How to Survive a Recession
04/01/08

It is said that "A recession is when other people lose their jobs. A depression is when you lose your job."

With many predicting a recession in the US, the average consumer may be worrying how a recession might affect them and what they can do to insure against the negative effects of recession. These are some of the effects of recessions and how to deal with them.

More difficult To Borrow. In a recession banks are less willing to lend. This is particularly a problem at the moment, because of the concurrent credit crises which is reducing the availability of loans.

• Solution: Avoid taking on any unnecessary debts. The debts you have try to reduce and consolidate into a lower interest rates bearing account.

• On the positive side, in a recession interest rates are likely to be lower, meaning lower interest payments for mortgage holders.

Unemployment. This is the main concern over a recession. If output does fall, there is likely to be a fall in demand for labour. This problem is often concentrated in those sectors most affected by the recession. For example, in the current climate, jobs related to finance and the housing market are more at risk than say the manufacturing sector.

• Solution: If you fear unemployment, start thinking what you might do as an alternative. Is it viable to consider working on a second income, such as online business.
  
• Do you have unemployment insurance to cover mortgage payments. If not, it would be worth taking insurance out now.
• Don't panic. Firstly, the unemployment may not occur; there is nothing to be gained by worrying over what we have no control other.
• If are made unemployed, the best solution is to be flexible in looking for work. Consider new avenues and skills that you could learn. Also recessions will be short lived; a period of temporary unemployment does not have to become permanent.

Falling profitability of Business. If you are a small business owner the effects of a recession can be keenly felt. Lower profits could even threaten the survival of the business.

• Solution: Look for ways to minimize costs without compromising the business. There are always ways to cut costs and increase inefficiency. Some economists even go so far as to say that recessions are a good thing because they force the economy to become more efficient.
• If your business is particularly affected by the downturn, look to see whether you can diversify to reflect the changing economic environment. For example, if you specialise in selling luxury goods with a high margin try including some new product lines which appeal to people's desire for frugality.
• A fall in profits is likely to be cyclical. therefore try to plan a financial plan to borrow at a low cost for the difficult years.
  

Falling Stock Market

In a recession, stock markets are likely to fall as lower profits reduce dividend payments. Try to diversify your investment portfolio. In a recession, commodities such as gold often do well. Even in a recession, there can be good investment opportunities.
Also bear in mind that stock markets can often be forward looking. For example, stock markets have fallen sharply since the start of the year in anticipation of a recession. When a recession comes, stock markets often don't fall any more.

Consumer Confidence

Often the worst aspect of a recession is the affect on consumer confidence and people's fear about the future. Bear in mind, the media often exaggerate the extent of a downturn in the economy. The media like to highlight sensationalist stories. However, it is often not as bad as it is made out to be. Keep a calm and detached attitude and just make the best of the current situation.

Any Benefits of a recession?

• Lower interest rates. Good for borrowers
• Lower inflation rates. Good for savers
• Sometimes difficult times can force us to reevaluate our financial situation. It can make us look for new business avenues and new ways to cut costs and spending. Although it may be temporarily unpleasant, the important thing is not to panic but try to make the best of any situation we find ourselves in.

Buying in a Rocky Housing Market
by Aleksandra Todorova

Indifferent to the bleak real estate headlines, 26-year-old Michael Klauer and his fiancée recently bought a two-bedroom condo in the desirable Lake View neighborhood in Chicago. They weren't in a rush to buy, but when an opportunity presented itself only a month after they started looking, they jumped on it.

The apartment, listed at $519,000, was theirs for only $480,000 — an initial offer they didn't back down from, even though they knew the seller had bought the place 10 months earlier for $512,000. Factoring in the broker's fee and sales taxes, the seller lost more than $44,000 on that deal, according to the couple's realtor, Jay Michael, owner of the Estate Property Group in Chicago.

"We leveraged the fact that they'd already moved out and were in a [financial] struggle to keep two places," Klauer says. And even though the condo's value may drop further, the couple wasn't concerned since they plan to live in the place for at least three to five years. "It was a good time to buy," he notes. "Prices are on the down low, and it's something I could sit on for a while."

Watching housing prices plummet is just the push opportunists like Klauer need to jump in and snatch up a bargain on a prime piece of property — one that just a little over a year ago was unreasonably overpriced. But, in this market, such deals don't come without pitfalls from tighter lending standards to widespread expectations that home values will continue to fall as foreclosed properties glut the market.

Home prices declined 8.9% in the fourth quarter of 2007, compared with the same period in 2006 — the largest drop in 20 years, according to the S&P/Case-Shiller U.S. National Home Price Index, which tracks housing data. Many markets posted double-digit drops, including Miami, where home prices fell 17.5%, and Las Vegas and Phoenix, down 15.3%. (If that isn't daunting enough, consider that during the 1990-91 recession, decline rates bottomed at 2.8%.)

Even though demand for homes and construction may start improving as soon as the second half of this year, Celia Chen, director of housing economics at Moody's Economy.com, projects that the housing market won't completely hit bottom until mid-2009, largely because the glut of unsold homes created by foreclosures will continue to depress prices.

It doesn't help that interest rates, which in late January fell below the 6% threshold for mortgages of $417,000 or less, are as stable as a teenager's mood swings. For the week ending Feb. 29, rates were up to 6.3%, according to market research firm HSH Associates. Rates on jumbo loans, or those of $417,000 or more, remain high, at an average 7.18%. "It's a very unsettled marketplace," says Keith Gumbinger, vice president of HSH Associates. "Rates are high for a couple of weeks and then go back down, as investors are running up and down the seesaw on inflation and recession."

It's no wonder that most buyers are staying on the sidelines. In January, existing-home sales declined by 23.4% from the prior year, according to the National Association of Realtors. New-home sales also sank to their lowest point since early 1995.

"People are waiting for the other shoe to drop," explains Jonathan Miller, president of Miller Samuel, a New York-based real estate appraiser. "You could even argue that there are lots of people who want to buy, but they don't want to look stupid."

Yet, with so many properties to choose from and desperate sellers willing to negotiate, it may still be tempting to buy a home in this tumultuous market. Here are three things you should know before you start house hunting.

Clean up your financial act

Still gripped by the credit crunch, mortgage lenders have gotten much tougher. Credit score requirements are going up and down payments are back in vogue, Gumbinger says.

"The break line of good to bad credit used to be a FICO [score] of 620," he explains. "Over the last year, it's moved to 650, then 680 and now it's starting to push over 700." Borrowers who have lower scores may have to come up with higher down payments, or settle for loans with higher fees or interest rates.

Getting a home with low or no money down, meanwhile, is a thing of the past. Lenders may even require more than the traditional 20% in markets that are especially hard-hit. Last December, Fannie Mae issued a directive, effective Jan. 15, 2008, increasing down-payment requirements by five percentage points in declining markets. (So, if a certain type of loan allows up to 90% financing, buyers in some markets will have to put down 15%, rather than 10%.) "A lender will not give you a loan with 5%, 10% or even 20% down in an environment where the loan he makes today may be greater than the value of the home tomorrow," Gumbinger explains.

Borrowers who have good credit, have the cash for a down payment, manage their debts well and have the documentation to prove their income and assets won't have a hard time qualifying for a mortgage. Fall short on any one of those requirements, however, and things get a lot more difficult.

Stay away from foreclosures

Foreclosures are touted as great deals (especially by services that sell foreclosure listings). In some areas, real estate agents have even started taking potential buyers on "foreclosure tours."

In reality, however, buying a foreclosed property — or even one in a neighborhood plagued by foreclosures — is risky. "A heavy concentration of foreclosures indicates that there's some sort of economic problem in the region that will keep your home value from at least remaining stable," says Miller. "Or that there was some speculation and there may still be some air left to come out of that market."

In addition to suppressing values, foreclosures lead to increased crime and an overall decline in communities. Brad Charnas, an appraiser in Cleveland, says there are some neighborhoods in his area that may never come back to normal. "You can't believe the damage that's been done by all the homes that have been abandoned," he says. "Squatters are taking over, they're using candles because there's no electricity and putting the homes on fire."

Take your time

Jay Michael, the Chicago realtor, is in the market for a condo himself these days. But when he sold his apartment in December last year, he moved into a rental so he can take his time. "I'm looking for someone who wants to sell far more than I want to buy," he says. When he finds that seller, he won't hesitate to low-ball. A month and a half ago, he made a $750,000 offer on an apartment with a $1.175 million asking price. "The agent told me the client was so insulted they didn't even want to counter," he says. "So I told them to keep the offer on file. Further down the line they might find they want to sell at $750,000."

That may have been unthinkable a year ago, but could now help you snatch a nice piece of property at a bargain price. Research, however, is essential. Before making an offer, find out when the seller bought the place, how much they paid for it and how much they owe. (A realtor should be able to provide this information, although it's also public record.) Knowing more about their personal situation — whether they have more than one property to support, for example, also helps.

Without a doubt, a buyer's strongest ally in this market is time. "If you're in it for the long term, it might be an OK time to start looking for a house now," says Economy.com's Chen. "I'd just really take my time and find something really good. You have the luxury of a lot of choices and can really bargain."

Tuesday, March 4, 2008

Selling Tips
By Ken Edwards

So what can you do to sell your home quickly and at the best price possible?  Here's a list I offer my clients.

Price it Right.  Don't make small price reductions.  That's the equivalent of chasing the tide as it goes out.  If you aren't getting offers, or, worse, no showing, slash 10% off the sale price of recently sold comparable properties (not your current asking price) and you may be surprised at the action you'll get.  Let's start a bidding war.
List it Right.  If you haven;t listed your house with a top real estate broker in town and selected an agent from that firm who can give your marketing program the time and exposure it needs, consider doing so.  If your property is currently listed with a friend of relative with whom you just had to list it to keep the peace, exactly how long will you wait and how much is this costing you?  They had their shot, so when it expires, shop you listing elsewhere with due apologies.
Stage your home.  Kick your marketing program into high gear.  Starting with the removal of clutter inside and overgrown shrubs outside, have an accredited home staging professional take a look at your home and give you some brutally honest feedback starting with curb appeal.  We all know that you love your home including all the chachkees you've collected, but buyers have a hrd time looking beyon them.  Pack them for the move you'll be making soon.
Create a buzz in your neighborhood.  Have an open house with prizes and refreshments and invite your neighbors in.  Don't forget that they have  friends, relatives and colleagues from work and clubs they belong to and they love your neighborhood (otherwise they wouldn't be living there).  They'll soread the word to all of their contacts and that will increase your home's sphere of influence.  Remember that sphere of influence and source of income have the same initialization, SOI.
Use the power pf the Internet.  Make sure your home has a high Interenet presence.  Try searching for you home on Realter.com and any search engines and listing services your friends and colleagues use.  Did you find it?  What other listings came up when you search in your price category?  How did you home stack up against the competition?  Make the necessary adjustments and additions.
Photos, photos, photos.  Pictures sell.  Make sure your photos are the best they can be and are seasonal.  I can't tell you how many snow scenes I see in summer listings.  That's a killer.  NO clutter, no ladders against the house, good lighting are all obvious (you'd think), but you'll have to go beyond that.  Use a super wide angle lens - 14mm is a great size.  Rent one or use a progessional photgrapher.  You should have about 25 phots.  Don't settle for less.  More photos = more visbility, literally and figureatively.
Create a virtual tour.  Make sure your home has a still image or video tour to "walk" potential buyers through it as if they were seeing it in person.  Consider adding a 360-degree panorama from the street in front of your house.  Buyers want to size up the neighborhood before they come.  You'll be able to weed out those buyers who would not be interested without going through the trouble or expense of showing it to them.  More importantly, you'll excite those who, when they see it in person, will think it's even nicer than they thought.  It will be easier to move them to an offer based on their "second" visit.
Offer a "financial goody bag" to go along with your house.  Things you can throw into the goody bag include pre-paid taxes, closing costs, permanent mortage rate buydowns, even maid or gardening services.  Buyers sometimes will react to these deal sweeteners and move your property up in their short list because of them.
January 25th, 2008

Boosting Your Home's Value in a Down Market
by Kelli B. Grant
provided by SmartMoney.com

   Real estate may be considered a long-term investment, but you should be keeping track of your home's short-term value just as you would the rest of your portfolio.
   With foreclosures reaching an all-time record in the third quarter, the housing market has been flooded with the highest number of single family homes up for sale since 1988. That glut, in combination with the ongoing credit crunch, helped to strip 5.7% off the value of the average U.S. home last year, according to Zillow.com, an online real estate service. Values could continue to dive well into 2008.
   Even if you're not planning to sell your home anytime soon, you should be concerned about falling home prices. An estimate of your home's current value is a must for assessing homeowners insurance and property tax, as well as for planning your estate. It's also an important factor in figuring out which remodeling projects you should embark on now in order to get a bigger payoff in the long run.
   If you seek to boost the value of your abode, make sure you don't overdo it. Now is not the time to dip into your home's equity or rack up credit-card debt to fund pricey remodeling projects.
   Instead, choose projects that offer the most bang for the buck. Here are five ways to beef up your home's value without embarking on a costly and massive renovation.
   Keep up with the Joneses. Find another outlet to express your individuality. To get the most money out of your home, you need to be in lockstep with your neighbors. "You don't want the biggest house on the block, or the nicest," says Sid Davis, author of "Home Makeovers That Sell." If most of the other homes on your block have laminate kitchen countertops and you splurge for granite, it's unlikely you'll get that money back in added value. Nor does it pay to be nonconformist. If all your neighbors' homes have designer kitchens, buyers will see replacing your olive green '70s-era refrigerator and oven as one more line on their tab.
   Go green. Projects that improve energy efficiency offer some of the best returns, says Vena Jones-Cox, past president of the National Real Estate Investors Association. You'll reap immediate savings in the form of lower energy bills. And when you're ready to sell, rest assured that these upgrades will catch cost-conscious buyers' eyes. "If you look at what features real-estate agents are pushing, it's 'new furnace,' 'new windows,' 'new roof,'" she says. Swap out 10 old windows with insulated wood replacements, for example, and you could expect to recoup 81% of the project's $11,384 cost, according to Remodeling magazine's 2007 Cost vs. Value Report. In comparison, spending $69,817 to add a sunroom returns just 59%.
   Gossip. Nearly 80% of consumers now start their search for real estate online, according to the National Association of Realtors. Considering that so much of a home's value is desirability (i.e., how close your house is to the best schools or how safe the neighborhood is) it can't hurt to do some cyber-boasting about your area's best features, says Diane Saatchi, senior vice president for Corcoran Group, a New York-based real estate broker. StreetAdvisor.com lets homeowners rate everything from sidewalk cleanliness and noise to cellphone reception and neighborly spirit. YourStreet.com users can post local news stories and debate each other about the best local pizza joints or dry cleaners.
   Clean house. Aim to complete several small upkeep projects each year, like weather-stripping entryways, re-plastering a cracked facade or securing a loose floorboard. Although these problems are simple and inexpensive to fix, left untouched, they can cumulatively spell big trouble at sale time, cautions Saatchi. Buyers expect a $2 discount for every dollar of damage discovered during a home inspection, according to home inspection service HouseMaster. "People are very mindful of things that add to the cost of the house," she says. "Better you think about that first and can correct it before you put the house up for sale."
   Exercise contractor caution. With fewer new homes being built, more contractors are looking for work. The good news: As contractors scramble for your business, bids will be more competitive, says Jones-Cox. You may also be able to negotiate a smaller upfront payment. The bad news: You'll need to be more vigilant about picking the best contractor for the job. "Contractors are starving for work," she says. "They may tell you they can do jobs they don't have the skills to do." Check that your would-be contractor has the appropriate licenses with your town building department, and that there are no outstanding complaints with the Better Business Bureau. Also, ask the contractor for a list of former customers for whom they've completed similar jobs, and
follow up with each
Placed on Yahoo!Finance: Thursday, January 17th, 2008