The Economy: Why All the Panic?

   For the last couple of weeks, all we have heard is how bad the current economic situation is. The markets are going to crash and interest rates are going to skyrocket. Panic has definitely engulfed the entire country.

Consumer confidence, as measured by the University of Michigan’s Consumer Sentiment Survey, has fallen to a number not seen in thirty years. This panic has actually had a negative impact on the economy.

It was said best by Mark Zandi, chief economist at Moody’s Economy:

“Confidence normally reflects economic conditions; it doesn’t shape them…

Yet at times, particularly during economic turning points, cause and effect can shift. Sentiment can be so harmed that businesses, consumers and investors freeze up, turning a gloomy outlook into a self-fulfilling prophecy. This is one of those times.”

What does the data actually show?

We decided to look at certain economic indicators and compare them to the numbers from a year ago. Here is what we found:

We are not making the argument that the current numbers are worth celebrating. We are only suggesting that the sky is not falling.

Bottom Line

Conditions aren’t as dire as some are professing. Make good sound financial decisions based on your own economic conditions. There is no need to panic.

Homeownership: Still the American Dream

    Yesterday, Fannie Mae released their National Housing Survey for the second quarter of 2011. They survey the American public on a multitude of questions concerning today’s housing market. Each quarter, we like to pull out some of the findings we deem most interesting. Here they are for the most recent report:

Most Important Reasons to Buy a Home

When we talk about homeownership today, it seems that the financial aspects always jump to the front of the discussion. However, the study shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, are:

1. It means having a good place to raise children and provide them with a good education
2. You have a physical structure where you and your family feel safe
3. It allows you to have more space for your family
4. It gives you control of what you do with your living space (renovations and updates)

The Home as an Investment

Though most people purchase a home for non-financial reasons, everyone realizes there is a money component to homeownership. Here is what they said on this issue:

1. 65% of the general population (and 67% of homeowners) believe that homeownership is a ‘safe’ investment.
2. 56% believe that homeownership has more potential as an investment than any other traditional asset class.
3. 69% think that now is a good time to buy a home (this number has increased in each of the last two quarters)

Rent vs. Buy

We are always interested in the difference people see in renting vs. owning.

1.  63% of renters have aspirations to someday own their own home
2.  72% of renters think that owning is superior to renting
3. 95% of homeowners see homeownership as a positive experience (4% see it as a negative experience) while 82% of renters see renting as a positive experience (17% see it as a negative experience)
4. 96% of homeowners live in a single family residence while 46% of renters live in a multi-unit building

Bottom Line 

Even in difficult times, Americans still realize the value of homeownership.

Things to Consider Before Renting a Home You Can’t Sell?

In this difficult housing market, more and more homeowners are considering renting their house instead of adjusting the price. We strongly believe that residential real estate is a great investment and therefore can understand this thinking. However, if you have no desire to actually become an educated investor in this sector, you may be headed for more trouble than you were looking for. Before renting your home, you should take the following steps to make sure this is the right course of action for you and your family. Set a consultation appointment with an eviction attorney People rent out their homes assuming that every tenant will pay the rent every month. We must realize, because of the current economy, there are millions of people not paying their mortgage. There is a chance you may rent to someone who at some point can’t (or simply won’t) pay you the rent. Understand what the legal challenges of eviction could potentially be before deciding to rent your home Interview property managers If you are not a full-time investor, hire a professional to handle the property. You need someone to find a qualified tenant, collect the rent and manage the problems. You don’t want to have to make collection calls. What would you say if a tenant told you that they had enough money to either buy food for their children or pay you your rent but not both? You need a person experienced with these situations to help. You also don’t want to receive calls at all hours of the day and night regarding maintenance issues or challenges a neighbor may be creating for your tenant. Create an honest budget Sure, you will receive revenue in the form of rent. However, don’t forget you will also have expenses. Some of the expenses you should consider: Mortgage Payment (unless there is no mortgage on the home you will rent out) Property Taxes Maintenance Expenses such as repairing or replacing: roof, heating/air conditioning unit, appliances, etc. Insurance – Check with your insurance company who may suggest or demand that you increase your liability coverage. Bottom Line Again, renting out residential real estate historically is a great investment. However, it is not without its challenges. Make sure you have decided that you want to rent the house because you want to be an investor, not because it looks like an easier way out than selling the house.

When Did Americans Start Playing It Safe?

   There seems to be a paralysis in America right now. Companies are afraid to hire even though they are sitting on hordes of cash. Politicians are afraid to show leadership on certain issues as it may cost them the next election. People are afraid to move forward with a purchase of a home because they are afraid a better buy will appear next week. Everyone wants to PLAY IT SAFE.

Playing it safe did not make this country what it is today. If General Washington played it safe, we would still be talking with a British accent. If Dr. King played it safe, he would have told us about a plan he had not that he had a dream. If Disney played it safe, there would be no Disneyworld.

  If my pop played it safe, he would have kept us in an apartment in the Bronx and not moved us 50 miles east into our own home with our own backyard on Long Island. However, he didn’t play it safe. Was he nervous about the financial responsibilities that came with buying his first home? Of course he was. But he loved his family so much he didn’t allow fear to paralyze him. He conquered his fear and did what he knew was the right thing to do. If he were alive today, I’d hug him right now.

Companies, politicians and the American people have to get back to dreaming and doing the right thing. This country has always been a place where, if you work hard, your dreams can come true. That is still true today.