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Alex De Mostafa's Articles in Real Estate

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IRS Currently Non Collectible Status OK, you owe IRS a lot of money and you can't pay them. So what else is new? You're not the only one. Take a... Learning the New Basics for Working Capital Loans Small business financing for business owners have changed recently and the process of reviewing working capital management basics will help business borrowers when faced with potential commercial lending difficulties. How Security Devices Can Lower Your Insurance Premiums The better you protect your property - home, business and vehicles... Is Renter's Insurance Worth Buying? If you are living in a rented accommodation, you do need to consider renter's insurance. Although your landlord will have to provide... How To Find Management Rights Opportunities In Cairns Queensland Living in Cairns Queensland is a dream come true for people that want to live a very fulfilling and somewhat off beat laid back lifestyle. Purchasing management rights is quite possibly the best way to make that dream become a reality. Stop a Foreclosure by yourself- Act fast and save your house You may have been hit with a foreclosure notice or know that one is about to come. All hope is not lost if you act quickly. Even if your income is severely reduced or has plunged to 0, there are methods that you can use to stop the bank dead in their tracks. How Spray Foam is Part of an Energy-Efficient Home If you are not familiar with spray foam, it is a form of insulation used in building construction. It has polyurethane base; once the foam is mixed and pumped, it... What Does Homeowners Insurance Cover? Now that you're a homeowner, you know that you'll need an insurance policy to protect yourself from disasters, accidents, and other mishaps. It's important to... Five Innovations in Green Flooring As the name implies, green flooring is an ecologically friendly alternative to traditional synthetic flooring methods. It is focused on using organic and easily renewable materials, eliminating negative... Discover Negotiating Tips for Okanagan Real Estate Listings Okanagan home finders Rob Dion and Lee Ivans are your #1 Okanagan Royal Lepage realtors. Let Rob and Lee search through Okanagan real estate listings for your perfect Okanagan real estate home. Visit our website for Okanagan homes for sale. Why Should I Get Apartment Insurance? You might have Aunt Martha's hand-me-down TV from the basement now, but next Christmas Uncle Mike might give you a 50-inch flat screen HDTV because he's so proud of you. You'll be glad you... Make Your Home Sell in a Slow Economy According to the National Association of Realtors (NAR), the inventory of homes that are currently listed for sale may not be depleted until well into the... How to Succeed in Real Estate Lead Generation When one talks about real estate as a business, it is unavoidable to think about how highly competitive the industry is. Since economic situations are dynamic and rapidly change... Wainwright Realtors Smith Mountain Lake Wainwright REALTORS specialize in real estate in the Smith Mountain Lake area of Virginia. Tenant Screening - What You Need To Know For building owners and property manager's there are few things more devastating than entrusting treasured real estate to residential or commercial tenants who abuse the property or... Real Estate In New York Is Interesting For Investors Real estate in New York has been always a dream for many investors. Lately, many people are investing. Mega Property Projects in Dubai This is a short article about the mega projects engulfing the real estate focus in Dubai. Alt-A Mortgage Crisis About to Hit the U.S. The current mortgage crisis in the U.S. is the result of a firestorm of subprime mortgage failures. The next mortgage crisis to hit the U.S. will be the result of a similar firestorm of Alt-A mortgage failures. Real Estate Market Today Real estate is a legal term for describing a piece of land and anything associated with the land – commonly a house or an apartment situated on that particular piece of land. Real estate was a booming industry before the severe recession hit the US, but now there is a significant slump in the business. Property prices are going down like never before and the real estate market is showing a big slump. Yet there is still hope. Grand Rapids Condos In the past few years, there has been a rise in the sales of condos. Now Is The Time To Invest In Smith Mountain Lake Real Estate Market Real estate business has the potential of giving you a lot of return on investment, especially if you consider investing in Smith Mountain Lake area. Investing In Smith Mountain Real Estate Market Is A Good Option There is absolutely no denying the fact that recession has hit all markets and business sectors. In Financial Markets, the Herd is usually Wrong Financial markets are fickle monsters. Whichever way the herd moves the market will go the other direction. During the Great Housing Bubble rally, prices were pushed up the herd mentality. As prices rose, more and more people were convinced prices would continue to rise, so the pool of buyers swelled. Credit standards dropped to qualify more buyers, and the party went on and on. The Participation of Women in the Housing Bubble One of the unique characteristics of the Great Housing Bubble was the large increase in market participation among women, sometimes single women and sometimes as married women buying property on their own. Subprime Will Return, Alt-A is Dead Like a Phoenix rising from the ashes, Subprime lending will make a comeback. Lenders focus on the three Cs: Creditworthiness, Capacity, and Collateral. Creditworthiness is measured by one's FICO score, Capacity is based on one's income, and Collateral is the value of the property the loan is being written against. The subprime lending business model was originally intended to take people with poor FICO scores that had good income and savings and give them bridge financing until they could repair their FICO scores and refinance into conventional loans. This business model will probably return in a few years as there will be many people in this category due to the crash of prices in the Great Housing Bubble. The High-End Suburbs Will Also Crash The course of a financial market, particularly the real estate market, is a long and winding road full of twists and turns and unexpected outcomes. It was certainly foreseeable that banks and builders might fail and the GSEs might need to be bailed out, but the how and when of these occurrences are always unpredictable and newsworthy. The Loan Program for the Next Housing Bubble Lending during the Great Housing Bubble was too messy. There were too many loan programs. Since real estate always goes up, and since people want immediate access to this appreciation to spend it like income, a new loan product which readily provides this money is in order. The Option ARM was a major innovation. By allowing for negative amortization, people were able to add to their loan balance and effectively "cash out" their equity. The problem with this loan program is that it didn't go far enough, people still had to make payments, and they had to get HELOCs to extract the remainder. Why Were People Buying Houses While Prices Were Dropping? There is a great deal of price volatility in California. There are significant periods of time where house prices will appreciate faster than incomes increase. This is purely the result of irrational exuberance. Prices cannot rise faster than incomes on a sustained basis, but prices can certainly go up faster than incomes when a bubble is inflating. Does Home Appreciation Make It Easier to Move Up? The conventional wisdom in California real estate is that you buy a home, and when it appreciates, you sell it and move up to a better home. There is some truth to this idea, but not in the way most people think. Getting Out of a Real Estate Transaction Changing your mind on a stock purchase is relatively easy. Stocks are very liquid, and transaction costs are very low. However, changing your mind about a real estate transaction is not so easy. Real estate is very illiquid in a declining market, and the transaction costs are very high. Market Solutions for Preventing the Next Housing Bubble There is one potential market-based solution that would require no government regulation or intervention that would prevent future bubbles from being created with borrowed capital: change the method of appraisal for residential real estate from valuations based exclusively on the comparative-sales approach to a valuation derived from the lesser of the income approach and the comparative-sales approach. Both approaches are already part of a standard appraisal, so little additional work is necessary, other than appraisers will have to focus on doing the income approach properly. Personal Problems Resulting From the Great Housing Bubble The economic problems caused by asset price bubbles often lead to personal problems in the wake of the deflating bubble. Statistics about unemployment, foreclosure and bankruptcy are impersonal. The events that result in any one of these outcomes was anything but impersonal: these things happened to real people who had very real emotional responses. Many people during the fallout of the Great Housing Bubble experienced all three. Any one of these outcomes can lead to depression, suicide, divorce and a whole host of traumatic personal problems. All of it was preventable if the bubble was not allowed to inflate in the first place. What Happens in a Foreclosure? Foreclosure is the forced sale of a property owned by the borrower in order to satisfy the debt(s) secured by the property. Foreclosure laws are complex, and they vary from state to state. There are no federal laws governing foreclosures. The borrower is the legal owner of the property who has entered into a mortgage agreement with a lender to pay back all borrowed money, fees and interest due. Lingering Problems from the Deflation of the Housing Bubble As with any illness, the recovery is often plagued by symptoms of the disease and unwanted side effects. The recovery from the Great Housing Bubble will be no exception. The main problems will be experienced by those who bought at peak prices and did not go through the cleansing foreclosure process. As painful as foreclosure is to those who must endure it, foreclosure is the cure to the disease of the market. After foreclosure, a borrower is no longer burdened by high housing payments, and is free to move to find new work and spend income on consumer goods. How Does a Decrease in Home Ownership Rates Impact Residential Real Estate Markets? There is a strong correspondence to the growth of the subprime lending industry and an increase in home ownership rates. This is a direct result of lending money to those borrowers previously excluded from the housing market either because the borrower did not have the downpayment, or they lacked good credit. The collapse of the subprime lending industry in 2007 and the subsequent foreclosures on the millions of subprime loans caused a decrease in home ownership rates. Only a Fool Believes Real Estate Prices Always Go Up In 2007 and 2008, house prices declined nationally for the first time since the Great Depression. From 2002 to 2006, there was a massive Ponzi Scheme of ever-increasing debt that fueled the Great Housing Bubble. People bought in to this Ponzi Scheme because they believed real estate prices always go up. They were encouraged in this belief by the National Association of Realtors. Factors that Influence the Price Declines in Residential Real Estate Markets There are a number of factors that will influence the timing and the depth of the price decline. There are a number of psychological factors and technical factors in play. How to Get Best Furnished apartments in Tokyo Tokyo serviced apartments are the most popular and inexpensive option for your residence problem. You can easily get help with many Tokyo apartment websites. Emergency Economic Stabilization Act of 2008 Did Not Work In early October 2008, the Congress passed and the President signed the Emergency Economic Stabilization Act of 2008. The purpose of the bill was "to restore liquidity and stability to the U.S. financial system and to ensure the economic well-being of Americans." The law authorized the Secretary of the Treasury to establish a Troubled Asset Relief Program (TARP) to purchase the toxic waste poisoning the balance sheets of lenders and other financial institutions. This measure was passed in response to an unprecedented seizure of the short-term credit markets. Banks quit lending money to other banks once it became apparent that few of them were solvent. This fear spread to all short-term commercial paper and threatened to bring down the entire financial system. It is unclear whether or not this new program will save the institutions holding the toxic waste. Housing and Economic Recovery Act of 2008 Did Not Work In late July 2008, Congress passed and the President signed the Housing and Economic Recovery Act of 2008 that included the following provisions: Federal Housing Finance Regulatory Reform Act of 2008, HOPE for Homeowners Act of 2008, and the Foreclosure Prevention Act of 2008. These programs did not accomplish what they set out to do. Hope Now? The Big Lies of the Housing Bubble The first of the numerous bailout programs was "Hope Now" introduced in October of 2007. As the name suggests, Hope Now was sold to the general public as a reason for them to hang on and continue making crushing payments for as long as possible. It was a false hope, but even false hope gave homeowners a little emotional relief, and it provided a few more payments to the lenders. According to their website, "HOPE NOW is a cooperative effort between counselors, investors, and lenders to maximize outreach efforts to homeowners in distress." The plan was to streamline the process of negotiating workouts between lenders and borrowers to keep borrowers making payments and ostensibly to stop them from losing their homes. The emphasis was on making payments and maximizing investor value in collateralized debt obligations. Very few people benefited from the program, despite government claims to the contrary, and no rights or benefits were conferred to borrowers that they did not already contractually have. There was much fanfare when it was first announced, but the program did far too little to have any impact on the housing market. Cincinnati Ohio Home Inspection Tips If you are planning to stop renting and buy a place you should plan to get a home inspection for your new Cincinnati, Ohio area home. Getting A Home Inspection For Your Dayton Ohio Area Home Gives You Peace Of Mind If you are interested in getting a home inspection for your Dayton, Ohio area home, be sure to find a reputable home inspector to do the job for you. The Denial Stage in a Financial Bubble There are many identifiable stages in a financial mania. These include: enthusiasm, greed, delusion, denial, fear, capitulation, and despair. When the limit of affordability is reached and the pool of available buyers is exhausted, prices start to decline. At first market participants are still overwhelmed by greed, and they choose to ignore the signs that the party might be over. The Greed Stage in a Financial Bubble There are many identifiable stages in a financial mania. These include: enthusiasm, greed, delusion, denial, fear, capitulation, and despair. In the greed stage of a financial bubble, the bullish sentiment reaches a feverish pitch and prices rise very rapidly. Every owner in the market is making money and most believe it will go on forever. The Enthusiasm Stage in a Financial Bubble There are many identifiable stages in a financial mania. These include: enthusiasm, greed, delusion, denial, fear, capitulation, and despair. At the beginning of the enthusiasm stage of a financial bubble, prices are already inflated, so there is cautious buying from traders looking for trends and momentum. Precipitating Factors in Financial Bubbles There is often a precipitating factor causing the initial price rally that pushes prices above their supported fundamental values. A bubble rally is usually kicked off by some exogenous event, but it may occur simply because prices have been rising and investors take notice, or it can be merely the result of a lack of investor fear and the widespread belief prices cannot go down. Behavioral Finance Theory Behavioral Finance abandoned the quest of the efficient markets theory to find a rational, mathematical model to explain fluctuations in asset prices. Instead, behavioral finance looked to psychology to explain asset valuation and why prices rise and fall. The primary representation of market behavior postulated by behavioral finance is the price-to-price feedback model: prices go up because prices have been going up, and prices go down because prices have been going down. Efficient Markets Theory The efficient markets theory is the idea that speculative asset prices always incorporate the best information about fundamental values and that prices change only because new information enters the market and investors act in an appropriate, rational manner with regards to this information. This idea dominated academic fields in the early 1970s. Efficient markets theory is an elegant attempt to tether asset prices to fundamentals through the common-sense notion that people would not behave in irrational ways with their money in financial markets. This theory is encapsulated by the "value investment" paradigm prevalent in much of the investment community. Housing Bubble Deflation - The Stages of Grief Markets are the collective actions of individuals, and the psychology of the markets can be broken down to the psychology of the individual participants who make it up. When price levels in a financial market collapse, most people lose money. Any loss has a psychological impact on the individual causing her to experience grief. The grieving process is generally divided into several overlapping stages: denial, anger, bargaining, and acceptance. These stages are also apparent in the mass psychology of the market. Floplords - Flippers Turned Landlords When house prices stopped their dizzying ascent in the Great Housing Bubble, many speculators found themselves with large monthly debt service costs and no income to offset expenses. Many chose to quit paying their mortgage obligations and allowed the property to be auctioned at foreclosure. Many chose to rent the properties to reduce their monthly cashflow drain, and they became accidental landlords. In the vernacular of the time, they became floplords, flippers turned landlords. Primary Buyer Support Levels in Residential Real Estate Markets The two true real estate investor types, Rent Savers and Cashflow Investors, move in to a market and create a bottom when comparative rents come into alignment with the total cost of ownership. Rent Savers enter the market and begin purchasing real estate. It makes sense for them to do so because ownership becomes a savings over renting (hence the term Rent Saver). What Are the Two Kinds of Real Estate Investors? There are two types of true real estate investors: Rent Savers and Cashflow Investors. These two groups will enter a real estate market without regard to future appreciation because either the cash savings or the positive cashflow warrant the purchase price of the asset. These people are largely immune to the emotional pratfalls of speculators because the value of the investment to them is not dependent upon a profit to be garnered when the asset is sold. They will hold the asset through any price declines because they are not feeling any pain when prices drop. Since these investors will purchase houses even if prices are declining, they are the ones who move in to create a bottom and end the cycle of declining prices. Housing Bubble Market Psychology Financial markets are driven by fear and greed: two basic human emotions. Rationality and careful analysis are not responsible for, or predictive of, current or future price levels in markets exhibiting bubble pricing as the emotions of buyers and sellers takes over. Reactions to the Housing Bubble Burst When a bubble in a financial market pops, it does not explode in spectacular fashion like a soap bubble; it is more comparable to a breached levee which releases water slowly at first. Once the financial levee is ruptured, the equity reservoir loses money at increasing rates. It washes away the imagined wealth of homeowners who bought late in the rally or used home equity lines of credit to fuel consumer spending until the reservoir is nearly empty and the torrent turns to a trickle. Ultimately, the causes of failure are examined, the financial levee is repaired, and the reservoir again holds value, but not until the dreams and equity of many homeowners are washed away. The Supply Curve in Residential Real Estate Bubbles The supply curve is the opposite of the demand curve: sellers will make very few units available at low prices, and sellers will make a great many available at higher prices. Wherever these two curves meet is where supply and demand are in balance and market transactions are taking place. Eighteen Common Lies Realtors Tell Realtors are agents of sellers, and it is not uncommon for them to exaggerate the income and appreciation potential of a given property to help sell it. It is a realtor's job to obtain the highest possible sale price for a piece of real estate. The most common ploy realtors use it to attempt to create a sense of urgency in a buyer. In a seller's market, prices are rising, and buyers already feel a sense of urgency. In a buyer's market, prices are falling, and there is no urgency on the part of buyers. This fact does not stop realtors from trying to create urgency even if the truth is cast asunder. Housing Bubble - How to Identify One Prices went up a large amount during the Great Housing Bubble, but what makes this price increase a bubble? To answer this question it is necessary to accurately measure price levels and review historic measures of affordability to establish these price levels are not sustainable. Measuring house prices is not a simple task, and there are many methods market watchers use to evaluate market prices. These include the median, the average cost per square foot, and the S Credit Rating Agencies and the Secondary Mortgage Market Credit rating and analysis of collateralized debt obligations and all structured finance products are integral to the smooth function of the secondary market for mortgage loans. A credit rating agency is a company that analyzes issuers of debt and debt-like securities and gives them an overall credit rating which measures the issuer's ability to satisfy its debt obligations. Are Mortgage-Backed Securities Dead? One can argue that structured finance creates greater efficiency in our financial system because capital is freed to pursue other objectives. Although, it can also be argued, as Warren Buffet has, that derivatives, the product of structured finance, are "financial weapons of mass destruction." Both arguments stem from the same characteristic of these securities: excessive debt. Everyone Wants To Live Here... Not! The Great Housing Bubble witnessed many foolish ideas and beliefs about real estate. Among the most foolish was the idea that prices went up because everyone wants to live wherever they are. When rational arguments fail to explain something, it is only natural that people will start making things up. Mortgage Interest Rates - How Are They Determined? Mortgage interest rates are the single-most important factor determining the borrowing power of a potential house buyer. When rates are very low, a borrower can service a large amount of debt with a relatively small payment, and when interest rates are very high, a borrower can service a small amount of debt with a relatively large payment. What is the Option ARM Payment Rate? A negative amortization loan is any loan where the monthly payment does not cover the monthly interest expense. Interest-only or conventionally amortizing loans do not have this feature, and the monthly payments are based on the interest rate charged and/or the duration of the amortization schedule. Since the negative amortization loan breaks down this traditional relationship, there is a completely separate rate calculated for the minimum payment amount. Expat life in Isle of Man and Ireland The Isle of Man and Ireland are two neighboring countries. Life there is great as n expat. This is due to the happiness these places provide. Expat in Liechtenstein vs. Lithuania What to choose between Liechtenstein and Lithuania if you decide to work as an expat? The decision is all up to you. Both countries having their advantages and disadvantages. Expat Taxes If you are an expat working in a foreign country, then you should be aware of the rules and regulations about expat taxes; you should be aware of your obligations and rights. Dallas Metro Homes Prices show strength against the rest of the nation. Dallas homes for sale values decreased 4.3 percent between December and the past 12 months. according to the S Importance of intelligence for an expat in Malta One of the key factors to well-being and ultimately survival as an expat is intelligence; how much does intelligence matter for an expat in Malta, and how does it influence her state. Where Is The Epicenter Of The Housing Bubble? The epicenter of the Great Housing Bubble is located in Irvine, California. One of the primary causes of the bubble was the lowering of lending standards and the extension of credit to people who could not handle the responsibility: Subprime borrowers. The word "subprime" has become indelibly linked to the Great Housing Bubble. It is one of the causal factors that make the bubble unique, and the collapse of subprime is widely regarded as the pin-prick which began the bubble's deflation. Expat life in Gibraltar, a British territory How much easy or complicated is the life of an expat in Gibraltar, which is a territory belonging to the Britain. Expat United kingdom and the Ukraine Expats in the United Kingdom and Specifically the Ukraine have the advantage of being familiar with most of the languages and traditions that are commonly held. Here we will discuss the advantages of Expat United Kingdom and Expat Ukraine. Moving Overseas Moving overseas is a small adventure; the more prepared you are the more you will be able to enjoy the new circumstances of your life. Expat in Cyprus versus expat in Greece Even though Cyprus and Greece are neighboring and similar countries, being an expat in one or the other is not quite the same thing, each coming with its pros and cons. So You Want to Become an Expat to Russia and Moscow Want to read about Expat about Russia and Moscow. Read this article The Housing Bubble was a Massive Real Estate Ponzi Scheme People have not fully grasped the changes that will result from the deflation of The Great Housing Bubble. There are many historic parallels with the closest being The Great Depression. When the stock market bubble of the 1920s began to deflate in late 1929, few thought the boom times of the decade were over, and even fewer saw the disaster coming of The Great Depression. The 2008/2009 recession will not likely reach the severity of The Great Depression, but it will signal the end to the lifestyle to which so many have become accustomed. 4 Tips To Help Sell Your Home Quickly The season for home sales is almost upon us and home sellers are getting nervous about how long their home will be on the market before it finds a buyer. Future Housing Bubbles - Should We Prevent Them? The deflation of housing bubbles is very financially and emotionally painful, and if possible, housing bubbles should be avoided. The pain of the deflation of a housing bubble cannot be avoided by trying to keep the bubble inflated, or by trying to deflate it slowly. The only way to avoid these problems is to prevent the bubble from inflating in the first place through some form of intervention in the mortgage market. Intervention can take the form of a market-based intervention demanded by investors and ratings agencies, and it can also come about through direct government regulation. Know Your Rights - Info For Renters, Patients, And Employees It is important to know what your rights are and what to do if they are violated. Foreclosures and Residential Real Estate Markets The number of foreclosures will affect both the timing and the severity of the deflation of the Great Housing Bubble. It is foreclosures that drive prices lower quickly. Foreclosures control the timing of the crash because they directly impact the must-sell inventory numbers: the greater the number of foreclosures, the greater the rate of decline in house prices. By early 2008, most real estate markets had already surpassed the peak set in the price decline of the early 90s of Notices of Default and Trustee Sales (foreclosures). Understanding The Popularity Of Real Estate In Collingwood, Ontario If you have been reading real estate news lately, you're probably wondering why there's so much fuss about property in the Collingwood area of Ontario and why the buzz these days is about how buying or renting property there is such a great idea. Speculative Equity - What Is It and How to Get It? People who purchase real estate use the phrase "building equity" to describe the overall increase in equity over time. However, most people think in terms of capturing speculative equity, the equity gained from other speculators bidding up prices. Everyone wants to make money by doing nothing, and the lure of speculative equity is that one can make millions by simply buying and holding an asset. To really understand equity, it is important to look at the factors which either create or destroy equity to see how market conditions and financing terms impact this all-important feature of real estate. Judicial and Non-Judicial Foreclosure - What Is the Difference? When a borrower cannot repay a loan, the lender may or may not be able to sue the borrower to collect any shortfall. The key difference is whether or not the loan is classified as a recourse loan or a non-recourse loan. If the loan is recourse, meaning the lender can go after any shortfall, the lender still must go through a judicial foreclosure in order to collect the deficiency. How To Easily Find Foreclosure Listings Finding foreclosure listings is the most important aspect of investing in foreclosed property. To understand how to locate foreclosure listings, you must first understand that there are several ways that property foreclosure listings can be found. Foreclosure Investing - How To Make Money By Investing In Foreclosed Homes Foreclosure investing is an excellent way to see a huge return on your money. In times when the economy is slow, or the housing market has lapsed, great deals abound, making the environment perfect for foreclosure investing. A Few Tips For Getting Started In Real Estate Investing Real estate has long been considered as one of the better investments available. Real Estate Speculators Usually Fail Despite the huge price spike in the final two years of the Great Housing Bubble caused by wild speculation, most speculators will lose a great deal of money. They will buy when prices are high, and they will sell when prices are low. The causes are rooted in basic human emotions that work against making the proper decisions to profit in a speculative market. 10 Reasons Why You Should Invest in Costa Rica Real Estate I have been living in Costa Rica for 3 years now. Here is 10 reasons for you to invest in properties in Costa Rica. Real Estate Bubble Fallacies - Can You Identify Them? There are a number of fallacies about residential real estate that either affirm the belief in perpetually rising prices or minimize the fears of a price decline. These fallacies generally revolve around a perceived shortage of housing or a belief that the higher prices are justified by current or future economic conditions. These misperceptions are not the core mechanism of an asset price bubble, but they serve to affirm the core beliefs and perpetuate the price rally. Subprime Containment Theory Was a Lie Conventional wisdom (or market spin) was that the risk of default from subprime would not spill over into Alt-A and Prime loans. This argument was made because these two categories have historically had low default rates. Of course, this argument ignored the "liar loans" taken out by those with higher credit scores, the unmanageable debt-to-income ratios, and payment resets for interest-only and Option ARM loans which were also given to the Alt-A and Prime crowd. Historically, this group had not defaulted because they have not been widely exposed to these loan types. Home Equity - What is It? Many people who purchase real estate have no idea what equity is, what creates it, what destroys it, and what to do with it. People who purchase real estate use the phrase "building equity" to describe the overall increase in equity over time. However, it is important to look at the factors which either create or destroy equity to see how market conditions and financing terms impact this all-important feature of real estate. Lose Your Money or Learn to Identify Asset Bubbles Many people did not see the NASDAQ tech-stock bubble. Many people did not see the Great Housing Bubble either. Those who participated in either financial mania lost a great deal of money. People need to know what to look for in order to avoid future financial manias. Interest Rate Resets on an Adjustable Rate Mortgages Are a Problem Many people took out adjustable rate mortgages during the Great Housing Bubble. After 25 years of steadily declining interest rates, people forgot about, or never knew about the risk of rising interest rates and what it would do to their housing payments. Adjustable rate mortgages are great while interest rates are declining. Their payments are lower than fixed rate mortgages, and as interest rates decline, they become an even better deal. However, when interest rates go up again, these loans will become a nightmare. Low Mortgage Interest Rates, It Is a Bad Time to Buy A House The fluctuation in mortgage interest rates has implications for when it the best time to buy and the best time to refinance a home mortgage. It is a popular misconception that low interest rates make for a good buying opportunity. It is not. Buy when interest rates are high, and refinance when interest rates are low. Real Estate Only Goes Up... Not! The mantra of the National Association of Realtors is "real estate only goes up." This economic fallacy fosters the belief in future price increases and the limited risk of buying real estate. In 2006, prices in many markets began to fall. By 2008, the rate of price decline had greatly accelerated. This is dramatic proof that real estate does not always go up. Despite this obvious fact, the National Association of Realtors still tries to lure greedy buyers with fantasies of unlimited wealth in residential real estate. Future House Prices are Dependent upon Future Loan Terms Every homebuyer operating in the deflation of the Great Housing Bubble needs to consider what loan terms will be available in the future. At some point, most buyers become sellers. The future buyer will likely need to borrow most of the money necessary to complete a real estate transaction. The availability of credit and the loan terms this future buyer will face is the primary determinant of the price this buyer will pay for real estate. 3 Steps To Finding The Perfect Piece Of Real Estate Are you looking to purchase a piece of real estate? Whether you are purchasing residential, commercial, or investment properties, you can use the 3 steps outlined in this article to ensure that you get the property you need. Housing Bubbles as Cultural Pathology What is a Cultural Pathology? There are certain beliefs if widely held and acted upon by a group of people leads inevitably to collective suffering and personal destruction. The housing bubble was a form of cultural pathology. It spawned a number of beliefs and actions that caused people to lose their houses in foreclosure. Housing Bailouts are False Hopes One of the more interesting phenomena observed during the bubble was the perpetuation of denial with rumors of homeowner bailouts. The bailout rumors were false hopes provided by the government to allow homeowners in hopeless situations a brief respite before they faced losing their homes in foreclosure.

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