The Truth Begins To Come Out

In the Jan. / Feb. edition of Personal Real Estate Investor, we published a cover story entitled "Foreclosures: America, You're Being Misled."

 The mainstream press is beginning to question the true dimensions of the subprime collapse. A story by Scott Burns on MSN Money (click here) published yesterday said the "crisis" is overblown for three main reasons (the following paragraphs are direct quotes):

• "Though the national rate of foreclosure increased by a whopping 79% between December 2006 and December 2007, the rate was still only 1.033%. Because about 30% of all homes are owned mortgage-free, this means that for all the noise about a crisis, only seven-tenths of 1% of all homes were in foreclosure.

• "In the top 100 housing markets, the average foreclosure rate was somewhat higher -- 1.38% -- and it was up 78% over the previous year. But if you rank-ordered the list of the top 100 areas, only 34 had foreclosure rates above the group average. Fifty-one areas had rates of 1% or less.

• "Foreclosure rates actually fell in 14 of the 100 areas. More important, many of the areas with the highest increases in foreclosure rates were rising off rates that were tiny. The Bethesda, Md., area, to offer the most extreme case, saw foreclosures rise 1,288% -- to a rate of 0.682%. In other words, foreclosures there were virtually nonexistent the year before. Today they are still well below the national average. The same can be said for the Albany, N.Y., area (up 638% to 0.25%), the Baltimore area (up 544% to 0.73%) and the Providence, R.I., area (up 354% to 0.41%)."

Burns also points out that even if you bought halfway through the price surge and your home's value dropped in the past two years, you're still ahead of the game.

"Suppose you paid three times your income for a house and it nearly doubled in value over five years. What does that mean? It means your net worth grew by nearly three years of income. Try achieving that with your 401(k) plan. Even if you bought halfway through the surge, your gain is likely to be well more than one year of income. However you cut it, the change compares quite favorably with working and saving."

 Real estate investment - still the most lucrative game in town.

 Scott Seckel, Editorial Director, NEXZUS Publishing

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