Home prices up – for now

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: 

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 Thursday at 8:30 PM ET, 5:30 PM PST:

http://www.LiveWebinarTraining.com

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

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
–