Category Archives: Personal Real Estate Opinions

Kansas City real estate is historically safer than the stock market.  Want more proof?  My IRA is down 37.4% this year!  My individual stock holdings are down 35.02%. 

My real estate?  I’d say, at most, down about 3% on one and even to up about 1% on another.  No great shakes either way given the time component of real estate investing. 

Just a thought…

Are you upside down on your real estate holdings?  Then unless you have the cash to bring to closing to make up the difference you might want to stay put.

See, here’s the deal, if you purchased an investment property and the value has dropped you’ve only “lost money” if you sell it.  If you purchased that property and the montly rent is paying the mortgage, taxes and insurance plus any miscellaneous/reasonable expenses then you should keep that property.  Keep renting it until the market turns.  When will that be?   I don’t know.  But why would you want to lock in a loss?

I’ve seen so many houses that purchased at prices available today are a steal compared to a few years ago.  And in Johnson County, Kansas the rental market is strong.  Real strong.  I’ve had property managers tell me there simply are not enough 3 bedroom, 2 bath houses for rent. 

It’s unlikely JoCo will get hammered the way some areas have.  There are foreclosures in Johnson County, to be sure.  But the ratio is favorable to the real estate owner and investor.

I was reading Kansas City.com this morning and one sentence jumped out at me like no other. 

“Still, California, Florida and Arizona accounted for more than half of the nation’s foreclosure activity in August.” 

Did they say half?  Three states are largely responsible for the mess all of us are in…even those that pay their mortgages.  I’m not rich.  In fact, like most Americans I can’t go too long without income before I’d be in pre-foreclosure myself. 

But why am I and others like me being punished, taxpayer wise, for all these mistakes of the greedy.  I angers me.  And I think many others.  If my small business fails (that of a real estate agent) will the governement buy my bad debts and work something out for me?

There is a lot I do not know.  Physics, for one.  Macro-economics is another.  (I am one of the few real estate bloggers that will tell you that, I’ll bet.)  But I do know my checkbook.  I know the hurt I see families going through with their struggling in this economy.  I know real estate agents and mortgage officers around the country that have disappeared and I have no idea where they are or how they are doing.

I know Kansas City is suffering but not nearly to the extent of so many other cities and their economies.  And I know that the whole Freddie/Fannie thing is causing indecision with people that really should not be indecisive at this moment.

I know, and I truly believe this, that fortunes in the next real estate market are being made now. 

This post is not put out for the marginal buyers of real estate investment property.  In this economy if you do not have proper reserves and a proper down payment you need to conserve liquid assets until you do.  Do not gamble on appreciation or quick re-sales.

This post is addressed to those of you I’ve spoken with in the last 30-60 days sitting on the sidelines with heavy assets.  You know who you are.  $80,000 to invest.  $100,000 to invest.  $120,000 to invest.  Plus reserves in retirement accounts and great equity in your primary homes.  You should be in this real estate market. 

To some of you I’ve mathematically shown you how you will benefit.  Even IF Kansas City suffered a 10% down fall over the next year or two you would still come out ahead, way ahead, in any 8-10 year scenario.  And I cannot think of a time ever that Kansas City has suffered that kind of decline.  And I really don’t imagine it happening now in the areas I would invest in real estate in Kansas City.  Market fundamentals should tell you the same thing.

Real estate appraisers are in a tough spot.  Of course, they almost always are.  The Kansas City Star today has an article that basically says that real estate appraisers are the problem, or at least part of the problem, that led to the housing crisis we find ourselves in today.  (Want to have some fun, read through the comments sections.  Oy.)  Also part of the problem were “unscrupulous real estate agents and mortgage brokers, whose commissions are determined by the size of the deals.”

Whew.  Glad I got that off my chest.  For all of you I’m telling you right now it’s in my best interest to sell you an investment property over-inflated in price.  <sarcasm>  After all, by over-selling you by 10% on that $150,000 duplex I make an extra $288!!!!…before taxes/expenses.  <cue photo of me boarding a flight to Europe for the month>

Getting back to appraisers, they really are in a tough spot.  When the market was turning hotter a short 5 years ago they got pressure to respond.  When a realtor would put a sign in the yard of a house that sat in  a neighborhood with no inventory and it goes under contract for 5% more than the previous high seller and gets under contract in less than one week then everyone can plainly see that there is an upward pressure on housing.  Yet, appraisers had their rules they had to follow and they were slow to respond and I do remember talking to more than a few who had to look beyond the subdivision to find “comps.” 

Now, appraisers are under pressure from banks and end users to be sure there is no downward pressure on housing because they don’t want to be stuck holding a note that is worth what the property is worth.  (I don’t blame the lenders for feeling this way.)  Appraisers are running scared and a bit dazed and confused.

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All of this assumes the real estate appraiser is honest.  If he’s in cahoots with a mortgage broker or realtor or whomever then they all deserve to go to jail.  I think I’ve made my position clear on the subject of mortgage fraud.

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Getting back to the subject at hand I’m a little confused myself.  I remember Congressional hearings on why the housing boom wasn’t reaching down to the working class.  Why were lower income whites and urban blacks being kept out of the ongoing riches of real estate?  Remember those?  I do.  Go back and check, it is a historical fact.

Now, after the mortgage industry responds there are Congressional hearings on who is to blame!  Appraisers!  Mortgage securities sellers!  Greedy real estate investors!  Realtors!  Mortgage brokers!  And anyone else to help spread the blame.

Well, how about Congress?  They were the ones who were exerting an undo amount of pressure on a subject you knew little about.  Yes, greed and ignorance and fraud were very much players in all of this throughout the industry and throughout the public.  Think every buyer was an innocent bystander?

Home ownership has been a steadily rising statistic in this country for the last 60 years.   (You really should visit that link.)   I read somewhere (sorry can’t find the reference) that this statistic grew disproportionately from ’98 till about ’05.  Now this statistic is correcting itself. 

This real estate correction, whether minor in Kansas City or devastating in Sacremento, has caused heartache for thousands of Americans.  Whether losing their homes to foreclosure or their rented house because their landlord is losing it to the bank or the investor who bought securities in mortgage products people have lost.  Blaming entire sections of the industry is as preposterous as it is dangerous. 

Enforcement agencies have for years failed to do their jobs because they are either underfunded or out-dated.  Put people in position to investigate and put the bad guys in jail.  Go after them with full force.  But until you are ready to do that quit just writing article on article about who is to blame.