Archive for March, 2009

The day after Christmas last year, I wrote the article “If You Think Mortgage Rates Are Low Now; Wait Until You Read This.“? The main point of the article was to illustrate the coming commerical real estate collapse that is inevitable.? Back in December I predicted that retail sales for Christmas would be horrible; we are slowly starting to see those numbers trickle in.? Many retailers are struggling mightly to keep their business models profitable.

Over the last three months, the unemployment rate has continued to climb.? If Christmas sales were down, imagine what Valentine’s Day and Easter retail sales are going to look like.? Many retailers that are paying a premium for ideal real estate locations are not going to be able to fulfill the financial commitments they made.? Only the strong retailers will survive as we have seen Rite-Aid, Sears and RadioShack as report financial numbers that would hint they are going to cease to exist in the near future if the economy continues to struggle.

All those Rite-Aid stores on premier corners will be empty builders; the RadioShacks and Sears in every shopping mall will be empty.? The cost of the real estate alone will cause many retailers to adjust their business models.? We will no longer see companies renting space solely for the advertising.? It is likely you have been in a mall or shopping center recently and have noticed the amount of empty spaces and closed stores.? This is just the beginning; it is going to get much worse.

To compound matters, commercial office space is going to become abandoned as well.? Many corporations are downsizing and asking individuals to work from home as they do not want to incur the costs of renting office space.? Cutting the cost of office space could save some companies millions of dollars, so it is likely that this is going to happen sooner than later.? All those office buildings that were erected during the last three years are going unrented because the business of America has changed.

It is quite unfortunate, but the commercial real estate collapse is inevitable. If you do not think this is a strong possibility, just look at the stock chart of CB Richard Ellis.? A steady 80% decline of the last year pretty much paints the picture.

CB Richard Ellis offers a range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estate assets globally under the CB Richard Ellis brand name

This is an industry I would want no part of right now as things are going to get even worse!

Make sure to vote on how you feel about Obama on the Dollar at www.obamaonthedollar.com.? Can you believe people are actually pushing this already?

Not long after Toll Brothers announced a deal for 3.99% mortgage rates, Lennar follows by offering 3.625% for life!? This is the lowest rate that the home builder has ever offered.? The nation’s largest home builder is offering the special on “select homes” in which the closing will occur on or before April 30th.? Loan amounts cannot exceed $417,000 and the minimum credit score to qualify is 700.

This seems to be the beginning of the home builder war for the lowest rates.? All home builders are struggling greatly in the current economy due to the subprime mortgage crisis and the increasing unemployment rate, among other factors.? The special offer expires on April 30th, but if the housing market continues to show an increase in monthly new housing supply, we are likely to see many more deals.

If you are interested in buying in the near future, this is an offer you cannot pass up.? Do not go above and beyond your means just to get this rate, but if you fit the minimum requirements and there are Lennar homes in your market that are desirable, it makes it very appealing to at least consider a Lennar home.? Please be aware of the fact that many more deals like this will follow as the unemployment rate may reach levels that we have not seen in modern history.

Make sure to vote on how you feel about Obama on the Dollar at www.obamaonthedollar.com.? Can you believe people are actually pushing this already?

As many of you know, mortgage rates have dropped to historic lows over the last few weeks.? At first glance, this seems like great news for home owners and the overall economy.? When you dig deeper into the prospect of lower mortgage rates, you realize that even if rates continue to plummet, it may not help the housing market at all.? I have been adament about the fact that unemployment is going to keep this country in a recession.? Until we see the unemployment rate start to decline, the economy will not get better.

If hardworking Americans continue to lose their jobs, how are they going to make their mortgage payments?? If mortgage rates were under 4% it would not matter if there are jobs being lost.? The only way that we will see a bottom in the housing market is when supply equals demand.? There is currently 12 months of housing supply which is still extremely high.? Unfortunately, the housing supply graph shows that we are still in an uptrend for supply.? If people are losing their jobs and housing supply remains high, who is going to buy all the homes on the market?

The only individuals who will have a chance to buy up some of these homes are investors or home owners with a great deal of money.? It seems that the later of the two is quite reluctant to put any money into another house in the current economy.? What have you done for me lately is a saying that many Americans use and think on a daily basis.? The current pscyhology of the housing market is that if you buy a home you could immediately see a 20% loss of value; it is almost worse than buying a vehicle in some housing markets.

Overall, mortgage rates trending lower is great for those who want to refinance and save money over the long run, but it is going to do very little to help create a bottom in the housing market.? If you have been financially smart with your money and have some extra cash saved up, now is one of the best times in history to get that low rate refinance that you have always wanted.

On March 4th, I wrote the article ?First the Mortgage Crisis, Now the Life Insurance Crisis?? to help illustrate the possibility of an upcoming life insurance crisis.? Less than two weeks later, the Wall Street Journal reported the same possibilities.? Throughout the month of March, most insurance stocks trended higher with spectacular gains.? The three companies that I mentioned in the original life insurance crisis article were up 75%, 107% and 160% respectively.

Principal Financial Group – March 9th – 5.88 – March 27th – 10.30 – 75% gain

Lincoln National Corp – March 9th – 5.01 – March 27th – 10.37 – 107% gain

Hartford Financial Services – March 9th – 3.63 – March 27th 9.41 – 160% gain

Today Lincoln National Corp filed with the SEC that they will not seek to issue debt under a FDIC program that helps banks and financial institutions to access debt at a reasonable rate.? At first, this sounds very positive for the company until we find out why Lincoln National Corp is not seeking assistance.? The company?s investment manager said he didn?t feel the company would qualify to participate under the current provisions.

With this statement, Lincoln National Corp is down over 33% and is bringing the entire life insurance sector with them.? Principal financial is down 18% and Hartford Financial is lower by 9% on the day.? Lincoln Financial is not the largest life insurer by market capitalization, but if one major insurer goes under, several more are headed in the same direction.? Many of the life insurance corporations have seen 75% or more declines in their stock prices since the beginning of 2009.? It looks like there are more problems ahead for these companies.

Fortunately, life insurance policies are guaranteed up to $100,000.? Unfortunately, if you have a policy higher than that, you could lose a great deal of your insurance policy if the life insurer that covers you goes under.? It is likely that the government will try to prop up some of the bigger insurers, but as you can see from Lincoln Financial, all of them will not receive government assistance.

So far this year I have been quite accurate with my mortgage rate predictions.? Over the last two weeks, I have been off .01% and .03% respectively.? I will be highly surprised if I can repeat that success this week, but I will do my best.? National advertistments and news headlines have stated that mortgage rates continue to hit an all time low.? Many are stating that rates are 4.5% or under.? This is definitely not the case.? This week, my prediction is that the Freddie Mac weekly mortgage rate survey will show

30 year fixed rate mortgage – 4.79%

We are definitely trending lower, but I think the psychology of lower rates is starting to set in and we could see a bounce VERY soon.? That is just a hint as to my feelings for the first week in April.? Stay posted to Subprime Blogger to get weekly mortgage rate predictions.? I will write an article on Thursday when Freddie Mac comes out with their weekly data.