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real estate fluctuationlets chat for a second, shall we?

watching hgtv is a good thing. i can even say that watching shows like ‘flip this house’ can be educational and entertaining, but let’s be real. just because you have your broker’s license, watch these shows religiously, and live in atlanta doesn’t necessarily mean that you’re going to make it big and live off of investment property income. long-term wealth is not built on the dreams of getting rent checks for the rest of your life.

john rogers, the founder of ariel investment corporation, recently proved this statistic and the misconception african-americans have about long-term wealth in a recent chicago tribune article. his solution? educate black culture.

so let’s do that, shall we?

it is not a coincidence that we at ybpguide constantly and consistently write articles about ‘feeding the pig’, becoming financially literate, and how to save $20k. statistics have been calculated and it is no secret that a majority of our parents’ generation did not have the means or tools that we have in setting up long-term, healthy wealth avenues. this has to change with us. real estate, no matter how much ‘bang’ you think you can get, will NOT get you there. stay in the lane of diversified mutual funds and stocks. learn about annuities. don’t just follow the fad of putting money in the 401k. know the myths. stay educated.

i am privileged to know some older black folk who are doing really well. their advice has always been for me to keep saving my money and socking dollars away. pay myself first. one of my older friends used to own more than 15 buildings! the dividends were not worth the stress.

the ybp is slowly being redefined. we are lean, green, financially sound machines. come join us.

Written by UMO contributor Diontre Pewitte

Isn’t it funny how old songs can apply to new problems no matter when they were recorded? One of my favorite groups of all time, De La Soul had a smash hit in early 2000 with a track called, “All Good”. The title sounds well enough, but the lyrics actually presented a different story. “It ain’t all good, that’s the truth things ain’t going like things should” is the hook that was melodically bellowed by Chaka Kahn. While this hook could be applied to just about any industry trial or tribulation, it couldn’t be more representative of what’s going on in the adjustable rate mortgage industry.Young Black Professional Guide to ARM

Adjustable rate mortgages (ARMS) are mortgage products that allow borrowers to take advantage of promotional rates for a fixed period of time and after the promo is up then the rate will adjust based on a predetermined rate index. The ARM product was supposed to allow people the chance to get more house for less money and as their incomes increased they would be able to handle the higher payment.

During the residential mortgage boom consumers were jumping into adjustable rate mortgages with the quickness. Lenders were greedy for more deals and consumers were overly ambitious about their future financial situations. It got so bad that people who were making $30K/year were buying $215K houses with the assumption that they could just sell it when the rates adjusted. This was a really bad idea, when the bottom fell out of the housing market home values were one of the first things to go. Home values have actually begun to decrease in many markets around the country leaving many people upside down in their homes.

Mortgage Fact:

  • Approximately twenty percent of all ARMs are currently in the foreclosure process
  • Approximately 10 percent of ALL mortgages are delinquent, 2-1/2 percent of mortgages are in foreclosures.

For example:

John, who was mildly credit challenged took out a $200,000 mortgage with a 2/28 term @ a 4% fixed rate promo. He was paying the loan back at 4% for the first two years with the understanding that the rate would adjust for 28 straight years after the 2nd years promo was completed. Based on his promo John is paying about $954/mo, which is not bad for a $200,000 house. Fast forward two years in the future and now it’s time for his first rate adjustment (did I mention that the rate can adjust up to 4 times in one year). Let’s say the rate adjusts to 7.25%, John’s payment has just jumped from $954/mo to $1354/mo (+$400). Ugh, that’s a hard pill to swallow even before we start talking about the increases in the price of gas, food and insurance.

John’s situation is a very common problem for people who bought homes in the lenient lending era of 2004-2006. Recent reports have estimated that more than 600,000 homeowners will have issues with adjusting rates mortgages and of that 600,000, 50% will probably lose their homes to foreclosure. Common sense would suggest that if you’re stuck in an ARM that you should just go ahead and refinance. That’s a good idea in theory, but the reality of the housing market is that home values have begun to stabilize and even decrease in some markets. Additionally, due to the uncertainty of the housing market many lenders have substantially tightened their lending guidelines. As a result it’s become very difficult for credit challenged borrowers to secure financing.

Tips to managing your ARM:

  • See if you’re in a position to refinance your loan, make sure you do your research. You’ll want to see what similar homes have sold for in your area, check to see if you have a pre-payment penalty on your existing ARM.
  • Proactively adjust your monthly budget to accommodate the increases in payment
  • Consider adding a housemate to help subsidize the increased cost of your mortgage
  • If you’re having trouble making the payments contact your mortgage company, despite what most people think your house is worth more to you than it is to the bank and they really don’t want it. Ask them if they will work out a temporary reduced payment arrangement for you.
  • If you already in trouble and need outside assistance contact the local ACORN group in your area an see if they can provide you with assistance. ACORN is a not-profit organization that designed to assist low to moderate income individuals in many different areas. In light of the current anticipated foreclosure rates in low to moderate income neighborhood areas AKORN has taken a strong stance against predatory lending practices and the after effects of it.

As always if you want more information come check us out at Urban Money Online

(image from businessweek.com)

these past few days have been very revealing as discussions i’ve had with friends and family, reading comments on shaquanda cotton’s issue, and articles i’ve stumbled across have thrust a common issue back into my mental space: race.Young Black Professional Guide Race

being in london for the past 6 months has also given me an ‘out-of-body’ experience with reference to how americans are obsessed with race. if you’ve been following the comments on our post and shaquanda’s blog, you’ll see that visitors are coming from all over. a few perplexing comments have been around how ‘others’ do not like america because of their racial obsession. while i no doubt believe race has weight in all parts of the world (read: apartheid and aborigine), the history of america, coupled with images like katrina, amadou diallo, and strom thurmond flow into a concept i was introduced to (and spoke about) in high school: affirmative action for whites.

in certain markets, pbs and california newsreel are running an acclaimed series in the study of race and its illusion. one of the attached articles is an analysis of affirmative action for whites. here a few notes that i wanted to pull out of the article:

  • affirmative action, despite its unpopularity among many privileged white americans, actually originated in the 17th century when european immigrant indentured servants (read: italian, polish, irish) demanded ‘rights’ after enslaved africans replaced them. the outcome was 270 million acres of american indian land ‘handed over’ in the homestead act of 1862.
  • although it still takes money out of my paycheck in 2007 (and everyone else’s for that matter), the social security act of 1932 was written with provisions to exclude agricultural workes and domestic servants. let’s see, who predominantly had those jobs in the 1930’s (and even today): blacks, mexicans, and asians.
  • many know that home ownership is the path to financial independence and wealth. when the federal housing authority (fha) poured $120 billion into the economy between 1932 and 1962 to allow the working class to own homes, 98% went to white families with provisions to allow ‘racially diverse’ neighborhoods as a financial risk.

let’s break that last part down to the numbers so that we can wrap our brains around what that means.

120 billion * .98 = 117.6 billion, or 117.6 for simplicity. as of july 2006, there were 300 million people in the united states, with 82% of those being white. 300 million * .82 = 246 million white people. if you take the 117.6 billion given to them and divide by 30 years, it comes to about $16,000 a year to start owning a home. would anyone here like $16 grand for their first house?

coupled with the entire pbs video series, the idea of race becomes simply an excuse for one set of people to psychologically feel superior to another. the result of this ‘im better than you’ attitude is a mosh pit of insecure adults vying for most superficial advantage that they can get. these same adults run the businesses that make-up our world economy, legislate government that create laws, and police our citizens to enforce these laws. the ‘ten things everyone should know about race‘ reiterate this sentiment.

as a young black professional, the simple answer is to understand this reality and lead a purposeful-driven life to enact change. while the world may not reach the utopia of equality and fundamental logic in our lifetime, the exposure of this reality in 2007 should allow us to see the path still being plotted from ghana to obama.

Young Black Professional Guide White Privilege

when i moved from kansas city to chicago, i was able to find an apartment in the heart of lincoln park, with no money down, new appliances, 700 sq. ft. with hardwood floors for $1000 a month. the complex included a concierge at the front, roof deck, a convienent store in-front of the building, built-in dry cleaners, and across the street from a hospital.

i didn’t use a service. i didn’t sign up for any apartment finding service. while i will admit that being a native of chicago helped, i had never lived in the lincoln park area. so what was my secret tool?

craigslist. Young Black Professional Guide Craigslist

craigslist is a no-frills search engine for classifieds. remember how your parents or grandparents always told you to look in the classified ads of the newspaper to find good deals? craigslist is the web equivalent. no fancy graphics, gimmicks, ads, or sign-up process. it’s just text, links, and a few pictures.

it is these simple characteristics that make craigslist so popular. the first you’ll do when on the website is pick your city. for the newbie, its as simple as <your_city>.craigslist.org. for me, it was chicago.

smack dab in the middle of the page is a category for ‘housing’. [tip 1] decide whether you what type of housing you want. if you sublet an apt, you more than likely will not have to make a downpayment. this is because subletting is like assuming someone’s lease that they have already put a deposit on. in most cases, you’ll have to pass a simple ‘can i afford this place’ background check. sometimes the current tenant (person living there now) wants to recoup their money, so they may ask for a little something. [tip 2] if choosing a sublet, make sure that you can renew the lease once it is up. some of the postings under ’sublet’ are actually just temporary housing for a couple of months because the tenant is going out of town. if you’re planning to stay in the apt, make sure this is not the case.

craigslist does a good job of letting the shopper know to avoid scams. they usually post a general message in bright red and yellow on each post. if something is a scam, it can be flagged and immediately removed. no fuss.

Young Black Professional Guide Craigslist

while the craigslist search isn’t revolutionary, it is simple enough that with a few keywords, it can be manipulated. [tip 3] search by amenities or apartment type. if you’re looking for a loft, type in ‘loft’. i know it sounds straightforward, but sometimes using the amenities as a keyword may open up surrounding areas since most searches start with a particular area in the city. once you find a particular area and get a few of the street names, use those terms as search phrases too. [tip 4] don’t use too many search criteria off-the-bat. sometimes you can get discouraged when you try to type in a key phrase and nothing comes back. browsing through a set of results based off of one criteria may yield some interesting results.

another neat feature of the search is the ‘has image’ checkbox. when checked, this will pull back posts that have images attached to it. sometimes these can be misleading, as a ad agencies add non-descript or their logo to posts since most people like to ’see’ what they’re looking for. [tip 5] don’t necessarily limit your searches to ‘has image’. some of the coolest places don’t have images directly in the post, but have links to a website that has a ton! you may miss it if you filter by this option. [tip 6] no image can replace actually seeing the apartment. your mother always told you not to judge a book by its cover. the same goes for apartment hunting. while a place may look great, do not hesitate to go and check it out in person. talk with the renter. ask questions like ‘why are you moving’ and ‘how friendly is the staff here’. nothing can beat first-hand impressions.

Young Black Professional Guide Craigslist

[tip 7] use the neighborhood search links at the top. most listings will be grouped into parts of the city. this is helpful if you don’t know the city too well, but want to be adventurous. [tip 8] find listings that have been mapped on google. when someone posts a listing, they also need to add the details of where the apartment is. Young Black Professional Guide Craigslistwhen that happens, a link will appear at the bottom of the post directing you to google maps so you can ’see’ where exactly the place is. this is probably one of the better features because from google maps, you can type in ‘restaurants’ or ‘groceries’ from that location and see what is close to address. i can’t tell you how convienent it is to be able to walk across the street to get a half-gallon of milk!

[tip 9] contact the person who placed the ad. craigslist does an excellent job of protecting people’s email address because it assigns a temporary address for people who want to be contacted by potential renters. don’t be afraid to use it! a simple ‘copy’ and ‘paste’ into your favorite email program, i suggest gmail, can get a lot of your queries answered.

[tip 10] be patient. as with any big purchase, being patient about finding a place and getting the best deal go hand-in-hand. if time permits, start perusing a couple of months (i usually go about 4-5 months) before you plan to move. usually, you’ll see the same listings pop-up again and again. this can be used to your advantage since the person is obviously trying to get out of their agreement. when i found my apartment, the guy was willing to pay half of the first month’s rent because he HAD to move.

you’ll notice that craigslist also has many other categories of shopping goodness. don’t be afraid to check out a new table or even car because local businesses post deals there too! here is a link to another craigslist tip on lifehacker.

craigslist: bargain shopping made easy.

Young Black Professional MLK Drive IntersectionHypothetical question for you:

Would you live on MLK Drive?

Is it just me or is it very perplexing that when I’m looking for a new place to live, MLK Drive is not the street I want to be living on. As Black History Month comes to close, I wanted to point out the cnn.com article that proposed this same question.

Historically, MLK Drive symbolizes the divide between affluent neighborhoods and poor neighborhoods. This is a direct parallel with Dr. Martin Luther King, Jr.’s struggle of trying to unite whites and blacks together during the Civil Rights Era. As the article points out, there are many streets in the United States named after the slain civil rights leader. While it is admirable that many of these neighborhoods still hold their symbolism especially in this day of apathetic black mindset, the question still remains. Would you live on MLK Drive? Do you feel that there is anything wrong with that sentiment?

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