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BOA – restructuring, not pink slips

by admin on September 12, 2011

Smart Real Estate News & Commentary by Chris McLaughlin September 12, 2011

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BOA – restructuring, not pink slips

Bank of America (BOA) is widely believed to be on the verge of deep cuts in both its retail business and related personnel. Reports speculate that as many as 40,000 Bank of America employees may need to be let go as the embattled bank seeks to raise capital.  Yet, the issue is not profitability or capitalization, but rather the ongoing uncertainty about how much the bank is going to have to pay in legal liabilities and obligations tied to its ownership of residential mortgage-backed securities, according to a new report from Christopher Whalen with Institutional Risk Analytics.

Bank of America CEO Brian Moynihan will address wary investors at a conference organized by Barclays Capital. Moynihan recently shook up company management to align it with the bank’s three core customer groups: consumers, companies and institutional investors in part of an ongoing internal reorganization. Still, more is needed.  He is expected to speak today on the prospect of $1 billion in monthly savings, and outline a plan to make it happen, presumably including the above strategies.  Nonetheless, Whalen believes such a strategy is ill-timed and confidence-breaking.  “We do not see any need for layoffs or piecemeal asset sales at BOA, yet that is precisely the strategy being pursued by BOA management led by Moynihan,” Whalen writes. “Could you possibly pick a worse time than today to be a seller of a loan servicing or origination business?”

Bank of America stated it intends to sell its correspondent mortgage lending business. And if no buyer comes forward the bank will slowly wind the operations down.  Furthermore, the initiatives will not cure the bank’s real problems which stem from legal and regulatory liabilities tied to representation and warranties on RMBS and an influx of lawsuits over mortgages.  “At the current run rate, the BOA subsidiary banks are on track to do $84 billion in revenue in 2011, down from $86 billion in bank revenue during 2010,” Whalen said.  Whalen added that reports suggesting Bank of America is selling or shutting down its correspondent banking unit did little to ease the qualms of investors. “The firm faces tens of billions in current legal claims and may see these claims evolve and grow into larger demands for rescission of RMBS,” Whalen wrote. “Whereas two months ago we were talking settlement of at least put-back claims, now it is questionable whether BOA can settle any of the outstanding claims in the near-term. Why should Plaintiffs settle?”  Other growing concerns, according to Whalen, is the “imponderable risk that BOA and other lenders may face criminal prosecution in New York for these busted RMBS deals.”  As the market waits for more guidance from Moynihan, Whalen writes “for now, this situation is in the control of the federal and New York State courts, not Brian Moynihan, federal bank regulators or the Obama Administration.”  He added, “The fact that the FDIC and the FHFA both had to object, belatedly, to the Countrywide put-back settlement shows you what lies ahead in terms of additional claims from the GSEs and bank holders of RMBS. To paraphrase Freeman Dyson, the unthinkable has a bad habit of occurring.”

JP Morgan – bank rules are anti-American

In an interview with the Financial Times, Jamie Dimon, chief executive of JPMorgan Chase, said he was supportive of forcing banks to have more capital but argued that moves to impose an additional charge on the largest global banks went too far, particularly for American banks  The Basel III capital rules are designed to make the financial system safer by making banks build up risk-absorbent “core tier one” capital to at least 7% of risk-weighted assets. The biggest, including JPMorgan, have to reach 9.5%.  “I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are blatantly anti-American,” he said. “Our regulators should go there and say: ‘If it’s not in the interests of the United States, we’re not doing it’.”  Mr Dimon also criticized global liquidity rules, arguing that regulations that viewed covered bonds – a European market feature – as highly liquid but discounted government-backed mortgage-backed securities in the US were unfair and that other details hit investment banking activity core to US banks hardest.  Regulators say all countries compromised on agreeing the rules, which put eight banks – five from outside the US – in the top level of capital. But Mr Dimon said there was a threat that Asian banks, in particular, could take US market share because of the combination of US domestic and global rules.

“I think any American president, secretary of Treasury, regulator or other leader would want strong, healthy global financial firms and not think that somehow we should give up that position in the world and that would be good for your country,” said Mr Dimon. “If they think that’s good for the country then we have a different view on how the economy operates, how the world operates.”  US banks are struggling to deal with new regulations and litigation, both stemming from the financial crisis. Mr Dimon said it could be “three to 10 years” before the industry emerged from lawsuits brought by investors looking for compensation for the losses incurred on structured products underpinned by bad mortgages.  He said he was ready to agree a settlement over lax servicing and foreclosure standards that is expected to see the industry pay $20 billion in penalties. But he said banks could not be placed in “double jeopardy” and needed an appropriate release from legal liability.

HARP improving or expanding?

Getting on-time borrowers with high loan-to-value ratios into refinanced mortgages is likely to be a key focus of any federal refinancing plan to stave off defaults, according to analysts at Barclays Capital.  Allowing borrowers with higher LTVs to refinance at lower rates is part of the government’s attempt to reduce credit risk for Fannie Mae and Freddie Mac, the analysts said.  The Federal Housing Finance Agency (FHFA), which oversees the mortgage giants, is considering removing barriers for borrowers with LTVs past 125% to refinance.  “If there are frictions associated with the origination of Home Affordable Refinance Program (HARP) loans that can be eased while still achieving the program’s intent of assisting borrowers and reducing credit risk for the enterprises, we will seek to do so,” said Edward DeMarco, acting director of the FHFA.

Barclays analysts said Demarco’s statement argues for improving the HARP program, not expanding it.  “It seems that the FHFA is not looking to increase the amount of borrowers eligible for the HARP program by expanding the cut-off date, but is rather looking to enhance the efficacy of the existing program for current HARP-eligible borrowers,” according to the BarCap analysts.  Changes to the two-year old federal plan have some concerned about a possible wave of refinancings and what that would do to mortgage-backed securities.  “There is also likely to be a renewed focus on refinancing high LTV borrowers with strong pay histories, in a shift from the current scenario, where it effectively became a streamlined refinancing vehicle for low LTV borrowers,” the analysts said.

Greece down the tubes?

Germany may be getting ready to give up on Greece, as measures in the credit markets signal growing concern about the smaller nation’s ability to repay investors.  Yields on Greek two-year notes rose above 60% today for the first time. Credit-default swaps to insure the country’s five-year bonds and to speculate on government securities closed at an all-time high of 3,500 basis points on Sept. 9. The contracts are the highest in the world and more than three times the 1,134 basis points for Portuguese debt.  After almost two years of fighting to contain the region’s debt crisis and providing the biggest share of three European bailouts, German Chancellor Angela Merkel is laying the groundwork for what markets say is almost a sure thing: a Greek default.  Officials in Merkel’s government are debating how to shore up German banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three coalition officials said Sept. 9. The move capped a week of escalating German threats that Greece won’t get the money unless it meets fiscal targets, and as investors raised bets on a default.  US Treasury Secretary Timothy Geithner says that European authorities must “demonstrate they have enough political will” to end the crisis.

Carney – could Obama’s plan worsen the European crisis?

We don’t have many details about the Obama administration’s latest mortgage refinancing scheme but Ezra Klein helpfully points to a Congressional Budget Office (CBO) analysis that might shed light on how it could work.

‘For a sense for whether a refinancing scheme could actually help the economy, here’s a new analysis from the CBO.  This isn’t an official estimate, since there’s no official plan yet.  Instead, CBO’s economists invented their own (plausible-sounding) refinancing scheme. Their plan would be available for one year and allow borrowers who aren’t behind on their mortgages to refinance at current market rates. One key point is that borrowers wouldn’t have to pay the large risk-based fees often demanded by Freddie and Fannie, which deter many people from refinancing—the fee would just be the one paid on the initial mortgage.

Here’s what the CBO predicts the results would be: About 2.9 million homeowners would take the government up on its offer, saving $7.4 billion in lower monthly payments in the first year alone. An additional 111,000 borrowers would avoid default, which would, in itself, save Fannie Mae and Freddie Mac—and hence taxpayers—$3.9 billion.  Against that, however, government investors in mortgage-backed securities—including the Treasury Department, the Federal Reserve, Fannie, and Freddie—would lose about $4.5 billion, as loans get paid off early. So the net cost to the government would be pretty modest. Private investors in mortgage-backed securities, meanwhile—a group that includes banks, pension funds, mutual funds, etc.—would take a hit of about $13 billion to $15 billion.  Now, since many of these investors are foreign, and since these investors wouldn’t all necessarily reduce spending by the amount of their losses, the CBO estimates that the “net effect would be an economic stimulus” for the US economy. The money gained by borrowers does more to boost the economy than the money lost by investors.’

A lot of those foreign investors, of course, are European financial institutions. So if the mortgage plan works to help borrowers refinance, the already shaky European banks could find themselves under even greater pressure.  I wonder how that will sit with European politicians?

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
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

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NAR – Pending Home Sales Rise

by admin on April 28, 2011

Smart Real Estate News & Commentary by Chris McLaughlin April 28, 2011

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NAR – pending home sales rise

March saw another increase in pending home sales, with contract activity rising unevenly in six of the past nine months, according to the National Association of Realtors (NAR).  The Pending Home Sales Index (PHSI) rose 5.1% to 94.1 in March from a downwardly revised 89.5 in February. The index is 11.4% below 106.2 in March 2010; however, activity was at elevated levels in March and April of 2010 to meet the contract deadline for the home buyer tax credit.  The data reflects contracts but not closings, which normally occur with a lag time of one or two months.

The PHSI in the Northeast fell 3.2% to 63.4 in March and is 18.4% below March 2010. In the Midwest the index rose 3.0% in March to 83.5 but is 16.6% below a year ago. Pending home sales in the South jumped 10.3% to an index of 110.2 but are 10.5% below March 2010. In the West the index increased 3.1% to 103.7 but is 4.1% below a year ago.  Lawrence Yun, NAR chief economist, said home sales activity has shown an uneven but notable improvement. “Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24% and demonstrate the market is recovering on its own,” he said. “The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards.”

GNP slows

Gross domestic product, the broadest measure of the nation’s economic health, rose at an annual rate of 1.8%, the Commerce Department reported today. That’s a significant slowdown from the 3.1% growth rate in the final quarter of 2010.  Most predictions for growth have fallen precipitously over the past several weeks as rising prices spooked forecasters. Economists surveyed by CNNMoney were predicting growth of 2.0% in the first quarter. But some estimates were as high as 4.3% just two months earlier.  The sharp rise in oil prices in recent months was a major drag on growth. Besides cutting into the amount of money consumers had to spend on other items, the higher prices for imported oil caused a rise in the nation’s imports, which cut into GDP. The increase in imported goods shaved 0.8 percentage points off of growth by itself.  Rising inflation on overall prices also took a bite out of growth. Since GDP is adjusted for inflation, higher prices mean the economy must grow at a faster pace just to keep up. Consumer prices were up at a 3.8% from a year earlier, according to the report, compared to a rise of only 1.7% in the fourth quarter.  And the weak real estate market continued to weigh on the economy, as investment in homes and housing construction fell at a 4.1% pace in the quarter, while investment in non-residential real estate, such as offices, stores and factories, plunged by 29%.  But economists are expecting the slowdown to be temporary — they still project full-year growth of 3.1% for 2011.

DSNews.com – Home ownership dropping

The U.S. Census Bureau reported yesterday that the homeownership rate dropped to 66.4% at the end of the first quarter. It’s fallen back to a level not seen since 1998. Analysis of the numbers shows that the housing bust has more than reversed the increase in homeownership gained during the boom.  Economists at the research firm Capital Economics say the further decline in the homeownership rate in the first quarter “provides yet more evidence that Americans are now less able and less willing to buy a home.”  Paul Dales, the firm’s senior U.S. economist, said, “Part of this fall is due to foreclosures and the combination of high unemployment and tighter credit conditions preventing households from getting on the property ladder.”

But, Dales added, “[I]t also seems likely that there has been a reduction in the desire to own a home now it’s clear that housing is not a one way bet.”  At the same time, the homeowner vacancy rate fell to 2.6% from 2.7%, but Dales says this figures till remains above the long-run trend, suggesting that there is still too much supply.  Two million of the homes up for sale were sitting empty during the first quarter and another 4 million empty properties were not even listed, he explained.  “The inevitable consequence of low demand and high supply is lower prices,” Dales said.

Unemployment up

The number of initial claims rose to to 429,000 in the week ended Apr. 23, up 25,000 from the week before. It was the highest level in three months, and surprised economists, who were expecting initial claims to drop to 390,000 in the latest report.  The 4-week moving average of initial filings– a number that tries to smooth out week-to-week volatility — also rose above the threshold to 408,500, up 9,250 from the previous week. The 8-week moving average, which is an even better gauge for the longer-term trend, also ticked above 400,000.  In the government’s last monthly reading on the labor market, the unemployment rate fell for a fourth straight month in March to 8.8%, the lowest since March 2009, as the economy gained 216,000 jobs.

The Labor Department’s April job report is due at the end of next week.  Meanwhile, the number of Americans filing for ongoing claims decreased 68,000 to 3,709,000 in the week ended April 16, the latest data available. That’s the lowest figure since September 2008, and below economists’ estimates for 3,690,000 continuing claims.  Ongoing claims reflect people who file each week after their initial claim until the end of their standard benefits, usually after 26 weeks.  The 4-week moving average for ongoing claims fell by 22,750 to 3,697,750.

Ryland’s loss grows

Homebuilder and mortgage lender Ryland Group posted a first-quarter loss of $19.5 million, or 44 cents per share, as the company continued to grapple with falling home sales and a real estate market flooded with competing foreclosures and existing home sales.  The firm reported a loss of $14.3 million, or 33 cents a share, a year earlier.
 The builder, which also maintains its own mortgage finance group, failed to meet analyst expectations, with the average analyst expecting a loss of 31 cents a share.  Ryland’s loss deepened as sales fell about 30% to $168.6 million for the first quarter, down from $241.9 million a year earlier.

Home sales fell 17.2%, with only 966 new orders reported in the first three months of 2011, compared to 1,167 a year earlier when the homebuyer tax credit was still in play coaxing buyers into the market.  Ryland’s results for the quarter were hurt by pretax charges on inventory, valuation adjustments and other write-offs for the period.  The company’s deepening loss comes at a time when homebuilders are struggling to attract new buyers.  Moody’s Investors Service recently revised the ratings outlook for PulteGroup Inc. from positive to stable over concerns the homebuilder’s operating performance and the industry’s return to a more stable environment will take more than a year.

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
–

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Americans Still Believe Home Ownership is the Best Investment

by admin on April 26, 2011

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

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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
–

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Home Ownership Declines in the US

by Chris McLaughlin on April 29, 2009

Real Estate News & Commentary by Chris McLaughlin, April 29, 2009
http://www.shortsalesriches.com/welcome.html

No money, no credit – but an honest desire to succeed?
That’s all it takes to get into the lucrative business of
finding and reselling short sale properties.  We’ve had
people go from zero to six figures in less than six months!
See if there’re any spots left for this webinar Thursday at
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Economy declines 6.1%
In the first quarter of 2009, the U.S. gross domestic product shrank almost as much as it did in the fourth quarter of 2008, according to a government report today.  The drop was much worse than expected.  According to economists surveyed by Briefing.com, expectations were for a drop of 4.7% in gross domestic product, but the actual drop turned out to be 6.1% — the biggest drop in 26 years.  The two major influences are businesses pullbacks in spending, accounting for 2.6 percentage points of the overall decline in GDP; and inventory reduction during the quarter, which contributed another 2.8 percentage points to the drop in GDP.  State and local governments also cut back on spending.

Mortgage loan application volume down 18.1%
The Mortgage Bankers Association (MBA) announced that the Market Composite Index, a measure of mortgage loan application volume, decreased 18.1 percent on a seasonally adjusted basis to 960.6 from 1172.2 a week earlier.  On an unadjusted basis, the Index decreased 17.4 percent compared with the previous week and increased 62.7 percent compared with the same week one year earlier.  The refinance share of mortgage activity decreased to 75.3 percent of total applications from 79.7 percent the previous week, and the adjustable-rate mortgage (ARM) share of activity increased to 2.1 percent from 1.4 percent from the previous week.

Home ownership declines
According to the US Department of Commerce Census Bureau, the rate of U.S. homeownership slipped in the first quarter to the lowest level since the start of the decade.  U.S. homeownership dropped to 67.5 percent from 68 percent a year earlier, driven by a sharp decline among younger buyers as well as among African-American households.  Today, 74.7% of adult whites own their homes, and blacks are the smallest segment of mortgage borrowers, with only 46.1% of the population currently owning their home.  Hispanics followed at 48.6%, with “all other races” experiencing a homeownership rate of 57.4%.

Six banks fail stress test
Bloomberg says that at least six of the 19 largest U.S. banks require additional capital, according to the results of the so-called “stress-tests.”  Fed Chairman Ben S. Bernanke, Treasury Secretary Timothy Geithner, and other regulators are scheduled to meet this week to discuss the tests, but Geithner has suggested that the options for raising capital include converting government-held preferred shares dating from capital injections made last year, raising private funds, or getting more taxpayer cash.  Bank of America and Citigroup – two of the banks in question – are currently appealing.  According to an April 24 analysis by Morgan Stanley, three of the other four banks are likely to be SunTrust Banks Inc., Keycorp, and Regions Financial Corp.

Now on to our real estate investing education section…
Signs of the Times – How Short Sale Investors Can Spot the True Turn-Around
At the first sign of slowing declines and a few stocks going up in value, the media is eager to report that the worst is over. Before you run out and begin buying up stocks or bonds it might be a good idea to review the signs of a real bottom. Expect a true turn-around to take place after the following events have been established:

Debt Liquidation. While the big bank bail-outs and automobile manufacturers might seem to have drained the Federal Reserve, remember what we spoke about earlier this week…the giant derivative mess is still waiting in the sidelines with numbers that literally dwarf everything else to date. Wait until the true debt liquidation takes place before getting overly excited by the early signs of a supposed recovery.
Failures.  Sooner or later the federal government will stop bailing out bad companies and instead, turn their sights on trying to preserve what is left of the American economy. In a Darwinian struggle for survival, weak companies will fail while larger companies purchase assets for pennies on the dollar. Don’t expect the government to make a major announcement restricting all the bail-outs, instead, simply keep a close eye on spending to see the signs of slowing and eventual capitulation related to the bail-outs. Plain and simple, the federal government won’t be able to afford the true cost of throwing good money at bad business.

Wall Street Woes. Short sale investors already know how fickle the media and traditional economists can be when it comes to investment advice so it should come as no surprise that they will once again be wrong when it comes to Wall Street. When you begin hearing that all stocks are now ‘worthless’ then start searching for signs of the bottom….the same way that real estate has been nearing its own bottom presently. Remember, the tendency is always toward an over-correction prior to a true turn-around.

The Big Event. Every turn around is preceded by a “big event.”  While we don’t pretend to know the future, we can learn a little from the past and take an educated guess that the big event preceding the true turn around could borrow from the pages of history in the form of a major monetary policy change, national bank holiday or other watershed event that “re-sets” the currency and economic system. Already nations from around the world are calling for a new reserve currency to be issued by the International Monetary Fund while the Internet itself is rampant with reports speculating on the emergences of the Amero in much the same way Europe adopted a co-existent currency in the Euro. Whatever form the big event takes, it is certain to reduce those holding dollars, stocks and bonds to potential ruin.

Take time to review the history of other nations in the grip of economic uncertainty to determine how well real estate performed. Indeed, it is one of the few assets that lead to wealth after the true turn-around took place. Meanwhile, keep your eyes and ears open for opportunity to establish your financial future via short sale investments….the time to buy the best bargains is always on the way down – not up. That is when you will really want to sell then reap the rewards of all your hard work and determination.
See you at the top!

Chris McLaughlin
http://www.shortsalesriches.com/welcome.html

Don’t miss our webinar Thursday night at 8:30 PM ET, 5:30 PM PST:
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Finally, a blog for Real Estate professionals
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About the author:

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

As the top Florida foreclosure and pre-foreclosure expert, he oversees more than 100 short sale & REO closings each month.  Long-time authority on real estate investing and rapid flipping of distressed homes.  Owns portfolio of nearly 100 high-value, high-profit properties.
* Owner and Supervising Broker of one of Florida’s
largest Real Estate firms, running 4 different
offices, supporting nearly 450 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
* On twitter: http://twitter.com/mclaughlinchris
* On facebook:
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