Short sales and huge inventories of bank-owned real estate properties continue to put downward pressure on home prices, according to data released today by California-based analytics company CoreLogic. Fifty-seven of the 100 largest statistical areas based on population posted year-over-year declines in March.  Nationally, CoreLogic’s March Home Price Index report shows prices fell 33.7% in March 2012, from their peak in April 2006.  Home prices, including distressed sales, edged downward year-over-year, falling 0.6% from March 2011 to March 2012. Excluding distressed sales, home prices rose slightly, climbing 0.9% year-over-year. In spite of the yearly decline, home prices rose month-over-month. Including short sales and real estate held by banks, prices increased 0.6% month-over-month — the first monthly rise since July 2011. Proving just how much of a drag short sales and REOs are on home values, prices have appreciated monthly for three consecutive months when distressed sales are excluded from the stats.  Even with all the bad news, the relatively flat monthly and yearly changes seem to indicate prices are beginning to steady, and some states even saw significant price appreciation. Wyoming, West Virginia, Arizona, North Dakota and Florida all saw yearly gains of 4% or more. Wyoming topped the list with an increase of 5.9% year-over-year.

Jobless claims slightly down

Slightly fewer Americans filed for new unemployment benefits last week, a reassuring sign about the labor market in the closely watched economic reading.  The Labor Department reported yesterday that 367,000 filed new jobless claims in the week ended May 5, down from 368,000 the week before. The previous week reading was revised up by 3,000.  Economists surveyed by Briefing.com had forecast 365,000 would file for help.  There have been growing worries about a weakening of the recovery in the jobs market, especially after a disappointing April jobs report that showed employers adding far fewer jobs than expected.  Jobless claims, which had been falling steadily earlier this spring, also had climbed again in recent weeks before a drop two weeks ago.

Free mortgage review, few apply

It’s been more than six months since government regulators and banks first extended an offer to 4.3 million homeowners facing foreclosure: to review, at no cost, the foreclosure process to check for any possible errors or misrepresentations.  Homeowners stand to collect compensation of as much as $100,000 if errors are found. But thus far, only a tiny percentage of those eligible have signed up.  The push for a review process was set in motion by the “robo-signing” scandal. In 2010, several banks admitted mishandling some foreclosure documents. Some borrowers may have wrongfully lost their homes as a result, and the scandal exposed systemic problems in the foreclosure process.  In the wake of the scandal, federal bank regulators required 14 mortgage companies to establish the Independent Foreclosure Review process.

The review costs homeowners nothing, but at last count, only 165,000 people — fewer than 4% of those eligible — have applied.  The original April 30 deadline has since been extended to July 31.  Last month, Housing and Urban Development Secretary Shaun Donovan tried enlisting a group of housing counselors to get more homeowners to sign up for the review.  “I am concerned that not enough folks have signed up, and that we’re going to waste that opportunity,” Donovan said.  Donovan says the process presents the first real opportunity for most troubled homeowners to get an independent read on whether their case was — or is — being handled appropriately.

Chinese banks coming to a location near you

The Federal Reserve gave three state-owned Chinese banks its stamp of approval Thursday to expand their presence in the United States.  The central bank accepted an application from Industrial and Commerce Bank of China Ltd., along with China Investment Corporation and Central Huijin Investment, to become bank holding companies by purchasing up to an 80% stake in New York-based Bank of East Asia USA.  The approval marks the first time the Fed has allowed any large Chinese bank to purchase a US bank, and it could boost merger and acquisition activity “as Chinese banks may look to acquire regional banks in order to establish a US footprint,” said Guggenheim senior policy analyst Jaret Seiberg, in a research note.  Meanwhile, the Fed also granted the Bank of China permission to open its fourth US branch in Chicago. The Beijing-based bank already has two branches in New York and one in Los Angeles.

NAR – sales up, inventory down

Median existing single-family home prices are firming in many metropolitan areas, while improving sales and declining inventory are creating more balanced conditions, according to the latest quarterly report by the National Association of Realtors (NAR).  The median existing single-family home price rose in 74 out of 146 metropolitan statistical areas (MSAs) based on closings in the first quarter from the same quarter in 2011, while 72 areas had price declines.  In the fourth quarter of 2011 only 29 areas were showing gains from a year earlier.  A new breakout of income requirements on a metro basis shows most buyers have the necessary income to buy a home in their area, assuming a favorable credit rating.

At the end of the first quarter there were 2.37 million existing homes available for sale, which is 21.8% below the close of the first quarter of 2011 when there were 3.03 million homes on the market.  There has been a sustained downtrend since inventories set a record of 4.04 million in the summer of 2007.  The national median existing single-family home price was $158,100 in the first quarter, which is 0.4% below $158,700 in the first quarter of 2011.  The median is where half sold for more and half sold for less.  Distressed homes - foreclosures and short sales which sold at deep discounts – accounted for 32% of first quarter sales; they were 38% a year ago.  Total existing-home sales, including single-family and condo, increased 4.7% to a seasonally adjusted annual rate of 4.57 million in the first quarter from a downwardly revised 4.37 million in the fourth quarter, and were 5.3% above the 4.34 million level during the first quarter of 2011 when sales spiked. 

The national median family income was $61,000 in the first quarter.  However, to purchase a home at the national median price, a buyer making a 5% down payment would only need a $34,700 income.  With a 10% down payment the required income would be $32,900, while with 20% down, the income drops to $29,300.  First-time buyers purchased 33% of homes in the first quarter, unchanged from the fourth quarter; they were 32% in the first quarter of 2011.  The share of all-cash home purchases in the first quarter was 32%, up from 29% in the fourth quarter; they were 33% in the first quarter of 2011.  Investors, drawn by bargain prices and who make up the bulk of cash purchasers, accounted for 22% of all transactions in the first quarter, up from 19% in the fourth quarter; they were 21% a year ago.  In the condo sector, metro area condominium and cooperative prices – covering changes in 52 metro areas – showed the national median existing-condo price was $157,200 in the first quarter, which is up 3.4% from the first quarter of 2011.  Eighteen metros showed increases in their median condo price from a year ago and 34 areas had declines.

Regionally, existing-home sales in the Northeast jumped 8.6% in the first quarter and are 6.6% above the first quarter of 2011.  The median existing single-family home price in the Northeast declined 3.2% to $226,300 in the first quarter from a year ago.  In the Midwest, existing-home sales rose 5.5% in the first quarter and are 11.7% higher than a year ago.  The median existing single-family home price in the Midwest increased 0.8% to $125,300 in the first quarter from the same quarter in 2011.  Existing-home sales in the South increased 2.1% in the first quarter and are 4.1% above the first quarter in 2011.  The median existing single-family home price in the South rose 1.2% to $143,600 in the first quarter from a year earlier.  Existing-home sales in the West rose 5.9% in the first quarter and are 1.4% higher than a year ago.  The median existing single-family home price in the West slipped 0.9% to $196,200 in the first quarter from the first quarter of 2011.

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.”

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.

 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.

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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.

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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-
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* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
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* In 2011, Chris’ 4 Central Florida real estate offices
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Settlement to boost short sales

The government’s $25 billion settlement with the nation’s five biggest mortgage servicers over so-called “robo-signing” practices could boost short sales, as loan servicers will receive credit when they approve sales that include forgiveness of a portion of underwater homeowners’ debt.  Although the settlement is only expected to help a fraction of homeowners who owe more their properties are worth — perhaps one in 20, according to one estimate — it will also help bring certainty back to housing markets by removing some of the obstacles that have been keeping homes stuck in the foreclosure pipeline.  Announced last month, detailed terms of the agreement between mortgage servicers and a coalition of state attorneys general and federal agencies were filed today.

Broadly, the settlement calls for mortgage servicers to pay $5 billion in fines and commit to a minimum of $17 billion in homeowner relief, including principal reductions. Another $3 billion is earmarked for helping underwater borrowers refinance. “We will see an increase in short sales, because lenders and loan servicers will get the same credit for doing a short sale, as if they did a loan modification or principal reduction,” said Rick Sharga, executive vice president of Carrington Mortgage Holdings LLC.  Allowing debt forgiveness on approved short sales to count against the required $17 billion in principal reductions helped secure a settlement that will reach more borrowers, the paper said. Loan servicers will also get partial credit even when it’s investors, rather than the banks themselves, taking the loss.

Also, if the remaining six to 14 loan servicers sign on to the settlement, it would grow to about $30 billion with more than $45 billion in benefit to homeowners, HUD said.  Cade Holleman, executive director of the Irvine, Calif.-based National Association of Women REO Brokerages, said the day is fast approaching when brokers and agents who have concentrated heavily in real-estate owned properties will have to diversify.  Short sales, refinancings, and loan modifications are each “pulling REO inventory out of the game,” he said.  “You’ve got to keep your eye on that process,” Holleman said.  “You can no longer be 80% REO,” but must diversify into short sales and property management.

Retail sales up

Total retail sales increased 1.1%, the Commerce Department said, after an upwardly revised 0.6% rise in January.  Economists polled by Reuters had forecast retail sales rising 1% after a previously reported 0.4% gain in January.  Sales last month were buoyed by a 1.6% rise in sales of motor vehicles, reflecting pent-up demand by households and growing confidence in the economy as job creation speeds up.  Excluding autos, retail sales advanced 0.9% last month, adding to January’s upwardly revised 1.1% gain.  Gas prices rose 20 cents last month, according to government data.  Sales at gasoline stations surged 3.3%, the biggest gain since March last year, after rising 1.9% in January. Excluding autos and gasoline, sales rose 0.6% in February after increasing 1% the prior month. Gasoline accounted for 11.5% of retail sales in February.

Outside autos and gas stations, details of the report were fairly upbeat, suggesting recent solid gains in employment were supporting consumer spending.  Last month, clothing store receipts jumped 1.8%, the largest increase since November 2010, while sales at building materials and garden equipment suppliers advanced 1.4%.  So-called core retail sales, which exclude autos, gasoline and building materials, were up 0.5% after advancing 1.0% in January.  Core sales correspond most closely with the consumer spending component of the government’s gross domestic product report.   Sales at restaurants and bars rose 0.8%, while receipts at sporting goods, hobby, book and music stores increased 1.0%.  Sales of electronics and appliances rose 1.0%, while receipts at furniture stores fell 1.2%.

Olick – rent bubble?

“Typically when rents go up, more renters turn to home buying.  When home prices go up, more turn to renting, but today’s housing market is anything but typical.  Rents were up 3% nationally in January, year-over-year, according to a soon-to-be released new rental index from Zillow.com. Home prices, however, were down 4.6% annually.  When you look locally, the numbers are more dramatic.  In some markets, rents rose almost as much as home values fell. Take Chicago, for example, where rents were up just over 9% annually while home values were down just over 10%. The same is true for Minneapolis, where the divide is nearly the same. In San Francisco and Detroit, rents are up around 5% while home prices are down the same. It begs the question, as the rent vs. own divide grows, will the rental bubble suddenly burst?  Right now investors are rushing to get in on cheap foreclosures, hoping to turn them around for quick rental income. The regulator of Fannie Mae and Freddie Mac, the FHFA, is in the midst of a pilot program to sell 2500 foreclosed properties to investors as rentals. The bulk of these properties are already rented, which means buyers get a turn-key investment with instant returns.  In the meantime, multi-family housing starts were up over 14% in January from December and have been rising steadily as developers look to cash in on high rental demand and relatively low supply. Multi-family REITs are seeing big returns.

So what exactly is the tipping point, given that mortgage availability is still tough, consumer confidence in housing is still weak, and employment, while improving, is still not where it needs to be to spur strong buyer demand?  ’While it seems that rents are rising at the expense of home values, the opposite is true. A thriving rental market will stimulate home sales, as investors snap up low-priced inventory to convert to rentals. That, in turn, will lower the number of homes on the market, which will eventually help put a floor under the value of all homes,’ says Zillow chief economist Stan Humphries.  More supply of rental homes, especially single family, could slow the upward trajectory of rent rates, which in turn would make renting more attractive and buying less so. It just raises a red flag to see home affordability at a record high, investors rushing in, and rents so strongly outpacing home values.”

Banks to face tough reviews

Banks will face stiff penalties and intense public scrutiny if they fail to live up to the standards of a $25 billion mortgage settlement with state and federal authorities, according to court documents filed as part of the deal Monday in federal court in Washington.  While the broad outline of the deal was announced last month, the mechanics of the agreement that took more than a year to negotiate were laid out in Monday’s filing, including exactly how much credit the five banks would receive for varying levels of loan forgiveness and just what kind of conduct from the past is off-limits to future investigations.  Banks must review their adherence to the new rules every quarter through a random sampling of cases, with a maximum threshold for errors at 1% in some cases if they are to avoid fines. “Any error that is found during the sampling process will have to be corrected,” the official said.  In some cases, servicers would face civil penalties of up to $1 million for each violation of Monday’s consent order.  Repeat violations could bring fines of $5 million each. An independent monitoring and enforcement office is being set up under the agreement, to be paid for by the banks, that will be led by Joseph A. Smith Jr., the former North Carolina banking commissioner.

The complaint, which specifies the terms of the settlement, comes nearly 18 months after reports of “robo-signing” and other abuses in the foreclosure process set off a nationwide furor, and marks another legal milestone in the wake of the bursting of the housing bubble and the financial crisis of 2008-9.  The five banks covered by the settlement - Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally - engaged “in a pattern of unfair and deceptive practices,” according to the complaint. Besides failing to perform modifications for borrowers seeking to ease the terms of their loans, the documents also cite what consumers have been complaining about for years: lost applications and other paperwork, inadequately trained staff and wrongfully denied modification requests.

WSJ – rise in Phoenix housing shows the way to recovery

As home prices continue to drop in most cities, a nascent real-estate rebound here holds lessons for the rest of the country.  This sprawling desert metropolis was one of the hardest hit housing markets during the bust. Phoenix home prices declined 55% from 2006 through the end of 2011, and Arizona’s foreclosure rate jumped to No. 3 in the nation in 2009. Hundreds of thousands of homeowners are underwater.  Now real-estate economists across the country are studying an early but surprisingly broad Phoenix turnaround. The sharp drop in home prices has brought new buyers into the market. Unlike other markets where housing recoveries have been snuffed out by big overhangs of homes for sale and foreclosed properties, inventories are lean here.  “Phoenix has hit a bottom,” says Thomas Lawler, an independent housing economist who was one of the first to warn six years ago that prices in overbuilt metros were poised to fall.  The nation’s hard-hit housing markets face a tough act: engineering a housing recovery without traditional trade-up buyers, many of whom are either unwilling or unable to sell because of huge price declines.

Phoenix has found a viable formula. Low prices are igniting demand from first-time buyers and investors who are converting the homes to rentals. The local economy is on the upswing with several big employers like Amazon.com Inc. and Intel Corp. hiring again, which is further increasing demand for housing. And the region is benefiting from a surge of buyers from Canada who are using their favorable exchange rate to scoop up bargains in the desert.  Local mom-and-pop investors are also playing key roles in soaking up supply. Out-of-state buyers accounted for one-quarter of all purchases last month. One in every 25 sales went to a buyer that listed a Canadian address when registering the sale, according to the Cromford Report, a local real-estate publication. Many are flush with cash from a real-estate boom of their own in Canada and an exchange rate that has given Canadians unusual buying power.

Nationally, housing demand still remains weak and bank-owned sales are expected to rise this year, putting more pressure on prices. Many economists say they expect home prices nationally could fall by another 3% or so this year before hitting a bottom next year. Most expect that prices will rise little for several years.  US home prices fell another 2% in the fourth quarter on a seasonally adjusted basis, according to the Standard & Poor’s/Case-Shiller index tracking 20 cities. But prices rose by 2% in Phoenix, the biggest increase of any metro area in the country. Over the past year, prices in Phoenix are down by 1.2%, the smallest drop since its prices started falling in 2006.  Big price drops, like those in Phoenix, are another key. In Detroit, prices are down by 46% over the past six years and have fallen to levels last seen in 1994. Sales have picked up in Miami, where prices are down by 51% over the past five years.

But low prices alone haven’t been enough to so stabilize other epicenters of the housing bust where job growth still lags. In Las Vegas, where prices have tumbled 62% since 2006, including 8.9% over the past year, the local economy is heavily dependent on tourism and gambling, both industries that haven’t recovered. “A lot of markets in the country have hit a bottom, but I just don’t see them coming back the way Phoenix has,” says John Burns, a homebuilding consultant in Irvine, Calif.  The improving housing market in Phoenix isn’t much comfort to anybody who bought a home there a few years ago. More than 52% of mortgage borrowers owe more than their homes are worth, according to CoreLogic, a real-estate data company. And not everyone in Phoenix is convinced that the improvements will last, especially if the economy falters or oil prices soar.  Phoenix saw a small run-up in prices three years ago when federal tax credits spurred a buying frenzy, but prices dropped again once the credits expired. Others worry that banks have delayed foreclosures and will begin to saturate the market with more properties in the coming year.

Small business optimism up

Optimism among small business owners may be increasing at a “glacial” pace, but it’s “mostly headed in the right direction.”  That’s according to William Dunkelberg, chief economist of the National Federation of Independent Business and keeper of the Small Business Optimism Index. The latest survey of 819 NFIB members showed indications that small business owners are starting to spend, and could even ramp up hiring in some sectors over the next few months.  Respondents to the February survey expressed optimism about their expectations for higher real sales, an increase in inventories and positive earnings; these three things taken together helped push the index up 0.4%, to 94.3, the sixth straight increase in the monthly index.  Inventories have decreased for many business owners in the past month – 20% of respondents reported reductions – which is good news for an economy that needs spending to make it grow.

Capital outlays, too, are being planned, according to the survey. “The capital spending number keeps going up,” he noted. “It’s the highest we’ve seen in years.” While still far from normal, he said, “Even if it’s just to fix a leaky roof, business owners’ capital expenditures are rising.”  In the past month, more business owners also added workers – 12% of owners added 3.4 workers per firm.  The November elections, as well as the uncertainty surrounding health-care reform, are causing some business owners to remain on the sidelines, said Dunkelberg, waiting to see the outcome of both before committing to spending and expansion. “There is a lot of political uncertainty between now and November,” he said.  Still, the trend, at least for now, is upward. And for many business owners, even a slow improvement is better than movement in the other direction.

Foreclosures to jump in 2012

Analysts expect between 900,000 and 1 million homes will move from delinquency into REO in 2012, back to levels seen before the robo-signing slowdown.  Servicers moved roughly 800,000 properties through the foreclosure process and into REO liquidation in 2011, according to RealtyTrac. After resolving affidavit problems late last year, banks began moving more properties through the process. JPMorgan Chase analysts expect repossessions to reach as high as 900,000 even with a wave of new alternatives to foreclosure.  “Several major policy changes in the last few months have sped up resolution of the pipeline. Of course, new delinquencies will ensure that full resolution will still take years, but the pace may be faster than we expected,” analysts said.  Daren Blomquist, vice president of RealtyTrac, said that pace could return this year.  “For 2011 we hit 804,423, not quite the 825,000 we were on pace for because of a slowdown in November and December,” Blomquist said in an interview. “We are expecting close to 1 million REOs in 2012 as some of the delayed foreclosures finally complete the process this year.”

The pace began to pick up in January but is still down from 2011. Servicers repossessed 66,500 homes that month, up 8% from December but down 15% from one year ago.  Just because a property moves into REO doesn’t mean it will be resold that year, either. For instance, Freddie Mac data shows the GSE had to wait an average of nearly 200 days to unload an REO. According to Blomquist, there were nearly 538,000 REO sales in 2011, roughly two-thirds of all homes repossessed that year.  About 2.6 million loans, or half of the total delinquency inventory, will be removed either through modification, short sale or a traditional repossession in 2012, Chase analysts said.  The AG settlement guidelines released yesterday could result in 500,000 modifications, according to Chase.  The Treasury Department expanded the Home Affordable Modification Program in January to allow more borrowers to qualify and provide higher incentives for principal reduction.

Analysts still expect the changes to result in relatively few additional modifications, roughly 140,000 added to the 220,000 permanent workouts under the program estimated this year.  If so, HAMP workouts may outnumber the 270,000 proprietary modifications, which have routinely outsized HAMP in the past.  Chase analysts also expect the Fannie Mae and Freddie Mac bulk REO sales and rental programs to reach as high as 100,000 properties. A pilot program began in February to sell just 2,500 Fannie-owned homes.  Roughly 500,000 short sales could occur in 2012, roughly one-third of all liquidations — which include the 900,000 expected repossessions and the new rental program as well.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

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
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

Forward this e-mail to your friends!
Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

************************************************************

MBA – mortgage application down

Mortgage applications decreased 0.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 24, 2012. This week’s results are adjusted for the Presidents Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 0.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 9.4% compared with the previous week. The Refinance Index decreased 2.2% from the previous week. The seasonally adjusted Purchase Index increased 8.2% from one week earlier. The unadjusted Purchase Index increased 0.9% compared with the previous week and was 4.3% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 0.33%. The four week moving average is down 0.96% for the seasonally adjusted Purchase Index, while this average is up 0.64% for the Refinance Index.

The refinance share of mortgage activity decreased to 77.9% of total applications from 80.1% the previous week. This is the lowest refinance share since December 2, 2011, and the first time the measure has fallen below 80% since December 9, 2011. The adjustable-rate mortgage (ARM) share of activity decreased to 5.0% from 5.3% of total applications from the previous week. “Mortgage rates remained near survey lows last week, but refinance volume fell slightly,” said Michael Fratantoni, Vice President of Research and Economics at the Mortgage Bankers Association. Fratantoni continued, “According to survey participants, more than 20% of refinance applications were for HARP loans. The HARP share of total refinance applications has increased over the past month. Purchase application volume increased over the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010.” In January 2012, among home purchase applications, 86.4% were for fixed-rate 30-year loans, 6.5% for 15-year fixed loans and 5.4% for ARMs. The share of purchase applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 1.7% of all purchase applications. The share of 15-year fixed and ARM decreased from the previous month while the 30-year fixed and “other” fixed category shares increased from last month.

Growth up 3%, inflation up

Gross domestic product expanded at a 3% annual rate, the quickest pace since the second quarter of 2010, the Commerce Department said in its second estimate. That was a step up from the 2.8% pace it reported in January. Price indexes also swelled, with the core personal consumption expenditures (PCE) index jumping 1.3%, against an advanced reading of 1.1%. Economists polled by Reuters had expected fourth-quarter GDP would be unrevised at a 2.8% pace. The economy grew at a 1.8% pace in the third quarter. While the rebuilding of inventories added a hefty 1.88 percentage points to GDP in the last quarter, the pace of accumulation was not as fast as previously reported. Business inventories increased $54.3 billion, instead of $56.0 billion. Excluding inventories, the economy grew at a 1.1% rate, rather than 0.8%. That was still a sharp step-down from the prior period’s 3.2% pace. Although business overall business spending was revised up, investment in equipment and software was lowered to a 4.8% growth rate from 5.2%. Export growth estimates were also lowered, but weaker imports led to a smaller trade gap.

In addition, consumer spending — which accounts for about 70% of US economic activity — was a touch firmer than initially thought. Consumer spending rose at a 2.1% rate instead of 2%. Even spending on home building was firmer than previously estimated and investment on nonresidential structures was modestly weak. So far data ranging from employment to manufacturing have shown underlying strength in the economy, reducing the need for the Federal Reserve to ease monetary policy further by launching a third round of asset purchases or quantitative easing. But surging gasoline prices, which have risen 12.6% or 42 cents since the start of the year and averaged $3.78 a gallon in the week through Monday, are clouding the outlook. High gasoline prices helped to almost snuff out growth early last year. However, economists believe the impact on households this time could be mitigated somewhat by weak costs for natural gas and a strengthening labor market.

WSJ – Senators for short sales

The best that can be said about the latest Congressional attempt to heal the housing market is that politicians have at least diagnosed a real problem: a glut of homes for sale. Like other proposed top-down fixes, however, the latest Beltway brainstorm would likely hurt more than help. Republicans Lisa Murkowski and Scott Brown and Democrat Sherrod Brown want to speed up short sales, which occur when a lender agrees to let a homeowner pay off a mortgage by selling a home at a price below the outstanding loan balance. Their bill—introduced earlier this month—would force lenders to approve or deny short-sale offers within 75 days or face a $1,000 fine, plus attorneys’ fees. The lender could ask for an extension only once, for 21 days. Accelerating short sales isn’t a bad idea, in and of itself. Delinquent borrowers can offload their mortgage and find another home they can afford, or move to an area that’s cheaper. Lenders don’t have to endure a lengthy foreclosure process and risk having the property sit unoccupied for months, if not years. Borrowers who can afford the home can snap them up at bargain prices.

But why do the Senators want to interfere in a market that is working? CoreLogic recorded 293,574 short sales last year, up from 273,100 in 2010 and 64,813 in 2007. That makes sense: Lenders want to minimize their losses as best they can and are working through their portfolio as quickly as possible. Setting an arbitrary timeline for short sales makes for a good political talking point, but it might have unintended consequences. Lenders often have to coordinate with investors and second-lien holders to approve the deal, which takes time. They also don’t want to rush, make a mistake and expose themselves to litigation for sloppy paperwork, especially after the recent furor over alleged “robo-signing” abuses. Fraud is another concern, though it’s hard to get firm estimates on the extent of the problem. Risk consultancy Interthinx estimates about $1 billion was lost annually in deals between 2007 and 2010 when buyers resold property for more than 20% of the original sale value within six weeks—a red flag for fraud in a market with falling or flat home prices. Sometimes a broker’s low-ball assessment done on a house is fraudulent; sometimes a broker conceals from the lender the fact that a willing buyer exists for the house at a higher price. Big banks like Wells Fargo or Bank of America can devote resources to fighting this kind of fraud but smaller lenders may not have the same capabilities. Try as Congress might, there’s no quick fix to the oversupply of homes that’s weighing down the housing market. Increasing the regulatory burden on lenders will only prolong the pain.

WSJ – home prices hit new lows

Home prices fell to fresh lows in December, but economists say that a drop in the number of homes listed for sale could help stabilize prices in parts of the country this year. Home prices fell by 4% last year, according to the Standard & Poor’s/Case-Shiller index that tracks 20 metro areas. Prices dropped by 1.1% for the three-month period ending in December compared with the same period ending in November. That was slightly better than November’s reading, when prices were down 1.3% from October. Tuesday’s report is the latest evidence that the housing market still faces a cloudy outlook after a six-year downturn. The inventory of homes for sale has contracted, reducing competition among sellers, according to The Wall Street Journal’s quarterly survey of housing-market conditions in 28 metro areas.

But a large potential backlog of foreclosed properties hangs over many housing markets. Other headwinds including tight mortgage-lending standards that show few signs of easing. “These are times of continued, great uncertainty about home prices,” said Robert Shiller, the Yale University economist who co-founded the index that bears his name. “We might be on the verge of a home recovery, but then, maybe not.” Others are becoming somewhat optimistic. Thomas Lawler, an independent housing economist in Leesburg, Va., said the S&P/Case-Shiller index should hit a bottom this spring. He said many analysts have overlooked positive developments, including a dearth of new construction and the falling share of homes selling out of foreclosure. “You don’t hear very many people talk about the actual housing stock, and how slow it’s growing,” he said, while conceding that it is “absolutely true that organic demand has yet to show any material rebound.”

Even when prices stop falling, they aren’t likely to rise for years, leaving millions of homeowners stuck in properties worth less than what they owe. “We’re looking at an L-shaped recovery,” said Stan Humphries, chief economist at real-estate website Zillow, who predicts another 3.7% decline in home prices for the coming year. In most of the country, home prices aren’t falling at anywhere near their jaw-dropping pace of 2008. But only two markets showed an increase in home prices during the fourth quarter. In Phoenix, home prices were up by 0.8%, while Miami reported a smaller gain of 0.2%. Detroit was the only city to post a year-over-year gain, rising by 0.5%. Home prices in Atlanta, meanwhile, fell by 12.8% last year, while Chicago posted a 6.5% decline. One surprising development in many housing markets is that the supply of homes for sale has fallen to a five-year low. While that normally would be a sign of health, real-estate agents say a paucity of homes is holding back sales.

At the current sales rate, it would take about four months to sell the supply of homes on the market in Denver, Washington, D.C., and Orange County, Calif. That level is lower, at less than three months, in Phoenix and San Francisco, and has dropped to just 1.9 months in Sacramento, Calif. But several markets still face supply-demand imbalances that could keep pressure on prices. New York’s Long Island had a 13-month supply of homes at the end of the fourth quarter. Nashville and Charlotte, N.C., had a 12-month supply, and northern New Jersey had a nearly 11-month supply. Those numbers will rise if banks sell more foreclosed properties as they correct deficient mortgage-handling practices.

Unemployment for 5 years

The US economic recovery is “frustratingly slow” and it could take four to five years to ratchet the unemployment rate down to about 6%, from more than 8% now, a top Federal Reserve official said yesterday. The recovery is held back by the housing market and Europe’s debt crisis among other headwinds, but monetary policy is now appropriately positioned to eventually achieve this “maximum employment” level, said Cleveland Fed President Sandra Pianalto. “We do not have a good deal of concrete history for monetary policy to fit our current circumstances, but I am confident the Federal Reserve is making the most of its tools to move the economy in the right direction,” the Fed official said at an economic development meeting in Westfield Center, Ohio. Pianalto, a voter this year on the Fed’s policy-setting panel, is a moderate dove in line with Chairman Ben Bernanke’s core of policymakers who have taken aggressive action to bring down unemployment, which stands at 8.3% after rising above 9% last year. The US central bank in late 2008 slashed interest rates to near zero and has since bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades.

Olick – time to buy?

“Nobody wants to catch a falling knife. It is as simple as that. If potential buyers see continued home price erosion, they will stay parked on the sidelines. But as with everything else in this unique and historic housing market, perhaps the usual logic doesn’t apply. ‘Housing is one of the great investments right now. I tell people all the time when they come up to me, they say, ‘What should I do, Mr. Trump?’ I say go buy a house,’ said Donald Trump earlier today on CNBC. ‘It wouldn’t be an obvious mistake to buy a house now,’ hedged Robert Shiller, barely a few hours later. Perhaps they were just jumping off Warren Buffett’s declaration yesterday that if he had a way to manage them, he would buy a couple of hundred thousand single family homes and rent them out. Housing appears to be rated a ‘buy’ these days, especially among investors, who see a ripe and rising rental market and big potential for income. But is it the right time yet for what I call ‘organic’ buyers to get in? By this I mean people buying a home to actually live in it, raise a family in it, let the dog run around in the back yard. If prices are still falling, couldn’t an even better deal be waiting down the road a bit?

No. House prices will continue to fall on a national basis at least through 2012, but you have to look past national headlines to your local market, which is likely already recovering nicely. The trouble with the national numbers is that they are heavily weighted toward the lower end of the market and to the distressed end of the market. Around 73% of homes that sold in January were priced below $250,000, according to the National Association of Realtors. Forty-seven% of homes sold that same month were considered ‘distressed,’ which is either a foreclosure or a short sale (where the lender allows the borrower to sell for less than the value of the mortgage). With all the activity in these areas, no surprise that prices skew lower. The $250,000 to $500,000 price range may now be the sweet spot for the market. Sales in January were up in this price range, and if you have good credit, you are within GSE and FHA loan limits in most markets. While FHA just raised its insurance premiums, which may hurt much-needed first-time homebuyer demand, it is still one of the best loan products out there today, especially for those with lower down payments. You cannot time housing any more than you can time the stock market. True, housing moves far more slowly, but that works to its benefit, as prices don’t rise and fall on daily news or even on major events. Sales have clearly bottomed in housing, and prices always lag sales. They will lag longer this time around, no question, but they will come back. Supply and demand will eventually win out, even after an historic crash. If you can’t get a good mortgage now, then perhaps it’s not your time, but if you can, waiting may not buy you much.”

US conducts criminal libor probe

The US Justice Department is conducting a criminal probe into whether the world’s biggest banks manipulated a global benchmark rate that is at the heart of a wide range of loans and derivatives, from trillions of dollars of mortgages and bonds to interest rate swaps , a person familiar with the matter said. While the Justice Department’s inquiry into the setting of the London interbank offered rate, or Libor, was known, the criminal aspect of the probe was not. A criminal inquiry underscores the serious nature of a worldwide investigation that includes regulators and law-enforcement agencies in the United States, Japan, Canada and the UK. Several major global banks, including Citigroup, HSBC, Royal Bank of Scotland and UBS, have disclosed that they have been approached by authorities investigating how Libor is set. No bank or trader has been criminally charged in the Libor probes. It wasn’t clear which banks or traders the Justice Department is targeting in its criminal probe.

Fannie loses $2.4 billion, asks for $4.6 billion

Fannie Mae lost $2.4 billion in the fourth quarter and asked the federal government for another $4.6 billion in bailouts. Fannie earned a $73 million profit the same period the year before. The government-sponsored enterprise reported a $16.8 billion loss for the entire year, widening 20% from the $14 billion in losses in 2010. Fannie paid $2.6 billion in dividends to the Treasury Department in the fourth quarter. Since entering conservatorship in 2008, Fannie received $116 billion in bailouts through the end of 2011 and paid back roughly $19.8 billion. A $6.1 billion increase in lost net fair value of its assets pushed a poorer performance in 2011. Significant declines in interest rates over the year pushed more losses on its risk management derivatives. Combined with Freddie Mac and Ginnie Mae, the federal government guaranteed more than 99% of mortgage-backed securities issued between 2009 and 2011, accounting for more than 85% of all single-family loans.

Fourth quarter revenues declined 8% to $4.5 billion from the year before. Revenues for the year actually increased 17% to $20.4 billion. Fannie charged off $4.7 billion in credit losses, increasing 40% from the same quarter in the prior year. The higher losses came from a slight increase in foreclosures. The mortgage giant repossessed more than 47,000 homes in the last three months of 2011, up from nearly 46,000 one year prior. The problem loans continue to rise from the books of business originated between 2005 and 2008. These loans cost Fannie $140 billion since 2009. Its becoming a smaller portion of the entire portfolio, though, shrinking to 31% at the end of 2011 from 39% the year before. “Our new single-family book now accounts for more than half of our overall single-family guaranty book of business,” said Fannie Mae CFO Susan McFarland.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

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
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

Forward this e-mail to your friends!
Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

************************************************************

2012 – the year of the short sale?

By Tom Tryon: “Here is the real-time tale of two real estate markets. One market is depressed and distressed. Property values are down. Since mid-2006, residential values in Florida have declined by 51%. Hundreds of thousands of properties have been, or are, in foreclosure and huge numbers of homes have been repossessed. Consider these statewide numbers, presented by analyst Jack McCabe during last week’s Herald-Tribune Hot Topics forum:

- 150,000 residential properties in Florida have been repossessed, and are owned, by banks.

- 371,000 foreclosure cases are open in courts.

- 530,000 residential mortgage loans are at least 90 days past due and in default.

- 265,000 homeowners have not made a mortgage payment in more than two years.

- 1 million residences are in some form “distressed,” whether in foreclosure, owned by banks or in default.

- 46% of mortgages “under water” – in other words, the debt exceeds the current market value of the residential property.

Add this number – 809, the average number of days to process a foreclosure in Florida – and it’s easier to understand why so-called short sales, in which owners and mortgage holders sell at steep losses, are viewed as advantageous options and positive movements in the total market. The overriding question posed during the forum was: Will 2012 be the Year of the Short Sale? The answer, expressed by the overwhelming consensus of McCabe, the guest speaker, the panel – Michael Braga and Harold Bubil of the Herald-Tribune; attorneys Nancy Cason and Tom Avrutis – and audience was: Yes. There was one caveat: 2013 might be the Second Year of the Short Sale. That’s because the volume of pending foreclosures — and the imminent threat of even more, could make it impossible to clear this “shadow inventory” from the real estate market. There was widespread agreement among the 150 people — analysts, lawyers, bankers, real estate agents and developers — who attended the forum that more lenders are warming to short sales, despite the bottom-line effects of writing off losses. What’s more, the homeowners in financial peril are overcoming the psychological hurdles – and coming to terms with the financial implications of – short sales.

The real estate market is so complex that it’s impossible to cover in a multi-day symposium, much less a 90-minute forum. But I took away two simple points: 1) The current market is like a summer day in Florida: Dark and cloudy during one part of the day, with scattered sunshine and the possibility of bright days ahead; 2) It’s no wonder my wife and I have stayed in the same home for 25 years; real estate makes my head spin.”

Oil prices on the way up

Oil prices are poised to gain for the third straight week, undermining global equity market sentiment and threatening the fragile economic recovery. A CNBC poll of analysts and traders showed 12 out of 16 respondents, or 75%, expect oil prices to rise this week. Three believe prices will fall and one expects no change. Though the bulls comprise the overwhelming majority, many are lightening long positions, or bets that prices will rise, as they believe the recent rally is showing signs of fatigue. “You have to trade from the buy side but I would be reducing my long positions ahead of the weekend,” said Tom James, Chairman & Co-Founder, Navitas Resources, in an email on Thursday. “The fundamentals in the physical market don’t support the current short term price.” James added that he was looking to add long positions on any pullback in Brent crude to $115. “Target for the year is now $150 on longer term basis for Brent.”

Numerous respondents this week are warning higher retail gasoline prices could threaten the fragile economic recovery in the US David Kotok, chairman and chief investment officer, of Cumberland Advisors said an additional penny a gallon on gasoline translates roughly to a $1.4 billion decrease in US annual spending power. The average US price of gasoline jumped 18 cents a gallon in the past two weeks to $3.69 on Feb. 24, according to the nationwide Lundberg Survey, Reuters reported. But supplies of fuel remained plentiful in most of the country, the survey found. At $4.24 a gallon, San Diego had the highest average price for regular unleaded gasoline on Feb. 24, while the lowest price was $3.07 a gallon in Denver. Some believe gasoline prices may average $4.50 a gallon or as high as $5.00, damaging demand ahead of the peak summer driving season.

Olick – builders say good market trumps energy prices

“Sales of newly built homes are still stumbling along at historically low levels, but builders claim they are beginning to see the light at the end of a very long tunnel. Sales may not be surging back, but in some of the better local economies, buyer interest is. We saw it at open houses over the President’s Day weekend, and it’s starting to show up on line even more dramatically. Virginia-based NewHomesGuide.com, the website of New Homes Guide magazine, saw a 46% jump in unique visitors from December 2011 to January 2012 and a 47% jump from one year ago. Page views were up 59%. ‘We always see a seasonal jump in January,’ said Publisher, Leslie Stritmatter in a press release, ‘but the increases from the same period last year show this to be a much more significant bounce. I’m very hopeful that this is a sign of consumer confidence returning to the markets.’ Consumer sentiment is improving. ‘Right now the improving labor market trumped rising gasoline prices in influencing confidence, which is good in that new jobs and wages can help cushion the blow of an ever rising cost of living,’ says analyst Peter Boockvar at Miller Tabak.

When it comes to housing, the same may be true of high affordability, improving employment, better confidence, record-low mortgage rates and lower-priced homes; they all trump rising gasoline prices. ‘We don’t think there’s going to be a big impact from gas prices because we have so many forces taking us to recovery,’ says Richard Kettler of Kettler/Forlines Homes. Kettler says they have seen a substantial increase recently in the number of visits to his homes, which largely straddle the suburbs and exurbs of Washington, DC. ‘The attitude of the home buyer is much better, they’re more excited,’ he adds. He also notes there is now suddenly more interest in larger homes, not McMansions, but moving from the 2 thousand square foot range to 3000. Higher gas prices may not hit buyer demand overall, but they will affect some choices. ‘We are more sensitive today because of the economic scenario we are still recovering from,’ says Mark Fleming, chief economist at CoreLogic. ‘From a housing perspective, this impacts the exurban communities, as an increased cost of living will reduce demand to buy homes, and these are the same communities hit the hardest by the housing crash anyway.’ A study by the Federal Reserve in 2010 found that a 10% increase in gas prices reduces home construction by 10% after four years in locations with a long average commute time, compared with other locations.

The effect of higher gas prices on home buyers will depend on how long the spike lasts. If consumers think it’s temporary, they won’t factor it as much into their decision. There are, however, continuing obstacles to the new home market. Sales are still barely above where they were last year, and last year was the worst on record for the nation’s builders. This despite all the stimulus in the market. And as I’m writing this, Mr. Kettler just came out of his office, grumbling that one of his sales is being held up by an appraisal that came in too low.”

Debt ceiling fight on the way

Remember the bitter debt ceiling debate in Washington last summer? Well, another showdown could be in the offing sooner than planned. The deal cut this summer to end the debt ceiling standoff provided for a $2.1 trillion increase in the country’s legal borrowing limit, which now stands at $16.394 trillion. At the time, it was estimated that such an increase could carry the Treasury Department safely beyond the contentious presidential election season and into early 2013. But now that Congress has extended the payroll tax cut, emergency unemployment benefits and the so-called Medicare doc fix — only some of which was paid for – there is a greater chance that US borrowing could reach the debt ceiling sooner. Treasury Secretary Tim Geithner recently told lawmakers that even with passage of the payroll tax bill – which will add an estimated $101 billion to deficits in fiscal year 2012 — he doesn’t expect the debt limit to be reached “until quite late in the year.” That’s a hair past the Nov. 6 election but smack dab in the middle of the fiscal firefight that Congress is expected to have over the expiring Bush tax cuts.

Meanwhile, the Bipartisan Policy Center, which analyzed projected monthly deficits and other factors that could play a role in Treasury’s borrowing, now projects that the debt ceiling could be hit between late November 2012 and early January 2013. Of course, if need be, the Center notes that Treasury could still avert a US default by employing “extraordinary measures” — such as suspending investments in federal retirement funds. So even if Treasury is at risk of hitting the ceiling at the end of November, it’s possible that its moves could take the risk of default off the table until early 2013. Keep in mind, though, that these estimates assume nothing material changes between now and the end of the year to increase federal borrowing. But if there are any surprises along the way — such as a slowdown in the economic recovery that puts a crimp in federal revenue, or more unpaid-for legislation — the debt ceiling could be hit before Election Day, said longtime political observer Norm Ornstein, a resident fellow at the American Enterprise Institute. Either way, the presidential election, the pending expiration of the Bush tax cuts and the debt ceiling are a combustible mix. And it’s impossible to predict the endgame for any of them yet. Much will depend on when the ceiling is breached and who wins the election, Ornstein said.

Florida’s “category 5″ foreclosure problem

Already facing overloaded dockets of criminal and civil cases, Florida’s court system is getting hit by a deluge of foreclosures that could tie up the state’s legal system for years to come, according to nationally prominent lawyer. “It’s Florida’s Category 5 foreclosure hurricane,” said Kendall Coffey, a legal expert and author of “Foreclosures in Florida,” a book he discussed during a Space Coast Tiger Bay Club dinner in Cocoa Beach. “Collateral damage can be seen in every sector of life,” he said. “The collapsing real estate market inflicted waves of unemployment, massive losses in the financial and real estate industries, and an untold human cost for the families forced out of homes auctioned at public sales. The mortgage meltdown has also battered local governments with a deteriorating tax base.” There are 368,000 pending home foreclosures in the state, and that number could double by 2016, Coffey said. “In contrast to most states that employ abbreviated processes for deeding the mortgaged property back to the lender, every foreclosure action in Florida is a lawsuit governed by the same rules for pleadings and court hearings that apply to other civil litigation,” said Coffey, who added the average foreclosure in Florida takes 806 days. “We’re not just going to hand it over to the lender.”

“Foreclosures in Florida” details aspects of Florida law along with legal and practical strategies for lenders and borrowers embroiled in default issues, work-outs and litigation over troubled mortgage loans. Coffey is partner in the Coffey Burlington law firm in Miami and has a home in Brevard County. He’s a former US attorney, legal analyst for the CNN, MSNBC and Fox networks and author. He was among the lawyers representing Al Gore during the 2000 presidential election recount dispute. His latest book, “Spinning the Law,” looks at the art of trying cases in the court of public opinion. The foreclosure crisis that began with skyrocketing default notices in 2006 has engulfed the nation, but hit Florida especially hard. Half of state’s homes are “underwater,” meaning owners owe more on their mortgages than their home is worth. The state’s real estate driven economy is generating floodtides of litigation and has spawned an industry of foreclosure defense lawyers who rely on overwhelmed court dockets to stave off foreclosure and keep clients in their homes, Coffey said. “Florida still has and will have one of the slowest rates of foreclosure in the country,” he said. How will the consumer fare? “Ultimately,” Coffey said, “homeowners will lose a contested foreclosure in the overwhelming majority of cases.”

More buyers paying with cash

Even more American homebuyers are paying cash to acquire homes, according to a new survey from Campbell/Inside Mortgage Finance. The group’s HousingPulse Tracking Survey said between October and January, the number of homeowners purchasing residences with cash grew from 30.8% to 34.1%. This trend is occurring at a time when mortgage rates are holding low. The survey noted that all-cash buyers are getting discounts of approximately 10%. Homebuyers who turned to cash purchases are doing so because of the slow underwriting process late appraisals and long-wait times when dealing with certain loans, the report said. “It is taking about 60 days to close a non-troubled FHA loan. About 30 days longer than usually a year ago,” an agent in Florida told the survey team. To release its report, the Campbell/Inside Mortgage Finance HousingPulse Tracking survey interviewed 2,500 real estate agents across the country.

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

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
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

Forward this e-mail to your friends!
Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

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New bill to speed up short sales

Senators Lisa Murkowski, Scott Brown, and Sherrod Brown are proposing a bill requiring mortgage lenders to make a prompt decision on whether to allow a short sale at the request of a home buyer. The bill, “Prompt Notification of Short Sales Act,” will require a written response from the lender no later than 75 days after the receipt of the written request from the buyer. This bill will require that the lender’s written response to the buyer must specify whether the request was approved, if more time is required, and, if they do need more time, the servicer must estimate a date a decision will be reached. The loan servicer is limited to one extension no longer than 21 days. This will give the distressed homeowner a more definite timeline for when the short sale will be completed so they can plan their move better.

Back in April 2011, Representatives Thomas Rooney of Florida and Robert Andrews of New Jersey introduced a similar version of the bill but it never came up for debate before a House committee before the legislative session ended. The previous version said that that if a borrower submitted a written request for a short sale of a home and if they didn’t receive a written response within 45 days, the request would be considered approved. This new version extends the response time for lenders but includes a penalty if they fail to comply. If the loan servicer doesn’t respond to a buyer’s request within the 75 day period, the buyer may be awarded $1000, plus reasonable attorney fees, per violation of the Act (this Act does not apply to mortgages where the borrower and the servicer have entered into a written agreement before the date of the enactment of this Act). The new bill would hold banks accountable to specific standards that they must follow, streamlining the process for everyone involved in the short sale transaction. It would make short sales more attractive to buyers and eliminate the uncertainty related to buying a short sale, resulting in more sales of distressed properties. This reduction of housing inventory will assist the stabilization of home prices and the real estate market.

Greece – again

Euro zone finance ministers are expected to approve a second bailout for Greece today to try to draw a line under months of uncertainty that has shaken the currency bloc, although work remains to be done to make the numbers add up. Diplomats and economists say they do not expect the package to resolve Greece’s economic problems. That could take a decade or more, a bleak prospect that brought thousands of Greeks onto the streets to protest against austerity measures on Sunday. French Finance Minister Francois Baroin said all the elements were in place to reach an agreement and Greek Finance Minister Evangelos Venizelos said he expected a deal. The finance ministers are scheduled to meet at around 1500 GMT. Euro zone ministers need to agree new measures to make the financing work, given the ever-worsening state of the Greek economy. But they say an agreement on Monday will help restructure Athens’ vast debts, put it on a more stable financial footing and keep it inside the 17-country euro zone. Senior Greek finance ministry and European Central Bank officials held a conference call on Sunday to go over the final details of the 130-billion-euro ($171-billion) program, including a report assessing the likelihood of Greece lowering its debt which is critical to the International Monetary Fund. While there is skepticism in Germany and other countries that Greece will be able to meet its commitments, including implementing 3.3 billion euros of spending cuts and tax increases, officials said momentum was building for a deal.

Olick – fewer foreclosures mean lower prices?

“For years now we have been harping on how distressed home sales put downward pressure on home prices all around them. Close to twelve million borrowers are now in a negative equity position on their homes because so many other borrowers were unable to afford their mortgages. The logical assumption would then be that as foreclosures ease, organic home prices will rebound. But what if the current, unique state of the housing market turns that assumption on its head? Foreclosure sales now make up a full one third of the market nationally and far higher percentages in states like California, Florida, Nevada, and Georgia. The supply of these properties has actually been dropping, pushing prices higher, even in the distressed category. There is huge investor and first-time home buyer demand for distressed properties at the low end of the market, and that has helped stabilize prices. ‘We believe the distressed part of the housing market has already bottomed,’ said Morgan Stanley analyst Oliver Chang on CNBC’s Squawkbox. ‘The bid that we see from the investor is the reason for this bottom.’ He sees further declines in organic home prices. Why?

Banks have been very slow to release their repossessed (REO) inventory onto the market, not to mention that foreclosure processing delays have literally millions of properties still sitting in foreclosure limbo. There is a dwindling supply of foreclosures and rising investor demand. Analysts keep pointing to overall falling inventories, but the current existing home sales pace doesn’t account for that drop. The fact is that with so much of the supply distressed, and so few organic sellers putting their homes up for sale, the inventory drop is artificially skewed to the recent lack of movement in foreclosures and a crisis of confidence among potential organic home sellers. Okay, so what about the fact that banks are ramping up the process now, which could put more properties on the market? That could boost supply, were it not for a new government program to sell foreclosures in bulk to large investors. Chang says over $1 billion in investor capital has been raised over just the past six weeks to take advantage of this new program, and he claims this could add up to 1.8 million jobs. Property managers, renovators, rental agents, he says would benefit from these bulk rental investments.

Mortgage analyst Mark Hanson, however, disagrees. He claims that individual investors will likely spend more on upgrades/renovations than bulk investors and will then sell to owner-occupants at a higher price, thereby not only stabilizing but increasing overall home values, while also juicing jobs. ‘Due to epidemic effective negative equity (not having enough equity to pay a Realtor and put a down payment on a new house) the repeat buyer cohort has been cut in half since 2007. They now make up the minority of national resales,’ says Hanson. ‘Investors and first-time buyers ARE the real estate market,’ he adds. ‘Investors and first timers want REO and short sales. Anything done to prevent the flow of distressed property will hurt the volume of existing home sales and all of the economic benefit that comes along with them. An REO-to-rent program will bring about record lows in monthly existing home sales volume. And volume precedes price.’ Hanson believes that when the distressed supply is choked off, by selling REO in bulk to rent, not re-sell, then the only thing you have left is meager organic sales. ‘The housing market will implode,’ he adds.

Yes, lower supply, in a normal market, would generally mean a return to home price appreciation, but that’s not the way today’s market is working because organic demand is still so weak and is hampered by tight credit. There is even less demand for mid- to higher-priced homes. ‘$200K to $300K is the new normal for home builders,’ says Rick Palacios of John Burns Real Estate Consulting. ‘Since new home prices peaked in 2007, new single-family sales of over $500K have been more than cut in half, dropping from 13% to just 6% of all new home transactions. The existing home market is much the same, with the bulk of sales and demand in the very low price tiers. It just goes to show that in the historic recovery from an historic housing crash, the usual rules just don’t apply.”

Iran drives oil higher

Oil prices jumped to a nine-month high above $105 a barrel on Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country’s nuclear program. By early afternoon in Europe, benchmark March crude was up $1.91 to $105.15 per barrel in electronic trading on the New York Mercantile Exchange. Earlier in the day, it rose to $105.21, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday. Markets in the United States are closed Monday for the Presidents Day holiday. Iran’s oil ministry said Sunday it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran’s crucial fuel exports. They include a freeze of the country’s central bank assets and an oil embargo set to begin in July. Iran’s Oil Minister Rostam Qassemi had warned earlier this month that Tehran could cut off oil exports to “hostile” European nations. The 27-nation EU accounts for about 18 percent of Iran’s oil exports.

The EU sanctions, along with other punitive measures imposed by the U.S., are part of Western efforts to derail Iran’s disputed nuclear program, which the West fears is aimed at developing atomic weapons. Iran denies the charges, and says its program is for peaceful purposes. Analysts said Iran’s announcement would likely have minimal impact on supplies, because only about 3 percent of France’s oil consumption is from Iranian sources, while Britain had not imported oil from the Islamic republic in six months. “The price rise is more a reflection of concerns about the further escalation in tensions between Iran and the West,” said commodity analyst Caroline Bain of the Economist Intelligence Unit. “Banning the tiny quantities of exports to the U.K. and France involves very little risk for Iran — indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage.”

Mortgage-backed bonds making a comeback

Some Wall Street investors made money as the mortgage market boomed; others profited when it fell apart. Having reaped big gains during both of those turns, Greg Lippmann, a former star trader at Deutsche Bank, is now catching the next upswing: buying the same securities built from mortgages that he bet against before the financial crisis erupted. Mr. Lippmann is joined by other big-money investors — mutual funds like Fidelity as well as hedge funds — in riding a wave of interest in the same complex loan pools that nearly washed away the financial system. The attraction is the price. Some mortgage bonds are so cheap that even in the worst forecasts, with home prices falling as much as 10 percent and foreclosures rising, investors say they can still make money. “Given its significant underperformance in 2011, we believe the product is as cheap to broader markets as it has been in a long time,” Mr. Lippmann, whose portfolio is heavy with subprime mortgage securities, wrote in a recent letter to investors.

Yet the tide could turn again and wipe out investors. Chief among the risks is Europe: the Continent’s banks still hold a significant amount of United States mortgage securities, and if they are forced to sell assets, it could wreak havoc on the market. Washington is a question mark, too. If banks have to pay for loans they issued under dubious circumstances, it would be a home run for investors, who could receive full payment for a mortgage in a security they bought at a discount. But if borrowers whose houses are worth less than their mortgages are able to reduce their principals on a large scale, bond investors could suffer because the securities would be worth even less than they paid. “As a money manager, you can’t close your eyes to that potential outcome,” said Jeffrey Gundlach, a founder of DoubleLine Capital, who has been buying mortgage securities since 2008. “To believe that this time we are really out of the woods and the prices will not drop again is dangerous. People made that argument a year ago.”

See you at the top!
Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

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 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* 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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

************************************************************

FHA defaults rise

Defaults on Federal Housing Administration (FHA) mortgages increased in December for the ninth-straight month.  More than 711,000 FHA-backed home loans were in default at Dec. 31, nearly 19% higher a year earlier.  As defaults increased, a constricted and delayed foreclosure process is hurting the government’s ability to unload the properties once they are repossessed.  The US Housing and Urban Development Department (HUD) held 32,170 REO in December, according to a recent report, the lowest level measured since the same month in 2007. The high was reached in March 2011 at 68,997 properties.  The FHA insures roughly one-third of the mortgage market, as private insurers have been struggling with capital shortfalls since the crisis in 2007.  But the FHA is in trouble as well because of the surging defaults. The capital ratio of the agency’s mutual mortgage insurance fund slipped to 0.24% last year, well below the 2% mandated by Congress.

Analysis from the White House’s Office of Management and Budget released this week showed the fund would actually fall into the red this year and need an unprecedented bailout from the Treasury Department.  Bank of America will send roughly $500 million to the FHA as part of a settlement reached last week over past countrywide origination problems. HUD Secretary Shaun Donovan said more settlements would be announced soon, sending between $900 million and $1 billion to the FHA.  The agency will also be raising insurance premiums above the hikes set to take place in 2012 as a result of the payroll tax cut extension reached last year.  Donovan said this week that new loans written this year and last are proving to be more profitable than expected. But the market remains fragile and another downturn in housing could put the fund in further trouble.  “A very significant piece of what determines the actuarial value of the fund is what we project to happen to home prices,” Donovan said. “The better than expected performance of the new loans can be offset if home prices perform worse than we expect.”

Tax cut deal announced

A payroll tax cut for 160 million Americans, set to expire at the end of this month, would be extended through December under a bipartisan deal announced early today by US congressional leaders.  The accord would also renew expiring jobless benefits for millions of others and prevent a pay cut for doctors of elderly Medicare patients.  Economists say the tax cut extension and renewal of jobless benefits should provide a lift to the US economy, certain to be a key issue in the battle for control of Congress and the White House in the run-up to Election Day.  “We have reached an agreement and we’re moving forward,” Republican Representative Dave Camp, who headed the negotiating committee, told reporters shortly after midnight EST.  It was not immediately clear when the House of Representatives and Senate would vote on the deal, but lawmakers hoped to do so before they leave Friday for a week-long recess.  Many Republicans had initially balked at the extension while others insisted that its cost had to be offset by spending cuts to prevent an increase in the US deficit.  House Speaker John Boehner and fellow Republican leaders cleared the way for a deal on Monday when they dropped their demand that there be spending reductions to pay for the tax-cut extension.

Olick – foreclosures up again

“After a year-long reprieve from rising foreclosures, the numbers are going up again.  One in every 624 US households received a foreclosure filing in January, up 3% from the previous month, according to a new report from RealtyTrac.  Foreclosure activity froze in many states in 2011, due to processing delays after fraud, or so-called ‘Robo-signing,’ were uncovered in the fall of 2010.  The thaw is now on.  ‘We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation’s largest lenders,’ said RealtyTrac’s CEO Brandon Moore in a written release.  ‘Foreclosure activity increased on a year-over-year basis for the first time in more than 12 months in Florida, Illinois, Indiana and Pennsylvania, following a pattern we saw in late 2011 in states such as California, Arizona and Massachusetts.’

While states that do not require a judge to preside over foreclosure proceedings, like California, saw a jump in filings toward the end of last year, judicial states have all but stalled. That will now change, thanks to the $26 billion dollar government-lender/servicer settlement. There will still be some delays on individual state levels, but the wheels are turning again, and that means more bank repossessions and more foreclosed properties heading to the re-sale market.  Bank repossessions, the final stage of the foreclosure process, increased at least 30%  year-over-year in several states, including Massachusetts, which saw a 75% spike.  Bank-owned or REO (real estate owned) activity hit a 16-month high in Illinois and a 15-month high in Indiana.  Default notices, the first stage of foreclosure, were flat nationally in January, but spiked in judicial states, like Connecticut and Pennsylvania (up 112%) and even in non-judicial states like Maryland (up 100%).

Nevada still posted the highest foreclosure rate, with one in every 198 households receiving a filing, despite an 8% drop in foreclosure activity. Nevada is a non-judicial foreclosure state, so the foreclosure backlog has been clearing for the last several months.  The situation is the same in California, where foreclosure activity dropped to a 50-month low, but the state still posted the second highest foreclosure rate in the nation. More than 51,000 borrowers received a foreclosure filing in January. California cities still account for nine of the top ten metro foreclosure rates, according to RealtyTrac.  As optimism seems to abound for the spring, at least among the nation’s home builders whose sentiment index jumped to the highest level in four years this month, foreclosures still stand in the way of a robust recovery.  Distressed property sales lower the value of homes around them, and that pushes more borrowers into a negative equity position, owing more on their mortgages than their homes are currently valued. Until banks work through the enormous backlog of foreclosures, which number in the millions, home prices will not hit a firm bottom, especially in the most troubled local real estate markets.”

Jobless claims down

Jobless claims slipped 13,000 from an upwardly revised 361,000 the previous week and beneath economist estimates that actually saw the number rising.  The drop in jobless claims marked a near four-year low, suggesting the labor market was finally strengthening.  Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 348,000, the Labor Department said, the lowest since March 2008. The prior week’s figure was revised up to 361,000 from the previously reported 358,000.  Economists polled by Reuters had forecast claims rising to 365,000. The four-week moving average for new claims, seen as a better measure of labor market trends, fell 1,750 to 365,250 — the lowest since April 2008.  Considerable slack still remains, with 23.8 million Americans either out of work or underemployed. There are no job openings for nearly three out of every four unemployed.  A Labor Department official said there was nothing unusual in the state-level data and no state had been estimated.  The number of people still receiving benefits under regular state programs after an initial week of aid tumbled 100,000 to 3.43 million in the week ended Feb. 4. That was the lowest level since August 2008.  Economists had forecast so-called continuing claims falling to 3.50 million from a previously reported 3.52 million.  The number of Americans on emergency unemployment benefits rose 16,568 to 3.00 million in the week ended Jan. 28, the latest week for which data is available.  A total of 7.68 million people were claiming unemployment benefits during that period under all programs, up 18,304 from the prior week.

Housing starts up

The Commerce Department said today that housing starts climbed 1.5% to an annual rate of 699,000 units.  Initial estimates for housing starts can be subject to large revisions and the government revised the December reading significantly higher to a 689,000-unit rate.  The Commerce Department initially estimated groundbreaking in December advanced at a 657,000-unit rate.  Economists polled by Reuters had forecast housing starts rising in January from the initial reading to a 675,000-unit pace.  Starts of multi-unit buildings, which are often rented, jumped 8.5% last month. New construction on buildings with five units or more increased 14.4%.  Groundbreaking on single-family units, which make up a much larger portion of the sector, fell 1.0%.  Permits climbed 0.7% to an annual rate of 676,000 units.

Inflation up

US producer prices outside food and energy recorded their largest increase in six months in January, but are unlikely to ignite inflation pressures given the slack in the labor market.  The Labor Department said on Thursday its seasonally adjusted core producer price index rose 0.4% last month, the largest gain since July, after increasing 0.3% in December.  Economists polled by Reuters had expected core PPI to rise only 0.2%. In the 12 months to January, core producer prices rose 3.0 after increasing 2.7% in December.  But overall prices received by farms, factories and refineries edged up 0.1% after dipping 0.1% in December.  The rise, which was smaller economists’ expectations for a 0.4% gain, reflected declines in food and energy prices.  In the 12 months to January, producer prices increased 4.1%, moderating from 4.8% December. That was the smallest increase in a year.  The Federal Reserve last month viewed inflation as largely contained and said it expected to hold interest rates near zero at least through late 2014.  Wholesale prices outside of food and energy were pushed up by a drugs costs, which accounted for about 40% of the increase. Higher prices for light motor trucks and household appliances also contributed.  Passenger car prices fell 0.8% after rising 0.5% in December.

Student loans drain retirement savings

Student loan debt amassed by parents is growing faster than loans taken out by the student.  Parents’ loan debt has more than doubled over the last decade — exceeding $100 billion dollars or 10% of all outstanding student loan debt, according to the independent research firm FinAid.org.  “Parents of every income level are increasingly borrowing for their children’s college education. It doesn’t matter whether the parents are low income, middle income or upper income. There’s been dramatic growth in the percentages of parents who’ve been borrowing,” says FinAid.org founder and publisher Mark Kantrowitz.  Many parents who co-signed loans or borrowed money on their own for their children’s education now face the loss of their retirement nest eggs, homes and other assets. As student loan debt has topped US credit card debt, “America faces the very real possibility of another major threat on par with the devastating home mortgage crisis,” according to a new study by the National Association of Consumer Bankruptcy Attorneys (NACBA).

Piling up student loans in middle age is “troublesome”, says NACBA vice president John Rao, an attorney with the National Consumer Law Center. “Parents who take out loans for children or co-sign loans will find those loans more difficult to pay as they stop working and their incomes decline.”  But, parents’ need to borrow has grown as their savings has declined and plummeting home values have made it difficult for many households to tap what was once a common financial resource — the equity in their homes.  Parents have an average of about $34,000 in student loans and that figure rises to $50,000, including interest, over a standard 10-year loan repayment period. Interest rates on the most common parental loan – the federal Parent “PLUS” loan – is fixed at almost 8%. So the return on parents’ investments needs to average at least 8% just to break even.  The fixed-rate PLUS loan is often a better choice for families than private student loans, whose rates may vary. But the need to borrow private or PLUS is often a sign of over borrowing, Kantrowitz says.  “Parents should borrow no more than they can afford to pay in 10 years because they have to worry about their own retirement. By the time they retire, they should have no debt remaining since they will have no income to repay that debt.”

Southern California – January sales up, prices down

Southern California home sales rose slightly last month as investors snapped up the region’s lowest-priced properties, sinking prices to the lowest levels in more than 2 1/2 years, DataQuick, a research firm, reported yesterday.  More than half of existing homes sold were foreclosed on in the previous year or short sales — transactions in which the price is less than what is owed on the property.  There were 14,523 new and existing homes and condominiums sold in the six-county region in January, up 0.4% from the same period last year, DataQuick said. Sales plunged nearly 25% from December, reflecting a typical seasonal decline.

Last month, 669 new homes sold, the lowest monthly tally since DataQuick began tracking sales in 1988.  The median price was $260,000, down 3.7% from $270,000 the same period a year earlier and from December. It was the lowest price since $249,000 in May 2009. During the current cycle, prices peaked at $505,000 in the middle of 2007 and bottomed out at $247,000 in April 2009.  John Walsh, president of the San Diego-based research firm, said January is typically a poor gauge of future sales but that the mortgage market “remains dysfunctional.” Nearly one-third of homes sold last month were paid for fully in cash for a median price of $199,000.  Absentee buyers — mostly investors and second-home purchasers — bought 26.8% of homes sold, paying a median price of $193,500. Absentee buyers were especially active in the Inland Empire, which has Southern California’s lowest-priced homes.  Homes that sold for at least $500,000 accounted for 16% of sales, down from 18.3% a year earlier, DataQuick said. During the last decade, a monthly average of 27.2% of homes sold for at least $500,000.

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 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* 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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