CATEGORY: Economy for all

Hay una burbuja inmobiliaria en el Peru? Hasta donde van a subir los precios? Que ha determinado que los precios hayan subido tanto? Es sostenible esa subida de precios? El experto analiza las condicionantes de la subida de precios en el Peru y hace recomendaciones de inversion.

Para consultas particulares escribenos a: german@24chitown.com

Agradeceremos sus comentarios.

En Espanol: Comprar Real Estate en el Peru en 2013?

Hay una burbuja inmobiliaria en el Peru? Hasta donde van a subir los precios? Que ha determinado que los precios hayan subido tanto? Es sostenible esa subida de precios? El experto analiza las condicionantes de la subida de precios en el Peru y hace recomendaciones de inversion.

Para consultas particulares escribenos a: german@24chitown.com

Agradeceremos sus comentarios.

U.S. rate on 30-year mortgages rises to 3.59%

WASHINGTON (AP) — Average U.S. rates on fixed mortgages rose for the second straight week, staying slightly above historic lows.

Mortgage buyer Freddie Mac says the rate on the 30-year loan increased to 3.59 percent, up from 3.55 percent last week. Two weeks ago, the rate fell to 3.49 percent, the lowest since long-term mortgages began in the 1950s.

The average rate on the 15-year fixed mortgage, a popular refinancing option, rose to 2.84 percent. That’s up from 2.83 percent last week and a record low of 2.80 percent the previous week.
Cheap mortgages have helped drive a modest housing recovery this year. Home sales are higher than last year, although they are still below healthy levels.

U.S. home prices are also rising. Prices for all homes, including distressed properties, jumped 2.5 percent in June from the same month in 2011, according to a report issued Tuesday by data analytics firm CoreLogic.

Builders have grown more confident after seeing increased demand for homes. In June, they increased their spending for a third straight month.

Low mortgage rates could also provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend. Many homeowners use the savings on renovations, furniture, appliances and other improvements, which help drive growth.

Still, the pace of home sales remains well below healthy levels. Many people are still having difficulty qualifying for home loans or can’t afford larger down payments required by banks.

Mortgage rates are low because they tend to track the yield on the 10-year Treasury note. A weaker U.S. economy and uncertainty about how Europe will resolve its debt crisis have led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.

To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year loans was 0.6 point, down from 0.7 point last week. The fee for 15-year loans also was 0.6 point, unchanged from the previous week.

The average rate on one-year adjustable rate mortgages fell to 2.65 percent from 2.70 percent. The fee for one-year adjustable rate loans was unchanged at 0.4 point.
The average rate on five-year adjustable rate mortgages rose to 2.77 percent from 2.75 percent last week. The fee remained at 0.6.

Copyright © 2012 The Associated Press. All rights reserved.

Fannie Mae announces program to boost Miami condo sales (sigue traduccion al espanol)

Miami I have 8 clients with over 700 credit scores, more than $15K in down payment and most of them make more than $50K a year. All of them want to buy in Miami “those great condo deals”. All of them are no cash investors and want to play vultures here in the “Ground Zero” of Real Estate. The problem was: No financing… in the buildings with those deals. In the expensive ones, where the price doubles there is financing. If you wanted to buy 20, 30 cents out of a dollar…. it needed to be cash.

Well, good news! Fannie Mae announced a new program to provide financing. Now, is Fannie Mae a bank? Is she a rich aunt from Europe?

Nop. Fannie Mae is a government-sponsored institution who re-purchase the loans that banks make. Bank of America or Chase “originate” residential home mortgages but they do not keep those in their portfolio, they originate and immediately turn around and sell the loan to Fannie Mae (or Freddie Mac) for cash. Banks do not like to keep loans (portfolio) because it drains their liquidity for 30 years. They rather turn around, sell the loans for a discount, make a profit and keep moving forward.

The problem was that if Fannie Mae did not repurchase loans in specific building due to their bad finances and number of foreclosures…. banks did not want to lend on those buildings. Then without being able to resell many sellers went to foreclosure or sold at ridiculous prices.

Now this might change. Email me to send you a list of buildings with the “Special Approval” designation of Fannie Mae. As you can see there are dates for some of those because this status might change… so do not procastinate again!!! This is a window of opportunity so take it.

Give me a call for questions, we can go into more detail over the phone.

German

847-962-0923 / german@24hourschicago.com

________________________________

EN ESPANOL

Tengo 8 clientes con mas de 700 en su score crediticio, mas de $15,000 para downpayment y casi todos hacen mas de $50K al ano. Todos quieren comprar esos “increibles deals” de Miami. Todos ellos no tienen cash pero quieren ser esos buitres que se levantan los mejores deals. El problema es que No Hay Financiamiento…. en los edificios donde esta lo bueno. Los edificios caros, donde los precios estan mas del doble alli si hay. Pero si usted quiere comprar a 20, 30 centavos por dolar, tenia que ser cash.

Bueno, buenas noticias! Fannie Mae anuncio un nuevo programa para proveer financiamiento. Pero, es Fannie Mae un banco? una tia rica de Europa? Quien es Fannie Mae?

No. Fannie Mae es un institucion sponsoreada por el gobierno americano que se encarga de re-comprar los prestamos que los bancos hacen. Banco de America y Chase “originan” prestamos hipotecarios residenciales pero no se los quedan en sus portafolios, ellos originan e inmediatamente se dan la vuelta y los vende a Fannie Mae (o Freddie Mac) por efectivo. Los bancos no mantienen estos prestamos en su portafolio porque les quita la liquidez por 30 anos. Ellos mejor se dan la vuelta, los venden a descuento, hacen una utilidad rapida y siguen para adelante.

El problema es que Fannie Mae no compraba los prestamos en determinados edificios debido a las malas finanzas y elevado numero de casas reposeidas de los mismos…. los bancos entonces no querian prestar en esos edificios. Lo que terminaba pasando es que la gente que queria vender en los mismo terminaba en foreclosure o rematando las unidades de sus edificios pues los compradores no podian conseguir financiamiento.

Ahora esto podria cambiar. Escribanme un email y les mando la lista con edificios con “Aprobacion Especial” de Fannie Mae. Como puede ver hay fechas pues este status puede cambiar en cualquier momento. No lo piense 4 veces y deje pasar esta oportunidad.

Deme una llamada si tiene preguntas y vamos sobre mas detalle.

German

847-962-0923 / german@24hourschicago.com

30-year interest rates hit a new record low

WASHINGTON – Dec. 4, 2009 – The average interest rate for a 30-year mortgage dropped to a record low of 4.71 percent this week, pushed down by an aggressive government campaign to reduce borrowing costs.

The rate, published Thursday by Freddie Mac, is the lowest since the mortgage finance company began tracking the data in 1971. The previous record of 4.78 percent was set during the week ending April 30 and matched last week.

The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make homebuying more affordable and prop up the housing market.

Despite the government support, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent downpayment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders across the country. Rates often fluctuate significantly, even within a given day, often tracking yields on long-term Treasury bonds.

This week’s drop reflects a rush of investors into the security of government debt after concerns about financial trouble in Dubai drove investors to safe harbors. But rates climbed back later in the week, and analysts say they are likely to remain volatile.

“There are no guarantees that mortgage rates are going to stay at these low levels,” said Greg McBride, senior financial analyst at Bankrate.com.

And millions of American families have not been able to take advantage of them, particularly in the areas where home prices have fallen the most.

About 11 million households, or 23 percent of homeowners with a mortgage, owe more on their home loans than their house is currently worth according to First American CoreLogic, a real estate information company.

That makes refinancing difficult.

While the government has launched a program designed to help these “underwater” borrowers, only about 140,000 homeowners have used it so far.

In Orlando, mortgage broker Chris Brown says the low rates are a boon to first-time homebuyers who can qualify for a loan. But he says he isn’t getting much business from homeowners looking to refinance.

“Most of the people that could refinance probably have” done so, he said. “Rates have been artificially low for quite some time.”

The average rate on a 15-year fixed-rate mortgage fell to a record low of 4.27 percent, from 4.29 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.19 percent, up from 4.18 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.25 percent from 4.35 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.

Buyers and homeowners who want to refinance are picking up their phones. Mortgage applications rose 2 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday, driven by a more than 4 percent increase in purchase applications and a nearly 2 percent increase in applications to refinance existing loans.

Copyright © 2009 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved.

US$8,000 First Tax Home Buyer Tax Credit extended until April of 2010

Couple giving two young children piggyback rides smiling
Congress has finally extended the first time home buyer tax credit into 2010. President Obama signed the bill into law yesterday. Here are the specifics so you can see if you qualify:

– You need to have your contract ready by April 10th, 2010
– You need to close on this purchase by July 1st, 2010
– First time home buyers are defined as anyone who has not owned a home for the past 3 years.
– If you will buy in 2009 you will get your US$8,000 tax credit after you file your 2009 Tax Returns in 2010.
– If you will buy in 2010 you will get your US$8,000 tax credit after you file your 2010 Tax Returns in 2011.
– If you own your home for more than 5 years and you want to buy a second one, you will receive a US$6,500 tax credit.
– The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.
– The purchase price of the home must be less than $800,000.

Text me or give me a call if you have questions 847-962-0923. You can also email me to: german@24hourschicago.com

German

“Be a millionaire with Real Estate in Half an Hour or your money back guarantee”, a quick comment about those midnight infomercials.

Retro TV Commercial

A few weeks after a tremendous amount of traveling, I couldn’t sleep very well so I started zipping the remote at 3 a.m. and I was amazed/annoyed!!! There were a bunch of guys talking about these “Magic Real Estate courses” with zero money down, no credit, and no income necessary to buy, rent, sell or flip showing all these amazing homes, cars, beautiful women, beaches, boats, all the “things that we dream about”. You just need to pull out your credit card and call now!!!

It came to my attention since I do Real Estate for a living. I bought a couple of those courses to see the “magic formulas” and I found out that there was a lot of marketing and not as much substance. The advertisement alone looks to me misleading: “you can buy even if your credit score is horrible, if you filed bankruptcy or if you do not have a job” It reminded me of the factors that caused the Real Estate bubble and of the “car salesmen” of Real Estate who are a disgrace to the profession. It reminds me of a happy family that is being cheated and disappointed by a “consultant” who has no idea of reliable advice.

So is anyone ready to deal with vacancies, evictions, liability issues and housing repairs with no money down and no reserves? Is anyone ready to find good financing, deal with appraisal issues and markets that go upside down?… A housewife who barely has a high school diploma or a guy who can barely handle arithmetic is ready to handle million dollar deals. Sorry, but I am little bit skeptical. Licensed Realtors and Mortgage Loan Officers, many of whom have college educations, got many people in trouble with loans that they couldn’t afford. I think it might be irresponsible to suggest Real Estate as an easy business for many people. Even if they tell you “Yes, but there is a 1-800 number and you can ask everything there to dedicated specialists”… oh really? Someone in some town of Arizona is going to tell me how to deal with problems in Waukegan, Illinois or in Hialeah, Florida?

The people who read my blog are people that I love: friends or clients. I do not want them or you to get ripped off. In the same way that there are no magical pills to make you lose weight, there is no secret $199 mail course that can teach you how to be a millionaire in 30 minutes. Let’s get real please!

Here are some points that you should consider when investing in Real Estate:

-Do you homework: understand all the specs of every single deal, since all are different!!! Crunch the numbers, study the market, statistics, trends, demographics, etc. Do not let computer software tell you an undisputable truth.

-Be on top of things. One of these gurus said that “collection is automatic”. Really? So if I put “any tenants” I do not need to worry that they won’t pay and that the income will flow from their checking account to yours. Again, Really? I wonder if he understands the word “lay off”, bad character or unemployment. Also, I did not hear anything regarding building reserves to cushion your vacancies or evictions or foreclosures.
Build a healthy portfolio of income generating properties takes time. It does not happen automatically or overnight.

-Be your own property manager “hands on” to get to know the business. If you never handled these matters you need to learn the trade like an apprentice. You cannot hire a Property Manager if you do not know what it is involved. Like all of the midnight TV guys… he might rip you off.

-Get a specialist who you trust and who has a verifiable success record in Real Estate Investment. You do not need to use me, but you need someone to walk you through the first deals so you can ride the bike alone on your own. If you get bankrupt on the first or second deal, there will not be many more to come.

Real Estate Investment is great. You can make a lot of money, but it is not for everyone. You need to be “hands on”, detail oriented, cost cautious, knowledgeable and hard working. I know these infomercial guys hate “hard work” (that is why they sell courses on TV) but there is no other magic way. You need to work hard and learn the trade before you will actually switch into automatic pilot. Four years ago in the middle of the Real Estate Forum I was called an “Old timer” and “Risk Adverse Old School Investor” by a bunch of South Florida’s fancy investors. Yes, I proudly am. Guess what??? My Real Estate portfolio in this current crisis has a positive cash flow… 2 out of 4 of those guys filed for bankruptcy last year, the other 2 are in serious trouble. Like Anthony Robbins says: “Massive Success is the best revenge”.

I would love to get a phone call from you to talk about Real Estate. I hope you are doing well with your investments and do not forget to have fun with them.

Have a great and profitable week!

German

Pssst…. Have you seen interest rates recently? I have an updated to the hour chart below on the right side of the blog, if you want to take the pulse to the 30 years-fixed.

Timing the market

Opportunity
I wonder why I did not buy Citibank stock when it went down to less than a dollar? Greed or fear? I was there in front of my E-Trade account did my fundamental and technical analysis, did all my home work, knew that the government will not let it die, my gut feeling was saying go for it!, I remember that afternoon… after 2 hours of thinking I stood up of my desk and said: Let’s wait.

You know the rest of the story. I regret that did not do it now. The opportunity is gone.
I have a few clients who asked me: Hey German when do you think the Real Estate market will bottom up? I usually tell them: “On Friday, September 4th, 2009 at 4.02 pm. There will be a huge thunderbult in the skies and the sun will come out shining! You will know exactly then that the recession is over and the prices will start rising after that exact moment”.

Point to make is there is no way to calculate the exact time to buy. You can analyze and then take advantage of a favorable environment. Do your homework, do some research and find out yourself if this is a good moment to do it:

– Interest rates are low. Yes 5% or 6% is not 4% but is less than 18%. Remember or read about Carter and Reagan times. I love the 80’s but I did not love this part.

– Inventories are still at all times high. Foreclosures makes the homes next door to decrease value and there are a lot of those so the prices are still cheap. Since developers are not building now and will not do it for the next 5 years (banks will not finance new projects), chances are that there will be a deficit in years to come when all the inventory dries up.

– Unemployment is at 10%. Not at 25% because that is a depression but with 10% people are “afraid” so there are less buyers out there. So if you are secure financially and confindent you will find less competition and find that great deal.

– Inmigration and a growing population rate is here to stay. In Chicago there is and will be lots of international inmigration and midwest inmigration. Just ask your neighbours in Michigan and Ohio where they kids will go to study or work. Florida will receive plenty of baby boomers and inmigrants from all over the world with the years to come. Location works also to decide what is the city that you will pick to live.

Yesterday we were looking at homes in Brickell with a few clients. The sweet deals, that corner units with that view to the bay at $180K are long gone… the whole tiers. The smart investors are almost done shopping. I am talking about the quiet ones, the ones with experience and money. They never make the news but own the prime properties in all the cities. The ones that buy “value” not fashion or price are buying now. Do you want to look for another “Sign of the Times”?

Have a great Labor Day weekend all!

German

Loan Modifications: What is the effect on your credit score?

Playa del CarmenGood morning!!!
Last week I was working in Playa del Carmen, Mexico and several people asked me about the effect of the now popular “Loan Modifications” on their credit score. Here is a good note about that. Please do not hesitate to give me a call if you have questions: 847-962-0923. German

Sun Sentinel Editorial Board
August 21, 2009

Facing one of the worst housing markets in memory, struggling homeowners now have another incentive to walk away from an investment gone bad.

It’s hard enough to modify terms of a home mortgage, despite the federal government’s efforts to ease those procedures for individuals desperate to hold onto their houses. Unfortunately, the “Big Three” credit bureaus — Equifax, Experian and TransUnion — have issued new guidelines that allow lenders to report new mortgage loan modifications as “partial payment status,” a designation that could lower an individual’s credit score by more than 50 points.

A loan modification doesn’t reduce the principal, but makes it easier for homeowners to repay what’s owed by reducing the interest rate and stretching the length of the original loan. Credit agencies are paid to assess credit risks, and that includes people who can’t pay their mortgages. But these are extraordinary times. Penalizing a homeowner for successfully re-negotiating a loan could have the unwanted consequence of inducing more foreclosures.

First American CoreLogic, a real estate analysis firm, more than 15 million mortgage holders, or 32.2 percent, are “upside down” on their mortgages, meaning they’re paying more than their houses are worth. In Florida, the negative-equity picture is worse at 49 percent, and the figures are even higher in South Florida, hovering around 51.5 percent in the Miami- Fort Lauderdale area.

Now, thanks to the credit-rating agencies and an indifferent government bureaucracy of financial regulators, there will be homeowners who will unnecessarily become credit risks. While a loan modification provides a better outcome than a short sale, foreclosure or bankruptcy, punishing homeowners who work with their lenders is counterproductive.

If the credit bureaus won’t change the guidelines, the Federal Trade Commission should. If not, perhaps it’s time to consider President Obama’s proposed Consumer Financial Protection Agency.

BOTTOM LINE: Give homeowners a break.
Copyright © 2009, South Florida Sun-Sentinel

The recession is over. Find out when you will feel better.

Yep! It was released a few hours ago: the unemployment rate is only 9.4% and it was expected to be 9.6%. The free falling stopped so why aren’t you get a job yet? Or why don’t you have more money than a couple of months ago? Well, it takes some time… companies will not start hiring people like crazy overnight. They will be cautious since most of us learnt a lesson out of this mess. I think all of us will be more carefully from now on. This will determine an slow grow in the near future.

In past recessions the main economy drivers were housing, durables and exports. Internal demand accounted as much as 70% of the economy. Not this time, at least not in the near future. There have been structural changes with this crisis. People and companies will spend and hire much less than in the past. America looks like will become more frugal which I do not think is all a bad thing. Let’s keep ourselves focus and do not be over optimistic. All that I am saying is that it looks like we are not going anymore down. The way up will take a few years. That is my opinion.

Where are the opportunities in Real Estate in this new environment?

1. The “amazing deals” are almost gone so hurry up. Banks became smarter so they are not “writing off” bad loans and getting ride of the house for nothing anymore, now they learnt to “work things out”.

2. Rates are still low. Yes they are. Jimmy Carter was the Obama of the beginning of the 80’s. After his management rates went around 18% for a mortgage so please do not complaint when your loan officer offers you 6% 30 years fixed.

3. Now we have the Commercial Real Estate crisis which is a great opportunity for buyers like you. Because demand is low many retail businesses lost their properties. You can step in buying for cents out of a dollar… same like in residential. Buy mixed use properties, strip malls or whatever good piece you have in mind. Call me to analzyze it together.

Do not unbuckle! This road to recovery will be bumpy but we will be fine long term. Have a great weekend!

German

How you can take advantage of the Inflation?

If you lived in Peru or Argentina by the second half of the 80’s beginning of the 90’s you know what it is. It means that every month your salary is reduced not because of wage cut because your purchase power decreases due to the increasing prices.

I came to the US on 2000 and I remember buying a gallon of milk in Wallgreens at $2. Sometimes It came down to $1.90 so I used to buy a couple on the corner of Church and Skokie Boulevard in Skokie, IL. Now like the Bob Dylan’s song “Times are A-changing”… in the Publix of Brickell in Miami, FL or in Tony’s of Humboldt Park Chicago, IL you find Dean’s or Prairie Farm gallon in between $4 till $6. It took 50 years to get from 30 cents of dollar the gallon until $2. It took 9 years to get to $6.
I am not a hardcore milk fan, so what is the problem with this? The problem is that if you are the average American your income did not grow 300% in 9 years. Further more it looks to me that this is just the beginning.

Without getting deep into Economic concepts. If you increment M1 (supply of money) in the economy, (this means paper dollar bills in plain English) without and increase in good and services of the economy then prices will increase. More simple, if Uncle Sam start printing too many dollars, the green buck will depreciate. Simple law of offer and supply… too many paper bills then they are less worthed.
It would be nice if your salary would be indexed so every month you will have an increase in your salary just to keep up your purchase power. Purchase power is how much you can buy with a certain amount of money. But it is not and it probably will not be.

The inflation will hit Main Street America. Milk will probably increase 8% a year consistently as soon as the economy starts moving again. Same with other prices in the economy. I wish I can be wrong about but I lived in the 80’s in Peru, I lived in a Hyper Inflation environment and it is not fun. My dad used to own a hardware store and he used to need bags of paper bills to pay suppliers. He needed two drawers in the cash register and it was sad to see my old man being nervous next to the 30’s of each month with a package of cash ready for other people.

How can you take advantage?
See the environment now and project yourself economy 10 years ahead. Let’s identify an opportunity:
– Rents are cheap because there was built too much housing inventory during the last years. Will not be like that forever since population keeps growing and there is still a lot of immigration not only from other countries also from countryside.
– Interest Rates are still low now: 5% 30 years fixed average. This is not normal! Rates were around 18% during the 80’s and yes people still borrowed money.
– Home prices are at the historic bottom. Also this will not be like this forever.
So what about if you buy a property with several units on it and lock it in a 30 years fixed loan. Your payments will be fixed for 30 years and…… YES!!!! Rent prices will go consistently up just with the inflation effect. If you do not see it yet… let me a do a quick example:
A 3 flat in Humboldt Park (Chicago, IL) with easy access to public transportation will give you a monthly rent roll now of ($800+$700+$600) = $2100 and your mortgage $1300 plus ins and taxes $400 so you make $400 a month. After the recession your payments will increase BUT YOU PAYMENT of $1300 will remain the same. Taxes and Insurance will go up too but the inflation effect will be much higher on the rents.

Please take advantage of the inflation factor, give me a call and let’s make some money for your future!
German
847-962-0923
www.germanllanos.com

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