Critical Juncture For Silver and Gold

With the Fed's latest iteration of QE, the question many are asking is whether risk assets continue their bullish move or if the market will once again shrug as it did following QE3.  An an interpreter of price, the question is best answered through relative movement, and by considering what the Fed wants – nominal growth.  What that means is that the Fed wants some combination of actual inflation and actual growth to push the economy into escape velocity mode.  Of course, just because the Fed wants it does not mean it will happen, but that seems to be the goal of monetary policy now.

So does price think it's going to work?  It seems plausible, particularly when considering the relative behavior underway in markets.  Take a look below at the price ratio of the iShares Silver Trust ETF (NYSEARCA:SLV) relative to the SPDR Gold Trust Shares (NYSE:GLD).  As a reminder, a rising price ratio means the numerator/SLV is outperforming (up more/down less) the denominator/GLD.

The ratio now is at a critical juncture given that it has crossed its own 20-day moving average, but is still within what appears to be an uptrend of leadership.  If a breakout in silver's strength occurs, it might mean that further risk-sentiment is likely in markets, which is likely to make gold rally, but not to the same extent as silver and other more industrial-sensitive commodity plays.

Silver is often referred to as “poor man's gold,” but the truth is it is an imperfect substitute for the yellow metal.  Silver tends to be much more sensitive to industrial demand, while gold is less so on a relative basis.  As such, when silver outperforms gold, it means money is starting to bet on an increase in industrial production and global reflation.  Note that the ratio rallied in January and February during the best first quarter for equities in a decade, underperformed throughout the corrective period of April-May, bottomed in early June as the melt-up began, and has since fought higher.
 

Gold Tests $1,700 On Discount Buying, Possible European Rate Cut

Gold has once again fallen victim to global economic concerns, dropping to a four-week low this week on the back of US budget talks and the ever-looming threat of the fiscal cliff. Investors engaged in another commodities sell-off, sending gold to $1,686 on Wednesday, its lowest price this week. But what goes down must, at some point, come back up — and after a two-session decline, gold investors can breathe a little easier: Thursday saw spot gold prices back to toying with highs above $1,700 per ounce.

As volatile as gold has been of late, investors buy it up whenever the price is right. The yellow metal’s discounted price has presented investors with a good buy, and many were taking advantage of that on Thursday.

On Tuesday, Bart Melek, head of commodity strategy at TD Securities, told Bloomberg, ”gold is being sold along with just about everything else in commodities with the worries on the fiscal cliff.” Gold, which is widely known as a safe haven asset, is just as susceptible to economic concerns as other commodities, as has been showcased by “knock-on effects” brought on by the threat the fiscal cliff poses to the global economy.

Gold investors are waiting with bated breath for Friday’s release of the non-farm payroll data and the upcoming Fed meeting slated for next week, where hopefully a resolution will be reached regarding the fiscal cliff. If the US is unable to save itself from falling off the cliff, “the possibility that a $600 billion package of tax hikes and spending cuts due to kick in in the New Year could push the world’s biggest economy back into recession,” according to Reuters.

Also helping gold shake off some of its losses is renewed interest in safe-haven buying spurred by European Central Bank (ECB) President Mario Draghi’s comments at a press conference. Draghi hinted further interest rate cuts may be put in place to boost economic growth in Europe. The ECB has cut its growth forecast for the year, anticipating a contraction of 0.5 percent, 0.4 percent higher than originally expected. Low interest rates are considered inflationary and therefore bullish for precious metals.

Household Investments In Gold Are Not Irrational

Gold is fantastic. Gold is a problem. Depending on who you are, you will choose one of these statements. For Indian households gold has emerged as the investment destination of choice. After declining over the first half of calendar year 2012, third quarter data shows an uptick in demand despite high prices and a higher customs duty. Not only is gold demand up, but that for coins and bars is growing faster than that for jewellery. Coins and bars demand grew 12% over the third quarter of 2012 over 2011 (for calendar year), while that of jewellery grew 7%. Coins, bars and exchang-traded funds are investment vehicles while jewellery is more of a traditional store of wealth for women.

A cash-fuelled run-away real estate market (it seems the Delhi real estate market rose 25% after the Commonwealth Games to soak all the cash the over-invoiced bills threw off) has priced real estate so high that the average household sees a large part of the disposable income get eaten up by the monthly mortgage payment. Food and other living cost inflation (caused by supply side blocks that the government has chosen not to address) has seen spending more than double over the last few years reducing the surplus left for discretionary spending and for savings. If the supply side of savings has shrunk, the behaviour of banks and financial product manufacturers and sellers has caused a breakdown of trust causing households to switch their investment vehicles. For example, over Rs.1 trillion have been lost by retail investors in just life insurance products due to sharp sales practices and trap-like products. Grumpy stock markets have added to the retail disenchantment with financial market-linked products while gold returns have been good. 

Investment in the metal, either buying it directly or through aa exchange-traded funds (ETFs) has seen Rs.1 lakh grow to Rs.3 lakh  over the last five years. Over the same period, the Sensex has turned  that Rs.1 lakh into Rs.94,000. If this was not reason enough, add the  overall atmosphere of uncertainty about the future of India and the rush towards gold is explained. Household money has run towards safety. And therefore to gold. To blame the household for causing a balance of payment crisis is uneducated.Since India does not have enough gold we import it. Tonnes of it. About 700-800 tonnes are imported each year. Dollars are paid out and 2011-12 saw $62 billion or 3% of the gross domestic product (GDP) flow out of the country to purchase gold. This outflow of hard currency makes our balance of payments a mess. Payments for gold explain a large part of the current account deficit (the shortfall between imports and exports of goods, services, transfers and investment flows) of 4.2% of the GDP. 

Recent press statements by the Reserve Bank of India and the ministry of finance suggest that the government will announce a gold-linked deposit scheme soon to allow investors the benefits of holding gold without actually buying the metal, potentially reducing pressure on the balance of payments. Opinion pieces and reports on this gold rush of households are condescending in parts—the financially illiterate household knows no better and buys gold. But I don’t think the Indian household is making an irrational choice given the situation that the average household finds itself in. For the un-banked anyway gold has been the only way to accumulate money, but I refer to the switch that household savings have made towards gold and real estate.

35 Ways To Market Your Property

In order to become a successful real estate investor there are certain skills that must be mastered. One of these skills is marketing. The following list is a great way to insure your marketing program is successful and make sure that your investment home does not sit empty and drain your bank account while you wait for a buyer. Make an effort to do several of these action items each day until your investment home sales, rents, leases, or you are forced to move in: 1. Put signs in yard (be sure phone numbers are readable): For Sale. Flexible Seller. Motivated Seller. "0" down.

2. Check out & fix mail box if needed.

3. Plant colorful flowers & add mulch.

4. Replace front light fixtures as needed.

5. First look inside must be a positive.

6. Soft music playing is good idea.

7. Make sure house is very clean (especially kitchen and bathrooms).

8. Take good pictures inside and out.

9. Check tube every few days (keep filled with fresh new colored flyers).

10. Replace directional signs (as needed every few days).

11. Run “For Sale” ads in newspaper.

12. Get an 800# with number capture feature.

13. Place ad with FSOB.com.

14. Trade leads with others home sellers.

15. Post house on real estate association sites.

16. Blanket the neighborhood with flyers (include the finder’s fee).

17. Promote open houses with:

Ads.

Directional signs.

Big balloons.

18. Have a lunch at home for realtors the week of the open house.

19. Make up a realtor flyer, offer free lunch $ door prizes. 

20. See that landscaping looks great. 

21. Clean driveway if needed.

22. Paint and repair front door as needed.

23. Replace house numbers as needed.

24. Make house smell like apple cinnamon.

25. Keep the inside of the house looking bright.

26. Put lock box on door for showing.

27. Put tube on main sign with flyers.

28. If local laws permit--place directional signs from main streets.

29. List for sale & lease on MLS with pictures.

30. Run “For Lease” ad in newspaper (be sure ad gets listed on net).

31. Run long term rent to own ad in tabloids (like The Greensheet and Penny Saver).

32. As calls come in keep good notes (for this and future sales).

33. Post ads on free real estate listing sites.

34. Visit neighbors and talk it up (offer a finder’s fee).

35. Have open house every other week (each better than the last).

European Economic Recession Worse Than Expected, Leaders Say

Europe's economy is still reeling and unemployment could remain high for years despite the progress made in solving the debt crisis, the European Union warned Wednesday, as it downgraded next year's forecasts for the 27-country bloc. 

The commission had previously expected the 17 countries that use the euro to find its footing next year, with 1 percent growth. Now it predicts only a 0.1 percent uptick. The report also suggests that unemployment won't start falling until 2014 -- and then only slightly. "Europe is going through a difficult process of macroeconomic rebalancing and adjustment, which will last for some time still," Olli Rehn, the EU's economic and monetary affairs commissioner, told reporters. "Market stress has been reduced but there is certainly no room for complacency." 

The eurozone has made progress this year toward resolving its debt crisis, which has been dragging down economies throughout the EU and beyond. Countries that use the euro have slashed spending and promised to keep their deficits in check; they've vowed to better protect their banks by improving how they're regulated and supervised; and the European Central Bank has put in place a plan to help countries struggling with high borrowing costs, the hallmark of the crisis and the reason some have sought bailouts.

This commission's predictions for this year reflect that grim reality. It expects the EU's economy to contract by 0.3 percent, rather than remaining flat as it forecast in the spring. It also predicts that the eurozone GDP will fall 0.4 percent, against a previous expectation of a 0.3 percent drop.

Official third-quarter GDP figures -- which will show whether the eurozone has entered recession as economists suspect it has -- are due to be released on Nov. 15. A recession is defined as two quarters in a row with negative growth.

The commission's report also confirms that the crisis is not sparing even Germany, Europe's largest economy and the traditional motor for growth.

It predicted that Germany would eke out just 0.8 percent growth in 2012, compared with its earlier forecast of 1.7 percent. ECB President Mario Draghi warned Wednesday that "the latest data suggest that these developments are now starting to affect" the German economy.

In a speech given in Frankfurt, Draghi called on governments to back up the ECB's plans to help countries with their borrowing costs by cutting debt and improving growth through cutting excessive red tape.
"Across the whole euro area, governments are making determined efforts to reverse economic imbalances," he said. "They are implementing reforms to redress the misguided policies of the past and to create sustainable long-term growth. It is a difficult road and there is still a long way to go. But the early signs are encouraging." 

The Key To Your Long Term Success In The Real Estate Business

Now, granted, this is not some earth shattering revelation, but let me tell you how important I believe this is to our business. I always strive to do more than is expected. Below are some examples of how we do more with the different players in our investment model.

Doing More than is Expected With Your Real Estate Business

Real Estate Agents Or Sellers:

Whenever I call a new agent, I do so with a specific property in mind and I ask a couple of key questions about the deal. During the call I let them know what I am looking for and a little bit about our track record.

Whenever I call a new agent, I do so with a specific property in mind and I ask a couple of key questions about the deal. During the call I let them know what I am looking for and a little bit about our track record.

Investors:

My model relies on recycling capital through private investors, and that is why we have created our unique model that is very investor friendly. We want our investors to have enough security where they actually wish we don’t pay them. First, we only look to secure investor capital after we have repaired and leased units. We do not believe in asking investors to lend on distressed assets. We want them to have security in a leased and producing property.

Next, we offer double digit interest rates on the investor capital as we don’t buy “skinny deals”. Our minimum expected return is 20%+ and thus we are happy to pay double digits on repaired and leased properties. We have leveraged this model successfully for several years now. It’s no surprise that investors who have lent money at double digit rates with tremendous security will talk about it with their friends. Once our investors understood our model they started talking to their friends about the double digit returns they were earning on repaired and leased properties. At that point we had more investors calling to learn about our model and the momentum just keeps building.

So there you have it; the key to this business is ALWAYS doing more than is expected!!!

Silver’s Need For Rescue Increases As Price Fall Continues

Downward pressure in the silver market has not abated. Friday’s action provided a clue as to what was in store this week. Silver was pushed below its 50-day moving average and though it could not be kept down at that level for the close, the metal lost $0.75. As North America slept Sunday night, pressure was again applied to the market, setting silver up for a week that saw it touch new lows.

A market focal point this week was a two-day Federal Open Market Committee meeting that appears to have produced nothing especially meaningful for the silver market — except perhaps disappointment for those wanting more action from the Fed. The benefits of QE3 are rapidly disappearing and US economic data continues to improve. That is not only weighing on hopes that the Fed will be prompted to act more aggressively, but is also leading to speculation that its current program may not continue as long as many would like.

More market participants are starting to draw the conclusion that instead of expecting to thrive on monetary policies, investors are going to have to get used to the idea of markets driven by fundamentals. For silver, that could be a reason for concern.

Scotiabank, a major market participant, has quickly changed its bullish tune. “We are bearish so long as silver trades below $33.40,” the firm said in a market comment.

News of a 2.8 percent decline in Chinese silver imports in September was also a source of pressure on silver this week. Furthermore, HSBC warned that future Chinese demand for silver may be curbed due to an oversupply of solar panels. The bank referred back to its belief that silver demand for solar panels is also declining for two other major producers: the US and Germany.

The latest Commitments of Traders report reveals continued erosion of net speculative length and open interest for COMEX silver. Two weeks ago, silver ETF investors dropped 25.5 metric tons. Last week, the outflows more than doubled, with 54.6 metric tons of silver sold.

The Close:

An improvement of sentiment was seen in the markets Thursday. Silver was able to draft support from rising gold prices and speculation about forthcoming monetary policy from the Bank of Japan. December silver on the COMEX was about $0.50 higher at $32.12 after the US day session closed. The final New York spot price was $32.11, a $0.38 gain.

Silver needs more than an up day here and there. Market participants continue to warn that silver bulls must step their game up as silver’s risks of falling solidly into bear territory are increasing.

Ways To Invest In Gold And Buying Gold For Cheap

Unless you have been away on a distant planet, you are probably aware of the huge boom in the gold price. In this article we will look at ways to invest in gold, how to evaluate gold stocks and buying gold for 

Cheap.

The gold price inflation has been savage since the 1970, when gold was available for under $40 per ounce – today it stands at the thousand dollar mark. Not many investments have returned so well and so consistently over time.

So what are the different ways to invest in gold? Here are a few of the best and most recognized ways:

1. Another of the recommended ways to invest in gold is by investing in gold stocks. However, you need to know how to evaluate gold stocks to do this correctly.

2. One of the best ways to invest in gold is to buy gold bullion or gold coins, though there is most.

3. You can buy gold through gold jewelry.

There are also advantages to investing in gold – it is always in demand and it is fairly liquid with banks, jewelers, coin collectors and even specialized gold buying shops willing to buy your gold. It is also a good hedge against the increased cost of living, and versus economic and political volatility and decline as happens frequently in the world.

Generally, it’s not possible to pay very far below the market price for gold. Having said that, you may be able to get a reasonably good deal by buying gold coins and gold rich items.

Also, investing in the right gold mining stocks is effectively a way of buying gold for cheap because some stocks are always undervalued. That means their gold stock is worth far more compared to the share price you pay to acquire it. However, you must know how to evaluate gold stocks before doing this.

If you do decide to buy gold stocks, you must have the correct investment skillset and know how to evaluate gold stocks. That’s what we will look at next.

How To Evaluate Gold Stocks:

1. Always go for sound management. Make sure that the management team that is running the gold stock have pedigree. A good management can do wonders for a company and it’s ability to strike gold.

2. You need to understand how to read a balance sheet, profit and loss account and cashflow statements to make sure that your gold company is sound. There is often a lot of false hype surrounding certain gold stocks, and too often the hype does not pan out. When you understand how to read financial statements, you can identify dangerous investments and just stick to the safe ones.

3. Do your maths – try and calculate how much of your investment in the gold stock is backed by actual gold. The higher the figure the better.
Hopefully this article will help you in your quest to find the best ways to invest in gold.

Investing In China 2012

China is the hottest business and investment story on the planet. The 21st century has already been proclaimed the "Chinese century," and shock waves from China's frenzied entrepreneurialism, manufacturing prowess and low-cost labour are rocking industries throughout the world. As in every gold rush, fortunes are being made, and each new tale of a freshly minted zillionaire fuels the China fever. China is the biggest growth story in history. We can't afford to miss it! Well, we aren't going to miss it, because, like other economic tidal waves (the Internet, for example),

China will affect us whether we invest in the country or not. And before we rush in, we should remember that the Internet craze melted down not so long ago, and one other megatrend, real estate, may yet do the same. But we wouldn't be human if we didn't dream, and China's size and three decades of spectacular wealth creation certainly offer much in the way of inspiration. So how can we cash in?

The safest but most labour-intensive China investment strategy is to move to the country, learn the language(s) and settle in for a decade or two. This way, you can be close to the action, and if you don't strike it rich on your own you can sell your China expertise to someone else. If you're not up for this level of commitment you can buy China-related securities, either directly or through funds.

If you go this last route, of course, sometimes what you will be buying is not the actual stock of a Chinese company, but the stock of, say, a Cayman Islands company that has a contractual relationship with a Chinese company, one that you must pray will last longer than many contractual relationships in China (where contracts are often viewed as a snapshot of an ever-evolving arrangement). The same Chinese companies also occasionally list stock simultaneously in Shanghai, Hong Kong and New York, and trade at different prices on each market—so you might end up paying more for the same asset than a professional investor with global reach.

Which brings up a key point, one that is often lost in the din of do-it-yourself investing propaganda: you can buy China stocks, —if you really want to, but there is absolutely no reason for you to do so. On the contrary, there are dozens of reasons for you not to do so, starting with the competition.

Professional China investors live in China, speak Chinese, visit Chinese companies, drink baijiu with Chinese managers, schmooze with Chinese lawmakers and party members and have dozens of China-focused Wall Street analysts calling them day and night with every crumb of China-related information they find. These investors have multimillion-dollar research budgets, deep China expertise and armies of Chinese analysts, and many were born and raised in the country (before being educated at Harvard et al.). Once in a while we may uncover some gem that these experts miss, but chances are slim that we can do it consistently.

So if buying individual China stocks sounds nerve-racking, you can (wisely) opt for a mutual fund. But here, too, beware. Even dime-a-dozen U.S. funds often charge egregious fees, and fees on foreign ones can be especially steep (2 percent of assets per year, or more). Also, although many China funds have posted excellent performance over the past few years, this performance may have been the result of market trends or luck (the H shares, for example, have had a strong three years).

It may be true, as some argue, that China's markets are so inefficient that most managers can deliver above-market performance (contrary to the case in the United States, where they can't), but the jury is still out on this. In any event, you're probably best off seeking low-cost active funds, passive index funds or exchange-traded funds (ETFs).

In Hong Kong and New York, on the other hand, China stocks may actually be cheap. Merrill Lynch, for example, estimates that the Hong Kong H shares are trading at about 11 times 2005 estimated earnings, versus a long-term U.S. average of about 16 times earnings, and this valuation appears attractive for long-term investors. Whether this is the result of the market's anticipating an economic slowdown or simply an appropriate discount to compensate for China's risks and uncertainties, is unclear, but at least the stocks don't appear to be incorporating much of a China premium.

But this still doesn't mean that it makes sense to buy them. Despite the attractiveness of China's long-term story—presumed future economic superpower and so on—its stocks are still just a subset of a minor asset class: emerging-market equities. As such they should constitute, at most, only a tiny fraction of the average portfolio.

China, moreover, is only one of dozens of emerging markets—it currently represents only 7 percent of the MSCI Emerging Markets Index, for example—so the total China exposure should usually be far less than 1 percent of assets. Most investors can get all the China exposure they need by owning U.S. companies that do business there or small helpings of Asian and emerging-markets funds.

Investing In Silver: Double Down On The White Metal's Gains

Gold remains the favorite of precious metals investors, but silver is now a strong number two...with a bullet.

That means you should consider investing in silver now before it goes even higher. In case you haven't noticed, after wallowing around in the mid-20s for months, silver prices have shot back over $30 an ounce. And thanks to wildly bullish technical and fundamental indicators, silver could soon retest its 2011 high, or even blow through it. 

Strong Signals For Silver Price Rally

From a technical viewpoint, the rally in silver may be just beginning. You see, the silver futures markets are in what's known as "backwardization." It's a rare condition that occurs when the current cash price is higher than distant contract prices. In other words, it costs more to buy silver today than it would to buy silver a month from now, or six months from now. For instance, the September 2012 silver contract closed on Aug. 27 at $30.90. The December 2012 contract closed the same day at $29.64. And the March 2013 contract closed at $27.28. There's only one reason for this - there's a shortage of physical silver on the open market.

There are also signs that industrial demand is improving. Unlike gold, silver has a bevy of critical industrial uses.

There's silver in just about every electronic device out there - from televisions to computers to cellphones to tablets. But since July 3, stockpiles in warehouses dropped 6.5%, posting a four-month low on Aug. 8, according to COMEX. Inventories had grown every month since November to 147.1 million ounces. Investors bought 797 tons of silver-backed exchange-traded products this year. They now hold 18,093 tons, or more than eight months of global mine output. That brings total silver assets to just 2.9% below the record 18,639 tons held in April 2011. Investors will likely buy another 500 tons in 2013, Barclays PLC (ADR NYSE: BCS) and Morgan Stanley (NYSE: MS) predict. 

Turnaround In Silver/Gold Ratio

Historically, the price of silver per ounce has usually been equal to around 1/16th of an ounce of gold,meaning it took 16 ounces of silver to equal the value of a single ounce of gold. But over the past decade, gold has taken off, trading as high as 60-70 times the price of silver. That is, until last year. As silver prices rose to nearly $50 an ounce, the ratio fell to 30-1. But as prices for the white metal settled near $27, the ratio has skyrocketed back up. Right now, you get 55 times more silver for your money than gold. But it would still have to triple in price to even sniff where it should be in relation to gold.
And there are signs that this is just what's going to happen. 

The Two Best Ways For Investing In Silver

Like gold, there's a variety of options for investing in silver - but two in particular stand out from the crowd.

One popular option for silver ownership is through exchange-traded funds (ETFs).
The iShares Silver Trust ETF (NYSEArca: SLV) has over $9 billion in assets and trades more than 9 million shares daily. SLV shares represent approximately 1.0 silver ounce each and are easy to buy and sell through your broker. The ETF has gained approximately 110% since inception, delivering both performance and liquidity. But ETFs can only establish a paper claim on silver.

Fact is, there's no substitute for owning physical silver in times of crisis. But it's simply not practical to own large amounts of bullion and keep it in your house. That's why owning a combination of both paper (ETF's) and a small amount of coinage is the way to go. You can buy "junk" silver -- bags of pre-1965 dimes, quarters, and half-dollars -- that contain about 90% silver.

Collectible silver coins often have premiums of 25%-50% or more than the spot price of silver. But because they don't have collectible value, you can buy "junk" coins now at just 1%-2% above the current spot-market price for an ounce of silver. They usually come in $1,000 face-value bags worth about $23,600 at today's prices. But many dealers will split them into smaller bags.
 

What Would You Do If You Were Starting To Invest In Real Estate Today?

What Would You Do If You Were Starting Today?

The very first thing I would do is get down on my knees and thank my lucky stars to be beginning my investment career at absolutely the best time of our lifetime!!!  Remember fortunes are made by investing at depressed levels and at the bottom or near bottom of cycles

Establish Your Deal Selection Criteria

After I have built my basic understanding of the market I would decide on what criteria I want to use to decide on what is and isn’t a good deal.  I recommend every investor pick one metric that is easily transferable between property types.  For me that metric is “Yield” or my expect return on all cash outlaid to secure and rehab a property. Today I personally look for expected yields in excess of 20% in my market.

Research Phase: Analyze Your Market & Learn What DEALS Really Are

The next thing I would do is get off my butt and start doing my basic homework.  I would go out and see no less than 50 and probably 100 properties in my investment area of choice.  I am not kidding!!! I would immediately build a spreadsheet with data on no less than 100 properties.  Things like Prices, Expected Rents, Repair Budgets, etc.  This would give me the basis or foundation to understand what is a good deal, what is a bad deal and what is a great deal!!!!

Find Passive Real Estate Investment Opportunities

Now if my market didn’t offer these types of returns or I didn’t have the time to devote to learning a new market I would still find away to participate.  I would find an investor with a proven track record, a simple to understand process and become a passive investor.  This would insure a decent return with a lot less headaches, reduced risks and still give me the upside I want.

Start To Make Offers

After understanding my market and deciding on my criteria for identifying a great deal I would start making offers on properties that met my criteria.  I would hold fast to my criteria and not let bidding wars drive up prices.  In fact you should only expect to get 1 out of every 10 properties you make an offer on.  If your success rate is higher than that I believe you are offering too much on your properties.

By following this strategy I am convinced I could secure 4 investment properties with Government-backed loans inside of 90 days and secure 10 properties inside my first year. Every property I bought would have a 30 year fixed interest rate and I would be a very happy man!!!!


In the end if I was starting today I would not let this investment cycle pass me by.  I would become a very active investor in my market and if my market didn’t offer returns I would find a way to be a passive investor in another market that offered great returns.

Top 10 Real Estate Predictions For 2012

There is a lot of talk in media about shadow inventory. When I hear reporters talk about shadow inventory, it's often reported incorrectly as though the reporters do not understand the term shadow inventory. This is not the number of homes going into foreclosure. Shadow inventory is the numbers of homes that have been foreclosed upon and yet not available for sale.

Bulk sales is typically the most profitable for investors because the discounts are steep. The catch is investors are required by the bank to buy a bundle of homes at one time to get that discount. Then, investors will fix up the homes and put them on the market, staggering the sales so the market is not inundated with inventory. That's because investors want to maximize returns on investment.

Investors have 3 ways to buy a foreclosure home. They can buy the home on the courthouse steps during a bidding frenzy, they can buy the home through MLS after an REO agent has listed the home, or they can buy a group of homes offered as bulk sales by the banks that have foreclosed on those homes.

How To Negotiate The Best Deal

Buyers are finally being able to take advantage of cooling trends in previously hot markets. Multiple offers are no longer being thrown at sellers as soon as the For Sale sign hits the front yard.
Competition has dwindled in many areas as investors disappear and buyers take to the sidelines. Unless a buyer thinks his local market is headed for a big downturn, this could be the pause that allows him to get into the market with a few perks unheard of in recent years as a bonus.

Here Are 5 Things Buyers Need To Know To Negotiate The Best Deal In A Market Shifting To Their Favor:

1. When you make an offer, know the recent comparable sales; it’s the best bargaining tool. “See what’s going on out there,’’ says Beverly Durham of ReMax Gold Coast Realty in Camarillo, Calif., where entry-level single-family homes begin at $500,000. “Make an offer $10,000 to $15,000 under what the last one sold. Even in this market, if you insult your seller, they won’t want to deal with you. Sellers know what the last one sold for. You want them to at least look at your offer.”

2. Multiple Listing Service (MLS) properties usually state what the seller owes. If not, your agent should be able to track down the figures. There’s a big difference in negotiating with an owner who owes more than the house is worth and one who has a lot of built-up equity.

3. Human nature is the biggest problem for sellers and buyers to overcome in a changing market. Prices stagnate or drop a few percentage points and it’s amazing how different buyers and sellers react. Sellers still think their house is “special” and immune to the market. Buyers figure every seller is about to be foreclosed on and make ridiculous low-ball offers. Smart buyers do their homework, know what size home they need, how much they can afford and then search the market for what they want and negotiate fairly.

4. Find out as much as you can about the seller’s motivation -- retirement, job, divorce, wants to move up but only if he gets the right price. Durham says if a buyer knows the seller’s motivation they can negotiate a better deal or move on to the next property.

5. “After 45 to 60 days the seller is usually absolutely sick of keeping their house spotless and sick of people walking through,’’ said Durham. This is when a seller may be the most anxious about selling their house as traffic to their house has likely fallen sharply.

Real Estate Investing Basics

The details of real estate investment can be overwhelming. There's a whole new language to learn: closing costs, resale value, liquidity, and inspections. But if you're willing to overcome your apprehensions, you'll find that real estate can be a wise investment. If you are considering investing in real estate, it's important that you do your research so that your investment will turn into a profitable venture. It's harder to get out of real estate than a stock or bond purchase, so educate yourself and make sure you understand exactly what you're doing.

You must consider inflation when investing in real estate. Believe it or not, a real estate investor can reap profits from inflation alone. Check out this example. An investor has $30,000 worth of equity in a $100,000 property. With a 3 percent inflationary increase in property values, her holdings are now worth $103,000 — a $3,000 increase. That $3,000 increase on her $30,000 investment translates into a 10 percent return — due solely to inflation.

A real estate investment is generally tangible — you buy land or property that you can actually see. Think about how stocks and bonds work. You invest your money in a company you do not physically own. By buying shares, you are in essence lending the company your money and hoping for a profit. With real estate, you own the “company,” so you need to sell “shares” of it to see a profit — by selling or renting the property

“Americans Will Downsize And Live Multigenerationally, In Order To Offset The Fraud They Know Exists In Real Estate.

A searing indictment of The Bernanking System in Business Insider:

Once people start to come out of negative equity, even more of them will sell and try to get out from under the cloud they are under. So, the housing bubble orchestrated by the Fed and by the hedge funds and by the wealthy could free up massive inventory. The average person fears negative equity. The Fed will not erase that memory.

Keep in mind that about 4.4 million houses were sold in 2011 and only 2.4 million mortgages were taken out for purchase. That is a mortgage depression and the rise in house prices has not changed that mortgage depression.The only way people will risk negative equity is if their house prices are cheaper than rent. But the artificial inflation of housing prices will do nothing but push the average Joe away from housing.

People are learning that the uptick in prices is a scam, both by banks withholding massive inventory, and by the Fed making more easy money available to the rich. Once they own most of the inventory, they will be forced to initiate a housing bubble or they will be stuck with the properties. 

Where Is The Real Estate MarkeIt Going Today???

It’s the age we live in; every data point, story, press release, blog post triggers a monsoon of pundits and analytical analysis that either sends you running for the hills or tripling down on your latest investment.  If you don’t believe me, scroll through this reputable blog and tell me how I should be the most confident in years on Tuesday then be disappointed in home sales twice only a week later.  With everything out there, how do you find the truth?

First, understand the basics of real estate.  Unlike the stock market, real estate is slow moving, plodding, and a hyper-local asset class.  Despite what the headlines might say, you have not missed the bottom in many locations.  If you are looking to buy a single family home, tomorrow will be just as good a day as yesterday, as will six months from now.  Interest rates tend to move on a quarterly basis and rarely increase more than 0.25% in that time span.  Sure, your neighbor might have a 3.75% interest rate, but your 4.25% will put your payments close enough and will still be historically, the lowest in our history.


Second, understand the underlying data.  As it relates to real estate, one needs to be especially cautious.  Data may or may not be adjusted for seasonality, it may or may not be a selection of particularly poor or particularly good markets, it may be new homes vs. existing homes, etc.  With the need for new headlines every hour, data can and will be manipulated to tell whatever story is the flavor of the moment.  Personally, I always start at one of the sources.

Last, but most importantly, understand your market. National real estate statistics rarely add value to a local buyer. Real estate is cyclical everywhere; however, the size and length of the peaks and valleys can vary dramatically. If GM moves a plant in your neighborhood to another state, you can bet prices will move aggressively downward no matter what the national real estate market is doing. Understanding this differentiates great realtors from the rest of the pack.

Amazing realtors don’t parrot pseudo-facts from newspapers or websites; they utilize stats to enhance their local market knowledge. Acting as the knowledgeable voice of reason to clients inundated with misinformation will only serve to build trust and respect for your craft.

Here’s What To Expect From The Housing Market For The Rest Of 2012

2012 has been good to the US Housing Market. In most places home prices are up, demand is up, money is super cheap, and transaction volume is up. Banks are unloading their backlog at steady but not disruptive pace. Not surprising with the improving market conditions, new delinquencies are declining rapidly. The press and traditional housing market data folks have caught on.

 what should we expect for the rest of 2012? Do we dare call it a “recovery”? Here’s what you need to know:

1. Home prices across the US are already up 10% year-to-date. You’re going to seefive more months of “Up” headlines before the next cycle of home price declines make their way into the news.
2. Note that our earliest leading indicators – the data that leads 6 or so month out, have plateaued and are showing the end-of-year declines. Nothing scary in this data yet. Most of the rest of the year is dominated by bullish headlines.
3. In tandem with home prices, rents are climbing. I’ve described this virtuous cycle previously.

All of these factors combine to make real estate investing a hot market for the rest of the year. Lots of cash that has been sitting on the sidelines is now chasing a few properties with cheap financing and strong and improving yield. These are the makings of a bull market.

So there you have it. That’s the second half of 2012. Amaze your friends with your prescience.

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