February 2010 Unemployment Rate Holds

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here’s an article I found titled, “Jobs report shows unemployment unchanged,” by David Goldman…

This article is great. It has a chart that shows the number of jobs lost monthly since January 2009 to present. I’m not sure why the author is attributing the better than expected jobs numbers to the big snow storms last month. I would think that something like a blizzard would be a negative on businesses and prompt more lay offs. Whatever though.

The important part to take away from this article is really that unemployment stayed unchanged from last month at 9.7%.

I love it! If you’ve been following my articles you know my theory on how the economy is going to start taking strides forward if the unemployment rate holds and improves a little in the next few months! By the unemployment rate not getting worse, I think it’s still supporting my hypothesis that the unemployment rate has peaked in this recession. Check this out… I gathered this info from the Bureau of Labor Statistics to create a chart I can update each month to better illustrate the historical trends of this recession’s unemployment rate.

I started this chart at the beginning of 2007 because that’s when we as real estate investors started seeing our own recession start to get ramped up. I guess the recession by definition didn’t get going until about the beginning of 2008. As you can see the unemployment rate consistently increased for two years (2008 – 2010).

Now we’re creating a nice peak right at the 10% area. The “9 per. Mov. Avg.” is just a 270 day moving average I tossed in there because it’s pretty cool to see that our unemployment rate just crossed under it. So it’s awesome to see that we broke through that floor.

Anyway, here’s my silly little hypothesis:

Get about 3 to 5 more months of the unemployment rate holding or dropping and the recovery will be 100% full force back on! Why? The media & the Government will start to make a big deal out of it’s kinda good news (only kinda good because the unemployment rate will still be over 9% most likely at that time). We’ll see everyone start to believe that the recessionary times are over, and businesses will start rocking again.

My guess is that the unemployment rate will drop from the then maybe 9.4%ish to about 7.5% by the end of 2011. The basis for the 7.5% rate guess-timation is that in our last recession it took about 24 months to gain about 50% back of the recession’s unemployment rate original run up. History has a tendency to repeat itself.

This recession’s unemployment rate curve’s slope is similar to that of the prior recession when it was increasing rapidly. This recession was just over a longer period of time so the unemployment rate increased at a similar velocity but over a longer period of time (making this a much worse recession for unemployment than back in 2001).

About half of the original run-up in unemployment rate is roughly 2.5%…..so it makes sense to think that we could be looking at a 10% – 2.5% = 7.5% unemployment rate in December 2011 and then of course possibly we’d go all the way down to 5% in December 2013. No – it’s not very scientific, and Yes – it’s a blind guess, but here’s for taking a stab at it anyway.

What are you’re guess-timations?

Do you think that an improving economy over the next 4 years will be good for private money recruiting or bad?

Let’s hear it!!

All Eyes on the Job Market

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here’s an article I found which is all about the job market and other economic news…

This coming week is packed full of big economics news with the “main event” coming on Friday when we get our February job’s report.  This article is great because it lays out the economic indicator news that’s to be reported each day of this week.  It also has a little nugget of info about what’s going on with Greece and their financial mess.

How’s this for great news!!!

On the upside, the fourth-quarter reporting period has been positive, with earnings jumping 201% from a year earlier and 16% from a year earlier without the financial sector. Last week’s revision to fourth-quarter GDP growth was better than expected, with the economy rising at a 5.9% annualized rate, the fastest pace in six years (Twin).

Even if the expert’s expectations for the reports this week are mixed; we’ve had something to be pretty happy about.

I’m still hoping that we’ll keep the unemployment rate under last month’s figures.  If you look at the chart (below) of the past decade there is certainly a peak that’s forming right now.

I’m still super hopeful that this next round of unemployment numbers comes in lower than last month’s 9.7%.  If bit by bit, the unemployment rate keeps trickling down (even if it’s just a 10th of a percent each month), this marginally good news COULD go from something only economics geeks like me blab about to mainstream excitement.

Let’s say over the next 90 days the unemployment rate keeps falling (even by the slightest of margins), the media will probably take hold of it and do what they do best; make mountains out of mole hills!  I hope this all comes to pass because I could easily see the media reporting this “GREAT NEWS” (well, not really considering the unemployment rate would probably still be over 9%), and pound it into all our recovery hungry heads that the recession is over and it’s time to get back to spending!

Think about it, it would likely drive consumer confidence and we’d see recovery on both the consumer side and business side. Maybe it’s a bit artificial, but the spending could drive more job creation and drive us right on out of the current struggles.

As soon as this happens, we as investors will be happy to see mortgage applications increase, nudging housing demand back a little, thus increasing home values a bit.  Interest rates would start to go back up a hair (but not necessarily for private money loans because we are independent of the dang banks, of course), banks would get a bit more profitable (great for Wall St.) and then POOF….we’re really truly on the road to recovery in the real estate market.

One other thing to note about my little hypothesis is that in this recovery relay race, we’d finally take the baton back from the government and they would be able to slowly retreat from all these expensive stimuli packages.

What do you think?

Financing Buys Better Deals… NOT!

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here’s an article I found that reinforces the concept that cash is king, even in a buyer’s market.

Hey there my friends, this week’s spotlighted article is titled, “Homebuyers Finding that Cash Really is King; Even in Buyers’ Market, Many Can’t Close Deals as Investors Snap Up Homes.”  The later half of this week’s article is a tangent of comments made by the author in the article. If you’re into studying unemployment, you may dig this hard core.

If this article doesn’t edify the fact that private money is a smarter route to take for an investor to acquire real estate than traditional methods, than I don’t know what does. Check this stat out from the article!

“Across the country, some 22 percent of all previously owned homes sold in December were purchased entirely with cash, up from 16 percent a year earlier.”

I guess this is no real news to the Private Money Blueprint family because we know that cash is absolutely king in the real estate world. I guess there’s just more people that are getting wise to the facts and using cash instead of banks. The author of the article hits the nail on the head mentioning that buying with cash gets investors better deals vs. financing because it doesn’t require a bank’s approval & its way faster and easier!

Here’s where I’m going to run off on a tangent and jump on my soap box a bit. There was mention in the article of an underlying issue brewing from the contents of this article. The author notes in the article that as inventory of homes for sale drops, it’s harder to get good deals unless you are a cash buyer.

What About The Drop In Inventory?

Duh, cash is king, we know, but what about the drop in inventory?

I think we’re going to start seeing inventory decrease more and more in 2010, but not as much for the author’s reasons (holding up foreclosures for hopeful mortgage modifications). Instead, I think we’ll have the job market to blame as it rebounds (finally).

Keith Hall, Commissioner of the Bureau of Labor Statistics on Friday, February 5, 2010 announced before the Joint Economic Committee (US Congress) that, “The unemployment rate declined from 10.0 to 9.7 percent in January“.

I think that if our government plays it right, we may have just come off our unemployment peak for this recession! What do you think?

Unemployment Stats…

Check out this Unemployment Rate chart from the Bureau of Labor Statistics.

I know it’s too early to tell and all, but I like what I’m seeing. The government is starting to really get it right in my perspective!

Did you listen to the emphasis on job creation in the State of the Union speech the other day? How about the possible $5,000 tax credit given to employers for each new employee they higher up to $1/2 Million per company that’s on the table in Washington?

It goes without saying that if you’ve been reading my columns I am a staunch believer that job creation and lowering the unemployment rate is the #1 driver that’s going to get our economy back to solid ground.

Finally, we’re looking to set aside something like $33 billion for job creation as a stimulus instead of giving $800+ billion to the banks last year (who aren’t as important to us private money guys anyway). If the government can get this stimulus passed and others follow, I’m excited for my optimistic educated guess of unemployment recovery in our midst to turn into reality.

Where this all looks like it’s leading is a potential uplift in the real estate markets… a slow one… but potential uplift.  However, a huge factor in moving properties on the market is the availability of financing for the end buyer (which banks are still very tight with their money)… but when you have the cash (not necessarily your own… but funds from private lenders) available to buy properties today you’re ahead of the game and can capitolize on the best deals, the quickest, with the most profit spreads.

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