dodd-frank

Smart Real Estate News & Commentary by Chris McLaughlin May 25, 2011

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New home sales up

The Census Bureau reported an annual sales rate of 323,000 new homes last month. That was up 7.3% from a revised rate of 301,000 in March.  Economists had forecast a sales rate of 300,000, according to consensus estimates from Briefing.com.  While sales have risen for two months in a row, the April rate was down 23.1% compared with the same month in 2010.  In February, new-home sales fell to a revised 278,000, marking the lowest level since the government began tracking the data in 1963.  Sales in April rose the most in the West, where the supply of foreclosed homes has been shrinking. But sales remain sluggish in economically challenged states in the Midwest and South.  The average price of homes sold in April was $268,900, according to the report. That was up from $250,000 in March, but down about 2.5% from the beginning of the year.  There were an estimated 175,000 new homes for sale. That’s the lowest level on record, according to Vitner.  At the current sales rate, it would take 6.5 months to sell through that inventory, the report said.

25% of retirees have no savings

One in four Americans age 50 or older said they had exhausted all of their savings during the recession, while 67% at least reduced their retirement savings account balances during the previous three years, according to a report by the AARP Public Policy Institute released Tuesday.  More than half, 53%, said they were not confident that they will have enough money to live comfortably in retirement.  More than 80% said the economy had impacted their retirement plans. During the recession, nearly one third said their home declined substantially in value and one quarter experienced a job loss.  As a result of their struggles in recent years, 44% of those above age 50 said that they would likely work part-time in retirement, while 33% said they expect to delay retirement. Nearly 13% had returned to the labor force and were either working or looking for work.  The AARP’s Public Policy Institute polled more than 5,000 Americans — age 50 and over — who were employed, had been employed, or were seeking employment during the recession.

MBA – mortgage applications up

Mortgage applications increased 1.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 20, 2011.  The Market Composite Index, a measure of mortgage loan application volume, increased 1.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.9% compared with the previous week. The Refinance Index increased 0.9% to its highest level since December 10, 2010. The seasonally adjusted Purchase Index increased 1.5% from one week earlier. The unadjusted Purchase Index increased 0.8% compared with the previous week and was 3.1% higher than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 5.2%. The four week moving average is up 1.2% for the seasonally adjusted Purchase Index, while this average is up 7.1% for the Refinance Index.  The refinance share of mortgage activity increased to 66.8% of total applications from 66.7% the previous week. This is the highest refinance share since January 28, 2011. The adjustable-rate mortgage (ARM) share of activity decreased to 5.8% from 6.3% of total applications from the previous week.

Durable goods orders down

The Commerce Department said durable goods orders dropped 3.6% after an upwardly revised 4.4% rise in March, which was previously reported as a 4.1% increase.  Economists polled by Reuters had expected orders to decline 2.2% last month.  Orders were pulled down by a 30% plunge in volatile aircraft bookings. Boeing took in just two aircraft orders, sharply down from the 98 it received in March, according to information posted on the plane maker’s website.  Motor vehicle bookings dropped 4.5%, the largest decline since August, likely tracking an 8.9% dive in auto production during that month. U.S. manufacturing contracted for the first time in 10 months in April as a result of supply chain disruptions in the wake of the March earthquake.

Excluding transportation, durable goods orders unexpectedly fell 1.5% after a revised 2.5% rise in March, previously reported as a 2.3% increase. Economists had expected this category to rise 0.5%.  The report showed weakness across the board, with big declines in orders for machinery, capital goods, defense aircraft, communications equipment and computers. However, orders for computers and electronic products rose.  Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 2.6% last month after an upwardly revised 5.4% increase in March. Economists had expected a 0.2% gain from a previously reported 4.3% rise.  Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, fell 1.7%.

Olick – home builders hurting

“The best number out of today’s report on sales of newly built homes is not the 7.3% bump up in signed contracts, it’s the drop in inventories to a 6.5 month supply.  That number is based on a quicker sales pace and a drop of 5000 in the absolute number of newly built homes on the market.  That volume is the lowest since at least 1963, according to Miller Tabak’s Peter Boockvar, who worries that the supply of existing homes is still simply too much for anyone to be touting the builders.  ‘The best response on the part of builders is to shoot themselves in the foot for as long as they can financially stand, so the market can more quickly absorb the excess inventory of existing homes which make up most of the overall market,’ writes Boockvar.  Aristar’s JT Smith chimes in on the actual April sales number: ‘Unadjusted sales of 32k makes April 2011 tied for the worst April sales number in recorded history.’

My concern is not over the inventory of newly built homes. I think it’s a big positive. My problem is the glut of bargain-priced REO (bank owned) homes against which the builders compete.  This does not include homes that the big banks own, and it doesn’t add in the homes with loans that are 90+ days delinquent, which is 1.96 million, according to Lender Processing Services, or the number of properties that are in the foreclosure process, which is 2.18 million.  Yes, a lot of these REOs are concentrated in the hardest hit states, but there is plenty to go around the nation. Another couple of roadblocks to the builders are higher commodity prices, which make them unable to lower their prices too far (although they are now building smaller, cheaper homes), and the fact that more potential buyers want to live in or closer to major metropolitan areas thanks to high gas prices. That’s not where most of the big builders do their work or have their land inventories.  I’m thrilled the builders sold some homes in April, more than the month before, and I know there is a ton of pent up demand out there; I’m just not so sure that demand is headed toward new construction, at least not in the next few years.”

Warren avoids answers

The political drama surrounding Elizabeth Warren, the force behind the Consumer Financial Protection Bureau (CFPB), played itself out Tuesday when a House subcommittee grilled the CFPB architect on everything from her role in advising other regulators to her departure time from the hearing.  The hearing grew contentious at several points with lawmakers probing Warren with specific questions about her role in recommending a $20 billion settlement between state attorneys general and mortgage servicers.

The subcommittee’s chairman Patrick McHenry (R-N.C.) pushed Warren on previous congressional testimony in which she characterized the committee’s involvement in the mortgage servicing settlement proposal to a situation where she gave advice when asked for it. McHenry asked, “If you are so proud and enthusiastic about your advisory role and advice, why didn’t you express that in the settlement issue?”  Warren responded saying, “We gave advice when asked.” When further probed about whether she would disclose information from settlement meetings, Warren said, “Congressman, my calendar is an open book.”  McHenry shot back, “Are you saying it shows you discussing those items?” Warren stated later in the conversation, “We have provided advice to federal and state officials regarding a potential servicing settlement. We have been sharing our analysis and recommendations in creating a solution that would hold servicers accountable.”  Warren also said her office had sent a statement responding to questions brought up on the mortgage servicing issue by lawmakers and never received a response.

Congresswoman Ann Marie Buerkle  (R-N.Y.) pointedly asked Warren why starting salaries for posted CFPB positions are 60% to 90% higher than equivalent government positions. Warren responded, “We are following the law set up in Dodd-Frank, the five banking regulators are paid on a different pay scale, and the reason is because they are bank regulators and competition for those jobs includes people who are in the financial services industry.”  Buerkle shot back saying, “This is not the private sector. The government needs to be accountable to the people. It just seems like this regulatory body has questions to answer given the huge disparities in salaries.”  When asked if the bureau will keep complaints against companies private or if they will be public, Warren never provided a yes or no answer, only stating that “we are trying to work with the industry to find a system that works.”

The heated debate highlighted the contention already surrounding Warren, one of the most controversial figures in the mortgage finance industry. During the meeting, Warren never directly answered McHenry’s question about whether she would accept the director of the CFPB post. Instead, the Harvard professor avoided a “yes” or “no” response to the question, saying only the decision is up to President Obama.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

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)

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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

    * Follow me on Twitter: http://twitter.com/mclaughlinchris

    * Join my Facebook Fan Page: http://www.mclaughlinchris.com

Smart Real Estate News & Commentary by Chris McLaughlin October 1, 2010

Forward this e-mail to your friends! 

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CNBC’s Olick – foreclosure delay means big trouble

“JP Morgan Chase told CNBC on Wednesday that it will delay more than 56,000 foreclosure proceedings due to paperwork that was signed, ‘without the signer personally having reviewed those files.’  That came on the heels of GMAC halting foreclosures and evictions in 23 states for roughly the same reason. All this leads anybody with a heartbeat to figure that other large servicers will likely follow suit, as potential lawsuits abound.  So what will that mean to the larger foreclosure crisis and the already weakening housing recovery?  ‘It’s clear the pace of foreclosures will slow down,’ says Laurie Maggiano, Policy Director in the Treasury Department’s Homeownership Preservation Office.  ‘As of right now this is a policy and procedure issue until proven otherwise, but never underestimate mid-term electioneering,’ says mortgage consultant Mark Hanson. ‘If this does go to the next level (i.e. national foreclosure moratorium, fear that hundreds of thousands of foreclosures have been performed illegally, etc.), the unintended negative consequences on the mortgage market, MBS investors, banks’ balance sheets and ultimately the housing market will be significant. ‘ 

We’re already seeing threats of ratings agency downgrades on all the major servicers, not to mention the threat to housing’s overall recovery. If the bulk of these cases are valid, then delaying them is only going to prolong the pain.  ‘Worst case is that the current foreclosure problems turn out to be industry-wide and trigger a landslide of legal challenges that lock up foreclosures resolutions for a year or more,’ says Guy Cecala, publisher of Inside Mortgage Finance.  That means all kinds of borrowers would sit in their homes free of charge, banks would be unable to get any return at all, and the housing market would still be facing the inevitable: ‘We may then see a [foreclosure] surge at some point in the future,’ notes Treasury’s Maggiano.  We’ve talked an awful lot about artificial government stimulus skewing the housing recovery as it tries to help; that’s nothing compared to the potential for this latest scandal to wreak havoc on housing yet again.”

Dodd-Frank bill more trouble for business

Acting Comptroller of the Currency, John Walsh spoke before the Committee on Banking, Housing and Urban Affairs Thursday, about the challenges facing his office in adapting to the Dodd-Frank Act — citing the transition as a “mammoth effort.”  His sentiment was reiterated in a letter to Congress from the National Association of Federal Credit Unions.  “The additional requirements imposed by Dodd-Frank have created an overwhelming number of new compliance burdens, which will take credit unions considerable time and effort to resolve,” the letter said. “A slightly longer period for implementation of Dodd-Frank — up to 24 months — would help alleviate some of these burdens and give credit unions more time to comply.”  Walsh said the biggest task right now is integrating the Office of Thrift Supervision into the Office of the Comptroller of the Currency, which requires the OCC to not only revise its rules, but review and republish the rules for the OTS also. 

The OCC duties under the bill also include supporting the Financial Stability Oversight Committee, whose first meeting is scheduled for tomorrow. Walsh expects that under Basel III, will help advance the Dodd-Frank Act and help absorb some of the present challenges.  The NAFCU, however, sent its own list of recommended changes and potential provisions for Congress to consider, including changes to the appraiser independence standard (mandatory reporting requirements on credit unions and other lenders who believe an appraiser is behaving unethically or violating applicable codes and laws, with heavy monetary penalties for failure to comply) and the Bureau of Consumer Financial Protection’s power to preempt consumer protection rules.

Personal income up

The Commerce Department says personal income rose 0.5% in August, the largest increase this year, while spending by individuals rose only 0.1 percent for a fourth straight month.  Personal income increased $59.3 billion, or 0.5% last month, said. That’s more than the 0.3% rise economists expected.  Meanwhile, spending by individuals rose $41.3 billion, or 0.4%, matching the gain from the previous month.  Analysts polled by Reuters had forecast spending, which accounts for about 70 percent of U.S. economic activity, rising 0.3 percent in August.  A consensus of economists polled by Briefing.com had also expected personal spending to climb 0.3% in August. In August, spending was supported by a 0.5 percent rise in personal income, the largest rise since December, the Commerce Department report showed.

The rise in incomes was above market expectations for a 0.3 percent increase and followed a 0.2 percent gain in July.  Spending adjusted for inflation rose 0.2 percent after a similar gain in July. The fourth straight month of gains offered hope that consumer s continued to prop up economic growth in the third quarter. Spending grew at an annual 2.2 percent pace in the second quarter, with overall gross domestic product expanding at a 1.7 percent rate, the government reported on Thursday.  With spending a touch below the 0.5 percent rise in disposable income, the saving rate edged up to 5.8 percent from 5.7 percent in July. Savings rose to an annual rate of $661.9 billion.

New York prices stabilize

Manhattan apartment prices were up year-over-year in the third quarter as more residents bought larger apartments, according to the city’s biggest brokerages.  The median price was $914,000, up 7.5% from a year earlier, according to a report from Prudential Douglas Elliman.  The Corcoran report said the median price was up 9% to $900,000 since last year.  “Prices are jumping because of a shift in the mix,” said Jonathan Miller, who writes the Elliman report.  Studio apartments’ share of the market fell by 8% while two-bedroom apartments’ share rose by the same amount, he said.  The median price of a two-bedroom is about three times higher than a studio’s median price.  “Market-wide price metrics have stabilized” and even in some cases improved, Liebman said.  Prices of new housing as opposed to resale on the West side rose compared with both last year and last quarter, while the median price of existing condominiums on the East side rose 28%, according to the Corcoran report.  This quarter, 27.7% of Manhattan’s listings sustained price cuts, but that is 14% less than last quarter and 29.4% less than a year ago.  Also, condo resales spent 17.5% less time on the market than last year, while co-ops spent 19% less time, StreetEasy.com said.  Manhattan’s Midtown East section, within walking distance of its main office district, saw the most home closings, with 300 closings at a median price of $687,500, according to StreetEasy.com.”

Stimulus gone, jobs gone

Tens of thousands of low-income workers lost their jobs Thursday as a stimulus-subsidized employment program came to an end.  About a quarter of a million people in 37 states were placed in short-term jobs thanks to a $5 billion boost to the Temporary Assistance for Needy Families program, according to the Center on Budget and Policy Priorities. States used about $1 billion to provide subsidized employment, with the remaining funds going to cash grants, food programs, housing assistance and other aid.  About half the jobs were summer employment for youth and the rest were for disadvantaged parents. Each state configured its initiative differently. Some covered all the workers’ wages for a few months, while others paid for a portion of their salary.  With the program expiring, many of the adults have been told not to report to work anymore.  A handful of states will continue to operate the programs for another few months, but most of those will be downsized considerably.

Now for our real estate education section…

Learn a Lesson from the Big Boys…aka What’s in the Works for 2011 and Beyond

Ever wish you had a crystal ball to know what is in the works for next year’s marketing campaigns? Today we are going to give you a taste of what is to come for 2011 and beyond. Not only is it a great way to position your own real estate and short sales messages to appeal to the same crowd as that targeted by the big boys but riding the wave of something “bigger” is a great way to cash in on the top trends for the coming year.

Cause Marketing -  Forget “shock and awe”…today’s hottest trend in the financial, service and even communication industry is “cause” marketing. Need a new credit card? Select one that automatically donates to your favorite charity. Savvy real estate and short sale professionals trying to reach a concerned target market should consider visible support for charitable or other common causes. It’s a great way to show your support and gain visibility while taking advantage of tax incentives.

Back to Basics – Making memories never goes out of style but it’s time to get serious about family, friends and social support networks when major outlets like Disney are making it the foundation of their upcoming promotional efforts. Family oriented neighborhoods and other areas that support lifestyle choices are prime targets for the back to basics marketing message.

Ambush Marketing – Have a rowdy crowd that tends to be impulsive, spontaneous and excitable? Build on it by creating exciting campaigns using the latest in technology combined with special events, location related incentives and other fun, festive ventures. Not only does it set you apart but it’s a great way to gain a bit of local press and notoriety.

Green – Eco friendly alternatives might sound like yesterdays news but everyone from car manufacturers to pet products are planning major marketing campaigns around healthy and sustainable living. Real estate and short sale professionals can tap into this growing trend via a number of new ways including environmentally friendly appliance upgrades, access to public transportation or even the re-use of older homes. Take stock of your properties to determine which are able to attract the green market segment.

Local Marketing – Everyone from LexisNexis to the farmer next door is interested in local visibility and because all real estate is essentially local – well, you should be too. Local is the new global in that the appeal extends beyond the normal reach of those buyers or sellers in the immediate area; instead, the new local creates customized opportunities and services that serve the needs of buyers and sellers from diverse backgrounds in a well defined area and context. Specialized expertise and experience is essential.

Price – Bargains still sell….use the recession to your advantage by competing on price whenever possible. Think it won’t work…how long does it take most people to complete this sentence…

“Five – Five dollar…..”

Yes, it’s the Subway theme that you love to hate but it does demonstrate the successful sales strategy of affordable quality. Stay away from “cheap” and emphasize the intelligent aspect of making a great sales transaction. This is an especially helpful solution to those less than impressive properties in need of extensive repairs or renovation.  Add a few discounts or free products (ie, home warranty for someone just starting out, big screen television for a retiree couple, Disney vacation for a family) to up the ante and make them feel great about the decision. Just do what it takes to close the deal and move on to the next transaction.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin August 31, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

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*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com 

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CNBC’s Olick – homebuyer credit again?

“Just when I thought the housing market was finally being left to correct on its own, I’m starting to hear talk regarding yet another home buyer tax credit. From HUD to the hedge funds, it sounds as if it is gaining steam yet again. This one could involve not just first time/move-up buyers, but a credit for buyers purchasing foreclosed properties or short sales (when the bank allows you to buy a home for less than the value of the outstanding mortgage).  HUD Secretary Shaun Donovan, appearing on CNN’s State of the Union this weekend, didn’t rule out another tax credit. He did say it’s ‘too early to say,’ but then added that ‘we’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.’  After that several Congressional candidates in Florida threw their voices behind the possibility, and Florida Gov. Charlie Crist then chimed in on the same show, saying that another tax credit, ‘would stimulate the economy. It would increase home sales in Florida.’ He finished with: ‘I would absolutely encourage the president to support that because it would certainly help my fellow Floridians.’

So of course then I went the official route and followed up with a HUD spokesperson who responded:  ‘No news here…there are no discussions underway to revive the credit.’  Is it all political? And is another tax credit the answer?  ‘I don’t think it’s all political,’ says housing consultant Howard Glaser. ‘I think they are panicked that the economy/housing got away from them.’ Glaser doesn’t sound convinced the tax credit is really on the table.  ‘They can do a lot off budget with the GSE’s and FHA with no Congress.’  I know a lot of you out there would argue that a housing market correction, as painful as it is, is necessary for housing to truly find its footing again and recover for the long term. Another artificial stimulus could just prolong the agony and set us up for the same drop off in sales and prices that we’re seeing right now.  But it could also move some inventory quickly.

With inventories of new and existing homes dangerously high, and the shadow supply of foreclosures pushing that volume even higher, more stimulus could be a necessary evil. I liken it to what I’m doing with my lawn this week. All summer I fought the weeds, pulling them, using the organic sprays and repellents, spreading mulch to deprive them of any air.  And then I gave up.  I called the lawn service and told them to bring every chemical in their arsenal.  Shock the overgrown mess into submission once and for all, so that I can start fresh again and reseed this fall.”

Banks modifying more than HAMP

Banks have long come under fire not doing enough to help troubled homeowners, particularly when the mortgage crisis started spinning out of control in 2007. Many loan servicers initially addressed the problem by tacking on the missed payments, which only increased strapped homeowners’ monthly burden.  However, banks now are doing nearly twice as many modifications under their own foreclosure prevention initiatives than under the Obama administration’s signature Home Affordable Modification Program (HAMP). 

Servicers completed nearly 644,000 so-called “proprietary permanent modifications” in the first half of this year, compared to 332,000 such adjustments made under the Obama program, according to Hope Now, a consortium of mortgage servicers, investors and housing counselors.  About half of borrowers who don’t land a permanent HAMP modification are given an in-house adjustment, according to federal statistics.  About 78% of banks’ in-house modifications involved interest rate and principal reductions, Hope Now found.  Wells Fargo, for instance, said last week it has reduced more than $3.1 billion in principal on nearly 60,000 loan modifications in the past 18 months. It uses a combination of principal adjustments, interest rate reductions and term extensions to assist its borrowers.

Hidden secrets

Buried in section 953(b) of the Dodd-Frank financial reform act is a new rule forcing companies to disclose the ratio between their chief executive’s pay package and that of the typical employee.  While this may sound like a good, if intrusive, idea on the surface, it creates what lawyers call a “logistical nightmare.”  “We’re not debating the concept of disclosure – we think it’s a good thing,” said Larry Burton, executive director of the Business Roundtable, which represents chief executives of the biggest US companies. “But you can do more harm than good if you take a well-intended piece of policy and implement it badly. That’s the risk here.”  The rules’ complexity means multinationals face a “logistical nightmare” in calculating the ratio, which has to be based on the median annual total compensation for all employees, warned Richard Susko, partner at law firm Cleary Gottlieb. “It’s just not do-able for a large company with tens of thousands of employees worldwide.” 

Pay experts said business had been caught off-guard by the measure, which was not one of the high-profile battlegrounds of the Dodd-Frank legislation. Companies are now gearing up to lobby the Securities and Exchange Commission, which has to write detailed provisions for the new rule.  The rule could also reward with a relatively low ratio those companies that outsourced low-paid work rather than keeping jobs in-house, lawyers said.  Robert Menendez, the senator who sponsored the provision, dismissed business fears. “The idea behind the new rule is that sunlight is the best disinfectant,” said an aide. “Disclosure will help encourage fair pay for workers at a time when middle class pay has stagnated while CEO pay has skyrocketed.”  Like most intrusions by government into the private sector, this one will have bucketloads of unforeseen consequences I’m sure.

Home prices rise

Standard & Poor’s/Case Shiller composite index of 20 metropolitan areas rose 0.3% in June from May on a seasonally adjusted basis. The rise was better than the 0.2% increase expected by economists polled by Reuters, though slower than the 0.5% rise in May.  Unadjusted, the 20-city index gained 1% following May’s 1.3% jump.  S&P, which publishes the indexes, also said home prices nationally rose 4.4% in the second quarter after a 2.8% drop in the first quarter.  Prices rose in 17 of the 20 metro areas in June, S&P said, adding that in the first half of the year 15 of the 20 areas had positive annual growth rates. The housing market is in better shape than a year ago, S&P said.  “Given the way home sales collapsed in July and given the boost in housing activity across the board in the second quarter, it’s clear this may have been the calm before the storm,” said David M. Blitzer, chairman of the index committee at S&P.  “The worry starts when you remember that the Homebuyers’ Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak,” Blitzer said in a statement.  “The inventory of unsold homes and months’ supply data were particularly troubling,” he said, adding that “if this relative weakness in demand continues, it will likely filter through to home prices in coming months.

Auto sales lowest in 28 years

U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs.  While automakers increased discounts by 1% from July to an average of $2,864 per vehicle, sales to individuals probably fell 7% from last month, according to Santa Monica, California-based TrueCar.  Industrywide deliveries, to be released tomorrow, may have reached an annualized rate of 11.6 million vehicles this month, the average of eight analysts’ estimates compiled by Bloomberg. That would be the slowest August since 1982, according to researcher Ward’s AutoInfoBank. The rate would be 18% below last year’s 14.2 million pace, when the U.S. government’s “cash for clunkers” incentive program boosted sales.  “Home sales are way down, the stock market is way down, the unemployment report is very disappointing and consumer confidence is sputtering,” Jesse Toprak, vice president of industry trends at TrueCar.com, said in an interview. “People just don’t want to make big-ticket purchases because they’re uncertain about their jobs and the value of their homes.”  Ford, helped by new models such as the Fiesta small car, will post a 5.2% sales drop, the average of six analysts’ estimates. Chrysler, aided by deliveries to large buyers such as rental-car companies, will have sales increase 3%, the average of six estimates. General Motors Co. will fall 19%, the average of four estimates, in line with the industrywide drop.

Now for our real estate education section…

Frequency Intervals & Demographic Trends

Statistics. Love them or hate them but most business decisions involve the use of statistical data including the purchase and sale of investment real estate. For example, one common measure of a good investment property is “affordability”. But what exactly constitutes affordable?

It’s an important consideration and one that most short sale investors do not fully understand. The short answer is that an affordable home is at or below the “average” household income for that location; ie, it can be purchased or rented by most households and is therefore an attractive investment. However, this really only relates a small amount of the total information required. Average or mean incomes are notoriously inaccurate due to skewing of results at the high or low ends. Likewise, “average” priced homes are equally biased due to very high priced or very low priced home.

One way to avoid the problem is to use frequency intervals in combination with demographic trends and housing price. Frequency intervals are ways of measuring a large group of items to determine which is the most commonly occurring. For example, let’s assume a short sale investor is interested in purchasing a few properties in a given city; s/he is very prudent and does some research to find out the average household income and the average sales price of a home. So far – so good. Just for the sake of simplicity we will assume the household income is close to the national average at $50,000. The average sales price of homes in the area is $150,000 or roughly 3x the annual household income. Our savvy short sale investor sets out to find a few homes in that price range…what could go wrong? Well a lot.

Unfortunately, the rising rates of unemployment combined with a few very high incomes skew the results…basically there are a lot of low-end household incomes in the $25,000 range and a small but significant number of wealthy households in the $ million dollar range. The “average” may still be $50,000 per household for that city but it fails to account for the lack of a substantial middle class. Basically, there are very few households able and willing to purchase a home for $150,000. The lower income households cannot qualify and the higher income households may not be interested.

The solution is to use frequency intervals for all pertinent data including household income, age and other significant criteria. By learning how many households are in a given income bracket, how many are of home-buying or renting age, etc… the investor has a much more detailed plan of action. Returning to the prior example, rather than purchase a $150,000 average home, the investor may concentrate efforts on homes priced at or below $75,000 and/or luxury homes instead. This would appeal to the largest number of buyers and renters for that area at either/or the low income level of high household income level. It’s a simple solution to address highly volatile markets and disparate data.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

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)

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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
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Smart Real Estate News & Commentary by Chris McLaughlin July 22, 2010 

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Failed HAMP may benefit from HAFA

With the amount of canceled trial modifications in the Home Affordable Modification Program (HAMP) passing permanent conversions, some are anticipating that the Home Affordable Foreclosure Alternatives (HAFA) program will be more effective in keeping homeowners out of foreclosure.  As you’ll recall, HAFA was designed to give borrowers who failed to make those payments a chance at a short sale or deed-in-lieu of foreclosure.  Based on survey data of the eight largest HAMP participants, the Treasury found that 45% of the canceled trials from HAMP are in an alternate modification. More failed HAMP modifications could enter HAFA after falling into delinquency after the conversion into permanent status.

For modifications that have been permanent for more than six months, 6% have fallen into 60-plus day delinquency again. The default rate, or the percentage of modified loans that are now 90 or more days delinquent, is less than 2% at six months after the conversion. Cary Sternberg, president of Excellen REO, an asset management firm and subsidiary of Titanium Solutions, said that HAMP was designed for those who want to stay in their home, but as prices continue to deteriorate, more homeowners are looking for a way out, either through short sale or deed-in-lieu.  “Then comes HAFA. In recognition of the fact that some borrowers simply could not make payments even if the payment were lower, a more dignified exit strategy was created,” Sternberg said.  “It is too early to tell what the success rate of the HAFA program will be, but I am betting it will be far better than HAMP,” Sternberg said. “HAMP is a Band-Aid, HAFA is an exit strategy.”

Dodd-Frank Act bad for business

Surprise!  The Dodd-Frank Act signed yesterday by President Barack Obama could have a range of unintended consequences on the mortgage securitization market, according to various commentaries.  Standard & Poor’s (S&P) president Deven Sharma warned the legislation could expose rating agencies to greater liability for — and lawsuits over — ratings of mortgage-backed deals.  According to Barclays Capital analyst Joseph Astorina, Moody’s Investors Service, Fitch Ratings and S&P “have instinctively pulled back from the new issue securitization market until they are better able to asses this new liability.”  The law’s reforms concerning securitization are designed to remove the incentive of the “originate-to-distribute” model, according to a client alert from law firm K&L Gates. 

Other “unintended” consequences cannot be known until the legislation is enforced, noted accounting firm Deloitte in commentary.  “By way of example, a driving element of the law has been to address the ‘too big to fail’ issue, reducing the risk that large firms might take excessive risk because they are in effect guaranteed to be bailed out in the event of a failure,” the firm said. “But because this is an extremely complicated problem, no one actually knows what the consequences of the new law will be — the new systemic regulator will probably make this a central issue as it sharpens its mandate in the coming months.”

Jobless claims up

The Labor Department says there were 464,000 initial jobless claims filed in the week ended July 17, up 37,000 from a revised 427,000 the previous week.  The number of claims was much higher than expected. A consensus estimate of economists surveyed by Briefing.com expected new claims to rise to 445,000.  The 4-week moving average of initial claims, which is calculated to smooth out volatility, was 456,000, up 1,250 from the previous week’s revised average of 454,750.  The government also said 4,487,000 people filed continuing claims in the week ended July 10, the most recent data available. That’s down 223,000 from the preceding week’s upwardly revised 4,710,000 claims.  Economists surveyed by Briefing.com expected ongoing claims to edge lower to 4,600,000 from the unrevised 4,681,000 in the previous week.  The 4-week moving average for ongoing claims fell by 21,500 to 4,567,000 from the preceding week’s revised 4,588,500.

Commercial real estate coming back?

Analysts have been warning for months that commercial real estate could be the next shoe to drop in the subprime mortgage collapse that came to a head in 2008, but there may be some good signs in the thawing of securitization markets and indications that investors are ready to come to auction when properties are on the block.  Marc Halle, managing director of real estate investments for Prudential Financial executives, acknowledged that distressed conditions are likely to intensify in the market but does not expect to see “wholesale foreclosures.” Instead, real estate investment trusts could become a more attractive asset class in a slowing economy as interest rates stay low and REIT dividends remain solid.  The banks are expected to launch $1.4 billion in two offerings of commercial mortgage-backed securities, according to a report Wednesday in the Wall Street Journal, which cited sources familar with the planned sales. 

The offerings pale in comparison to the more than $1 trillion coming due in maturing debt over the next five years, but offer some glimpse that Wall Street may be getting back on board.  Uncertainty among borrowers regarding whether banks will go back to more normalized lending practices is at the root of criticism against the Frank-Dodd financial regulations that President Obama signed Wednesday.  Banking analyst Dick Bove, at Rochdale Securities, said there is a persistent rumor that the Federal Reserve is looking at loosening capital requirements. Bove, a harsh critic of the new law, said that would be a welcome development.  “It demonstrates that the Fed understands that it must help the banks so that the banks can help the economy,” Bove said in a note to clients. “It implies that the Fed will not be very hasty in putting into effect the onerous rules being mandated by the banking legislation. If the Fed truly understands this, the outlook for banking and, more importantly, the economy is beginning to change in a positive manner.”  Banks themselves have been voicing some slightly encouraging sentiment regarding the direction of commercial real estate.

20% of Americans suffered major economic loss

The new Economic Security Index, constructed by Yale political scientist Jacob Hacker and a team of researchers, estimates that 20% of Americans suffered a significant economic loss last year – the highest level in the past 25 years.  The Index looks at the interaction of three key variables that have a direct bearing on a person’s economic security: income loss, medical expenses and debt.  The ESI defines people as economically insecure when their situation meets two criteria. First, within a year’s time they have lost 25% or more of their available gross income. Available gross income is the money they have left over after paying for medical costs and debt. Second, they don’t have enough in an emergency fund or other liquid reserves to make up the difference.  According to the index, which tracks Census Bureau data since 1985, 12.2% of Americans were economically insecure in 1985. By 2009, Hacker and his team estimate that 20.4% of Americans could be classified that way. The actual number of people affected increased by more than half, from 28 million in 1985 to roughly 46 million by 2007, the last year for which hard numbers were available.  In the past, some economists, such as Stephen Rose of the moderate-progressive think tank The Third Way, have conducted research that counters the broadly negative view about how the middle class has fared economically over the years.

Now for our real estate education section…

How to Price Any Property for Maximum Profits

Although the classic definition of the “right price” is whatever a willing buyer is willing to pay a willing seller (yes, we know it’s redundant), pricing is also a value proposition. In order to price a property for maximum profits, it’s essential to understand how to communicate and evaluate the value proposition to both the buyer and the bank.

What to Measure

1. Capacity – Any given area or builder has a set capacity. The more less capacity, the higher the price assuming demand is in place. During the height of the real estate boom, savvy builders capitalized on desirable locale’s by creating a sense of urgency related to capacity…often to the detriment of the eventual buyers who later learned there was a glut of unsold condo’s or other properties waiting in the sideline. However, despite the recent decline in real estate, many markets and specific neighborhoods remain highly desirable with limited capacity.

2. First Offering – Closely related to capacity is the concept of “first offering”. Face it, everyone likes something that is “brand new” but have you ever stopped to ask yourself why? A new house or neighborhood is somewhat “unproven” but the excitement of being “first” tends to create anticipation that can be tapped into. Take a note from developers that routinely price high to create a sense of value, then discount to provide customers a sense of a “good deal”.

3. Enhanced Value – Everyone likes to feel like they are appreciated and nothing says “appreciation” like a free upgrade or other valuable service. Make a list of amenities included in the sale of the property and/or consider including a few low-cost additional enhancements. Popular ones include free lawn-care for a year, electronic device or home warranty.

What to Exclude

1. Acquisition Cost – Without a doubt, this is one of the most common mistakes made by novice investors; the tendency to use acquisition cost as a basis for the sales price of a property. As millions of Americans have learned, what you pay for a property may have little to no bearing on the eventual price of a property….good and bad. Although the media is filled with horror stories about people that paid too much for a property (of more often…obtained bad financial terms), there are equally impressive numbers of people that made a lot of money after paying very little for a property. Price the property based upon value…not acquisition cost.

2. Expenses – If acquisition cost is the most common errors, surely expenses are the next. The tendency to add up the cost of repairs, insurance, broker and agent fees, taxes and other expenses in order to derive a figure is outdated at best and limiting at worst. Again, price the property based upon perceived value rather than cost or expenses. It’s often possible to perform inexpensive upgrades that dramatically alter the appearance (and desirability) of a property for very little investment. Don’t deny yourself the benefit of a fully priced property if in fact, it’s possible to price higher.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–