inflation

Smart Real Estate News & Commentary by Chris McLaughlin December 20, 2011

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Housing starts up

The Commerce Department said on Tuesday housing starts jumped 9.3% to a seasonally adjusted annual rate of 685,000 units, the highest since April last year.  October’s starts were revised down to a 627,000-unit pace from a previously reported 628,000 unit rate.  Economists polled by Reuters had forecast housing starts rising to a 635,000-unit rate. Compared to November last year, residential construction was up 24.3%.  Building permits, a gauge of future construction, rose by 5.7%. The increase was spurred by more apartment permits.  New homes have an outsize impact on the economy. Each home built creates three jobs for a year and $90,000 in taxes, according to the National Association of Home Builders.  Although the overall housing market remains weak, rising demand for rental apartments is boosting the construction of multifamily homes.

Housing is becoming less of a drag on the economy and residential construction has now grown for two straight quarters.  Even home builders are adopting a more optimistic view of the sector, with confidence rising to a 1-1/2 year high in December.  Last month, housing starts for the volatile multi-family homes segment surged 25.3% to a 238,000-unit rate, and groundbreaking for projects with five or more units hit the highest level since September 2008.  Single-family home construction — which accounts for a large portion of the market — rose 2.3% to a 447,000-unit pace.  New building permits unexpectedly increased 5.7% to a 681,000-unit pace in November. Economists had expected overall building permits to fall to a 635,000-unit pace last month.  Permits were pushed up by a 13.9% jump in the multi-family segment. Permits for buildings with five or more units were the highest since October 2008. Permits to build single-family homes rose 1.6%.  New home completions dropped 5.6% to 542,000 units last month.

Still, the total is far below the 1.2 million homes that economists say would be built each year in a healthy housing market.  A full recovery for the sector, which was one of the main triggers of the 2007-09 recessions, remains far off in the future given a glut of unsold homes, weak prices, high unemployment and tight credit.  Housing starts are still less than a third of their 2.273 million rate peak in January 2006.

Tax hike coming?

With a tax cut for 160 million US workers set to expire in less than two weeks, Republicans and Democrats in Congress on Monday were mired in a last-ditch battle over extending it.  In a surprise turnabout, Republicans in the House of Representatives are now pushing for a one-year extension of the payroll tax cut and have rejected a short-term compromise struck by Republicans and Democrats in the Senate at the weekend.  House Republicans had initially expressed concerns over the economic benefits of renewing the tax break, which expires on Dec. 31, and soon-to-expire jobless benefits.  The House is set to vote sometime during the day on Tuesday to formally request negotiations with the Senate on a new bill.  But the path to compromise was far from clear as Democrats took a hardline stance.  Democratic Senate leader Harry Reid said he was unwilling to reopen negotiations. Almost all senators have already left Washington for the holidays and the Democratic-controlled chamber has no legislative business scheduled until Jan. 23.  The stand-off between Republicans and Democrats raised the specter of a $1,000 tax hike on the average American worker and millions of unemployed losing their benefits.

Olick – beware of sale revisions

“We already know the housing crash was bad, perhaps the worst in history; tomorrow we will learn that it’s worse than we thought.  The National Association of Realtors, for a number of reasons I won’t get into because they’ve been widely reported, over-counted home sales during part of the last decade and has spent the better part of this past year figuring out just how badly they did that.  They consulted with economists at the Federal Reserve, Fannie Mae, Freddie Mac, the Department of Housing and Urban Development, the mortgage bankers, the home builders, as well as umpteen other housing specialists, and tomorrow they will release their results.  Expectations are that home sales could be revised down anywhere from ten to twenty%. The Realtors’ chief economist said the revision would be, ‘meaningful.’

The revisions will likely not change the fact that last year saw the fewest homes sold on record. They will not change estimates of home prices, nor the home price drop since the 2006 peak, nor will they change inventories of unsold homes in month’s supply (how long it takes to sell that many homes) although absolute inventories will be revised lower. They will not affect monthly or annual percentage changes in sales recently.  The revisions will also have nothing to do with how many newly built homes sold, nor will they say anything about the health of the nation’s home builders.  Far more importantly, the revisions will have nothing to do with how many borrowers are behind on their mortgage payments or in the process of foreclosure, which is 6.26 million, according to numbers just released from Lender Processing Services.  The Realtors’ revisions will not change the losses at banks, losses to investors, and losses to the now government-owned mortgage giants Fannie Mae and Freddie Mac, nor to the Federal Housing Administration.  The Realtors’ revisions will change perception; they may even change consumer sentiment. Headlines will scream Wednesday morning, and reporters like me will jump in with the ‘breaking news,’ that far fewer existing homes sold over the past four years than previously thought.  The crash will look bigger, as the Realtors are only revising numbers starting in 2007, because ‘they did a side-by-side comparison of the calculations and the drift began only in 2007,’ says an NAR spokesman. ‘So there was no need to revise earlier data. It appears that roughly half of the revisions come from the drop in FSBO’s [For Sale By Owner].’

Let me repeat what I just wrote: The crash will look bigger. Will that change anything in the economy today? Will it affect the housing market going forward? Will it hamper the fledgling recovery (which I’m not 100 percent sure is really taking hold)?  My guess is no, but the revisions, and the hue and cry surrounding them, will hurt consumer confidence, which was beginning to come around ever so slightly.  The home builders reported an increase in buyer traffic and buyer inquiries in December, and said gains in the past months are ‘an indication that pockets of recovery are slowly starting to emerge in scattered housing markets.’ These new numbers will hurt that new-found confidence, not because of anything real on the ground, but because of the perception of just how far we fell.  It is commendable that the Realtors are correcting their miscalculations, but equally distressing that just as our outlook for the future was brightening ever so slightly, and home buying demand was beginning to awaken, we have to be reminded of a very dark past, darker than we knew.  There are still considerable headwinds facing housing’s recovery, not the least of which are foreclosures, and potential buyers have to factor that into their decision making. They should not, however, be spooked by nasty new numbers that really just put an exclamation point on what we already knew … that housing went from an unprecedented boom to an unprecedented bust and took down our economy with it.”

Economy to expand?

The US economy will continue to expand moderately next year and inflation will remain under control, Richmond Federal Reserve Bank President Jeffrey Lacker said on Monday.  While he did not comment specifically on monetary policy, Lacker, an inflation hawk who will rotate into a voting seat in the policy-setting Federal Open Market Committee next year, indicated he does not see the need for further monetary stimulus.  “The macroeconomic experience of 2011 provides vivid illustration. Despite large-scale efforts to provide more monetary stimulus, growth has disappointed and inflation has ratcheted upwards,” Lacker said in remarks before the Charlotte Chamber of Commerce.

Counseling doubles chance of modification

Borrowers who received foreclosure counseling through a national program were twice as likely to receive a modification, according to a study released yesterday.  The Urban Institute evaluated roughly 800,000 homeowners who took help from the National Foreclosure Mitigation Counseling program from January 2008 through December 2009. NeighborWorks America administers the program with federal funds.  The counselors are approved by the Department of Housing and Urban Development. They work on homeowner budgets and guide borrowers through the various options provided by the mortgage servicer to avoid foreclosure.  Those who went through the program were at least 67% more likely to remain current within nine months of receiving a modification, according to the study. Borrowers who went through the program had their payment reduced by an average of $176 per month.

Congress slashed funding for HUD housing counseling programs earlier in the year. The mortgage industry called for lawmakers to restore the money because of the more than 5 million homeowners who are at least 30 days delinquent, according to Lender Processing Services.  In November, Washington restored some of the money, and HUD was allowed to grant $40 million to counselors.  Eileen Fitzgerald, CEO of NeighborWorks America, said the program and others like it help homeowners and servicers alike by reducing redefaults.  “In short, the personalized work nonprofit housing counselors do to help homeowners improve their overall financial situation had the greatest effect on a homeowner not falling behind again on their mortgages in the future,” Fitzgerald said.

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)

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About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin December 15, 2011

Forward this e-mail to your friends!

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Short sales increase in Florida and California

Short sales made up 73% of the pending sales last month in the core Orlando market, up from 64% a year ago, according to a report released Wednesday by the Orlando Regional Realtor Association.  Sales of these “underwater” houses constituted about a third of the 1,950 November closings reported by Realtors in the core market, which consists mainly of Orange and Seminole counties. Sales of “ordinary” existing homes constituted about 40% of the market, while bank-owned properties made up about a quarter of the month’s sales.  Short-sale prices have also risen during the past year, from $99,000 in November 2010 to $106,000 last month. But the median price of “normal” resales has declined 8% during the same 12 months.

Over the past year, short sales and foreclosures, key indicators of the health of the housing market, have dramatically increased in California too.  Originally, foreclosures and short sales were occurring in the Inland Empire, Lancaster and northern Los Angeles County, but now they’re creeping south.  From Jan. 1 to Dec. 1, 2010, 59 short sales were recorded in Sherman Oaks. This year during the same period, 92 homes sold in short sales with another 36 pending sales and 22 actively listed, for a total of 150 properties, a 154% increase.  Meanwhile, foreclosures sold during the same months last year totaled 48, compared to 51 foreclosure sales closed, four pending and another nine on the market, for a total of 64 homes, a 33% increase.  About a third of the short sales and the majority of foreclosures occurred in pricey neighborhoods north of Ventura Boulevard.  Although home prices in the southern San Fernando Valley, including Sherman Oaks, slid down about 26% to 35% during the economic downturn, they were still less than the 40% to 60% price declines recorded in other locales.

Jobless claims down

Government reports on weekly jobless claims and manufacturing activity in the Northeast for December released Thursday offered fresh evidence the US economic recovery is picking up steam.  New US claims for unemployment benefits dropped to a 3 1/2 year low last week, a government report showed on Thursday, suggesting the labor market recovery was gaining speed.  Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 366,000, the Labor Department said. That was the lowest level since May 2008.  The prior week’s claims data was revised up to 385,000 from the previously reported 381,000. Economists polled by Reuters had forecast claims rising to 390,000 last week.  The unexpected drop in claims last week pushed them closer to the 350,000 mark that analysts say signals labor market strength.  The four-week moving average of claims, considered a better measure of labor market trends, fell 6,500 to 387,750 — the lowest since mid-July 2008.  The number of people still receiving benefits under regular state programs after an initial week of aid edged up 4,000 to 3.6 million in the week ended Dec. 3.  Economists had forecast so-called continuing claims rising to 3.63 million from a previously reported 3.58 million. The number of Americans on emergency unemployment benefits increased 254,642 to 3.05 million in the week ended Nov. 26, the latest week for which data is available.  A total of 7.45 million people were claiming unemployment benefits during that period under all programs, up 874,670 from the prior week.

WSJ – foreclosures slow, build for next year

Declines in foreclosure filings slowed in November from a year earlier, suggesting a new wave of foreclosures could hit the market early next year, according to a new report by RealtyTrac.  The online marketplace for foreclosure properties said foreclosure filings in November dropped 14% from last year and 3% from October. Yet the year-over-year decrease represented the smallest annual decline over the past 12 months, and some states actually posted year-over-year increases in foreclosure activity. Also, despite the seasonal slowdown in foreclosure filings, RealtyTrac said its research suggests that a new wave of foreclosures could come next year.  RealtyTrac measured foreclosure filings though default notices, foreclosure auctions and bank repossessions. It said default notices were down 9% from last year, while bank repossessions and foreclosure auctions both dropped 17%.

California had some of the worst foreclosure statistics, as nine out of the top 10 highest foreclosure rates in metropolitan areas were in the Golden State. California, along with Florida and Michigan, had the highest total foreclosure filings in November, with California making up 28% of the national total, the most of any state. Nevada, California and Arizona had the highest foreclosure rates, with Nevada topping the chart. One in every 175 Nevada housing units were involved in a foreclosure filing in November, more than three times the national average.  On the opposite side, North Dakota, Vermont and West Virginia had the lowest foreclosure rates.  According to a recent study from TransUnion, the highest mortgage delinquency states or districts in 2012 are expected to be Florida, Nevada and the District of Columbia, while North Dakota, South Dakota and Wisconsin should have the lowest rates.

New York factory orders up

A gauge of manufacturing in New York State showed growth accelerated in December to its highest level since May as new orders improved, the New York Federal Reserve said in a report today.  The New York Fed’s “Empire State” general business conditions index rose to 9.53 from 0.61 the previous month. Economists polled by Reuters had expected a reading of 3.00.  New orders rose to 5.10 from minus 2.07, while inventories gained to minus 3.49 from minus 12.20. New orders were also at their highest level since May.  The survey of manufacturing plants in the state is one of the earliest monthly guideposts to US factory conditions. The gain in December added on to improvement last month that pulled the index out of a five-month contraction.  Employment gauges continued to be mixed. The index for the number of employees perked up at 2.33 from minus 3.66, but the average employee workweek index fell to minus 2.33 from 2.44.

The Federal Reserve has long maintained that inflation will settle at levels at or below those consistent with its price stability mandate.  Last month, wholesale prices were pushed up by a 1% rise in food prices. Vegetables accounted for more than half of the increase in food prices last month. Food prices rose 0 .1% in October.  Gasoline prices edged down 0.1% after falling 2.4% in October.  In the 12 months to November, producer prices increased 5.7% after rising 5.9% the prior month. Wholesale prices outside of food and fuel were bumped up by passenger car prices, which are on the rise again after floods in Thailand disrupted supply chains.  Motor vehicle production was earlier this year disrupted by the earthquake and tsunami in Japan. Passenger car prices rose 0.6% after falling 0.8% in October. Prices for light motor trucks fell 0.2% after dropping 1.6% in October.

Olick – the politics of housing

“Housing may have been the catalyst for the Great Recession, but it is not number one on America’s fix-it list for our next President.  Fixing the economy should come before housing policy, according to a new survey by real estate website Trulia.com.  Americans first want to see lower unemployment, more employment growth and reducing the federal budget deficit.  ‘The partisan split in Washington and the recent housing policy debates are not what Americans want from their government,’ said Trulia’s chief economist Jed Kolko. ‘Although Washington and lobbyists have been debating the conforming loan limit, Americans would rather see more action to make refinancing easier and to deal with vacant homes.’  Still, those same respondents, 72% of them, said government policies should encourage home ownership. Wasn’t that ‘encouragement’ kind of what got us into this mess?  The Trulia survey seeks to draw distinctions between what Republicans want from housing policy and what Democrats want, but the answers don’t differ all that much, except when it comes to helping troubled borrowers. 74% of Democrats want government to encourage mortgage loan modifications that reduce principal balances. Just 61% of Republicans support that.

For respondents from both political parties, the number one sign of housing recovery would be fewer defaults and foreclosures; at the bottom of the list is rising homeownership.  This is perhaps the most troubling finding for the near future of the housing market, because we are going to see more foreclosures in the first half of 2012, as banks work through the enormous backlog of delinquent loans that were on hold this year due to the so-called ‘robo-signing’ foreclosure paperwork mess.  Since consumer confidence is going to be the driving factor in housing’s recovery, increased foreclosures and the headlines that go with them, regardless of where they are locally, will have an overall impact on home buying nationally. Sales have been stabilizing slightly this Fall, but likely only because foreclosures had been stalled, so the distressed share of the market was not so blatant; that’s about to change.  Most analysts are predicting that the big pain will be in the first half of 2012, and as those foreclosures are supposedly quickly absorbed into the market, organic home buyers and sellers will come back. However, more than half of those surveyed by Trulia said they were not at all confident that the President can stabilize the housing market in the next year. This is a notable increase since he took office.”

Sales outlook brighter

The National Retail Federation said it now expects holiday sales to rise 3.8% to a record $469.1 billion. That is up from the group’s October forecast, which called for growth of 2.8%.  The new forecast is still lower than the 5.2% growth seen last year, but is above the 10-year average increase of 2.6%.  The reason for the updated forecast is that NRF, a retail industry trade group, found that industry sales for November rose 4.5% year-over-year, and that the average American has completed far less of their holiday shopping than in previous years — an indication that many shoppers bought for themselves in November and have lots of shopping left to do.  While retailers are “cautiously optimistic” that the season will turn out better than initially expected, NRF President Matthew Shay said “a number factors, including the debt crisis in Europe and continued political wrangling in Washington, could impact consumer spending this holiday season and into 2012.”  The NRF’s figures compare sales at retail stores with the year-earlier period and exclude restaurants, gasoline, automobiles and online sales.  That is why its results look different than those announced by the US Commerce Department, which said US retail sales grew a weaker than expected 0.2% in November.

WSJ – Chicago sued by Fannie and Freddie

The federal regulator overseeing Fannie Mae and Freddie Mac sued the city of Chicago on Monday over an ordinance that makes mortgage creditors liable for the upkeep of vacant properties.  Lenders are liable for daily fines of as much as $1,000 if they don’t mow lawns and provide basic maintenance on vacant buildings under an ordinance signed into law by Mayor Rahm Emanuel. Lenders especially opposed the requirement they maintain properties they hadn’t yet taken back through foreclosure.  After lenders threatened to sue, the city revised the ordinance in November by dropping a provision that had defined creditors as property owners. But those changes didn’t satisfy the Federal Housing Finance Agency, which sued Monday.

Chicago has one of the biggest foreclosure backlogs in the US, delays thanks in part to state requirements that lenders take back homes through the courts Banks and courts have been overwhelmed by the volume of cases, that have exacerbated the problem of neglected vacant buildings.  The agency said the ordinance was unfair because it imposed all of the costs of ownership without any of the benefits, such as the right to sell or lease the property. The lawsuit also said the ordinance overstepped federal law by subjecting Fannie and Freddie to regulation that is the jurisdiction of the FHFA.  The ordinance requires mortgage owners to pay a $500 fee to register vacant properties and to conduct monthly inspections of properties to determine if they are vacant. In a statement, the FHFA said that registration fee “represents a tax” on Fannie and Freddie.  “We are looking into the details of the lawsuit, but this type of action demonstrates the need for swift action” by the state “to hold lenders responsible for securing vacant properties,” said a spokesman for Mr. Emanuel. “During the passage of the compromise ordinance, we negotiated with national and local lenders, who then stood alongside the mayor to announce the agreement to secure vacant properties in Chicago.”

The lawsuit could help head off copycat ordinances. Las Vegas last week passed a similar measure that would require banks to pay a $200 registration fee for properties with defaulted mortgages. Bank officials could face fines or jail time for homes in disrepair.  Consumer advocates and community groups have criticized banks for delaying foreclosures or, in extreme cases, abandoning them in order to avoid picking up the tab for shabby homes once owners or tenants vacate them.  Researchers at the nonprofit Woodstock Institute estimated that nearly 1,900 vacant properties in Chicago are stuck in the foreclosure process at a cost of $36 million in upkeep costs borne by the city. “By in many cases ignoring these properties you’re doing a disservice to the community and a disservice to the investor,” said Tom Feltner, vice president of the Woodstock Institute.  Fannie and Freddie were taken over by the government three years ago, and today they answer to their regulator, the FHFA, which is charged with conserving the firms’ assets. The rescues of both companies have cost taxpayers $151 billion and counting. Monday’s lawsuit was filed in US District Court for the Northern District of Illinois.

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

Smart Real Estate News & Commentary by Chris McLaughlin December 9, 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

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

Florida, South Dakota foreclosures up

California-based CoreLogic said the rate of foreclosures in the Tampa-St. Petersburg-Clearwater area among outstanding mortgage loans was 12.26% for September, an increase of 1.55 percentage points compared with September 2010, when the rate was 10.71%.  At the same time, the mortgage delinquency rate has increased.  During September, 16.73% of mortgage loans in the Tampa metro area were 90 days or more delinquent compared with 16.44% for the same period last year. That’s a 0.29 percentage point increase from the same month last year.  The foreclosure activity in Tampa-St. Petersburg-Clearwater was higher than the national foreclosure rate of 3.48% in September. That’s an 8.78 percentage point difference.  Florida as a whole fared a little worse. In September, 17.38% of mortgages in the state were delinquent.  This data comes on the heels of another report from CoreLogic this week that showed Tampa Bay area home prices dropped 8.5% in October, compared with a year earlier.  The higher foreclosure rate could drag down sale prices further. The home-price decrease dropped less than 1% when distressed properties were excluded from the index, CoreLogic said. When troubled properties, such as short sales and bank-owned sales, were taken out of the data, prices declined just 0.9%, the report said.

CoreLogic says the rate of South Dakota foreclosures among outstanding mortgage loans for September is 1.4%, an increase from 1.11% in September 2010.  But the South Dakota rate sits more than 2 percentage points below the national foreclosure rate for September, which is 3.48%.  In Sioux Falls, the state’s largest city, the September foreclosure rate climbed to 1.48%, from 1.25% in September 2010. Two years earlier, the rate was below 1%.  The rate of mortgage delinquency in South Dakota decreased. In September, 2.63% of mortgage loans were 90 days or more delinquent, compared to 2.72% for the same period last year.

US trade deficit narrows

The US trade deficit narrowed in October to its lowest in 10 months, but imports from China hit a record high.  The trade gap totaled $43.5 billion, in line with a consensus estimate from analysts before the report. However, the Commerce Department revised its estimate of the September trade deficit to $44.2 billion from $43.1 billion.  As a result, the October trade gap narrowed 1.6% from September, instead of widening, as most analysts expected.  Both US imports and exports declined in October, in a possible sign of weakening demand in the US and abroad. Imports fell 1% to $222.6 billion, led by a $3.6 billion drop in industrial supplies and materials. The average price for imported oil fell for a fifth consecutive month to $98.84 per barrel, from its May peak of $108.70.  Despite the overall import decline, imports of capital goods and food, feeds and beverages increased to records in October.

Imports from China rose to a record $37.8 billion and imports from Japan increased to $12.3 billion, the highest since April 2008. US exports fell 0.8% to $179.2 billion, led by a $1.3 billion drop in industrial supplies and materials. The biggest monthly decline in that category was for non-monetary gold, which tumbled 25% to $3.5 billion. However, for the first 10 months of 2011, non-monetary gold exports totaled $27.8 billion, compared to $14.8 billion in the same period last year.  US exports to China increased to $9.7 billion, the highest since December.  The US trade gap with China was unchanged in October at $28.1 billion, but remained on track to surpass the annual record of about $272 billion set in 2010.

Olick – what are buyers putting down?

“Ask the Realtors, the Builders, even the Housing Reporters, and they’ll all tell you that the biggest impediments to housing’s recovery are higher credit underwriting standards.  Down payments are a big part of that, as most mortgage market experts will say you can’t get those great low rates today without putting down at least 20%, and more if you need a jumbo loan.  That’s why a new report from LendingTree listing the states with the highest and lowest average mortgage down payments was so surprising to me. It wasn’t the states, but the cash down.  New Jersey came in with the highest average, but that average was just 13.76%, according to LendingTree. North Dakota boasts the lowest average at 12.29%. Still both are well below the 20% we all complain about.  Granted FHA (Federal Housing Administration) loans, which due to the government insurance, require very low down payments, and while they rose to a very large share of the market during the worst years of the housing crash, they have since fallen back to an approximately 20% share of originations today.

Fannie Mae and Freddie Mac require at least 10% down, but then you have to pay private mortgage insurance to get the best rates.  ‘The reality is when you put less than 20% down, you have to pay for some kind of insurance to protect the lender from the higher risk that you’ll default…but private mortgage insurers these days aren’t always willing to do business with low down payments,’ notes a LendingTree spokesman.  If average down payments are this low, it raises concern over proposed mortgage industry regulation that would require a 20% down payment for a lender to be able to securitize and sell a loan fully into the marketplace. Lenders, like LendingTree, don’t like it.  ‘If Federal regulators were to adopt the proposed 20% down payment requirement, a majority of borrowers wouldn’t be able to meet the standard given the findings in this report,’ said Doug Lebda, founder and CEO of LendingTree.  But what if the average that LendingTree is reporting, isn’t what it appears to be?  ‘What we know is that 20-25% of mortgages nationwide carry down payments of 3.5% or less (FHA or VA) while most of the rest carry down payments of 20% or more (Fannie, Freddie and jumbo),’ notes Guy Cecala of Inside Mortgage Finance. ‘So an average of 12 or 14% is not impossible, but it doesn’t really mean that a lot of people are actually getting mortgages with those ‘average’ down payments.’  Don’t you just hate it when real math gets in the way of a good lobby?”

One holdout to new EU treaty

The European Union said Friday that 26 of its 27 member countries are open to joining a new treaty tying their finances together to solve the euro crisis. Only Britain remains opposed, creating a deep rift in the union.  In marathon overnight talks, the 17 countries that use the euro gradually persuaded nearly all the others to consider joining the new treaty they would create. Some of those countries may face parliamentary opposition to the treaty, which would allow for unprecedented oversight of national budgets.  “Except for one, all are considering participation,” EU President Herman Van Rompuy told reporters after the summit ended. “I’m optimistic because I know it is going to be very close to 27.”  A document released near the end of a high-stakes EU summit Friday said the leaders of nine of the 10 EU countries that don’t use the euro “indicated the possibility to take part in this process after consulting their parliaments where appropriate.”  ”This is the breakthrough to the stability union,” German Chancellor Angela Merkel told a press conference after the summit.

EU leaders expressed disappointment that Britain stayed out.  French President Nicolas Sarkozy blamed the split on British Prime Minister David Cameron.  “David Cameron made a proposal that seemed to us unacceptable, a protocol to the treaty that would have exonerated the United Kingdom from a great number of financial service regulations,” Sarkozy said shortly before dawn, after what he called a “difficult” dinner meeting had dragged through the night.  Cameron defended his stance.  “What was on offer is not in Britain’s interest so I didn’t agree to it,” he said. “We’re not in the euro and I’m glad we’re not in the euro. We’re never going to join the euro and we’re never going to give up this kind of sovereignty that these countries are having to give up.”

MBA – no compensation changes please!

The Mortgage Bankers Association (MBA) doesn’t want to see any changes to the mortgage servicing compensation.  In a letter to the Federal Housing Finance Agency (FHFA) , the trade group said no one has made a compelling case for why the current model needs to be tweaked. MBA President and CEO David Stevens said the group agrees with the government that there is a need for improvements for all participants of the mortgage underwriting and securitization processes.  “However, we believe that any change to the current servicing compensation model is unnecessary to accomplish these goals,” he said.  In late September, the FHFA proposed two mortgage servicing compensation models.  The MBA believes dramatically changing residential servicing, origination, and secondary market operations serves no one, claiming “radical changes in any of the major structures underlying the existing TBA market could reduce liquidity in the TBA.”  “The world of residential mortgage servicing has undergone unprecedented stress over the course of the economic downturn,” Stevens said. “The current servicer compensation model is still the best approach and making radical changes, like the proposed ‘fee for service,’ will have dramatic impacts not just on originators, servicers and investors, but also on borrowers in both the costs they pay to get a mortgage and the support they receive from their servicers.”  The MBA prefers a cash reserve structure, which calls for deferring some existing fees to cover servicing costs for “catastrophic economic and default situations.”

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

Smart Real Estate News & Commentary by Chris McLaughlin December 7, 2011

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Home prices fall

According to the CoreLogic Home Price Index (HPI), national home prices, including distressed sales, also declined by 3.9% on a year-over-year basis in October 2011 compared to October 2010.  This follows a decline of 3.8% in September 2011 compared to September 2010.  Excluding distressed sales, year-over-year prices declined by 0.5% in October 2011 compared to October 2010 and by 2.1% in September 2011 compared to September 2010.  Distressed sales include short sales and real estate owned (REO) transactions.

Highlights as of October 2011

-  Including distressed sales, the five states with the highest appreciation were:  West Virginia (+4.8%), South Dakota (+3.1%), New York (+3.0%), District of Columbia (+2.4%) and Alaska (+2.1%).

-  Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.1%), Illinois (-9.4%), Arizona (-8.1%), Minnesota (-7.9%) and Georgia (-7.3%).

-  Excluding distressed sales, the five states with the highest appreciation were: South Carolina (+4.6%), Maine (+3.1%), New York (+3.1%), Alaska (+2.9%) and Kansas (+2.8%).

-  Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8%), Arizona (-7.0%), Minnesota (-5.7%), Delaware (-3.9%) and Georgia (-3.6%).

-  Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to October 2011) was -32.0%.  Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -22.4%.

-  Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 78 are showing year-over-year declines in October, two fewer than in September.

Citigroup plans layoffs

Citigroup is cutting 4,500 jobs worldwide, Chief Executive Vikram Pandit said on Tuesday, becoming the latest large bank to trim staff.  Pandit, speaking at the Goldman Sachs Financial Services Conference, said the bank would record a $400 million charge in the quarter for severance and other expenses related to the layoffs.  The cuts are equal to about 2% of Citi’s workforce of 267,000 employees at the end of third quarter 2011.  Pandit said the cuts would be completed over “the next few quarters” and would come from a range of businesses.  Citi joins other banks worldwide that have cut more than 120,000 jobs as regulations have imposed tighter industry rules and the economy remains weak.  Pandit said Citi’s reductions would involve its proprietary trading units, which are being wound down.  The 2010 Dodd-Frank financial reform law features a provision known as the Volcker Rule that limits banks from betting their own capital in the market.  Pandit also said Citi’s expense previously disclosed expense reduction program generated $1.4 billion in savings so far this year, nearly 4% of the bank’s $37.72 billion of operating expenses in the first three quarters.

MBA – mortgage applications increase

Mortgage applications increased 12.8% from one week earlier (which included the Thanksgiving holiday), according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 2, 2011.   The Market Composite Index increased 12.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 60.2% compared with the previous week. The Refinance Index increased 15.3% from the previous week. The seasonally adjusted Purchase Index increased 8.3% from one week earlier to its highest level since August 5, 2011. The unadjusted Purchase Index increased 47.2% compared with the previous week and was 0.8% lower than the same week one year ago.  “Coming out of the Thanksgiving holiday, applications increased significantly as mortgage rates dropped to their lowest levels in about two months,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “In particular, refinance applications increased sharply, with some lenders seeing refinance volume double. Despite this surge, aggregate refinance activity is still below levels reported two weeks ago. Some lenders indicated they are beginning to see an increase in HARP loans, but that increase is still a small portion of the move this week.”

The four week moving average for the seasonally adjusted Market Index is down 3.20%. The four week moving average is up 3.33% for the seasonally adjusted Purchase Index, while this average is down 5.13% for the Refinance Index.  The refinance share of mortgage activity increased to 76.0% of total applications from 73.9% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.7% from 5.8% of total applications from the previous week.  In November 2011, among refinance borrowers, 52.9% of applications were for fixed-rate 30-year loans, 26.2% for 15-year fixed loans, and 5.8% for ARMs. The share of refinance applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 15.1% of all refinance applications. The shares for 30-year fixed and the “other” fixed category increased from the previous month, while the 15-year fixed and ARM shares decreased from last month.  For applications for home purchase, 85.5% were for fixed-rate 30-year loans, 6.8% for 15-year fixed loans, and 5.9% for ARMs. This is the second lowest ARM share for purchases since January 2011.

Stock market in for a beating?

Robert Prechter, founder and president of Elliott Wave International, says there’s a big storm coming our way.  Prechter compares the current phase of the market to the late stages of the 1929 – 1933 period in US history; a time marked by extreme volatility eventually ending in tears.  “One of the things that happened in 1929 was that a consortium of the biggest banks in the country tried to stop the market from going down,” notes Prechter. Those banks failed of course, just as Prechter says they did when the Central Banks tried to prevent the coming financial meltdown in 2008 by offering essentially free credit.  The timing is only different, he says, because “banks these days are much bigger than they were in 1929.” In the 20′s institutions were reliant on client money to lead their bailout attempts. Today Central Banks have the ability to call on future, often overstated, tax revenues and are unencumbered by anything such as a gold standard when attempting to ward off the human desire to hide under the covers, financially speaking.

Prechter also draws parallels to April of 1930, 1937, and other periods in which relatively brief recoveries dissolved. Pick a tool, any tool, and Prechter says it suggests a stock market going lower. “Patterns, sentiment indicators, or momentum are all saying the same thing: This is a bear market rally.”  According to Prechter, not all the Central Banks in the world trump international trends towards a cautious, negative mood already impacting all things financial. This trend, the inverse of those giddy days of the 1990′s when all things seemed possible (even Internet stocks and the Euro!), causes predictable behaviors in the masses. They tend to sell stocks, stop spending, and start revolting against current leadership; all of which should sound familiar to those who read the newspaper.  It’s an environment confounding to bulls and bears alike. At the beginning of 2011, Prechter notes, the bulls were betting on a sharp recovery in stocks and “got hurt quite a bit.” Commodities were a bad bet, hurting “hyper-inflationist” bears.  Let’s remember that real estate isn’t in the stock market.

Olick – two housing markets?

“As we head toward the end of the year, for some reason the drumbeat to claim that housing has bottomed is growing louder.  There were a few positive indicators in September, rising housing starts and rising home sales, that gave some analysts fodder for optimism, but the readings on prices are far less rosy, and alas far more complicated.  Two reports out today show home prices are falling again after seeing some gains in the Spring and Summer. Lender Processing Services says they’re down 3.7% annually in September, erasing the gains of the Spring, and they say all of the 13,500 zip codes it tracks are in the negative.  Meanwhile CoreLogic says prices fell 3.9% in October, but when you take out foreclosures and short sales (the latter when the home is sold for less than the value of the mortgage), home prices are down just 0.5% annually. The vaunted S&P/Case-Shiller home price index was down 3.9% in September, and that’s a three month running average including distressed and non-distressed property sales.

So why are analysts now predicting a house price recovery?  Goldman Sachs put out a report late last week predicting that S&P/Case-Shiller would drop 2.5% further and then bottom, probably in the summer of 2012. This when the S&P/Case-Shiller folks themselves predict a 3.5% drop and a bottom later in 2012. The Goldman theory is based on some kind of ‘equilibrium’ price model for each market. They also claim that homes no longer appear ‘expensive.’ when you look at price/rent ratios, and that historical models suggest that income and population, as always, will drive improved demand.  Then this week analysts at Barclays Capital honed in on the difference in price drops between distressed and non-distressed properties. They claim the non-distressed market is stabilizing, so that must mean that a foreclosure or short sale is, ‘increasingly being seen as a poor substitute for a non-distressed home,’ according to analyst Stephen Kim. He claims the disparity will in fact widen over time.

So are we just supposed to ignore the distressed market? What about the fact that in some cities more than half of the properties selling are distressed? And what about the fact that there are more distressed properties coming to market, as the banks ramp up the long-stalled foreclosure process? And how about appraisers using distressed properties as comps to non-distressed properties?  I realize many of you think I’m too bearish on housing’s recovery, but trust me, nobody’s more sick of reporting the same lousy numbers than I am. The problem is that while sales are improving slightly, and consumer sentiment may be settling a bit, the mess left to clean up from the past is still weighing heavily on the future. The economy may be improving slightly, buyers may be considering getting back in, but we are barely half way through the overhang of distress, and any change in the economy could set us back even further.  I am in no way claiming that housing is in for a quadruple dip nor that we are going to see more big losses. Frankly I think we’re going to be flat in housing for a long time, which is not a very interesting story to tell from a reporter’s perspective. While there may be two types of properties (distressed and non-distressed), there is just one housing market, and you cannot negate one to inflate or deflate the other.”

Small business more optimistic, maybe

Optimism of small business owners remained flat in November at 53%, according to a new scorecard by SurePayroll, the leading online payroll service for small businesses with less than 100 employees. That’s fairly good news after optimism rebounded by 20% in October from an all-time low of 33% in September.  The report, which measures the current health of small business in America, also showed hiring was down from October, but wages on the other hand did tick up slightly. Still both remain down 3% and 0.5% year-to-date, respectively.  Small businesses make up 99.7% of all employer firms and employ more than half of private sector workers in this country, according to the US Small Business Administration, which describes a small business as having fewer than 500 employees.

While 53% of small business owners are optimistic about the state of the economy and the health of their business, one must not forget roughly the same amount of are just as pessimistic. Alter says most of SurePayroll customers describe themselves as “cautiously optimistic” and that sentiment rests heavily upon what happens in Washington.  Next year one of the biggest factors to impact the decisions made by small businesses is the Supreme Court’s ruling over the constitutionality of Obama’s health care law, according to SurePayroll’s November scorecard. By a ratio of 2 to 1, the small business owners surveyed are hopeful the Supreme Court finds the health care legislation unconstitutional. If that were to happen, hiring and wages would likely see a boost, says Alter.  Another big factor to impact small businesses is whether Congress will act to extend the employee payroll tax credit and if so, who will have to foot the bill. Passing an extension would provide many Americans with an extra $1000 dollars in discretionary spending, which would be good for business, says Alter. But, if it is businesses who have to cover the expense of that credit, that would certainly hurt hiring and wages.

WSJ – delinquent CMB loans declines

The share of delinquent commercial mortgages that were bundled together and sold as securities declined modestly during the third quarter for the first time since the property downturn began four years ago, according to a survey released yesterday by the Mortgage Bankers Association.  The share of loans at least 30 days past due fell to 8.92% from 9.02% in the second quarter for commercial and multifamily loans in mortgage-backed securities. Those loans have had the worst performance among all commercial mortgages originated during the boom, and the delinquency rate was still above the 8.52% mark of one year ago.

Commercial mortgages held by US banks had a 90-day delinquency rate of 3.75% at the end of the third quarter, down from 3.94% in the second quarter. Delinquencies on bank-held commercial loans have fallen or remained flat in each of the past four quarters.  Delinquencies posted small increases on multifamily mortgages held by Fannie Mae and Freddie Mac, but the increases came from very low absolute levels. Freddie Mac has a delinquency rate of just 0.33%, or around one-tenth of the level of delinquencies of commercial banks. That was up from 0.31% in the second quarter but down from 0.36% in the first quarter.  Nearly 0.57% of Fannie Mae multifamily mortgages were delinquent at the end of September. That was up from 0.46% at the end of the June, but down from 0.71% at the end of 2010.

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