The book you hold in your hands can assure your success as a real estate professional. It offers you an amazing insight into the landmines which are in large part responsible for the real estate debacle we see now and it also introduces you to a never before available tool – The Home Value Predictor. This tool will give you micro data at the local level, both historical and predictive, that will set you apart as a savvy and super informed professional.
Clearly we are in unprecedented times. The good news is, there are opportunities available today that have never existed before. If you are one of the ones who has access to the tools that will help you take advantage of those opportunities, you can create your own financial legacy and assure well being for yourself and your loved ones.
To many, this may seem like the worst time to consider real estate investing, especially given the latest doom and gloom headlines. Having thrived in the real estate industry for over 20 years, I can honestly say things have never been this challenging. Realtors, builders, lenders and even the average buyer and seller feel the pain, as they worry about an uncertain future.
Like many, I can’t help but ask: Why didn’t more people and industries foresee the major 2007-2008 real estate declines in local markets? And how did it happen that seriously deficient mortgages have affected Wall Street and credit issuers all across the nation, and indeed the world?
The answers are varied, but they do have one common denominator – incomplete and/or inaccurate information which resulted in erroneous assumptions.
We’ve learned how mortgages were bundled into traunches and rated. The bundling of variously rated mortgages together was expected to have greatly reduced risk overall of mortgage backed securities. However, the fundamental premise of this bundling was seriously flawed. And now we see the ripples in the pond, as these securities fail to perform as promised.
As investors we wonder: Will house prices continue to drop? As of this writing, many experts believe they will. Indeed, famed Professor Shiller of Princeton (co-founder of the Case-Shiller housing index) believes housing prices still have a huge downward turn in store. What is still overlooked, however, is that even today’s best analysts are using failed data, so their predictions are suspect.
In 2007 prices fell nationally more than 5%. There are millions of vacant properties in the United States. Although foreclosure rates have already doubled (from 2006 to 2007), in parts of California and other former “hot spots,” it’s just the tip of the iceberg. Industry experts predict between 1.3 and 1.5 million foreclosures by the end of 2009 due to sub-primes and Alt-A’s. This will further increase excess housing inventory and force prices even lower—by as much as 10 to 15%. Going forward, there is yet another round of resets scheduled to hit in mid-2010 and beyond.
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Prior to its acquisition by Bank of America, Countrywide slashed its payroll by 12,000 individuals and tapped emergency reserve credit lines to help weather the storm. All but one of the large publicly traded builders posted losses in 2007.
In response, many builders have slashed both prices and work forces to compensate for falling demand. Some industry analysts predict that 54% of workers in the building industry will lose their jobs before the crisis is over. And we’re probably only half way through the correction as of 2009. In the end, this will likely be the largest housing correction since the Great Depression.
Like others, I am not without trepidation. Real estate is my livelihood. In 2005, I had to hire staff just to keep up with emails and answer phones, which never seemed to stop ringing. Today, like most real estate professionals, I pound the pavement and am simply grateful to hear the phones ring!
You might be asking: Who wants to buy when house prices are falling? Or invest in a MBS (Mortgage Backed Security) when the asset is declining and the expected yield is at huge risk? The question to consider is: what is the true yield of any asset when it is declining in value, and does the current risk matrix take true local risk into account?
Most importantly, are the risk analysts relying on historically false assumptions? To compound the global uncertainty, buyers do not feel safe in their jobs, lenders are reluctant to lend, and the rules of obtaining any kind of credit are changing almost daily.
The real estate market is not a mystical concept. Or is it? Like the stock market, real estate is predictable within a very specific range, when there’s access to currently accurate, reliable and relevant information available.
The key question is: But what is this range? When a database is ample enough to let us collect, sort, and filter economic and market information related to hyper local areas, including price movement, it is possible to identify profitable opportunities in any investment environment—even during a massive correction like the one we are currently in.
To thrive in any investment environment, what is needed is a real estate tool unlike any yet seen and far more advanced than the simple Automated Valuation Models currently touted as the “optimal tools of our time.” The Home Value Predictor is that tool.
Now for the good news. With the continuing flood of foreclosures and an already massive inventory, this is an excellent time to invest in real estate. To do that successfully, however, you need a tool that can sort, filter and ultimately analyze the most current information to help identify profitable properties at the hyper local level.
The media tells us that the market is in a complete melt down. Yet, five million homes were sold in 2007. And in 2009 many of the sold homes were sold as short sales (meaning the lenders agreed to take a lesser payoff than the mortgage called for.) This provided fantastic opportunities for savvy investors or buyers. Even if we assume that only 1% of those sales were genuine profit opportunities, it means that 50 thousand units transacted represented ample profits.
This book is not about lists of available foreclosed homes. Nor it is about current deals, or how to make you feel like you have just attended a Tony Robins seminar.
Rather, this book is about the creation of an accurate analytic system – the Home Value Predictor – which is a tool that lets you, as a real estate professional or buyer, understand a property (and its immediate local market) from the micro ground level up.
The information you hold in your hands provides a comprehensive understanding of factors that WILL influence a property’s present and future value – and therefore assure your success in the market.
This book has two parts. Part I will explain why the market is crashing on all fronts, and Part II will afford a solution that will help you thrive in any local market, armed with detailed and comprehensive current local information.
Opportunities are prevalent, but you must know where to look. What the mass media overlooks, and where you can profit, are the still very stable “micro-climates,” where foreclosure rates are low, job stability is high, and school districts are sound.
What many of us are up against is that the media generally tends to overlook these possibilities in the current climate. The reason is simple. The media, like many consumers, only has access to free information and the free information is historically faulty or incomplete.
If lenders had access to the most current, relevant, reliable and accurate information, at a hyper local level, there might not be almost 18 million vacant housing units, today’s record foreclosures and a looming sub-prime loan crisis that could literally drag the entire economy into depression.
It all comes back to the data. While a great deal of local property data is available and free, this data is not sufficient in its current form to accurately predict the soundness of a real estate investment.
In this book, you will learn what went wrong and why. We will analyze the role that builders and lenders played in the current crisis. I will also review our current real estate tool options and why they failed to help us predict this entire mess. Finally, you will learn what the ideal real estate tool looks like (the Home Value Predictor) and how it can help any real estate professional, investor, or buyer thrive in this or any market.
The fact is that real estate represents a growing portion of many of our investment portfolios. Its importance will grow in the coming years as more institutional investors
re-enter the market and begin to thrive once again.
Now, just imagine that you had a tool that could zero in on the most profitable stock opportunities in the coming year—and that it actually worked.
This book introduces just such a tool as applied to real estate and our intent is to help you grasp its power, precision and reliability. Our goal is that this tool will guide investors through the complex world of real estate like never before. Anyone using this tool will become an instant expert with all the latest, most relevant and most accurate micro local economic and market information available, with a means to make sense of it. And you, as a user of this tool, can guarantee yourself a very prosperous future.
Finally, our tool is designed to let you know the future value changes down to the Census Block Group level.
This is my passion, and why I wrote this book. What began as a graduate school project for me soon turned into an obsession that has inspired me for the past several years. With this tool, I am confident than anyone can thrive even during these hard times and in any market.
Now, let’s learn what really affects home values and determines price movement.
