Stocks, and Bonds, and Mortgages Oh My: Sunday Morning Thoughts 10 October2010

This week has proven to be a time of many revelations.  The stock market has seen the dollar gain strength to only start falling short of expectations.  The Fed’s are possibly going to lower interest rates to help the slow moving economy to pick up speed.

And now President Obama has had to veto a bill that would make it harder on already suffering home owners when it comes to foreclosures.  The Senate obviously did not read the bill before voting.  As for mortgages-whether defaulting or originating -things are about to get even trickier and stricter than before.

What comes to mind, how all this will effect my investments, and is the New Reform Bill currently working?

The bill is slowly being implemented.  Keep you eyes and ears open for more updates.

The Bond market is rumored to be on the verge of a bubble about to burst.  But as you watch the video, predicting a bubble that will bust, is not as easy as you think.

Is A Bond Bubble Forming? Economist Burton Malkiel talks to Steve Forbes about the trouble with bubbles.

A final note on mortgages, as we have all heard Bank of America, JPMorgan Chase, and Ally Financial are placing some of their foreclosures on hold.  No doubt to check the paperwork.  Although halting the paperwork, will not halt the foreclosure process.  So once the paperwork is in order then the foreclosure will happen.

Many courts have been throwing the request for foreclosures out, due to multiple errors in the paperwork.  A temporary pause could cause pressure later.  Like when water is held by a dam then the dam is removed, the rage of the water causes more damage than if it were allowed to flow freely in the first place.

A false lift to home prices could happen in some areas if almost all of the foreclosures are halted for an area with a lot of impending foreclosures. If only a few are halted then the impact would be slight to minimal at best.

By no means will the temporary halting of foreclosures turn this better than buyers market into a strong seller’s market.  Instead of buyers stopping a new purchase of a home, one may want to take advantage of this new Bad News and invest through a short sale.

The lenders may be more apt to work towards getting a short sale approved instead of losing money on a halted foreclosure.

Why Real Estate is a profitable tangible asset for a diverse portfolio: Sunday Morning Thoughts

Although consumers are spending less and new housing contracts have also fallen off, investing in real estate can still be a profitable asset in any portfolio.

We are now in a buyers market with many deals all over the place.  So many deals in fact that no two investors ever actually have to out negotiate each other for a deal.  No need to be one of the first to find a deal, although looking for lucrative deals now which will have considerable appreciation in the future is a better strategy for our current real estate market.

Let’s take a better look at this buyers market.  It has evolved into a buyers market because of the abundance of foreclosures, and even more foreclosures to come.  All the foreclosures are not just from the housing segment.  The commercial segment is now beginning to have the projected foreclosures and will continue to rise.

Currently many people are plagued with the thought of the economy getting worse, which it will with the lessening of consumerism and an increase in bad debts.

To keep the housing market from falling further down the Federal government might extend the homebuyers tax credit until the spring, losing it now will only cause a rapid slow down in home purchases.

With so many housing deals, why haven’t we seen an upward move in the housing industry for purchases?

Simple answer, credit tightening and a larger down payment required by lending institutions.

An investor can profit from this seemingly bad situation by being a private lender.  The purchase agreement would not be for thirty years like a conventional loan, but for a period of five years with an extension of contract if necessary.

This would give the investor a monthly or quarterly payment which more than likely will exceed the interest amount of a CD, money market, or even their current investments.

There isn’t a guarantee of payment but the tangible asset is part of your portfolio.  If the buyer were to not make the payments, in effect disregarding the contract, then the lender could foreclose on the property.

The answer in how to avoid a negative experience is to only hold a loan for a person deserving of credit.  Lending institutions are having money issues and are turning away many good people.

So at this time, in this buyers market, we have banks in money crisis not able to lend, people with 15-20% down payments and stable incomes but unable to get home loans.

Private lending makes more sense than playing the stock market in an unstable economy.

Visit us at http://www.BackedbyRealEstate.com to sign up to be a private lender.