came out this week that really summarizes the situation and solutions. Last Chance Millionaire by Douglas Andrew. Let me know what you think of it.
Doug will be in town next week giving seminars. Contact me if you want to go.
It says that Boomers have less kids, less retirement cash, and will retire substantially older than previous generations, or not at all.
In fact, apparently since Social Security was created 50 years ago, retirement age had been trending toward younger ages until about the 1980s.
Sure, we are living longer. Sure, I certainly don't plan on quitting work and being idle, a sure formula for an early grave. But to me retirement means financial independence. It means freedom to choose. So in that sense, it's important and I want it now.
What's overlooked with Boomer retirement is the enormous riches they've accumulated from about 2000-2006 by simply owning their homes. This could be the key to salvaging themselves from the brink of retirement failure if they just get a clue how to preserve and grow their most fortunate, if only inadvertent new wealth.
And if you look at the real estate news on my website, you'll see that they'd better act fast before that wealth disappears. It'll take precious years to not only recover the loss of their home equity values, but the additional growth they could have yielded if they had acted to grow and diversify that equity before the real estate market deflated.
Good new book came out this week that really summarizes the situation and solutions. Last Chance Millionaire by Douglas Andrew. Let me know what you think of it.
Doug will be in town next week giving seminars. Contact me if you want to go.
Thursday, June 7, 2007
Housing Prices Down, Stocks Up...No, they're down... No, they're up...
I'm not even going to read the whole articles. I can get the drift. And I only care about the big picture, anyway. Two articles posted under News Section on my website today:
What's interesting is how the good news gets accompanied by the bad news, and the meaning gets lost in between. The bad news in the Bernanke article is that stocks fell as a result of Bernanke's talk! Why would stocks fall when the Fed says the economy is so strong??
They fell because when the economy is strong, the Fed keeps interest rates high. Why? Because if money was super-cheap, people would build business and commerce on easy borrowed money so fast, that the economy would then over-heat. The danger in an overheated economy is that prices begin to rise. (Inflation. I'll explain that connection in another blog.) Inflation out of control sends the whole house of cards tumbling.
So, while some sectors like real estate have been waiting for interest rates to come down, it ain't gonna happen for a while now. Good news, bad news. The message? Stocks are tumbling momentarily because some people want interest rates down and they're not happy. But interest rates are staying high because the economy is hot right now - and overall that's good for stocks, if a little rough for real estate.
Don't worry, it'll shift sometime later up the road. The two markets tend to see-saw each other. Right now it's stocks' day in the sun.
What's interesting is how the good news gets accompanied by the bad news, and the meaning gets lost in between. The bad news in the Bernanke article is that stocks fell as a result of Bernanke's talk! Why would stocks fall when the Fed says the economy is so strong??
They fell because when the economy is strong, the Fed keeps interest rates high. Why? Because if money was super-cheap, people would build business and commerce on easy borrowed money so fast, that the economy would then over-heat. The danger in an overheated economy is that prices begin to rise. (Inflation. I'll explain that connection in another blog.) Inflation out of control sends the whole house of cards tumbling.
So, while some sectors like real estate have been waiting for interest rates to come down, it ain't gonna happen for a while now. Good news, bad news. The message? Stocks are tumbling momentarily because some people want interest rates down and they're not happy. But interest rates are staying high because the economy is hot right now - and overall that's good for stocks, if a little rough for real estate.
Don't worry, it'll shift sometime later up the road. The two markets tend to see-saw each other. Right now it's stocks' day in the sun.
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