Mortgage applications rise from a 7-month low
Real Estate News & Commentary by Chris McLaughlin, July 8, 2009
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Mortgage applications rise from a 7-month low
The Mortgage Bankers Association (MBA) said today that its loan application index rose 10.9% to a reading of 493.1 in the week ended July 3, from the prior week, on a seasonally adjusted basis. The reading of 444.8 in the prior week was a 7-month low. MBA’s seasonally adjusted refinancing index rose 15.2% last week to 1,707.7, after a 30% drop in the prior week. On a 4-week moving average, which smooths out volatility, the purchase index rose 1.4% and the refinance index fell 10.9%.The average 30-year mortgage rate remained unchanged at 5.34% last week. The average interest rate for 15-year fixed-rate mortgages increased to 4.83% last week from 4.81% in the earlier week. A sudden rise in home loan rates, on account of rising treasury yields, from record lows in the spring had hit home refinancing a few weeks ago. Home loan rates have stabilized since. Analysts say low rates are critical to housing market recovery.
Government’s mortgage plan not yet effective
It is now 5 months since the Obama administration introduced its mortgage rescue plan. The initial feedback on the effectiveness of the program has not been encouraging. Loan servicers have been finding it difficult to cope with the number of applications for loan modification and refinancing. Analysts are citing administrative inefficiency as the main reason for the lack of effectiveness of the program. President Obama has said more needs to be done. “Our mortgage program has actually helped to modify mortgages for a lot of our people, but it hasn’t been keeping pace with all the foreclosures that are taking place,” Obama said last month. According to RealtyTrac, about 1.5 million homes went into foreclosure in the first 5 months of the year. The total number of foreclosure filings will hit 3.5 million this year, according to Mark Zandi of Moody’s Economy.com. Administration officials say they are doing what they can to resolve the bottlenecks. Do not expect any quick results. “Immediately, we want to see an improvement in borrower experience, but I don’t think that means we will see a resolution of every hiccup in the process,” said Seth Wheeler, senior adviser at the Treasury Department. “We should see over the course of the summer real improvement, but those challenges will linger well into the fall certainly.”
Apartment vacancies near historic high
According to Reis, a real estate research firm, the vacancy rate for apartments, in the second quarter of this year, is at its highest in over 20 years. Reis expects the vacancy rate to climb further if the economy does not recover. The vacancy rate rose 1.4% from last year to a record 7.5%, the highest since 1987. The all-time high vacancy rate is 7.8% in 1986. “We are reaching that historic high very quickly,” said Victor Calanog, director of research at Reis. The vacancy rate in the second quarter was 0.20% higher than the previous quarter. Rising unemployment on account of the economic downturn has had a direct impact on people in the age group of 18 to 24 years, the largest tenant segment in apartments. The effective rent dropped 1.9% in the second quarter, from the prior year and 0.9% from the first quarter. “If you’re a landlord right now at least you’re recognizing that things are tough,” Calanog said. Landlords, in order to lure tenants, are slashing rents and offering a number of concessions. “It’s very clear there’s some leasing going on, but it’s coming at the cost of a whole lot of concessions offered,” Calanog said. Reis has predicted many more quarters of distress for apartments, given the current state of the economy.
Competition for jobs intensifies
The Labor Department says U.S. employers advertised for more positions in May than April while the number of employees seeking employment also increased. The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) found there were 2.6 million positions available at the end of May, up from 2.5 million in April. The JOLTS report denotes that jobs get created even in recession and companies hire new workers. This is what economists like to call “churn” in the labor market, as millions of employees are both hired and fired each month. On average, about 5.7 people were competing for every available job in May from about 5.5 in April, and from less than 2 per job in December 2007, when the recession began. Jobs in construction and manufacturing were the worst hit in May while education, retail trade, and professional services saw more jobs getting created than lost in May.
Survival does not mean success for GM
Emerging out of bankruptcy is just the first step in General Motor’s (GM) long-term battle for survival and growth. GM has been losing market share in the U.S. over the last decade or so and there is no easy way of getting back to a leadership position in the market. “Can they put out less products but more successful products? The jury will still be out on that for a couple of years at least,” said Bob Schulz, Standard & Poor’s senior auto credit analyst. “A product pipeline doesn’t turn on a dime.” GM is still at a cost disadvantage compared to its Asian rivals on account of its underfunded liabilities such as employee pension costs. In addition to its internal problems, GM faces a tough economic situation on the demand side. “They’re coming out with a clean balance sheet and new cost structure. But they’re going to continue to struggle in the short to medium term, particularly with the U.S. market,” said Stephen Spivey, senior auto analyst for Frost & Sullivan. “It’s way too early to say if they’ve done enough in bankruptcy.” Some analysts believe small cars are critical to GM’s success. “The key for everybody, not just GM, is to consistently make money on the sale of small cars in the U.S. market,” said Michael Robinet, vice president at auto consultant CSM Worldwide. “That’s a tall order, particularly for the U.S. automakers.
Now on to our real estate investor education section…
Sellers – Learn how to Sell Your Home Fast
Whether you are a short sale investor, broker or homeowner these tips for making your home sell fast are sure to streamline the process. Professionals in the field can create a checklist for potential sellers or homeowners can use the following steps to take matter into their own hands and attract legitimate short sale offers with quick closing times.
- Begin preparing the paperwork as soon as possible. Your agent or short sale investor is often able to help. Typically you will need the following items:
- Hardship letter
- Tax Returns
- Bank Records
- HOA, Property Taxes and other pertinent outlays associated with the property.
- Copy of Mortgage, liens or other monies owned on the property.
- Put out the word. Let everyone know you need to sell the home – fast. Use works like ‘motivated seller’ or “distressed homeowner” to indicate a willingness to work with buyers able to provide a fast closing.
- Contact the lender to let them know your situation.
- Perform maintenance and upkeep as you are able. If finances are an issue, try to make the property appear as attractive and well maintained as possible.
- Create a list of what you need the most from this deal. For example, if you need a fast closing avoid bankruptcy then say-so when speaking with the agent or potential short sale buyers. If you need a new place to live or rent after closing then mention that as well. Often these items can become part of the negotiation process to help make the deal work.
- Identify personal property prior to accepting a final offer. If you intend to take the appliances be sure to specify this in advance. Likewise, it’s important to bring all items that will remain with the home (good and bad) as well as be removed from the home prior to entertaining offers.
- Make a folder of all contact information and paperwork. Keep it accessible when speaking with real estate agents or potential buyers. Remember, everything must be in writing and never sign something you don’t fully understand.
- Avoid entertaining multiple offers all at once. While this might seem like a good way to increase the odds of a successful sale, it often creates unnecessary delays that could result in your losing the home or growing farther into debt. Instead, ask to see proof of financing or other indication of a quick closing.
- Keep it realistic. Even the most reputable short sale offer is likely to be somewhat slow given the large number of sales currently going through the system. A lot of sellers are searching for solid short sale offers so increase your odds by responding quickly to all inquiries and remaining patient throughout the process.
10. Start Early. The sooner you start the better the odds of selling your property before it becomes critical or urgent.
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com
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About the author:
Chris McLaughlin is widely known as America’s top
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