Rising less fast does not mean slowing down

People seem to confuse the rate of acceleration with speed. If you are traveling in your car in a forward direction where you are accelerating to get onto the highway your speed is increasing. Once you get to the merge point you match your speed with other cars by reducing the acceleration. This means you continue to raise your speed but do so less quickly. When there is a good match you merge into traffic.

If house prices are rising but they are doing so less quickly in years past we still end up with higher prices. Only if prices are falling in an absolute sense will the value of houses be in decline.

Headlines reported in many news reports are there to catch your attention. They are not to produce a balanced view of the market reality.

There is a report from the Office of Federal Housing Enterprise Oversight (OFHEO) which shows what has been taking place in the prior 3 month reporting period. Take a look as you can find your state and likely your city if you are in a MSR. It will given you an idea of what is going on with prices/values as opposed to the rate of increase or the rate of new construction sales.

John Strozier provides a summary of the report on his blog.

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2 Responses to “Rising less fast does not mean slowing down”

  1. Beach_babe9711 Says:

    could you explain about putting investments in LLC’s. is it better to put real etstate (single family) in a LLC instead of a S corporation? and someone told me its better to out the house on a land title instead of using your name?

    Check out the following book. It covers the topic goes into some related topics you did not ask and highlights the risks plus complications. Note that in California there is a fairly high annual charge for just having an LLC (no matter what the LLC is used for).

    Wealth Protection Secrets of a Millionaire Real Estate Investor by William Bronchick
    The author is a real estate investor and an attorney. The book is inexpensive and an easy read.

    and my other question, when you go to the county clerks office to get information on pre foreclosers, or notes, do they useually have the phone number of the owners, or just their address and name? and for vacant houses, is the clerks office the best place to go? or would you go to the tax asseors office to find out whos paying the taxes on it?

    When checking the county records on a foreclosure assume there will be no contract information for the owner other than what was recorded at the time the title was transferred. You need to search for the owner and you are largely on your own. The trustee handling the process can be contacted. In at least some states you can register as an interested party and be updated if anything changes with the file. There should be a small fee.

    The county tax records might have a more current address for where the tax bill has been sent in past years. That can provide a lead.

    Note that your success in buying a property goes up when it is vacant. Most investors will not work very hard to find the owner. Also the owner is emotionally detached from the property so more likely to sign it over to you. You just have to be a better person than the lender. They are losing the property. You or the lender is the choice.

  2. Beach_babe9711 Says:

    do you think its realistic to make 100,000 a year just from distressed and preforclosers. im in california, since prices are so high. if i can find 1 house that is distressed for example…buy a bad house in the best neighborhood 450,000$ add value to it, put about 30,000 in to it, and sell it for 580,000 to 600,000. since most houses next to the houses that are selling fore 450,000 are right next to houses that are 550,000- 620,000. so thats about 100,000$ in profit plus i would have my license so id save 1,000 selling it myself on the MLS and im living in the house to lower the holding cost. or buy a pre forecloser since theres 30 of them right now in my city, and take over their loan…some of them are worth 500,000 or 600,000 and they have over 100,000 in equity, and ill pay them 5,000 to let me takeo ver their loan so they get money to. and even rent it to them after if they needed to. since your expericed i was seeing if that is realistic. ive seen people do it in california recently. but after expenses like closing cost and fees, i would still get apprechation that will make up for it. since aprechation is 10% here rightnow….if it was then if i can make 100,000 each year, less than 5 years i can buy two houses with 200,000 of my money down, and make money renting, and still do capital gains. and in a few years refianace my rental properties from the payments and apprehcation and make more cashflow each month. plus they would all be in a coporation so id save a lot of taxes.

    The strategy has worked for others in the past. I can work in the future.

    Some issues.

    Legally you can not take over a loan. The loan is still in the name of the borrower. The lender can call the loan due. Many times this never happens but you have to realize what it means when you take over the payments.

    You are assuming appreciation. 3 times in the last 20 years or so California or S California has seen prices fall. Hence betting that prices only rise is a bad idea.

    Most savvy investors will never rent a home back to the person who was losing it. Too many legal, financial and emotional landmines.

    You also have to know about the laws concerning buying from a seller who is in foreclosure. There are some extra obligations put on you as the buyer. Mostly to protect the seller but some of the time the rules make it even worse for the seller. Know the laws or expect you could be sued – you would be the nasty investor who took advantage of someone while they are down.

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