All right we're back and that we are around and apple are discussion about five things to watch in housing in 2014. And remember coming up. We're gonna talk about that second home you're thinking of buying and not activity in the second home sector and if you're thinking of prep may be buying that second home abroad though we've got six. The locations you may want to consider that you can get on the she. Brett Craig he doesn't fourteen currents and beyond and we've covered a few things folks were enacted a recap at this point for the economy of time that we're up against your butt. Number for the list. What to watch for -- doesn't fourteen number four what oil investors do -- their homes this is something to keep an eye on. A handful of institutional investors have purchased tens of thousands of homes that are currently being in and out. Or they hope so anyway these homes tend to be concentrated if you the regions that have been hardest hit by foreclosure over the past five years. So investors -- did the investor purchases played obviously the key role in the stabilization. Of the prices in the general market where those homes may be. So. Because there will open up homes at a time of supplies rarity dwindling. That's going to be obviously something that would make you think that those markets would be fairly state were strong. The key question now what's gonna happen if the initial rested -- subsides because is that kind of cools off a little bit you've got these people holding lots of homes there are gimme more renters in the market in the world before. But more lenders and investors are extending debt financing to some of these property owners which should help boost the returns as well. So -- -- perfect the expense management associated with maintaining and -- tens of thousands of individual homes -- remains to be seen. Mark what -- think the some of these guys have gone into you so these companies. Or individual investors but big time investors who bought. Dozens if not hundreds of homes some cases thousands of homes. In certain concentrated areas for the purpose of bringing him out. It obviously did stabilize home prices in general but they bought it low low prices anyway so it's not like they. Boosted a huge. Recovered for home prices but what do you think happens in 2014 though these. All the inventoried and that's owned. That was to be leased out well most of it is a good percentage I'm sure is leased out Tom and do we've seen there's no. Data that I've seen yet that leasing rate rental rates are are are dropping by -- I can tell you. I'm I'm gonna bet that for a Q3 Q4 of 2014 -- national average. Definitely rental rates will stabilize and possibly start to change the other direction. Because there are so many -- saw such. An increase. In the purchase and the the supply availability of rental properties. That is just a natural phenomena then there's less housing inventory for purchase on we're seeing the demand shift more more demand for purchases the economy stabilized. As sound as as housing and stabilize the starting move back the other direction. Lot of people sat on the sideline prudently young first time homebuyers going gosh. I want to buy now while looks like housing is gonna continue to go down into perpetuity. So now that's new in the other direction you're seeing a big increase in those first time homebuyers jumping back into the game -- so. To number five folks -- in this list. -- housing hit that tipping point for affordability because you know what. Right now homes I would say still are tipping -- leaning toward the side of affordability it would take too much more movement for that to change especially because. Even though people the seed in the numbers reported on the national news each evening inflation is that they are folks in it is more expensive to live today's it was a couple years ago. So as it costs more more way to buy groceries. Pay for -- the gas in your gas tank and all that kind of stuff. It's also gonna make it harder to afford a home as the prices of homes go up for the cost of retreats and things like that. I gotta finish this we don't appreciate you station you know class right folks we get a job bid -- grim data Minneapolis Minnesota called the toll free hotline with a following I have to go to my house my first mortgages -- seven -- With a balance of a 192000. Dollars and 26 years left. My second is it 33000. And is only 3.5 percent now but will be going up eventually. I think my house is worth 250 to 200000. Dollars or so and I have no plans to move. -- refi or not. This was a tight when Imus say go as an attempt to refinance. However. -- equity situation -- in the first and second mortgage depending on whether that's a purchase money second that she took out when she bought the home were she to overcome all odds they're ago. Tried -- giants try she's probably you know huh. Watch out for any goofy weird stuff just look at -- solid twenty year maybe 25 or thirty year fixed rate mortgage okay all right jump and back to an already you saint 2014 housing. All right so bottom line folks with with where we're -- with the affordability he -- a thing. -- specially the coastal markets San Francisco Los angels some of that test if we saw some incredible. Housing price rebounds. So the price of those homes going up makes it far less affordable for people who buy them but it also reduces foreclosure is now they've got more equity to -- stronger equity position. But here we go I mean you look at 30% increases in some like areas of Los Angeles that big increase median house price jumped way up. It's a good thing if purity in that home he's got more equity and at home not necessarily good thing if you're looking to buy a home. Where is it tipping point that we will seat but as we see inflation rear its ugly head and is in general gets more more expensive to live. House prices going up too much will cause on the go the other direction and we'll see him start to go back down watch for that. See with the trends are that we'll help you make your decision if you should hold or by. In 2014. All right folks okay so let's talk about the lessons learned it from the housing bubble which I think cracked with talk about lessons learned we always wanna learn lessons. From bad things in the housing bubble is one of those deals and get things as it goes over number five there analysts -- talk about the -- tipping point theory can get to the point we're not only does it -- but it burst once again there are some authorities some experts out there that see that happening in 2015. I don't know. If I would say that we have a bubble brewing. But let's talk about just in case folks to prepare you the main thing here is. Is it a bubble well. For it to be a bubble I think you have to have a serious. -- access to credit. People buying homes they shouldn't be buying homes all over again that are gonna we'll stay in his home to sustain I'll see that happening -- now about it. But we're gonna talk about -- that first in 200678. And may be a little bit of bubbles still versed in 2009. And we come back. We'll play what we think you should have learned from like joining stay tuned. Our folks we are back -- life as you -- Mark. You get around with this ball here we're talking about five lessons learned. What should -- what should at least our listeners. Which -- they've learned but more importantly what can we remind them about because I think lessons that we learned sometimes forgotten after 45 years in the incident like. The -- heard around the world so the burst around the world that's right folks so like yourself and you've heard -- discuss these over the last. Five years is the reality is we began to show. Right in the middle of what we call the after the bubble had burst -- my right the trek atrium and the community here so I'm not so we want to take our show now for just over five years. Right five on five. -- Have you the math means a bigger in the show since like what 19727676. Something like that OK so last since the latter since the end of 2008. Thanksgiving of 2008 the exact. Annika first show was just the -- Thanksgiving 2008 ever think of where we are thankful. -- folks so one housing bubble bust lessons lesson number one. Adjuster expectations. Years ago people purchased a home lifted at most their lives and probably considered -- passing it on to their children. There were more modest homes people that not everyone didn't have their own bedroom in their own bathroom at the age of two -- may be at birth. And they didn't have. Square footage that's often times would probably be decisive most school house's. Come back then that today a 3504000. Square foot house is not unique. So number one is make sure is -- the lesson you learn as adjust expectations what do you need to put the roof over the head. Would it over your head what is going to sustain in creating happy family life. For you is it. What we called in the mansion or is it a comfortable. Cozy little place where you can call home make -- round and raise your family he choose to do so number two. OK so we all fancy ourselves as fantastic investors especially when we buy something. As it's going up and then we may sell it as it's still going up. And -- what is that well that's called may be participating at the right time be a little bit lucky. I'm not necessarily be imprudent. On and so don't think that you can time the market and this applies to interest rates despite any investment in life may treat got a strategy. That it makes made some sense for you. Whether that market goes the other direction. Or whether it continues on his trajectory -- do not assume you do as an individual can outsmart the market number three is. Do not this is something Craig and I've been passionate about since we began in the business so for Craig 27 years ago and for me just over ten years ago on the -- so folks don't use your home. Like it's a piggy bank. What is diversification. Well it's not having all your money in one place if you to a fifteen year mortgage. Pay off that house and you have a 200000 dollar house -- -- nothing on it and you don't have a sizable. And equal or. Let's say. Three times as much money. 200 and retire one retirement plan 200 in the market it's satirist you don't have those you're not diversified. You'll weighed heavy and real estate what happens. While look at the bust look at the boom look at the bubble you concede that your values. Your real network went down significantly in many of the -- -- lost your house who got that the -- in effect that would. National historic event another should you steer she'd get us here right in the middle of -- get mom a little geo locate Craig. We have by Gerard in Houston Texas you know the following him. Hello I have a duplex that live and on one lived in one side and my cousin lives in the other yet it. -- rate is five and -- -- and thirty year loan -- 153000. On one loan covering both units I think it's worth about 200010 refinance as my primary residence or what they called a real property. Should I -- the question drugs. Go baby -- that things get out of there you you're our money you can say assuming they're gonna -- as your primary residence if you do indeed live in one side of it. So it doesn't matter that your reading the other that's a primary residence -- to -- unit -- -- -- it up for a clear plan for loan but yes your -- your gonna -- save some bucks get that thing -- watch those closing costs and fees though. Try to you know cost loan or try to get -- very low cost loan. That's the key to making sure you -- we get a return on that. Refinance investment in tennis say that the piggy bank part of the talk about the lessons learned in 2000 in in in the boom from will say. 2000. Early two thousands up -- 20062007. And in the subsequent bust. Is that. People borrowed from their equity in their home to pay off credit cards. The equity continue to go up they continue to not change their patterns of spending. Ran up more credit cards they went back to that natural account that it gone up in value previously they -- again through the form of -- home equity to pay half credit cards. Then they went back again possibly many times three and four times over 567 year period because it kept going up in value. The bust happened whenever they went back and then realized oh. I can't pull cash out to now catch up on these other things now the overall bills became so much that they -- financial turmoil and stop making their housing payment. Stop making credit card payments it's better. So folks that's the lesson we learned live conservatively. Live as if you got a plan that extends beyond. The most recent depreciation numbers on your home all right number for your own research don't listen the real true that tells you necessarily home values will go on dip into perpetuity shows yet. Appreciation factors that are possibly in the double digits don't listen the mortgage person that says oh my gosh you need to buy now because you're gonna make so much money when you go to sell a house. Do your research look at historical timeline but always consider that this investment may go down in value and where you going to stand and and last is I think long term financing. Often if if you can't afford the house Obama on a thirty year or even afford it on -- fifteen year mortgage. Then you shouldn't be doing the home loan. In other words if you've got to do an arm. To be able to off for the mortgages at lower rate -- -- things that will adjust up or if you did in the interest or he didn't interest only loan heaven forbid and that's the only way you could afford the home. Fail. Don't do it we've learned that lesson. And we're -- and repeated OK well maybe we are one day but we're telling -- your listeners -- you're not gonna you know better are right when we come back we're gonna talk second home. -- A lot of ambient purchased and maybe you should be one of those people considering it. Like John.