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BOA Florida plan draws 678 short sales

Bank of America’s (BOA) payoff to Florida homeowners who do a short sale instead of dragging out a foreclosure has averaged $12,000 per deal and helped close 678 contracts statewide since it debuted in October.  The Florida-only plan originally targeted 20,000 homeowners with incentives of between $5,000 and $20,000 to forgo the more than two-year foreclosure process and leave their home in “broom swept” condition for a new owner.  Bank of America spokesman Rick Simon said the Charlotte, N.C.-based company remains “enthused” about the pilot program, which generated 3,900 purchase offers and 11,000 verbal agreements from customers who said they were interested in participating.  “We’ve quietly done a little experimentation with a similar plan in one of the non-judicial states, but we are not to the point of announcing a major expansion,” said Simon, adding that monthly short sale volume has more than doubled this year.  “Of particular note is the response from ‘hand-raisers’ who heard about the program and asked to be included without us reaching out to them.” 

To participate, purchase offers had to be submitted by mid-December. Sales must close by Aug. 31.  Attorney Adam Seligman said his North Palm Beach firm of Cohen, Norris, Wolmer, Ray, Telepman and Cohen has closed about a dozen Bank of America short sales in which owners received a cash incentive.  “It’s just difficult dealing with them because they can’t seem to put into writing who qualifies,” Seligman said about Bank of America. “They have general guidelines, but nothing specific.”  Florida was a testing ground for Bank of America because of the state’s high foreclosure rates. Wells Fargo and JPMorgan Chase have similar plans.  In March, Florida ranked fourth nationally in foreclosure activity, with one in every 336 homes receiving some type of foreclosure notice, according to a RealtyTrac report that was released Thursday.  The same report said it takes an average of 861 days to foreclose on a home in Florida.  Short sale incentive money is meant to dissuade struggling borrowers from going through a prolonged foreclosure, which can cost the bank more in the end then a cash payout up front. Typically, the bank also is willing to waive a deficiency judgment, which is the remaining balance on the home seller’s mortgage after the short sale is completed.

Retail up

Total retail sales increased 0.8%, the Commerce Department said on Monday, after rising 1% in February.  Last month’s gains, which surpassed economists’ expectations for only a 0.3% rise, could prompt analysts to raise their first-quarter growth forecasts from an annual pace of around 2.5% currently.  The economy grew at a 3% rate in the fourth quarter.  The rise in sales last month was broad-based, even though Americans paid 27 cents more per gallon of gasoline than they did the prior month.  Motor vehicle sales rose 0.9% after increasing 1.3% in February. Auto sales have accelerated in recent months, boosted by pent-up demand by households.  Excluding autos, retail sales climbed 0.8% last month after advancing 0.9% in February. 

Elsewhere, gasoline sales receipts increased 1.1% after rising 3.6% in February. Excluding autos and gasoline, sales advanced 0.7% in March, adding to the prior month’s 0.5% gain.  Details of the report showed some strength, suggesting consumer spending will continue to support growth.  Last month, clothing store receipts rose 0.9%, while sales at building materials and garden equipment suppliers jumped 3.0% — the largest gain since December.  So-called core retail sales, which exclude autos, gasoline and building materials, rose 0.5% after increasing by the same margin in February. Core sales correspond most closely with the consumer spending component of the government’s gross domestic product report. Sales at restaurants and bars edged up 0.3%, while receipts at sporting goods, hobby, book and music stores rose 0.5%. Sales of electronics and appliances increased 1.0%, the largest gain since October, while receipts at furniture stores climbed 1.1%.

Spring recovery?

Five years after the US housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery.  Reduced prices, record-low mortgage rates, higher rents and an improving job market appear to be emboldening many would-be buyers.  Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.  And many people seem to have concluded that prices won’t drop much further. In some areas, prices have begun to tick up.  Interviews with more than two dozen potential buyers, sellers, brokers, Realtors and economists suggest that confidence is up and that sales will move slowly but steadily higher.  The spring buying season got an early lift-off from an uncommonly warm January and February — a winter that was the best for sales of previously occupied homes in five years. Permits to build houses and apartments rose in February to their highest level since 2008.

Some analysts detected a slight uptick in prices for February and March. CoreLogic, a real estate data firm, says prices for homes not at risk of foreclosure — about two thirds of the market — rose 0.7% in February. It was the first increase in four years. Price gains occurred both in some hard-hit areas, such as Phoenix, and some still-thriving areas like New York and Washington.  In Miami, the average sales price has surged 14% in the past year, according to Trulia, a real estate data firm. In Phoenix, the average is up 13%, in Pittsburgh 9%.  Earnings reports Friday from two big banks suggested that more people are taking out mortgages. JPMorgan Chase issued 6% more mortgages from January through March than it did a year ago and got 33% more applications. Wells Fargo issued 54% more mortgages and received 84% more applications.  Still, few think the housing industry is nearing a return to full health. For that to happen, a robust job market would be needed. More hiring would give more people the money and job security to buy. That would help boost sales and prices.  Such areas as Atlanta, suburban Las Vegas and central California show few signs of recovery. And in some others — from Seattle to Cleveland — home prices have continued to slip. The average has dropped 9% in Seattle over the past 12 months and 7% in Cleveland.

US can handle higher gas prices and 30% taxes

Cheer up, Treasury Secretary Timothy Geithner says not to worry!  According to him, the US economy is in a better position to deal with high gasoline prices and taxes. He added that unseasonably warm winter had lowered overall energy costs for consumers.  “The economy is in a much better position to deal with those pressures … because natural gas prices are down, the overall cost of energy for consumers is down,” Geithner said on ABC’s “This Week” program.  A spike in gasoline prices caused economic growth to brake sharply in the first half of last year. Gasoline prices have risen 64 cents since the start of this year, leaving many Americans with a sense of deja vu, which was further reinforced by a slowdown in the pace of job creation last month.  However, Geithner said it was too early to tell whether the economy, which he described as getting stronger, would go through a repeat of last year. “We can’t tell yet. Obviously, we’ve got a lot of challenges ahead and some risks and uncertainty ahead. And some of those risks are, of course, Europe is still going through a difficult crisis,” he said.  He also dismissed suggestions that the country’s huge budget deficit put it at risk of being the next Greece, adding that the challenge was to bring the deficit down without compromising economic growth.  In a separate interview, Geithner said a proposal to impose at least 30% income tax on Americans making more than a million dollars a year will not hurt the economy by stifling investment and growth.

NAHB – builder confidence down

Builder confidence in the market for newly built, single-family homes declined for the first time in seven months this April, sliding three notches to 25 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, released today. The decline brings the index back to where it was in January, which was the highest level since 2007.  “Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.  “What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said NAHB Chief Economist David Crowe. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”

Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. Each of the index’s components registered declines in April. The component gauging current sales conditions and the component gauging sales expectations in the next six months each fell three points, to 26 and 32, respectively, while the component gauging traffic of prospective buyers fell four points to 18. (Note, the overall index and each of its components are seasonally adjusted.)  Regionally, the HMI results were somewhat mixed in April, with the Northeast posting a four-point gain to 29 (its highest level since May of 2010), the West posting no change at 32, the South posting a three-point decline to 24 and the Midwest posting an eight-point decline to 23.

Fitch – builder confidence should be up

Fitch Ratings believes single-family housing starts will increase 10% in 2012, while new home sales will rise 8%, according to the firm’s latest US homebuilding update.  Still, the ratings giant sees an erratic homebuilding market after witnessing disappointing results for 2011.  “Single-family housing finished well below expectations at the beginning of the year,” Fitch said in its update. “Single-family starts fell 8.5%, while new home sales declined 5.9%. Existing home sales, meanwhile, improved 1.7%.”  Despite challenges in the housing market and the expectation that home prices will remain soft, Fitch expects builders to fare better in 2012 with the market peppered with less competitive rent options and new home inventories at historic lows.  Fitch’s outlook for homebuilders runs from stable to negative, with most builders rated as stable.   The sector continues to face headwinds from a an anemic job market and what Fitch calls “negative buying psychology,” where people are afraid to buy a home, fearing home prices are still vulnerable to decline.  Going forward, Fitch believes public homebuilding firms will add selectively to their developed lot holdings while committing resources to partially or undeveloped land.  “The still irregular flow of appropriately priced land from banks and other sources tends to support this strategy,” Fitch said. “However, if the operating environment becomes more challenged. Fitch expects builders will be more cautious as to land purchase and will preserve cash.”

BOA streamlining short sales process

Bank of America (BOA) says it’s making changes to its short-sale procedures that will shorten decision times on short sale offers to 20 days, down from 45 days or longer.  The new task flow in BOA’s short-sale management platform, Equator, will enable short-sale specialists to conduct tasks like document collection, valuations and underwriting simultaneously. When buyers walk, agents will have five days instead of 14 days to submit a backup offer.  Bank of America is requiring a new third-party authorization form for short sales initiated beginning April 14.  When the changes to Equator take effect Saturday, five documents will be required to process short sales initiated with an offer:

-  A purchase contract including buyer’s acknowledgment and disclosure.

-  HUD-1.

-  IRS Form 4506-T.

-  Bank of America short-sale addendum.

-  Bank of America third-party authorization form.

The Equator platform will be offline the night of Friday, April 13, and into early Saturday, April 14, to implement changes. Offer documents and supporting documents for all short sales submitted with an offer must be uploaded before Friday, April 13, or files may be declined.

Import prices up

Overall import prices rose 1.3% in March, the Labor Department said today. That was the biggest gain since April 2011.  Economists polled by Reuters had expected import prices to rise 0.8% last month. February’s data was revised to show a 0.1% decline instead of the previously reported 0.4% increase.  Stripping out petroleum, import prices increased 0.3% after falling 0.1% in February.  Higher costs for energy have fueled inflation in recent months but a still-weak jobs market has made it harder for businesses to raise other prices.  Data on Thursday is expected to show tame price pressures at a wholesale level, with producer prices seen rising 0.2% in March when stripping out food and energy.  But today’s report underscores the size of the price shock that is stinging Americans when they refuel their cars.  Last month, imported petroleum prices increased 4.3%, the biggest gain since April 2011.  Elsewhere, imported capital goods prices edged 0.2% higher after being flat in February. Imported motor vehicle prices climbed 0.3% after being unchanged in February.  The Labor Department report also showed export prices rose 0.8% last month, above analysts’ expectations for a 0.4% gain. Export prices increased 0.4% in February.

MBA – mortgage applications down

Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2012.  The Market Composite Index, a measure of mortgage loan application volume, decreased 2.4% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 2.1% compared with the previous week.  The Refinance Index decreased 3.1% from the previous week.  The seasonally adjusted Purchase Index decreased 0.5% from one week earlier. The unadjusted Purchase Index increased 0.1% compared with the previous week and was 5.5% higher than the same week one year ago.  There was no adjustment made for Good Friday.  The four week moving average for the seasonally adjusted Market Index is down 2.08%.  The four week moving average is up 2.19% for the seasonally adjusted Purchase Index, while this average is down 3.45% for the Refinance Index.  The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5% of total applications from 71.2% the previous week.  This is the lowest refinance share since July 29, 2011.  The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5% of total applications from the previous week.

In March 2012, the share of applications for investment properties increased to 8.3% from 7.4% in February 2012.  However, the increase in investor share was driven by refinance applications for investment properties (which increased to 9.2% in March 2012 from 7.7% in February 2012), as the share of purchase applications for investment homes decreased over the month, from 6.1% in February 2012 to 5.7% in March 2012.  The investor share of purchase applications also decreased on a year over year basis, falling from 5.8% in March 2011 to its current level of 5.7% in March 2012.  While MBA tracks applications for second homes and investment properties separately, giving them the ability to distinguish between the two, the combined share of investment and second home applications for home purchase had the same directional components for the month of March 2012 – up on the whole and up for refinance applications last month, but down for home purchase activity.

Credit eases

Credit card lenders gave out 1.1 million new cards to borrowers with damaged credit in December, up 12.3% from the same month a year earlier, according to Equifax’s credit trends report released in March. These borrowers accounted for 23% of new auto loans in the fourth quarter of 2011, up from 17% in the same period of 2009, Experian, a credit scoring firm, said.  The banks are looking to make up the billions in fee income wiped out by regulations enacted after the financial crisis by focusing on two parts of their business — the high and the low ends — industry consultants say. Subprime borrowers typically pay high interest rates, up to 29%, and often rack up fees for late payments.  Some former banking regulators said they worried that this kind of lending, even in its early stages, signaled a potentially dangerous return to the same risky lending that helped fuel the credit crisis.  The lenders argue that they have learned their lesson and are distinguishing between chronic deadbeats and what some in the industry call “fallen angels,” those who had good payment histories before falling behind as the economy foundered.  Regulators with the Office of the Comptroller of the Currency, which oversees the nation’s largest banks, said that as long as lenders adhered to strict underwriting standards and monitored risk, there was nothing inherently dangerous about extending credit to a wider swath of people.

Olick – debate over principal forgiveness

“The man at the center of the controversy over writing down mortgage principal on Fannie Mae and Freddie Mac loans isn’t wavering. He may be reconsidering previous loss formulas, factoring in new government subsidies for principal write-down, but his opinion seems largely unchanged.  After beginning a speech this morning about all the so-called ‘Enterprises’ (Fannie and Freddie) have done to help millions of borrowers behind on their mortgage payments, and reminding listeners of his agency’s mandate to, ‘preserve and conserve the assets of the Enterprises,’ FHFA Acting Director Ed DeMarco took a left turn.  ‘There is another human element in this story that does not seem to receive much attention,’ DeMarco continued. ‘Clearly, many households got over-extended financially. Some accumulated debts they couldn’t afford when hours or wages were cut or jobs were lost. Others withdrew equity from their homes as house prices soared. Others bought houses at the peak of the market, often with little money down, perhaps in the belief house prices would continue to climb. Yet there are other Americans who did not do this thing.’ 

That last part really clinches what may eventually be his decision not to allow principal forgiveness, or to do it in an extremely narrow way. Yes, there are all kinds of formulas, and ‘net present value’ analyses that have been and continue to be run. There will be Enterprise gains offset by taxpayer losses, and there will be estimates of operational costs to implement a wide-ranging and necessarily transparent program. But in the end, less than one million borrowers would be helped, and for DeMarco, as for many others, it will come down to fairness and cheating.  ‘One factor that needs to be considered is the borrower incentive effects. That means, will some percentage of borrowers who are current on their loans, be encouraged to either claim a hardship or actually go delinquent to capture the benefits of principal forgiveness?’ asks DeMarco.  ‘This is a particular concern for the Enterprises because unlike other mortgage market participants that can pick and choose where principal forgiveness makes sense, the Enterprises must develop the program to be implemented by more than one thousand seller/servicers. In addition, the Enterprises will have to publicly announce this program and borrower awareness of the possibility of receiving a principal reduction modification will be heightened among Enterprise borrowers,’ he explains.

In other words, this opens the flood gates to cheating. The fact is that there are 11 million borrowers who currently owe more on their mortgages than their homes are worth and yet the vast majority of them are still making monthly payments. Those who haven’t been paying have been delinquent, in some cases, for many years. The concern is that borrowers who are current on their loans might think it’s unfair that those who are not current are being rewarded and they are not. It would take a relatively small group of them strategically defaulting to offset the gains of any principal reduction program and turn it into a massive debacle.  ‘The far larger group of underwater borrowers who today have remained faithful to paying their mortgage obligations are the much greater contingent risk to housing markets and to taxpayers. Encouraging their continued success could have a greater impact on the ultimate recovery of housing markets and cost to the taxpayers than the debate over which modification approach offered to troubled borrowers is preferable,’ concludes DeMarco.  He is expected to announce a decision on principal reduction this month, but the analysts are already out:  ‘We see this as a strong political attack against principal reduction,’ says Jaret Seiberg of Guggenheim partners.  The Obama administration is clearly pushing for it, with Treasury Secretary Timothy Geithner recently telling a Senate panel that there is a, ‘very strong economic case’ for principal write-down. He suggested DeMarco, ‘take another look at the math,’ which DeMarco is obviously doing. The trouble is, when it comes to today’s housing market and today’s borrowers, paying your mortgage, whatever it’s worth, is not always a simple equation.”

Oil to sink below $100?

Sandy Jadeja, Chief Technical Analyst at City Index, said the charts suggest US futures may drop to $98 a barrel, and if that level is broken, momentum could accelerate taking the crude to as low as $87.  Oil prices contained below $100 would help alleviate the strain on the US consumer, offering some relief to the broader economy. A gallon of gasoline cost $3.94 at the pump last week, two cents higher than the previous week and 5.9% more expensive than a year earlier, MasterCard said in its weekly Spending Pulse report on Tuesday.  The catalyst for the move lower in oil prices may come later Wednesday when the US Department of Energy’s Energy Information Administration releases weekly stockpiles data at 10:30 am ET.  The report is expected to show a 1.8 million barrels build in commercial crude oil inventories for the week ending April 6, driven by higher US imports of Saudi crude, according to analysts polled by Platts.

CoreLogic – April MarketPulse Report

CoreLogic today released its April CoreLogic MarketPulse report. The monthly economic publication provides insight into the current and future health of the US economic climate with particular focus on housing and mortgage metrics. Chief Economist Mark Fleming and Senior Economist Sam Khater authored the articles and commentary.  The April MarketPulse report:

-  Indicates “now is a good time to buy,” with housing affordability at its highest level ever (as of February 2012), and shows many of the key housing metrics are holding steady through the typically slow winter season.

-  Reports the single-family rental market is strong and vibrant with high and stable rents, low months’ supply and a healthy pace of signed rental leases. The report reveals what markets offer the best return for single-family rental investors. “The potential size of the rental market for REOs this year (and annually over the next few years) is over $100 billion dollars,” said Khater in the report.

-  Shows capitalization rates for single-family rental properties in 26 geographically diverse markets. Capitalization rates are the most common metric for determining the profitability of an investment property.

-  Provides a chart of the rent-to-mortgage ratio for Miami, Fla. The chart indicates the point in time when it became cheaper to buy than to rent, providing insight to investors buying and holding rental properties, as well as to new first-time home buyers.

For a complete copy of the April CoreLogic MarketPulse report, including a complete set of data and charts, visit http://www.corelogic.com/downloadable-docs/MarketPulse_2012-April.pdf.

Half a decade into the deepest US housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end.  House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.  But a painful part two of the slump looks set to unfold: Many more US homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.  “We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010,” said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio.  “Last year was an anomaly, and not in a good way,” he said.  In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.  Five major banks eventually struck that settlement with 49 US states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.

 Mortgage servicing provider Lender Processing Services reported in early March that US foreclosure starts jumped 28% in January.  More conclusive national data is not yet available. But watchdog group, 4closurefraud.org which helped uncover the “robo-signing” scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash.  Although foreclosure starts were 50% or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47% from 2011. Those of Wells Fargo’s rose 68% and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment. 

Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.  Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64%), Chicago (43%) and Miami (53%).  RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it’s mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.  “The subprime stuff is long gone,” said Michael Redman, founder of 4closurefraud.org. “Now the folks being affected are hardworking, everyday Americans struggling because of the economy.”

Crackdown on tax havens

As regulators clamp down on money flows around the globe, governments, even those that prided themselves on the strength of their secrecy laws, like Switzerland, are facing pressure to share banking information and change their policies.  Now, private banks and wealth managers are scrambling to convert so-called black money — assets that have not been disclosed — into accounts that are above board.  The shift may provide opportunities for the industry. As more funds become legitimate, analysts say financial institutions will be able to sell extra wealth management products to affluent people and enter markets that had previously been off limits.  “There’s much less black money now than three years ago,” said Jean Schaffner, head of the Luxembourg tax practice at the law firm Allen & Overy. “It’s in the banks’ interests for clients to come forward with their money.”  For decades, Western governments tolerated offshore tax havens, places where the wealthy could park millions away from the gaze of their domestic authorities. Switzerland, in particular, developed a reputation as a place where the wealthy could rely on secrecy laws.  But the tide began to turn in 2008, particularly after the financial crisis prompted many governments to act in concert.  As Switzerland and other locales tightened their financial controls, many people initially flocked to other tax havens like Singapore and Hong Kong, which still offer some of the world’s most secret accounts. But these places, too, are facing new pressures.

NAHB – 101 improving housing markets

The list of housing markets showing measurable improvement expanded slightly to include 101 metropolitan areas in April, according to the National Association of Home Builders (NAHB)/First American Improving Markets Index (IMI), released today. Thirty-five states (including the District of Columbia) are now represented by at least one market on the list. The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. The 101 markets on the April IMI represent a net gain of two from March, with 13 metros being added and 11 markets slipping from the list while 88 markets retained their places on it. Among the new entrants, areas as diverse as Rome, Ga.; Coeur d’Alene, Idaho; Greenville, N.C.; Brownsville, Texas; St. George, Utah; and Huntington, W.Va., are now represented on the IMI.  The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas.

The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the US Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.  A complete list of all 101 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in April, is available at: www.nahb.org/imi.

Job improvement slows

US payrolls rose far less than expected in March, keeping the door open for further monetary policy support from the Federal Reserve, even as the unemployment rate fell to a three-year low of 8.2%.  Employers added 120,000 jobs last month, the Labor Department said on Friday, the smallest increase since October.  Economists polled by Reuters had expected nonfarm employment to increase 203,000 and the unemployment rate to hold at 8.3%.  The slowdown in employment growth last month likely reflected the fading boost from unseasonably warm winter weather. It supported the caution on the labor market from Fed Chairman Ben Bernanke last week.  Bernanke expressed doubts the recent job gains could be sustained, and March’s weak report was in line with expectations that economic growth slowed to an annual pace of 2% in the first quarter from the 3% rate in the October-December period. 

The weakness in hiring last month was concentrated in the vast private services sector, which added only 90,000 after increasing payrolls by 204,000 in February. Retail employment fell dropped 33,800 after falling 28,600 the prior month.  Construction hiring fell 7,000, the second straight monthly decline. Temporary help fell 7,500 after rising 54,900 in February.  However, manufacturing enjoyed another month of strong job gains, with factories adding 37,000 new positions, helped by carmakers trying to meet pent-up demand for motor vehicles. Factory jobs increased by 31,000 in February.  Government employment edged down 1,000 after rising 7,000 in February. Despite the weak employment gains last month, average hourly earnings rose 5 cents.  The workweek dipped to 34.5 hours from 34.6 hours in February.

WSJ – Fed in favor of the banks’ foreclosure-rental approach

Last month, Bank of America Corp. announced a plan to allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate.  In addition, Fannie Mae is selling 2,500 homes in eight metropolitan areas around the country. The government-controlled mortgage firm is selling the $320 million portfolio to investors, who would be required to turn them into rental properties.  The Federal Reserve set out new polices for banks that decide to rent out foreclosed homes, endorsing a strategy for managing the huge number of distressed properties that have piled up during the housing bust. The central bank said in a six-page policy statement Thursday that the Fed’s regulations permit the rental of foreclosed properties to tenants “in light of the extraordinary market conditions that currently prevail.” The policy clarified that banks that would otherwise be required to sell off the properties more quickly can turn to rental as a strategy. 

Federal Reserve Chairman Ben Bernanke and other central bank officials have spoken publicly about the need to encourage banks to rent out foreclosures. “With home prices falling and rents rising, it could make sense in some markets to turn some of the foreclosed homes into rental properties,” Mr. Bernanke said in a February speech.  The central bank said that banks holding large numbers of foreclosures should establish detailed policies for renting foreclosures, including a process to determine whether the properties are safe to occupy and meet local building code requirements.  The Fed said banks should set up criteria by which properties are picked to be rental properties. The banks should establish plans that “describe the general conditions under which the organization believes a rental approach is likely to be successful,” the central bank said.

Smart Real Estate News & Commentary by Chris McLaughlin March 20, 2012

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Christian Science Monitor – ten best cities to buy short sales

10. Seattle-Tacoma-Bellevue, Wash. (average short sale discount – 24.5%)

Short sales took off in the Seattle area in the fourth quarter of 2011: 925 pre-foreclosure homes were sold. That’s a whopping 46% increase from the same period a year earlier and represented 7.4% of all home sales in the area, at an average price of $245,403. Buyers of short sale homes reaped a nearly 25% discount off non-foreclosure homes. Seattle is also among the top metros to buy foreclosure properties generally, at an average discount of 43%.

9. Phoenix-Mesa-Scottsdale, Ariz. (24.7%)

Phoenix is the sixth-most populous city in the United States. Known as the Valley of the Sun, the Phoenix metropolitan area had the second-highest number of pre-foreclosure home sales on the list, with 7,112 (up 43% from the fourth quarter of 2010). Short sales made up 20.3% of all homes sold in the area, at an average price of $122,212. As a state, Arizona saw one of the largest year-over-year increases in pre-foreclosure sales, up 48%.

8. Portland-Vancouver-Beaverton, Ore./Wash. (26.1%)

The Pacific Northwest is a pricier housing market that Phoenix, with fewer homes available. The area sold only 679 pre-foreclosure homes in the fourth quarter, which is the third-lowest number on the list (the minimum for inclusion is 500 homes). Still, that’s up 37.2% from 2010, and a willing buyer can get a short sale home for an average price of $190,042, which represents an average discount of 26.1% below market value.

7. Los Angeles-Long Beach-Santa Ana, Calif. (28.0%)

The most populous state in the country, California saw short sales increase in the fourth quarter. Los Angeles led the charge, with the most short sale houses sold of any metro in the country, let alone the state, at an average sale price of $342,668. In terms of total home sales, Los Angeles also boasts the highest percentage of short sales on the list, at 22%.

6. Jacksonville, Fla.(28.8%)

Situated on the St. Johns river at the top of Florida’s Atlantic coast, Jacksonville is the largest metropolitan area in the country from a geographical standpoint. It’s cheap, too – 677 short sale homes were sold in the area in 2011′s fourth quarter, at an average sale price of $116,447. Jacksonville saw a 41.34% increase in short sales from 2010, with pre-foreclosures making up 12.4% of all home sales in the area.

5. St. Louis (29.6%)

The St. Louis area has by far the cheapest housing market of the short sale metros on the Top 10 list. Nearly 600 pre-foreclosure homes were sold there in the fourth quarter of 2011, at an average price tag of $96,131. Short sales made up only 5.7% of home sales in St. Louis (the lowest proportion on the list), but short sales increased 19.9% from 2010.

4. Atlanta-Sandy Springs-Marietta, Ga. (32.9%)

Georgia’s foreclosure problem has continued to worsen in recent years. Foreclosure sales made up 39% of total home sales for the state in the fourth quarter of 2011, the third-highest of any state. As a result, the Atlanta area ranks high in both short sales and foreclosure sales.  The area saw the biggest surge in short sales of all the cities on the Top 10 list, with 3,387 homes sold, up 63% since the same period in 2010. Short sales made up 14% of all home sales in the quarter, with an average price tag of $123,271.

3. Chicago-Naperville-Joliet Ill./Ind./Wis. (33.5%)

In addition to a deep average discount on short sales, the Chicago metro is one of the top places to buy foreclosed homes, with an average discount of 49.1%. Chicago sold 2,409 pre-foreclosure homes in the fourth quarter of 2011, at an average sale price of $156,349. That’s a 28.9% increase from the fourth quarter of 2010.

2. San Jose-Sunnyvale-Santa Clara, Calif. (37.3%)

Home to Silicon Valley, the San Jose metro area is located just south of San Francisco and is the third largest metro in the state. In the fourth quarter of 2011, 1,169 homes were sold in short sales at an average price of $398,413. That’s the highest price among the cities on the Top 10 list, even with one of the biggest discounts in the US. Short sales increased 34.1% from the end of 2010 and made up 18.6% of all home sales in the San Jose area.

1. San Francisco-Oakland-Freemont, Calif. (41.0%)

Discounts for short sale homes don’t come any bigger than this in major metropolitan areas: more than 40% in San Francisco. Such sales surged 50% in the San Francisco metropolitan area from the fourth quarter of 2010: Nearly 3,000 homes in pre-foreclosure were sold in 2011′s fourth quarter, at an average price of $330,733. Short sales made up 19.2% of all home sales. The city is not among the top markets  for deeply discounted foreclosure homes, indicating that lenders are taking measures to help homeowners avoid foreclosure.

Goldman Sachs cut jobs

Goldman Sachs has begun a new round of staff cuts in its trading and investment banking divisions, three sources familiar with the matter said, a sign of continued cutbacks on Wall Street.  The job cuts follow 2,400 positions Goldman eliminated last year, and further reductions are possible as the company continues to reduce costs to raise profitability, the sources said.  The latest round of cuts is part of Goldman’s annual employee review process.  The new job cuts are taking place in all of Goldman’s four main divisions, including sales and trading, investment banking, wealth management and investing and lending, according to one source familiar with the matter.  Many of the cuts are aimed at traders who can be replaced with new technology, or back-office, technology and operations staff who can be replaced with less expensive employees, the source said. The bank has been pushing aggressively to replace staff in high-cost areas like New York and New Jersey with less costly workers in Salt Lake City, where the company is building a sizable workforce.

Housing starts down

The Commerce Department said housing starts slipped 1.1% to a seasonally adjusted annual rate of 698,000 units. January’s starts were revised up to a 706,000-unit pace from a previously reported 699,000 unit rate.  Economists polled by Reuters had forecast housing starts little changed at a 700,000-unit rate. Compared to February last year, residential construction was up 34.7%, the biggest year-on-year rise since April 2010.  New building permits surged 5.1% to a 717,000-unit pace last month, far exceeding economists’ expectations for an advance to a 690,000-unit pace from January’s 682,000-unit rate.  Housing starts last month were pulled down by a 9.9% drop in the construction of single-family homes — which account for a large portion of the market.  Groundbreaking for multifamily housing projects soared 21.1%. This segment is benefiting from rising demand for rental apartments, as falling house prices discourage some Americans from owning a home.  Housing starts in the South rose to their highest level since October 2008.  Permits to build single-family homes jumped 4.9% to a 472,000-unit pace — the highest since April 2010. Permits for multifamily homes increased 5.6% to a 245,000-unit rate.

Small cars costing more

Across the board, prices for these cars are moving up along with gas prices.  KBB tracks used car prices week to week. For the week ending March 2nd, it found used car prices jumped 1.3% to $12,286. That should not come as a surprise given the way auction prices have shot up. Used car auction house Adesa says the average compact car sold for $6,942 (up 4.4%) on the wholesale market in February.  While automakers are moving as quickly as possible to ramp-up production of small cars or at least the small fuel-efficient engines to put in those cars, it won’t happen overnight. So expect the tight inventories for many small cars to continue for some time. Eventually, that could play out with small cars selling with a minimal discount to the sticker price. Perhaps even at a premium to the MSRP.  One thing is certain, we won’t see increased incentives or rebates for new cars anytime soon. Automakers don’t need to grease a market where buyers are coming into the showroom.

Olick – did a warm winter steal spring housing?

“As if we really needed a reminder that today’s housing market is still very fragile, the first installment in a slew of housing data to be released this week came in below expectations.  Home builder sentiment, as measured by the National Association of Home Builders’ monthly sentiment survey, was unchanged in March, and February’s reading was revised down.  This after five straight months of gains in builder confidence.  ‘Many of our members continue to cite obstacles on the road to recovery, including persistently tight builder and buyer credit and the ongoing inventory of distressed properties in some markets,’ said NAHB chief economist David Crowe in a release.

Most troubling was a big drop in sentiment out West, which is where the bulk of the nation’s foreclosures and distressed properties are. Banks are really ramping up the foreclosure process now that the so-called ‘Robo-signing’ settlement is behind them and new guidelines are in place. That means more foreclosed properties will be hitting the housing market, as the still-swelled pipeline finally begins to empty.  While the all-important South region, most meaningful for the builders, saw an increase in sentiment, it is still below the national average, and overall current sales were down and buyer traffic was flat. Only sales expectations over the next six months rose. That could have a lot to do with unseasonably warm weather.  With temperatures in most of the country hitting near record highs in January and February, it begs the question, did much of the Spring market start early, and did it steal from the historically strong months of March and April?  ‘We think it has pulled forward a useful amount,’ says analyst Stephen East of ISI Group. ‘It definitely helps breaking ground and has been a big help on the jobs front.’

In fact ISI studied weather in all four regions and reported that while favorable economic trends and specifically job growth are the primary driver of renewed housing activity, ‘We believe some demand was pulled forward from the later Spring months, implying the first quarter could be above investor expectations, while the second quarter could be below expectations.’  Weather cannot be discounted in home sales, especially sales of new construction, since builders can offer potentially faster turnarounds for new orders if they’re not hampered by frozen earth. February saw a big spike in the ‘current sales’ component of the home builder sentiment index. Buyer traffic in March was unchanged.”

House GOP wants to overhaul tax code

House Republicans will call for overhauling the US tax code by reducing rates as well as the number of income tax brackets as part of their 2013 budget proposal.  House Budget Committee Chairman Paul Ryan of Wisconsin is slated to unveil today a tax and spending plan that would shrink the number of brackets to two from six with rates set at 25% and 10%. The top rate now is 35%.  Ryan’s proposal would also eliminate the alternative minimum tax while reducing the corporate tax rate from 35% now to 25%, according to documents provided by his office.  The plan may revive Republicans’ call last year for overhauling Medicare, though with a compromise Ryan has since written with Oregon Democratic Senator Ron Wyden on the health program for the elderly and disabled. It may also spur a reprise of proposals to carve big savings from other safety net programs to drive down the government’s $1.2 trillion deficit.  Though the proposals probably won’t become law anytime soon, they are certain to inflame an election year debate over what to do about government red ink.  “We’re back with a budget that offers real solutions,” Ryan said in a video posted yesterday on his website. “Americans have a choice to make — a choice that’s going to determine our country’s future.”

Fast foreclosure bill may return

Florida’s quickie foreclosure bill died quietly in the Senate on the last day of the 2012 legislative session, and although homeowner advocates fear it will reappear next year, sponsor Kathleen Passidomo said it may not be her pushing it.  The Naples Republican is confident the controversial bill, dubbed the Florida Fair Foreclosure Act, would have passed if it had come up for a vote by the full membership. Instead, she said it got lost in the last minute hustle to hear dozens of proposals before the end of the session March 9.  The Florida Bankers Association agrees there were enough votes in the Senate to pass the nationally watched proposal, which flew through the House in a 94-17 vote on Feb. 29.  But Anthony DiMarco, executive vice president of government affairs for the association, said it’s too early to tell what kind of expedited foreclosure plan may materialize in 2013.

The association said in its end-of-session newsletter that it believes “internal Senate politics” led to the bill’s demise and that it will push for similar foreclosure legislation next year.  “I think there will be a foreclosure bill filed next year if the prediction of a huge glut of foreclosures in the courts holds true, but whether I file it or not, I don’t know,” said Passidomo, noting that she has other interests and that this was the second time she tried and failed to streamline the state’s foreclosure logjam with legislation. “This was a missed opportunity.”  Still, it was the furthest a bill aimed at reducing Florida’s mounting foreclosure backlog has made it since the real estate crash. An estimated 368,000 foreclosure cases are in the courts statewide, with more on the way.  February foreclosure statistics released last week by the research group RealtyTrac showed a nearly 53% increase in South Florida filings compared with the same time in 2011. The spike was 40% statewide.  “I would be very surprised if the bill does not come back,” Boca Raton attorney Margery Golant said. “The industry is pushing everywhere it can to be able to move faster on foreclosures.”

WSJ – Wall Street keys on rentals

Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae.  The idea is that the new owners would rent out the homes at first rather than reselling – potentially aiding a housing-market recovery by reducing the number of properties clogging the market. The fact that big-name investors are interested also suggests they anticipate sizable future profits in housing.  Currently, banks selling through regular real-estate listings are getting more than 90 cents on the dollar of their asking price, according to industry analysts. They could be reluctant to unload properties in bulk if it means selling for much less.  Firms considering bids include Austin, Texas-based broker-dealer Amherst Securities Group and a fund run by mortgage-bond pioneer Lewis Ranieri. Hedge-fund manager Paulson & Co. and private-equity investors Colony Capital LLC are also considering bids, according to people familiar with the process.  The sale consists of 2,500 homes divided into eight regional pools, ranging from 572 properties in Atlanta to 99 in Chicago. The total current market value is $320 million, according to an offering document prepared by Credit Suisse, which is advising Fannie.

Bulk sales, however, pose a trade-off. While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties in bulk to large investors could require Fannie Mae to sell at a big discount, leading to larger initial costs. It is unclear which would be least costly ultimately to taxpayers, who are responsible for the big mortgage-finance company’s losses.  Purely in dollar terms, the sale would be small by Wall Street standards. But it could offer clues about whether investors are willing to pay prices high enough to entice Fannie Mae – along with its sibling Freddie Mac, federal agencies and banks-to do more bulk-sale deals in the future.

Bernanke justifies Fed

Federal Reserve Chairman Ben S. Bernanke returns to his roots as a university professor today, seeking to explain and justify the existence of the central bank ahead of the 100th anniversary of its founding next year.  Bernanke will deliver the first of four hour-long lectures on the history of the Fed as part of what public relations specialist Richard Dukas called a “P.R. offensive” to buff the central bank’s tarnished image. The Fed is being attacked from both the left and the right, with liberals criticizing it for not doing enough to bring down unemployment, and conservatives blaming it for doing too much and risking faster inflation.  Bernanke’s return to the milieu where he spent more than two decades will give the Fed’s top policy maker an opportunity to “set the narrative” on the central bank’s role during and after the financial meltdown, said Princeton University professor and former Fed Vice Chairman Alan Blinder. “The question of who gets to write the history is an important one.”  If Americans lose faith in the Fed’s ability to manage the economy and contain inflation, that will rob monetary policy of some of its potency, according to Dana Saporta, director of US economics research for Credit Suisse Securities in New York. Policy has “less effect the less confidence the public has in the Fed,” she said.

HARP still a massive failure

Fewer underwater homeowners worked through the Home Affordable Refinance Program (HARP) in December than in any other month in more than a year, despite changes that removed previous barriers.  About 2,700 mortgages with a loan-to-value ratio between 105% and 125% received a HARP refinancing in December, down 47% from November and the lowest since October 2010. All HARP refis fell 36% monthly to 23,000 in December, hitting a low not seen since November 2009.  Total refinancings at Fannie Mae and Freddie Mac rose 5% to 376,000.  The data released by the Federal Housing Finance Agency (FHFA) included no loans with LTV ratios above 125% — now considered eligible. Those changes, dubbed HARP 2.0, took effect at the beginning of December.  Corinne Russell, a spokeswoman for the FHFA, said the agency’s data likely won’t reflect the changes until it releases numbers for the first quarter of this year. She said it typically takes 60 days to originate and close a loan and another 90 days from closing to loan delivery to Fannie and Freddie.

But with the changes, Russell said the agency is hearing that more lenders are refinancing loans with LTV ratios above 105%.  “Anecdotally, we know that lenders are embracing HARP 2.0, originating loans under the new terms,” Russell said in an email.  Analysts reviously predicted effects if the changes might not surface until February’s data.  HARP refinancings totaled 93,000 in the fourth quarter, bumping up the cumulative total 10% to 1.02 million over the life of the program.  Mortgage servicers closed 19,500 trials through the Home Affordable Modification Program in the fourth quarter, bringing the cumulative total to roughly 400,000. Active HAMP trials ended the fourth quarter at 36,391, down from 42,279 as of Sept. 30.  Short sales and deed-in-lieu deals increased 13% to roughly 35,000 in the fourth quarter, the highest total since the government placed Fannie and Freddie into conservatorship.  Julia Gordon, FHFA manager of single-family policy, said the agency is working to streamline policies in those programs.  “It’s not as if there’s some enormous gulf between the policies,” Gordon said. “Even small differences in policy can create frictions that are not necessary.”  Foreclosure starts at the government-sponsored enterprises declined to 218,000 from 224,000 in the third quarter, and mortgages 90-plus days delinquent dipped slight to 3.78% from 3.81% of Fannie and Freddie’s portfolio. Florida led states in those delinquencies at 11.5%, followed by Nevada and New Jersey at 8.3% and 6.3%, respectively.

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 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
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