GMAC

Smart Real Estate News & Commentary by Chris McLaughlin October 12, 2010

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JPMorgan expanding mortgage review

In September, Chase announced a review of 56,000 foreclosure cases in 23 states that require a judge to sign off on a foreclosure. The recent move expands the inspection to states that do not require judicial approval.  Under the latest expansion, the foreclosure process will continue while documents are being examined, expected to take a few weeks.  In the initial review, Chase requested that the courts not enter judgments until completion of the audit. Without a judgment from a court, those homes cannot be sold.  The initial review was announced after the lender discovered that its employees may have signed affidavits on the basis of reviews done by other personnel.

In those 56,000 cases, JPMorgan Chase has asked its local foreclosure attorneys to communicate to courts, affected homeowners and their lawyers. The notification process is underway, a company spokesman said.  Banks have come under increasing pressure from lawmakers in recent weeks to review foreclosures or to expand existing reviews.  On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The bank said the foreclosure process on delinquent borrowers will continue, but it will not proceed to judgment or a foreclosure sale.  Ally Financial, previously known as GMAC, the finance arm of General Motors, has said it is temporarily suspending evictions and post-foreclosure closings in states that require judicial review while it conducts a review of documents.

I’ll be covering this mess in detail this coming Thursday at 2 PM ET, 11 AM PST:

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Job losses worse than we thought

The government currently estimates that 2.2 million jobs were lost from April of 2009 through March of this year, a significant portion of the 7.8 million jobs lost since the start of 2008.  But in a little-noticed note at the bottom of September’s jobs report, the Labor Department said it now appears there were 366,000 additional jobs lost during the 12 months that ended in March, a revision that is not yet included in the official numbers.  During the 12-month period that ended in March, that so-called birth-death adjustment added 336,000 jobs to overall total payrolls. 

The birth death adjustment also resulted in an estimated 682,000 additional jobs in the six months since March, although unlike the widely-reported monthly job readings, that gain is not seasonally adjusted. Still it is significant, accounting for more then 40% of the job gains reported since the spring. “The birth-death model isn’t working,” said Robert Brusca of FAO Economics. “As businesses are having trouble getting credit, it’s not surprising.”  “Around turning points, the revisions tend to be larger,” said Lakshman Achuthan, managing director of Economic Cycle Research Institute. “At the bottom of the cycle, they tend to underestimate the job losses.”

A U.S.-wide foreclosure moratorium would be “catastrophic”

The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but warned against dramatic nationwide action.  “It is imperative, however, that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy,” SIFMA Chief Executive Tim Ryan said in a statement.  On Sunday, White House adviser David Axelrod said he was “not sure” about a national halt to foreclosures.  Disclosures that some big mortgage processors filed affidavits without proper scrutiny in thousands of foreclosure cases has drawn anger from Congress and advocacy groups, with some prominent lawmakers calling for foreclosures to be halted in all 50 states.  The health of the U.S. housing market is a key concern.  Politicians are acutely aware of voter anxiety as the congressional election looms on Nov. 2 and regulators are under heavy pressure to prevent a repeat of the 2007-2009 financial crisis that began when the U.S. housing bubble burst.

2010 deficit at $1.3 trillion

The Treasury Department will deliver the official deficit numbers later this month, but according to preliminary estimates released by the Congressional Budget Office, the federal government ran a deficit of nearly $1.3 trillion in the fiscal year that ended Sept. 30.  According to CBO, the fiscal year 2010 deficit came in $125 billion below last year — the worst on record since World War II.  On the tax front, corporate revenue rose by $53 billion, or 39%, from 2009. Stronger corporate profits were the result of improved economic conditions and more generous rules for writing off business expenses.  The Federal Reserve’s investments in the housing market and other areas of the economy also paid off for Uncle Sam. Receipts from the Fed to the Treasury rose $42 billion, or 121%, over 2009. 

Overall government spending fell. The costs of the Troubled Asset Relief Program, which just ended, and payments to mortgage giants Fannie Mae and Freddie Mac declined. The same is true for funds spent on federal deposit insurance.  But other than that, the CBO reported, spending rose at a faster pace — 9% — than it has in awhile. Much of that increase was due to greater spending on the unemployed, on benefits for Medicare, Medicaid and Social Security and various provisions in the 2009 Recovery Act.  The federal cost of benefits for the jobless alone rose by 34% as the economy continued to suffer high rates of unemployment.  Interest payments on the debt also rose 13%.

Record number of foreclosures in Washington, Oregon 

A record number of properties were foreclosed in Washington last month with 2,007, which is up 55.2% from year ago and 19% higher than August, according to Foreclosureradar. The company said just 7.3% of the foreclosures were sold to third-parties, with the rest going back to the bank and pushing REO inventory up nearly 11%.  Foreclosure sales in September also rose in Oregon with an 18.5% jump to a record 967, which is almost 90% higher than the year earlier. Nevada’s sales of foreclosures increased 39.2% last month from August.  Meanwhile, the bank-owned, or REO, inventory in Arizona and California continues to increase, as fewer foreclosed homes are being purchased by investors. Foreclosureradar said the number of foreclosed properties acquired by third parties fell 15.6% in California last month.  “Most foreclosure investors flip the properties they purchase after taking care of title, occupancy and repairs,” the company said. “This process is taking 44.5% longer [in California] than it did a year ago, up from 95 days to 137.”  Arizona’s REO inventory has climbed steadily for a year, rose 4.2% in September, and is now 68% higher than a year ago, according to Foreclosureradar. 

The real estate data firm has been tracking foreclosure rates in California since March 2007, and recently began offering data for Arizona, Nevada, Oregon and Washington.  Foreclosureradar said its analysts have yet to see any impact from the foreclosure moratorium in the states it tracks because they don’t handle foreclosures through the courts.  “We regularly see lenders make minor mistakes in foreclosure filings” founder and chief executive Sean O’Toole said. “But the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure. The clear problem in the housing market today is not foreclosures, but negative equity; and as long as the focus remains on the symptom rather than the disease we will see little progress towards real solutions and this crisis will drag on for years to come.”

Small business optimism up

The National Federation of Independent Business (NFIB) said its optimism index edged up 0.2 points to 89.0 in September — the latest sign of sluggishness in the U.S. economic recovery.  Boosting the index, the number of firms reporting increases in capital outlays in the last six months rose to 45 percent, up 1 percentage point from a month earlier but still near a 35-year low, the NFIB said.  “The downturn may be officially over, but small business owners have for the most part seen no evidence of it,” said William Dunkelberg, the group’s chief economist.  The U.S. recession ended in June 2009 but the recovery slowed dramatically in the second quarter.  Investors bet the Federal Reserve will pump billions of new dollars into the economy soon to spur growth.  The NFIB poll showed 16 percent of small businesses plan to cut jobs over the next three months, up from 13 percent in an August survey 

Now for our real estate education section…

Nixing the Fix?

On October 7th, President Obama announced his intent to veto the foreclosures document bill which could potentially help restore some semblance of balance to the current crisis involving the robo-signing scandal. Advocates of Obama’s position claim it would lead to increased numbers of foreclosures and greater potential risk of banking abuse or irregularities in an already abusive system. Critics say the bill was urgently needed to curb the rising backlog of homes and prevent a complete meltdown of an already stressed system due to the foreclosure moratorium. Who is right and what are the stakes if Obama is wrong?

In a Nutshell

The law was originally proposed in April of 2005 by Rep Robert Alder of Alabama in order to allow states to recognize the authority of foreclosure documents from one state to another. It was currently revitalized in response to the robo-signing crisis. President Obama intends to use a pocket veto to nix the proposed fix.

More Than What Meets the Eye

The question of whether or not this is the correct course of action is exacerbated by President Obama’s timing; according to political experts, a pocket veto can only be used when Congress is out of session however, the Senate is not yet adjourned. Critics point to the irony of using yet another “technical irregularity” as a proposed method of solving the original one.

Right or Wrong?

Setting the legal and technical issues aside for just a moment, the most urgent question is whether or not the proposed legislation would curb the tidal wave of documentation irregularities that have resulted in a near stand-still of foreclosures in half the nation. By signing the bill, President Obama would open the door for states to recognize the documentation from state to state and therefore help expedite the processing of an already huge backlog. Critics claim irregularities are prevalent and automatic approval would be less likely to recognize – much less correct – faulty processing and leave little room for appeal. Who are the winners and losers? It depends on who you ask or believe but unanticipated consequences are a very real threat including:

Distressed Homeowners – Despite the claim that the bill is intended to help homeowners, they may find little comfort in a more rigorous process given the already extended delays and moratorium on current foreclosures. Experts agree it is unlikely the technical difficulties are likely to result in any real changes to the default status of the homeowner but rather a more extensive process.

Banks and Investors – Investors are likely to react negatively to the news that an end to the real estate crisis isn’t in sight and may actually grow worse. Once again, government intervention is skewing the “invisible hand” toward a direction that many disagree with. Banks, already reeling from the burden of bad loans and depressed portfolios, are likely to suffer extensive setbacks while attempting to process this new batch of butchered loan documents. Lenders may soon be required to mark down the value of bad assets resulting in insolvency for borderline banks.

HOA & County Government – Improper documentation has resulted in homeowners not having been removed from the tax rolls in many states, leaving them financially liable for property taxes yet unaware or unable to respond. HOA’s are already suffering from a loss of income and likely to see even longer delays due to documentation issues. Empty homes are becoming a source of blight in many communities even before the impending moratorium. More empty houses are simply expected to worsen an already bad situation.

The Bottom Line: Short sales are an increasingly attractive alternative for desperate homeowners and banks alike. Rather than see this as a set-back, savvy short sale investors should learn to recognize the opportunity and move on it sooner rather than later!

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 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
–

Mid-Day Market News & Commentary by Chris McLaughlin, January 2, 2009
http://www.shortsalesriches.com/welcome.html

——
You really can make a huge six figure income … even a 7 figure income … with no money out of your pocket in the deepest recession our country has ever faced.  How?  Well, you asked and we listened … some of you said that 9 PM ET webinars were just too darn late for you!  So we’re holding one this Saturday … at 4 PM EST: 

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——

In a reminder of how many loans were authorized but didn’t comport with true underwriting guidelines, Fannie Mae estimates that IndyMac owes up to $1 billion in mortgage repurchases.   When loans don’t comport to Fannie Mae’s guidelines they are able to be called, thereby forcing the originator to repurchase them.  In this case, IndyMac is bankrupt and is controlled by the Federal Deposit Insurance Corp. (FDIC).  It remains to be seen how the FDIC will handle this issue.

GMAC won’t get exclusivity with GM anymore.  Typically the finance arm of the motor giant provided all of the financing for GM vehicles.   But now that it converted to bank status in order to tap into $5 billion of the government’s $700 billion in TARP funds, Uncle Sam has placed new restrictions on the financial giant to enable more competition.

Now on to our real estate investing education section…

Must Have’s for Better Ads

Learn how to create fantastic copy with these “must have’s for better ads”.  Whether you are buying or selling your short sale career will never be complete until you understand how to effectively communicate with others. One of the most misunderstood aspects of modern methods of communication is the Internet; you don’t need to spend thousands on Google Adwords or build expensive flash based websites…just give people what they want when it comes to solid information.

1.     Photos. They say a picture is worth a thousand words but even more importantly, it attracts attention. Before you can say anything meaningful, it is necessary to grab the attention of others. If you are selling a property then the more the merrier; take as many pictures as possible and don’t scrimp on style. Make sure the property looks its best and lead with something that grabs the attention of others. If you are selling then don’t discount the power or pictures; simply go for one that exemplifies the main message. For example, a fist full of bills might be a powerful message for someone in financial distress. Learn to use pictures to capture attention and tell the story when buying or selling short sale real estate.

2.     Descriptions. Provide detailed information without overwhelming the reader. This is not the time or place to try an impress viewers with your superior knowledge or intellect; use the KISS formula (Keep it Simple Stupid) to communicate with buyers and sellers by providing the information they really want to know in a non threatening manner.

3.     Contact Info. Make it easy for both buyers and sellers to contact you – right now. People have grown accustomed to instant gratification so make it easy for others to find you instantly. Provide email, phone, instant chat or other methods of contact then follow-up as soon as possible.

4.     Examples. Don’t assume your reader fully understands the information provided; instead use working examples to communicate in a meaningful way. Be sure to use a cross section of people and situations that are similar to your target audience. For example, if you plan to target working class family neighborhoods then use an example of a family that would likely live in that area. Ditto for the pictures.

5.     Testimonials. Never underestimate the power and influence of peer pressure or word of mouth marketing. Whenever possible, use testimonials especially from neighbors or other easily recognized resources. Studies demonstrate people are much more likely to use the services of someone they trust if the name is associated with a recognized ‘authority’ or provided by a neighbor or family member.

——–

See you at the top!

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

P.S.:

Are you ready to get 2009 rolling?  Then it is time to come to our LIVE “Recession Proof Real Estate Investing” webinar this coming Saturday at 4 PM EST, 1 PM PST:

https://www2.gotomeeting.com/register/703821628

Mid-Day Market News & Commentary by Chris McLaughlin, December 26, 2008
http://www.shortsalesriches.com/welcome.html

——
Are you ready to get 2009 rolling?  Then it is time to come to our LIVE “Recession Proof Real Estate Investing” webinar tomorrow, Saturday, at 4 PM ET and 1 PM PST! 

https://www2.gotomeeting.com/register/521115603

——

GMAC Financial Services got a huge Christmas present this week when the Federal Reserve approved its application to become a bank holding company, thereby enabling it to tap into $700 billion of TARP rescue funds.  Not only will GMAC be able to tap into the bank stabilizing funds, it will also be able to borrow from the Fed’s discount window for virtually no interest. 

Somber retailers took note that the Grinch showed up this holiday season.  According to Mastercards’s SpendingPulse division, total retail sales dropped 5.5% in November and a whopping 8% in December as most Americans kept their money in their bank accounts.  Luxury items were hit the hardest, with a drop of 35%, while electronics dropped 27% and women’s apparel slid 23%.  But there was so positive news from retailers, but it just so happened to be online…

There’s more proof that Americans are tired of crazy malls and rude drivers that steal your parking spots: Amazon.com announced that its 2008 holiday season was its “best ever.”  Get this: orders came in at a record-breaking 72.9 items per second! 

Here are some pretty cool amazon.com holiday facts they released today:

• Amazon.com sold enough “Breaking Dawn” books that stacked end to end they would reach the summit of Mt. Everest eight times.
• During the period from Nov. 15 – Dec. 10, Amazon sold one copy of Microsoft Office Home and Student 2007 every 2.5 minutes.
• The weight of all GPS devices sold from Black Friday through December equals the combined weight of 151 Mini Coopers.
• Amazon sold enough high-performance headphones that everyone attending the last three Super Bowls could grab a set and rock out.
• Amazon Grocery sold enough coffee to give each resident of the highly caffeinated city of Seattle a cup per day for two months.
• Amazon sold enough Casio G-Shock watches to outfit every Kanye West fan attending the 2008 Glow in the Dark Tour concert at Madison Square Garden, N.Y.
• Amazon sold enough Coldplay CDs that laid side by side they’d stretch from Seattle to Violet Hill (a street in London and the album’s first single) and more than halfway back.
• Amazon sold enough Munchkin Mozart Magic Cubes to fill every seat in the Sydney Opera House five times over.
• Amazon sold enough Wild Planet Hyper Dash games that the total weight of sets sold is over 81,000 pounds — almost the size of two 747 aircrafts.
• Amazon sold enough Spalding basketballs to fill three C-130 cargo planes.

Now, on to our real estate education section…

The Misery Index and Short Sales Negotiations

The Misery index is derived from taking the unemployment rate and adding it to the rate of inflation to gauge the economic and social climate of the nation. The higher the misery index, the more negative and desperate the average consumer tends to become. The low was 2.9 percent in July of 1954 with the high reaching 21.9 in June of 1980. Today the misery index stands at 7.77 and rising as of the end of November 2008.

So, how should short sale investors use this information? Well, in a couple of ways. First of all, watch the macro trend…as the index increases so too does the uncertainty of the average American consumer (and by proxy, business owners). Their spending habits tend to decrease and they often start to save for a rainy day.  People, business owners and even banks in this stage tend to think it is short-term and less inclined to negotiate more than a minimal reduction.

Next, watch for a shift. The second stage takes place as momentum builds and the rate of change increases at a faster and faster pace. Uncertainty gives rise to outright fear as people begin to worry about their own job or financial future. Banks and business owners begin to think this could last longer than expected and begin to pad their own balance sheets for the long run. There is a decidedly motivated response to downsize unnecessary assets, overhead or other non-performing holdings.  Short sale investors will find these individuals and banks much more motivated especially if approaching with fast closing and minimal escape clauses. The emphasis of 90 percent (or more) of people will be a flight to “safety” during this  stage as evidenced by the purchase of government bonds or other items that provide little to no real return.

The third and final stage is recuperation. Banks, investors and others realize the properties or other holdings were now over-sold and represent financially desirable long term investments. Even more importantly, there is a renewed interest in actual earnings due to the erosion of real earning power. Every short sale investor will do well to remember that earned income represents only a relatively modest allocation of most income…over the long term few people can actually live entirely on their own earned income. At this point, the money tends to flood into tangible assets and commodities including oil, real estate, farm and agricultural lands or products, oil, minerals, natural gas and other related holdings resulting in rapidly rising prices…and profits for those with the foresight to buy during stage two.

So, where are we today…most experts agree we are now transitioning from stage one into stage two making this the perfect time to begin buying foreclosures and short sales in earnest.  To keep track of where the misery index is heading, visit http://www.miseryindex.us/default-pda.asp at least quarterly. 

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See you at the top!

 

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

P.S.:

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