Real Estate News & Commentary by Chris McLaughlin, September 1, 2009

http://www.shortsalesriches.com

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July pending home sales rise to 2-year high

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in July, rose 3.2 percent to 97.6, the highest level since June 2007, from 94.6 in June.  Analysts polled by Reuters had forecast pending home sales to rise 2 percent in July.  Pending sales were 12 percent higher in July from the same period last year.  There is a one to two month lag between a contract and a done deal, so the index is a barometer of how sales completed this month and next will turn out.

Housing recovery…or not?

The good news:  Home starts have risen for five straight months, while sales of new homes recently hit their highest level since last September.  Prices are up as well: the Case-Shiller index of national house prices rose 2.9% in the second quarter, ending a three-year decline.  According to Toll Brothers’ chief executive officer Bob Toll, “declining cancellations and more solid demand indicate that the housing market is stabilizing.”  The bad news:  According to many skeptics, things are not so rosy.  Mark Hanson, who runs a California real estate research firm, attributes the much-ballyhooed recent house price gains to a shift in the types of properties changing hands.  At one point earlier this year, as many as half of all transactions nationally were resales of foreclosed properties, largely at low prices.  Since then, so-called organic sales (those not involving distressed properties) have risen while foreclosure sales have remained stable.  This improved mix — together with cheap financing and a couple of popular tax incentives — helped to revive prices in some hard-hit areas.

But with schools opening up again and the summer home-selling season winding down, sales by nondistressed sellers are likely to fall in coming months, Hanson said.  Adding to the pressure on prices, the end is in sight (or already here) for some popular housing subsidies.  An $8,000 federal tax credit for first-time home buyers is due to sunset in December.  A $10,000 California tax credit for buyers of newly constructed houses expired last month.  Says Hanson: “This summer is shaping up as the gateway into the next move down.”

Are banks holding on to bank-owned foreclosed properties?

With all the rumors flying around, it’s hard to tell what’s going on with foreclosures, but Diana Olick decided to look a little deeper.  In response to her question, Bank of America (BOA) pointed out what we’ve reported here before…that foreclosures have been down because banks have been waiting for the Making Home Affordable program to kick in before going through the final steps of foreclosure.  Now that the program is operational, BOA anticipates a spike in foreclosures.  In BOA’s words:  “We do not hold foreclosed properties off the market.”  According to Ted Jadlos of LPS Applied Analytics, “Based upon foreclosure and REO timelines, it’s going to take at least 18 months to flush the system of our current problems.  But to flush the problems in only 18 months, more problem loans need to leave the system relative to the new problem loans of today and tomorrow.  That does not appear to be the case right now—we aren’t clearing faster than new problems are emerging.”

Manufacturing expanding, construction spending down

According to the latest Institute of Supply Management (ISM) report, manufacturing expanded for the first time in 18 months while the overall economy grew for the fourth month in a row.  ISM said its index of national factory activity rose to 52.9 in August from 48.9 in July.  The median forecast of 78 economists surveyed by Reuters was for a reading of 50.5.  A reading above 50 indicates expansion in the manufacturing sector.

At the same time, Commerce Department data showed today that total U.S. construction spending fell 0.2 percent in July, worse than the flat reading that economists had expected, to the lowest rate since February 2004.  Private residential construction increased 2.3 percent in July after dropping 0.5 percent in June, in the largest rise since last September, when it increased 3 percent.  Federal building rose 0.8 percent to a record $29.57 billion seasonally adjusted annual rate, but that wasn’t enough to keep all public construction from decreasing 0.7 percent in its first monthly decline since January.

Cash for clunkers…now what?

Analysts say automakers could see the U.S. seasonally adjusted rate of sales, a closely watched indicator of demand for big-ticket items, jump to nearly 16 million vehicles in August under the “clunkers” program, but now that it’s finished, what can we expect for auto sales?  The annualized sales rate reached 15.8 million vehicles in August under the program, but likely will drop off the rest of the year, although not back to the lows seen early in 2009, Barclays Capital analyst Brian Johnson said in a note.  “We expect sales for the remainder of the year to fall well below August results, but believe momentum from the program as well as the stabilization in the economy and improvement in consumer confidence could boost sales above the 9.5 million average seen in the first half.”

Now on to our real estate education section …

What’s in a Name? Navigating Complex & Sometimes Confusing Lender Lingo

When it comes to dealing with short sales one of the most frustrating and time consuming aspects for homeowners is simply understanding who they are speaking with. As we have previously mentioned on the ShortSalesRiches.com blog, many homeowners fail to differentiate their servicer from their lender much less anything more complex. Learning a bit of lender lingo, as well as the most typical steps in a short sale contact process, can go a long way toward reducing the frustration and failure rate for novice buyers.

1. Servicer.  In the most simplistic terms, the servicer is typically the first contact for homeowners that have fallen behind on their mortgage. The servicer handles the routine aspects of payments, credits and delinquencies but may not actually own the note itself. The servicer has limited ability to modify late payments or make other contingencies but is unable to change the terms of the original contract in any meaningful manner. For that, it is necessary to contact the lender directly.
2. Lender. The lender is the actual entity that owns the mortgage and will have the final “say so” when it comes to accepting the short sale offer as well as other major decisions.
3. Loss Mitigation. Depending upon the size, the “bank” or “lender” will frequently have a loss mitigation department specifically designated for at-risk properties. The loss mitigation department may go by other names such as foreclosure department, loan modification department, workout dept, bankruptcy dept. homeowner’s assistance division or other similar titles. Once you identify the proper ling for a given institution, be sure to jot it down for future reference.
4. Loss Mitigation Specialists. Once you have identified the proper department for the given lender it is now time to fax over the appropriate paper-work (not sure what paperwork? Tune in to one of our seminars to learn more!). Remember, the loss mitigation specialist is likely to be literally buried under a mound of other offers – treat them kindly and don’t waste their time or else you risk being banished to the far corner of that desk!
5. Portfolio/Asset Manager. Think you are done after dealing with the loss mitigation specialists? Not so fast! YOU are done but the paperwork is not. That is because the paperwork will face a final review in front of the portfolio or asset manager. The loss mitigation department actually reports to the asset manager in charge of the original portfolio. Remember, most mortgages are/were bundled together and then sold in the form of securities or other investment instruments. The asset manager is responsible for maintaining the guidelines of the portfolio under their supervision.

A final word about portfolio managers – don’t get the bright idea to go directly to the portfolio manager; although it occasionally happens it is typically only for problem situations and is frowned upon. It is a much better idea to develop a great working relationship with a loss mitigation specialists and customize the paperwork to meet the portfolio guidelines as exactly as possible.

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

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