Realtors

Smart Real Estate News & Commentary by Chris McLaughlin September 3, 2010

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NAR – pending home sales rise

The Pending Home Sales Index (PHSI) rose 5.2% to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1% below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.  The PHSI in the Northeast rose 6.3% to 62.5 in July but is 21.1% below a year ago. In the Midwest the index increased 4.1% to 66.7 but remains 25.7% below July 2009. Pending home sales in the South rose 1.2% to an index of 86.3, but are 15.6% lower than a year ago. In the West the index jumped 11.6% to 95.0 but is 17.6% below July 2009.  The national index had fallen 29.9% in May and another 2.8% in June.

Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”  Yun added, “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy. The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.”

Government fires, business hires

According to the Labor Department, the economy lost a total of 54,000 jobs in August, matching the revised estimate of jobs lost in July.  Briefing.com had predicted a loss of 120,000 jobs in the month.  The bulk of the losses came from the public sector, as the government cut 114,000 temporary census workers. It was the third straight month that census worker layoffs caused an overall decline in jobs.  Government payrolls outside of the Census Bureau trimmed another 7,000 jobs in the month, with most of the cuts coming from state governments. The good news is that private sector hiring was stronger than anticipated. Businesses added 67,000 jobs to their payrolls in August. Economists had forecast a gain of 44,000 jobs. It marked the eighth straight month that businesses added jobs, following nearly two straight years of job losses.  The unemployment rate rose to 9.6% in the month from 9.5% in July, matching economists’ expectations.  Stubbornly high levels of unemployment and weak job creation have raised fears that the nation’s economic recovery is in danger of stalling out and falling into a double-dip recession.

Delaying foreclosures will cost lenders

In a letter sent to servicers, Fannie Mae said it will now review the compensatory fees due to servicers in cases where the government sponsored entity feel servicers are unnecessarily delaying foreclosure.  It says that loans “must not be put on hold on a blanket basis.”  Fannie Mae also says that servicers must not jump the gun either, but rather must follow the letter of the law as it pertains to HAMP/HAFA guidelines.  In a July speech, Edward DeMarco, acting director of the Federal Housing Finance Agency, told loss mitigation servicers that, “if you have an abandoned property or a borrower not willing to discuss or work with anything, then get going [and foreclose],” he advised.  Fannie Mae allows several exceptions in the case where the property is occupied, unless “the borrower has displayed an obvious lack of concern for the mortgage obligation.”  In cases where the property is vacant or the borrower is not going to pay any of the mortgage, “servicers must expedite foreclosure proceedings under the greatest extent allowable by law.”

Harrisburg going broke?

On Sept. 15, Harrisburg, Pa., was scheduled to make a $3.29 million payment on the bonds it issued to build a trash plant. But, the cash-strapped city doesn’t have the money.  “The city’s budget is in deficit,” said Chuck Ardo, spokesman for Harrisburg Mayor Linda Thompson. “We’re looking for ways to trim the budget just to keep services going.”  “Now the chickens have come home to roost,” the mayor said in a statement released Wednesday.  In May, Moody’s knocked the rating on its general-obligation bonds three notches to B2 — five steps below investment grade. To put that into perspective: Moody’s rating on Greece’s government debt sits at A3 — still investment grade.  “It’s a warning to holders of bonds issued by financially stressed state and local governments,” said John Lonski, chief economist for Moody’s Investors Services.

“Credit crisis is still with us.”  And in, fact, many on city council have been floating the idea of bankruptcy.  However, Mayor Thompson chastised them for that.  “There are some in this community who see bankruptcy as a silver bullet,” said Thompson. “But, it’s actually just a can of worms. The pro-bankruptcy cabal has blocked every attempt we’ve made to find a way back from the fiscal abyss.”  She said the city “is developing a comprehensive plan to meet its debt obligations in the future.”  Ardo said the mayor considers bankruptcy to be an “option of last resort,” though it’s not clear how the city will pull itself out of the red.  “Given the city’s financial challenges, it’s difficult to predict what will happen next,” he said.  The city of Harrisburg is scouring its financial accounts as part of its drive for fiscal austerity.

Title insurance premiums down

According to a market share analysis done by the American Land Title Association (ALTA), title insurance premiums decreased 8.5% year-over-year to a total of $2.3 billion. The total of title insurance premiums for the first half of 2010 is also down relative to 2009, down 2.9% at $4.4 billion.  It’s a sign that demand for first-time home mortgages is depleting and refinance transactions are soaring.  “The latest market share analysis reflects an on-going recession in the housing market, with further downward pressure on home prices,” said Pfotenhauer. “While an abundance of affordable homes and low interest rates make the market attractive, people need jobs to obtain credit and purchase homes.” 

Title insurance is a policy that protects a borrower against any mistakes, fraudulent activity, rick or defect of a mortgage upon origination. Title insurance premium totals are congruent with the volume of loan origination transactions. Lenders also generate their own policies to protect their interest in a mortgage transaction. The insurance premium is based on the actual amount of the loan.  Title insurance premiums can also be purchased during a refinance, although the premium is exponentially smaller. Borrowers going through a refinance are not required to purchase title insurance because the original insurance carries over with them through the lifetime of the mortgage. Therefore, even when the volume of refinances increases, the total volume of premiums nationwide will falter.  Only Colorado, Illinois, Texas, New York and the District of Columbia saw year-over-year increases in title insurance premiums. The states that generated the most title insurance premium during Q210 were California ($350.7 million, down 13.6% from Q209), Texas ($266.1 million, up 0.1%), Florida ($169.9 million, down 2.2%), New York ($150.8 million, up 2.4%) and Pennsylvania ($97.1 million, down 19.2%).

Now for our real estate education section…

Friday File – 15 Minute Resolution: Email Update

Email. It has become such an integral component of our lives that it’s easy to take for granted. It’s even easier to use it the wrong way especially during day-to-day interactions or marketing. It’s important to remember the five key roles that email should fulfill when using it for business:

1. Increase awareness. Every email you send out should increase awareness about you, your services and other important information including homes you have on the market or types of property you would like to list/buy.

2. Build a better relationship. Earlier in the week we talked about how important it was to create an emotional connection with clients; email should build upon that by creating a friendly exchange. Abrupt, abbreviated exchanges are easily misunderstood or can give the impression of not caring. It’s especially important to avoid this risk when sending messages via iPhone or other mobile devices; sometimes it’s better to wait until you are able to sit down and respond with a complete sentence rather than respond right away.

3. Incentives & Motivations. Sometimes you can feel a hot client beginning to grow cold and then eventually just slip away. Create a renewed interest or sense of urgency with a well-timed reminder about upcoming properties, seasonal trends, interest rates or other specials that may be available.

4. Business. By far, the most important function of email is to drive business. Whether buying or selling, building your business IS the business. Ask for referrals, post finder fees and get creative about using email to turn more transactions into done deals.

5. Retain &/o cross sale. It’s easier to retain a good client than find a new one. It’s also easier to sell a formerly satisfied client something new than to start over with an unknown entity. Retaining clients by forming a long term relationship is one of the most important aspect of email but don’t forget to cross sale. For every buyer there is a seller. Most buyers are likely to become sellers at some point in the future. Many will purchase more than one property or have other needs. Referral fees, resales, second homes, investment property, commercial or residential leases and much more are all potential sources of revenue. Expand your reach even if you are not the primary service provider; your relationships are valuable assets that can be used by other providers in the area while allowing you to remain in touch with clients.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin September 1, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

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*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

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Bulk REO Training Program … Your Questions Answered Tomorrow!

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System!  And get PROOF on why we’re best able to help you achieve

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Home prices up – for now

According to the S&P/Case-Shiller Home Price Index, national home prices jumped 3.6% in the past year. Prices also climbed 4.4% in the second quarter compared with a 2.8% plunge in the first quarter.   “While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s.  Home prices across the country could be substantially lower a year from now, according to Pat Newport, an analyst with IHS Global Insight. “It’s now apparent that the demand for housing is a lot weaker than anyone thought,” he said.  That has resulted in a glut of inventory, which a slew of bank repossessions of foreclosed properties is only making worse.

Plus job gains are still proving elusive.  “These three factors are enough to bring home prices down,” Newport said.  A market basket of 20 metro areas tracked by the S&P/Case-Shiller home price indexes showed that prices gained in all markets but one. The index is up 4.2% year-over-year, well above a 3.1% forecast from industry experts as compiled by Briefing.com. The month-over-month gain was 1%.  “Las Vegas was the only city to record a fall in prices during June (-0.6%), compared with a month earlier. All 19 other markets were either up or flat, with Chicago, Detroit and Minneapolis the biggest winners. Each gained 2.5%.  Fifteen of the 20 cities recorded 12-month price rises, with San Francisco leading the way. Its 14.3% increase was one of three cities posting double-digit gains, with San Diego prices jumping 11.2% and Minneapolis 10.7%.  Las Vegas had the biggest 12-month loss, down 5.2%.

Jobs mixed

Private sector employers cut 10,000 jobs in August — down from the downwardly revised 37,000 jobs they added the month before, according to a report by payroll processing firm Automatic Data Processing.  Those cuts reversed a sixth-month trend of private sector employers adding jobs and surprised economists, who had expected the report to show 13,000 jobs added in August.  After rising for three months in a row, planned job cuts plummeted to 34,768 last month, the lowest level since June 2000 and down 17% from the previous month, according to outplacement firm Challenger, Gray & Christmas Inc. 

Compared to a year ago, downsizing activity dropped 55% in August, and job cuts have eased 65% so far this year compared with the same period last year.  Despite the overall improvement in August, government and non-profit hiring continued to lag. The government and non-profit sector has shed the most jobs this year, accounting for 30% of all 2010 job cuts and eliminating three times more jobs than the pharmaceutical sector, which reported the second highest number of year-to-date cuts.  Real estate, chemical and commodities companies boasted the fewest job cuts in August, while the entertainment and leisure, automotive and computer sectors announced plans to do the most hiring.

Mortgage apps up

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 2.7% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 2.3% compared with the previous week.  The Refinance Index increased 2.8% from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8% from one week earlier. The unadjusted Purchase Index decreased 0.4% compared with the previous week and was 37.0% lower than the same week one year ago.  “Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates. 

The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “The sharp decline in MBA’s Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July.  Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September.”  The four week moving average for the seasonally adjusted Market Index is up 5.2%.  The four week moving average is down 0.2% for the seasonally adjusted Purchase Index, while this average is up 6.3% for the Refinance Index.  The refinance share of mortgage activity increased to 82.9% of total applications from 82.4% the previous week and is the highest refinance share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8% of total applications from the previous week.

Consumer confidence up

The Consumer Confidence Index rose to 53.5 in August, from July’s upwardly revised level of 51.0, the Conference Board, a New York-based research group that compiles the index, said yesterday.  The rise follows two months of losses and beats the drop to 50 that economists surveyed by Briefing.com were expecting. But the index is still painfully low, falling far below 90 — a level that typically indicates a stable economy.  “Markets are broadly interpreting this as an improvement in the economy, but overall consumer confidence is still very, very bad,” said Tim Quinlan, an economist with Wells Fargo. “We went from being severely depressed about the outlook, to just being depressed about the outlook.”  While the uptick means consumers’ short-term outlook for the economy has improved slightly, a weak job market continues to weigh on their attitudes, Lynn Franco, director of the Conference Board Consumer Research Center said in a statement. 

“Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future. All in all, consumers are about as confident today as they were a year ago,” Franco said.  Jobs will remain the key driver behind morale, said Daniel Penrod, senior industry analyst for the California Credit Union League. The index showed 45.7% of consumers still feel jobs are “hard to get” in August, a minor uptick from July.  The government’s closely watched jobs report due on Friday is expected to reinforce that view. Economists forecast a loss of 120,000 jobs in August, following the decline of 131,000 in July, and an increase in the unemployment rate to 9.6% from 9.5%.

Mortgage rates hit (another) record low

The national, 30-year fixed-mortgage rate (FRM) slightly decreased from a week earlier, setting a new record low average of 4.26%, according to the Zillow Mortgage Marketplace weekly update. This is down 0.03% from last week and 0.02% below the previous record low.  Regionally, 30-year rates vary, but the majority of states witnessed a deflation. Most large states saw a decline in rates: California’s current rate of 4.28% is down from 4.3% last week; Texas’ at 4.23% is down from 4.28%, and Massachusetts’ at 4.26% is down from 4.27%. 

Rates substantially decreased in New York to 4.24% from 4.31% and New Jersey to 4.19% from 4.27%. Rates increased in Washington to 4.33% from 4.29% as well as Colorado, up to 4.3% from 4.17%. Rates remained flat in Florida and Pennsylvania at 4.2% and 4.37%, respectively.  Zillow reported the national average rate for 15-year fixed home loans remained flat at 3.82%, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 3.29%.  Zillow’s rates are based on real-time mortgage quotes from lenders registered with, but not exclusively bound to the company. The national average comes from thousands of daily quotes given to anonymous borrowers through their website. State averages are also available.

Now for our real estate education section…

CHAID & Other Marketing Know-How

Today’s topic isn’t for the novice short sale or real estate newbie but rather veteran investors searching for robust tools to help make informed decisions about future trends. Yesterday we discussed the use of frequency intervals and demographic trends to help build a predictive model with direct day-to-day application for your investing decisions. Now we will turn our attention to the use of CHAID and SIMM data to help understand how economists, researchers and marketing experts are able to generate broad trends well into the future. Once you understand the basics, it’s easy to use the same techniques in your own local market.

SIMM or simultaneous media usage studies, are performed twice each year. Each segment contains roughly 15 to 17 thousand participants with a total of 14 groups representing major age range distributions patterns. With over 200,000 participants, the study is large enough to generate valuable data which can then be generalized to the larger population. The US government also conducts similar types of survey’s and data gathering activities although typically with less emphasize on media penetration. Not only does this level of consumer tracking across all media sources (online, magazines, television, newspapers, radio etc) assure a comprehensive tracking mechanism, it also forms the foundation for predictive modeling and consumer purchasing behavior.

Consumer participants are asked questions such as “whether or not they intend to buy a house in the next year then combined with household income, age and other basic demographic information, it is used to generate a CHIAD or Chi Square Automatic Interaction Detector. Despite the somewhat fancy sounding name, a CHIAD is little more than a decision tree. For example, for those participants which indicate they intend to purchase a home within the next year they may then be asked whether it will be a primary purchase or a second home. The time frame of that purchase (1-3 months, 4-6 months etc…). The size of the home and so forth.

So, how can this be used in your local market? Depending upon the size of your social media reach and client list, it’s easier than ever to create an informal survey to gauge the level of interest and intent in any given zip code or metropolitan statistical area. It’s also possible to gather large scale data created by the government (both state and local) in order to combine it with that of the Census, Department of Labor and other federal generated trends.

Remember, information is power. To stay informed about the most important real estate and investment related information available, sign-up for our daily newsletter and free webinars.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin August 31, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com 

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

**********************************************************
Bulk REO Training Program … Your Questions Answered Tomorrow!

Join us tomorrow for an intensive overview of the Bulk REO Trader

System!  And get PROOF on why we’re best able to help you achieve

your goals with Bulk REOs.

Click here and RSVP for our webinar TONIGHT at 8:30 PM ET, 5:30 PM PST:

http://www.LiveWebinarTraining.com

**********************************************************

CNBC’s Olick – homebuyer credit again?

“Just when I thought the housing market was finally being left to correct on its own, I’m starting to hear talk regarding yet another home buyer tax credit. From HUD to the hedge funds, it sounds as if it is gaining steam yet again. This one could involve not just first time/move-up buyers, but a credit for buyers purchasing foreclosed properties or short sales (when the bank allows you to buy a home for less than the value of the outstanding mortgage).  HUD Secretary Shaun Donovan, appearing on CNN’s State of the Union this weekend, didn’t rule out another tax credit. He did say it’s ‘too early to say,’ but then added that ‘we’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.’  After that several Congressional candidates in Florida threw their voices behind the possibility, and Florida Gov. Charlie Crist then chimed in on the same show, saying that another tax credit, ‘would stimulate the economy. It would increase home sales in Florida.’ He finished with: ‘I would absolutely encourage the president to support that because it would certainly help my fellow Floridians.’

So of course then I went the official route and followed up with a HUD spokesperson who responded:  ‘No news here…there are no discussions underway to revive the credit.’  Is it all political? And is another tax credit the answer?  ‘I don’t think it’s all political,’ says housing consultant Howard Glaser. ‘I think they are panicked that the economy/housing got away from them.’ Glaser doesn’t sound convinced the tax credit is really on the table.  ‘They can do a lot off budget with the GSE’s and FHA with no Congress.’  I know a lot of you out there would argue that a housing market correction, as painful as it is, is necessary for housing to truly find its footing again and recover for the long term. Another artificial stimulus could just prolong the agony and set us up for the same drop off in sales and prices that we’re seeing right now.  But it could also move some inventory quickly.

With inventories of new and existing homes dangerously high, and the shadow supply of foreclosures pushing that volume even higher, more stimulus could be a necessary evil. I liken it to what I’m doing with my lawn this week. All summer I fought the weeds, pulling them, using the organic sprays and repellents, spreading mulch to deprive them of any air.  And then I gave up.  I called the lawn service and told them to bring every chemical in their arsenal.  Shock the overgrown mess into submission once and for all, so that I can start fresh again and reseed this fall.”

Banks modifying more than HAMP

Banks have long come under fire not doing enough to help troubled homeowners, particularly when the mortgage crisis started spinning out of control in 2007. Many loan servicers initially addressed the problem by tacking on the missed payments, which only increased strapped homeowners’ monthly burden.  However, banks now are doing nearly twice as many modifications under their own foreclosure prevention initiatives than under the Obama administration’s signature Home Affordable Modification Program (HAMP). 

Servicers completed nearly 644,000 so-called “proprietary permanent modifications” in the first half of this year, compared to 332,000 such adjustments made under the Obama program, according to Hope Now, a consortium of mortgage servicers, investors and housing counselors.  About half of borrowers who don’t land a permanent HAMP modification are given an in-house adjustment, according to federal statistics.  About 78% of banks’ in-house modifications involved interest rate and principal reductions, Hope Now found.  Wells Fargo, for instance, said last week it has reduced more than $3.1 billion in principal on nearly 60,000 loan modifications in the past 18 months. It uses a combination of principal adjustments, interest rate reductions and term extensions to assist its borrowers.

Hidden secrets

Buried in section 953(b) of the Dodd-Frank financial reform act is a new rule forcing companies to disclose the ratio between their chief executive’s pay package and that of the typical employee.  While this may sound like a good, if intrusive, idea on the surface, it creates what lawyers call a “logistical nightmare.”  “We’re not debating the concept of disclosure – we think it’s a good thing,” said Larry Burton, executive director of the Business Roundtable, which represents chief executives of the biggest US companies. “But you can do more harm than good if you take a well-intended piece of policy and implement it badly. That’s the risk here.”  The rules’ complexity means multinationals face a “logistical nightmare” in calculating the ratio, which has to be based on the median annual total compensation for all employees, warned Richard Susko, partner at law firm Cleary Gottlieb. “It’s just not do-able for a large company with tens of thousands of employees worldwide.” 

Pay experts said business had been caught off-guard by the measure, which was not one of the high-profile battlegrounds of the Dodd-Frank legislation. Companies are now gearing up to lobby the Securities and Exchange Commission, which has to write detailed provisions for the new rule.  The rule could also reward with a relatively low ratio those companies that outsourced low-paid work rather than keeping jobs in-house, lawyers said.  Robert Menendez, the senator who sponsored the provision, dismissed business fears. “The idea behind the new rule is that sunlight is the best disinfectant,” said an aide. “Disclosure will help encourage fair pay for workers at a time when middle class pay has stagnated while CEO pay has skyrocketed.”  Like most intrusions by government into the private sector, this one will have bucketloads of unforeseen consequences I’m sure.

Home prices rise

Standard & Poor’s/Case Shiller composite index of 20 metropolitan areas rose 0.3% in June from May on a seasonally adjusted basis. The rise was better than the 0.2% increase expected by economists polled by Reuters, though slower than the 0.5% rise in May.  Unadjusted, the 20-city index gained 1% following May’s 1.3% jump.  S&P, which publishes the indexes, also said home prices nationally rose 4.4% in the second quarter after a 2.8% drop in the first quarter.  Prices rose in 17 of the 20 metro areas in June, S&P said, adding that in the first half of the year 15 of the 20 areas had positive annual growth rates. The housing market is in better shape than a year ago, S&P said.  “Given the way home sales collapsed in July and given the boost in housing activity across the board in the second quarter, it’s clear this may have been the calm before the storm,” said David M. Blitzer, chairman of the index committee at S&P.  “The worry starts when you remember that the Homebuyers’ Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak,” Blitzer said in a statement.  “The inventory of unsold homes and months’ supply data were particularly troubling,” he said, adding that “if this relative weakness in demand continues, it will likely filter through to home prices in coming months.

Auto sales lowest in 28 years

U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs.  While automakers increased discounts by 1% from July to an average of $2,864 per vehicle, sales to individuals probably fell 7% from last month, according to Santa Monica, California-based TrueCar.  Industrywide deliveries, to be released tomorrow, may have reached an annualized rate of 11.6 million vehicles this month, the average of eight analysts’ estimates compiled by Bloomberg. That would be the slowest August since 1982, according to researcher Ward’s AutoInfoBank. The rate would be 18% below last year’s 14.2 million pace, when the U.S. government’s “cash for clunkers” incentive program boosted sales.  “Home sales are way down, the stock market is way down, the unemployment report is very disappointing and consumer confidence is sputtering,” Jesse Toprak, vice president of industry trends at TrueCar.com, said in an interview. “People just don’t want to make big-ticket purchases because they’re uncertain about their jobs and the value of their homes.”  Ford, helped by new models such as the Fiesta small car, will post a 5.2% sales drop, the average of six analysts’ estimates. Chrysler, aided by deliveries to large buyers such as rental-car companies, will have sales increase 3%, the average of six estimates. General Motors Co. will fall 19%, the average of four estimates, in line with the industrywide drop.

Now for our real estate education section…

Frequency Intervals & Demographic Trends

Statistics. Love them or hate them but most business decisions involve the use of statistical data including the purchase and sale of investment real estate. For example, one common measure of a good investment property is “affordability”. But what exactly constitutes affordable?

It’s an important consideration and one that most short sale investors do not fully understand. The short answer is that an affordable home is at or below the “average” household income for that location; ie, it can be purchased or rented by most households and is therefore an attractive investment. However, this really only relates a small amount of the total information required. Average or mean incomes are notoriously inaccurate due to skewing of results at the high or low ends. Likewise, “average” priced homes are equally biased due to very high priced or very low priced home.

One way to avoid the problem is to use frequency intervals in combination with demographic trends and housing price. Frequency intervals are ways of measuring a large group of items to determine which is the most commonly occurring. For example, let’s assume a short sale investor is interested in purchasing a few properties in a given city; s/he is very prudent and does some research to find out the average household income and the average sales price of a home. So far – so good. Just for the sake of simplicity we will assume the household income is close to the national average at $50,000. The average sales price of homes in the area is $150,000 or roughly 3x the annual household income. Our savvy short sale investor sets out to find a few homes in that price range…what could go wrong? Well a lot.

Unfortunately, the rising rates of unemployment combined with a few very high incomes skew the results…basically there are a lot of low-end household incomes in the $25,000 range and a small but significant number of wealthy households in the $ million dollar range. The “average” may still be $50,000 per household for that city but it fails to account for the lack of a substantial middle class. Basically, there are very few households able and willing to purchase a home for $150,000. The lower income households cannot qualify and the higher income households may not be interested.

The solution is to use frequency intervals for all pertinent data including household income, age and other significant criteria. By learning how many households are in a given income bracket, how many are of home-buying or renting age, etc… the investor has a much more detailed plan of action. Returning to the prior example, rather than purchase a $150,000 average home, the investor may concentrate efforts on homes priced at or below $75,000 and/or luxury homes instead. This would appeal to the largest number of buyers and renters for that area at either/or the low income level of high household income level. It’s a simple solution to address highly volatile markets and disparate data.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin August 30, 2010

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Foreclosure relief – great for banks; for consumers not so much

Mark Gimein of Daily Finance makes the following points about why HAMP actually hurts many borrowers while helping banks:

1.  Foreclosure relief in many cases simply stretches out borrowers’ slow bleed of resources. By keeping borrowers in limbo while letting lenders delay repossessing houses they can’t sell, foreclosure aid is now benefiting borrowers less than the lenders who created the mortgage mess. For lenders, mortgage modification is the waiting room in the mortuary, a convenient place to hold borrowers while the banks deal with the overflow of houses already repossessed.

2.  Most borrowers behind on their mortgages are already overburdened with other debts. After the mortgage reduction, the typical modification recipient, despite an average $513 drop in monthly payments, has to devote 63.5% of his or her income to mortgage payments, other debt, and taxes.

3.  Banks don’t have to kick people out quickly.  Banks have steadily slowed down the foreclosure process: The average homeowner in foreclosure now is an amazing 461 days behind in his payments. Barry Ritholtz of financial blog The Big Picture calls banks’ reluctance to take over houses “strategic non-foreclosure.” Taking a leisurely path to repossession lets lenders avoid the costs of maintaining properties they can’t sell in a market that remains in free fall in much of the country.

4.  The last insult added to this mess comes from Fannie Mae, which has promulgated new rules that lock those who don’t make the effort to modify their mortgages out of the Fannie-backed mortgage market for seven years.  So ultimately this comes full circle, and what started as an effort to help borrowers has become another cudgel in the hands of lenders.

Spending up more than income

Consumer spending is critical because it accounts for 70% of economic activity.  The Commerce Department says spending fell 0.1% in April, rose a tiny 0.1% in May, was flat in June, but rose 0.4% in July.  Personal incomes were up 0.2% in July, less than expected but at least an improvement over June when incomes had not risen at all.  With spending rising, the personal savings rate slowed to 5.9% of after-tax income. That’s down from 6.2% in June, the highest in nearly a year. Even with the July decline, the savings rate is nearly three times higher than it was before the recession began in December 2007. 

The July spending gain was the highest since a 0.5% rise in March. But the concern is that demand could taper off in the second half of this year if unemployment remains near double digits.  If Americans don’t have jobs, they don’t have the income to support spending. the economy is growing too slowly to support sustained job growth and some fear it could fall back into a recession. Economic growth slowed to 1.6% in the April-to-June quarter, the government reported Friday. That was revised down from the initial estimate of 2.4%.  A string of weak economic reports in recent weeks has prompted economists to trim their growth forecasts for the rest of the year and next.

Fannie Mae portfolio up 4.1%

Fannie Mae’s mortgage portfolio through July is up 4.1% from the year ago yet down somewhat from June, and the GSE issued nearly half the mortgage-backed securities during the month than in did last July.  Fannie ended July with gross holdings of nearly $812 billion. That figure stood at $770.4 billion last year and $817.8 billion in June.  The agency issued $42.7 billion of mortgage-backed securities during July, a nearly 48% decline from $79.7 billion a year earlier but up 6.4% from June. Fannie’s MBS issuances peaked in June 2009, when more than $130 billion was issued.  The serious delinquency rate in Fannie Mae’s portfolio fell to 4.99% in June, which is the latest month data is available, from 5.15% in May. For the year-ago July, the agency’s delinquency rate was 4.17%. The rate peaked at 5.59% in February and was as low as 3.42% in April 2009.  “Fannie Mae and FHLB are taking advantage of better funding from callables as bullet LOAS widens due to renewed corporate issuance and calmer short LIBOR levels,” said Jim Vogel of FTN Financial. “The gain can be as much as 10bp.  The obvious result is that both need less funding from bullets and floaters.  The superior funding stems primarily from the constant demand for new callables to replace those redeemed at close to a $100 billion monthly pace.”

NABE – economists mixed on what to do

The National Association of Business Economists (NABE) said Monday that three-quarters of its members believe that promoting economic growth should be a higher priority than reducing the national deficit, according to an August survey of the nation’s economic policy.  However, nearly the same number of NABE economists said they do not think another stimulus package is necessary to halt the economic slowdown and get the economy back on track. At the same time, a majority believe that policymakers should do more to boost job growth.  The survey, based on responses from 84 NABE economists who work for private-sector firms and industry trade associations, comes as economic growth in the United States has slowed significantly after rebounding from a deep recession.

The NABE survey showed that just under half of those polled see deflation as the main threat facing the economy in the short term, but respondents were less certain about whether inflation or deflation is the biggest threat over the next three years.  In a sign of the challenges currently facing Fed policy makers, there was little consensus among the NABE economists on when the central bank will raise interest rates and begin selling off assets it bought during the financial crisis.  After cutting rates to historic lows near 0% in December 2008, the Fed has been without its main tool for supporting economic activity for nearly two years. It has since bought billions worth of Treasury bonds in an effort to bring down rates for home and other consumer loans. But some central bankers are worried about adding to the $2 trillion worth of assets the Fed has acquired over the last few years.  A clear majority of economists said that none of the existing tax cuts on individual income, dividends and capital gains should be allowed to expire.

DSNews.com – Homebuyer’s tax credit coming back?

After a worse than expected falloff in home sales during the month of July, buzz about a possible revival of the federal homebuyer tax credit has begun to surface.  The National Association of Realtors (NAR) reported last week that sales of previously owned homes plummeted 27 percent in July, hitting their lowest mark in 15 years. New home sales also took a dive, dropping nearly 13 percent from June to July.  Both reports were clear indications of the frailty of the housing market post-stimulus. Although, the steep declines were actually considered a by-product of the tax credits themselves, which expired on April 30 – payback for the incentives that pulled sales forward into the spring months. 

HUD Secretary Shaun Donovan said on CNN’s “State of the Union” program this weekend, “The July numbers were worse than we expected, worse than the general market expected, and we are concerned. That’s why we are taking additional steps to move forward.  Donovan said it was too early to say for sure, after only one month’s numbers, whether the administration would revive its popular homebuyer tax credits to give the housing markets another much-needed boost, but he didn’t wholly rule it out as an option.  “All I can tell you is that we are watching very carefully,” Donovan told CNN. “We’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.”  Two U.S. Senate candidates from Florida, one of the hardest hit states by the housing downturn, spoke out in favor of bringing back the federal tax credits for homebuyers on the CNN program.

Now for our real estate education section…

Take the Mystery Out of Time Mastery

One of the most frequently cited reasons for not actively pursuing short sale investments is a lack of time; work schedules, family obligations and other day-to-day activities simply seem to take every available moment. So, where does everyone else find the time to invest? Surely they all can’t be retirees with nothing else to do all day. You are right – they aren’t. Research shows that busy people are more likely to remain busy and get even more done because they have mastered the mystery of time management.

For those of you who have read (and failed) at the 4-Hour Workweek or the 7 Habits of Highly Effective People and other popular time management books, the first step is to determine why you are out of control in the first place. Are you overwhelmed with work, home or other obligations? Chances are you may not even realize the extent of the problem but instead spend your days going from one urgent task to the next.  Although urgency is a great motivator, it can go too far. When the daily “to-do” list tends to pile up into a never-ending series of activities without an end in sight, you can be sure it has gone too far.

Rather than trying to figure out how to schedule enough time to attend a time-management course or sit down and re-prioritize the entire week or work through the weekend in yet another vain attempt to “get organized” try this instead; get control. Sounds simple doesn’t it? Well in some respects it really is simple. Today is Monday…give this a try for five days and see how it works for the remainder of the week:

1. Begin by asking yourself what really constitutes the most important actions for the day…the ones you would stay late in order to finalize…then work on those first. Be careful not to confuse “important” items with “urgent” items.

2. Next on the list are those “opportunity” items. These are tasks which are either time sensitive or require some level of consistent work in order to bring about.  If you find the opportunity list growing too large, it’s time to step back and get a reality check. Keep the list small and only add items once the original ones are accomplished. If an item is no longer a priority then delete it; don’t leave it on the list waiting for another day.

3.  Delegate. Learning how and when to delegate takes a bit of patience and persistence. Contrary to popular belief, hiring someone else to handle the mundane tasks in life isn’t always as simple as it seems. Finding the right person can be time consuming and fraught with frustration especially for those that have a tendency to micro-manage. Let go and let others do their job so you can do yours!

4. Appointments versus Tasks. Understand the difference. Appointments are traditionally the last thing you can delegate but many of the tasks required in the process of an appointment can easily be delegated. Create a list of significant outcomes that can be tracked and put into effect immediately.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–