Real Estate Investing

A friend of mine recently put to paper (or put to keyboard and datastream in this case) an idea she and her husband discussed on a recent vacation.  Nothing short of brilliant, the idea is one that I fervently hope catches fire in the minds of the people in charge of fixing the foreclosure crisis we are facing across the country.

With 1.2 million jobs lost so far this year according to today’s unemployment report by the Labor Department, loss of employment is - of course - the impetus for not being able to make your house payment.  Katherine Coble’s solution,

If you become unemployed while holding a student loan, you can fax proof of unemployment to some office somewhere and then be exempt from making those loan payments until you get a job.  That’s called an automatic stay.

Why can’t we do the same thing with mortgages?   Especially now that most mortgages seem to be owned in some way by the government (much like with student loans.)  The default and foreclosure rates would surely go down if people weren’t technically falling behind on their mortgage payments as they looked for work.  The downside for the lender is that they don’t get their money–but they weren’t getting it anyway.  The downside for the borrower is that they aren’t paying down their mortgage during those months.  But they likely weren’t able to pay it down anyway.

Clearly, there would need to be time limits on this type of automatic debt relief for people who find themselves in the unemployment line.  However, that people would have a chance to hold onto their homes after going through the devastation of a job loss may be a cornerstone of rebuilding consumer confidence.

Are you listening, powers that be?

Photo by respres courtesy of Flickr Commons.

I feel kinda bad for President-Elect Barack Obama.  Seriously, who would want the daunting job he is now facing?  In my own little bubble, I only worry about housing - what’s in store for the real estate market in 2009?  2010?  Can I continue to make a living as a residential specialist?  Will my clients be able to hold onto their jobs so they can make the payments on the house I find for them?  What about my own house?  It needs some repair work, but with the pay I’ve made lately I’m doing good to keep up with just my mortgage payment, much less fix the gutters and put on vinyl soffits.

You can see all the worry I’m facing and these concerns are just a fraction of my own big picture.  That said, I can’t imagine taking on the problems of the whole nation under the microscope of the world.

So before I overwhelm myself with *everything* this new Administration will be dealing with, I’m refocusing back on the housing market for 2009.  Money Magazine Senior Writer Stephen Gandel wrote a great article where he predicted housing will continue to be slow in ‘09:

Then look at the fact that 18.6 million homes in this country are now sitting vacant, more than at any other time since the Census Bureau began tracking that figure in the 1960s. And that 2.8% of U.S. mortgage loans are now at least three months in arrears, up from 1.4% a year ago. That rate is projected to peak in early 2009.

But if a recession lasts for three-quarters of the year, as some economists are predicting, the number of foreclosures could remain high longer. Add it all up and you have another lousy year for real estate.

However, Mr. Gandel went on to say that if prices drop low enough the housing market wildcard could be investors buying up the excess inventory because they’ll be able to rent for more than their monthly payment.  Right now investors should be considering real estate as a staple of their financial portfolio.

Further while these times are exceedingly difficult for all of us, the difference between this week and last week is that the person who was elected to serve as President brings something many haven’t felt in a long time… personal responsibility.  I believe - and this is not necessarily the opinion of banks.com - that Barack Obama can inspire people to find ways to save money, to spend wisely, to get their financial houses in order.  And when this type of personal responsibility spreads, we’ll see the economy opening back up, the housing market blossoming, and the stock market recovering.

Photo by BohPhoto courtesy of Flickr Creative Commons.

Illinois Senator Barack Obama has been elected as the first African-American President of the United States.  This is a true huge moment in the history of this nation.  However, the election was the easy part… now the hard work begins.  President-Elect Obama faces a daunting task of bringing the economy back into balance so the selection of his cabinet members will be vitally important.

I agree with CNN that the first cabinet position to be filled should be the Secretary of the Treasury.  Although the campaign chiefs are being quiet about who this person would be, CNN reports on speculations for possible choices,

New York Federal Reserve President Timothy Geithner is seen as one of the leading candidates for Obama. Geithner was the Fed’s point person on the rescue of Bear Stearns and American International Group as well as the failed talks to keep Lehman Brothers out of bankruptcy.

and

Obama economic advisor Warren Buffett has also been suggested as a potential pick for Treasury secretary. And during the second presidential debate, McCain even endorsed him as a possible pick if he wins.

Two former Treasury secretaries are also mentioned among possible Obama picks - Robert Rubin and Lawrence Summers. Rubin has ruled out a return to Washington, however.

My own suggestion is Senator Kay Bailey Hutchison (R-Texas).  In a previous life, I worked for a financial assciation of which Senator Hutchison was a member when she served as State Treasurer.  She was possibly one of the smartest people I’ve known with a sharp financial acumen.  She currently serves on the Committee of Appropriations and is ranking member of the Committee on Commerce, Science, and Transportation. 

Also, Peter Lynch could be brought in as an advisor to the Obama administration.  His mantra has been, “Invest in what you know.”  That famous investment principle could be a beacon for a recovering economy.  And why would we support such a simple thing?  Because housing - real estate - is one of the three basic needs for survival: food, shelter, and clothing.  Even birds need their own nests.  Shelter is what we know and we hope that people will come back to real estate for their investment needs.

Time will tell whether President-Elect Obama does cross party lines for his political appointments.  My hope is that his cabinet choices be made because they are the best and the brightest in the various areas of responsibility, not because they happen to be of his own political party.

Photo by narcosislabs, courtesy of FlickrCommons.