A growing number of Chinese are joining tours organized especially for investors who want to take advantage of slumping U.S. real estate prices amid a financial crisis. While China’s ultra-rich have been buying property in the U.S. for years, the buying tours are new, made attractive by still-rising Chinese income levels and American real estate prices that have been falling for two and a half years.

More than 100 Chinese buyers have joined such tours since late 2008. The home-buying opportunities mirror a larger trend. Cash-rich Chinese companies are looking to buy resources made suddenly cheaper by the downturn or companies suffering under the global debt meltdown.

China had the world’s fifth-largest population of millionaires in 2008 with 391,000, up 20 percent from the previous year. Chinese buyers are looking at both commercial property and homes to rent out or use on business trips. And the U.S. has plenty of unsold homes to offer — 3.67 million as of the end of December.

A good percentage of second homeowners fall into the retirement age demographic, and quite a few of them have at one time or another kicked around the idea of selling their primary residence and moving into that beachfront condo or mountain chalet full-time. But there are six reasons why you might consider renting your vacation home instead.

1.  Income from renting is better than foreclosure. According to government data, close to 40%, and perhaps as many as 50%, of the foreclosures in 2007 were of nonowner-occupied homes, which generally means vacation homes. S&P Chief Economist David Wyss expects this trend to continue into 2008 and 2009, pointing out that it’s psychologically easier for people to skip payments on a secondary home.

2.  Circumstances have changed since you made your retirement plans. Maybe grandchildren have arrived on the scene and you can’t bear the thought of moving hundreds of miles away from them. Regardless of specifics, your life bears no resemblance to what you thought it would be when you made your retirement plans.

3.  You’ve suddenly realized there’s no place like home. You’ve decided you like being near your friends, you don’t want to leave your church. Or perhaps you’d like to stay in your hometown most of the year (you kind of like the change of seasons) and spend the bitterest winter months in your beachfront condo. Renting your second home out during the time you are not staying there makes it financially feasible to keep both homes. Traditionally, many retirees would sell the home they lived in for 40 years, downsize to a smaller house or apartment, and split their time between that home and their vacation place in.

4.  You’ve decided to “retire” from retirement. It is not unusual for people to test-drive retirement and find that it’s just not for them. Work can provide many rich rewards—structure, social interaction, mental stimulation, and a sense of purpose—that people keenly miss when they retire. And when they discover that quitting the rat race isn’t quite what they thought it would be, more and more people are opting to return to the workplace. And (let’s be honest), sometimes people simply can’t afford to retire.

5.  Your fixed income hasn’t kept up with your lifestyle. Even when you’re happy to give up the daily grind of your job, losing the paycheck that comes with it can be pretty painful. Factor in inflation, rising taxes, and unexpected new expenses, and you may find that what seemed like a manageable cost of living five years ago doesn’t seem that way anymore. Your second home, even if it’s paid for, may start looking like a liability due to property taxes, homeowner’s association dues, and maintenance costs. 

6.  You’re currently renting your vacation home through a property management company, but you’d like to make more money. Ditching the middleman may be the way to go. Property managers simply charge a hefty fee for their services. In fact, you have to rent 10 more weeks with a management company to end up with the same amount of money you’d make renting by owner.

People who try renting by owner often end up liking it so much that they pour their earnings into another vacation home. a recent survey by the National Association of Realtors found that some 55% of vacation homebuyers said they were likely to purchase another property within two years.

The development of real estate in China has good prospects in the long run despite the sluggish demand. Amid an estimated continuous urbanization drive in China, more people may move to cities in the next decade and more, creating increasing demand for houses.

Statistics show that real estate investment accounted for nearly 20% of the total investment in fixed assets last year, driven up by about 5% as against 2000

Real estate investment increased by more than 30% between January and July this year, despite the shrinking housing demand since the second half of last year. The country’s real estate developers, which experienced huge profits in the past decade, sold out about 260 million square meters of houses in the first six months this year.

Apparently, the British are eyeing the East as well.

‘It’s like a great hotel suite.’ 

New York-style luxury high-rise lifestyle is creeping into the wealthiest echelons, fed by trends like people looking to own more than one home, foreigners drawn by the weak dollar to invest in Los Angeles. For 2006 and 2007 in Los Angeles County, condos sold better than single family homes, even as the market was dipping, real estate data shows, although sales above $5 million are still few.

Los Angeles is becoming a more vertical area at all income levels as land for development becomes less plentiful and traffic congestion, and now high gas prices, steer more people to cluster around mass transit stations and more community-like sections

Competing to lure the ultra rich out of their grand homes and compounds is a new generation of high-end high-rises, with hundreds of units already under construction or planned that promise a higher level of services and more square footage than the typical luxury condo here, which usually sold for under $10 million.

Subprime was the tip of the iceberg. Prime will be far bigger in its impact.

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building. Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12% in April from a year earlier. Defaults are likely to accelerate because many homeowners’ monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks tighten their lending standards, making it harder for people to refinance loans or sell their homes.

What will sting borrowers more than rising interest rates, analysts say, is having to pay interest and principal every month after spending several years paying only interest or sometimes even less than that. Now, some borrowers could see their payments jump 50% or more, and they may not be able to sell their properties for as much as they owe.

Many borrowers who got these loans during the boom had good credit scores, but many of them owe more than their homes are worth. Analysts believe that many will not be able to or want to make higher payments.

Farmland is an investment, not a trade.  A lot of people don’t know it, but one of the most crazy speculative bubbles in the late 20’s was Farmland. Bankers and lawyers, doctors and ministers left their offices and clients and drove pell mell over the country to procure options and contracts upon this farm and that, paying a few hundred dollars down and expecting to sell the rights before the following March brought settlement day.

Everyone then maintained that there was only a little land as fertile as the fields of Mississippi, Illinois, Iowa and Minnesota and everyone sought to get his part before it was all gone. Like gold, it was limited in extent and of great potential value. Prices skyrocketed from $100 to $250 and $400 per acre without regard to the producing power of the land.

Mukesh Ambani’s $2 Billion Home

The 27 storey skyscraper being built in Mumbai by Mukesh Ambani, the richest person in India, could be the world’s largest and costliest home with a price-tag nearing two billion dollar, according to Forbes magazine.

When the Ambani residence is finished in January, completing a four-year process, it will be 550 feet high with 4,00,000 square feet of interior space. Mukesh Ambani was ranked as the fifth richest person in the world with a net worth of 43 billion dollars.  Ambani heads India’s most valuable firm Reliance Industries, an oil and petrochemicals giant.

Atop six stories of parking lots, Antilla’s living quarters begin at a lobby with nine elevators, as well as several storage rooms and lounges. Down dual stairways with silver-covered railings is a large ballroom with 80% of its ceiling covered in crystal chandeliers. The report said that Ambanis plan to use the residence occasionally for corporate entertainment also and they want its interiors to have a “distinctly Indian” look and feel. To get an idea of which floor is for what, click here.

Accelerating Price Declines in Most Big Cities

A Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone.

At the same time, the price decline implies an incredibly rapid loss of wealth. In real terms, the rate of price decline in the 20-city index would imply a loss of almost $6 trillion in real housing wealth over the course of the year, an average of $85,000 per homeowner. The only time that many Americans have lost that much wealth in a short period of time would have been during the Great Depression.

The number of California homes lost to foreclosure in the first quarter surged 327% from year-ago levels — reaching an average of more than 500 foreclosures per day.

The Result: 517 foreclosures every day in the first quarter of 2008. The main factor behind this foreclosure surge remains the decline in home values. Additionally, a lot of the ‘loans-gone-wild’ activity happened in late 2005 and 2006 and that’s working its way through the system. The big ‘if’ right now is whether or not the economy is in recession. If it is, the foreclosure problem could spread beyond the current categories of dicey mortgages, and into mainstream home loans.

Greed does terrible things. People going through foreclosure don’t deserve any kind of sympathy. They should’ve read the fine print. Too many people living above their means to impress the guy next door who is also sinking.

To some, Larry Ellison’s $200 million reproduction 16th-century Japanese emperor’s estate in the hills above Silicon Valley sums up everything wrong with America’s out-of-control real estate market. Imagine how upset Ellison’s critics became this week when they found out that the the world’s 14th-wealthiest person had negotiated a 60% tax break on his property. As a result, his local assessor’s office is sending the 63-year old $3 million.

Ellison won the tax break by essentially arguing that he had squandered money on Larryland, and would never be able to get his investment back. Ellison said that the property had suffered from “significant functional obsolescence” and was therefore worth $64.7 million, not the $166.3 million on record (substantially less than the $200 million it cost to build).

Larry’s 23-acre Japanese emperor estate property ended up featuring a 2.3-acre man-made lake filled with drinkable water, 2,000 tons of imported Chinese granite, a waterfall with a built-in fog machine and an on/off switch, several miles of underground tunnels for domestic staff, a 30-ton boulder in the master bedroom shower, and a replica 16th-century bridge that was built by craftsmen in China.

Acknowledging A Loss Is The Most Difficult Thing To Do

Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back. To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures.

Such tactics are impeding efforts by policy makers to help struggling homeowners get easier terms on their mortgages and stem the rising tide of foreclosures. But at a time when each day seems to bring more bad news for the financial industry, lenders defend the hard-nosed maneuvers as a way to keep their own losses from deepening.

When borrowers default on their mortgages, lenders foreclose and sell the homes to recoup their money. But when homes sell for less than the value of their mortgages and home equity loans (a situation known as a short sale) lenders with first liens must be compensated fully before holders of second or third liens get a dime. In places like California, Nevada, Arizona and Florida, where home prices have fallen significantly, second-lien holders can be left with little or nothing once first mortgages are paid.

People with weak, or subprime, credit could be hurt the most. More than a third of all subprime loans made in 2006 had associated second-lien debt, up from 17% in 2000. And many people added second loans after taking out first mortgages, so it is impossible to say for certain how many homeowners have multiple liens on their properties.

Many homeowners who were subject to predatory lending practices - including brokers who misrepresented payments - are trying to rework their loans. Few are having any luck.

Most mortgages aren’t owned by a single bank. Instead, they are packaged and sold to investors on the secondary market, which means that loan servicers are actually beholden to investors, not borrowers. Borrowers may be offered a temporary repayment plan, which keeps foreclosure at bay, but tacks the owed money onto to the back of the loan.

“The payments in this kind of workout are unaffordable to the homeowner,” said Diane Cipollone of the National Fair Housing Alliance. “And sometimes homeowners sign it anyway. They don’t know what to do. They know that if they don’t agree their home will go right into foreclosure. But soon they default on the repayment plan, and that’s counterproductive.”

And it’s much harder for troubled borrowers to get a deal that permanently lowers their mortgage payments. The Hope Now Alliance of mortgage lenders and servicers, including Citigroup, Bank of America and J.P. Morgan , says it has kept over one million borrowers out of foreclosure since July. But only about one quarter of them - 278,000 - have actually had the terms of their mortgages modified.

Once a buyer falls in love with a property, they actively collude in the whole fairy-tale process, swallowing whatever the seller says without thinking to question it.  

1. “My neighbors are wonderful!”  Really? Why not check it out for yourself? Knock on the wonderful neighbor’s door. Tell them you are thinking of buying the house next door and ask them what they think of the neighborhood.
2. “The roof leaked once, but we fixed it.”  The seller may not even think they are lying here, but if the repairs have been done in some half-baked way, you need to know. Get a professional home inspection. 
3. “I’ve only seen one termite on the deck.”  If there’s any hint that there might be problems with pests, you should get an insect inspection. These creatures are not wandering hobos dropping in on a house for a look around then moving on their merry way. They come in groups.
4. “There’s no radon — ever.”  Nearly one out of every 15 homes in the U.S. is estimated to have elevated radon levels. To find out about radon gas levels in your area, contact your local Environmental Protection Agency office.

5. “I didn’t know I should have told you about the foreclosure.” Get title insurance. Judgments, tax and mechanical liens are covered by title insurance.

6. “The planes from the airport don’t fly over this house.” You can find this out for sure by contacting the FAA.

7. “There’s never been any flooding.” Most older homes do have some flooding in the basement when there is excessive rain, so it is quite possible a seller could lie to you about this.

8. “Our schools are great!” For an objective view, get a free school report from HomeFair.com or GreatSchools.net.

9. “They can’t build on that lot across the street.” Why can’t they? If the lot is too small, they might get a variance. Talk to the planning board to find out.

A List Of Important Things You Should Do:

• Get a professional home inspection. Qualified home inspectors routinely uncover problems with houses that you can’t see. The most common problems involve plumbing, cooling and heating systems, leaky roofs, kitchen appliances and cracked foundations.

• Spring for extra inspections. These include insects, radon, leaky underground tanks and bad well-water.

• Visit the property during rush hour and on Friday or Saturday night. It’s the only way to see what the next-door kids are like, how traffic is on the weekends, and how noisy it really gets around the neighbor’s pool.

• Get a signed disclosure form from the seller or the broker representing the seller.  If they don’t disclose the defect, they’re subject to suit.

In a normal housing market they’d be able to sell, but now they are stuck.

Far from the housing crisis’ epicenter, high earners with good credit may be heading for trouble as their adjustable rate mortgages (ARMs) adjust beyond their means, local real estate agents and others say. In a normal housing market they’d be able to sell, but now they are stuck. The next wave of problems will come from prime borrowers who bought too much house or borrowed too much against it. A “prime” borrower is one with good credit.

Real estate agents warn that some high-income borrowers have already been forced to sell or leave their homes and more will follow. Especially those who used their homes as ATMs, withdrawing cash via home equity loans.  There are also signs some lenders are warily eyeing “prime” borrowers. JPMorgan Chase & Co. raised its reserves for possible home equity loan loss for subprime and prime borrowers by $635 million in the second and third quarters last year.

Getting into property during the boom was easy, with mortgages freely available for no money down. Then came the subprime crisis and the credit crunch, slowing the market, pushing prices down and home inventories up. Home owners who bought recently with no money down are the ones most likely to abandon a property when they fall behind on the mortgage.Real estate agents say speculative investors who bought to make a profit are also walking away as the rents they charge fall behind the mortgage payments as their adjustable-rate mortgages readjust. The home owners who find it harder to walk away are those who took out large home equity loans before prices started falling and now owe far more than their home is worth. Unlike subprime borrowers, however, wealthy home owners are more likely to try to cut a deal with their lender, rather than end up in foreclosure.The alternative solution available to them is to opt for a short sale. Under a short sale agreement, the borrower sells below the mortgage value and the lender writes off the difference. The lender gets less than originally anticipated, but is not stuck with a foreclosed property. The borrower’s credit rating is damaged, but not as badly as if they had lost the home.

Each of the following mistakes can cost you $100,000.

1.) Investing too conservatively during retirement. If you follow conventional wisdom and, as you approach retirement, shift money out of stocks into more stable investments you could miss many opportunities. Instead of parking too much of your assets in bonds, invest in an asset mix that leaves enough room for Standard & Poor’s 500 stock index.

2.) Launching a divorce war. A full courtroom showdown can easily cost $250,000. Try to soften the financial impact by using a lower-cost mediation option. Or try to work on saving your marriage.

3.) Underinsuring your home. If you’ve lived in the same house for at least 10 years, it’s probably worth 50% to 100% more than you paid for it. But if you haven’t updated your homeowners insurance, you could lose those gains if disaster strikes. Ask your insurer to reassess your home’s replacement cost and adjust coverage accordingly.

4.) Overpaying for your mortgage. The annual percentage rates on mortgages in a given area can vary by close to a percentage point. Over a typical 30-year term, this can cost you $27,000 on a $299,000 home. Shop for the best mortgage rate by checking local banks, your credit union, big-lender Web sites and mortgage-related sites.

5.) Maintaining an unhealthy lifestyle. Bad health habits not only catch up with you as you age but they can also hit you in the pocketbook in the form of higher life-insurance premiums. Before you apply for life insurance, consult your doctor about the best way to get your health status in line with the “preferred plus” underwriting requirements.

6.) Paying needless fund fees. If you buy mutual funds from a broker, you could pay a commission, or “load,” of up to 5.75%. Annual expenses can also vary among funds, from 1.5% or more a year to as little as 0.1%. Fix: Choose no-load mutual funds with low expense ratios. You can buy them directly from investment companies such as Fidelity, T. Rowe Price, and Vanguard.