NAR – pending home sales rise

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
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Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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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
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