My Reality Show: Homebuyer 101 ~ Searching for a Home

So far my reality show is in full swing. Click this link to find the first 3 rules to home buying. Remember to check your credit, get pre-approved, and save for your down payment. First 3 Rules

Once I complete the first 3 rules, I set out to search for my house of dreams. Here are the steps to make sure your ready to find your dream house:

1. Practice Before The Real Thing - This is the first step in your reality check as a home buyer. Before waisting your time and stressing your agent out, practice finding the home of your dreams on your own and see what your pre-approved amount gets you in many different neighborhoods. The web is a great tool for pr acting with specialty sites and sites that tap into all Multiple Listing Service (MLS) listed homes. For Chicago, here are the sites I practiced with:
Dreamtown.com
Trulia.com
Zillow.com
Realtor.com ***
chicagotribune.com (Real Estate section)
Redfin.com ***

*** These sites helped me get the most accurate information

2. Narrow Your Search - Its time to narrow your search by more than just price. Choose the following: Preferred Locations, Total Price, Must Have Features. Here is mine:

Preferred Locations -
Here is a listing of all Chicago neighborhoods: http://www.chicagohome.com/neighborhoodMasterList.cfm

Most of the North Side: (Irving Park, Avondale, Roscoe Village, Logan Square, Bucktown, Wicker Park, St. Ben’s, North Center, Rogers Park, Lakeview, Lincoln Square, Albany Park, Lincoln Park, Uptown, Edgewater, Portage Park, Ravenswood)

South Side (Hyde Park, Kenwood, UIC)

Total Price - Know two key things about the price: 1. List Price, 2. Monthly Payment Price

List Price - The total amount you want to spend. This will impact your down payment.
Monthly Payment Price - Also estimate your total monthly budget which should include the mortgage payments, taxes, association fees...and be aware of insurance costs.

Must Have Options


Property Types: Primary - Duplex, Townhome, Single Family Home
Square Feet - At least 1600
Bed Rooms - At least 2
Bathrooms - At least 2
Balcony/patio/deck
Closet space
Washer/Dryer in unit
Central air or separate unit in each room
High ceilings
Intercom/Security/Buzzer Door Entrance or Locked Fence
Good parking situation
Access to Transportation
Grocery/food/stores
Hardwood
Kitchen - Stainless Steel Package, Update Cabinets
Bathroom - Updated Features

3. Get Professional Help, Choose an Agent

My personal opinion is that if you are well informed your agent is helpful but not vital. Don't be afraid to find your home on your own and then just rely on the agent to show you the property (and then help you close the deal). I would explore a growing breed of agencies that allow you to use a powerful site to 'Narrow Your Search' and choose the properties that meet your criteria...on your own. The catch for you doing all that work is the agency will split the COMMISSION with you. Check out sites in Chicago like Redfin.com and ZipRealty.com. I learned through my experience that a traditional agent will do the exact same thing, however, they put in your 'Narrow Your Search' criteria for you and then you choose the properties that look interesting.

I used Redfin and enjoyed their service. However, I went with a traditional agent because Redfin doesn't focus on short sales...a type of distressed property I was leaning towards. Look for agent that lives works and surrounds in the city for at least 5 years. They have seen highs and lows in the economy.

If you choose a traditional agent, create a questionnaire to grill your potential candidates (yes, they are working for you):
~ Is this your full-time job?
~ Are you familiar with distressed properties (foreclosures & short sales)?
~ Where were you last five deals?
~ Who else will be working with me?
~ Will you show me ALL properties available for sale?
~ When am I committed to working with you?
~ Has a client ever filed a complaint?
~ How are you paid?

4. Tour The Homes - Schedule roughly 4-6 homes in a session. This is a good amount that will allow you to remember each property. I recommend taking a camera with you when touring homes. This was the best tool because I remembered so much more.

What's in My New Fave Five Portfolio

Well if I had my T-Mobile Sidekick I would be dialing up these stocks in my Fave Five list. After reading my previous post you see that I am looking to build a base with longer term plays that will offer protection and growth. Stocks like TIP, EPD, and GE are for the long road because they protection you from inflation, provide a nice dividend, and offer large cap value...respectively.

I became to write about clarity and the activity that I am seeing in the markets allows me to return to my screening process. A process that allows me to rely on quantitative data analysis and less on my emotions. Here are my picks and the my views of what the data tells me.

My FAVE FIVE for August with price points:

Interactive Brokers (NasdaqGS: IBKR) - This may be my favorite pick this month. I would be a heavy accumulator between $18.15 -18.60. Also any points when they dip below $19.12 I would start nibbling at the stock. I like the activity in the stock market which allows this company to garner more fees and I am bullish on the fact that they market themselves as a low cost fee servicer.

Americredit (NYSE: ACF) - I am pleased that this stock came up screen. At 16.94, I would be a buyer of this automobile finance contract purchaser and servicer. I believe 'Cash for Clunkers' will be a huge benefit to this company and the proof is in a recent discussion on CNBC with the AutoNation CEO. He directly attributed the program with bringing buyers with good credit scores into showrooms.

Bank of America (NYSE: BAC) This one is simple. Everyone and there mama is buying into BAC and I told you before I don't go against smart money. It came up on my screen and further research shows industry hedge fund smart guys like Peltz, Jana Hedge fund, Dan Loeb and my current favorite John Paulson are jumping on to this train. Take Paulson, my dog owns 168 Million shares. Hmmm, is that enough to make you think twice! I'm struggling with a price point but I'd love to see a small pullback to pick this stock up @ 15.96

Becton Dickinson (NYSE: BDX) - This one is simple. Even though I like Paulson, I am a bigger fan of Warren Buffet. He steered me right with Burlington Northern and now he's on board with BDX. Jump on the wagon @ $65.49

Pfizer (NYSE: PFE) - This was not uncovered by my screen but I like the activity around PFE. This was added at the last minute and switched with my honorable mention Boston Sci. As I was researching PFE, I learned that the management has indicated a plan to raise the dividend by 25% by the end of the year. I can dig that!

Honorable Mention Fave Fives:

Rait Financial (NYSE: RAS) - I have to give you a 'penny stock'. RAS hits my screen and should be picked up at $2! The only problem is that it took off the other day to the tune of 29%. Well you win some and you lose some.
Boston Scientific (NYSE: BSX) - This gets the dubious number six on my list. It got replaced by an older maybe more responsible friend PFE. But grab BSX @ $11.06.

Urbanomics ~ Portfolio Plays

It has been a busy summer for me. As you can see from my updates I have been consumed with trying to buy a home. Lately, I have increased my number of posts and this could probably means one thing. CLARITY
I won't admit that it is a perfectly clear picture as to what may be coming down the road but I would say that I have a better feel as to how things may continue to play out.

My personal belief is that this rally is a bear market rally. I will admit that it is a rally nonetheless and you can't try to go against the trend. See a post that I wrote away back about sticking with the trend: Bad Banks Will Rally. So here are a quick summary of my points:

- The goverment's combination of TARP, stimulus, and incentives (Cash for Clunkers, Homebuyer Tax Credit) have been the right recipe to bring the economy from lifelining.
- Unemployment continues to be the thorn in the side of an economic recovery. As a person that is near to the streets, this and foreclosures are the most important issues.
- The economic data is starting to trend up and when you've hit the bottom there is only one direction to go. We've seen gas, homebuilders, banks, credit card delinquencies, and even unemployment start to tick up


After considering these points, I believe that things are getting better but very SLOWLY. I understand that unemployment is a lagging indicator but I think things are different this time. High umemployement, which I believe will continue to rise...is a problem to a primarily service driven economy. This will be a drain on most American businesses ranging from restaurants, homebuilders, banks, etc. I believe businesses have benefited immensely and are recovering but I think the everyday person is struggling to adjust to the NEW NORMAL. The new normal for businesses mean that cost cutting efforts will continue for long while and hiring will not come back as new revenues will be hard to come by. I think that this is an "incentive" driven rally and a pullback is soon to come because nothing has really changed. Money has been pumped to save starving business but not many industries have really been punished for their actions which got us here. This is the fundamental back drop of moral hazard...no one has learned their lesson. If you need proof, then just look act the actions of the big banks once they got out from underneath TARP. I believe the waste and excesses have not been rung out of the system and the average person on main street is left holding the bag. That bag results in job losses, delinquencies, debt, possibly higher taxes, and UNCERTAINTY. I now bring my lunch and limit my Patron shots due to this uncertaintly. So here is my portfolio which reflects an uncertain world that appears to be getting a little bit clearer:

Stocks based on my view of the ecomony:

TIP - Treasury Inflation Protection EFT; inflation will be coming and this is where the smart money is parking some of their stash
DUG - Ultrashort Oil; if you read above, when the economy improves so does the price of Oil. But high oil is not good for this struggling economy
GE - General Electric; an industry stallworth that should rebound, especially since GE Finance won't be the undoing of this company
BBY - Best Buy; this is where I like to shop and now that Circuit City became a casuality of this economy its more pie for Best Buy (hey that rhymes)
GLD - A Gold ETF; this is an inflation protection move.

Stocks based on my screening:

EPD - Enterprise Partners; this is a natural gas pipeline company that has an outstanding dividend and it prime position it commodities move higher
IBKR - Interactive Brokers; asset managers and investment banks that are still around are benefit from the volatility and new business
GLW - Corning; this maker of LCD displays will stand to benefit as flat screens continue tobe the 'it' thing to buy. I can't wait to get my 52 inch bad boy

Junk Your Clunker...

I previewed the details of this program awhile back. Cash for Clunkers has been a huge success for the automotive industry and they just got extended another lifeline. The Congress approved another $2 Billion dollar measure that will allow the program to continue. If you still have questions about junking your clunker see the official site here:

Car Allowance Rebate System: http://www.cars.gov/

My Reality Show: Homebuying 101

My online reality show is probably the slowest show that you've followed in awhile, but hey its still running! If you recall, my show started with trying to determine if the stimulus bill really had any stimulus to it??? So I read through some of sweet parts of the bill to see if they could get a penny pincher like me off the sidelines and contributing to a deteriorating economy. The one part of the bill that immediately attracted me what the Homebuyer Tax Credit. Yes, welcome, first time homebuyers like me. I searched high and low and I'm sometimes surprised at the lack of direct information provided to help you through what is a huge huge purchase. So far here are the rules to help you finance the purchase of your next home:

Rule 1: From a previous post, you learned to CLEAN UP YOUR CREDIT. Click here to learn about how to view your credit for free ---> Free Credit Check

Rule 2: Find a reputable bank or mortgage broker who will pull up your credit and give you a Pre-Approval amount based on your gross income and outstanding debt levels (i.e., credit card balances, car loan, student loans, etc). Knowing "How Much Home You Can Afford" is critical! My rule of thumb is try not to spend more than 80% of what your Pre-Approval amount is. If you haven't received your Pre-Approval use this rule of thumb, don't spend more than 40% of your net monthly paycheck. Remember net = take home pay. This rule prepares you for a few things things that you may still want to spend money on like: the ability to still save/contribute to your retirement, afford new expenses, and still have a life.

Rule 3: SAVE, SAVE, SAVE for at least of a 10% Down Payment. This will be a huge step in determining if you are really ready to commit to buying a home. For instance, the average condominium (in my book) is roughly $300,000. This means you need to come up with $30,000 as a down payment!!!!

Tricks up my sleeve:

- A trick to Rule #1 is to contest all questionable items on your credit report with support and in writing. The nice thing is contesting your credit history can be done online.

- The trick to Rule #2 is to follow my "Rule of Thumb" notes above. Budget for less and you will be able to sleep easier at night.

- And my last trick! For Rule#3, consider or ask if the home you are looking into qualifies for a FHA Loan. This loan is government sponsored and only requires you to put 3.5% Down!!!

Stayed tuned on how to begin your house search...

Urbanomics Market Update - June 20th

Urbanomics Market Update
~the update for people that don’t watch the “stock channel”

GAS, the last time I wrote my update I predicted gas prices were going to rise and boy did they take off. As of a couple of days ago, the price of gas at the pump has risen for 50 (this is not a typo) straight days!! AAA, noted recently that the nationwide price average is around $2.679 and every state is joining in this party at the pump. Since I was sport on with my last analysis I will include my most recent prediction on the direction of gas.

Gas Prediction: My thoughts are that gas will start to top out at these levels. The fundamentals of economy just can’t support gas at these levels…people will take other measures as they did last year to ease this costly burden. At the right price, I would look to make an investment that gas begins to drop.


STOCK MARKET, this week the stock market was down roughly 3%! You may think that there are a few signs that things may be improving but I would not be running to join the crowd. Be afraid because a number of experts are betting that the rally is running out of steam just as the everyday investor is starting to pump money back into their investment portfolios, mutual funds, and retirement portfolios. My prediction won’t change…so check out my write up from last time below.

Market Prediction: if you had peeked at the stock market you might have seen that it has been doing really well in the last couple of months. If you feel like you missed the party…DON’T. The reasons vary as to why it was moving up rapidly (like people spending their tax checks at the beginning of the year) but it probably won’t continue going up so quickly much more. This is my opinion but the economic data doesn’t lie. The data recently released says:
- Consumers are saving and not spending money
- Housing foreclosures are on the rise again (And rates continue to rise!)
- Unemployment continues to reach record monthly numbers (Unemployment dipped last month and is on the rise again!)

WHAT TO EXPECT NEXT,

Cash for Clunkers – The Congress just passed a bill known on the streets as “Cash for Clunkers”. It probably took a cue from Germany which has passed a wildly popular strategy in their country. This bill was going to be hard to argue against as it helps boost a lagging industry, cleans up the environment, and lowers the consumer’s bills. The bill requires you to buy a car that is more fuel efficient that your last car and you will get a voucher of up to $4500 to make this switch. The real name of the program and a link to the website can be found here: www.ConsumerAssistanceToRecycleAndSaveProgram.org
Or try the auto industry’s site aimed at promoting the bill:www.CashForClunkersHeadquarters.com

Home Buyer Tax Credit – A new proposal is moving around the senate to INCREASE the existing tax credit. Senator Johnny Isakson of Georgia is the brains behind this new proposal which want to raise the existing $8000 credit to $15000!!! The other changes are this bill would be for ALL homebuyers in contrast with the last which was just for first time buyers. The other change would be to eliminate the income limits which are currently capped at $75000.

Prediction: My opinion is this will have some trouble passing through Washington. At a time when Wall Street and the Real Estate industry have lost our trust, this bill will raise too many questions about who is really benefitting from the latest home tax credit. By removing the income limit and opening it up to anyone this could potentially benefit wealthy homeowners and property investors…two groups who may need the least assistance out there and have the least amount of trust out there.

HOUSING, things still look uncertain for this part of the market.
- A new wave of foreclosures are still set to hit the market
- The tax credit deadline is looming
- Rising interest rates are not positive for consumers

Urbanomics Market Update ~ May 15

Urbanomics Market Update
~the update for people that don’t watch the “stock channel”

GAS, the price of a barrel of oil (better know as gas you put in your car) continues to rise, so this means that the cost you pay at the pump will be rising also. I know you want to know why, and all I can tell you is that has to do with the season, speculation, and investors betting the economy is turning around.

STOCK MARKET, if you had peeked at the stock market you might have seen that it has been doing really well in the last couple of months. If you feel like you missed the party…DON’T. The reasons vary as to why it was moving up rapid (like people spending their tax checks) but it probably won’t continue going up so quickly much more. This is my opinion but the economic data doesn’t lie. The data recently released says:

• Consumers are saving and not spending money
• Housing foreclosures are on the rise again
• Unemployment continues to reach record monthly numbers

WHAT TO EXPECT NEXT, the talk around the investing water coolers is the next shoe to drop is the realization that the Credit Card and Commercial Real Estate industries are hurting. In a nutshell, unemployment is bad for consumers who stop paying their credit card bills and a recession is bad for businesses that stop paying for the buildings they use. Both of these problems affect banks and real estate companies which have hundreds of billions of dollars at risk.

DOES THE STIMULUS WORK, surprisingly the answer might be yes. The stimulus plan appears to be working with estimates stating that roughly a billion dollars a day has been released in the first 80 days, I will let you do the math ($80B). And states representatives have indicated that they are putting the money to work quickly. For example, I was shocked by the potential numbers noted by the state of Texas, which says they estimate that 69,000 jobs will be saved or created through the implementation of stimulus money for transportation projects.

HOUSING, number from two key sources, the National Association of Realtors & RealtyTrac (foreclosure experts) are out.

• Home Prices fell 14% since this time last year (Largest decline ever)
• First-time homebuyers accounted for HALF of all new sales
• “Distressed” (foreclosures and short sales) accounted for HALF of all transactions
• Foreclosures filing up 32% from a year ago (RealtyTrac record)
• 1 in every 374 housing units received a foreclosure notice

Industry Predictions: Housing may not return to normal until 2010, until then BUYERS are running the show