Real Estate Wealth Protection Through Short Sales

Is a sharp correction in store for the real estate market?

Fannie Mae, the largest buyer of mortgages in the US, is worried. They recently warned that the probability of a housing bust has risen sharply in certain parts of the country.

Fannie Mae and Freddie Mac financed about 43% of new home mortgages last year. That's down from 53% the year before.

Fannie and Freddie only buy "conforming loans" In these days of easy money and competition for borrowers... more lenders are selling mortgages to non-government sponsored loan buying companies. They have less stringent lending standards. That means more risk as it allows home buyers with poor credit records or unconfirmed income to qualify for mortgage loans.

Listen to this! 24% of the sub-prime loans sold to non-conforming buyers in 2004 were adjustable rate mortgages with an interest only feature. And... these mortgages are not restricted to less expensive houses. The share of jumbo mortgages loans ($359,650 & up) accepted without full documentation increased from 27% in 2001 to 51% in 2004.

Fannie Mae warns that the real estate collapse of the late 1980s was preceded by similar patterns.

Some point out that the real estate bubble is effecting value in just certain areas. But they don't understand that just 22 of the most expensive metropolitan markets in the U.S. account for 35% of the total value of the country's residential real estate.

If those markets begin to collapse they will shock real estate values everywhere.

What should you do if you are sitting on fat real estate capital gains. First... make plans now. Once a correction (crash) begins you will have a hard time getting out of your property. Values plunge and buyers disappear.

If you don't believe there will be more than a little dip in real estate appreciation and you want to hold on to your property... here's an idea. Use the stock market as insurance. How do you do that?

Find real estate stocks and do short selling. Well managed this can be an effective strategy.

If real estate values continue to climb you still own your property and continue to accumulate capital gains.

If real estate values begin to fall you sell short selected stocks and profit from the decline, which balances the loss in the value of your real estate. You protect your real estate gain... and maybe even come out ahead on the strategy.

An ETF is an Exchange Traded Fund. That's a basket of stocks that trade under one symbol just like a stock. You can quickly buy, sell or short an ETF through an online broker in seconds. You have instant liquidly... something you don't have with real estate.

Two ETF's that you could be ready to short sell would be:

IYR - A basket of real estate stocks

IYF - A basket of financial stocks.

Lots of areas would be hard hit by a down turn in real estate including: banks, mortgage lenders, utility companies, materials suppliers and especially home builders.

The stocks of leading home builders that would suffer during a real estate bust include:

Brookfield Homes - BHS;
Beazer Homse - BZH;
Centex Corp - CTX;
D R Horton - DHI;
K B Home - KBH

Yes, short selling is a radical strategy for the smaller real estate investor, but aren't you the one who needs the gain protection the most?

You may find a local stock broker that would give you some help, but you should understand some basics about the stock market and trend following.

You can easily learn that here... http://digbig.com/4dxys

Mark Walters is an investor-entrepreneur helping other investors from his Web pages at http://www.Lease-Option-Sub2.com

---

Water, Water Everywhere on the Waterfront

Waterfront living is among the most desirable of locations in... Read More

The Real Estate Agent Alphabet

Alphabet Letters after a person's name seem to bestow some... Read More

Fixer Uppers: Dont Make This Mistake

Making money with "fixer-uppers" isn't about repairing drywall or planting... Read More

Should You Accept A Full Purchase Offer For Your Note or Not?

You could be facing a dilemma when considering payout options... Read More

Land for Sale

Think owning land would cost a fortune? Think again! While... Read More

Pricing your House to Sell

Most Sellers set their initial asking price at an amount... Read More

Real Estate Development Feasibility Study (Income) - $1.2 Billion Developer Tells You How To Do One

There are two sides to a feasibility study and in... Read More

The Cat in the Attic

Strange and unexpected things happen during home inspections. Seldom are... Read More

An Often Overlooked Secret of Marketing and Negotiating for Real Estate Investors Looking for Deals

When you call sellers, what do you say? When you... Read More

How To Sell Your Home FSBO

You decide to sell your home and believe you can... Read More

Should You Allow Buyer To Rent During Closing?

It's not uncommon for an investor to sell a house... Read More

Content Ideas for Ads and Brochures When Selling Your Home

Even in this hot real estate market, selling your home... Read More

FSBO Novel Preface

PrefaceWe are For Sale By Owners, "FSBOs." We spend our... Read More

What is a Loft Apartment?

What is a loft apartment? At the most basic level... Read More

Where Does Your Real Estate Commission Fee Go - Why is The Commission so HIGH?

Many who have bought and sold properties through Realtors numerous... Read More

10 Things You Shouldnt Do When Youre Buying a Home

Home Buying Don'tsYour home buying process is well underway. The... Read More

San Diego Real Estate, Million Dollar Homes

San Diego county has always been known for its Luxury... Read More

Property Investing - Am I Buying for Profit or Prestige?

All of us have emotional preconceptions and assumptions. They are... Read More

As a Realtor, How Do I Attract Listings?

Have you ever noticed that despite the massive number of... Read More

Buying a Newly-Built Home? Ten Benefits of Using a Real Estate Professional

It might not seem necessary to involve a real estate... Read More

Real Estate: Reasons and Priorities for Purchasing Property

Real Estate: Reasons and Priorities for Purchasing Property. It's not... Read More

The Real Estate Cycle

The real estate cycle, like the business cycle, refers to... Read More

Tax Free Exchanges: Watch out for the New Residence Rules

On October 22, 2004, President Bush signed tax legislation that... Read More

Real Estate Investing Works In Your Area Too!

I hope you had a spectacular weekend!Things have been going... Read More

Late Mortgage Payments Sabotage PMI Cancellation

There's something you should know about PMI!Private mortgage insurance is... Read More

Buying Property in Spain - How to Avoid Paying over the Odds

Spain has a lot to offer Northern Europeans and until... Read More

Flipping Houses for Gold: Three Tips to Help You Find the Perfect Fixer

Many real estate investors enjoy "flipping houses," or buying and... Read More

Decorating to Sell a House by Meeting Three Key Needs

Specific marketing campaigns are no longer just for automobiles and... Read More

An Estate Planning Primer

An estate plan can be designed by clients and their... Read More

Salt Lake City Real Estate

From the mountains to the valley, there are many types... Read More

The Psyche of The Seller and The Tenant Buyer

For those of you who were not psychology majors the... Read More

If Your House Is a Mess, You Dont Have To Sell For Less

Don't be tempted by "We Buy Houses" or "Sell Your... Read More

How to Buy Fixers for Profit

Do you dream of becoming a multi-millionaire real estate investor?... Read More