Rethinking Homeownership?

A Business Insider article labeled this recent Time Magazine cover story as, "great news for housing market".  Needless to say, you're out of your mind to use a media cover story to guide your home-buying decisions.  There's no doubt that we can outsmart ourselves by complicating matters, but we can certainly do a similar disservice by taking too simplistic of an approach.

Media and sensationalism go hand in hand these days.  These dramatic statements sell product and help the bottom line.  In reality though, if you have the ability to purchase a home (especially if you're a first-time home buyer), should we really believe that buying a property discounted 50% plus at 3.5% - 4.5% interest rates doesn't make sense?  I'm obviously painting with a broad brush and can't speak to the validity of every opportunity in every market, since all deals aren't created equal and there are plenty of homes out there that still shouldn't be purchased despite how far they have already fallen.  However, there are definitely some great housing opportunities out there carrying extremely affordable price tags.  In fact, some price points make it much cheaper to own rather than to rent even when factoring in insurance, property taxes, and maintenance.

So ... no, I'm not rethinking homeownership and neither should you.  The housing picture remains grim, but don't check your brain at the door and get absorbed in this nonsense.  What's next, "Rethinking Investing?".  We all know that financial independence comes from a working wage, right?  Just ask Bill Gates, Warren Buffet, and nearly every other financially well-off individual.

CoreLogic: Home Price Index for July 2010

CoreLogic reported their home price index to be flat for July, 2010 and noted underlying weakness in housing as a growing number of markets are declining since the expiration of the federal tax credit:

SANTA ANA, Calif., September 15, 2010 – CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, today released its Home Price Index (HPI) that showed that home prices in the U.S. remained flat in July as transaction volumes continue to decline. This was the first time in five months that no year-over-year gains were reported. According to the CoreLogic HPI, national home prices, including distressed sales showed no change in July 2010 compared to July 2009. June 2010 HPI showed a 2.4 percent* year-over-year gain compared to June 2009.

CoreLogic made it a point to reiterate that the weakness in housing is spreading and the weakness is continuing to grow relative to market conditions a handful of months back:

"Although home prices were flat nationally, the majority of states experienced price declines and price declines are spreading across more geographies relative to a few months ago. Home prices fell in 36 states in July, nearly twice the number in May and the highest since last November when national home prices were declining," said Mark Fleming, chief economist for CoreLogic.

12 Month House Price Index Change: Single-family combined series

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12 Month House Price Index Change: Single-family combined excluding distressed series.

(Click on chart for larger image in same window.)

This report continues to highlight the difficulties that remain in place for the U.S. housing market.  The lack of jobs and disappearing stimulus show how fragile the overall housing market is.  Even the absurdly low interest rates aren't enough to offset the poor underlying fundamentals.

Click the following link to view the actual CoreLogic report: CoreLogic Home Price Index Remained Flat in July [Actual PDF Report].

Real Estate and Economic Links

BiggerPockets.com:
* How Does Your Bank Define “Performing Loan”?

Inman News:
* Near-record affordability in real estate

HousingDoom.com:

* Is Using A “Victim Strategy” In The Housing Market So Bad?

MSNBC.com:
* Home lending pace rises; most are refinancings

Calculated Risk:
* Lawler: Again on Existing Home Months’ Supply: What’s “Normal?”
* Fed's Beige Book: Continued growth, but "widespread signs of a deceleration"

HousingWire.com:
* Double dip in home prices coming in 2011: Clear Capital

Real Estate and Economic Links

BiggerPockets.com:
* Housing Market Insight – Week of September 6th

Inman News:
* Most bankers don't see credit easing

RealtyTimes.com:
* From "Double Dip" to Double Opportunity

New York Times (Economix):
* Mortgage Rates and Home Prices
* Interest Rates and House Prices: A Murky World

Calculated Risk:
* Mortgage Rates and Home Prices
* Housing Starts and Vacant Units
* Housing Completions will set new record low in 2010

Landlord, Tenant, and an Eviction on Rye

This kind of news gets to be awfully exasperating. When do people learn to simply get along and work together? Does everything have to come down to a lawsuit? Are the issues needing to be addressed here so insurmountable that all parties being impacted can't get into a room, have a civil discussion, and find an amicable solution? Oh right, I'm assuming that people are willing to find some middle ground. How simplistic and foolish of me!

Jamie Dimon Singing the Real Estate Blues

The Los Angeles Times blog recently posted an article titled, "Jamie Dimon's real estate woes" noting that Dimon hasn't been immune to the housing downturn either as he has had to drop the asking price of his Chicago mansion:

"The mansion, where Dimon lived back when he headed up Bank One, originally went on the market for $13.5 million in 2007. The bad real estate market has forced a series of reductions that have brought the listing price down by nearly half, to $6.95 million."

As a result of Dimon's misfortune, the author (Daniel Popper) states:

"As homeowners have struggled to modify their mortgages with JPMorgan Chase & Co., more than a few have probably felt flashes of anger toward the company's chief executive, Jamie Dimon ...... It may be some comfort to these folks, then, to know that Dimon has not been immune from the problems of falling home prices."

I'm the last person to sympathize with the likes and ranks of people like Jamie Dimon, but I don't wish him ill will or find comfort in his circumstances despite not liking to deal with CHASE bank on any level.

Unfortunately, the greed and irrational exuberance at the highest levels (Jamie Dimon's world) of these uber and / or multinational corporations has created turmoil for the vast majority of people in this country. Furthermore, countless hardworking Americans have encountered these incredibly tough times to no fault of their own as a result of this unregulated mess and the slick maneuvering these uber banks use to assess account and various transaction fees.

For Jamie Dimon, the economic mess that he was complicit in developing (or stood by allowing it to happen) has now landed like a big pile of crap squarely in his mansion's backyard. Welcome to the sober party! Unlike many Americans, I'm guessing he'll fare a little better even if he does have to get more aggressive with price drops on his modest abode.

Tony Robbins Warns on Housing and the Economy

Tony Robbins gives a "special warning" regarding where he believes the U.S. economy is headed:

" ... the financial world, as you know it, is about to change radically at levels you won't even imagine and it's coming really quick. I can't tell you when, but I know it's coming quick; sometime in the next three, four, five, six, seven months it's going to happen".

In the same camp as many economists, Robbins' is predicting more difficult times around the corner (stock market and housing). In fact, Robbin's is citing that the U.S. economy is on the cliff again as the stimulus effect is weaning.

Times are difficult, but it's certainly not productive to be frozen by fear and to concentrate on everything that's not working. In fact, it's difficult to operate at any level when your actions are being guided by fear and negative emotion. As Robbins' states, "Put yourself in a position where you educate yourself."

Positive thinking and education don't guarantee that everything will come out rosy. However, simply look around to see what fear, ignorance, and negative thinking get you. It's a waste of time and leads to many bad and uniformed decisions. We all know times are challenging. How we deal with it will largely determine how we're going to get through it. Cliche, yet true.

For obvious reasons, millions are made during the most dire economic conditions. It's our job to figure out how we're going to be one of those who prospers.

Embrace the challenge!