CH-CH-CHANGES In Real Estate Kevin Hall – February 20th 2009
Overview • New Terms • Practice Issues • New Facts of Life- Practice, Principles and Legal Aspects • Finance – Economics • Just for Fun • Predictions • Things I need to learn more about
NEW TERMS • Broken Condo • Jingle Mail • Buy and Bail • Cash For Keys • Sheeple • Confumbo – $417,000 to 546,250 • Pent-up Ability • Positive Cash flow Investments
Real Estate Practice • Marketing – Diminishing Half-Life • Changes in how we access information – • Pre-Baby Boomer – Find an Expert • Baby Boomer – Consumer Reports – Direct Response • Post Baby Boomer – Blogs - Forums • Death of Print Advertising?
Marketing Ch-Ch-Changes • Web 1.0 to 2.0 to 3.0? – Ads to Banners to PPC to social marketing & beyond • Viral Marketing –JC Penney DogHouse http://www.youtube.com/watch?v=SecVCh9dg4I • Social Media • Face Book • My Space • Linked In • Blogs,Micro-Blogs – Twitter • Widgets
Practice-Principles-Legal Aspects Ch-Ch-Changes • SB7 – 90 days added to NOD !!! • Bank Addenda & Online submission of offers • Per Diem • Auctions • Loan Modifications • Valuation, BPOs • Short Sales • Tax Changes – Federal v. State on Forgiven Debt • Private taxes – Lennar Homes
The Big ChangesFinance & Economics • What the Heck Happened? • Is Gravity just a good idea or is it a law? • The Law of Unintended Consequences • The Law of Supply and Demand • The Theory of Relativity • Kevin’s Caveat – The more I research the less I know • Kevin’s 2nd Caveat,Red State Blue State
The Law of Supply and Demand • Analogy – This is America’s Finances on Crack • When excess becomes the norm • “Too many dollars chasing too few goods” • Remember the Basics – Money Supply • Interest Rates • Buy/Sell Treasuries • Reserve Rules • You cannot legislate Asset Value
The Law of Unintended Consequences • Post 9/11 Federal Reserve Actions • Repeal of Glass Steagle • Uber Leverage – Banks & Consumers • 80/20 loans, vs. FHA & VA • Sub-Prime, vs. FHA • Congressional Pressure, “I’m here from the Government and I’m here to help you” • Corporate Compensation –short sighted • Government interfering with the foreclosure process – ultimately works against the consumer
Theory of Relativity • Relationship between housing and other goods and services • Relationship between Rents and Mortgages • Relationship between leverage & income – Debt-to-income • Lender or Lessor? • The Market will try to find equilibrium
Who is to Blame? Pt.1 • Government – • Regulation vs. Manipulation, failure to remember the law of unintended consequences. • Home ownership is a privilege not a right. • Asset Value cannot be legislated • Permitting banks to be over leveraged • Madison Avenue • AMEX Commercial • Flip this house-type shows • Late Night experts
Who is to blame? Pt.2 • Consumers • Big Screen Plasma T.V.’s are not constitutionally guaranteed • Homes as ATM’s • I don’t want to keep up with the Joneses, They can try to keep up with me! • Hey, I’m the victim here!
Who is to blame? Pt. 3a • Banks & Lenders • Excess is best – over leverage • From MBS to SIV’s CDO’s CMO’s Tranches & more • Shell Game aided by rating and insurance companies • Next Major Concern – CREDIT DEFAULT SWAPS
Who is to blame? Pt. 3b • Real Estate Lenders • Abandoning reasonable underwriting • Fog the mirror underwriting Liars Loans • Too low of a bar of entry • Real estate agent acting as lenders • Offering excessive gains for bumping margins etc. • Pay Option Arms – • “Spin” Deferred Interest & Pre-Payment Privilege
Who is to blame? Pt. 4 • Real Estate Agents • Agent acting as Lender • Relying on the “Wealth Effect” • It is different here/now • Buy now or you will be priced out forever • Ignoring the laws of relativity – sometimes renting does make more sense
Just for Fun • SubPrime Primer – unedited http://www.youtube.com/watch?v=4PDNngQsEUE • SNL Bailout skit – unedited http://www.snlbailout.cx/ • Housing Downfall – Hitler Version http://www.youtube.com/watch?v=bNmcf4Y3lGM • Fred Thompson – Spend Spend Spend http://www.youtube.com/watch?v=wu8r1Gse--0 • Peter Schiff vs. Arthur Laffer http://www.youtube.com/watch?v=LfascZSTU4o • Time Report – 25 people to blame? http://www.time.com/time/specials/packages/article/0,28804,1877351_1878509_1878508,00.html
Predictions • This will never happen again! (right) “Those who cannot remember the past are condemn to repeat it”–G. Santayana • What will it be called next time? • Watch the Sheeple • Inflation is inevitable • Underwriting will make provisions for folks who lost their home to foreclosure / short sale.
Random things that I want to learn more about: • Fibonacci • Lie to me – to tell when the CEO’s are lying to keep from spooking their investors • Short selling & option trading • Thomas Jefferson - "I believe that banking institutions are more dangerous to our libertiesthan standing armies. If the American people ever allow private banks tocontrol the issue of their currency, first by inflation, then bydeflation, the banks and corporations that will grow up around the bankswill deprive the people of all property until their children wake-uphomeless on the continent their fathers conquered."