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Record 3,000,000 homes in foreclosure
RealtyTrac, the online marketer of foreclosed homes, reported that one in 45 households — or 2,824,674 properties nationwide — were in default last year. That’s 21% more than in 2008, and more than double 2007’s total. “As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans,” said RealtyTrac CEO James Saccacio in a prepared statement. However, by all accounts it is still uncertain whether efforts like Obama’s Home Affordable Modification Program have forestalled or just delayed foreclosure. By early December more than 680,000 borrowers had gotten temporary workouts but only a few thousand had been permanently modified. “In the long term, a massive supply of delinquent loans continues to loom over the housing market,” said Saccacio. “And many of those delinquencies will end up in the foreclosure process in 2010.” The four states with the most foreclosure filings — California, Florida, Arizona and Illinois — accounted for a full 50% of the nation’s properties receiving notices. Nevada recorded the highest rate of foreclosures, at 10%, followed by Arizona, at 6.1%; Florida, 5.9%; and California, 4.75%. But some states where foreclosure hit hard early are now faring better. Indiana foreclosures fell by 9.9%, Ohio by 10.5% and Rhode Island by 23.6%. California, by far the most heavily populated in the union, posted the most filings with 632,573, up 20.8% from 2008. Golden State cities have also recorded some of the steepest declines in home prices, with values falling 50% or more in some Central Valley cities.
Unemployment claims up
The Labor Department said in its weekly report that the number of Americans filing for initial unemployment insurance rose more than expected last week. There were 444,000 initial job claims filed in the week ended Jan. 9, up 11,000 from a revised 433,000 the previous week. A consensus estimate of economists surveyed by Briefing.com expected new claims to rise to 437,000. The 4-week moving average of initial claims was 440,750, down 9,000 from the previous week’s revised average of 449,750. The government also said 4,596,000 people had filed continuing claims in the week ended Jan. 2, the most recent data available. That’s down 211,000 from the preceding week’s revised 4,807,000 claims.
The 4-week moving average for ongoing claims fell by 151,500 to 4,855,000 from the previous week’s revised 5,006,500 but, as always, remember that the decline may just mean more filers are dropping off those rolls into extended benefits. Unemployment claims in six states dropped more than 1,000 for the week ended Jan. 2, the most recent data available. Claims in Illinois fell the most, by 6,928, which the state said was due to fewer layoffs in construction, trade and manufacturing industries. A total of 18 states said the claims rose by more than 1,000. Claims in Massachusetts jumped the most, by 1,166, which the state attributed to layoffs in the transportation, warehousing and manufacturing industries.
DSNews.com – commercial mortgage defaults dangerous for banks
The anticipated surge in commercial mortgage defaults this year could wipe out profits at a number of U.S. banks, according to a research study published by SMR Research Corporation. However, SMR said this problem is not likely to morph into a true crisis that would endanger U.S. or global financial systems. The study found highly delinquent commercial mortgages were only 0.1 percent of Citigroup’s assets. JP Morgan Chase also appears to be “walled off” from the dilemma, and exposure at Bank of America is only slightly higher. At small banks with less than $1 billion of assets, however, commercial mortgages were 32.5 percent of total assets. This level of dependence is six-fold higher than at big banks with $50 billion or more of assets, SMR said. Highly delinquent commercial mortgages equaled 3 percent or more of 154 bank’s total assets, as of September 30, 2009. SMR said banks earn profits of only about 1 percent of assets in a reasonably good year, so many of these institutions will be hard-pressed to make any money in 2010, and some banks may even become insolvent.
The 90-day-plus delinquency rate on all commercial mortgages, including multi-family apartment building loans and commercial construction loans, increased at a notable rate in 2009. On September 30, it reached 5.59 percent, up from 3.51 percent just six months earlier. In addition, the vacancy rate on apartment buildings reached its highest level since 1965, and vacancy rates were also high at shopping centers and office buildings. According to SMR’s study, the total commercial mortgage loan market was $3.4 trillion at the end of the third quarter in 2009.
Retail sales lame in December
The Commerce Department said total retail sales fell 0.3% to $353 billion last month, compared with November’s upwardly revised 1.8% jump. Economists surveyed by Briefing.com had anticipated that December sales would grow 0.5%.Consumer spending accounts for two-thirds of U.S. economic activity, and related reports such as retail sales are closely watched to determine whether a recovery is underway. Sales excluding autos and auto parts fell by 0.2% from November and core retail sales, which excludes autos, gasoline and building materials, fell 0.3 percent after rising 0.9 percent in November. Analysts expected sales ex-autos to jump 0.3%.
Health and personal care stores increased 0.8%. But restaurants and bars fell 0.6%. Electronic and appliance store sales plunged 2.6%. Also showing declines: building material and garden supplies dealers, down 0.4%; food and beverage stores, down 0.8%; clothing stores, down 0.6%; general merchandise stores, down 0.8%. Mail order and Internet retailers rose, up 1.4%. Furniture retailers climbed 0.3%. Sporting goods, hobby, book and music stores jumped 1.6%. Given that the economy was so weak 12 months ago, year-to-year increase was strong. December 2009 retail sales jumped 5.4% compared to the same month in 2008. Stubbornly high unemployment remains the weakest link in the recovery from the worst economic downturn since the 1930s. Job worries are expected to constrain consumer spending, which normally accounts for more than two-thirds of economic activity
Housing sales up
In the December 2 edition of the Summary of Commentary on Current Economic Conditions, commonly called the Beige Book, eight Federal Reserve Districts reported an economic uptick. In fact, all but two Fed districts reported increased activity or improved conditions, with Philadelphia and Richmond seeing mixed results. At the end of the year, home sales increased in every district but San Francisco, where activity was steady and Kansas City, which experienced a decline. Lower-priced homes typically purchased by first-time homebuyers outpaced sales of higher-priced homes.
The districts project the extension and expansion of the homebuyer tax credit could give an added impetus to the expected seasonal sales upturn this spring. Despite the improved activity, prices have remained at their low levels. Boston, Philadelphia, and Cleveland experienced price declines, Richmond remained steady, while Dallas reporting some “firming” in prices. New residential construction activity is at low levels in most districts, but Chicago and Minneapolis are exceptions to this trend. Rising vacancy rates and falling rents both impact the weakness in commercial real estate. Landlords are focusing on tenant retention, negotiating lease extensions at low rents and with favorable allowances. Loan demand continues to decline or remain weak and credit quality continues to deteriorate, most districts said. The exception to this is residential mortgages, which is experiencing a steady demand.
Fannie Mae Launches Special Approval Designation
Fannie Mae announced that it’s going to take a look at hundreds of condominium projects in Florida that may not currently meet Fannie Mae’s standard eligibility criteria to see if it can allow additional projects to become Fannie Mae-eligible through a new “Special Approval” designation. Projects deemed to be sufficiently stable following the closer examination are granted a Special Approval designation, meaning lenders can originate and deliver mortgage loans secured by units in these projects to Fannie Mae. Projects found to be eligible will be listed on www.eFannieMae.com as project reviews are completed, and qualified borrowers will be eligible for financing.
Special Approval designations are for established condominium projects only, effective for periods between 9 and 18 months, and lenders are required to confirm the project’s Special Approval designation on the date of the loan application. “This new initiative is geared toward providing maximum support for Florida’s distressed condo market as we continue to provide liquidity to the housing market more broadly,” said Karen Pallotta, Executive Vice President, Single Family Mortgage Business. “The state’s condo market has been particularly hard hit by the housing downturn and we’re working with the industry and our partners to do all we can to stabilize the market and help spur recovery.” Moe Veissi, National Association of Realtors First Vice President agreed: “NAR applauds Fannie Mae for taking this important step to make condo loans more readily available in Florida…Our state is probably the hardest hit as far as the condo market is concerned, and Fannie Mae’s new effort to take a closer look at project eligibility could go a long way to putting projects back on a healthy financial track.”
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Finding Foreclosures
Thanks to the internet, finding foreclosures is now as simple as signing-up for an automated service or website that delivers results directly to your inbox. Unfortunately, not all services are created equal. There is a time lag between when paperwork is filed at the local court-house and when it finally arrives to the website database. Some serious short sale investors still like to do things the “old fashioned” way while others simply rely upon a bit of additional “know how’ to steal the best deals before others are even aware they are on the market. Here to help jump-start your own search are a few of the most common methods of finding foreclosures:
1.Online. There are dozens of websites, search engines and even real estate agents that will send a daily update of foreclosures in your area. Most are extremely simple, easy to use and affordable with prices that range from free to very low cost. Given the time savings, every serious short sale investor will use one or more of these on a constant basis. Just keep in mind, there are limitations especially when it comes to finding the absolute best properties and prices.
2. Legal Notices in the Newspaper or Online Equivalent. Assuming you are one of the few remaining people that subscribe to print newspapers, turning to the legal section has been a tried and true way of learning about delinquent properties in the past. Unfortunately, not only is there a time delay but trying to sort out which paper published the legal notification isn’t always easy. Unless you enjoy spending a lot of time reading very small print from a variety of local newspapers – use this option sparingly at best. Instead, use an online service or sign-up for an email feed of the legal section of the local news.
3. Lis Pendens List(s). Once a property is severely delinquent and is going into foreclosure the bank will file a “Lis Pendens” notice with the local Clerk of the Court. Online foreclosure listings simply compile the same information that is available free at your local court house; depending upon your area, many are available online or via fax for low/no cost.
4. Real Estate Agents. Let agents and brokers know you are in the market and chances are, it won’t take long at all before your inbox is filled with valid leads. Although many people balk at the idea of using an agent, it’s often possible to make a lot more money in the long run by allowing the agent to sort through all the properties that meet your criteria. Not only will you save time by not pursuing dead-end properties, but sifting through an inbox complete with photo’s, tax information, topography and even insurance quotes is a tremendous way to maximize personal productivity and focus on profits.
Bottom line – Looking for short sales is a lot of fun but don’t allow it to interfere with the primary purpose of your investments…making money. Automate leads and allow others to sift through the various criteria then follow-up with the most promising properties.
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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