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Home sales drop 7.2% 

According to the National Association of Realtors (NAR), existing-home sales fell in January but are above year-ago levels.  Economists polled by Thomson Reuters had forecast that completed sales last month rose almost 1% to a seasonally adjusted annual rate of 5.5 million, up from 5.45 million in December.  Existing-home sales – including single-family, townhomes, condominiums and co-ops – dropped 7.2% to a seasonally adjusted annual rate1 of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5% above the 4.53 million-unit level in January 2009.  Total housing inventory at the end of January fell 0.5% to 3.27 million existing homes available for sale, which represents a 7.8-month supply at the current sales pace, up from a 7.2-month supply in December. Raw unsold inventory is 9.6% below a year ago, and is at the lowest level since March 2006.  The national median existing-home price for all housing types was $164,700 in January, unchanged from a year earlier. Distressed homes, which accounted for 38% of sales last month, continue to downwardly distort the median price because they typically are discounted in comparison with traditional homes in the same area.  A parallel NAR practitioner survey4 shows first-time buyers purchased 40% of homes in January, down from 43% in December. Investors accounted for 17% of transactions in January, up from 15% in December; the remaining sales were to repeat buyers. The survey also shows that buyer traffic increased 9.4% in January.

Economy grows 5.9%

The Commerce Department reported today that the nation’s gross domestic product (GDP), the broadest measure of the nation’s economic activity, grew at an annual rate of 5.9% in the last three months of 2009.  Economists surveyed by Briefing.com had forecast that the revision would show the same 5.7% growth that was originally reported a month ago.  The solid growth follows a 2.2% annualized increase in the third quarter. Most economists now agree that the recession probably ended at some point last summer.  Still, the recovery is widely perceived as fragile. Economists point out that much of the growth at the end of the year came because businesses were no longer slashing inventories. Federal Reserve Chairman Ben Bernanke testified to Congress this week that the central bank will need to keep interest rates low in order to support the economy.  The recovery is even less apparent to the typical American. Job losses have continued in all but one month and most economists believe unemployment will stay close to 10% for much of the year.  Credit remains tight for small businesses and consumers and the recovery in housing prices is uneven at best. The most recent survey of 5,000 American consumers by the Conference Board found the greatest level of worry about the current state of the economy in 27 years.

Housing recovery off the rails?

As the Federal Reserve nears the end of a critical, year-long program to support the mortgage market, the recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago.  “Housing is at a pivotal, ambiguous point,” says Ted Gayer, co-director of Economic Studies at the Brookings Institution.  Recent reports from home sales to mortgage activity has been starkly negative. And, even if some of it can be written off to seasonal patterns, namely weather, the weakness is not what people expected.  New homes sales fell to a record low in January, extending a two-month slide; both pending and existing home sales were down in the most recent month; homebuilder sentiment in January fell back to where it was last June, and mortgage applications have fallen three of the past four weeks.  No one expected a wonderful housing recovery with unemployment stubbornly high, the consumer balance sheet still in repair mode, and credit conditions stingy, but right now there’s palpable worry about momentum–especially given a string of solid months in mid- to late-2009.  Global Insight, for one, says it will probably lower its projections for housing starts and new home sales. The homebuyer tax credit, which now applies to repeat buyers and not just first-time ones, “isn’t panning out, its’ not registering, “say Newport. “Demand for new housing is a lot weaker than we thought it would be.”  Some 4.5 million homes are expected to fall to foreclosure this year, following 2.8 million in 2009. In contrast, existing homes sales for the two-year period will average about 5.5 million.

Green jobs mythology

“Green jobs” have become a central underpinning of the Obama administration’s rationale to promote clean energy. But how valid is the assumption that a “clean-energy” economy will generate enough jobs to mitigate today’s high level of unemployment?  The Washington Post took a look at the question.  Consider just one clean-energy sector, the smart grid, for its job-creation potential. The Obama administration allocated a little more than $4 billion in funding from the American Recovery and Reinvestment Act to the smart grid, most for installing smart meters — digital versions of the spinning electric meters that are omnipresent nationwide. Virtually eliminating human intervention by eliminating the need for meter-reading and transmitting data directly to utilities, smart meters promise more accurate measurement of electricity usage as well as increasingly efficient management of energy production resources.  It typically takes a team of two certified electricians half an hour to replace the old, spinning meter.

In one day, two people can install about 15 new meters, or about 5,000 in a year. Were a million smart meters to be installed in a year, 400 installation jobs would be created. It follows that the planned U.S. deployment of 20 million smart meters over five years, or 4 million per year, should create 1,600 installation jobs. Unless more meters are added to the annual deployment schedule, this workforce of 1,600 should cover installation needs for the next five years.  Now let’s consider job losses. It takes one worker today roughly 15 minutes to read a single meter. So in a day, a meter reader can scan about 30 meters, or about 700 meters a month. Meters are typically read once a month, making it the base period to calculate meter-reading jobs. Reading a million meters every month engages about 1,400 personnel. In five years, 20 million manually read meters are expected to disappear, taking with them some 28,000 meter-reading jobs.  That’s not an increase in jobs.  It’s a loss.  And this metric is one that follows “greening” everywhere – the sad fact is that to streamline to “greener” technologies eliminates jobs.  It’s all fine and well to treat mother nature better, but patently dishonest to pretend it’s a jobs strategy.

DSNews.com — House prices fall

According to the Federal Housing Finance Agency’s (FHFA) seasonally-adjusted purchase-only house price index (HPI), house prices declined modestly in the fourth quarter of 2009.  On a seasonally adjusted basis, the fourth quarter HPI was just 0.1% lower than it was in the third quarter of 2009. However, the quarter-to-quarter decline in prices was much more significant when measured without seasonal adjustment. According to FHFA, the unadjusted national decline was 1.5%.  FHFA’s seasonally-adjusted monthly index for December was down 1.6% from its November value, and over the year, seasonally-adjusted prices fell 1.2%. Although house prices in the fourth quarter of last year dropped notably from the fourth quarter of 2008, prices of other goods and services during this same period rose 1.9%. Accordingly, the inflation-adjusted price of homes fell approximately 3.1% over the latest year.  The all-transactions HPI, which includes data from mortgages used for both home purchases and refinancings, also fell in the fourth quarter of last year. Compared to the previous quarter, the index declined 0.7%, and over the four-quarter period it plummeted 4.7%. FHFA said the difference between appreciation rates in the two indexes is entirely explained by the inclusion of refinancings in the all-transactions index.

Now on to our real estate investing educational section…

Friday File – 15 Minute Real Estate Resolution

This week we spent some time discussion the use of social media marketing for real estate including several specific tips to enhance your LinkedIn profile page. This week’s 15 minute real estate resolution takes it to the next level by suggesting you take the time to adopt an actual strategy for using LinkedIn. Before implementing these advanced level tips be sure you have a firm handle on the basic LinkedIn process.

1. Set-up a “Company Buzz” application. Simple select any keyword desired (ie, short sale real estate) and the Company Buzz application will show you what is being said about the topic on Twitter. It’s easy to get started; simply log in to LinkedIn, click on the “applications” menu to the left then click on “Company Buzz” on the application page. Install the application, allow it to display on your LinkedIn profile page and then type in your Twitter ID or topic keywords etc… All the tweets will then automatically show on your LinkedIn page.

2.  Ask & Answer. Questions are a great way to engage others or show what you know. Ask and answer at least one question this week just to get a taste for the application. It’s quick and convenient enough that you might find yourself using it more frequently than anticipated.

3. LinkedIn Lions. There is a lot of debate whether or not someone should join a LIONS group or not. These meta networkers can certainly raise your ratings but LinkedIn has also suggested a rather negative position in relation to these groups. On the other hand, open networking has been shown to work especially when used properly and not abused. For more information on the general LinkedIn LIONS visit http://finance.groups.yahoo.com/group/linkedinlions/ or perform a search for real estate specific LIONS groups in your area. Remember, LInkedIn has now limited the total number of connections to only 30,000 so use discretion.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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
–

Forward this e-mail to your friends!  Then they can subscribe directly at the following link:  http://www.smartrealestatenews.com/

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Home prices fall

Home prices fell, but just 2.5% during the last three month of 2009 compared with the fourth quarter of 2008, according to the S&P/Case-Shiller Home Price Index. That was a big improvement over the past three years.  “As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now, said David Blitzer, chairman of the Index Committee at Standard & Poor’s. “However, the rate of improvement seen during the summer of 2009 has not been sustained.”  The index did rise 1.6% on a seasonally adjusted basis during the fourth quarter compared to the previous three months, for the third consecutive quarter of increase.  S&P reports the national statistics quarterly and an index of 20 cities monthly. The 20-city index inched down in December, falling 0.2% compared with November. Only four cities showed improvement.  One of those was Las Vegas, where prices rose 0.2% — the first monthly gain for that city in three years.  The future of home prices remains difficult to forecast, though, as the market at some point will have to weather the withdrawal of government measures to boost home buying, Yale economist Robert J. Shiller told CNBC.  “This isn’t a forecast, but it’s a worry that home prices might drop substantially from here forward once this support is taken away,” Shiller said in a live interview after the report was released. “Mortgage rates will go up, the economy might double-dip, the expectations for housing which helped drive the market might change suddenly once people see this support being withdrawn.”

Jobs bill passes

The Senate voted Monday to push forward a $15 billion jobs creation bill that would give businesses a tax break for hiring the unemployed. The 4-prong bill will:  Exempt employers from Social Security payroll taxes on new hires who were unemployed; Fund highway and transit programs through 2010; Extend a tax break for business that spend money on capital investments like equipment purchases; and Expand the use of the Build America Bonds program, which helps states and municipalities fund capital construction projects.  The final legislation is a scaled-down version of an $85 billion bipartisan draft bill that was crafted by Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa.  However, the bill does not extend the deadline to apply for unemployment benefits and the COBRA health insurance subsidy. Some 1.2 million people will run out of benefits after Feb. 28 if the deadline is not extended. Lawmakers are looking to pass a separate, 15-day extension to give them time to enact a longer fix.  And unlike the House’s bill, the Senate measure does not provide additional assistance for states. Many governors, who are holding their annual meeting in Washington, want the Obama administration to send more federal dollars their way so they can cope with yawning budget gaps.  Labor leaders and left-leaning think tanks all say the Senate must do more to spur job creation – as if the Senate can fabricate jobs out of thin air somehow.

Commercial real estate prices up

US commercial real estate prices, as measured by Moody’s Investors’ Service/Real Estate Analytics, Commercial Property Price Indices (CPPI) increased for the second month in a row in December, rising 4.1%, as the commercial real estate (CRE) market continues to face several challenges, such as the rising tide of defaults and subsequent foreclosures.  Moody’s said the index’s improvement was the largest month-over-month increase in the nine-year history of the CPPI and followed a small, 1% gain in November. The volume of transactions also rose in December, typical for the end of the year, Moody’s added. In December, 716 transactions totaling $9bn were recorded in the month. At the end of December, CRE prices are down 29.2% from a year ago and 39.8% from two years ago. They are 40.8% below their peak values.  But, Moody’s said, it’s uncertain whether the recent price increases represent CRE passing the bottom of the market or are only the “volatility of a market in transition.”

Underemployment at 20%

According to a Gallup poll released today, nearly 20% of the U.S. workforce lacked adequate employment in January.  Gallup estimated that about 30 million Americans are underemployed, meaning either jobless or able to find only part-time work.  This is a big deal, because underemployed people spent 36% less on household purchases than their fully employed neighbors in January, while six out of 10 were not hopeful about their chances of finding adequate work in the coming month.  Gallup surveyed more than 20,000 U.S. adults from Jan. 2 to 31. The results have a 1% point margin of error.  Gallup found that underemployed Americans were more likely to have a favorable view of Obama, with 55% approving of his performance as president against 49% of the wider public.  Hopefully this doesn’t give President Obama ideas for a campaign strategy – to put people out of work to increase his popularity.  The poll’s estimate of U.S. underemployment is higher than official statistics, and tends to paint a darker picture of the economy than official statistics. The Labor Department, for its part, disagrees with Gallup and claims only 16.5% of American workers were without employment or worked part-time for economic reasons in.  A Labor Department official said the government rate may be lower because it factors out temporary seasonal changes in employment to better reflect the underlying economy.

DSNews – Subprime securities fall in value

Heightened concerns about the valuation of subprime assets backing U.S. residential mortgage-backed securities (RMBS) has manifested in an across-the-board drop for all vintages, Fitch Solutions reported last week.  The ratings agency’s U.S. Subprime RMBS Price Index fell by just under 6 percent month on month to 7.17 as of February 1, down from 7.62 as of January 1.  All vintages dropped in value, highlighting concerns about the valuation of all RMBS subprime assets. Driving the declines was the 2007 vintage, which dropped by 17.7 percent, followed by the 2005 vintage falling by 9.5 percent month on month. Recent loan level analysis conducted by Fitch Solutions on the indices’ constituents found that the 2007 vintage showed a significant jump in 90-day plus delinquencies rising from 13.7 percent to 14.2 percent.  “The rise in delinquencies is signaling a potential increase in 2007 loan defaults,” explained Thomas Aubrey, managing director at Fitch Solutions.  Further evidence of a potential rise in defaults is in the six-month constant default rate (CDR) for both 2007 and 2005 vintages, both of which fell only marginally, the company said. Fitch explained that this is in stark contrast to much larger declines in the default rates of 2004 and 2006 vintages.

Now on to our real estate investing educational section…

Fiscal Survival of the Fittest

Survival of the fittest applies to economics as well as biology – in fact, some would argue the concept is better applied to the financial arena than any other area of study. Unfortunately, it’s a fact few Americans want to face head on…it goes against the steady diet of “American ingenuity” and the (false) belief that any child born in the good old USA can grow up to be anything they want. While there are exceptions to every rule, survival of the fittest is an economic trend currently undergoing the equivalent of an ice-age extinction as one era gives rise to an entirely new one. Research by consulting firm McKinsey found a few unsettling statistics that demonstrate the depth of the problem:

Over 70 percent of currently employed Americans work in jobs for which there is low or declining demand. This includes both blue collar and white collar. Competition for jobs that cannot be shipped overseas (healthcare for example) has created high competition which is driving down wages and promoting part-time, per diem and other “job sharing” situations.

Mainstream stores are doing double-takes as consumers shift spending habits. Not only are brick and mortar stores under heavy competition from online retailers like Amazon but the bleak economy is finally taking a toll. Violating one of the core marketing principles ‘never undercut your own product’, heavy weight’s ranging from Proctor & Gamble to Macy’s are rolling out discount versions of their more expensive popular items. Cost of Tide got you down? Don’t worry, you can now buy Tide Basic…a discount version. Research shows 1/2 of Americans have already reduced spending and 1/3 plan to do so permanently with 18 percent of consumer switching from name brands to generics in the past two years alone.

So, how are Americans spending their money both today and into the near future?

1. Nearly 34 percent of the average household income goes toward housing. Expect this trend to continue as people downsize into affordable housing options.

2. Just over 19 percent goes toward entertainment and/or miscellaneous items…however, as a discretionary item this is subject to volatility.

3. Roughly 17 percent goes toward transportation – a number experts expect to hold steady as people opt for more affordable options.

4. Just under 13 percent goes toward food; a necessity to be sure but one that is subject to “replacement” purchases as people opt for hamburger instead of steak during tough times.

5. Approximately 11 percent on retirement and personal insurance.

6. Nearly 6 percent on healthcare.

Even a precursory look at where Americans spend their money tells the average investor where to spend theirs…housing, entertainment, transportation, food, financial products and healthcare. Those are the big six that run the American economy. Now stop and consider which are available to the average “little guy” investor…stocks and bonds for healthcare, insurance and finance have been decimated in recent years. The auto industry? Please! Now that’s it’s been nationalized you can count on the same efficiency that brought you the driver license office to run the auto industry. Food is notoriously volatile and forget direct intervention unless you have an unusual level of gardening know how. No, the answer remains the same today as it did 100 years ago…real estate. It’s not easily outsourced, it’s not subject to the market manipulations of stocks and bonds nor is it entirely dependent upon your ability to work yourself into an early grave. It simply requires a willingness to adapt to the new economic environment like all other species that learn to thrive or barely survive.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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
–

Forward this e-mail to your friends!  Then they can subscribe directly at the following link:  http://www.smartrealestatenews.com/

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

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

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

Done For You Lead Machine Unveiled Tomorrow!

You don’t want to miss this webinar … an all new done for you

lead machine with social media!  This is the first time that this new

concept has been unveiled — so don’t miss it!

RSVP here for the webinar tonight at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/340133283

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

Fannie and Freddie failing

Freddie Mac and Fannie Mae were among the first big financial institutions to receive massive federal bailouts after the financial crisis hit in 2008. Government officials have been racing to fix bailed-out car makers and banks and are pushing to reshape the financial-services industry. But Fannie and Freddie remain troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government.  Nearly a year and a half after the outbreak of the global economic crisis, many of the problems that contributed to it haven’t yet been tamed. The U.S. has no system in place to tackle a failure of its largest financial institutions. Derivatives contracts of the kind that crippled American International Group Inc. still trade in the shadows, and investors remain heavily reliant on the same credit-ratings firms that gave AAA ratings to lousy mortgage securities. Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflated a dangerous housing bubble.

After prices collapsed, sending shock waves around the world, the federal government put America’s housing-finance system on life support and it has yet to decide how that troubled system should be rebuilt.  On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion. The government is “running Fannie and Freddie as an instrument of national economic policy, not as a business,” says Daniel Mudd, who was forced out as Fannie Mae’s chief executive in September 2008 when the government took control.  Other housing experts contend that prolonged government intervention will make it more difficult and costly to eventually wean the companies off government support. “The more aggressively we continue kicking the can down the road, the larger the losses become and the harder it becomes” to address the companies’ future, says Joshua Rosner, managing director at investment-research firm Graham Fisher & Co.  As mortgage delinquencies rise, Fannie and Freddie are required to set aside more capital to cover anticipated losses. Each quarter, if their revenues are insufficient to meet those financial needs, the Treasury has to kick in more money.  With delinquencies still rising, the outlook is grim. At Freddie, 3.87% of single-family mortgages were at least 90 days past due at the end of December, up from 1.72% a year earlier. Fannie is worse: 5.29% were 90 days past due in November, up from 2.13% a year earlier.

Olick – Obama shifting from HAMP to HAFA (short sales)?

Diana Olick picked up on something Seth Wheeler, Senior Advisor to the Treasury Department, said last week.  According to Olick:  “In discussing the Obama Administration’s Home Affordable Modification Program (HAMP), which is arguably less successful than anyone intended, Wheeler made a comment leading some to believe that the Administration may be shifting focus from modifications to another program which simply gets troubled borrowers out of their homes as quickly and cleanly as possible.  Wheeler told ASF members and guests, ‘Short sales, deeds in lieu are other ways to prevent foreclosures to help achieve stability [in housing].  Modifications are only for a certain subset of distressed homeowners.’”  Olick points to the widely acknowledged failure of HAMP and suggests that Wheeler’s mention of the Home Affordable Foreclosure Alternatives program (HAFA) is indicative of a shift in emphasis for the Obama administration. 

HAFA specifically targets short sales and deeds in lieu of foreclosure. According to the directive: Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days of the date the borrower: Does not qualify for a Trial Period Plan; Does not successfully complete a Trial Period Plan; Is delinquent on a HAMP modification by missing at least two consecutive payments; or requests a short sale or DIL.  According to Olick:  “My guess is that last one is the most popular.  The HAFA program offers incentives in this program “upon successful completion of the short sale” or Deed in Lieu. They include borrower relocation assistance of $1500, a servicer incentive of $1000 to cover administrative and processing costs and investor reimbursement of $1000 for subordinate lien releases. That’s when the investor allows up to $3000 in short sale proceeds to go to subordinate lien holders.  ‘It is my belief that the success of HAFA will be vastly greater than HAMP,’ says Mark Hanson, a mortgage consultant in California.  ‘Going forward, figuring out exactly what this means for foreclosures, REO, house sales, housing inventory, values, bank balance sheets, second mortgages, RMBS prices, the builders, the mortgage insurers, and sentiment is where the focus will be.’”

Tax rate balloons

Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.   The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.  Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems. But at least seven states voted to raise their taxable wage bases, the level of income subject to unemployment tax. And another 10 are looking at upping the wage bases or tax rates.  In addition, employers pay federal unemployment taxes. If states don’t repay their federal loans, businesses could see their this federal tax go up as well in coming years, said Rich Hobbie, executive director of the National Association of State Workforce Agencies.  Higher taxes dampen employers’ ability to hire new workers, crimping any nascent economic recovery. Companies pay taxes on each employee on the payroll.  “There’s no doubt it discourages hiring,” said Douglas Holmes, president of UWC-Strategic Services on Unemployment and Workers’ Compensation, an employers’ trade group. “In fact, it leads to increased unemployment.”  Texas, Hawaii, and Florida are the hardest hit.

Consumer credit falls

According to the Federal Reserve, total consumer borrowing fell a seasonally adjusted $1.8 billion, an annual rate of 0.8%, to $2.456 trillion in December 2009.  Economists predicted a decline in total borrowing of $10 billion in December, according to a consensus survey from Briefing.com. November saw a downwardly revised 10.6% decrease, or $21.8 billion, in total consumer borrowing.  Sean Maher, associate economist at Moody’s Economy.com said he expected November to be revised upward, but instead it was even more negative — so December’s more upbeat data “doesn’t mean we’re out of the woods.”  For all of 2009, consumer debt dropped by 4% to $2.46 trillion from $2.56 trillion in 2008.  Revolving credit, which includes credit card debt, fell in December by $8.5 billion, or an 11.7% annual rate, to $866 billion. 

But nonrevolving credit, which includes car and student loans, bucked the trend. It rose by $6.8 billion, or a 5.2% annual rate, to $1.59 trillion.  The data’s recent volatility and large revisions make it difficult to make predictions, Maher noted, but he expects revolving credit will fall substantially in the coming months but will start to taper off around June.  “Consumers are still finding it tough to get credit, but there are some signs we’ve reached a bottom,” Maher said. The credit crunch should begin easing now, he said, “with breakeven around the middle of the year — and we’re looking for a pretty quick rebound by the second half of 2010.”

DSNews.com – Home ownership at lowest point in a decade

Home ownership in the United States hit a 10-year low during the fourth quarter of 2009. According to data released by the Census Bureau last week, the homeownership rate fell to 67.2% at the end of last year.  That’s down from 67.6 percent the previous quarter and 67.5 percent one year earlier. It represents the lowest percentage of Americans who owned a home since the second quarter of 2000. Homeownership has been on a steady downward slope since 2006, when it became evident that more and more borrowers were put into loans they couldn’t afford and housing woes began to eat away at the government’s long-time push to make the American Dream a reality for anyone that wanted it.

Regionally, homeownership rates are highest in the Midwest (71.3 percent) and in the South (69.1 percent) where housing is considered relatively affordable. They are lowest in the West (62.3 percent) and the Northeast (63.9 percent) where home prices are on the higher end of the spectrum.  Relative to a year ago, the biggest decline, though, was in the South (down 0.7 points) and in the West (down 0.4 points), where you can find the foreclosure hotspots of Florida, California, Arizona, and Nevada.  The Census Bureau also reported that the percentage of vacant homes in the U.S. rose from 2.6 percent in the third quarter of last year to 2.7 percent in the fourth. All told, there were 2.09 million homes sitting empty and available for sale at the end of last year, up from 1.99 million three months earlier, the agency said. As Bloomberg explained, this number includes both listed properties and those that banks have repossessed and have not yet listed.

Now on to our real estate investing educational section…

Sooner or later every short sale investor encounters a sale in danger of dying. Fortunately, with a few simple steps it’s possible to dramatically reduce the risk of spoiling a sale.

1. Get Smart. Prequalify and prepare from first contact. Everyone has an “A” list and a “B” list when it comes to prospective buyers but it’s still necessary to put things into proper perspective before spending a lot of time and effort on dead-ends. Remember, the internet helps to eliminate and reject prospects through the use of well placed questions and comments.  For example, asking a simple question such as “Is there another home you wished you had bought?” can explain a lot; price range, comfort zone and readiness just for starters.

2.  Value-Driven. Tough economic times have led most buyers to become more price conscious than ever; it’s no longer enough to simply show a few over-priced homes to prep for an attractive in-house alternative…instead, be prepared to demonstrate real value with low risk. Buyers want to know they won’t lose money in the long run by buying a given house or property.

3. Don’t Shut Doors on any Deal. Some buyers are just the opposite – they have money and when presented with the right opportunity – are willing to go substantially above and beyond their traditional budget. Don’t automatically exclude higher priced properties for those that have the means to make ends meet at a larger than life level. In this situation, recognize the price is not the prime motivator but rather the “right”  property. Determine what constitutes a desirable deal then make it happen.

4.  Time Right. Timing is everything but it takes time to learn how to distinguish valid help from harassment when working with prospective clients. Too soon and you can quickly cool even the hottest prospect…too long of a delay and you risk having others step in to fill your shoes.

5. Preferred Status. Everyone likes to feel special and as a short sale professional it is your duty to given individualized attention to every prospect….of course, some clients are just a bit more special than others especially when it comes to sealing the deal. Find a few ways to express that little extra something when working with your “A” list clients; meet at a local coffee shop then foot the bill (don’t worry – it’s a legitimate write-off) or schedule exclusive “preview” showings to the most promising prospective buyers before the big announcement. Remember, it’s the thought that counts not necessarily the size of the status symbol.

6. Teach sellers to think like buyers and vice versa. Yes, it’s easier said than done but it’s all in the wording. By teaching sellers to act like buyers and buyers to act like sellers you assure they will present and demand more reasonable offers. Think of it as a small investment that pays big dividends at closing time.

7. Have a contingency plan in place. Every good investor identifies the “out” long before buying into the given investment – it’s no different with short sales. Know when and how you plan to exit the property then have a contingency in place should something go amiss. It’s one additional layer of protection that allows short sale investors to sleep easy by knowing they have plenty of outlets for every property.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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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Pending home sales level off

According to the National Association of Realtors, pending home sales have leveled from a market swing driven by response to the home buyer tax credit.  The Pending Home Sales Index increased 1.0 percent to 96.6 from 95.6 in November, and remains 10.9 percent above December 2008 when it was 87.1. In November, the monthly index had fallen by 16.4 percent from surging activity in preceding months.  Lawrence Yun, NAR chief economist, said it’s important to recognize how the tax credit is skewing market data. “There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded,” he said. “These swings are masking the underlying trend, which is a broad improvement over year-ago levels.

December activity was the fifth highest monthly tally in two years.”  The PHSI in the Northeast rose 2.3 percent to 76.1 in December and is 14.9 percent higher than December 2008. In the Midwest the index increased 5.2 percent to 86.9 and is 8.7 percent above a year ago. Pending home sales in the South rose 2.2 percent to an index of 98.4, and are 5.5 percent higher than December 2008. In the West the index fell 3.8 percent to 119.9 but is 18.6 percent above a year ago.  Yun projects the extended and expanded tax credit will encourage 2.4 million households to take the credit in 2010. “While new-home sales will remain low due to a lack of construction, existing-home sales are projected to rise to around 5.6 million in 2010,” Yun said. Last year there were 5.16 million existing-home sales.  He added that one of the greatest benefits of rising sales will be firming home prices. 

Son of TARP

Touted last week in Obama’s State of the Union address, the plan is the latest incarnation of a proposal the president first floated in October. President Obama will call on Congress Tuesday to recycle $30 billion of the remaining Troubled Asset Relief Program (TARP) funds into a new government lending program offering super-cheap capital to community banks that boost their small business lending this year. The initiative targets banks with assets of under $10 billion, which collectively account for more than half of the nation’s small business lending, according to White House estimates. Those banks would be able to borrow money from the Treasury at a dividend rate as low as 1% if they use the cash to make more small business loans this year than they did in 2009.  The first draft of Obama’s plan, announced three months ago, involved lending TARP money to community banks to use for local business loans. But community bankers reacted warily to the plan — they had little interest in taking capital from a program that has drawn so much criticism.

TARP’s extensive regulatory requirements were also a turn-off.  Obama’s new proposal asks Congress to divert TARP funds into an entirely new lending program. The administration hopes that scrapping the TARP taint will make the offering more attractive to bankers.  Banks with less than $1 billion in assets would be able to receive capital infusions of up to 5% of their assets, and banks with assets of $1 billion to $10 billion would be eligible to access investments totaling 3% of assets. More than 8,000 of the country’s 8,400 banks would be eligible to participate under these terms, according to government estimates.  The dividend rate for the capital would start at 5% and decrease by 1% for every 2.5% increase in small business lending the bank shows compared to a 2009 baseline. The dividend rate could drop as low as 1% for a community bank that increases its small business lending balance by 10%. That rate would stay frozen for five years, allowing the bank to pay the Treasury back gradually.  Maybe it will work and maybe it won’t, but if I were a Bank President I’d want nothing to do with a president who encouraged banks to borrow from him and then regulated and taxed them to death while attacking them for “greed.”

U.S. manufacturing up

U.S. manufacturing expanded in January at its fastest pace since 2004 but consumers increased their spending only slightly in December, worried by job prospects and the state of the economy.  The Institute for Supply management said its index of national factory activity rose to a reading of 58.4 from 54.9 in December, handily beating economists’ median forecast of a rise to 55.5.  A reading above 50 indicates growth in the sector. The prices paid component was at its highest since August 2008.  Economists said gains were driven by businesses replenishing inventories, which fell sharply during the recession.  “It is telling me that the first half of 2010 is going to be supported by the restocking,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York.  “We have a 3 percent to 3.5 percent growth range for the first half of 2010 and based on these numbers we might be underestimating the growth.”  The U.S. economy grew at a 5.7 percent annual pace in the fourth quarter, its fastest clip in six years, driven by a sharp slowdown in the rate at which businesses reduced stocks of unsold goods, the government said on Friday.  But while the ISM employment component hit its highest level in nearly three years, some economists said the month-on-month gain was fairly modest.  “All of the employment numbers are showing that the huge losses in jobs are well behind us but we are not gaining in jobs either,” said Jay Mueller, senior portfolio manager at Wells Capital Management in Milwaukee.

Time for a government exit?

The Obama administration’s bailout plans and stimulus packages are working to keep the economy from collapsing, but they are also creating an environment in which private investors in the securitization sector are reluctant to come back en masse. During a panel at the American Securitization Forum 2010 in Washington, titled “Restoring the Private Securitization Market and Unwinding Government Support Programs,” moderator Karen Weaver, global head of securitization research at Deutsche Bank asked: “Do you think the [securitization] market is ready for the [government's] exit?”  Ish McLaughlin, a managing director at Citigroup, said the investor base appears smarter and more understanding of the securitization landscape, though the investor base is significantly deteriorated. “80 percent of volume is bought by 20 percent of the investor base,” he said. “It’s too narrow a base to build a house on. And, if you can’t get your hands around the product now, you probably aren’t going to get you hands around it.”

Paul Colonna, president of fixed income at General Electric Investment Corporation added that the homebuyer tax credit helped stimulate the market, but it is no longer needed as long as banks get recapitalized in order to begin offering credit in a meaningful way.  “We have to start thinking about what the exit looks like. We’ll see rates rise, but at the end I don’t think rates are the problem,” Colonna said. “Loan mods are a big issue, you won’t see investors back in the market until we see what will happen with this.”  McLaughlin added that the money is there for creating a private market securitization market.  When private-label RMBS does come back to market, it will have to stand up under significant review. The industry is undergoing a sweeping reform of due diligence in order to increase transparency in the securitization process.

MBA – Commercial Loan Maturity Volumes

The Mortgage Bankers Association (MBA) today released the results of its 2009 Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes. The survey indicates that the volume of commercial and multifamily mortgage debt maturing in 2010 and 2011 is relatively low.  Of the $1.45 trillion balance of outstanding mortgages held by non-bank investors, only 13 percent of the total ($183.9 billion) will mature in 2010 and 7 percent ($99.8 billion) in 2011.  “Commercial and multifamily mortgages tend to be long-term loans, often for ten years or more,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.  “The fact that a disproportionate share of commercial and multifamily mortgages were made in 2005, 2006 and 2007 means that for most investor groups, only a fraction of the balance will be maturing in the next couple of years.” 

Commercial/multifamily mortgage maturities vary significantly by investor group.  Just 2 percent ($4 billion) of the outstanding balance of multifamily mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2010.  Life insurance companies will see 7 percent ($17.5 billion) of their outstanding mortgage balances mature in 2010.  Among loans held in CMBS, 12 percent will come due in 2010, including 7 percent of the $650 billion of loans in fixed-rate conduit CMBS and 72 percent of the $54 billion of loans in floating rate and large-borrower CMBS.  Thirty-two percent ($69 billion) of commercial mortgages held by credit companies and other investors will mature in 2010.  MBA’s 2009 survey collected information directly from servicers on the maturity years of more than $1.5 trillion in outstanding mortgages, including $1.45 trillion of non-bank commercial/multifamily holdings.

Follow Up: FHA Waives 90 Day Flipping Rule

With a glut of foreclosures plaguing the nation, the Federal Housing Authority (FHA) is temporarily removing restrictions on investors who buy and sell homes within 90 days.  “FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” FHA Commissioner David Stevens wrote in a statement last month. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”  The FHA is only lifting the ban for one year and there are rules.  You can’t flip the property for more than a 20 percent profit without getting two appraisals in most cases and the transaction must be at “arms-length” so friends don’t get together to drive up the home value and then snag some unknowing buyer.  The FHA program, like the Fannie Mae 3.5% rebate that we talked about here yesterday, are designed to get rid of the glut of foreclosures on the market, but some people are wary of them.  Diana Olick says, ” Look, I get it.  The United States saw roughly 2.8 million foreclosure filings in 2009, and many of those properties are still sitting on the banks and on Fannie and Freddie’s collective books. As continued foreclosures push inventories higher, they push home prices lower. 

Now on to our real estate investing educational section…

Devil Made Me Do It

They say the devil is in the details but nowhere is that old adage more true than when discussing real estate. In fact, some would argue if you haven’t encountered a few situations that could only be explained by “the devil made me do it” then you simply aren’t making enough offers. From time to time everyone is prone to make a few mistakes but learning a lesson from others is the first way to cut losses and move forward. The following are some of the most common short sale mistakes and mishaps.

 Playing dumb. Novice short sale investors sometimes are under the mistaken impression that buyers and sellers prefer to deal with less experienced – and therefore less intimidating – people. While that may be superficially true, the reality is a bit more complex. Buyers and sellers simply do not want to feel like they are being taken advantage of; when given the choice, they still prefer a knowledgeable (but trustworthy) professional. Avoid playing dumb. Plain and simple, it tends to backfire just when you least expect it. Remember, playing dumb comes in a variety of shapes and sizes to match any short sale deal; from conveniently leaving out pertinent details to “forgetting” to share certain facts or figures. Bottom line – build a relationship and put it into writing.

Getting greedy. Chances are you know someone who has tried this at some time or another; certainly every real estate agent has encountered a situation where the sellers attempts to accept two or more offers simultaneously. Unfortunately, short sale investors frequently find sellers that think accepting more than one offer increases the odds of a quick closing without ever realizing it works in exactly the opposite manner.

Axe the Ex. Never assume property gained from a divorce or other familiar situation is totally free and clear simply from what the seller says. The title company often requires the ex to sign away any rights to the property before the sale will go through. While there are ways around it, the process can be costly and time consuming. Make sure the paperwork is in place prior to finalizing the deal to avoid delays.  Closely related to the issue of divorce is the terminology regarding “tenants in common” versus “joint tenants” for properties in probate.  Joint tenancy provide for the right of survivorship whereas tenants is common requires a court to transfer ownership.

Added Insurance. Although most short sale properties are sold “as is”, investors can put an ace in the hole by adding an additional layer or protection for future buyers simply by purchasing a home warranty. These inexpensive add-on’s typically cost $350-$450 per year to cover most major appliances, plumping and even central air conditioning. It’s a small investment that more than pays for itself in today’s tough economic times. Buyers like the idea of not having to shell out additional funds in the event something goes wrong and short sale investors benefit from a strong differentiator that costs very little.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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
–