First, a bit of background:  Small businesses account for over half of the employment in the United States.  This will become profoundly relevant in just a moment.

The commercial real estate market in America is in a bad, bad position.  According to the Congressional Oversight Panel for TARP (the government’s rescue program for big banks and financial firms):

Over the next few years, a wave of commercial real estate loan failures could threaten America‘s already-weakened financial system. The Congressional Oversight Panel is deeply concerned that commercial loan losses could jeopardize the stability of many banks, particularly the nation‘s mid-size and smaller banks, and that as the damage spreads beyond individual banks that it will contribute to prolonged weakness throughout the economy.

While this sounds bad, it doesn’t really specify how big this “wave” of commercial real estate loan failures could be.  Unfortunately, the answer to that doesn’t make things look any better.  This morning on CNBC, Elizabeth Warren, the chair of the Congressional Oversight Panel for TARP, said:

We’re looking at a situation where about half of all commercial real estate loans are going to be underwater by the end of this year, and that is going to have a direct impact on about 3,000 community banks, or about 40 percent of our entire banking system.

HALF of all commercial loans will be under water by year’s end?  That’s simply astounding.  By comparison, the residential real estate market is in the worst shape it’s been in for many decades, and in the residential market, “only” about 21% of residential properties are currently under water.

But the real story here is how the commercial real estate debacle will affect the health of our nation’s small businesses.  Here’s the connection:

According to Warren, half of commercial real estate loans will be underwater by the end of the year.  She also tells us that a disproportionate number of both commercial real estate loans and small business loans are made by community banks.  Therefore, drastic increases in commercial loan losses lead to greater financial trouble for community banks which leads to fewer and smaller small business loans.

Small businesses, as we established at the beginning, account for over half of all jobs in the United States.  As continued funding becomes unavailable to these companies, rising unemployment becomes an even greater risk.

So as strange as it seems, problems in the commercial real estate market could have a material impact on the real economy for “normal” Americans - investors or otherwise.  And that’s a big deal.

Thanks for reading http://realestate.BryanEllis.com!

RealtyTrac tells us that foreclosures fell in January compared to December.  Good news?  Not so fast…

For several years, January foreclosures have been lower than December, so this is not necessarily an indicator of a reversal in the foreclosure problem in America.  Furthermore, January’s foreclosure rate was 15% lower than it was last January, which is simply astounding and not a positive indicator.

Along with that news, Zillow tells us that a little more than 1 of every 5 homes in the United States is currently “under water” (debt is greater than property value leading to negative equity).  These types of properties have a high probability of increasing the foreclosure problem in the immediate future.

Still, I believe optimism is in order.  Not because of foreclosure rates (which are still horrible) or unemployment statistics (which are abysmal) or government policies (which are utterly laughable)…

…but because of you and other individuals like you.  America is successful economically BECAUSE of all of the “little people” out there - just like you and me.  Fundamentally, it’s all about your focus - do you have a clear idea of what you want to accomplish financially?  Remember - times are tough right now, but they won’t be tough forever.  This difficulty might be the biggest opportunity you have ever had.

One of the things that I’m focused on is providing information to my subscribers (if you’re not on my email list yet, please use the space in the right side of this page) to both inform and encourage them.  There’s a lot of news that reflects poorly on the state of our economy - but that doesn’t have to be the same thing as “bad news” for you.  In fact - it shouldn’t.

It’s a great time to be alive, and a great time to be an American.  The future is bright!

Thanks for reading http://realestate.BryanEllis.com - and feel free to leave your comments or other words of encouragement for your fellow investors in the space below.

Stan Humphries, chief economist at Zillow.com, has published his latest analysis of the U.S. housing market, and it tells the same story that every reasonable person could anticipate:  The government’s efforts to “prop up” the U.S. real estate market has fallen flat and many real estate markets across the United States appear poised for a double-dip in home values.

Nationally, Humphries says that U.S. real estate declined by another 5% in 2009, with some markets - like Las Vegas, Nevada - doing much, much worse.

And in a sign of the times - the Mortgage Banker’s Association lost it’s Washington headquarters to a short sale at discount of $37.7 million to their purchase price of $79 million (according to TheStreet.com).  Doesn’t it strike you as quite odd that the organization whose purpose is to “represent the real estate finance industry” couldn’t see the writing on the wall for itself?

I don’t know if this is funny or really scary.  In some sick sort of way, I believe it’s the former.  Another case of “pride coming before the fall”?

Thanks for reading http://realestate.BryanEllis.com - check back frequently for more great updates and news items of value to real estate investors.  Your comments are welcomed below!

I’ve been thinking a lot about the core beliefs of serious real estate investors.  By “core beliefs”, I mean the fundamental truths about our business that are plain, clear and undeniable to the wise among us.

I’d love to have your thoughts about “core beliefs”.  Here are a *few* (I have many more ideas) of the core beliefs that may serve as good examples for you:

• I believe real estate investing is the surest way to achieve long-term, generational wealth
• I seek to establish transactions that are positive for all parties involved, even though the benefits may not accrue immediately to each party
• I seek financial independence and abhor the excessive involvement of government in my personal and professional life
• I believe that my biggest impact on my community can be had by realizing the greatest profits possible within the constraints of morality and ethics so that I can give back to my community in the manner that most resonates with my own inner guidance
• I reject the notion that virtue or praiseworthiness are achieved by being a financial failure

There are many more such thoughts I have in mind… my objective is to come up with something of a “Real Estate Investor’s Creed” to keep in mind as I further my own business, and to share it with you for your benefit as well.

So:  What other core beliefs/values should be a part of the serious real estate investor’s daily thoughts?  Please enter your suggestions in the comments area below - and thank you for reading http://realestate.BryanEllis.com!

Lately I’ve been quiet - too quiet - about all the news out of Washington, and its impact on real estate investors.  Nobody else is telling you how all of this will effect you as investors, so I guess that job falls to me again.

You really need to understand what’s going on, and the real effect it will have on you.  Here are a few examples:

• Unemployment -  Fewer jobs directly translates into two huge problems:  More foreclosures, and more people who are motivated to sell their homes.  Both of these things directly result in lower real estate values and thus negatively impacts your potential to be a success in the real estate investing business.  High unemployment means lower opportunity for real estate investors.

• Higher Taxes - The Obama administration has proposed an array of new taxes in the budget they proposed earlier this week, and the effects will be very bad.  Higher taxes mean less disposable income for “average” Americans who would normally be your tenants and buyers, but currently can’t afford to do so.  Even more importantly, higher taxes mean less money in the hands of the very people who can do the most to reduce the epidemic of unemployment in America - small business owners.  Every additional dollar in taxes paid by small business owners is another dollar that can not be used to create new jobs.

• Capital Availability - During the state of the union address, Obama trumpeted his call for giving $30 billion to smaller banks to fund small business loans.  But this ignores the fundamental problem:  Small business owners (like me and maybe you too) can’t afford the risk of taking on more debt in the current environment, because this administration’s activist economic policies have been pushed so quickly and to such extremes that it’s impossible for us to make an informed analysis about the state of the economy at any time in the near future.  The problem is not that there is no money to borrow, and it is not that interest rates are too high (they’re not).  The problem is that small business owners have every reason to fear that Obama’s policies will do the same thing to our economy that Carter’s did.  Obama is trying very hard to change the rules of our economy - such as by taking over car companies and directly controlling the amount of money being paid to employees of other private companies - and this makes it a very scary and confusing environment in which to operate for small business owners.  And few small business owners are going to be willing to take on the burden of greater debt in an environment in which the “rules” are being shifted by the government on what seems to be a daily basis.

Remember, my friend:  You must begin to think of yourself as a BUSINESS OWNER rather than an individual.  Regardless of whether your real estate business is a corporation, LLC or even a sole proprietorship, you are in business for yourself, and thus YOU are the target of the socialist policies Obama is pushing.  It doesn’t even matter if you’ve not yet completed your first real estate transaction:  You are still a business person whose future prosperity will, to a large degree, be caught in the crossfire of the foolish economic policies being pushed upon us right now.

It’s time to stand up and claim the rights we have as Americans.  Forget about party affiliations or any of the labels that are so casually thrown around.  The issue we face at present is that Obama (who is a serious left-wing radical and is neither a Democrat nor Republican if judged by historical standards) has absolutely no regard for the way his policies effect regular Americans.  He talks a good line… and then attacks us all in the policies he endorses.

Don’t ignore the news you hear each day.  There’s a good reason that a recent Bloomberg survey found that an overwhelming number of investors (77%) consider Obama to be opposed to the interests of business people.  And you are a business person, regardless of whether you’re just getting started on the road to real estate success, or if you’ve been in the game for years.

This is no longer about Obama.  He’s clearly demonstrated that he’s in way over his head.  This is about you and me as Americans, and demanding that the government begin to treat us with respect.  We’re just not going to take their garbage any more.  We can’t afford to.

Your comments and thoughts are welcomed below.  Thank you for reading http://realestate.BryanEllis.com.