U.S Housing - Just Walk Away...

Well if you’re in the market for a house in Las Vegas or Miami they all just went on sale for 28% off. I’m not suggesting that they’re good value, just cheaper than they were. Compared with the previous year house prices in both Las Vegas and Miami dropped a whopping 28% last month. These markets sagged a full 12% lower than the national average, which saw declines of approximately 16%. With declines like these it is no wonder that the delinquency rate is rising. In many markets it’s now cheaper and faster to simply default on your mortgage and walk away from the house than it would be to pay off an inflated mortgage. In the amount of time it would take to pay off the value that you’ve lost on your home you could have saved enough money for another house and rebuilt your credit. For example, if you purchased a house last year in Las Vegas or Miami for $350,000 you would now be down a whopping $98,000 in equity. At that point the only financially responsible thing to do would be to default on your mortgage. Why not just walk away?

U.S Housing

Ok so Buffet and many other deep value investors are starting to re-enter the housing market and some of you want to go against the herd and follow Buffets lead (and why wouldn’t you Buffet is the most successful investor of all time)...but which housing companies are going to survive? Which are going to fail? Which are going to thrive? There are some great companies out there that are certainly going to survive ie- HOME DEPOT, LOWES etc…However, are those companies going to thrive? What about builders? Which ones are going to continue to thrive? If you’re like everyone else out there you don’t know the answer to those questions (and neither do I). However, if you’re confident in the sector but not necessarily in the individual names of the sector you might want to check out the SPDR Homebuilders ETF.

“The SPDR Homebuilders ETF seeks to replicate as closely as possible, before expenses, the performance of an index derived from the homebuilding segment of a U.S. total market composite index. The Fund uses a passive management strategy designed to track the total return performance of the S&P Homebuilders Select Industry Index (the "Homebuilders Index" or the "Index"). The Homebuilders Index represents the homebuilding sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks regularly traded on the NYSE, American Stock Exchange, NASDAQ National Market and NASDAQ Small Cap exchanges (except Berkshire Hathaway). The Homebuilders Index is an equal weighted market cap index.”

The above description was taken from the American Stock Exchange

Year to date XHB is has already fallen 42.56%. Here are the top 10 holdings.

Home Depot - 4.44%
Lowes - 4.33%
Sherwin Williams - 4.75%
Mohawk Inds Inc - 4.99%
D R Horton Inc - 4.45%
Pulte Homes Inc - 4.62%
Toll Brothers Inc - 5.38%
Leggett & Platt Inc - 4.73%
Lennar Corp - 4.68%

It’s currently trading at almost exactly it’s net asset value.

(Disclaimer: As always please do your own research before making any purchases.)

Time to Get Back Into Housing? Buffet Thinks So

The U.S. housing sector is a mess, everyone’s waiting for the next shoe to drop in the whole sub prime fiasco and all the analysts are advising clients to avoid the sector. You’d have to be crazy to invest in the U.S housing sector right now… right? Well maybe not, last month Warren Buffet raised $750 million through a debt offering for Clayton Homes, which “builds, sells, finances, leases, and insures manufactured and modular homes as well as re-locatable commercial and educational buildings.”

Other successful investors initiating positions in the housing market include:
Robert Robotti
Robert Rodriguez

Home Renovations Update III

I thought I’d take a break from the “Investing Based on Demographics” theme for a day to give a quick update on my home renovations (as a couple of people have emailed me wondering how they're progressing). Basically, I haven’t really done much since my last update in July. However, this weekend I primed and applied the first two coats of melamine paint to our outdated kitchen cabinet doors. Three more coats will result in us having updated, new looking kitchen cabinets. The total cost for this project will be:

Melamine Paint: $80
New Hardware: $110 (estimate)

By simply painting our existing cabinets I’ve essentially saved 1 to 2 thousand dollars, as that’s what it would cost to replace the kitchen cabinet doors with brand new ones. As I’ve already spent $880 on home updates this will bring my total spent to $1070 leaving me $930 to spend on the remaining fix ups.

Renovations Update – II

I made some significant progress in my house renovations over the last 4 days. I primed and painted almost the entire interior of the house. Here are the approximate costs of the work:

–paint and primer (cost $210)
-beer for helpers ($175)
-food for helpers ($20)
-brushes and trays ($45)
-plaster for areas damaged by wallpaper/trim removal ($5)
-misc ($10)

TOTAL: $465 (leaves me $1120 in my renovations budget)

In my opinion the painting is by far the best "bang for my buck" and will have the greatest return once I sell the house.

Items Remaining:
-Aesthetic work to 2nd bathroom
-Painting front door
-Painting trim
-Replacing kitchen counter tops(?)
-Replace receptacle, switches + plates
-Clean/scrub garage
-Paint Kitchen cabinets

Home Renovation Update

Last week I wrote about some home renovations that I plan on doing prior to selling, here’s the update:
•Stained the deck (approx cost $15)
•Removed kitchen cabinet doors and filled in holes (approx cost $0)
•Replaced bathroom vanity, sink, faucet and moved plumbing (approx cost $400)

This week I plan on:
•Filling some holes in the bathroom drywall that were created as a result of removing porcelain inlayed toilet paper rolls and towel holders.
•Painting the removed kitchen cabinets

Total spent on the renovation so far:$415. This leaves me with $1585 remaining in my budget.

Home Renovations

I’ve recently been doing some renovations to my home in an attempt to increase its value before I sell later this year. I’ve budgeted $2000 to complete my “home makeover” and I’ll be doing all the work myself. I’ve done some reading on which areas of the house provide the most bang for your buck and as the literature suggests I’ll be concentrating most of my efforts on the kitchen and bathrooms but will be spending some time and money on the rest of the house as well. Here is a list of what I plan on doing:

1. Paint dated cabinets in the kitchen
2. Move and replace handles in kitchen
3. Remove wallpaper in kitchen
4. Replace kitchen counter tops
5. Tile a kitchen backsplash
6. Replace damaged trim around door in 3 rooms(dog scratched up)
7. Replace bathroom vanity, sink, faucet, mirror and
8. Stain back deck
9. Clean garage
10. Re-insulate garage door
11. Paint from deck
12. Paint entire interior of the house