CYCLE: "An interval or space of time in which is completed one round of events or phenomena that recur regularly and in the same sequence." 

Hedge fund titan John Paulson sees a housing cycle right now, and is very bullish. "It's more or less seven years - seven years up, seven years down. I think we are just at the beginning of the recovery. I would expect the recovery to continue for at least the next four, possibly seven, years."

In Southern California, where I live, the counties here have seen an average 28.3% jump in sales prices since June 2012. Research firm Data Quick says this is the biggest increase on record since they began tracking prices in 1989.

Others see a cooling. Redfin.com reports that investors are tired of bumping heads with regular home buyers, and believe this will cause a chill in the 2nd half of this year. The USC Lusk Center for Real Estate claims "potential home buyers aren't seeing their personal incomes grow enough to support such eye popping home price gains in the long run. This has just got to stop pretty soon, and I think the fall is probably when it will happen," said Director Richard Green. "People shouldn't expect this to continue for very long. If that is the basis they are buying on - they shouldn't."

Meanwhile, the iconic office building at One Wilshire Boulevard in downtown Los Angeles just sold for a record $437.5 million! Why? The building has become one of the world's top three telecommunications centers, with billions of phone calls, emails and internet pages passing thru One Wilshire every week.It's value comes because it is the primary terminus for major fiber-optic cable routes between Asia and North America - you can't reproduce the connectivity.

                  Hedge Funds and Owner Carryback

Clint Hinman, a long time note buyer, sees the current market this way: "A good chunk of the investor money buying up houses comes from hedge funds with a certain "life." In other words, the hedge funds' investors expect to be repaid at some point. So, somewhere down the road( 3 years, 5 years, etc.), the hedge funds will need to liquidate their assets and pay back their investors' principal."

  Many of these homes are occupied by renters, who eventually will rebuild their credit and cash reserves. They will want to buy a home.

If lending is still tight and "locking out" many of these people, how will these renters become buyers? How will the hedge funds generate the cash needed to repay their investors?

Hinman sees a surge in seller financing as a perfect vehicle for renters to buy homes. And, the funds' investors can be paid back by these notes being sold to folks like Clint and me and others in the note buying business.

Just another way of completing a cycle and getting cash into the hands of people and our economy.

                                               **

"I don't know anything about music. In my line of work, you don't have to."  Elvis Presley.

                  Flippers Return to the Housing Market

Property Radar reports that flipping has reached the highest point since 2005, with my state, California, of course leading the way because of our steep price gains.

There is a big difference, though, from the pre crash days. Back then, first time investors purchased with no down payment with hope of making a quick buck. Today, investors pay cash and focus on short sales and foreclosures.

See the comments in Cycle above. Can you figure out how this will all play out?

                            Big Time Discount

The Boston Globe is a revered East Coast newspaper, 141 years old.

In 1993 the New York Times paid $1.1 billion for the paper and its rich history.

John Henry, owner of the Boston Red Sox, just bought the Globe for $70 million dollars.

That's right, from $1.1 billion to $70 million.

Please remember this transaction when we are discussing the discount on YOUR note!!

                                       **

Eighty percent of English words are not spelled phonetically. That is, they are not written as they sound.  Tidbits.com

( Wonder why foreigners struggle with our language?)

                                       **

                 Citigroup Sees Refinancing Slow Down

Big banks are worried that homeowners are backing off the refinancing boom that's driven their earnings for the last year.

Citigroup joned JP Morgan Chase and Wells Fargo in reporting a slowdown in its refi business for the 2nd quarter. The firms report rising interest rates as the culprit.

Citigroup said its profit jumped 42% in the 2nd quarter compared with a year earlier.

The Fed monetary stimulus program. scheduled to scale back at the end of the year, has been pushing down interest rates in an effort to encourage consumer borrowing and spending.

                                          **

                            What Do You Think?

If you have any ideas how this Newsletter can be better, please let me know.

If you know anyone who might enjoy this Newsletter, please pass it on.

If you have questions about how to construct a note, call me.

If you think you may want to sell a note, but you are not sure, and just want someone to talk to, call me.

Thanks for reading!

CA Broker # 01915404