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Home prices slow their decline…for now
According to the S&P Case-Shiller home-price indexes, U.S. home prices decreased at a slower annual rate in October, but prices were flat compared to September. The indexes showed prices in 10 major metropolitan areas fell 6.4% in October from a year earlier, while in 20 major metropolitan areas, home prices dropped 7.3% on the year. However, both indexes were flat in October compared with the previous month. All 20 major metropolitan areas again posted declines from a year earlier, the 19th time in a row. Las Vegas continued to be hit the hardest, remaining the one market that has not seen a glimmer of hope so far this year. Prices have declined there for 38 consecutive months.
While the composite indexes were flat month-over-month, two areas — Phoenix and San Francisco — had greater than 1% growth. As of October, the 10-city index is down 30% from its mid-2006 peak, and the 20-city is down 29%. Nationally, home prices are at levels similar to the autumn of 2003. Month-to-month gainers were led by Phoenix which posted a 1.3% gain, and San Francisco, which rose 1.2%. Tampa fared worse, falling 1.6%. Las Vegas again was the worst performer year-over-year, which posted a drop of 27%. Phoenix and Tampa followed with declines of 18% and 15%, respectively. The best year-on-year performer was Denver, which posted a 0.1% decline. David M. Blitzer, chairman of S&P’s index committee, said the data, best described as flat overall, will likely “spark worries that home prices are about to take a second dip” as the come after a series of solid improvements.
Hiring up in 2010?
According to CareerBuilder’s 2010 Job Forecast, 20% of employers plan to increase the number of full-time, permanent employees in 2010, up from 14% in 2009. Only 9% of the employers surveyed said they plan to decrease headcount in 2010, down from 16% last year, while 61% don’t plan to change staff levels and 10% are unsure. 11% of employers said they plan to add part-time employees in 2010, up from 9% in 2009, and only 8% said they plan to decrease their part-time help in the year ahead, down from 14%, while 69% plan no change in headcount and 13% are unsure. Hiring is expected to increase in information technology, manufacturing, financial services, professional and business services and sales in the coming year, CareerBuilder said.
When asked which areas employers plan to hire for in the year ahead, one-third said technology, followed by customer service. Slightly less than one-quarter said they plan to add sales people, while research/development, business development, accounting/finance and marketing positions were also well represented. In keeping with 2009′s trend, many employers anticipate hiring freelancers or contractors to keep costs down in 2010.
Fannie and Freddie are headed for full government ownership?
Shares of Fannie Mae and Freddie Mac soared yesterday after the Treasury Department announced what essentially amounts to a blank check for their bailouts. The shares of the two firms are still publicly traded even though the federal government placed the companies into conservatorship in September 2008 due to losses from rising home foreclosures and falling home values. The two firms own or insure about $5 trillion of mortgage-backed securities between them. Both Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles Haldeman were given $6 million annual pay rates for 2009, with all the compensation coming in cash. Other top executives received annual cash payments of $2 million or more each, according to the companies’ filings.
The lack of stock and options for Fannie and Freddie executives suggests that when Congress and the Obama administration decide what to do with the mortgage firms, shareholders could be left with little or no equity. Bose George, an analyst with investment bank Keefe, Bruyette & Woods, wrote in a note to clients that the lifting of the $200 billion limit is likely a sign that the Obama administration wants to use Fannie and Freddie to provide additional help to the housing market. George said it’s clear that hundreds of billions of dollars in losses will have to be written off. He added that Fannie and Freddie will eventually need between $100 billion to $150 billion of assistance each from Treasury, making their bailouts by far the most expensive of the financial crisis.
3% economic growth rate next year?
Peter Cardillo, chief market economist from Avalon Partners, says US gross domestic product could grow at an annual rate of as much as 3% next year as consumers and businesses start to regain confidence. “We’re probably headed for growth somewhere between 2-3/4 and 3 percent here in the States and in terms of the global economy we’re probably looking at growth close to 4 percent,” he said. The US housing market remains under pressure, however, because banks are being restrictive with lending, according to Cardillo. He also said he thinks that the Treasury will begin to withdraw a lot of the excess stimulus liquidity currently in the system, but the risk of deflation has largely disappeared. I don’t think we run the risk of deflation in 2010, if anything we might run the risk of a nasty dose of inflation in the later part of the year,” he said. “There’s a good possibility that we could see jobs actually show an uptick for December by about 5,000-6,000 jobs, which is obviously very small but certainly a reversal,” he said. Well, that’s what we heard last year about this time too, but here’s to hoping!
Treasury reviews HAMP trials
The US Treasury Department enacted a review period for all active Home Affordable Modification Program (HAMP) trials until Jan. 31, 2010. The directive comes two weeks after the first HAMP report of 31,382 permanent modifications in nine months. The Treasury will begin reviewing all trials set to expire on Jan. 31, 2010. Active HAMP trial modifications include those that have been submitted to the Treasury system of record and have not been canceled by the servicer. During the review period, servicers will continue to convert eligible borrowers in active trials into permanent status “as quickly as possible,” according to the Treasury’s supplemental directive. Servicers cannot cancel any active HAMP trial modification during this period with the exception of a property not meeting HAMP requirements. Servicers must also determine if the borrowers in active HAMP trials set to expire on Jan. 31, 2010 are either current or behind on their payments. The Treasury also requires the servicers to send written notification of a borrower in danger of losing HAMP eligibility because of a failure to make all trial payments, missing documentation or both. The notice will provide the borrower 30 days to either catch up on payments or submit documents through Jan. 31, 2010, whichever is later. If the borrower finds evidence of a servicer error within that timeframe, the servicer must consider the new information for HAMP eligibility.
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Top Trends for 2010
Wondering what the new year has in store for short sales? While we don’t pretend to have a crystal ball capable of predicting the future, a brisk review of notable experts indicates a higher than average likelihood of the following trends for 2010:
1. Evaporating Home Equity Loans – Already on the endangered list, home equity loans are expected to become nearly extinct during 2010. Only those with the best credit, most favorable home locations and superior credit can expect to be approved for generous home equity loans in the new year.
2. Growing Interest in Personal, Peer2Peer and Other Alternative Lending – Look for creative financing techniques to continue to grow as traditional bankers continue to tighten lending standards. Owner financing, peer to peer loans, hard money lenders and other alternative options to generate cash are expected to grow in popularity during 2010 and beyond.
3. REIT Exodus – If the recently proposed REIT tax bill becomes law, experts expect a rapid exodus from REIT’s…a move with dramatic implications across the entire economy as some forms of REIT profits will be taxed as ordinary income rather than Capital Gains.
4. Favorable Interest Rates – Interest rates are expected to remain low for much of 2010 as the economy continues to suffer from a jobless recovery and weak dollar however, perhaps not as low as during 2009. Experts expect interest rates to approach 6% for a 30 year fixed mortgage by the end of 2010.
5. Increased Incentives – From first time homebuyers to existing mortgage holders, keep an eye out for various state, federal and local programs and tax credits designed to encourage the purchase of property throughout 2010.
6. More Rules - From new RESPA rules to continued clarifications on taxes related to real estate, new rules are expected everywhere. Short sale investors, bankers, brokers and real estate agents need to keep a close eye on ever changing documentation requirements to stay on the right side of rapid changes.
7.Steady Slowdown & Continued Declines – Don’t expect a full recovery during 2010. In fact, even the ever optimistic federal government and central bank warn home prices are still declining and likely to continue their slide into the new year at least in some markets. Other areas are expected to remain steady. Of course, every cloud has a silver lining – for short sale investors it simply means more buying opportunities.
See you at the top!
Chris McLaughlin
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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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