Are you ready to balance your portfolio yet?

For the past month I have been urging investors to diversify their portfolio and invest some of their stock portfolio into real estate rental properties.  I had forecast the end of the bull market and size able falls in Stock prices. I had also highlighted the tremendous returns from real estate rental appreciation plus increasing rental cash flows.

Well you can see the audit trail in my past blogs and in my Facebook posts. But the loss of $ 1 TRILLION last week and another $ 1.5 Trillion today, with Dow falling as much as 500 points, should be a call-to-action in anyone's book.  As an investor who has personally transferred some of his investments out of stocks and into real estate, an experienced Real Estate Broker, Mortgage Broker and a Property Manager, I can guide you safely through to a balanced portfolio which will help you weather the storm of the Recession that is about to hit us.

The tea leaves are already out there for savvy investors to see.  The economy has been very soft when even near- Zero interest rates only result in less than 2% GDP growth, the job gains are a mirage since they are mainly in service sector lower-paying jobs, the oil crash has not resulted in Consumers splurging but saving at record levels, Middle East and Russia instability, Chinese economic smoke and mirrors miracle, now spreading a contagion to our economy.  So it should be clear that the Bear market has already arrived and we will continue to see daily corrections of around 2% in Stock prices. So I have a recipe to free up your stock investments and move the funds into real estate rental properties which are relatively scarce unless you have good profession guidance and can move fast. 

New Year has dawned for Global Real Estate

2016 promises to be a momentous year for Global Real Estate.  With world wide uncertainties and unrest in the Middle East, China and N.Korea exploding a hydrogen bomb, and Europe trying to strengthen its union with weaker partners, the USA is perhaps the "safest" place for future growth and investment. Here in the USA we are coming out of a long recovery since the 2008 recession, but we are growing at a slow and steady pace of around 3% annually.

As we survey the investment opportunities here, it is instructive to note that the Stock Market has been subject to violent swings and the overall returns are negative or Zero at best. In stark contrast the Real Estate market has been growing around 7% annually on a national basis and in certain States like California and Silicon Valley, as much as 15% annually. This applies to both house prices and rental rates, so Real Estate is obviously the best place to invest in USA.

Given the backdrop of the global turmoil, it is most likely that there will be a huge increase in international investment into USA Real Estate market to propel house prices even higher and this combined with the increasing strength of the $ vis-à-vis the Euro, Pound, Renmimbi and other major international currencies, will provide even greater returns.

So the smart investor would be well advised to invest in USA real estate especially the West coast(San Diego up through Oregon to Seattle) even though there is local angst about the affordability of housing in terms of the percentage of income spent on rents or mortgages.  As an experienced  real estate investor, certified by the National Association of Realtors in Global Real Estate, a mortgage broker and real estate broker in the San Francisco Bay Area, I have noted in several years past, people always think " Gosh, the real estate prices cannot go up any more" but sure enough they rise relentlessly because Housing is a basic need and there is no comparable alternative for investing your money.

Which way is the Housing Market headed?

Everyone is aware of the huge increases in housing prices over the past 3 years.  There have been several factors at play here:
1. Deeply depressed housing prices as a result of the crash of 2008 and a slow economic recovery
2. Increasingly stringent lending requirements and a reduction in loan limits for FHA loans
3. Government regulation and efforts by Congress to streamline Fannie Mae and Freddie Mac
4. Private Equity investors and Overseas investors seizing upon attractive rental revenue opportunity
5. Reduction in REOs, Foreclosures, Short Sales, and other distressed sales bargains
6. Fear and apprehension by Homeowners about taking on more risk in moving-up market
7. Slow growth in new Home Construction as Builders cautiously await consumer demand
8. The Federal Reserve keeping interest rates extremely low and pumping liquidity through QE

This has led to a severe shortage of inventory of all categories of homes in all price segments of the market in all geographies.  This is especially severe in large Metros such as the San Francisco Bay Area, where Google, Facebook, Netflix, and other social media companies have produced several Multimillionaires eager to invest in upscale Villas and Estates. Consequently house prices have risen nationwide by over 14 % Year-over-Year with some areas exhibiting 25% increases. Days on Market statistics have dropped to less than 30 days with multiple offers over List price almost routine.  Also investors both domestic and International, have raised the number of All-Cash transactions to greater than 40%.

So what's likely to happen in the next 18 months for the rest of 2014 and 2015.  Here is my forecast:

1. The pump priming by the Fed will end with the tapering efforts already started, resulting in rising interest rates to 5.5 % for 30 year fixed.
2. A flood of Mortgage applications as buyers scramble to beat interest rate increases.
3. The Economy will finally begin to fire on all cylinders with unemployment rates dipping below 6% nationwide and down to 3% in large metros such as San Francisco and the Bay Area.
4. House prices and Rental rates will again begin to edge upwards by double-digits Year-on-Year as Sellers gain confidence in the Housing recovery and move to upgrade their housing needs.
5. The relative proportions of housing types will change with the aging Baby Boomer generation down-sizing to Urban centers within walking distance of shops, restaurants, recreation facilities and away from the Suburban Mac Mansions.


Stay tuned to further updates and forecasts of trends by specific geographies and housing categories.

Tax Updates You Should Know

Tax Updates You Should Know

U.S. a Safe Bet for Foreign Homebuyers

U.S. a Safe Bet for Foreign Homebuyers

Just completed a very successful seminar on Global Real Estate, at the California Association of Realtors(CAR) conference in Sacramento. CAR represents 160,000 Realtors from all over Califonia and the conference enlightens them on the latest developments in the Real Estate market.  As Vice Chair, I presented a global real estate Road Map and 3 top Executives from Global Banks(HSBC), Title Insurance(Stewart Title) and Realtor Brokers(Century21) to a huge audience of Realtors eager to learn how to garner a piece of the $170 Billion of global real estate transactions growing over 15% per year.  The seminar also highlighted the key reasons why Foreign Homebuyers find the US a safe bet for investment and how to navigate through international cultural, language, legal, financial barriers, several major players, to a successful purchase. If you could not make it to the conference, I can provide you with the link to the presentation.   sateesh.lele@century21.com

Markets Poised for Biggest Price Gains

Markets Poised for Biggest Price Gains

Poised for the next climb up in Real Estate Sales?

As we contemplate the new year ahead, we know that California Real Estate cannot continue to bounce back another 25% as it did in 2013.  Due to the recent run up in interest rate and the anticipated tapering in the Fed's bond buying program, CA Sales are forecast to grow another 9% (see CAR Slide3).
CAR Housing Forecast

http://www.car.org/3550/pdf/econpdfs/CAR_Forecast_2013-09_slide_3.pdf

 However, given the backdrop of the increasing momentum in the general economy, more jobs, lower unemployment, it is quite possible that we will see 13% sales increases especially in the high-tech Silicon Valley. Already there is anecdotal evidence of young software engineering families being forced to move further and further away from the South of Market area of  San Francisco to the East Bay and South Bay. Yesterday I showed rental property to a young software family who decided to move to South San Jose just to be able to afford rents of around $2,000/month for a luxury remodelled 2 bed/1ba condo.  Another family were planning to move out of their rental in Berkeley and move out to Walnut Creek, Danville, Pleasanton just to afford a basic 3 bed/2ba single family home.  So my analysis of the market situation today leads me to believe that we will see larger double-digit sales and sales price increases in 2014 especially in some hot areas of the South Bay and East Bay - I will be happy to assist you find something suitable provided you start now before the market heats up even more.  As a Mortgage Broker, I can also pre-qualify you and find you a competitive loan once we have found your new home. But you have to act now. Call me (408)644 4680