Mohamed Ibrahim’s Blog

Last weekend we were visiting my wife’s uncle in New Jersey and I really admired the beauty of his home. The house is set to face east with lots of sun, on a parcel of land of 2 acres, one hour from New York, around 5 minutes from I95.

The house has 4 beds upstairs, and one downstairs with 3 full baths upstairs, half bath in the main level, and one downstairs. Almost 7000 sq ft with hardwood floors in the two upper levels, tile in the kitchen and beatiful verde granite kitchen countertops.

The house is very nicely built, with decorative railings in the balconies some of which are black metal as in the room porches.

The house was for sale last year. They might have plans for selling it in the future. If you like the pictures contact him directly at morad at abusabe dot com .

The desire to own real estate is in the hearts, minds and souls of just about everyone. This induces demand, which is a pulling power that influences the market to rise.

I was reading the EXiT realty newspaper, called “The Exit Recruiter”. They usually have a theme of reminding people about some fundamental aspects of the market that will never change. One important aspect is that people desire to own real estate. Home ownership is called the American dream, as everyone dreams of owning a piece of land, which he mows and have a nice grill in the backyard and spend time playing basketball with his kids. It is a dream that everyone wants, and because of this another power is generated i.e. demand.

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That’s the update relative market absorption chart, for Montgomery county MD. In a nut shell, this chart compares the fraction of sold inventory to a year ago. So, if a bigger fraction of the homes on the market is getting sold compared to a year ago, this chart will be higher than 1. If not, then it will be less than one. Obviously, it’s been less than 1 since approximately March 2005 with only a slight peak on Feb 2007.

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An article appeared on the wall street journal online, suggesting that the housing troubles are over. There’s some interesting analysis over there that shows why it is over. Another article appeared yesterday also on WSJ, that shows more charts suggesting that the housing problems are over. This one shows a chart showing that the housing market reached the same bottom from which the housing market bounced up every time. Basically, it applies a similar theory to the support and resistance ideas used in the stock market.

However, there’s a couple of things that tells me we might still go in the flat bottom till the end of 2009. First Fannie Mae just expected prices to further drop. The chart in the second WSJ shows the market bouncing up after a recession, and we’re not in a technical recession yet.

I will update the chart that I used to analyze my local market, and will share it on the weblog. I agree that we are in the market bottom, but I think this bottom will be little bit more flat than just April of 2008.

That’s an updated chart compared to last month’s. Bad news is, the slump is going deeper. This chart measures the relative absorption to a year earlier, which is basically the demand in the market versus the offered units for sale. The updated chart shows that the ratio of closed settlements is even less than last month, when compared to a year earlier. It looks like there’s a lot of indicators showing contradicting markets. Some show that the market is about to bounce back, or at least their analysts hopes. Others show that the market is not bouncing at all, worse, it is going in a deeper hole. We’ll keep watching!

Standard and Poors released a report showing that the housing prices fell sharply, way sharper than every one expects. What S&P terms “S&P/Case-Shiller home-price index” dropped 10.7% since January 2007, after 9% drop in December compared to a year earlier.

Although this week news came out that existing home sales is one the rise, it seems that there are different type of buyers this time. Buyers are either trying to take significant advantage of the market, or strong investors are buying investments when there’s lots of blood. And I still believe that the market will bounce back, yet it looks this time that there’s a different type of bouncing back. There will be a lot of sales at low price first, then the price will start following as demand increases.

There is light at the end of the tunnel. Things are bouncing back, and I can tell! More showing requests than the last quarter. Still less than last year, but much better than last quarter. I previously argued the possibility of the market bouncing back, and it seemed possible through the market cycles. However, we also argued the strength of the market bounce and whether the fix the feds did is a temporary or permanent one. Lowering the interest rate is of course a temporary solution that increases the money with the people through the people borrowing more credit, and in the same time cause inflation due to the increase of the money supply.

So we should be happy that the market is bouncing back, yet be careful because at the end of that short peak there might be another trough - unless serious measures are taken by the government to seek permanent economic fix through bringing manufacturing jobs back in the US.

The federal reserve today lowered one of its interest rates to 2.25%. They lowered it 0.75%, which although was less than the market’s expectations, yet was an acceptable move by the market at large. All of the stock market indicators moved higher with the biggest leap almost in five years, happening in one day.

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News have been everywhere today that mortgage defaults are even higher than before. Foreclosure rates are increasing, because home owners give up even before their adjustable mortgage resets. Worse, two days ago a very known investor (Warren Buffet) became the most wealthy person, said that as far as he’s concerned we are already in a recession.

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In a recent post I analyzed the relative absorption chart, and saw a may be signal that at the end of the year we might see an upturn without knowing how long, since there is no way to forecast that. It seems that someone else is actually betting that this will happen. Some investors today despite this news traded equities instead of bonds, which analysts see as a leading signal for their confidence in the market turn around. Some good analysis is actually presented in this forbes article.

Reports have been going around today sourcing from NAR that the revised figures of last year existing home sales is down 0.49% from last year, which puts us at a 9-year low. The current market has been described as “the worst downturn since the Great Depression of the 1930s”. No one sees a fast turnaround here. In my previous post, I was anticipating that we’re now in a local minimum, and will see a peak of light by the end of the year.

I think now we will be very very focused on the Fed’s statement in front of congress on Wednesday and Thursday, plus the election process and how the three possible presidents plan to solve this mess.

There seems to be a fierce battle between home builders in providing competitive loans to buyers. The most recent one I noticed is by MI homes. I’m not related to M/I homes by any means, nor will benefit from any one getting loans from them. Their page says the offer expires on February 29th (Friday). Give it a look if you’re in the market for a new home, after all you can only buy new homes with a builder.

In an earlier post, I said that I will update my real estate analysis chart.

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Just heard today that the consumer price index showed that food and basic services price increase by 0.4%. This is very bad since it indicates inflation while we are already on the rim of a recession. This means that feds will have to increase rates to fight inflation, which will further affect the real estate market.

I’ll try to update my analysis charts to see what happened in the past two months and get a more visual indication of how fast we’re falling, so expect another post soon.

Home owners insurance provides coverage against disasters. There’s different types of policies. The basic coverage usually covers the home itself, and your belongings inside. However, there’s limits to what is covered. Usually, the basic coverage will not cover flooding or acts of god like a lightning strike for example.

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Secured loans (aka mortgages) are long term loans - however from my point of view they are loans. Loans are liabilities on you, since you not only has to repay the debt but also pay interest for borrowing the money. You might see lots of ads around for systems that consolidate loans, eradicate loans, eliminate loans. There’s no magic behind those systems. If you research them on the internet you’ll find a big common fact: you have to use the same income you have now.

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The pre-settlement walk through is the last check a buyer makes on the home before going to settlement, signing papers and handing the money. The pre settlement walk through is also sometimes referred to as the final inspection although it is usually not done with an inspector. It is a very important step for both the buyer and the seller before going to closing.

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One of the most important factors that will lead to visitors leaving is slow loading pages. And at that point, we should make distinction between sveral types of sluggishness: A. Slow due to HTML bloat B. Slow due to long server processing time C. Slow due to long browser rendering time.

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This is a good news for home owners with financial troubles. A plan was announced today called “Project Lifeline” that will enable homeowners to slow down the foreclosure procedures by 30 days. In some states like Maryland, the foreclosure procedures are considered on of the fastest nationwide. Such slow down is beneficial in case the homeowner was able to communicate with the bank and arrange an alternative solution, or figure out a way out of foreclosure and repay the loan.

Foreclosure is a horrible thing. It happens due to either a mistake where a home buyer buys a property larger than what he can afford, or due to financial problems like losing income. After the borrower can’t make his payments, the lender asks the court to auction the house to repay the loan. It is a process by which lenders try to recover their losses by auctioning the home and is done differently in different states. That does not mean that foreclosure is an entire remedy to the lender, actually the lender can sue the borrower if they didn’t cover their loss from the money made in the auction, and at that case the borrower will sometimes end up by filing bankruptcy since he/she usually won’t have enough to pay.

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