How to find the right price for a home in an area you are searching in

Mid-Day Market News & Commentary by Chris McLaughlin, October 30, 2008

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The stock market was higher today as global investors cheered the Federal Reserves' 50 basis point rate cut yesterday, sending the stock markets of many foreign countries higher in overnight trading.

Exxon Mobil posted the largest quarter profit ever on record: $14.83 billion. Net income climbed 58% to $2.86 per share. "Our integrated business portfolio, strong operational performance and financial discipline continued to allow us to capture the benefits of the commodity price environment," Exxon Mobil investor relations head David Rosenthal said during a call with analysts. "Despite recent volatility in the financial, commodity and credit markets, the fundamentals of Exxon Mobil's business remain strong," he said.

American Express announced today that it would lay off 7,000 employees, or approximately 10% of its work force, in order to save an approximate $1.8 billion in 2009. Kenneth I. Chenault, Chairman and CEO, said that "The re-engineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades."

Now on to our real estate investor section...

Affordable Housing Remains in High Demand

Here are a few facts from the US government... nearly 40 percent of homes were either 2nd homes, vacation homes or investment properties. That may not sound too bad until you realize over 65% of people already own their own home. Think about this a minute... if 2 out of every 3 people already own their own home, and then a LOT of those people own more than one home (and many own more than just one additional home) then it stands to reason there are a LOT of homes to choose from when it comes to finding short sale offers.

So, what about the so called housing shortage you hear the government talking about? Well, listen closely because it's always said very specifically...it's a lack of AFFORDABLE HOUSING! By now any short sale investor should be asking what qualifies as affordable housing? It's a good question that is likely to pave the road to riches for those that know how to ask the right questions and get the right answers.

First, let's discuss what affordable housing is NOT...

1. Affordable housing isn't the lowest selling price. Let's face it, a house in extremely poor condition can often cost more to repair and maintain than it saves in mortgage payments each month.

2. Affordable housing isn't the oldest home in the area. High heating, water and other costs associated with older homes can easily cost more in the long run.

3. Affordable housing isn't necessarily a mobile home. Rapid depreciation and lower appreciations combined with higher than average insurance premiums can erode long term profits and cost more.

So, now that we know what affordable housing is not, let's define what it is...

1. Affordable housing is safe, up to date, energy efficient housing that is easy to maintain and has low utility and insurance costs.

2. Affordable housing is located in a convenient area near shopping, schools and employment.

3. Affordable housing is in keeping with 25 to 35 percent of the average household income for working class laborers, renters and potential retirees.

Short sale investors don't need to search the oldest, most run down or high maintenance properties to find great - high demand properties. In fact, the most affordable housing options are often newer homes in convenient locations that allow an easy commute, future appreciation and low maintenance costs for buyers.

To find the right price for your area do the following:

1. Locate the average household income for the zip code.
2. Multiple by 3
3. Search for newer homes in convenient areas within 10 percent of the above amount.

More on Friday...

See you at the top!