Saturday, June 23, 2012

When Will Home Prices Go Up?

One of the most common questions I get from website visitors is:

"When will home prices go up?"

The answer is simple.

When those blue lines on the right of this chart begin hitting 400,000 per month for one straight year.

Right now the number is 69,000 per month.  Even The New York Times which has each one of its fingers and toes crossed for Mr. Obama and his reelection estimate payroll growth will not exceed 182,000 for the next six months.

Also, remember this bit of bad news.

Each month the gain is less than 250,000, the deficit needs to be made up at some point in the future.

Meaning?  If times don't change fast the 400,000 figure may grow to 425,000, 450,000, or more.

Also remember the economy needs to create 125,000 jobs per month just to keep up with population growth like immigrants, new college graduates, and other brand new entrants into the job market.

Think of 125,000 as a baseline of zero.

What you see on the chart above is the Obama economy, or a double dip recession the lamestream media still calls a three year old recovery.

Remember the U.S. government says the economic recession ended in June 2009.

Does that sound right to you?

Friday, June 15, 2012

Pep Boys Update

Perennial stock (mis)trader Jim Cramer has an AVOID call out on Pep Boys (PBY).  You can watch Jim Cramer bash the Pep Boys here.

I love the stock.  I wrote this blog post about it two weeks ago.  It's up about 5% since my call, by the way.

I've written for years about Cramer's inaccurate stock calls.  One recent study had his calls successful just 44.69% of the time.  In other words, a one-eyed drunken monkey flipping a coin would have a better track record than Cramer.

For the record, I love Cramer's show.  He's an entertainer, not a stock picker.  He's a very smart man who makes really dumb calls virtually every day on his show.  And that is the reason why he makes so many bad calls.  He makes LOTS of calls to start with.

I post very few stock tips in this blog.  Here and there, one or two.  I'm pretty confident about PBY and let's see what happens next.  If I'm wrong, I'll admit it.

It's the real estate, Jim.  Who is going to buy PBY to run the muffler business?  PBY is a real estate play.

By the way, Cramer recommends AutoZone (AZO) instead of PBY.  What is AZO?  A creature of hedge fund manager Eddie Lampert and his love of real estate plays like Sears and Kmart.  And Jim, why would I buy AZO when Lampert is selling AutoZone shares?

Wednesday, June 13, 2012

70% American Teenagers Unemployed

The Bureau of Labor Statistics reported that a whopping 70% of all U.S. teenagers are unemployed this summer. Here is a link to the official BLS report on teen unemployment.

The old teen rite of passage of cutting lawns, caddying on the golf course, and even working construction jobs like painting and roofing all summer long is disappearing.

The "official" unemployment rate for teenagers in the state of California is 36%.  Everyone admits the real number is much higher.  Even 80% in some areas.

What's the cause?  As the BLS reports, the rate has been falling for years.  It was about 50% unemployment before the latest recession.

But why now?

Why do only three out of ten teenagers have a job?

Employers are giving any jobs they have to adults.  There are plenty of experienced adults willing to work at any wage, even fast food jobs.  Why hire a 16-year old when you can hire a 26-year old to do the same job?

Teenagers will have to wait to learn necessary job skills such as showing up for work on time.

But, in reality, when will they learn them?  At age 22 after graduation from college?

Real estate investors should expect a rise in property insurance rates.  Unemployed teens equal vandalism.

Tuesday, June 12, 2012

Dying American Middle Class

For anyone doubting the American middle class is dying, please read this newly issued report by the Federal Reserve Board of Governors entitled "Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances."

The media has given this report a great deal of play on the 40% figure.

The average American middle class family since 2007 has lost 40% of its net worth, much (but not all) due to the housing bubble popping and the recession.

But the report goes far further.  Income is falling, savings are non-existent, and much more.

Please explain to me how "average" and "normal" middle class people will ever think of home ownership as part of the American Dream again.

It is now increasingly out of reach.  Even full-time employment with benefits is a fantasy for many.

Policymakers who ignore this report and fail to act on its conclusions doom the American middle class.

The United States used to have a bulging middle class with small pockets of rich and poor at the top and bottom.  Economically, the country looked like this.


Now, the nation is growing more at both ends and shrinking in the middle.


This is a recipe for social disorder and chaos, even in a city like Seattle where I live which is increasingly becoming richer at the expense of its suburbs.  When an average city worker like a cop, fireman, or teacher can no longer afford to live where they work, society has a problem.  So do real estate developers but let's not be picky.

READ THE FED REPORT.  Learn the type of country your children will grow up in a decade from now.  And then vote accordingly in November.

Sunday, June 3, 2012

John Beck Convicted

For many years real estate guru John Beck was a regular on late night television pitching his "Pennies on a Dollar" tax lien system where homes could be purchased for as low as $600.

I know you have seen these infomercials (and others like them) many times.

You won't see them or John Beck on TV ever again.

On April 20, 2012, John Beck along with two other get-rich-quick infomercial gurus (John Alexander and Jeff Paul) were convicted in the U.S. District Court for the Central District of California of a massive fraud scheme of gigantic proportions.

The Federal Trade Commission brought the case and is seeking $450 million in damages.

Nearly ONE MILLION consumers were defrauded by these three gurus and their infomercials.

Here is a link to Federal Trade Commission v. John Beck Amazing Profits, LLC

The FTC won at summary judgment, meaning the case against the defendants was overwhelming.

Please take the time to read the case and learn what schemes these gurus dreamed up, even selling $14,995 personal coaching and mentoring systems where not a single person who bought them made money.

Here is the official FTC page on John Beck.

Virtually nothing about John Beck's Free and Clear Real Estate System was legitimate.  From the moment you saw the infomercial you were being defrauded.  If you picked up the phone to place an order you were already snared in their trap.  Even these testimonials were fake.

I find all this news very sad because I always liked John Beck.  His courses in the past (1980s era) were always exceptional.  His FORCED SALE WORKBOOK was one of the first home study courses I ever owned and to this day I regard it as a masterpiece.  It was so good I know law offices that used it as a reference source.

The most upsetting point to learn about John Beck after reading the Federal case is he never really invested full time in tax lien properties at all.  Everyone, including me, always assumed he was a tax lien investing machine, filing quiet title actions by the score on all those "thousands" of liens he always claimed  he was buying.  He was so knowledgeable about the subject his experience seemed to be obvious.

In reality, he admitted in his deposition before the FTC he bought less than TEN homes in his lifetime using his tax lien method.

What happened?