black friday

Smart Real Estate News & Commentary by Chris McLaughlin November 24, 2010

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MBA – Mortgage applications up

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 19, 2010 increased 2.1 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 1.1 percent compared with the previous week.   The Refinance Index decreased 1.0 percent from the previous week and is the lowest Refinance Index observed since the end of June.  The seasonally adjusted Purchase Index increased 14.4 percent from one week earlier, which included Veterans Day. No adjustment was made for the holiday. On a seasonally adjusted basis, this is the highest Purchase Index recorded since the week ending May 7, 2010. The unadjusted Purchase Index increased 9.6 percent compared with the previous week and was 7.4 percent lower than the same week one year ago. 

The increase in purchase applications last week aligns with other incoming data suggesting that consumers are feeling somewhat more confident with their financial situation, said Michael Fratantoni, MBA Vice President of Research and Economics.  While the increase was magnified somewhat by the comparison to the holiday week, the level of purchase applications on a seasonally adjusted basis is now at its highest level since the expiration of the homebuyer tax credit.  The four week moving average for the seasonally adjusted Market Index is down 3.2 percent.  The four week moving average is up 4.0 percent for the seasonally adjusted Purchase Index, while this average is down 4.8 percent for the Refinance Index.  The refinance share of mortgage activity decreased to 78.6 percent of total applications from 80.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained constant at 5.3 percent of total applications. 

Unemployment claims down

According to the Labor Department, the number of initial claims fell to 407,000 last week, down 34,000 from 441,000 claims filed the week before.  Economists surveyed by Briefing.com had expected initial claims to rise slightly to 442,000.  The weekly measure has been stuck in a rut since last year, hovering in the mid to upper 400,000s and even ticking slightly above 500,000 in mid-August. Economists usually say the number needs to drop below 400,000 before the stubbornly high unemployment rate — which currently stands at 9.6% — can drop significantly.  A number as low as 407,000 is as close to that level that the data has gotten since July 2008, when there were 405,000 initial claims.  The four-week moving average, calculated to smooth out volatility, totaled 436,000, down from the previous week’s revised average of 443,500.  The number of people continuing to file unemployment claims for a second week or more fell to 4,182,000 during the week ended Nov. 13, the most recent data available. That’s down 142,000 from a revised 4,324,000 the week before, and the first time in two years that the number has slipped below the 4.2 million mark.  The report comes a day after Federal Reserve officials offered little hope for the job market going forward. The central bank said the unemployment rate will likely remain high between 8.9% to 9.1% in 2011.

Olick – Mortgage market too tight or just right?

“The message from the National Association of Realtors, or at least from its chief economist as he released lackluster sales results for October, is that the mortgage market is now largely to blame for the lack of a real recovery in housing.  ‘What is important is the access to credit. We believe that many qualified home buyers that want to stay well within their budget are being denied credit because of the overly stringent underwriting standards of today’s market,’ said Lawrence Yun in our usual post-news release interview.  Yun is right that the leaders of Fannie, Freddie and the FHA are touting the quality of their most recent books of mortgage business. FHA Commissioner David Stevens even said it in an interview with me last week that ‘the 2010 book is the best book in FHA history.’ He is clearly quite proud of that; Yun claims that’s the problem.  It’s a bold assertion, I have to admit. Lax underwriting is almost entirely to blame for the biggest housing crash in U.S. history and for the ensuing crash in the greater economy and banking sector. Banks gave away mortgages like toasters with very few questions asked. Fannie, Freddie and FHA played in that to a degree as well, as they tried to keep up with private-sector competition. Everyone has already admitted it over and over.  Now, barely a few years later, and as reform of the mortgage market is still in the works, the realtors are saying the market has gone too far; the fact that the last two years of mortgages are performing better than ever means that lenders have become ‘overly stringent.’ Yun claims there are plenty of responsible potential borrowers out there, ready to eat up all that bloated inventory—but they can’t get loans, so they’re out. 

He also points to a statistic in today’s report that 29% of all buyers in October used all cash. That is historically very high. I would also point out that nearly 20% of buyers were investors, who are all working in cash today because if it’s hard to get a mortgage on your first home, it’s next to impossible to get loans for multiple investment properties.  So here I sit, trying to determine if what Yun is saying is totally outrageous in this day and age of licking our wounds, or if he has a point.  Are mortgage lenders throwing the baby out with the bathwater? Have they made underwriting suffocatingly stringent to the detriment of recovery? Or is this exactly what we need today to stabilize the housing market, minimize new loan delinquencies and bring investor confidence back to the mortgage market?”

Fed predicts weak recovery for years

According to minutes from the Fed’s November 3 meeting, more than half of the central bank’s policymakers thought it would take about five or six years for unemployment, growth and inflation to return to more normal levels. Other Fed members warned the full recovery could take even longer than that.  The much weaker forecast is the major reason that policymakers decided earlier this month to announce a plan to try and jumpstart growth by pumping an additional $600 billion into the economy through the purchase of long-term bonds. That plan, known as quantitative easing, has been criticized by several economists, politicians and foreign central bank officials.  The Fed now expects the economy to grow between 2.4% to 2.5% this year, compared to an earlier forecast of growth between 3.0% and 3.5%.  The Fed also trimmed its 2011 forecast to growth of between 3% and 3.6%. Its earlier estimate was for growth of 3.5% to 4.2%. 

And the Fed now forecasts unemployment will only fall to between 8.9% to 9.1% in 2011, well above the 8.3% to 8.7% unemployment rate it previously predicted for 2011.  The Fed also indicated it expects unemployment to only drop to between 6.9% to 7.4% by 2013. To put that into context, the unemployment rate was 4.6% in 2007, the last year before the recession.  The central bank also maintained that inflation should not be a problem for the foreseeable future. Prices for consumer goods are expected to rise a little faster than in the Fed’s previous estimate, but still well less than 2% through at least 2012.  The Fed stated that price increases are now judged to be too low to maintain its goal of price stability, but some policymakers at the Fed have expressed concern that the steps the central bank is taking to stimulate growth could lead to higher inflation down the road.

Freddie Mac’s delinquencies climb

Freddie Mac‘s 90-plus day delinquency rate increased for the first time since February, according to the government sponsored enterprise’s monthly summary. The delinquency rate for single-family residences was 3.82% in October, up from 3.8% in September.  The delinquency rate for multifamily properties also increased, up to 0.44% in October from 0.35%; however, this is the second consecutive monthly increase in delinquencies on this type of property.  One year ago, the delinquency rate for single-family residences backed by Freddie Mac was 3.65% and 0.18% for multifamily properties. That constitutes a 4.6% yearly increase in single-family delinquencies from 2009 and a 144.4% yearly increase in multifamily delinquencies.  The 2007 vintage accounts for the most delinquencies, as 0.64% of these loans are between 60- and 90-days delinquent and 0.95% are more than 90-days delinquent. A total of 12,763 loans originated in 2007 are delinquent on Freddie Mac’s books.  Freddie Mac’s weekly mortgage rate survey indicated the rate for a 30-year fixed-mortgage rate increased for the first time in two months, up to 4.39%.

Problem banks increase

The number of banks on the Federal Deposit Insurance Corp’s confidential “problem” list grew over the summer even while the overall industry posted solid net income.  The FDIC says its list of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter.  At the same time, the FDIC says banks earned $14.5 billion during the third quarter. That was a decrease from the previous quarter’s result of $21.4 billion, but well above the $2 billion banks earned a year earlier.  The FDIC says banks set aside less money to cover future loan losses than at any time since the October-December quarter of 2007, before the financial crisis.

Fewer borrowers were behind on payments for credit cards and construction loans.  The amount of bad loans, those 90 days or more past due, declined for the second consecutive quarter, the agency said in its latest quarterly report. The balances for these loans declined by 2.1 percent, or $8.3 billion, in the third quarter.  Nearly 19 percent of institutions were unprofitable in the third quarter, however, and almost 36 percent had lower quarterly earnings then a year ago. As of last Friday, 149 institutions had failed so far in 2010.  The number of banks on the agency’s “problem list” grew from 829 to 860, which is the highest number since March of 1993 when there were 928 institutions on the list.

Now for our real estate education section…

Prepare Now for Black Friday

It’s that time of the year when shoppers are out and about picking their way through crowded stores, sorting coupons for cash savings and looking for the most lucrative real estate deals….? Not exactly. Although Black Friday might be the favorite day of the year for retailers, it’s less than impressive for many real estate investors. Traditionally, fewer people move over the holidays and battling banks while trying to lock-in rates is less than appealing to most would-be buyers who prefer to wait until after the holiday season is over to resume shopping.

So, what is an ambitious short sale investor to do? Actually several things come to mind both online and off. Here’s what you need to know to prepare for Black Friday:

1. Increase service to the select few. Window shoppers have plenty to keep them occupied and many other real estate agents will be out of town or otherwise engaged; make the most of the situation by providing better than average service to the few serious shoppers remaining.

2. Streamline keyword campaigns. Stop all ad testing and streamline the rest of your online marketing campaign until after the holidays. Stick with only the tried and tested top performers to generate results.

3. Consider alternatives. Although an open house may not be your typical idea of a good time investment, it could work in your favor over the holidays if the property is in a great location. Establish a high visibility area, offer free treats and consider adding other attention getting attractions, discount coupons or other incentives for people to stop-by and sign-up for your free information. Collect names and pass out contact information. Include an easy to add site for social media friends to make contact.

4. Tag Team. Work with local insurance agents, brokers and others to pass out materials at the mall, flea markets or other popular shopping spots. Let people know about bargain properties and how to reach you if they are interested in buying or selling.

5. Cinch the deal. Add major incentives to those willing and able to close by the end of the year by including appliances, a home warranty of other highly desired amenities. Other popular choices include a big screen television, hot tub or choice of flooring and paint…whatever it takes to make the deal happen is time and money well spent.

6. Out with the old and in with the new. Ring in a new year by eliminating the least productive properties in your portfolio. Whether the depreciation has run dry, the rents are too low or it’s a money pit draining your last dollar, everyone has a property that is dragging them down. Ditch it and move on! Get creative and showcase the home by having your very own Black Friday sale.

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
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Mid-Day Market News & Commentary by Chris McLaughlin, December 1, 2008
http://www.shortsalesriches.com/welcome.html
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It isn’t about what the economy is doing … it is about how you respond to it! Can you imagine that there’s a way to actually make tons of money in this market, literally a recession-proof investment strategy? Yes, you don’t need capital. You don’t need good credit. You just need a plan. And we’re gonna show you that plan, on Tuesday night. But there are only 50 spots available, so grab yours now:

Recession Proof Investing Webinar (Tuesday, 9 PM EST, 6 PM PST):
http://www.recessionproofinvestingwebinar.com  
—–
The financial markets were jittery this morning after the Institute of Supply Management index of manufacturing activity dropped to 36.2 in November from the reading of 38.9 in October. The drop represented the lowest reading in 26 years, spooking investors who for the most part were pleased with reports that holiday shoppers were buying.

ShopperTrack RCT, a firm that tracks sales for over 500,000 retail outlets, indicated that sales rose 3% to $10.6 billion compared to the Black Friday in the year ago period.

Around noon the Dow Jones Industrial Average was off 371.40 to 8457.64 and the Nasdaq was off 79.14 to 1,456.43.

The U.S. Department of Commerce announced today that construction spending dropped 1.2% for the month of October, a larger decline than the .9% many analysts had expected. Housing construction dropped by 3.5%, a larger drop than the decline of .5% in September. Most analysts attribute tightening credit as the leading factor causing the declines.

And in good news for drivers…national gas prices are now $1.82 a gallon, a price not seen since January 2005. This “energy dividend” is likely to assist many companies that were struggling with higher fuel costs. But for those interested in real estate, let’s hope this doesn’t mean buyers want to drive around to even more homes!

And finally, for the political junkies reading this…Senator Hillary Clinton officially was nominated by President Elect Barack Obama to be his Secretary of State. Obama is keeping Defense Secretary Robert Gates and nominated retired Military General Jim Jones to serve as National Security Adviser.

Now, on to our real estate investor education section…

Indicators and Indices: Information You Need to Know

There are two types of investors in this world: those that follow the masses and those that remain independent. Guess which type typically makes the most money? While many investors that go against the common trend of the day are considered contrarian investors, a more apt description may simply be “informed”. Given the recent melt-down hitting Wall Street and Main Street, only those that have a true understanding of current events will have the stamina, rational and readiness required to profit while others panic.

To that effect, one bit of information every short sale investor needs to know is how to “read” these common indicators and indices. While no single index is able to provide a full picture of current events, taken together the information is useful to demonstrate trends in the market. Here are a few lesser known indices to keep an eye on in the coming months:

Barron’s Confidence Index. Experts tend to think of bond investors as a bit more sophisticated and savvy than stock traders (in general) and therefore able to identify stock market trends earlier. This weekly indictor is not as well known to the common investor but eagerly tracked by “those in the know”. The index divides Barron’s 10 top-grade corporate bonds by the yield on the Dow Jones 40 bond average. Because top grade bonds have a lower yield than lower-grade bonds the index is always below 100 with an average range between 80 to 95; this week – the end of November 2008, it sits at 46.4 as compared to 78.8 only a year ago.

Tip: Most analysts believe there is a “lag-time’ between Barron’s Confidence Index and what stocks will be doing in 3-6 months. Expect the “flight to safety” to continue into early next year and keep an eye out for future reversals.

OFHEO Price Index. The Office of Federal Housing Enterprise Oversight publishes data of major interest to every short sale investor or real estate professional. The most recent data released on November 25th, 2008 shows home prices continued to slide during the past summer by an average of 6.0. However, since the cost of other goods and services increased by 6.7 percent, the inflation adjusted rate of decline actually approached 13 percent over the past year. Despite this dismal news, some states actually showed an increase including North Dakota (4%), South Dakota (3.9%), Texas (3.2%), Alabama (2.8%) and Oklahoma (2.8%).

Tip: The OFHEO utilizes Fannie and Freddie data to derive its data; obviously, given the recent government intervention into these programs the data may be skewed and does not reflect transactions outside of these quasi-governmental programs.
Index of Bearish Sentiment.

Although this index not housing specific, it can provide a useful tool for tracking trends in the general financial and/or economic environment. In a nutshell, this index provides a means of tracking reversals of official recommendations; ie, when the investment advisory service recommends a specific action then it is time to do the opposite.

So for example, if there are 200 total investment advisory services and 100 are bearish then the index would show 200/100 = 50%. This index is used to track the future trends of investors by using a contrarian perspective. When 42 percent or more are bearish then the market will go UP. When 17 percent or fewer are bearish the market will go DOWN.

Tip: Real estate investors can use this as a quick gauge to measure contrarian sentiment in their own markets or as a sub-set of REIT’s, builder stock etc…remember, investor advisory services follow trends rather than make them since by definition, they tend to report on what has happened in the market.

More on Tuesday!

See you at the top!

Chris McLaughlin

P.S.:

If you have the chance make sure you jump on this link now, to get the insight into why the foreclosure market is going to be THE PLACE to invest:

http://www.shortsalesricheswebinar.com  

Don’t miss it – everyone that has watched it says it is perhaps the most useful tool in understanding what’s going on in the real estate market, and how to make money in today’s environment.

P.P.S.: Join us for our next webinar, this Tuesday, December 2nd at 9 PM EST/ 6 PM PST:

A Recession Proof Real Estate Investing: Making Money in ANY Economy!

We’ll show you how to make money with no credit, no capital, and no holding costs! Think we’re crazy? Find out now!

http://www.recessionproofinvestingwebinar.com  

We’re limiting the webinar to 50 registrations to give individual attention to those who join … so jump on this link to register:

http://www.recessionproofinvestingwebinar.com  

 

Mid-Day Market News & Commentary by Chris McLaughlin, November 28, 2008
http://www.shortsalesriches.com/welcome.html

——
Retail stores on Black Friday aren’t the only places you can go to get a great deal!  If you watch this amazing video … about an hour into it you’ll find out a way you can save, too!   The feedback from those who watch this video is nothing short of AWESOME.  It features an investor we’ll name Mr. X who is making more money now than ever before!  Go now to see it!

http://www.shortsalesricheswebinar.com

—–

 From all the news accounts you’d now think they’ve been lying to us, as shoppers slammed retailers this morning and came out in droves to get deep discounts on holiday items.  But many that were questioned by the media in lines were clear: they are spending a lot less this year.  We’ll have to wait a bit to hear from the credit card companies how many purchases were made … but from the initial look of things it might not be as bad as everyone thought.  We’ll find out soon!

And the U.S. government isn’t the only democracy not buying up banks.  The Royal Bank of Scotland announced that the British government will take a 57.9% stake in the bank.  The government provided nearly 15 billion pounds to the beleaguered bank, and is expected to invest another 5 billion pounds through a preferred stock sale. 

Now on to our real estate investor education section …

Big Government Leads to Big Cost: 40 Percent of the Cost of a Home Before Taxes!

Short sale investors and those sitting on the sidelines waiting for the “perfect time to buy” would do well to take notice of the current economic policies of the nation. For those that haven’t yet noticed, “bail-outs” are big business…in fact, it seems nearly every big business in the nation is standing in line waiting for their share. The same goes for state and local districts throughout the nation as they scramble to compensate for lower spending and fewer taxes.

What many people forget is that sooner or later all the bills must be paid by someone; and that someone is typically the average citizen. The end result is always the same; “hidden taxes” in the form of fees, assessments and other costs that can drive up the price of a home even while the market rates remain more or less unchanged.

In former entries we have covered the impact of inflation and interest rates on the total cost of real estate with the conclusion that now is the right time to buy. If that wasn’t enough to convince you take the plunge with short sale investing then consider this; state and local governments (not to mention federal) need to make up budget deficits any way possible. One of the most popular ways throughout the history of this nation is to increase the fees and other costs associated with building a new home. In fact, the cost of compliance often results in less – rather than more- affordable housing options for years to come. Here are just a few of the ‘hidden” taxes, assessments, fees and other expenses likely to increase faster than the rate of inflation in coming years:

1.     Increased time and cost of building permits. Longer lead times and complexity also results in increased cost to the builder and eventually the buyer.

2.     Updated building code requirements including new energy efficient and eco-friendly regulations that can add hundreds or even thousands of dollars to the cost of a home.

3.     Higher per square foot land/lot development including Higher impact fees.

4.     Mandatory infill policies.

5.     Higher property taxes.

6.     Reducing parking allotments.

7.     Increased per unit fees associated with lower density developments.

8.     Mandatory ADA/physical barrier compliance changes.

Lest you think these types of fees don’t make a significant difference, recent research conducted by the University of Washington found housing regulations in Seattle added an average of $200,000 to the cost of the average home in the city between 1980 and 2006. During the same period of time, the cost of a home in Seattle went from $221,000 to $447,000…of which $200,000 was due to growth restrictions, impact fees, zoning regulations and development requirements.  Ouch!

 When Less is More and How to Make it Work for You

The federal Department of Housing and Urban Development (HUD) recently released new “zoning for affordability” guidelines for state and local governments throughout the nation.  Every short sale investor should know and understand these recommendations, how it is likely to impact affordable housing and what it means for your investment portfolio.

Less is More

According to HUD, minimum lot size requirements used throughout the nation were originally an artifact of inexpensive land, wide open space and minimal density.  In the modern economy not only is land expensive but the transportation cost, infrastructure requirements, indirect environmental and economic costs are adding up. Individuals, developers, local cities and the environment can no longer afford large lots like those used as former minimum lot requirements; official recommendations call for residential lots under 5,000 square feet (or roughly .11 of an acre) to be used for single family housing of the future.

The Trend

While the official new HUD residential lot recommendation for single family homes is 5,000 square feet or less some areas of the nation have already adopted even smaller lot ordinances. For example, Los Angeles adopted the “Small Lot Subdivision” ordinance which allows detached single family homes or townhouses to be build on units as small as 600 square feet without the typical liability and insurance costs associated with condominium projects. Seattle Washington has also passed a “Residential Small Lot” zoning district that allows single family homes to be built on lots measuring 2,500 square feet and San Antonio has followed-up with “R-3 Single Family Residential” zoning district of 3,000 square feet that do not require side-yard set-backs.

Short Sale Investors Take Note

As the trend toward affordability, reduced environmental impact and convenient commute times continues to increase short sale investors should anticipate state and local governments to adopt the HUD affordable zoning guidelines. As with all supply and demand economics, this trend is likely to result in several long term outcomes which will equate to cold-hard cash in your pocket:

1.     A premium on large lots. Although affordability takes precedent, many homeowners will still desire larger lots – especially those in convenient areas of town. Single families with children, those who enjoy gardening or other outdoor interests will continue to seek out larger lots within a short commute of major amenities.

2.     Potential for sub-dividing extra large existing lots. Single family residential lots well above the newly stated size may eventually be eligible for sub-dividing if they are located on the outskirts of town or other areas suitable for re-zoning.

 

More on Monday!

See you at the top!

 

Chris McLaughlin

P.S.:

If you have the chance make sure you jump on this link now, to get the insight into why the foreclosure market is going to be THE PLACE to invest:

http://www.shortsalesricheswebinar.com

Don’t miss it – everyone that has watched it says it is perhaps the most useful tool in understanding what’s going on in the real estate market, and how to make money in today’s environment.

P.P.S.:  Join us from our next webinar, this Tuesday, December 2^nd at 9 PM EST/ 6 PM PST:

A Recession Proof Real Estate Investing: Making Money in ANY Economy! 

We’ll show you how to make money with no credit, no capital, and no holding costs!  Think we’re crazy?  Find out now!

https://www2.gotomeeting.com/register/708013264

We’re limiting the webinar to 30 registrations to give individual attention to those who join … so jump on this link to register:

https://www2.gotomeeting.com/register/708013264