Florida Mortgage Report

Top 5 News Stories of 2007

Taking a look back through the events of this year, there is been numerous stories across the US, so we look at the top stories of 2007..

#5 - Dow Tops 14,000 - Hard to imagine at this time, but back in July and again as recent as October, the Dow broke above 14,000.  Volatility remains in the markets.

#4 - Fed Moves - Since August 3, the Fed has been battling the worst credit crisis in nearly a decade and has moved to cut rates three times in an effort to bail out the markets and to keep the economy on track.  Our opinion is they over reacted as inflation already ticked higher, but time will tell for sure.

#3 - Toy Recalls - Recall after recall came out about Chinese products that contained lead-based paint, illegal pesticides, electric shock risks, and even laced with the "date rape" drug.  And most came just in tome for Halloween.

#2 - Record Oil Prices - While oil has backed off a little, we are still feeling the increased expenses in our wallets.  A lot of the increase came from the falling value of the dollar, along with fears of dwindling supplies and increased demand in growing places such as China.

and the #1 story, yet again...

#1 - Housing Contagion - Mortgage defaults, increased foreclosures, failing debt across the markets.  Between the US and Europe, more than $100B have been written off after downgrades occurred.  Add to that, we are likely to continue to see write off into next year.  The effects are spilling over into other areas of credit, including commercial paper.  2008 will likely see increased defaults in credit cards, auto loans, and more.

There you have it, no surprises as far as we can tell.  What does 2008 hold?  Who knows, but we can expect increased legislation of the housing industry, mortgages in particular, for good or for bad.  We can also expect to see more foreclosures, credit card defaults, and basically continued write offs for the foreseeable future.

Where do I see the Florida mortgage and real estate markets in 2008?

I see a slow improvement coming as reality sets in, particularly in South Florida.  I don't see a recovery per se.  Many in the real estate industry, both realtors ad mortgage brokers, will be bowing out under the financial strains of staying in business and not adapting to the new marketplace.  That can be good news for the consumer as most who fall out will be those you wouldn't want to work with anyway, though I am sure a few will be.

As for those who work in the industry, if you can adapt and persevere, you will be rewarded.  Slowing markets do not mean your business needs to slow also, rather it can actually increase in these times.  As for me and Solid Rock Mortgage Corporation, our plans are to grow in 2008 and beyond, still meeting our goal of being #1 in Broward County for mortgage planning services by 2012!

Can You Predict the Next Real Estate Bubble and When the Bubble is Over?

Dan Amoss over at Whiskey and Gunpowder makes a good correlation to various valuation calculations and the prediction of a real estate "bubble".  Namely he compares rent-to-price and price-to-income ratios to determine whether real estate is overpriced or not.

His post is about the next real estate bubble that will likely occur, showing justifiable reasons for that bubble to happen in Eastern Europe.  He uses Bulgary as his example where rent-to-price ratios (cap rates) run at just 3-4% and the price-to-income ratios are around 7-9.

If you apply those same calculations to Florida real estate, particularly South Florida, you could easily see the properties down here were overpriced and a "bubble" was due for bursting.  A bubble bursting is not a disaster, but rather a correction that needed to take place to sustain a normal marketplace.

So, when should the potential investor get in? 

When the cap rates start to look attractive again, namely getting back to around 10%.  If we start seeing cap rates greater than 10%, then properties are being undervalued, which increases the chances of making a great investment.

Why wait until 10%?  You don't have to, but 10% is a good gauge for when properties are valued correctly.  You may very well be happy making less than 10%.  You may also want to make more than 10%.  You have more options as to when you purchase, but do not try to time the market. 

Instead, focus on your investment objectives and find properties that meet those objectives.  Never forget that you make the profit on the purchase, not the sale!!!

What about the family just looking to move?

When to buy is subjective for them.  There are a lot of variables that you cannot control, including the timing of when you must move. For these types of buyers I suggest to not try to time the market and focus more on finding a home that you love and can afford.  If you find one, buy it regardless of the market conditions because you will be happy living in it and not worried about the "investment".

If you are unsure if a property meets your criteria for a purchase, contact me and I can help.  I will help ensure the property you purchase fits into your overall financial and investment plans and help you find the mortgage that is the best fit also.

What Does Being an Airline Pilot and a Mortgage Planner Have in Common?

I still get people asking me why I do both professions.  The simple answer is that I love both.  It is hard to throw away something you love, especially when you are good at it.

Well, I feel the need to elaborate a little more.  There are similarities in both professions that are what drive me to do both jobs.  Namely they both revolve around the "planning" process and success is based on how well you plan. 

In flying, we work with dispatchers and other members of a "team", including ATC, though ATC has less of a role outside of the USA in many cases. 

Dispatchers plan a flight based on all of the ever changing variables:  winds, weather enroute, etc. and files the flight plan with ATC.  The flight crew (pilots) review the plan to make sure it makes sense and make adjustments if needed.  Then the pre-flight gets completed to make sure the airplane is safe and more adjustments are made to the plan if needed.  Once all of the passengers are on board, the "load" is computed and balanced, then sent to the pilots.  The pilots review the numbers and make adjustments to the plan if needed.  During the flight, pilots are constantly reviewing performance, ATC directions, and every other variable that goes into each flight and making further changes to the plan as needed, such as changing altitudes for smoother air. 

The end result is a safe flight and the client reaching their destination.  In flying, that destination is simply a point on the earth.  In finances, it is a different, moving target all the time.

That is where my love for mortgage planning comes in.  I work with a team of financial experts that work to help you achieve your financial goals and I am constantly looking for more teammates to help ensure that happens.

You see, everyone needs to have a plan, no matter what financial situation you are in.  Without a team of experts, it is not likely you will make it to your financial "destination".  In fact, you may not even know where that destination is or how to get there.  Chances are that you do not know how big of a role your mortgage plays in all of it either.

Mortgage planning is part of the role of a "dispatcher" as it relates to your financial "flight plan".  In financial planning, you should have a team of dispatchers, helping you maximize the efficiency of the plan and ensuring you are on track.

Mortgage planning will also help you navigate through or around the storms of life.  You know there will be at least one, so make sure you are able to navigate through it and reach your destination. 

There will undoubtedly be market turbulence as we are seeing right now.  Your mortgage planner should be there to review your situation and make adjustments (only if needed) to keep you heading towards your financial goals. 

I could keep going, but I think you get the point.  I love both jobs and they both have similarities in getting my clients to their destinations.  That is what drives me, seeing my clients, whether in an airplane or not, reach their destinations, whatever those may be.

Driving Through Broward? Chances Are You've Seen Plenty of Foreclosures

The foreclosure stats released last week showed a lot of gloom, but also a different picture than what is portrayed in the media and by the government.  Nevertheless, we cannot ignore some of the facts, and that is foreclosures are taking the market over.

If you are driving around South Florida, you have definitely seen a property being foreclosed on, even if you didn't realize it.  In the state of Florida, 2.19 percent of outstanding loans are in some part of the foreclosure process.

Miami-Dade County 20,475 foreclosures filed, or roughly 1 out of every 32 homes.  That's up nearly 10,000 from last year.  Broward County wins the race in South Florida, with 20,812 or roughly 1 out of 30 homes.

So, with this many homes, chances are your neighbor (or neighbors) are in foreclosure.  Now, don't get me wrong, not every foreclosure that is a subprime ARM holder that got screwed into a bad loan by an unscrupulous mortgage broker. 

For the real estate investors out there, this may be the best opportunity you ever get.  Once this economic cycle is completed, appreciation will return and affordability will have likely returned as well.

This is a "Be Careful What You Wish For" Post

Recently, I began asking for more testimonials, something I usually do not do as I would like to think I would receive them when my services warranted.  Then I read something, somewhere that showed statistically that if you do not ask, you will not receive.  Well, being the numbers kind of guy I am, I realized quickly I needed to start asking.

Well, I have not mastered the art of asking for testimonials, but decided to ask one of the many non-clients that have come to me for advice to provide a testimonial if he chose to.  To say I was blown away is a major understatement as I was not prepared for the degree of impact I have had on this gentlemen's life.

Here is the exact testimonial, including his name, used with his permission...

"While reading the Active Rain real estate blog online, I stumbled upon some words of wisdom that made good common sense.  Those words were written by Mr. Robert Ashby.  I took the time to visit Mr. Ashby's website, found an email address,  and wrote a letter explaining my circumstances in hopes that he could lend some more solid advice.  Mr. Ashby found the time to respond to my request while he was on vacation, I couldn't help but think this was the type of person who truly cares about the advice they're giving.  That initial contact occurred over 1/2 year ago, and I've maintained loose contact with Mr. Ashby since then, and he always responds to my questions with what I still consider good solid advice.  I consider Mr. Ashby a great asset in my education and understanding of how to utilize my mortgage debt to create financial well-being. It should be noted that while Mr. Ashby works out of Florida, I live in the southwestern United States, and am NOT a client of Mr. Ashby's, yet he always listens to my concerns and responds in a timely fashion.  I wish my local mortgage lenders were half as helpful.  I look forward to my continued correspondence with Robert and consider him an "Advisor for Life".  Thanks Robert."

- Justin R.
Las Vegas, NV

(I underlined the one sentence for emphasis)

A Little Credit Crisis Humor or Just How Stupid Are Bankers?

This video is an absolutely hilarious view of the credit crisis as it happened in the United Kingdom.  Amazingly enough, it is has striking similarities with the United States....

If you like it, let me know and I will look for more.

(Bremner, Bird and Fortune - Meeting the Adviser)

Really Simple Currency Investing Creates More US Money

Ok, as promised, here is what would have happened with your $10,000 investment when converted back to today's USD during the same time as my previous post's housing comparison. 

For a quick overview, this chart is based on you simply converting $10,000 USD to another currency and switching it back to USD today.  There are numerous ways to add additional rates of return (safely) in those other currencies and you would be even further ahead.  It is also not adjusted for inflation.

Currency Used	Worth Today (USD)	Rate of Return (annualized)
Euro	$15,732.74	8.59%
Aussie Dollar	$15,353.15	8.11%
Japanese Yen	$11,394.45	2.40%
New Zealand Dollar	$15,609.41	8.43%
Norwegian Kroner	$14,397.16	6.85%
South African Rand	$14,157.64	6.53%
Swiss Franc	$14,030.85	6.35%
British Pound	$14,159.87	6.53%
Canadian Dollar	$15,365.33	8.12%
Russian Ruble	$12,882.26	4.71%

As you can see, a fairly good hedge against the devaluing of the USD, and your home is by investing overseas (or even next door).  Wouldn't you like to have investment rates like those all the time, except for the Japanese Yen, of course.

I did this particular post for two reasons.  The first is that you must include international investments as part of your investing.  That should be crystal clear.

The other reason is that, with an open mind, it is easy to achieve far greater rates of return than your mortgage costs, so stop "focusing" on paying off your mortgage and get onto investing.  Delaying will only cost you more money.

Don't have the money to invest?  Your mortgage may actually be able to help you by putting that idle equity to much better use.  Don't rush out and do it though.  There are a lot of variables that play into a mortgage and investment plan and you need to find the right team of experts to make it work.

That being said, if you are thinking about how to "employ your house", then feel free to contact me (link in upper middle column).  I will help the best I can and, of course, if you are in Florida, I can work you through the entire process.

Just How Cheap is That House in Florida for Foreigners?

For those of us here in the states, we see our home prices falling and in many cases, particularly South Florida, plummeting into an abyss (Ok, it isn't quit that bad, but for some it seems like it).  With Existing Home Sales dropping at their fastest rate in decades (many relating it back to the Great Depression) and the continued fallout for the credit implosion, foreigners may find themselves at the right time to buy up Florida vacation or investment properties.

I am going to use my own house as an example for this one as I know exactly how much I paid for it in 2002 and how much it can fetch today, that is a realistic as it gets.  This will be a lesson in how currency exchange rates affect your purchasing power as well as how cheap some foreign nationals can grab up nice Florida homes (even at retail prices).

I paid $325,000 for my home back in 2002 and using today's estimated $600,000 (rounded up slightly) here is the comparison across the globe:

Currency	Price Bought	Price Today	Total Appreciation
US Dollar	325,000	600,000	84.6%
Euro	344,280	403,823	17.3%
British Pound	222,618	290,248	30.4%
Aussie Dollar	568,182	683,216	20.2%
Japanese Yen	40,427,913	65,502,183	62.0%
New Zealand Dollar	664,622	786,061	18.3%
Norwegian Kroner	2,561,072	3,284,072	28.2%
Swiss Franc	506,388	666,297	31.6%
Canadian Dollar	498,161	596,896	19.8%
South African Rand	3,201,970	4,175,365	30.4%

As you can clearly see, in other parts of the world, our home prices have not changed much, such as for Europeans using the euro as their currency.  My home in euros only appreciated 17.3%!!!

That chart also gives you an idea of how diminished our own buying power is elsewhere, even after the recent rally in the USD.

So, if you live in another country and are thinking about buying in Florida, this may be the opportunity of a lifetime.  The comparison above is "retail" and many homes can even be bought "marked down".

(I will, of course, post about how much US money you could have made if you had taken just $10,000 out of your property and invested it in a foreign currency.)

Dollar Pep Rallies Don't Make a Strong Dollar

The government continues to talk about a "strong dollar policy", but the "pep rallies" don't mean squat when it comes to reality.  As I mentioned last week, the dollar is following the Miami Dolphins' season, which is rather dismal to say the least, and "cheering" doesn't help.

More and more countries that have currencies pegged to the dollar are thinking of de-pegging it due to the dollars decline into oblivion.  The Gulf States are currently looking to do exactly that, but can you blame them?  Our mortgage and financial crisis is already creating worldwide turmoil, should they also let the dollars plunge do the same?

Again, looking at the team as we did last week, all we see are the teammates of the dollar cheering instead of getting in the game to push the dollar higher.  The Fed has been cutting rates and the clowns keep cheering "we have a strong dollar policy".  Meanwhile, almost every other (not dollar pegged) currency is beating the crap out of it.  These currencies keep setting new records, almost daily.

Foreigners are net sellers of US long-term securities due to the unattractiveness of the dollar.  That puts pressure on mortgage backed securities to sell off as well.  Japan, China, Taiwan and others are all in the process of selling these investments.  Why does the government keep trying to put lipstick on the pig?

Will things change?  Not likely, but maybe the government will open their eyes to reality and start doing something "real" to fix it.  The next Fed meeting regarding rates is December 11.  Will that date also live in infamy? 

I Bet You Can't Take Your Business to This Level!

I am willing to bet that your office doesn't compare with mine, at least not the one I use in my "side" business.  You may not be able to see the hat well, but I am wearing my company's hat so it shows the Solid Rock Mortgage Corporation logo.

My second office has got the best views in the world, literally, and it takes my mortgage planning business to new heights, speeds, and destinations.  The only drawback is that I do not have an Internet connection in the cockpit, but then again, blogging from the cockpit would not be wise either.  This picture will be as close to blogging from the cockpit as I will get, at least until they have Internet on airplanes and I am flying long haul on a break.

Nevertheless, I have fun and am able to meet many clients where they live during my travels.  My office is portable, so I can take it anywhere I have an Internet and/or phone connection.  The rest of the time, my team helps out where they can.  How often I fly depends and varies each week, but only on rare occasions am I not "in touch" with the real office.

Why do I fly?  The same reason I still do mortgages...I love helping people get to their destinations.  Flying is obvious to see.  Mortgages, for clarity, the destination is financial freedom and getting my clients there the best and quickest way possible for their specific situation.

So, if you fly American Airlines, look for me on your flight (chances are I will be wearing my hat).  Also remember, since you trust me with your life, why shouldn't you trust me with your mortgage?