Since pre-foreclosure #1 fell through, it’s back to the drawing board.  I have found the online website for miami-dade county clerk’s website which lists the upcoming foreclosures auctions on the steps of the court house.

After a little bit of research, I wasn’t able to find such a listing for Palm Beach.  I made a few phone calls to the PB County Clerk’s office again, got transferred a few times, and found out that they actually publish it in a specific newspaper called Daily Business Review.  This paper isn’t sold in the grocery stores.  I tracked down their website and found retail locations that sold them. 

At the Barnes and Nobles where I found them, there’s probably less than 5 copies left.  It’s definitely not a widely publicized newspaper.  And it’s behind the cashier’s counter, so you really have to know what you are looking for to find it. 

Now the next step is to figure out how much discount (if any) the properties at the auctions have been sold for! 

Over the past two weeks, I have been pretty excited about a pre-foreclosure property that’s on the inner-coastal waterway, but as a beginning investor, one thing I overlooked was to first make sure that the owners are motivated.

Even though their $300k loan has ballooned to $322k in less than 8 months (10.5% rate, 15yr fixed), the value of the land is still worth enough for the owners to refinance and get another loan to pay off their current loan. 

The owners have at least two law suits against them for lack of payment.  But with the new mortgage they took out, they should be able to pay off all the debt.  They did this once before in June 2005 to pay off their original mortgage of 200k and another loan for 15k.  But with the way they are going, they’ll probably default on their new higher balance loan in a few month.

I will keep tabs on this one, but I think that particular unit is a lost cause for now.

I know this is a REI blog, but I just have to post this because it made my life so much easier and I am 90% sure it will help you too.

My computer has been running slow (hasn’t everyone’s computer been running slow?) and today I finally figured out the problem.

The problem is that with each program you install, it may install some backgroung program to run when you start your computer.  This will really slow down your computer a lot.  Here’s how to fix it.

Go to “Start” then “Run”, and type “msconfig”

A little window will pop up, click on the right most tab “Startup”.  This screen tells the computer which program to run when your computer starts up.  The only one you need is anti-virus programs.  You can uncheck everything else (yes, EVERYTHING!).  Leave Norton, or whatever anti-virus program you use checked.

That’s all.  And reboot, you should see a huge difference in how fast your computer runs.

The Fed really has NO Choice but to raise rates more. Their main goal is inflation containment. One of the major incentives for foreign investors to come to the US (besides stable government) is because they believe that the Fed will keep inflation low. When they invest in another country, their gains could be eaten up by inflation in that country. Without strong inflation containment, investor confidence will be lost.

If (a Big if because the Fed won’t allow it, they will raise rates 50, 75 bps if they have to) inflation goes out of control, the demand for US sovereign debt will drop. That means the cost of borrowing for the US government via Treasury issuance will go up substantially.  That is because there is the same amount of supply of debt (Treasury bonds) and if there are fewer buyers, the price at which the bonds are auctioned would be lower.  For a 100 dollar par value bond, if the investors only had to pay 96 dollars as opposed to 98 dollar, their yield to maturity would be higher. 

When you look at the size of the national debt, it makes sense that the US government would want to keep inflation down, keep foreign interests buying US debt, so that we can keep living the way we live (in debt). It’s an awesome gimmick, isn’t it?

Everything else (including the housing bubble, which by the way isn’t included in the CPI, consumer price index, used to measure inflation) is secondary.  The Fed will take that into consideration but inflation is the number one enemy.

So as long as we keep seeing strong economic growth numbers, the Fed will continue to raise short term rates. 

How does that affect the housing market?  Well interest rates and mortgage rates will continue to rise (albeit not as fast as the Fed would like), hopefully slow down equity withdrawn from houses, which would cause demand to drop (because people will not have as much money to spend on goods and services) and slow down the economy.  Now it all makes sense.

This news came out of Bloomberg last Friday.
“Japan’s economy grew five times faster than the U.S. in the fourth quarter as exports climbed and growth in consumer spending doubled.                                

  
     The world’s second-largest economy expanded at an annual 5.5 percent pace in the three months to Dec. 31, the Cabinet Office said in Tokyo today. Gross domestic product grew a revised 1.4 percent in the third quarter, up from 1 percent.           

                    
     Japanese consumer confidence is at a 15-year high as companies hire and wages rise, propelling the economy toward its longest postwar expansion. Bonds and the yen fell on speculation a decline in an indicator of prices may give the government more ammunition to pressure the Bank of Japan into postponing a policy change.”
It’s funny how the same type of news could be interpreted so differently.  Basically, Japanese economy is starting to recover as shown by the growth in their GDP.  You would think that Yen should be stronger with the stronger economy news, but Yen actually got weaker.  Where is the rationale in that?
Despite such gains, the sentiment is that Japan is not out of the deflation troubles yet.  GDP of 1.4 percent is still much smaller than that of other growing economy in the region like China (approx. 8+% in recent years)
The fear in the Japanese market is that if the BOJ (Bank of Japan) changes their policy of low interest rates too early (meaning raising rates), their economy may fall back into deflationary mode.
How did this affect the currency market?
The news above combined with the Fed leaning more hawkish (meaning they will more likely raise rates in the coming meeting) based on strong Q1 retail sales data, Dollar strengthened against Yen to just shy of 119 yen today.  This is close to the high of last year.
I believe the Dollar will be strong against the yen for at least the next few months because consumer spending fueled by equity withdrawn from the housing market (as seen in the Q1 retail sales numbers) will continue.  And even when that runs out, consumers can still spend out of their credit card!  After all, that was (should have been) the first thing home owners paid off when they took out equity in their home right?
 

This past weekend, I swung by the pre-closure on inner-coastal Delray Beach again.  I met two of the neighbors and got some more information about the unit.  The unit’s owners actually also owe the co-op corporation fees for hurricane related deductible for fixing the roof.  In addition, they told me that the roof probably collapsed into the back bedroom and because it’s been a few months, it’s likely that the unit actually has mold damage.  The apartment also needs pest control.  All of this is bad news.  It’s looking increasing unlikely that this is a no-deal, but the next step I think is to talk to a realtor and get a good sense of what the market value would be if the unit were to be fixed up.  That will let me dig into the numbers and talk to subcontractors to get an estimate.  All of this will be difficult because the owners are still living there.  

I keep coming back to this pre-foreclosure rather than the other ones I have seen in the area or farther up north in Boynton because of the size of the unit.  By square feet, it is larger than some of the million dollar single family houses.  This co-op has got to go at some point because it’s sitting on prime real estate zoned for multi-units.  Time for more due diligence on this one.

Easy funding (easy to get mortgages such as Stated Income Loans for “BC” borrowers: ie borrowers who do not have a perfect “A” credit history) combined with low interest rates have allowed borrowers to buy bigger houses than they could traditionally afford. As everyone knows, this has driven up housing prices to historical levels.

Housing market can be slowed down at a controlled pace if large lenders such as Ameriquest, and Countrywide Home Loans restrict their lending criteria and not come out with new mortgage products such as the 40 year amortizing loan.

The 40 year amortizing loan effectively allows borrowers to afford a more expensive house while making the same monthly payment for a cheaper home with a 30 year amortizing mortgage.

As loan originations slow down, lenders originate fewer loans because there are fewer borrowers, so to keep generating fees, they need to come up with more creative loans to give borrowers incentives to take on a mortgage. In the early 1990’s, Japan had 100 year amortizing loans such that the borrowers AND their kids are indebted!!

Read the rest of this entry »

Easy funding (easy to get mortgages such as Stated Income Loans for “BC” borrowers: ie borrowers who do not have a perfect “A” credit history) combined with low interest rates have allowed borrowers to buy bigger houses than they could traditionally afford.  As everyone knows, this has driven up housing prices to historical levels.

Housing market can be slowed down at a controlled pace if large lenders such as Ameriquest, and Countrywide Home Loans restrict their lending criteria and not come out with new mortgage products such as the 40 year amortizing loan.

The 40 year amortizing loan effectively allows borrowers to afford a more expensive house while making the same monthly payment for a cheaper home with a 30 year amortizing mortgage.

As loan originations slow down, lenders originate fewer loans because there are fewer borrowers, so to keep generating fees, they need to come up with more creative loans to give borrowers incentives to take on a mortgage.  In the early 1990’s, Japan had 100 year amortizing loans such that the borrowers AND their kids are indebted!!

  Read the rest of this entry »