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Is it Time to Buy a House?

home_sales The national news is full of bad news about our economy – rising unemployment, stocks hitting ten-year lows, and the value of our homes falling. We wanted to get an inside perspective so we turned to the experts – the National Association of Realtors. We were fortunate to be joined by Jed Smith, their Senior Economist, on The Bigg Success Show today. Here’s a recap of our conversation:

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marylynnWe’re hoping for some rainbows and butterflies from you, Jed. Are there markets where home prices are actually rising?

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jedThere are a few. Right now, the market is in a process of stabilizing, which means that prices are down but sales activity is up in quite a few markets. Just to give you a few examples, prices are actually rising a little in Minneapolis, Minnesota; Mobile, Alabama, Stamford, Connecticut; and Amarillo, Texas. It varies around the country depending on a lot of local conditions. However, right now, we’re particularly interested in the level of sales. Obviously, a good level of sales can lead to an overall price rise in the future and, as your listeners probably know, both sales and prices have been declining for awhile. We’d sure like to see those level out and there’s some reason to believe that we’re getting to the bottom of the market.

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george
Real estate is still a local game, right?

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jedYes. Every market is local. To give you an example, prices are way down in Prince William County, Virginia. That’s a suburb of Washington. Just across the way, up the street in Washington, D.C., prices are stable; and in Arlington, Virginia, prices are actually starting to rise a bit. So it varies from region to region.

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georgeSo, while we may be hearing doom-and-gloom about national real estate prices, it’s possible – depending on your local market – that the dream house you want to buy is getting more expensive.

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jedWell, prices right now are down. As I said, they are starting to turn a little bit in a few markets. Most markets are either declining a little or holding steady while they’re getting ready to turn. But I think if you’re thinking about a house right now, I don’t think you want to think about a short-term flip. There was a lot of flipping a few years ago during the rapid run-up in prices in 2006 and 2007. Right now, as measured in terms of affordability, taking into account interest rates which are at an all-time low coupled with reasonable prices, housing is actually a very good buy. If you’re not buying it to flip it, but rather to hold it for five or six years, I think you’ll be very pleased with the ultimate result.

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georgeOn average, Jed, how much have house prices fallen back nationally from their peak?

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jedWell, that will vary from area to area. I think we want to talk in terms of the last year. They’re down about 15 percent in the last year, probably down about another 10 percent above that from the peak. That’s not true everywhere. That’s just a national average, like my head’s in the furnace and my feet are in the Artic, so I’m comfortable on average.

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george
I like the way you explained that!

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jedWe think that with the forthcoming recovery – there’s a lot of spending going on, a lot of economic stimulus, and a lot of effort to stop foreclosures – we project that prices will start to level out, certainly, by the fourth quarter of this year. That’s why, when prices are in good shape and you can get that $8,000 tax credit, right now is a good time to consider buying a house if you don’t own one.

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marylynnWe’ve been hearing that prices in areas like Detroit are just astoundingly low. Is it wise to go into an area that has been beaten up and buy some property there?

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jedThat depends on the long-term outlook for the area. Let’s put this into a little broader perspective than Detroit. Much of California, Arizona and Nevada have had prices that have been beaten up pretty thoroughly. Yet we all know that those areas are going to have vibrant job growth over the next four or five years and, right now, we see buyers flocking out to purchase property in that area. The prices are low, but the number of buyers showing up is substantial. I think for the longer term, these folks are getting a good buy.

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marylynnFor people who are thinking about buying in some of those areas, do you have any recommendations for finding an area that is beat up but has long-term growth potential? How do people get that information?

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jedThis is the type of information – specific market characteristics – that a Realtor would know. A Realtor could give you an idea of the outlook for jobs, income, population in a specific area, and how prices compare to the overall market for that area. That’s why we would recommend working with an expert – a Realtor – to understand the market because there are some good buys out there.

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george
And you probably know a Realtor or two, don’t you Jed?

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jed

I probably do.

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georgeI think you’re absolutely right. I have found in my life that it pays to turn to the professionals and let them help guide you through the process. With a Realtor, you know it’s win – win all the way through.

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jedWe think that Realtors bring a real value-added to the market because they live in the community, they know the community, and they’re part of the community. They’ve been there for a long time and they’ve done a lot of transactions. They can guide you – just like a doctor or a lawyer does with their professional services – in making your largest purchase.

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Thanks Jed so much for sharing your time and wisdom with all of us! And a special thanks to Hilary Marsh and Sara Weis, Jed’s co-workers at the National Association of Realtors, for helping us arrange our conversation with him.

If you’re in the market to buy or sell your house, the National Association of Realtors is a great resource. Check out their tips for home buyers and sellers.

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Thanks so much for reading our post today. Join us next time as look squarely at the four-leaf clover on St. Paddy’s Day! Until then, here’s to your bigg success!

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Smart Investors, Tough Times

investing People who find joy in bad news have to be pretty happy lately. The financial crisis has dominated the news, as we watch Wall Street and Washington scramble.

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We don’t usually do this – in fact, we’ve never done it in the 230 shows we’ve done so far. But this subject is so important and so timely. So we want to share some valuable information that our newsletter subscribers received in their In boxes last Friday.

In the last edition of The Bigg Success Weekly, we discussed “Profiting from Panic”. It was about maintaining the proper mindset in the midst of all this turmoil.

We started with the safety net that exists for depositors, investors, and insureds. Here are some links directly to pages that can answer your questions about banks, brokers, and insurers in a hurry. 

Banks

In general, banks are insured by the Federal Deposit Insurance Corporation (FDIC). However, not all money invested through banks is insured. What would happen if your bank failed? If you have accounts with a failed bank, what should you do? How can you obtain a release of lien, if a failed institution is your lienholder? The following links provide the answers to all of these questions:

What is the FDIC

A Guide to What Is and Is Not Protected by FDIC Insurance

FDIC Bank Find (make sure your institution is FDIC insured)

When a Bank Fails- Facts for Depositors, Creditors, and Borrowers

Is My Account Fully Insured?

Obtaining a Lien Release

Brokers

Accounts with brokerage firms also offer some protection through the Securities Investor Protection Corporation (SIPC). The coverage isn't anything like that offered by the FDIC, but it's still important to know what remedies might be available to you. 

How SIPC Protects You

Insurers

While banks and brokers have federal backing, insurance companies have backing through associations at the state level.

The National Conference of Insurance Guaranty Funds

If your insurance company fails, you'll want to contact your state's Department of Insurance, since insurance companies are overseen by that department in each state in which they operate. Click here for a directory of each state's office. 

Your State's Department of Insurance or Guaranty Association

Two billionaires, two eras, one mindset

Warren Buffett, the richest man in the world according to Forbes, recently invested $5 billion in Goldman Sachs, in the midst of all this turmoil. That’s pretty typical of how he’s made his fortune – he says he’s “fearful when others are greedy and greedy when others are fearful.”

He has also opined, “We want to do business in [a pessimistic] environment, not because we like pessimism but because we like the prices it produces.”
 
From: The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor, by Robert Hagstrom, Jr. 

Warren Buffett is not alone.

J. Paul Getty was one of the first billionaires and the richest man in the world in his day, according to The Guinness Book of World Records. He said, “I began buying stocks at the depths of the [Great] Depression. Prices were at their lowest, and there weren’t many stock buyers around. Most people with money to invest were unable to see the forest of potential profit for the multitudinous trees of their largely baseless fears.”

He went on to say that he made over 100 times his investment on many of these stocks!

From: How To Be Rich, by J. Paul Getty.

Our best strategy

So we can learn from these two men that we shouldn’t panic, even in turbulent times. Now, you may not want to rush out and buy a bunch of stocks. However, you probably shouldn’t sell out right now either.

These two billionaires made a fortune by going against grain. So keep making those 401(k) contributions. By investing consistently over time – paycheck by paycheck – you’re dollar-cost averaging into the market. In bad times, you’ll buy more shares with the same money than you can in good times – just like the billionaires. 

Above all – diversify, diversify, diversify. Diversification is one of the four key investment principles, according to William Sharpe, a Nobel Prize winning financial economist. Our newsletter subscribers read about these as well as some ideas to simply put them into practice.

Today, more than ever, it’s important for you to take on the role of Chief Investment Officer for you and your family. You can’t count on Wall Street or Washington to do it for you!

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If you would like to get the newsletter we’ve referred to here, just e-mail us: bigginfo@biggsuccess.com, with “Profiting from Panic” in the subject line. We’ll send it to you and sign you up for The Bigg Success Weekly!

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Next time, we’ll discuss why it’s so important to move beyond personal productivity. Until then, here’s to your bigg success! 

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Two Proven Keys to Happiness

happyThere’s a rising call for developed countries to track happiness, rather than just income and wealth. Economists say that the goal of a “rational actor” is to maximize his or her “utility” – their fancy term for happiness – over the course of his or her life. Perhaps governments are trying to catch up with the economists!

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Leicester University in England has tracked happiness for the past 30 years. Consistently, Denmark – not Disneyland – has topped their list as the happiest place on earth.

We wondered why … why are the people in Denmark so darn happy?

Is it the weather?

Average temperatures in Copenhagen are about 68 degrees in the summer and around zero in the winter. We don’t know about you, but that’s not our idea of great weather!

Is it the taxes?

Like her sister Scandinavian countries, Denmark has some of the highest taxes in the world. Now, granted those taxes are matched with some of the highest benefits for any citizenry.

Is it their lifestyle or their habits?

Danes are some the heaviest drinkers and smokers in the world?

Is it their diet?

One of the staples of the Danish diet is herring – this is a country that eats a lot of herring!

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marylynnSo it can’t be the diet, because … maybe it’s just my personal taste, but ick!

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georgeNow there a lot of theories about what makes the Danes so happy. One of my theories is that they drink so much, they don’t remember whether they’re happy or not!

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Seriously, theories are fine, but we thought we should look at what the research shows is driving this happiness.

Professor Kaare Christensen at the University of Southern Denmark found that Danes have low expectations. Because of this culture of expecting less, the people are happy when good things happen.

This made us think of something Tony Robbins said – if you’re not happy, you have a choice. You can either change your conditions or your expectations. But what if you don’t want to change your expectations?

Tal Ben-Shahar, who teaches the most popular class at Harvard University, found that the single most significant predictor of happiness is close relationships with friends and family. We found it interesting that 92 percent of Danes belong to some sort of social club.

Maybe that’s why social media has become so bigg! What do you think?

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Sources

University of Leicester Produces the first ever World Map of Happiness

Why Danes are smug: comparative study of life satisfaction in the European Union

Denmark: The Happiest Place on Earth

Denmark ‘happiest place on earth’

The REAL Happiest Place on Earth

And The Happiest Place On Earth Is…

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Are Good Looks an Advantage or a Disadvantage at Work?

A lot of attractive people complain that people assume things about them without getting to know them. It’s assumed that they’re unintelligent, superficial, and even arrogant.

You’ve been given the gift of physical attractiveness, which has to mean you’re lacking in other areas. In the social world, you’re just the pretty boy or girl.

But does that perception carry over into the professional world? Is there a bias against people who are good-looking?

 

Green Without Envy
Economists Markus Mobius of Harvard University and Tanya Rosenblat of Wesleyan University did a study to see how looks affected the hiring process. They divided participants into five groups:

  • Two of the groups never saw a photo of the candidate or the candidates themselves
  • The other three either saw the candidate’s photograph or in-person.

The groups who saw the candidates were much more likely to hire the more attractive candidate, even though the less attractive candidate was just as qualified.

These employers predicted that the attractive candidates would be more productive, and would be rewarded for it with higher pay.

Even Greener Pastures
Daniel Hamermesh, an economist at the University of Texas, is one of the world’s foremost authorities on the economics of beauty. Dr. Hamermesh has focused on how beauty effects financial success in the workplace.

His research confirms the results of the study we just referenced – that beauty gains an advantage because the doors of opportunity open more frequently. So they make connections, learn skills, and grow professionally. Then they’re able to leverage that first opportunity into many more opportunities, which results in even higher pay.

He also offers little hope for the unattractive. His research has shown that spending money on things to enhance your looks is a waste. You’ll only get back about 15 cents in pay for ever dollar you spend.

Our bigg quote today is by an unknown author:

“We could learn a lot from crayons; some are sharp, some are pretty,
some are dull, while others bright, some have weird names,
but they all have learned to live together in the same box.”

The more colors you have, the more colorful your world can be.


Questions for you

Socially, we often hear pretty people complain that they’re discriminated against. But research seems to show that it works to their favor in the workplace.

From your experiences, do you think good looks are an advantage or a disadvantage?

Is there a difference between men and women? Are good looks more important in the workplace for men or for women?

How about age? Is this something you think affects young people more than older workers or vice versa?

What do you think of Dr. Hamermesh’s finding that it doesn’t pay to try to package yourself better? Do you think it makes a difference?

Share your thoughts by leaving a Comment.

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