congress

Fed Seeks to Lower Mortgage Rates

Mid-Day Market News & Commentary by Chris McLaughlin, December 2, 2008
http://www.shortsalesriches.com/welcome.html

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Listen up folks. You need to start calling your investors …calling those fence sitters that have been sitting too long. The Federal Reserve just said they are going to start buying Treasury notes and bonds. Let’s review some gobbly gook FedSpeak that Fed Chairman Ben Bernanke said yesterday in Austin, Texas:

“The second arrow in the Federal Reserve’s quiver – the provision of liquidity – remains effective,” he said. “The Fed could purchase longer-term Treasury or agency securities on the open market in substantial quantities. This approach might influence the yields on these securities, thus helping to spur aggregate demand.”

Did you catch that? Folks mortgage rates are going EVEN LOWER. Why? Mortgage rate are directly tied to the 10 year treasury. As the Fed comes in and buys them up, that will send the yield on the treasury even lower, therefore reducing the overall rate on the 30 year mortgage.

And there’s more good news. Just last week the Fed announced that it would be buying $100 billion in debt from Fannie and Freddie, and around $500 billion in mortgage backed securities. Now what do markets do? They anticipate action and price it into the equation … so if you’re a Realtor, a loan officer, or a real estate investor, this is our version of a Bailout. Look for the 30 year fixed to stay well below 6%!

If, however, you agree with us that the government is mostly filled with morons that have been botching up this economic recovery after causing it, be sure to catch our recorded webinar on the topic:

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Ok, on to other real estate related news of the day…

Are you ready for this new statistic, reported today by the Wall Street Journal? TransUnion LLC, the Chicago-based credit bureau, predicts that 7.17% of consumers will be at least 60 days past due on their mortgages by the fourth quarter of 2009. That’s nearly double where it is today. “There are a lot more loans that will be resetting throughout 2009 through 2011,” Ezra Becker, principal consultant in TransUnion’s financial-services group, told the Journal. “There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now.”

If you think that REOs and short sales are slowing you need to get your head on straight! They will EXPLODE in 2009. Loan modifications can only have so much impact …

Bank of America announced today that it would be eliminating at least 10,000 investment banking jobs as it soaks up Merrill Lynch. The combined companies will have about 260,000 employees, with 50,000 representing the investment banking division.

And finally … someone got a brain in the public relations department at the Big 3 Automakers. General Motors announced today that its CEO, Rick Wagoner, would drive to Washington instead of flying. The CEO, who flew by private jet sipping champagne (ok, I through the champagne in for effect…you get the idea!) for his last appearance, will drive a Chevy Malibu hybrid from Detroit to DC. Ford’s CEO, Alan Mullaly will also be driving from Detroit. Now … it would be a public relations bonanza, and it would certainly send the right message, if we could get the two of these guys to share a ride!

Now, on to our real estate investor education section…

All Pain and No Gain? Not so Fast!

While the most recent data released by the Federal Housing Finance Agency FHFA may initially seem to indicate “all pain and no gain” taking time to delve a little deeper into the numbers shows a few clear-cut nuggets in an otherwise pan of silt.

First the pain…

U.S. home prices fell 1.8 percent in Q3 as compared to the previous quarter…the largest in the purchase only index 17 year history.

Over the past year prices have fallen 6.0 percent between Q3 of 2007 and Q3 of 2008 – not adjusted for inflation. Since the price of goods and services increased by 6.7 percent during the same period, the inflation adjusted decline is 12.7 percent.

Four states continue to see double-digit declines including Nevada (-20.9%), California (-20.8%), Florida (-16%) and Arizona (-13.5%).

A Few gains…

Some states actually managed to exhibit price increases even while most of the nation continued to show declining sales figures; North Dakota (4.0%), South Dakota (3.9%), Texas

(3.2%), Alabama (2.8%), and Oklahoma (2.8%).

Several MSA or Metropolitan Statistical Areas also showed price appreciation including Austin-Round Rock, TX (5.6%), Augusta-Richmond County, GA-SC (5.5%) and Rapid City, SD (5.4%).

Extension of higher conforming loan limits into 2009. While the recent increase to $729,750 for high cost areas is due to end by January 1, 2009, revisions due to take effect will increase loan limits to $417,000 for all homes and up to $625,500 in high cost areas.

Quick Tip…

Take time to sign up for automatic notification of the FHFA report as it is released by sending an email to FHFAinfo@FHFA.gov. The next quarterly report covering Q4 of 2008 is scheduled for the end of February 2009 and the next monthly index is due out on December 23, 2008.

More on Wednesday!

See you at the top!

Chris McLaughlin
http://www.shortsalesriches.com/blog

P.S.:

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Mid-Day Market News & Commentary by Chris McLaughlin, October 23, 2008
http://www.shortsalesriches.com/welcome.html

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Join us tonight, Thursday, October 23^th (Tuesday) at 9 PM EDT, 6 PM PST:

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This probably won’t come as a surprise to the many Realtors and investors reading this e-mail, but RealtyTrac announced today that US foreclosure filings were up 71% in the third quarter over the same period last year. Almost 766,000 homeowners had a sheriff show up at the door and with a foreclosure complaint in hand. Six states made up for nearly 60% of the list: Arizona, California, Florida, Michigan, Ohio, and Nevada. If you think for a moment that short sales and REOs are just a 2008 event you’re crazy. This will continue well into 2010 as the market absorbs the inventory that is just now coming online…

Alan Greenspan, famous for his “irrational exuberance” comments that took the air out of the Internet bubble, now has a new moniker he’ll be known for: “Credit Tsunami.” Greenspan testified before Congress this morning and told lawmakers that he was in a state of “shocked disbelief” over the extent of the credit crisis and the credit tsunami that has ensued.

The former Fed Chairman said that the key to relief will be stabilizing home prices, which he doesn’t foresee happening for “many months in the future.” “Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment,” Greenspan said. “Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity.”

In banking news, the venerable Goldman Sachs plans to announce today that it will lay off 3,260 employees, reducing its workforce of 32,500 by 10%.

Now, on to our real estate education section …

Back to the Future

Ahhh, the good old days. It may be hard to believe but there was a time when the average selling price of a home in this nation was under $30,000…in fact, it cost $28,900 to purchase a middle class home in 1973…a mere 35 years ago. Of course, gasoline cost 38 cents a gallon, a first class postage stamp was 8 cents and a dozen eggs were 45 cents. Yes, wages were also lower with the median family earning just over $12,000 a year…but it took $8,000 a year to qualify for the mortgage leaving the average family an extra $4,000 a year to save or spend as they see fit…nearly 1 out of every 3 dollars earned.

Today all of that has changed. The average cost of a home is over $200,000, gasoline is $3 to $4 a gallon, stamps seem to go up by the week and a dozen eggs are $3 to $4 a dozen. Although wages are higher, the median household income of $52,000 leaves less than $7,000 needed to qualify for the mortgage even with lower interest rates.

Ask yourself one simple question…how many houses would you have bought for $28k in California, Florida or other areas of the country in 1973 if you had the opportunity? Remember, this was the median selling price –many homes could be bought for much less! Let’s take a quick walk down memory lane to see the price of homes throughout the years:

1973: $28,900

1977: $42,900

1979: $55,700

1981: $66,400

1984: $72,400

1988: $89,300

1990: $97,300

1992: $102,700

1995: 117,000

1998: $136,000

2000: $147,000

2002: $167,000

2004: $195,000

2006: $221,000

2007: $217,900

Yes, short sale investors will notice the cost of a home has dropped in recent years but take a look at the big picture and ask yourself if it would have been a good idea to have bought 10 or 12 of those homes back in 1973…for the price of one today. What would your net worth look like now if you had?

There are two people in this world…those that let inflation work for them and those that are consumed by it. Short sale investors buy low and sell high. In recent weeks and months the Federal government has been printing money like never before. Experts agree inflation is likely to consume the savings and retirement accounts of millions of Americans like never before. Sooner or later the price of goods and services is likely to increase as the ravages of inflation resume their never ending progression. Make it work for you not against you.

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

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Join us tonight, Thursday, October 23^th (Tuesday) at 9 PM EDT, 6 PM PST:

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Fed Seeks to Lower Mortgage Rates as Foreclosures Set to Double in 2009

Foreclosures Up 71% in Q3

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