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Home prices bottomed?
According to the PMI Mortgage Insurance Risk Index, the risk of home prices dropping even lower in the next two years is stabilizing in most Metropolitan Statistical Areas (MSAs). The index charts the chance that home prices will rise or fall along a yearly timeline. To do this, PMI analysts translate a percentage, which predicts the probability that house prices will be lower in two years, into a Risk Index score. A score of 100 means there is a 100% chance that the prices will be lower in two years for that MSA. According to the latest Index, risk may have peaked for many MSAs, though the average risk score remains “very high.” In Q309, risk dropped in 22 of the top-50 MSAs. Of all the 384 MSAs measured in the Index, 212, slightly more than half, had decreases in risk scores.
But even though risk declined in the majority of MSAs, the average risk score stayed above 50, dropping for the first time in over a year from 58.3 to 57.5. MSAs in Florida, California, Nevada and Arizona continued to have the highest risk scores in the nation during Q309. All MSAs in Florida, Nevada and Arizona have risk scores in the 90s. But California showed some improvement. Of the 28 MSAs measured in California, 25 saw decreases in risk scores from Q209 to Q309. North Dakota, South Dakota, Nebraska and Vermont continue to show minimal risk. North Dakota leads the nation with the lowest risk score of 1.6. The leading MSAs in terms of risk correspond closely with the MSAs holding the highest foreclosure rates in the RealtyTrac Year-End 2009 Foreclosure Report.
Unemployment rate down, more jobs lost
The Labor Department says the good news is that unemployment fell to 9.7% in January, much lower than economists’ forecasts of 10%. The bad news is that the U.S. economy lost 20,000 jobs in January. The Labor Department also released an annual revision of U.S. payrolls on Friday, using data that wasn’t initially available. Losses for 2009 alone came to 4.8 million jobs, more than 600,000 more than previously estimated. The revision showed the economy has lost 8.4 million jobs since the start of the recession in December 2007 — 1.4 million more job losses than initially reported. The payroll number for December was revised to a net loss of 150,000 jobs. The government had previously indicated that 85,000 jobs were lost in December. But the government said the tepid job growth initially reported in November was actually much stronger than previously believed. Jobs rose by 64,000 in November, up from an initial estimate of 4,000. It is the only month in the past two years in which jobs grew.
January’s report offers hope that employers are starting to reverse course and may start adding jobs soon. Aside from November’s gain, January’s job losses were the smallest since the recession began and are down from the huge loss of 779,000 jobs in January 2009. The manufacturing sector added jobs for the first time since January 2007. Its gain of 11,000 jobs was the most since April 2006. Retailers added 42,100 jobs, the most since November 2007, before the recession began. Temporary help services gained 52,000 jobs, its fourth month of gains. That could signal future hiring, as employers usually hire temp workers before permanent ones. The average work week increased to 33.3 hours, from 33.2. That indicates employers are increasing hours for their current workers, a step that usually precedes new hiring.
Rent free for years
Diana Olick points to a new trend among homeowners. The percentage of borrowers who are delinquent on their mortgages but paying their credit card bills on time is growing, to 6.6 percent in the third quarter of 2009 from 4.9 percent in the same quarter of 2008, according to a new study by Chicago-based TransUnion. At the same time, the share of borrowers that are delinquent on credit cards but current on their mortgages slipped to 3.6% from 4.1%. In an interview with Reuters, the author of the study, Sean Reardon, confirmed, “This goes against conventional wisdom and that has always been that, when faced with a financial crisis, consumers will pay their secured obligations first, specifically their mortgages.”
As Olick points out, “most troubled borrowers have already figured out that there are so many forces in motion trying to save homes from foreclosure that they can easily miss one, two, five or six mortgage payments before even getting a call from the bank; then, they’ve got many more monterhs of negotiations over modifications, short sale options, even the foreclosure process itself, insuring they will have a roof over their heads for a good long time. Home building Analyst Ivy Zelman said that in some Florida counties the courts are so backed up with foreclosures that it can take up to three years to get one home through the system. That’s three years of living rent-free, which frees up plenty of cash to pay the Visa bill.” The study, based on a database of 27m consumer credit records, found the magnitude of delinquency is significantly higher in the lowest credit scoring segment, opposed to delinquency in the total market. The payment priority shift to credit cards over mortgages is even more pronounced in sand states like California and Florida, which experienced a more severe housing bubble effect, TransUnion said.
US debt ceiling raised
The House of Representatives voted yesterday to raise the debt limit by $1.9 trillion, raising the debt ceiling to $14.3 trillion, a new high for the amount of debt for the U.S. As recently as 2001, the U.S. debt was only at $5.7 trillion, but it exploded after Sept. 11, 2001, amid record spending by the Bush and Obama administrations. If Congress doesn’t hike the debt ceiling, the U.S. would be unable make good on Social Security and Medicare payments. The Senate approved the debt limit increase in mid-January on a 60-40 party-line vote. The House vote was a close one, at 217-212. All Republicans and more than 30 Democrats voted against raising the debt ceiling – moderate and fiscally-conscious Democrats were leary of voting for the bill. The debt ceiling increase is part of a broader bill that would impose so-called “PAYGO” rules on the House. In other words, the House would have to pay for all tax cuts or programs it creates so they are budget neutral. In theory, anyway.
Mortgage rates slightly higher
Freddie Mac’s weekly survey put the average rate for a 30-year fixed-rate mortgage (FRM) at 5.01% with a 0.7 origination point for the week ending February 4, up from last week’s average rate of 4.98%. It’s the first week-over-week increase in 2010. A year ago, the 30-year FRM was 5.25%. Bankrate.com’s weekly survey of large banks and thrifts put the 30-year FRM at 5.15%, up from 5.13% last week. Freddie put the 15-year FRM at 4.4%, up from last week’s average rate of 4.39%, but still down from last year’s rate of 4.92%. Bankrate.com put the 15-year FRM at 4.55%, up from 4.54% last week. Freddie Mac vice president and chief economist Frank Nothaft said despite the increase, rates remain relatively stable amid other positive developments, including recent increases in pending home sales and mortgage applications. “Even more encouraging news came from the Federal Reserve’s Senior Loan Officer Opinion Survey, which reported that banks have generally stopped tightening standards on most types of loans in the fourth quarter of 2009, with commercial real estate as the exception,” Nothaft said. “However, banks have yet to unwind the tightening that occurred over the last two years. Moreover, substantially fewer banks expected credit quality to deteriorate over the coming year,” he added. Freddie said the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.27%, up from last week’s rate of 4.25%. Last year, the five-year ARM averaged 5.26%. Bankrate.com’s average rate for five-year ARMs was 4.56%, up from 4.54% last week. Freddie’s survey of the one-year Treasury-indexed ARM put the average rate of 4.22%, down from last week’s rate of 4.29% and last year’s 4.92%.
Now on to our real estate investing educational section…
Friday File – 15 Minute Resolution for the Week
Whether you know it or not, everyone has at least three budgets; a financial budget, a time budget and a mental budget. As a short sale investor you have probably spent plenty of time calculating your financial budget but what about your time and mental budget? This week make a point of spending 15 minutes to plan and prepare for the week ahead. Not only will you save time and money (really they same thing) but most people find they feel less stressed and more refreshed at the end of the week.
1. Record then reward the time of your life. Do you know where the days, hours and moments of your life go? If not, start keeping track of how much wasted time you spend on mundane, non-productive activities. Decide which can be eliminated then move on to step two…delegate. Be sure to eliminate as much as possible prior to delegating or else you risk spending even more time and money on non-productive activities. Once you have eliminated and then delegated as many routine, mundane and non-productive activities as possible it’s time to reward yourself by setting aside at least a portion of that time toward achieving another life goal. It could be to take up a new hobby or spend additional time with family and friends; whatever the reason allow it to reconfirm the benefit to be derived from pursuing short sales.
2. Establish a mental budget. Sure, some people enjoy eating, thinking and dreaming about work or investments but for others it is simply a means to an end. Either way, establish a mental budget to determine a rational and reasonable return on your mental investment. Whether it’s ten hours a week or ten hours a day, find the right balance between work and play to create the life you really love. Not only will you appreciate short sales rather than resent the effort but it’s likely to show in your negotiations and communication with others.
3. Review your financial budget to balance all three. Make sure the time and emotional investment you are putting into short sales is adequately rewarded by establishing a minimum thresh-hold for each transaction. For example, if you know a project is likely to require x number of hours and you need to make at least $500 per hour then only accept projects that will meet or exceed your given criteria. Not every deal – even a good deal – is the perfect fit for every person. By aligning your needs, demands and expectations with a firm return it’s possible to spend less time while creating every expanding deals that satisfy all your criteria without sacrificing sanity.
See you at the top!
Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2009.
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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