The Real Economic Evidence Is Revealed By The Numbers

Posted on April 25, 2008
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Purchases of new homes in the U.S. plunged more than forecast in March to the lowest rate in almost 17 years as stricter loan qualifications and rapidly dropping prices caused buyers to disappear. Sales fell another 8.5 percent in the latest month to an annual pace of 526,000, the slowest since October 1991, from a 575,000 rate the previous month, the Commerce Department announced today in Washington. From December 2002, until December 2006, sales of new homes were more than one million per year, peaking at the rate of slightly more than 1.3 million annual new home sales in July of 2005.

I was particularly dumbfounded with this bit of wisdom as stated in a Bloomberg news story today, “The threat of a prolonged recession is growing as lower home values constrain consumer spending and persistent declines in homebuilding subtract from economic growth.”

Gee, are they geniuses or what?

We’ve gone from a rate of 1.3 million new homes purchased annually in 2005 down to just over 526 thousand annually as of 3 years later. Housing construction accounts for almost a quarter of the economy. It is a huge portion of our economy. And the new housing industry has collapsed by 60% in a 3 year time frame. The official news media presents those figures as indicating merely a risk of prolonged recession. Those numbers are absolutely terrifying. Building contractors are failing by the boatload. Jobs have dried up for tens of thousands of tradesmen. And it is presented as only a risk of recession?

Don’t rely on the geniuses in the financial media to warn you of the real truth, that this country is headed for an economic depression. I would assign their hindsight at 20/60, and that is being generous. I would assing their predictive abilities at 0/0.

First time home buyers are just about locked out of the housing market. Extremely restrictive lending standards make it almost impossible for all but those with impeccable credit and tens of thousands of dollars sitting around idly in a bank account to qualify for a First time home buyer loan.

The economy is crashing. Derivatives abuses by Wall Street have raped the financial system of the world. The dollar will be watered down constantly with each passing week as the Wall Street fat cats get bailout cash in “small” amounts of $50 to $75 billion at a whack. And as a result everything will cost more.

Get prepared while you can, the worst is still ahead of us.

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Lanzarote Tourism Remains Buoyant

Posted on April 24, 2008
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Owners of Lanzarote Property could have been forgiven for fearing a drop in business during the first few months of 2008 – thanks to the recent weakening of the pound versus the euro. But any such concerns have been dispelled by the release of visitor figures for January and February 2008. Which reveals a growth in British visitor numbers of nearly 17% versus 2007.

The figures, recently released by island airport operators AENA, also provide comfort for the market for property for sale in Lanzarote. As where tourism leads property investment tends to follow.

The appeal of Lanzarote to overseas investors isn’t so hard to discern. As this small speck of Spain lies just 79 miles off the coast of Africa. On the same line of longitude as Florida and parts of Mexico. So creating a highly clement year round climate that is often likened to that of an Eternal Spring.

In truth though the weather can get a whole lot hotter than that. And unlike some sunshine destinations there is no climatic downside to contend with – such as hurricanes or rainy seasons. With rainfall on the island incredibly low.

As a result these conditions create the ideal environment for anyone who enjoys an outdoor lifestyle. And the island is blessed with a great deal of natural beauty - so creating a breathtaking backdrop for all manner of activities and pursuits.

Unlike other Spanish sunspots Lanzarote also remains largely unspoiled. There are no high rise buildings or advertising hoardings to spoil the view. The three main tourist resorts have all been carefully contained. And all of the houses on the island have been painted white – creating an aesthetic harmony that provides a stunning contrast with the black volcanic picon and brightly coloured flowers that are universally employed in gardens across the island.

So where should property investors be looking on the island for that ideal investment?

There are two main strategic routes available. The most popular avenue is that of buying a studio or apartment in one of the main resorts of Puerto del Carmen, Costa Teguise or Playa Blanca.

These types of units usually form part of a bigger complex – so providing amenities such as a communal swimming pool, pool bar and shopping facilities on site. Making them ideal for tourists looking for a cheap and cheerful Canary Island holiday.

Prices remain reasonable – with studio apartments available in all resorts from as little as €75,000. Which yield rentals of £200 per week upwards.

The other main investment option requires a bigger budget – but commensurately provides much more attractive returns. Villa holidays are hugely popular on Lanzarote – and newer resorts such as Playa Blanca in the south of the island have been developed specifically to accommodate upmarket villas over apartment complexes.

Private villas with pools can still be snapped up from €250,000. With good quality villas renting out from a minimum of £500 per week.

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Are Higher Prices In Our Future?

Posted on April 22, 2008
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Proper business planning is essential in any business. Some companies are better than others of course; for instance, Toyota’s planning exceeds the U.S. automaker’s planning. Toyota developed innovative technology and began to introduce high mileage hybrids when the cost of gasoline began to rapidly rise. This type of proper business planning will lead to greater success.

Personal planning is very much like business planning. A successful life can be experienced with the right personal planning. For instance, if real estate values continue to drop, a first time home buyer should wait until prices reach bottom. But if prices are going to go up rapidly, now would be the time to buy. Planning the budget, future expenditures, and proper investments are an important part of a winning strategy.

The U.S. happens to be engaging in a hyperinflationary path today. What this means is the Federal Reserve is loaning billions of dollars to ailing banks. This causes many economical problems such as inflation. Many believe inflation to be the rise of prices; actually it is a devaluation of money due to dilution. When Ben Bernanke gave his infamous helicopter speech it was stated that the Federal Reserve can dilute the value of a country’s money when they feel the need.

Currently we are on a hyperinflationary path but need we continue this path to the bitter end? Will Bush’s depression end in a hyperinflationary or deflationary disaster? In the early 1920’s Weimar Germany followed this path until their currency, the Mark, was completely worthless. In 1914 the Mark’s worth was about 4.2 Marks to equal one US dollar. It began falling and in 1920 it took nearly 39.5 Marks to equal one US dollar. The sinking trend continued until November 1923 it took 2.4 trillion Marks to equal one US dollar.

By December of 1923 the Mark was completely without value and was replaced. This is a textbook example of a country’s currency that experienced hyperinflation to the point of worthlessness. The big question regarding hyperinflation is if it is necessary to add to the continuation of prices until it climbs to infinity? No. In the late 1970’s the U.S. was on an inflationary path. This could have continued with more and more currency being printed into existence; however, the attention focused on the rapidly raising costs. Paul Volcker, changed the course from a hyperinflationary one that the country was going down.

Unfortunately we seem to have found our way onto this path again 28 years later. Will we be able to stop the momentum in time or will like Weimer Germany in the 1920’s? Will cheap auto insurance become not so cheap? Will all prices go to absurd levels? Can we stop it and if so, when and how? Stay tuned.

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Evrything About Loan Process

Posted on April 22, 2008
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I have a web that explains the mortgage loan process and I thought it was comprehensive but I get at least one question a week about the loan process. Maybe it is confusing because many things happen in parallel.

First of course, you should shop interest rates and find a local mortgage broker that you feel comfortable with, is experienced and reputable.

Application:

You should go into the brokers/bankers office and you fill out a 1003 (loan application). You should also bring in your bank statements, retirement accounts, 401ks, W2s and tax returns and what ever else the Loan Officer requested. The Loan Officer makes copies and gives you back your originals.

An application can be filled out on line but I really don’t recommend you do that. Filling out an “on line” application is ok if you know whom you are dealing with and they are local. This could possibly save you a trip to the office but you really need that eye to eye contact. You should never just fill out an application on line if you don’t know who they are or if they are not local (even if they are a major branded company). Do not complete any request that suggest multiple offers as these companies sell your information over and over. This is not good.

During the time you sit with the loan officer he will review your documentation and with most companies he will pull your credit report while you are with him.

The LO will tell you “based on the information he has” that you qualify for “this type” of loan. He should also at this time tell you about all loan types you qualify for. He will also discuss interest rates and terms. He will have you sign several disclosures.

After the complete discussion of your options you guys should decide on your course of action. He should at this time give you a GOOD FAITH ESTIMATE. The law says he has three days to do this but now is the best time. He should go over every item to make sure you understand the document. In fact, if he doesn’t, I would seriously ask him why not. When this is done he puts all your official paper work in the file and turns it over to the processor.

Processing:

The processor verifies all the documents are in the file, puts the paperwork in order, enters it into DU or LP (automated computer systems). When the data is entered an automated approval or turn down is printed out. This is always “subject to” supporting documentation including appraisal, inspections, and title work.

The processor then verifies employment, verifies residence, orders an appraisal, and orders a title. I won’t go into the documentation requirements here but this is when things start to happen in parallel.

After the processor has received all these verifications back, the appraisal, and basic title work, they will review the file again and if it still qualifies they will forward the file to the lender’s underwriter.

Note: At this point she does not have a title policy or guarantee, but the title company has reported that there are no clouds on the title. Shame on the processor if she forgot to order this because it can delay your loan later. The actual title policy is not issued until later when the underwriter gives a “clear to close”.

The Underwriting Process:

The lender’s underwriter then reviews what is in the file, runs the numbers, and verifies that all of the documentation is present and that it supports the DU or LP approval (automated underwriting systems).

They also review the appraisal and the title at this time. This is part of the underwriting process. If there are problems in the appraisal review or title they will address them to the processor.

The processor will communicate with the LO and appraiser and/or title company to resolve the issues. This is part of the underwriting process. The processor collects the requested “stuff” and then forwards all information to the underwriter.

Only when the underwriter is happy will they give an “ok to close”. This ok is usually subject to receiving the title insurance policy from the title company. The title company faxes or transmits electronically the info to the lender. Then the Lender sends the closing documents to the closing company. This can sometimes take two to three days.

You have an appointment to close. You sign the documents, your loan is closed and you get the keys.

Processing should only take a week after you have provided all the documentation requested. The underwriting normally takes about 14 to 28 days. This time includes communicating with the processor if there are any deficiencies.

Every loan file is different; each Lender has different requirements and markets vary, so it is impossible to give an exact duration for each step.

You must understand the sequence and demand your loan officer gives you full details about what is going on. If you don’t understand, say so. This is YOUR investment. Insist on the facts. LO’s sometimes use industry terminology, ask what they mean if you don’t understand!

Article kindly provided by Wiki Magazine

Connie Sanders works with people each day helping them learn mortgage guidelines and what their best options are. Learn more about the mortgage loan process and your options at: http://www.mortgageunderwriters.com

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