Real Estate News & Commentary by Chris McLaughlin, November 18, 2009

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Land Flipping Finale … Thursday night at 8:30 PM ET, 5:30 PM PST:

There was so much excitement about the new strategy in flipping land that we’re holding an encore tomorrow night at 8:30 PM ET, 5:30 PM PST.

Here’s the link to RSVP:

https://www2.gotomeeting.com/register/530226171

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MBA – Mortgage applications down

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 13, 2009, decreased 2.5 percent on a seasonally adjusted basis from one week earlier, and 3.3 percent on an unadjusted basis. The Refinance Index decreased 1.4 percent from the previous week and the seasonally adjusted Purchase Index decreased 4.7 percent. The seasonally adjusted Purchase Index has declined for six consecutive weeks and is at its lowest level since November 1997. The unadjusted Purchase Index decreased 7.9 percent compared with the previous week and was 14.7 percent lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 1.2 percent. The four week moving average is down 5.8 percent for the seasonally adjusted Purchase Index, and up 1.4 percent for the Refinance Index. The refinance share of mortgage activity increased to 72.9 percent of total applications from 71.5 percent the previous week. This refinance share is the highest share since the week ending May 15, 2009. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4 percent from 5.5 percent of total applications from the previous week.

CPI breakdown

The Consumer Price Index, a measure of the average price level of a basket of consumer goods and services, was up 0.3% for the month of October, while the core CPI rate, excluding energy and food, rose 0.2%. CNBC has broken the index down so we can see where costs are rising or falling: CPI: Food: Up +.1%, Energy: Up +1.5%, Housing: Up +.09%, Apparel: Down -.35%, Transportation: Up +1.37%, Medical Care: Up +.18%, Recreation: Down -.38%, Education & Communication: Up +.16%, Other Goods & Services: Up +.26%. The change in core CPI figures show that at least for now, inflation is not an issue.

Housing starts down

The Commerce Department says housing starts dropped 10.6 percent to a seasonally adjusted annual rate of 529,000 units, the lowest level since April and the biggest drop since January. Compared to October last year, housing starts dropped 30.7 percent. Analysts polled by Reuters had expected housing starts to rise to 600,000 units. September’s housing starts were revised upwards to 592,000 units from the previously reported 590,000 units. Groundbreaking for single-family homes fell 6.8 percent last month to an annual rate of 476,000 units, the lowest since May. Starts for the volatile multifamily segment tumbled 34.6 percent to a 53,000 annual pace, extending the previous month’s slump. The recovery in the housing market has been led by the popular $8,000 tax credit for first-time buyers, which has since been extended and expanded by the government. It had been due to expire this month, and in October it was unclear whether the incentive would be extended - this uncertainty could have contributed to the slide in construction activity last month.

Oil prices close to 3% trigger

Even though the U.S. economy remains weak and one in six Americans can’t find enough work, oil prices have risen steadily this year. A barrel of crude costs around $80, more than double its price at the end of 2008. Some researchers warn we could once again be approaching the point at which rising energy costs will squeeze consumers, even if $80 isn’t even close to last summer’s peak above $145 a barrel. The price of a gallon of gas is $2.63 a gallon, according to the latest AAA survey. That’s well below the 2008 peak of $4.11 — but up 25% from a year ago and 63% above last December’s low. More important, it’s close to the $3 a gallon price that could strain consumers whose spending accounts for two-thirds of economic activity. “Any time it gets above $3, it’s worth watching,” said James D. Hamilton, an economics professor at the University of California at San Diego. “When you get to that level, you start to see a change in behavior as budgets get squeezed.” Hamilton said the $3-a-barrel price is noteworthy because it’s around the level at which consumers are devoting 6% of their budgets to energy costs. Hitting that point in recent years seems to have prompted Americans to pull back. The factors behind this spike include a pickup in global economic activity fueled by massive government spending, a decline in the purchasing power of the dollar as the U.S. holds interest rates near zero, and lack of new oil supplies coming online to meet future demand – all things that will persist for some time.

Home owners confused about home values

Real estate website Zillow.com says U.S. homeowner confidence varied significantly by region in the third quarter as home values in parts of the country stabilized while others saw declines. The Zillow Q3 Homeowner Confidence Survey and the Zillow Q3 Real Estate Market Reports claim that homeowners in the Northeast were the most cynical about their own homes’ values, even though the region posted the highest percentage of homes increasing in value during that same time period. One in five, or 20 percent, of Northeastern homeowners believes their own home gained value in the past 12 months, according to the survey, but in reality, 31 percent of homes in the region increased in value. Homeowners in the West were the least realistic in the country, with 28 percent believing their own homes’ values increased in the past 12 months. According to Zillow, 17 percent of homes in the region actually increased, resulting in a Misperception Index of 17. Nationally, 25 percent of homeowners believe their own home’s value increased in the last 12 months. In reality, 22 percent of U.S. homes gained value. “Homeowners are clearly confused about the housing market, and with good reason,” Stan Humphries, Zillow chief economist, said in a statement. “Home values in different parts of the country have shown varied performance in the third quarter.”

Now on to our real estate investing educational arena …

Money Matters – Seven Most Common Real Estate Financial Fiasco’s

When it comes to real estate, the majority of investors tend to use leverage via bankers and mortgage brokers which is perfectly fine and acceptable assuming they understand how to avoid common pitfalls. Unfortunately, even some of the more savvy real estate types tend to become less than impressive when it comes to credit terms and other money matters. Learn how to avoid these financial fiasco’s with a little help from your friends here at the shortsalesriches.com/blog.

1. Confusing Finance Charges with Interest Rates. Plain and simple, they are not the same thing. Don’t make the mistake of confusing them. Obtain the best possible interest rates and the best possible finance charges to avoid overpaying for the loan.

2. Borrowing Below Your Rating. Find out your credit score then locate the most competitive banker or broker available. Hard money lenders, discount brokers and others build a business on servicing more risky investments or those with inferior credit – because of this they tend to charge higher than average rates. LIkewise, other underwriters specialize in low-risk portfolio’s and tend to have the best rates. Although there are some variations, most investors find the best rates by showing at or slightly above their credit rating.

3. File the Paperwork! This is a problem whenever a property is sold or paid-in-full but it tends to become even more problematic with short sales that may have experienced paper-trail issues in the past. Make sure all paperwork is recorded with the Clerk of the Court ASAP otherwise, it could delay your next loan or even kill a deal. It’s worth a few extra dollars and a little extra time to file it yourself as soon as possible especially if your are working with slime debt to income margins related to your own financing.

4. Not Taking Taxes into Account. Understand how taxes will impact the profit of any property before making a final decision. It some cases, it might make more sense to pay fewer out of pocket expenses and take the additional tax write-off’s while for others it is all about revenue. Just understand the implications in advance to avoid unpleasant financial surprises down the line.

5. Timing Trouble. Novice short sale investors are especially prone to unpleasant surprises related to timing if they aren’t careful and cautious. Not only does it matter when the mortgage payment will become due but insurance and property taxes are other major cost considerations to keep in mind. Use timing to your advantage and avoid taking on more than you are able to comfortably handle.

6. Doing Business with Family. In general, it’s a bad idea but if you really want to risk it, be sure to have the proper contracts in place and never-ever go on verbal agreements or a handshake. It’s a quick way to turn a good short sale deal into a never-ending nightmare.

7. Forgetting to Re-Invest Profits. Taking out profits is part of the fun but don’t get so excited that you forget to set aside enough to re-invest or even grow your short sales in the future. Why settle for one ride on the Merry-go-Round when you can have a lifetime of steady growth capable of changing the financial future of your entire family? Keep perspective and set aside some to use on bigger and better deals.

See you at the top!

Chris McLaughlin
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http://www.shortsalesriches.com
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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
  * Follow me on Twitter: http://twitter.com/mclaughlinchris
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