Smart Real Estate News & Commentary by Chris McLaughlin April 25, 2011
Forward this e-mail to your friends! Then they can subscribe directly at the following link: http://www.smartrealestatenews.com/
*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com
*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris
************************************************************
Americans still believe home ownership is the best investment
According to a report by Pew Research released this week, this figure is only down 3% from 1991. Pew cites a CBS News/New York Times survey completed in 1991. Of those 81% of the adult sample, 37% “strongly agree” that a home is the ultimate long-term investment, while 44% only moderately agree. Both figures indicate less adamant view than the 1991 survey. Pew finds the overwhelmingly positive results notable in light of the fact that 47% of survey respondents said their home value depreciated since the beginning of the recession. About one-third of those surveyed claimed their home value has stayed the same, while 17% said their homes are now worth more than before the recession.
Almost half (44%) of individuals whose homes lost value said they expect to recoup their equity losses in three to five years. Another third are less optimistic and believe it will take between six and 10 years. Homeowners aren’t the only people who consider a house the best long-term investment one can make. Approximately 81% of current renters surveyed by Pew reported they would like to buy a house at some point. One-quarter said they would continue to rent. Homeownership ranked first among long-term financial goals for those who took the survey. That prospect was followed closely by living comfortably during retirement, being able to pay for their children’s college and being able to leave an inheritance. Pew Research polled 2,142 adults between March 15 and March 29 for this survey. The survey sample was comprised 57% of current homeowners and 30% of renters. The remaining percentage of people had special living arrangements, such as living with family members.
Oil up
Crude oil futures advanced as much as 0.7% after Syrian security forces detained at least 200 protesters while unrest showed no sign of ending in Yemen. US Senator John McCain said rebels in Libya need more assistance in the fight against Muammar Qaddafi’s forces. Saudi Arabia, holder of the world’s largest crude reserves, has no plans to raise production capacity, an oil official said. “The supply-side story hasn’t changed, we lost more than 1 million barrels a day in Libya,” Dominic Schnider, a Singapore- based director for wealth management research at UBS AG, told Susan Li in a Bloomberg Television interview. “Even if you’re going to raise production, the market will be concerned about what happens down the road, if you have an outage in, let’s say, Nigeria, where you have high-quality crude.”
Oil for June delivery rose as much as 78 cents to $113.07 a barrel on the New York Mercantile Exchange. That’s the highest intraday price since April 11, when futures reached $113.46, the most since September 2008. The contract was at $112.72 at 3:08 p.m. Singapore time. Brent crude oil for June settlement increased 46 cents, or 0.4%, to $124.45 a barrel on the London-based ICE Futures Europe exchange. Bullish bets on crude climbed in the past week, according to the Commodity Futures Trading Commission’s (CFTC) weekly Commitments of Traders report. Net-long positions in oil increased 8,337 futures and options combined, or 3%, to 289,916, according to the CFTC report. US crude inventories fell 2.32 million barrels to 357 million, the first drop since February, the Energy Department said April 21. Cushing stockpiles declined 770,000 barrels to 41 million barrels, the biggest drop since April 2.
Real estate markets show life at top and bottom
Four years after US housing prices began to nose-dive, eventually triggering a global financial crisis, signs of life are appearing at the top and the bottom ends of the market. By contrast, a sustained recovery remains far off for the vast middle ground of the US housing sector. Affluent Americans are feeling more secure as the impact of the recession fades and the stock market racks up big gains. “People who have decent income are saying, maybe I can trade up, buy a better property,” said Bill Hardin, director of the real estate program at Florida International University. “Some people are even saying, I’m willing to take a loss on the property I’m selling now to get something I couldn’t buy during the housing peak.”
Sales of homes worth over $1 million, which account for about 1.5% of total US sales, have risen in most states so far in 2011. Realtors, brokers and others in the housing industry report the first bidding wars for expensive homes since the crash. At the bottom end, homes are also on the move as investors pay cash for foreclosed properties to rent them out. It’s a different story in the middle of the market. Properties worth between $100,000 and $500,000 make up more than 60% of US housing. Sales in that category in March were down across every region of America from the same month a year earlier, when tax breaks were propping up demand. Foreclosures and short sales — whereby struggling homeowners sell their homes for below what they owe, with the consent of their lenders — are still a big drag. Credit remains tight and middle-income families are more pessimistic than their wealthier compatriots about the economy. Access to credit is cited as a broad problem. While the rich can simply put more money down, for most would-be buyers the need for more ‘skin in the game’ is a deal-breaker. Realtors and brokers complain that the credit drought is as extreme as the flood of loose lending of the boom years. “The pendulum has swung from too far to the left to too far to the right,” Corcoran’s Liebman said. “We need to find some balance in lending.”
Silver at all time high
Immediate-delivery silver climbed as much as 5.4% to $49.79 per ounce, surpassing the previous peak, which according to research company GFMS Ltd was $49.45 in January 1980. The metal traded at $49.2563 at 1:15 p.m. in Singapore, up for a ninth day and set for the longest winning run since an 11-day increase in March 2008. Spot gold also reached a record. Precious metals have rallied on investor concern that central-bank programs to revive economic growth with record-low interest rates and increased supply of money will reignite inflation and hurt currencies including the dollar.
Silver has more than doubled over the past year. “It’s driven mainly by speculative buying, with investors eyeing the record for a while now,” Yang Shandan, a trader at Cinda Futures Co., said from Zhejiang, China. “We might get a bout of profit-taking now that we’ve pushed passed the high.” July-delivery silver on the Comex in New York jumped as much as 8.2% to $49.845 per ounce, before trading at $48.730. The record was $50.35 an ounce, also set in January 1980, according to the exchange. Gold for immediate delivery climbed as much as 0.7% to $1,517.98 per ounce.
WSJ – buyer’s market?
Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market. Blame the nearly five-year slide of home prices. Those declines, which accelerated over the past two quarters, have left many sellers unable or unwilling to lower their prices. Meanwhile, buyers remain gun shy about agreeing to any purchase without getting a deep discount. That dynamic has fueled buyers’ appetites for bank-owned foreclosures. Those homes often hit the market at bargain prices, but they are being snapped up by investors who are paying in cash. The Wall Street Journal’s quarterly survey of housing-market conditions in 28 major metro areas shows inventories of unsold homes remain high but fell during the first quarter.
Listings were down by nearly 25% from one year ago in Miami and Orlando, and by 12% in Phoenix and Portland, Ore., according to figures compiled by John Burns Real Estate Consulting. Other markets, including New York’s Long Island and Charlotte, N.C., still face imbalances. At the current sales pace, it would take more than 16 months to sell all homes listed for sale in each market. A balanced market typically has a six-month supply. Meanwhile, home values fell in every metro area for the second straight quarter, according to data from Zillow Inc. Prices were down by more than 5% in Chicago and Detroit, the largest quarterly drops, to levels not seen in more than a decade. Values have fallen so far that many sellers with equity aren’t willing to drop their prices. Those without equity can’t cut the prices unless the bank agrees to take a loss in what is known as a short sale. Such sales can take months to complete and fall through at the last minute, deterring some buyers. Still, short sales hit a new high, accounting for 9% of all transactions in January, according to CoreLogic Inc.
“Frankly, until we start building some equity, the market is just going to sit here and do pretty much nothing for the next few years,” says Christopher Thornberg, a housing economist at Beacon Economics in Los Angeles. Homes that don’t need much repair work and that are located in choice neighborhoods near transit hubs or with good schools are in demand. While foreclosures are in demand, mortgage companies’ processing problems have sharply curtailed the flow of bank-owned properties onto the market in states such as Florida, New Jersey and New York, where courts must process foreclosures. To be sure, some of the challenges facing the housing market are easing as the economy adds jobs, boosting demand and easing mortgage delinquencies.Depressed prices coupled with low interest rates have made housing more affordable than at any time since 1975, according to Zillow. But the legacy of the housing market’s collapse has left two big structural problems. First, the huge erosion in homeowners’ equity has deprived housing markets of the all-important “trade up” buyer. Even those with equity often aren’t willing to sell at current market prices, exacerbating what housing analyst Ivy Zelman calls the “stuck factor.” Second, foreclosures are still weighing on housing markets. While mortgage delinquencies are down from their 2009 peak, an all-time high of 2.2 million loans were in foreclosure at the end of March, according to LPS Applied Analytics. Economists say the “shadow inventory” of another 4 million potential foreclosures will keep a lid on prices for years. Even in markets with rising demand and falling inventory, prices won’t go up because “there’s too much on the horizon, so nobody’s in a hurry,” says Ron Leis, a broker in Sacramento, Calif. Tighter credit standards have also left markets with fewer buyers at a time when more would help.
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 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
–
Donovan, have urged the firms to modify more home loans. Analysts say the Obama administration’s loan modification program has not done enough to stem the rising tide of foreclosures so far. The program’s effectiveness has been hampered by mortgage firms not being able to keep pace with the applications received for loan modification. “We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share,” wrote Geithner and Donovan in their letter.
According to the “2009 National Housing Pulse Survey,” conducted by the National Association of Realtors (NAR), homeowners consider high downpayments and closing costs as the greatest obstacles to home purchase. The survey participants said that they were highly concerned about their job security and their ability to get home loan. “Homeownership is an investment in your future; however, saving for a downpayment and closing costs is still too great of an obstacle for 82% of house hunters looking to take advantage of the current market,” said NAR President Charles McMillan.
American International Group (AIG), the beleaguered insurance firm, has sought permission to pay $2.4 million in bonus to 43 of its employees from Kenneth Feinberg, the Obama administration’s pay czar. Firms which have received bailout funds from the government need Feinberg’s permission to pay bonuses and retirement packages to their 100 highest-paid executives. Analysts say AIG will be seeking permission to pay about $235 million in retention bonus to employees in AIG’s Financial Products (FP) division next year. The FP division was responsible for the company’s near-collapse on account of its derivative losses. AIG paid $165 million in retention bonus to its FP employees earlier this year. That led to a scathing criticism by the public and Congress. A Treasury spokesperson suggested that Feinberg has the authority to deny permission to bonus payments which are deemed to be inappropriate and excessive. “Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives,” the spokesman added.
According to economists Robert Shiller and Nouriel Roubini, the negative sentiment prevailing now can have a deleterious effect on economic recovery. Shiller, a professor at Yale University, said: “The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear.” Shiller says the Great Depression was exacerbated due to a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again.” Shiller believes that the $787 billion stimulus package introduced by the Obama administration in not adequate to kick-start the economy and consumer sentiment has to improve sooner than later if the economy has to recover. Roubini predicts that more corporate bond defaults are likely. “The wave of corporate defaults is going to be massive,” Roubini said. “We’re not out of the woods.” Shiller and Roubini believe that lack of regulation in banking led to banks taking unmanageable risks, leading to credit crisis and government bailing out firms such as American International Group Inc.
