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Is Housing Cost as a Percentage of Income a Failing Measure?

Is Housing Cost as a Percentage of Income a Failing Measure?
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There are a great many analysts and economics experts who use the percentage of income spent by consumers on housing in various ways to measure economic health and spending patterns. Real estate practitioners love times like these for marketing, as they can show that in most markets it’s cheaper to buy than to rent. With interest rates still low and owned homes having to compete with foreclosures in the market, prices of homes not in foreclosure haven’t been rising much. Two recent articles only a day apart at money.cnn.com present interesting contradictions.

Millions of Americans are spending too much on housing

In this article, the stats say that more than 40 million Americans are spending more than 30% of their income on housing (mortgage/rent, taxes, and home expenses). Renters are said to be in worse shape, spending 49% versus 26% for homeowners.

Though home prices are rising, they’re still below the highs before the crash. The economy is a major factor, with wage stagnation cited as aggravating the problem. Even with low interest rates and home prices overall, buyers are still few and far between. This data is alarming to some economists, as housing plays a big role in our economy. Rental property investors are still happy and buying, but that’s slowing as well with rising prices.

Housing guru Shiller: Put your money in stocks

Robert Shiller, a Nobel Prize winning economist and one of the originators of the widely-used Case-Shiller Home Price Index, made a surprising statement at a recent panel discussion. He says that for wealth accumulation Americans should be renting and putting their spare money into the stock market.

He uses Switzerland as an example, where the home ownership rate is very low, people rent, and they’re in far better economic shape than the average American. The first contradiction seems to be in the numbers for the cost of rent-vs-own as a percentage of income. If the average homeowner truly does spend 23% less (49% – 26%) of their income to own, then they should be in better shape, with more money to invest.

Even more confusion results from Mr. Shiller’s CAPE Index, which predicts future stock market returns. Right now it’s not pointing to good news in the next five years, so why the buy stocks advice? In the same discussion he says that home ownership can ultimately be a good investment, especially if the homeowner avoids second mortgages and home equity loans. Wow, what should we be doing?

So, what’s the real story?

I believe that the real story is in the poor economy, stagnant wages, and shortage of good employment for graduating college students. Some of them aren’t equipped for the best jobs, as their degrees aren’t in areas needed, but there’s just not a lot of economic growth going on. If wages aren’t going up, and we know that rents are rising, it’s obvious that more of income will go to housing. This is especially true when stringent credit requirements and lack of a down payment are keeping people in rentals, increasing demand. But is that housing’s fault or just a lousy economy as a whole?

When I look at the stunning highs the stock market keeps hitting, it’s scary. It looks a bit like the housing market in 2006. It isn’t in my playbook to move money from real estate into stocks, but I don’t have the expertise to predict a stock market crash either. So, what is one to do?

Consumers: If you’re able to buy, it may be a good decision, as prices will continue to rise, though slowly.

Rental property investors: Times are still good. Until and unless the economy and wages improve, rents will continue to hold or rise. If you can buy at a bargain below market value, offering a nice property at just below prevailing rents should keep it occupied.

These type of conflicting articles are everywhere, indicating a lack of any definite trend for either the general economy or the housing market. Whether you’re a consumer or an investor, just use caution and buy right, a strategy that is always wise in any market.
Dean Graziosi

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Are You Happy? Honestly?

Are You Happy? Honestly?
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Hey, everybody. Welcome to this week’s Weekly Wisdom. This is Dean Graziosi. I’m here in my backyard on my iPhone, but I had a really important message I want to share with you today.

You know, heading into the holiday season there’ll be a lot of presents, and gifts, and happiness. And I wanted to share with my children that happiness is more than just external factors that give you a temporary boost.

What I said was, “Hey, guys. If you get what you asked Santa for, will that make you happy?” And they’re like, “Yeah!” And I said, “But what if I took that present and I wrapped it for you and I gave it to you next week, and gave it to you the next week, gave it to you the next week? Would it kind of wear off?” And they were like, “Yeah….”

And what I was trying to say to them is, enjoy your presents and love them, but happiness comes from the inside. It originates when you become the thermostat of life and not the thermometer.

Not changing who you are, how you feel when there’s too liberal of a president or too conservative of a president or when the economy’s good or when the economy’s bad or when your husband or wife is good to you or when your husband or wife is bad to you. When your kids are good or when your kids are bad. When you have money in the bank or no money in the bank. Believe me, I am in no way saying that money doesn’t help with happiness.

Dan Sullivan says, “If you can cut a check for a problem. You don’t have that problem.” That is true. When you can cut a check to help other people or build security in your own life or help strangers, that money is an amazing thing to go after.

And what I’m sharing today is that I want to make sure you don’t chase things… because I did for years thinking when I made that certain amount of money, when there was something different going on in my life then that will make me happy.

Don’t put off being happy until tomorrow. Find your happiness now. And, maybe that’s easier said than done. You might be saying, “Well, Dean, you’ve got money now. It’s easy.”

No, I didn’t find happiness because of money. What I found was when I truly understood my purpose and what really made me buzz on the inside and I did more of that and less of the things that frustrated me or that stripped my confidence, I started to find happiness.

So what I urge you this month, this time of the year going into the holidays, is really start being aware of what is it that drives you? What is your inner purpose?

If we were 100 years old right now, or you were 100 years old right now and you were looking back on your life, would you say, “Well, I had all the money but I wasn’t the greatest parent?” Or, “I was a great parent and I would do nothing different.”

You know, what are the things that drive and motivate you, that you could rewind your future and come back to right now in this present time and say, “That’s my purpose. That’s who I am,” or maybe it’s just a, a dirty diamond and you need to polish it.

This is a great time to reflect, a great time of the year to reflect and polish that own inner diamond of yours and find something that allows happiness to shine out rather than waiting for those exterior things to shine light in.

That’s my message for this week. It’s kind of the message I shared with my kids and I wanted to share it with you.

If you’re new, I am SO glad to have you. If you’ve been coming for years, thanks for coming back.

If you don’t have my first New York Times bestseller, a personal development book called, “Totally Fulfilled,” or my #1 Real Estate book 30 Days to Real Estate Cash then go get them for free at Deansfreebook.com. No shipping and handling, just free.

I’m Dean Graziosi and thank you so much for your time. I’ll talk to you next week!

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Dean Graziosi

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Stop Lying to Yourself!

Stop Lying to Yourself!
OK. Today, I want to talk to you about lying to yourself. We all do it. And a lot of us lie to ourselves because without realizing it, we can’t face the truth, and it’s easier to craft a story, to craft a lie.

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You say, “You know what, I’m happy with my job. You know, I should be content. I can pay the bills, and you know, my kids don’t have to worry about eating, so, you know, I like my job.”

No! Don’t lie to yourself. If your relationship isn’t good, then focus on it, and, and, and be honest, “It’s horrible. I go home and I’m sad. I go home. It’s not working. I go home and I want to run, but I just stay there for the kids, or I stay there because of money…”

No! If it’s that bad, stop lying to yourself. Let the pain sink in, because if you get disturbed, you will take action. But if it’s a lie just to get through the day, then stop lying to yourself. Look in the mirror and say, “I don’t like who I am… I have to make a difference.” Read a book. Go online. Get help.

So my challenge for this week is to find out where you’re lying to yourself. I just know that so many of us create lies, because we can’t face the truth, and it’s just good enough to get by. If you want to stay status quo, if you want to be OK, if you want to just get through life, then keep lying to yourself.

But if you want to actually make a change you have to find the lies, and go, “What are you doing? No, that’s a lie. The truth is you’re unhappy. It’s disturbing. Find an answer.”

If you tell yourself the truth then you can find an answer.

Have an amazing week. I’m Dean Graziosi.
Dean Graziosi

Real Estate and Travel Agents — Not the Same

Real Estate and Travel Agents — Not the Same
As a real estate investor, I’ve learned a lot about the business of real estate, transactions, and how the buying and selling game is played. I’m definitely not in the real estate agent-bashing camp, as investors get a lot of value from their relationships with real estate professionals. Sure, many of our deals never get close to an agent, and that’s just the way it works with distressed properties and motivated sellers. Our buyers are frequently other investors, so we connect a lot without real estate representation.

A recent independent poll commissioned by Discover Home Loans provides insight into how consumers use technology in the real estate buying and selling process, and how they view it as a resource. A few key findings point out how much consumers use technology for real estate activities:

89% of homebuyers use some form of technology to help them with the home buying process.
47% of all homebuyers report using technology helped them save money
92% of homebuyers say technology helped them save time
90% of homebuyers report an overall positive experience when using technology
83% of homebuyers feel technology helped them stay organized
93% percent of technology users say technology allowed them to do things remotely they otherwise would have had to do in person

Surveys like this one always bring out the viewpoint of many that real estate agent futures are going the way of the travel agent. I disagree, as there are differences in their relative services and their complexity. One other interesting data point from the survey is that 83% of the responding consumers used a real estate agent’s services in their transaction along with the technology tools.

Investors and consumers have somewhat different valuation criteria for real estate agents because we don’t necessarily use them in the same ways. The consumer usually has more process and transaction questions, needs more help in document review and negotiations, and relies on their agent for expertise gained from constant activity in the market. The investor tends to value the contacts, lead sources, and the transaction management services more. We let the agent take care of the details, even though we could do it ourselves; it’s more efficient.

The travel agent business model has definitely taken a major beating from technology, and a lot of the more common booking and research functions can be done online with sites like Expedia, Travelocity, Orbitz, Kayak, and others. Travel agencies that still flourish seem to be providing packaged upscale services for convenience, niche destinations and themed travel. Agencies put together trips with themes like food, history, books, movies and more. The key seems to be that there is more research and expertise involved to pull these themed destinations together than to just book a trip to Paris to see the Eiffel Tower.

Real estate transactions involve a lot more detail, legal pitfalls, and liability issues than putting together a trip itinerary. Many deals are simple, but others can have some tricky property restrictions, liens, encroachments, and other title and ownership issues. Even if there aren’t major problems, the average buyer or seller gains comfort from an agent who goes through the documents with them, such as title insurance and surveys, to make sure there aren’t any nasty surprises. Help with home inspections and negotiating repairs is another example of agent value to the consumer.

Articles from doomsayers that the real estate agent is going the way of the dinosaur are premature and overstated, at least until bigger technological advances come along. Does this mean that the full service brokerage and current commission levels are safe? Hardly. Real estate is really more of a service business than a sales business, especially since the Internet has made it easy to market a home to the world online.

The sooner real estate companies, franchises, and agents as independent contractors recognize where their value lies in the new tech-oriented process, the sooner they can adapt their service offerings and costs of doing business to meet consumer needs and price concerns. Flat rate service models are gaining ground, as well as discounted commissions for reduced service packages. Real estate agents will be around for a while, though they will definitely be doing some things differently.
Dean Graziosi