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

---

Rehab Your Way to Wealth: The Quick Way to Fixer-Upper Success

Completely rebuilding a house is not necessary to make money... Read More

Make Your House Earn Its Keep

Did you realise that there is a lot you can... Read More

How Much is that House in the Window?

With the recent release from the UK's biggest mortgage lender,... Read More

RESPA: The Real Estate Settlement Procedures Act

The Real Estate Settlement Procedures Act (RESPA) is a consumer... Read More

Find Bucks in Yucks! 20-Year-Old Woman Turns Doghouses into Dollars!

Do you dream of making money in real estate? Do... Read More

Water, Water Everywhere on the Waterfront

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

Flipping Fixers: Using Transformation Psychology for Top Dollar

Satisfying and lucrative real estate investment depends upon your correct... Read More

Real Estate Investing and Home Ownership

If you already own your home, you will probably make... Read More

Real Estate Investing - Free Vacations While Searching for Real Estate Acquisitions

Real estate investing professionals look for all possible tax deductions... Read More

Join the Bulgarian Property Boom With Confidence

An Irish property investor in Sydney, Australia has created an... Read More

Before You Buy A House ? Top 10 Tips

There are serveral things you need to think about and... Read More

Should You Use a Property Management Company or Manage Your Real Estate Investment in Florida?

When considering investment properties, first of all, it must be... Read More

Lake Havasu Real Estate

Lake Havasu real estate is a hot commodity. With surrounding... Read More

Investment Property Part I: How Not to Become a Slumlord

After riding the ups and downs of the stock market... Read More

Secrets of Making Money from Real Estate - Part 2

Leverage: With real estate, people and companies will lend you... Read More

How to Use the Internet to Help Your Apartment or House Hunting

So you are looking for an apartment to rent or... Read More

Property Investing Secrets 4

Property Investing Secrets:How to Sell to 100% of the Market... Read More

What Does It Take To Be A Donald Trump in Real Estate?

Since you are a business oriented person, you might be... Read More

Where To Start In Looking For A Central Illinois Realtor

Central Illinois is an excellent location for families and businesses.... Read More

Talk to a Lender Before You Sell Your Home

If you're looking to sell your home quickly, and for... Read More

How Do I Implement The Lease Purchase Plan?

Well, as we have discussed in previous newsletters first you... Read More

Real Estate Investors: How to Get a Powerful Marketing Education for Free

I am a total geek.A few weeks ago, late at... Read More

Purchasing Land: What To Look For

It doesn't take long to realize that finding the right... Read More

Real Estate Remains A Strong Investment

Opportunities to make big, quick profits in residential real estate... Read More

Eight Out of Ten Millionaires Surveyed Made their Fortune in Real Estate - How?

Consider the statistic in the title for a moment.8/10 millionaires... Read More

Find the Right Apartment Quickly and Easily Using an Apartment Locator Service

You've probably seen the ads or heard about apartment locators.... Read More

Selling Your House - $100,000 Pets

Is your pet worth $100,000? It may be if you... Read More

Use Targeted Decorating To Get A Higher Price For Your House

This article will show you how to sell your home... Read More

Whats This about a Housing Bubble?

In his recent testimony, Alan Greenspan warned against the possiblity... Read More

Late Mortgage Payments Sabotage PMI Cancellation

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

Real Estate Investors Kick Away $1,000

Those new to real estate investing often fail to take... Read More

Cheap Homes For Sale In Great Towns

Good Homes Under $50,000? My wife Ana and... Read More

Why Invest In Property?

Why property, some people ask when looking for an investment.... Read More