George Ure and Gaye Levy, Contributors
Despite lots of discussion, and claims by political figures that things have “leveled off” or are even about to turn upward, there are a number of housing-related news items lately that regrettably seem to indicate that the “worst is not yet over” in terms of the Housing Crisis in general, or the closely aligned Banking Crisis.
Touching on the banking sector first, we note that with the most recent (through 10/21/2011) data, the FDIC has now closed down or reorganized away 403 banks and bank holding companies since the Indy Mac issue began the Second Depression’s banking disaster in July of 2008, preceding the collapse of the stock and credit market synchronize “swan dive” by about 90 days.
Since that watershed event, our latest count shows 83 banks have been reorganized so far this year, down from 139 year-to-date in 2010. Still, a total of 6,068 individual branch locations have been involved.
Even with all the change in the banking industry, which is certainly consolidating in a never-before-seen way, the availability of funds to refinance upside-down homeowners has remained elusive. Despite Obama administration hopes that more than one million homeowners would participate, the numbers are still very thin.
Strategy One: If you still own a home, and particularly if you’re “upside down” – owing more on your mortgage than the property is worth – it’s best to be proactive and start the search for refinancing well ahead of need. With today’s low rates and some federal programs in place, there’s no time like the present to be shopping for a better deal. The federal government’s USA.GOV site has a list of resources which may lead to some relief.
Strategy Two: Keep an eye on the monthly Case Shiller/S&P 20-City Housing Index. This data, updated monthly, has long been one of George’s most quoted housing reports on the UrbanSurvival.com site because it’s as even-handed a report as can be found on what the real price movements are in key markets.
What you can see, by looking at the most recent data (which covers through August by the way, these things take time to work up) what you’ll see is that housing seems to have leveled off a bit, but that said, prices are still down a bit more than 4% this year, compared with last:
The chart above depicts the annual returns of the 10-City and the 20-City Composite Home Price Indices.
In August 2011, the 10- and 20-City Composites recorded annual returns of -3.5% and -3.8%, respectively. Both Composites and 16 MSAs – Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, and Washington DC – saw their annual rates improve in August compared to July.
This is not a very hopeful report, since summertime is historically when the highest rates of real estate sales occur. School’s out, so getting the kids into a new school in time for fall classes seems to drive many parents, but with moderately even curricula across states, and even the country to some level, moving kids should not be thought of as an insurmountable problem.
If your move involves one of the 20 cities in the Case Shiller/S&P data, it’s a good idea to see how your market compares with others around the country; the objective being to sell high in the market you’re leaving (if it’s even, or up) and buy low in your “landing” city where prices may be even more depressed.
Strategy Three: Keep an eye on the longer-term trends in prices since we may be approaching an ideal time to buy a low-cost rental home. In many cities, bank repos and government foreclosure auctions can lead to real bargains. Another angle to play is buying tax foreclosure properties. In some states, the original property owner can reclaim the property within two years of the tax sale, but the new owner has to be compensated their costs plus a percentage of the tax sales price (which may be 18% per year) in order to reclaim the property. After that, there’s no recourse for the former owner.
This is not to recommend every young family pick up a couple of rental homes, although they can, over time, become real dependable cash-flow generators and even do better than traditional savings plans for children’s college funds and other long-term investments.
The downside is that tenants can be destructive and abusive, plus squatting is a constant problem. In addition, rents are seriously depressed in the current economy. Horror stories of renters smearing feces on windowsills and walking out with appliances in the middle of the night are oftentimes true. But, as with any other business deal, you can moderate risk by doing a lot of homework, and this means spending time to bone up on landlord tenant laws and doing thorough background checks on prospective tenants. Don’t forget, former landlords may lie just to get rid of a bad tenant. Many large cities have landlord associations and offer background checking services for a fee.
Strategy Four: If you’re looking to cut costs, and you’re either single, or a couple — look into renting a room in someone’s home. This may seem like it would be a “hard sell” but it’s not. The reason is simple: Many of the Baby Boomer’s who thought they would be retiring later are under increasing economic pressure to pay off their home loans – many of which are refi’s – early. To approach a homeowner is not terribly difficult.
In the Seattle area (the former stomping ground for both of us), we know from current examples in our circles of friends, that a good-sized room with shared kitchen privileges can be had in a decent setting for as little as $300 per month. Think of it as “going back to college” for a little more dorm time. Leads can be picked up off Craigslist, local supermarket bulletin boards and so forth. It’s a good idea to have a “reference list” of past places you’ve stayed, with current working phone numbers so that a homeowner can “check you out.” Often, there’s some light housekeeping involved, but for a roof overhead in winter, who’s to complain?
Strategy Five: Consider renting someone’s boat. This might seem a bit far-fetched at first blush, but there are many boat owners who are just barely able to hang on to their boats. The reason is the marina rents nationally have not come down as quickly as demand would warrant. The reason: cities and municipalities own marinas in many areas.
One way to come up with leads is to put up a “live aboard wanted” sign in the local marina offices and see if the folks at the local West Marine store can help you. Sometimes a boat may be found by talking with members of sailing clubs, and look at the boats for sale columns in publications like 48 North in the Pacific Northwest, Latitude 38 from northern California south.
The East Coast is a more fractured market. But, in all markets you may approach yacht brokers and offer them a cut of the rent if you can afford $350 a month – many will find customers with boats unlikely to sell until spring and that can buy you some breathing room.
Strategy Six: RV’s are becoming super bargains, but they will keep getting cheaper. Hit Ebay and click on the “Ebay Motors” tab, and then look for “Other Vehicle” and then down to the RV’s and campers listings. The best “bang for the buck” is in 10+ year-old gas-powered rigs, which admittedly don’t get good gasoline mileage. But check out the cost: RV’s are getting much less expensive.
We recently saw a small 22-foot Class C rig with 80,000 miles on it, but a serviceable interior for two, go for just $1,300. Yes, it had some leaks and other issues, but a motivated buyer with $50 could have made it quite nice for another $50 worth of elastomeric roofing goo. A bit more upscale: a 98 diesel Fleetwood 37-foot pusher rig for about $22,000, and this was a diesel in good shape at 105,000 miles.
Strategy Seven: Off-season resorts may be “sleepers.” George & Elaine were in Branson, Missouri, a popular entertainment destination where three months out of the year things are really hopping. But come fall and into early spring, there are lots of bargains to be found while reading the local papers. Many hotels have both low-cost, long-term guest rates and many duplex and triplex owners would rather rent for something rather than have a unit sit vacant all winter.
Thanks to the Internet, you can find the winter-over places that make sense pretty easily. $350 a month seemed to be the going rate for off-season middle-lower accommodations in the Branson area, but we expect many resort areas will have off-season, 6-month leases as the economy continues to tighten.
George & Elaine are heading up to Branson, Missouri in a couple of weeks, and they’ve kicked around living in Branson part time because there are some really nice waterfront spots along the eastern side of the city. Six months ago, prices were in the $400-$500 range for two bedrooms, furnished with some utilities.
A check of weather in such places is worthwhile. Leases are cheap in Florida in the summertime and cheap in Maine in winter. Locals have told us Branson and some of those idyllic spots in the Ozarks get fierce ice storms, so you’ll need to pick and choose. Summers in Hawaii aren’t bad, especially on the windward side of the Big Island – Hilo isn’t nearly as expensive as Honolulu.
Strategy Eight: Housesitting is not entirely out of vogue. A few calls to real estate operations, and some creative sales pitches may land you a very low-cost home for several months. The key parts of the pitch include reliability, the value of having “owner’s eyes” on the property and surroundings, and don’t forget your bio with current reference contact information. High-end homes are particularly vulnerable to theft of expensive appliances, so your pitch might be something like this: I will pay you $300 per month and watch to make sure you don’t get a $5,000 property loss.
There are several channels to be pursued here: A constant scan of Craigslist for situations, phone calls to local real estate outfits, especially workable after an outbreak of appliance and copper thefts from upscale homes. And just calling people with “For Sale by Owner” (FSBO) signs out front.
Strategy Nine: Visit Unitedcountry.com which is one of the nation’s largest sellers of non-urban real estate specializing in farms and ranch lands. When you get to their search tool, put in a minimum of 1 bedroom and a maximum of $50,000 and you’ll be surprised what you can find. Most of these properties are rural, but if you can find an inexpensive home with good Internet connectivity, being a part-time farmer/prepper and “click ranching” as a customer service rep using a telephone and a computer is not a bad way to live. It’s often much cheaper than life in a dense and expensive urban setting.
In some parts of the country you can get amazing home values. A little time on the computer and even a job with $10 an hour begins to make sense. Why? That’s $20,800 per year, and if you have that kind of income odds are good that you can swing some kind of ultra-low (or no) down payment. That would mean typical taxes about $345 per month for the house and land, a tax break if you farm a bit, a place to live, and a much more laid-back lifestyle.
We recently saw a 4.78-acre property with a livable home, adjacent to a national forest in Oklahoma (land and homes are ridiculously cheap there) for just $45,000. That included a stocked pond, mountain views, a remodeled mobile home with two living areas plus abundant wildlife.
Find the school bus driving job to beef up a retirement, remembering you’ll need to pass a drug test to pass a commercial driver’s license (CDL) and then put in DSL. It’s a whole lifestyle choice for all ages: Retirement, farming – without click ranch.
Strategy Ten: Leave America and head for somewhere completely different. For example, we’ve heard from some expatriates (“expats” is what they’re known as) that they have been able to buy first-class three- and four-bedroom villas in overbuilt Spanish subdivisions for as little as USD$ 23,000. Similarly, we have readers in places such as Bolivia and Ecuador in South America that tell us that retired life there is a breeze IF you have taken the time to invest in learning a foreign language.
Curiously, research shows that learning new languages is easiest when you’re either very young OR when you are in the 60+ category. No, we have no idea why that is. A way to get “opened up” to exiting the USA is to drop by the Escape from America website and look around there and then join some Yahoo Groups on specific countries. Because most countries have income requirements that must be met in order to get long-term visitation permission, that limits this option somewhat, although for retired military and people on dependable retirements – or even click ranchers – this is a very desirable alternative to consider.
There are plenty of other ways to get around being out in the cold. Author Mike Oehlers The Fifty Dollar and Up Underground House Book will give you plenty of ideas which may be implemented for almost no cost. A shovel, some plastic grocery bags and maybe a pond liner and if you can find a place out of the way enough, you can dig in (literally!) and add value to some land.
Of course, with government regulations a lot of this might be best done under the radar of officialdom. Renting out a room in your home may subject you to building code and tax laws. Living on a boat may violate “living aboard rules” enacted back in the roaring ’90s. RV parking isn’t free, although Wal-Mart has really carved out a loyal following in RV circles because they allow over-nighting in their parking lots at many locations.
Remember, I.R.S. doesn’t take kindly to people who skin-flint their taxes even though they have moved overseas. They may hold to 10-year tax liability laws, though getting your hosting offshore and email, too, is not entirely out of the question if you’re an enterprising click-rancher.
Bonus Strategy: Take advantage of hard times and see if now might be the time to buy a distressed business. Often, when times get tough, spousal issues pop up, people move around, and occasionally you’ll see tremendous business ownership opportunities.
As an example: One of George’s clients sold his business about three years ago. George had counseled him on timing and what he wanted to do with his cash out sale. The client, wisely, bought a fine farm (larger than 10 acres) and put most of his money into gold and silver. He’s done very well for himself.
But now comes the interesting part: He’s just learned that the person who bought the business has lost it to the bank. A franchise agreement has been broken, and now George’s client is in the “cat bird seat” – and may be able to get back into his former business without the profit-and-loss load of a hefty franchise fee, and still be able to keep his rural home. His cost may be only a few thousand dollars out of pocket.
That’s not going to happen often but it only takes one or two deals like that falling into your lap over the course of a lifetime to get you to the point where you will own your own patch of dirt free and clear.
The main thing to remember is that even in a period of serious economic downturn there’s always opportunity for the prepared mind that has a set outcome in mind. If you focus on owning your own home, a life of self-sufficiency, health and a happy partner to share it with, then it’s as good as done.
Just takes a little work to usher it in is all. That’s what strategic living is all about.
Introducing Strategic-Living: a practical and useful online magazine providing inspiration and guidance as we make our way through the maze of changes that are coming our way. In collaboration with my friend and colleague, George Ure, Strategic-Living will offer a synthesis of Urban Survival and Backdoor Survival with much more detailed tips, tools and strategies for creating a vibrant and sustainable lifestyle wherever your path may take you. Think of Urban Survival and Backdoor Survival as your roadmap and Strategic-Living as your detailed guidebook. Here you will find articles and photos, diagrams and how-to’s, and a healthy dose get-out-there and do it with kick-in-the-ass inspiration.