A foreclosure report from RealtyTrac.com indicates that foreclosures in the US swelled to over 800,000 in Q1 of 2009, a 24% increase from the same quarter a year prior.

To put it in perspective, one out of every 159 houses received a foreclosure notice, just in the first quarter of this year.

It’s no surprise that the hardest hit areas are Arizona, California and up the West coast, along with Florida, the entire East coast and inland to nearly the Mississippi River.  The Midwest has held up fairly well in the foreclosure department, although the highly populated areas of Texas and strangely most of Arkansas are suffering.

In my area, there are some foreclosure opportunities to be had for investment purposes, but they’re not moving.  Investors aren’t gobbling them up like I thought they would, which makes me wonder about the overall perception of the real estate market.  There’s just no appetite for risk right now.

A prospective future rental?

As for me, there’s a 3 bedroom, 1 bath single family home near my previous rental that is currently in foreclosure.  Asking price is $18,000 which would represent a third of what it would appraise for, give or take.

Unfortunately it’s located to the South of the Campus, so it violates requirement #1 of my criteria for future rental properties.

I’ll keep an eye on it, and if it doesn’t move in the next couple weeks, I’ll have to get a tour and find out why.

My mortgage refinance, three months in the making, is finally a done deal.  Nearly 35 autographs, 18 pages initialed by both my wife and I, 3 lbs of paper, and a half hour out of our work day later and the 4.625% rate is a reality.

This cuts our monthly principle and interest by $250 per month, or about $3,000 annually.

The latest in the long saga of the refinance effort for our primary residence; the 4th loan handler called today to notify us that we’ve been approved for closing.  There is one very slight hitch in the works though, although I’m not real worried.  The message stated that the rate of 4.625% was approved for a loan amount of $152,400 bringing monthly payments to $1,080.

That sounds great, except for the monthly payment part.

By my calculation, the monthly payment should equate to just shy of $800 per month for principle and interest. A far cry from $1,080.

The representative did say, however, that those numbers were just preliminary .  I don’t know why she couldn’t give me the real, no kiddin’ numbers, they’ve only been working on this for 3 months!.

The final numbers should come via a phone call in 7 business days along with a request to schedule closing…

I’ve got two neighbors and a good friend out of state that have put their house on the market for no other reason than “they just want to move”.

All three couples have two kids, and all three live in good sized, three bedroom houses.  After pinging each of them that it’s really a great time to buy a house, so long as you can sell your existing one, they all followed with the same response: “we’re just bursting at the seems in our existing house, so it’s time for a change”.

Honestly, I can’t say that I agree that “we’re bursting at the seems” is a good enough reason to sell your house.  Two of the three couples will only get their money back from the initial purchase three years ago, and the third stands to make about $5,000.  And that’s if they get their asking price.

I can’t help but think that these three families are busting at the seems, not because if the increase in the number of kids they have, but because of the increase in “stuff” they have.  One has a basement that is packed so full of stuff you can’t even walk around in it; none of it is kids stuff.

I’ve gone to great lengths to get rid of the “stuff” my wife and I don’t use.  If there’s a box in the storage closet that hasn’t been opened in 5 years, there’s probably no good reason to keep it’s contents around.

What does every square foot of your house cost?

The way I look at storage is in mortgage payment per square foot.  Take the overall monthly house payment (add in taxes and insurance) and divide that number by the total square feet in your house.  Mine comes in at $0.65 per square foot.  So those Tupperware bins stacked up in the basement holding all my wife’s college t-shirts is costing me about $4 per month to store.

When you put it in those terms, those t-shirts sure would make good rags to wash the car with!

I’ve had Allstate Insurance (ALL: chart, web, Y!) covering my rental property for the last 4 years.  However, last Fall, they sent me a notice that my premiums would go up 52% this year without any explanation whatsoever.

Being the capitalist I am, I understand costs go up over time.  But not 52% at once.

I called for an explanation, and after cutting through the bull, and being passed around to three different people as I worked my way up the ladder, I had a district manager tell me that rates went up on landlord policies due to an increase in fraudulent claims over the past year.

That’s bull!

For one, I’ve never filed a claim, and never had a reason to.  Furthermore, if the company has a problem with fraudulent claims, that’s their problem, not mine.

So I’m doing what every good capitalist would do and exercising my options through my wallet.

Allstate was insuring my single little rental for $950 per year.  Just the structure, mind you, not the contents (that’s what renters insurance is for).  The increase for 2009 brought the annual premium to $1,460 with no increase in coverage.

As a comparison, I insure my personal home with a market value over $150,000 more than my rental, all my personal belongings, AND three vehicles for under the new premium to insure just my rental house.

That just doesn’t smell right.

My new policy is with USAA, whom I carry that home and auto insurance with, and they will insure the rental for the replacement cost, not the value; there’s a big difference.  All the while, USAA’s premium is cheaper than Allstates best quote, even after I assured them I’d not do business with their company unless they offered me something more reasonable.

Allstate’s new premium is based on the market value of the home, while USAA’s premium is based upon rebuilding the same home on the same piece of property with today’s dollars.  So the coverage is for nearly $200,000 more than Allstate would provide.

I’m not buying Allstate’s excuses for a drastic 52% premium increase.  Allstate reported a $1.3 billion net loss, or $2.11 per share, for Q4 of 2008 while expectations were for the company to make $1.35 per share.

In all, I seriously doubt that Allstate needed to raise my premium by 52% due to fraudulent claims.  I suspect they had to raise the premium because they’re not making any money due to poor performance of their own investments.

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Having recently initiated the refinance process, I’ve taken some interest in opinions from those in the industry.

When talking to the loan officer at Wachovia, I had to ask the requisite question: “Which direction do you see rates going?”  Not one to look a gift horse in the mouth (the refi rate would be 4.625% vs. my current 6.66%), I wasn’t going to let his response become a deal breaker, but I thought I’d ask anyway.

The answer didn’t surprise me.  He kind of hemm’d and haw’d around, and I saved him the misery of coming up with a response that wouldn’t put him in a bind, and just gracefully switched topics.

I knew that whatever answer he gave me could get him in trouble.  If he says rates will fall and they do, I’d be mad that I didn’t wait for a better rate.  If he says they go up, and they actually drop, he’s still in a bind.

If he really knew the answer, he wouldn’t be a loan officer.

Then came the appraisal.  The guy shows up with his tape measure, pen, pad and a camera.  Naturally, I had to ask him how business was going.  It was a rhetorical question, really.

Business was picking up, especially for third-party, independent appraisers.

Apparently, and this will come as little shock, banks were using their in-house appraisers to determine the value of the home, which ended up getting inflated by 100-300%.

Starting on May 1, loans sold to Fannie Mae and Freddie Mac will require an appraisal chosen by the two big banks.  In essence, the lender will be able to chose the appraiser, and in the in-house lender is chosen, the banks loan origination department will have no oversight for the process.

Unfortunately, the rules will only apply to Fannie and Freddie.  However, due to the trickle down effect of the loan trade, the effects will be spread far and wide regardless.

Since a large number of loans are bought by or guaranteed by Fannie or Freddie, the entire industry will have to play by the same rules if they want to play.

The Corner Office Comments

It’s a start.  This is a move that one would think would be inherent to the system to begin with, however, as we’ve found with our government, common sense does not reign supreme.

In talking to the appraiser who evaluated my home, it seems that the while the practices are still the same, the principles just got a lot tighter.

No more benefit of the doubt (not that I was looking for one).

Over the last decade an oasis has opened up in the Arabian Gulf.  First, The Palm Jumeirah grew from the sandy depths of the Jumeirah coastline, followed by its bigger siblings, The Palm Jebel Ali, The Palm Deira, and of course, The World.

These major land reclamation projects, funded by Nakheel Properties, were stimulated by the growth of the financial and entertainment prosperity of Dubai during the time of escalating crude prices and easy money.

Well, Dubai may have benefited from grandiose economic times, but the new world icon is not impervious to other end of an economic cycle.

The economic impact felt in Dubai has become evident with the halting of construction work on the Nakheel Tower; a building that would rise more than 3,290 feet to be the world’s tallest when completed.

Additionally, according to the Colliers International House Price Index, overall house prices in Dubai have dropped by 8% in the fourth quarter of 2008.

Other developments in Dubai have been affected as well, including the Trump International Hotel and Tower, Frond N villas, and Gateway Towers, as well as parts of the Waterfront and Palm Deira.

It’s been clear to me that Dubai has gambled big on its real estate ventures, with massive capital outlay for oasis-like resorts to draw in tourists to compliment the attraction to the financial sector.

Dubai House prices have in­creased 42 per cent in Dubai between the last quarter of 2007 and the first quarter of 2008, ac­cording to a report re­leased recently by global property consultants Col­liers International. -Source

What goes up like a rocket, comes down like a lawn dart!

Crude oil prices have fallen 75% since their highs during the summer of last year.  The global financial industry hasn’t fared well either, and Dubai is not immune to real estate whoas.

Late last year, Nakheel laid off 500 employees, about 15 per cent of its labor force, due to global market conditions.  Seeing as how the Nakheel Tower was to take 10 years to complete, a stoppage in construction and a layoff of a good chunk of their employees is a sign that the company doesn’t expect a quick turn around in global economic conditions.

It will be interesting to see how Dubai weathers this global economic storm.

About a week ago, out of the blue, I had this feeling I should call my bank and find out what the current refinance rates were.  Rates had been coming down, and with all the money being thrown around in the financial sector these days, I figured it couldn’t hurt to ask.

After about 5 minutes on the phone with a Wachovia representative, he informed me that an FHA loan with decent credit would refinance at 4.875%.  A Far cry from my current 6.66% rate!

Not bad, but I don’t want an FHA loan.

So after listening to the schpeal about the FHA loan, I asked him to tell me what the refinance rate was for a 30-year conventional loan.

“Well, if you have excellent credit, and the appraisal comes back with at least a 80% LTV, I can do 4.625%.”

Right… so how much will that cost me?

After asking him to repeat the number he just gave me, I then started digging for the catch.  You know, the gotcha on a heck of a good deal that they don’t tell you about until just before you sign on the dotted line.

“It looks like it will cost $1,900 for closing costs and fee’s, but we’ll pay them.”

Honestly, I thought I was being Punk’d.

I figured what he meant was that he’d wrap the closing costs back into the loan.  Nope.  The bank will actually pay the closing costs and associated fees (appraisal, title, etc).

Not wanting to look a gift horse in the mouth, I asked him to send me an application, with the rate locked in at 4.625%.

UPS next day air and it was on my desk.

After reading through all 60 pages of the application (I actually read it twice, still looking for the catch), I sat down with my wife and went over it.  Nothing seemed out of line, and I am able to withdraw my application at any time.

At any rate, it’s a good time to call your bank.  I don’t care what your current mortgage rate is at, it’s still worth the phone call!

Yesterday the appraiser stopped by and took measurements for the appraisal.  I’m crossing my fingers that I’m still at my 80% LTV, and that local market prices haven’t dropped that much.

The finger pointing continues.  The House rejected the effort to “stimulate” the financial sector with $700 billion, and all we hear on the talking heads show is how the Democrats are single handily killing off the economy, or how the Bush administration is responsible for all this mess.  Phooey.

This whole thing started snowballing well before Bush took office, and the proof is out there on the internet, if you just care to look.  For instance, an article from 1999 in the New York Times on how Fannie Mae was being pressured to offer easy credit to increase lending… by who?  None other than the Clinton administration:

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. -Source

And you can’t tell me we didn’t see this coming. It was seen coming back when this little fiasco was conceived.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s. -Source

And the result?  Yeah, the writing was on the wall, all the way back in 1999.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.” -Source

So, here is how this all really went down.  This mess was started by the Clinton administration.  The Bush administration inherited what would become the biggest financial mess in recent history, the Republican congress sat through the good times, and the Democrats jumped into the majority just before the fall out.  And now everyone is blaming everyone else, and nothing has been accomplished to fix anything.

Well, I shouldn’t say that.  The fact that our government isn’t accomplishing anything, is actually accomplishing what needs to be done: Nothing.  Let the banks fail.  Let those who lose liquidity suffer from the loss of liquidity.  And don’t spend my hard earned money trying to “fix” anything.  The markets are taking care of themselves in my opinion, and while it’s going to stink for a while, keeping the government hand out of the free market cookie jar will get things squared away all the more quickly.

Just because Americans have the right to own a home of their own, does not mean that they should all have the ability.

The Clinton administrations exercise in socialism failed.  Perhaps we should give capitalism a shot again…

I just received the 2008 tax valuation from my county treasurer. It’s clear that my local housing industry is feeling the effects of the national housing “crisis”, as the appraised value of my house increased less than 1% this year. Compare this to last year where the increase was 4.9%, and the year before when the valuation increased 6%.

Truthfully I’m not terribly disappointed about this, nor am I shocked. Other areas around the country are seeing the value of homes actually decrease, so I’m counting my blessings that my area isn’t yet in that boat.

Looking around the real estate market, there are a ton of houses on the market, and the area is certainly overbuilt. Commercial real estate is even more so. There have been strip malls built that have been vacant for 6 months or more, but curiously this has not deterred builders from building more commercial space.

The current state of the local market makes it attractive to buy a house, but I’d hate to have to sell one right now.

How about your area? Are your valuations still positive?

One aspect of investing in real estate is trying to take advantage of a short sale. Being unfamiliar with what a short sale is, I thought I’d do some research.

A short sale involves buying a house for less than the amount the seller owes the lender, pure and simple. A more sophisticated way of making real estate purchases, short sales probably require more tact and patience than buying a foreclosure, as it involves knowing more about a persons situation than you might let on.

A short sale usually occurs when a seller can’t make his loan payments because of death, divorce, job loss or other hardship. When homes are rising in value, owners can sell the house and pay back the lender. But when home values are dropping, like they are in many places today, and the owner hasn’t built up much equity, that’s not an option.

So some lenders will accept less than the amount owed to avoid the hassle and expense of auctioning the house, providing the owner proves that he doesn’t have other assets to make up what he owes.

As with many foreclosure listings, you’ll be buying the property as-is, so you’d have to include opportunities to back out of the deal (i.e. via home inspections) if things are not as they appear on the surface.

Searching for short sales is probably more work than I have time for at this moment, although I hear they are becoming more prolific as adjustable mortgage rates reset…

Does anyone have any experience with short sales?

After my visit to the termite palace yesterday, the real estate agent told me she’d keep an eye open for more property in the area. The question then became: What is your criteria?

My first rental property ended up setting the bar very high. I bought it from a bank, put less than $10,000 into it for rehab and renovation, and rent it to students. Overall, my net cash flow is $345 per month. So I guess those traits could start the list.

1. The property must be within 3 blocks North of the local University.

Talk about narrowing the field! This is probably the most restrictive of my criteria, but I have good reason for putting it in place. The area to the South of campus is fairly worn down, crime is higher, and it’s generally just a less attractive area. By in large, this means that I couldn’t rent the same house to the South of campus that I could to the North of campus. In short, the margin is smaller.

Additionally, the campus is bordered by two main streets, one on either side. To the West of the main street are upscale neighborhoods that sell for more than $300,000. Not at all conducive to renting out, especially to students.

To the East of the opposite main street is what we call “the hood”. You can find houses for $20,000 but you better bring protection if you care to visit.

So that limits my search to about 9 square blocks.

2. Must be able to purchase for less than $60,000.

The general consensus is that a property should rent for 1% of the sale price. But that if the sales price matches the appraised price.

When you look at renting to students, look at what rent should be per room, not for the overall house. In my area, it’s not unreasonable at all for a single student to pay $300 per month for one third of a 3 bedroom house. So if you have a two bedroom house, the rent should be about $600 per month. Any premium to that should be justified by a service or resource in return.

3. The high dollar issues must have already been fixed.

This is one I’m willing to budge (a little) on.

I’m looking for a place that has already had the plumbing overhauled, electrical box and wiring replaced, and fairly new air conditioner and furnace installed.

I’m willing to foot the bill for a new air conditioner and furnace. That work would have to be hired out, but you’re not looking at a lot of labor expense, and the job can be done in a day, maybe two.

Plumbing and electrical is a major task, one I’m not up for doing myself, and not willing to pay to contract out.

However, if the price is right, I could be swayed on this rule.

4. The place must be structurally sound.

Along the lines of rule number 3, the property must not require major structural work. This translates into big money. Simple stuff like replacing deck structure I can handle, but I’m not willing to replace floor joists and certainly not willing to replace walls because termites ate them out!

5. The property must be a 3 bedroom, and 1 bath, minimum.

The fewer bedrooms, the harder it is to rent. The difference in list price between a two bedroom and a three bedroom house can not be recouped by using my $300 per room rule of thumb. Consequently, you’ll end up asking for a premium in rent for less square footage and end up having to concede more services (lawn service, laundry appliances, etc.).

6. Must be able to rent to students.

The university in the area is fairly affluent itself, and it caters to those who come from affluent families. Accordingly, paying for rent is not a large part of the overall college budget. Therefore, the students that attend this college are a bit less stingy when it comes to negotiating rent. And given the fact that there are few nice (and relatively safe) places outside of campus to live, the premium is somewhat justified.

So what do you think? Are my criteria too strict? Am I missing something?

This afternoon I went over an looked at the property I’ve been watching for a few months. From the outside looking in, it appeared to be a rehab project that simply ran out of money. It’s typically opportunities like this that widen the margin on a deal, as most of the expensive stuff has already been taken care of by someone else.

Walking in through the front door, it was evident that the place had been lived in since the renovations took place. The carpet was dirty and stained, and there were remnants of belongings (crayons, broken pencils, etc) left in the kitchen drawers.

The walls in the front living room were cracked (as they typically are for the area) and are in need of a patch job and paint, but all in all it didn’t look too bad.

The basement reveals all.

Then I took a trip down stairs. The basement will always give you an idea of what’s really behind the walls because it provides the most access to the structure.

The plumbing had been redone fairly recently, as the new-style PEX (essentially plastic) plumbing that all the new houses are being built with today was running among the floor joists on the ceiling. The electrical had evidently been redone recently as well, as the 100 amp breaker box still shined and the wiring still looked new.

The furnace and hot water heater were new within the last couple years, so there wasn’t much risk in all the basic services and utilities.

A quick look between the joists and everything went south. About half of the joists were brand new, indicating to me that someone really did an overhaul on the major structure. It’s not easy to just replace a bunch of floor joists, especially on the lower level, as these joists typically bear the load for the rest of the structure. Replacing them is like swapping out the bottom level of blocks in Jenga. It’s a very delicate procedure that carries significant risk. The question then becomes: why were they replaced in the first place?

At first, it appeared that the sub floor was rotten. Perhaps water damage rotted the floor, and while the floor was being replaced, it was a good time to replace some joists that were over 100 years old. My curiosity kicked in, and it was while digging around in the rotten floor that I noticed that this was no water damage, this was termite damage!

Termites had turned the old sub floor to a fine dirty powder in most places, and a soft wooden sponge almost everywhere else. Yikes. I was starting to become deterred, but not completely put off. I could pull the carpet up (it needed to be replaced anyway) and replace the rest of the sub floor, no problem.

One thing about termites, though, is that if they had enough time to chew out an entire floor, chances are they didn’t just quit eating after the first coarse was through.

Back on the first level, I noticed there was a small hole in the wall in a lower bedroom. I stuck my finger in the hole to see if the lathe was still in good shape. I ended up poking at a dry spongy material inside the wall. What once was the lathe behind the plaster was now leftovers from the termite feeding that I was now standing on.

The entire structure of this house had been dissolved from the inside out by termites!

If it weren’t for the termites!

The house had so much potential. All the expensive components had been fixed, remodeled or replaced. All it needed was carpet, a few patches in the walls and a fresh coat of interior paint… and oh yeah, it needed to be gutted and rebuilt.

There is now way my conscience would let me rent this place out to college students knowing there were some major structural problems with the floors and walls, and completely re-doing the structure would not leave me with enough margin to rent.

Oh well, there are other fish in the ocean, and I can afford to be picky.

I called my banker yesterday after I started thinking about how I was going to finance another rental property. When I call this guy my banker, he IS the bank, as in, he OWNS the bank. A good guy to know, indeed!

One of the benefits to doing business with a small town bank is that you know the bank and they know you. There is no pre-approval as long as your logic is sound and the margin is wide. If you have the cash flow to support the investment, they’ll lend you the money.

So the conversation with the banker (Bruce) went like this:

Me: Hey Bruce, I’m looking at acquiring some more rental property, would you be interested in writing the loan?

Bruce: Absolutely, what are you looking at?

Me: Well, there is a property two blocks North of the one I already own that’s owned by a bank, and they are desperate to get out. It’s come down thirty grand in the last three months.

Bruce: How much money do you need?

Me: They are asking $59,900 but I think I can do better than that.

Bruce: Sounds good. Just write the check or whatever you need to do, give me a call and I’ll make sure the money is there to cover the deal.

Man do I love doing business with a small-town bank. You’d never have a conversation like that with Bank of America!

I’ve been casually looking for another rental property next to the one I already own. For a long time, the people in the area have been very proud of their houses, asking nearly 5 times what they’re actually worth. Needless to say, those houses are still on the market, many for as long as 15 months and counting.

But there is one property just a block or two away from my first one that has been on the market for 4 months, and its price has been dropping like a rock. The reason? The bank wants out!

I remember back when this property was on the market the first time around, and was purchased for nearly $100,000 by someone with intentions to rehab it. Evidently, they got half-way through with the job and ran out of money. The foreclosure process began and the bank ended up with their very own, half finished rehab. Just what they wanted, I’m sure!

The initial list price was $89,900 and has come down $10,000 each month for the last three. The current list price is $59,000 but I’m sure the bank would take less if the terms were right.

I’ve got an appointment to take a look in the property on Saturday, but I got bored today and started snooping around outside and looking through the windows.

The stucco exterior is in good shape and has been recently painted. The windows look brand new all the way around, and with the exception of a couple of torn screens, won’t need any work.

The bushes in the landscaping have died off due to neglect, but it wouldn’t take much to spruce things up.

The air conditioner looks fairly new, as the finish on the side of it is still shiny.

The property lacks guttering all the way around, but it wouldn’t take much to fix that. The last guttering job I had done ran me $800, but I wasn’t terribly pleased with the workmanship.

Peaking through the windows, the kitchen has been completely upgraded with new tile and counter tops all the way around. It’s not contractor-grade stuff either, which may explain why they ran out of money during the rehab!

The carpet in the lower level looks like it needs to be replaced or at a very minimum steam cleaned, and there are a few holes in the drywall, which is an easy fix. The original trim is still intact and has been recently painted, but I’m not a big fan of the pinkish color.

Naturally, I wasn’t able to see the bedrooms in the upper level, or the basement.

A few things I’ll be on the lookout for on my visit Saturday:

1. The condition and extent of the electrical wiring.
2. The condition of the plumbing. Anything but newer copper could pose a problem.
3. The condition and structural integrity of the foundation. The stacked-rock foundations in the area are fairly robust, but this is a major area that could bust a deal really quick.
4. Overall integrity of the structure. Drywall I can handle, major structural issues, not so much.

The property is in a better part of the neighborhood than my first rental, but it’s also further away from the local campus.

More to come…

It seems our good old government is setting a course to bail out those who weren’t responsible enough to take care of their own financial house.

Treasury Secretary Henry Paulson said today that the Department is “aggressively pursuing a comprehensive plan” to aid as many homeowners as possible. He went on to offer fresh details about a nearly complete government and private-sector effort to stem a huge number of foreclosures next year.

“We are leading the industry to develop a systemic means of efficiently moving able borrowers into sustainable mortgages,” Mr. Paulson said today in a speech to the Office of Thrift Supervision’s housing forum.

OK, so in not so many words, the treasury department is going to bail out those who thought taking on an adjustable rate mortgage seemed like a great way to get into a house they couldn’t afford, and now want help getting out of, but don’t want to go back to living in an apartment and resorting to eating Ramen noodles again.

I digress.

Mr. Paulson also said the Treasury is increasing efforts to reach out to borrowers struggling with their mortgages and also working to increase the availability of affordable mortgages. The secretary continued by saying that “The number of subprime mortgage resets is going to increase dramatically next year, and we need to make sure the capacity is there to handle it.”

And so, what’s in it for those of us who bit the bullet and are making the full payment on a fixed-rate loan?

This latest push to freeze the rates on these ARM’s seems typical of the widespread notion of fairness and equality. No one can fail (a la: no child left behind) and we must afford the same opportunity to those who are not willing to work as those who work their butts off (a la: the abuse of the welfare system in these United States).

If it seems as though I’m a bit jaded at this notion, I AM.

Personally, I like Frugal’s idea that we fixed-rate homeowners should get a credit or points to pay down the interest rate that we already locked in.

Sounds good to me.

I don’t usually lounge around on weekends and watch TV, but the four-day weekend has me unusually lazy. Or maybe it’s the left over tryptophan from Thanksgiving…

Anyway, one topic of discussion this morning on Fox’s Bulls and Bears show was finding the bottom of the housing market. A few of the talking heads were quick to point out that home builder stocks had dropped as much as 90% over the last year to 18 months, and that qualified them as a good buy, regardless of whether we’re at the bottom or not.

I disagree.

The stock market has the advantage of being able to predict where the housing market is going; one part statistics, one part speculation, if you will. All the housing market has is statistics; new home starts, mean housing values over the past 6-12 months, etc.

Personally I think there is still some bleeding to be had. In my opinion, the number of houses on the market and the mean housing value is the most significant parameter to look at in terms of finding a bottom. Right now, statistics show that the mean housing value has plateaued, but that statistic is skewed due to lack of movement of houses.

After people realize they’ll have to lower their asking price to sell their house, I suspect you’ll see the median housing prices fall.

At that point, it may be a good time to buy the housing market.

Now that I have things on cruise control with my rental house, it’s time to start putting some money into it.

Last week I contracted out a tree service to have the tree removed on the property line. I generally hate to remove good trees, but this one is right on the property line growing up through a chain link fence, and even worse, it was growing up through the electrical service lines to the house. That spells disaster when the limbs freeze up and take out the power to the house.

While they were at it, they ground out a second stump in the middle of the back yard.

All told, the bill was $800 once it was all said and done, but I think it was worth it, as the job is part of an effort to create a little curb appeal.

I really haven’t had any problems with the tenants, and I’m getting rent on time, which is a positive note.

Next, I’ll have some guttering replaced and some rotten wood trim replaced around the outside of the house, hopefully before the fall storms start kicking in.

A little over seeding this fall, and an additional landscaping project to add some color, and hopefully by spring I’ll have a good looking unit.

Along those same lines, I’ve contracted out a lawn service to mow the grass every other week. This eliminates the burden on the tenants, and alleviates my anguish of doing it myself.

It’s all coming together, slowly but surely…

I finally got my act together and converted my COSI Home Loan to a fixed rate, 30 year mortgage. For those not familiar with a COSI loan, the interest rate is based on the prime rate, less a fixed percentage. Therefore, if the prime rate goes up (as it has), so goes my loans interest rate.

It’s a bit like an adjustable rate mortgage (ARM) with a few caveats. An ARM is traditionally “fixed” for a short period of time. After that period of time, the rate resets to whatever the current rate is. In my COSI loan, the rate is constant for a year, but then resets each February. There is also a cap as to how much it can adjust in a single year, to the tune of about an extra $20 per month as a limit.

Up until recently, the loan rate hasn’t adjusted much, as the rate lags the prime rate by about 6 months, and the prime rate lags the rest of the market by an additional 6 months. In short, I used the COSI loan to my advantage for as long as I could, but the market is/was about to catch up to me.

The good news is, though, that rather than refinance the entire mortgage, World Savings allowed me to simply convert the existing loan into a fixed rate mortgage. Of course, they’d charge me a $550 fee to do this, but it will save me the $4,000 in closing costs…

Knowing what I know now, I probably would have just stuck with a 30 year loan in the first place. However, initially I was only planning on being in the house for under 5 years. But plans have changed, and so goes the mortgage strategy.

I gambled on a COSI Loan, and basically have broken even, but others haven’t been as fortunate.

Lesson Learned: When rates are at rock bottom, lock them in for a long time, as they can only go higher. If they should go lower, you can always refinance and save money. It’s never good to have to refinance to stop the bleeding!

OK, so the title of this post is a bit misleading. But it is true, Africa is for sale.

OK, so that’s a bit misleading as well.

However, if you’d like a little piece of “The World” development off of the coast of Dubai, scrounge the change out of the couch and pick your island.

Ireland was just purchased for AED 142 million, which translates into about $38 million USD.

Personally, I find this “real estate development” very intriguing, and it proves how strong the world economy really is. However, knowing what little I fully understand about our own US economy, I wonder how international economics will affect developments such as this.

For instance, if the price of oil crashes, what will this do to the economy in Dubai, and among other places, Iran?

A little economic topic to ponder this find Sunday night…