What are my options?
AS I have mentioned on my previous columns before that if you are in a position where your property value is much lower than your current mortgage balance (underwater value) you will need to ride out this very scary real waves for the next 3-5 years before you see any real equity in your property. For those who have good paying jobs, those who can actually afford and qualify for loan payments, good for you. If your intensions are to keep your house, just try to pay down the balance and hang in there.
But for those who are making enough to pay for their mortgage and living month to month without any room for any savings or room to enjoy your earnings, I want you to rethink your situation and listen and learn about what your options are and what our nations economist are predicting about what will happen to real estate. Don’t close your eyes and roll the dice and take a chance, this is not a $100 bet for 7 or 11, this is a couple of hundreds of thousands of dollars which probably translate to an average of $ 3-5,000 worth of month payments to you. Remember to multiply for 12 to get your annual spending and multiply again by 60 to get your 5 years budgeting plans.
Don’t live day-to-day and hope things will turn around fast, because it most likely won’t. I certainly hope it does for all our sake, but I have to be the one looking out for us and hopefully advise you well.
Our economy I strongly believe is still on thin ice, I know a lot of you in the health care industry are doing well, but for those unseasoned health care workers, their jobs are not very secured. For those newly graduates or those seeking employment in the healthcare industry, I am seeing halt signs of hiring. Our government is still trying to create a budget to pay our nations debts, but when you do simple arithmetic, you really need to wonder we have a deficit of 16 trillion dollars. As of last year federal direct revenue generated was only 2.5 trillion, state 1.6 trillion and local direct revenue is only 1.1 trillion totaling 5.1 trillion. Lets make the math simple, if you are in business and you borrowed $16 dollars and your are only making $5 dollars, what steps do you need to increase your income to pay off your debts? We are not talking dollar and cents, we are talking about 16 trillion in debts that is rising every second of every hour, scary thought. My most trusted Real Estate Investors advise to me was to pack up and go back home, he meant it. He said if we have a mother country to go back home to, do it. He claims that this is a ticking time bomb waiting to burst, just like any bubble that is too big not to fail.
For those who can afford their homes, if you are in a good area, if you have put in more money to your property and are enjoying your home. Hang in there, be conservative and start to save. Stop spending on unnecessary items that can wait, get your adult kids to help in contributing to your household expenses. I have a client who rented his other home out to his kids and he took the rent money saved it for a couple of years and gave it back to his son to buy a house. Which I thought was really a good idea and it benefited all parties equally. The father is very peaceful now knowing his son is sitting on a home with some equity and has learned how to be independent. The son is more than thrilled knowing his two years of rent money became his down payment to his new home.
For the homeowners who are knee deep in debt because of the mortgage balance, take your losses now and decide what is your best option. Short Sale, Deed in Lieu or Loan Modification (if u qualifies) but make a decision to resolve the problem, last thing u want to do is to walk away from your problems and bury it. Because it will surface someday soon and it will haunt you for many years to come.
I read up on some new about what might happen to our Real Estate prices and here are probably the most conservative realistic assessments that I would agree to. And I quote:
Home prices are expected to grow at an average annual rate of just 1.1 percent through 2015, The Home Price Expectations Survey, conducted by Pulsenomics LLC on behalf of MacroMarkets, is based on the S&P/Case-Shiller index over the next five years.
Those who stated that more government intervention in the market is necessary or desired cited refinancing, modifications, rental programs, and home equity conversions as ways the government can improve the market.
MacroMarkets LLC is a financial technology company. Pulsenomics is an independent research and consulting firm.
Okay, now will you please put this in front of your plans and goals and make sure you don’t shun this and think that values will go up 15-25% the next five years. It will have a long stagnant or minimal appreciation at best before it starts to go back up. As I have always said, new construction have to come back before everyone of us moves up a notch. Why? If there are buyers for new constructed homes, that means there will be jobs opening for that tier that left us three-four years ago. If they come back, money will flow everywhere from service, food retails etc. This will even help the rental market to get better and the cycle will begin to normalize.
My advice is to be conservative and save up for better days to come, it will come for sure just a matter of how soon.
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Thanks for your inquiries and support. Please call Ken Go of 1st Innovative Finance Group for your mortgage and real estate questions or needs. Call (562)697-7028 or write to [email protected].