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Smart Real Estate News & Commentary by Chris McLaughlin May 9, 2011

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Home values fall

Real estate data firm Zillow said its home value index fell 3% in the first three months of the year from the previous quarter, and was down 8.2% year-over-year.  The number of homeowners under water amounted to 28.4% of single-family homeowners, representing a peak since Zillow began calculating the data in 2009.  That was up from 27% in the fourth quarter of last year.  Foreclosures also rose, following the moratoriums that had been in place in late 2010. In March, one out of every 1,000 homes was in foreclosure.  Given all those factors, it is unlikely home values will reach a bottom this year, Zillow said, and the firm pushed its forecast out to 2012.

Republicans want consumer bureau curbed

Last Thursday 44 of the 47 Republicans in the Senate sent a letter to President Obama, arguing that the new agency is far too powerful, and lacks structural checks and balances that would make it more accountable.  Republicans want changes at the very top of the agency. The director — a position that sits vacant — would be replaced with a board.  Without mentioning her by name, the letter is a thinly veiled reminder to the White House that an attempt to nominate Democrats’ favorite candidate, Elizabeth Warren, would lead to a contentious fight on the Hill.  Officially a White House adviser who also works with the Treasury Department, Warren is a lightening rod figure in the fight over the future of the agency.  The House Financial Services Committee is also considering bills to prevent the bureau from flexing new powers. 

Freddie Mac sells record number of REO

Freddie Mac sold roughly 31,000 previously foreclosed and repossessed homes in the first quarter, a new record for the company as both government-sponsored enterprises shed inventory from the end of last year.  Combined, both Fannie Mae and Freddie hold 218,000 REO properties as of the end of the first quarter, down from roughly 234,000 at the end of 2010, according to their filings.  In the first quarter of 2011, Freddie holds roughly 65,000, compared to its larger sibling Fannie, which holds 153,000 REO in its inventory.  While both GSEs made progress in cutting down this portion of the nation’s inventory of foreclosed homes, which continues to drag down home prices, inventory has elevated since one year ago.  Both Fannie and Freddie held 163,000 properties in the first quarter of 2010, almost what Fannie holds currently by itself.  Repossessions at Freddie increased by nearly 1,000 in the first quarter, and the holding period for these homes averaged 191 days before being resold. This varies significantly from state to state, especially as servicers restart foreclosure processes in different areas of the country. Servicers paused the process late last year to correct procedural problems.  “We expect the pace of our REO acquisitions to increase in the remainder of 2011, in part due to the resumption of foreclosure activity by servicers, as well as the transition of many seriously delinquent loans to REO,” Freddie said in its financial supplement.

Gas prices to drop

After rocketing up 91 cents since January, including 44 straight days of increases, the national average this past week stopped just shy of $4 a gallon and has retreated to under $3.98. A steady decline is expected to follow.  Typically, gas prices peak each spring, then fall into a summertime swoon that can last several weeks. This year’s decline should be gradual but steady, said Fred Rozell, the retail pricing director at the Oil Price Information Service.  Some drivers might not notice much of a price drop at first, Rozell cautioned. When average gas prices fluctuate nationally, some areas are affected more than others. In cities with many service stations, for instance, prices can be slower to fall. It’s even possible prices will rise at some stations in coming days even if they decline nationally.  And after the galloping surge in prices this year, many gas station owners are reluctant to lower prices until they see their competition doing the same, Rozell said.  A drop in prices would take some pressure off struggling consumers as well as businesses. As prices soared this year, surveys showed that motorists started to drive less. MasterCard SpendingPulse said this past week that it had recorded its sixth straight week of declining gasoline consumption.  That’s a cautionary sign for the economy, because most drivers conserve fuel only after curbing spending on other discretionary items like furniture, computers and vacations.

DSNews.com – Las Vegas investor sales up

Las Vegas region home sales held at a five-year high in March amid strong activity from investors and cash buyers focusing on foreclosures. Due to the large number of discounted, foreclosure properties on the resale market, the median sales price fell in the area.  According to figures from DataQuick, the median price paid for all new and resale houses and condos sold in the Las Vegas metro area in March was $117,000, down 1.7% from February and down 10% from a year ago.  It was the sixth consecutive month in which the median fell year-over-year. The March median was the lowest since January 1996.  DataQuick attributes the median’s 15-year low to price depreciation, robust sales of low-cost foreclosures, strong sales to investors who target low-cost properties, low new-home sales, and higher-than-usual condo resales.  Distressed sales, the combination of sales of foreclosed homes and short sales, represented about 69% of March resale transactions, the company reports.  Foreclosure resales rose to 57.3% of the Vegas resale market in March, up from 56.7% in February and 55.5% a year earlier.  Short sales made up an estimated 11.7% of Las Vegas-area March resales, down from 14.3% in February and 13.7% a year earlier.  Based on trustee deeds filed at the county recorder’s office, DataQuick says the number of homes foreclosed on in the Las Vegas region in March rose from both a month and a year earlier.  Lenders foreclosed on 3,331 single-family homes and condo units that month, up 41.6% from February and up 52.1% from March 2010.

Fannie Mae declares 1Q  loss

Fannie Mae reported net loss of $8.7 billion in the first quarter, including a $2.2 billion dividend payment to the Treasury Department. The loss narrowed from $13 billion one year ago.  Fannie said still falling home prices drove losses during the quarter. The government-sponsored enterprise estimated home prices fell 1.8% during the quarter, even though some regions experienced gains.  The mortgage giant’s regulator the Federal Housing Finance Agency (FHFA) requested $8.5 billion from the Treasury to eliminate Fannie’s net worth deficit. Fannie now owes the Treasury $99.7 billion and so far paid $12.4 billion in dividends.  Fannie said if the market shifts away from refinancing as is likely to occur as mortgage rates rise, market share will dip further.  While business could be declining, legacy issues are too. The serious delinquency rate on Fannie Mae loans dropped to 4.27% in the first quarter from 5.47% one year ago and 4.48% in the previous period. The company said modifications and other workouts, combined with foreclosures when other alternatives are exhausted, outnumbered new delinquent loans hitting its books.

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)

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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 January 27, 2011

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

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Foreclosures spread

According a report released Thursday by RealtyTrac, one out of every 9 homes in Las Vegas received some kind of default notice in 2010.  But there is a silver lining: The foreclosure rate is actually dropping in Vegas, down 7% compared to the end of 2009.  In fact, rates fell in all top 10 foreclosure markets of 2010. In No. 2 Cape Coral, Fla., for example, filings dropped 28%. In third place Modesto, Calif., they fell 13%; and forth place Phoenix dipped 7%.  But even as foreclosures fell in the worst-hit areas, they rose in 72% of the 206 metro areas covered by RealtyTrac’s report.  Foreclosures have spread beyond the original bubble cities as the economy melted down. Unemployment rates spiked nearly everywhere, and people out of work can’t make their mortgage payments.  As a result, there is now a cohort of metro areas that didn’t enjoy the housing boom but are now enduring double-digit foreclosure spikes.

For example, Houston foreclosures grew by 26% — the biggest jump by any of the 20 largest metro areas — to one for every 62 households. The city suffered from a bleak job picture, with unemployment rising to 8.6% in November from 8.1% a year earlier.  Atlanta rose to 25th place with a 21% jump in 2010 filings following a 42% spike in 2009. And Salt Lake City filings ballooned by 30% in 2010, good for 27th place.  Bubble state cities still dominate the top of the list, however, accounting for 19 of the 20 top markets. And the easing in these worst-hit markets may be temporary, said Rick Sharga, spokesman for RealtyTrac.  He forecasts a foreclosure rise again in the Sand States this year as banks restart their engines. Overall, he thinks, foreclosures should plateau and stay at about the same level throughout 2012. “Until jobs come back, we won’t see much of a change,” he said.

Initial jobless claims higher

There were 454,000 initial jobless claims filed in the week ended Jan. 22, the Labor Department said today.  That was up 51,000 from the 403,000 claims filed the week before, and much worse than the 410,000 claims economists surveyed by Briefing.com had expected.  Jobless claims have bounced around for months, dipping below the 400,000 mark four weeks ago. Soon after, they began rising again. Since the weekly figures can be volatile, economists look at the four-week moving average to smooth out the week-to-week choppiness. That figure rose 15,750 to 428,750 from the previous week, showing a slightly worse job market.  Continuing claims — which include people filing for the second week of benefits or more — rose to 3,991,000 in the week ended Jan. 15, an increase of 94,000 from the week before.

Olick – what’s behind the new sales surge?

“No, I’m not about to throw a huge bucket of water on a really nice monthly stat that is infusing a modicum of hope in the housing market. I just want to put it all in perspective.  New home sales surged 17.5% in December, month-to-month, according to the Commerce Department, and that brought inventories way down to a 6.9 month supply (the total number of new homes for sale also fell to the lowest level since 1968). Prices of new construction actually bumped up significantly as well, up 8.5% year over year.  It’s important to remember that this particular data series is based on contracts signed in December and not closings, as the Existing Home Sales survey from the National Association of Realtors is. So what happened in December?  From the last week in November, into December, the rate on the 30 year fixed mortgage surged more than half a%age point, briefly touching 5%.

That clearly had the effect of pushing some fence-sitters to the buy side, worried that rates might go even higher, and they would be priced out of the market. Rates have since flattened below 5% with not much going on. The urgency is gone.  To put all this in perspective, while 17.5% seems like a big number, the actual number of homes that sold in December was 22,000, with November being revised down to 20,000. ‘So December is the second worst month in recorded history behind November,’ notes JT Smith of Aristar Funding. He also notes that 23% of the sales were of vacant lots.  The strange number in the report is a huge 72% jump in sales month to month out West, ‘strangely where most of the excess existing home inventory is,’ says Miller Tabak’s Peter Boockvar. I’m wondering if the surge out West isn’t due to the fact that foreclosure sales were halted, so buyers turned to new construction.  ‘Net-net, housing continues to bounce along the bottom, as we’re well aware that a bubble of the extend we had takes many years to work through,’ adds Boockvar.  It will be telling to see if this sales pace can hold on and improve, as banks ramp up foreclosures and start putting them back on the market.”

Deficit hits $1.5 trillion

New budget estimates released yesterday predict the government’s deficit will hit almost $1.5 trillion this year, a new record.  The daunting numbers mean that the government will have to borrow 40 cents for every dollar it spends.  The new Congressional Budget Office estimates will add fuel to a raging debate over cutting spending and looming legislation that’s required to allow the government to borrow more money as the national debt nears the $14.3 trillion cap set by law. Republicans controlling the House say there’s no way they’ll raise the limit without significant cuts in spending, starting with a government funding bill that will advance next month.  The CBO analysis predicts the economy will grow by 3.1% this year, but that joblessness will remain above 9% this year. Dauntingly for President Obama, the nonpartisan agency estimates a nationwide unemployment rate of 8.2% on Election Day in 2012. 

The latest figures are up from previous estimates because of bipartisan legislation passed in December that extended Bush-era tax cuts, unemployment benefits for the long-term jobless and provided a 2% payroll tax cut this year.  That measure added almost $400 billion to this year’s deficit, CBO says.  The deficit is on track to beat the record of $1.4 trillion set in 2009. That figure reflected huge outlays from the Wall St. bailout. The nonpartisan budget agency predicts the deficit will drop to $1.1 trillion next year.  “The fiscal challenge confronting us is enormous. To solve this problem, it will require real compromise and a great deal of political will,” said Budget Committee Chairman Kent Conrad, D-N.D. “We need to have both sides, Democrats and Republicans, willing to move off their fixed positions and find common ground.”

Google to get out of real estate

Massive search engine, Google, will take down real estate listings from Google Maps on Feb. 10.  Brian McClendon, vice president Google Earth and Maps, broke the story on the company’s LatLong blog yesterday and said the real estate listing feature is simply not popular enough to justify its existence.  Google first announced the tool in July 2009. Surfers using Google Maps gained the ability to find properties for rent or sale when searching locations.  “We’ve learned a lot and been excited to see real estate companies use Google Maps in innovative ways to help people find places to live,” McClendon said…yet we recognize that there might be better, more effective ways to help people find local real estate information than the current feature makes possible.  We’ll continue to explore this area.”  Four months after Google launched its real estate listing services, HousingWire broke that the Web firm planned to launch a mortgage pricing tool, the fate of which remains unclear.  Competition also pulled too much traffic from the tool, McClendon added.  Indeed, Web-based real estate information company Zillow is reporting record-breaking traffic, by logging more than 13 million unique users in the traditionally slow real estate month of December.

Now for our real estate education section…

Cash Buyer Myths

One of the most persistent myths in the real estate business involves the concept surrounding a cash buyers. In fact, even seasoned real estate agents and other professionals often succumb to these same myths and misperceptions. Today we are going to spend some time sorting out the facts from the fiction surrounding cash and shed some light on this elusive topic.

Myth #1 – Cash buyers are all rich. WRONG! Cash buyers come in all shapes, sizes, gender and income brackets so stop limiting your client roster due to an out of date mindset. The reality is that many buyers with average incomes are able and willing to pay cash. Common examples can include the sale of a prior property, inheritance, 401k or other withdrawal and even cash advances from other sources including signature loans or credit cards. Don’t place restraint on buyers by assuming cash is out of the question.

Myth #2 – Cash is King. Well, this certainly holds true in many instances but not always. For example, in some situations a seller may actually wish to hold a note as when providing owner financing over a long period of time. In fact, early pay-off is considered a risk to this type of portfolio due to the reduced interest earnings over the lifetime of the loan.

Myth #3 – Cash Can’t Compete with ROI. In the past this was often the case but with real ROI”s in the low single digits, cash deals have investors squealing with delight. For example, let’s assume an investor pays $50,000 cash for a house that rents for $500 per month. Setting aside 2 months worth for taxes and insurance, this investor still recognizes a 10% annual return excluding appreciation! Not a bad investment considering the alternative of leaving it in the bank earning two to three percent.

Myth #4 – It Takes a Lot of Time to Save Enough Cash. While it is true that trying to save up enough cash to buy a property for cash can take years, it is equally true that it doesn’t have to. The key is to set your sights on what will provide quick cash and then use the profits to fund future endeavors. One of the most critical mistakes made by novice investors is trying to shoot for the stars the first time out. Better yet, rather than trying to fund the purchase of a property all on your own, seek out a partner or provide bird dog services for other investors. Not only will it allow you to earn extra income to pay down bills and pad your investment portfolio, but you will also obtain valuable insight and experience without having to take on excessive risk.

Myth #5 – Cash Kills the Tax Advantages. Buying for cash may not allow some buyers to obtain a mortgage interest deduction but most of the other meaningful tax advantages are still available. Even more importantly, the streamlined time and cost associated with a cash purchase is often more than worth the savings. After all, it doesn’t make a lot of financial sense to spend a dollar in order to save 35 cents. For those that are using real estate as a method to make money, maximizing profits while minimizing expenses is the clear leader in tax strategies; cash allows that plus much more.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin January 11, 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

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

The 100% content video I told you about — the new way to cash in for 2011 — is creating a tsunami of excitement!  Here’s Part 2 of the miniseries on how to bird dog houses at the foreclosure auction:

Click here ASAP for this free mini-course as it won’t be up for long:

http://www.foreclosureauctionquickcash.com/blog/

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Most undervalued and overvalued cities

According to Local Market Monitor, most markets are fairly priced, eight markets are overpriced, and 15 are underpriced. That contrasts with the boom years: In mid-2006, 37 of the biggest markets were overpriced, six underpriced and 57 fairly valued.  Las Vegas received a paltry rating even though median home prices there are less $145,000, which is more than half of what they cost at the peak of the bubble and nearly 30% less than what Local Market Monitor calculates would be an “equilibrium price,” or fair market value.  The equilibrium price is based on economic and population growth, construction costs, vacancies, household income and interest rates with an “X Factor” thrown in. The X Factor is a mathematical constant, unique for each metro area, that represents the premium or discount that buyers have paid for local homes in the past. It captures the tendency for buyers to pay more for homes in what they consider more desirable locations.

A city like San Diego, for example, with its enviable weather and ocean-side location, commands more of a buyer’s premium than does, say, Buffalo, N.Y.  Both Las Vegas and Orlando have a glut of homes for sale, thanks to years of overbuilding during the housing bubble. They’re also two of the hardest hit foreclosure cities and have suffered outsized price declines, with Vegas values down 52% from their peak and Orlando 39%.  Most crucially, the economies of both cities have a heavy reliance on development, which has taken a huge hit in both places.  The most overvalued area right now is the Long Island, N.Y., counties of Nassau and Suffolk, which are suburbs of New York City. The current average home value there of about $418,000 is 26% higher than the equilibrium value of $318,000.  Even so, Local Market Monitor still gives it a “Typical Risks/Rewards,” rating, an average score. One particular positive factor there is a bright economic picture with unemployment at only 6.9% and some job growth expected this year.  Other overpriced markets include Los Angeles and Portland, Ore., both overvalued by 24%, and Santa Ana, Calif., 23%.  Akron, Ohio, is the second most undervalued market at -22% followed by Cleveland and Warren, Mich., at -21%.

Ford to hire 7000 by 2012

Ford Motor announced yesterday that it will add 7,000 new hourly and salaried jobs in the United States by the end of 2012.  The announcement, made on the opening day of the Detroit auto show, said Ford is adding nearly 4,000 hourly jobs at several of its U.S. plants this year, including 1,800 at the Louisville Assembly Plant, where it plans to start building the new design of the Ford Escape crossover SUV later in the year.  And the company plans to add another 2,500 factory jobs next year.  Ford also will add 750 salaried engineering jobs in product development and manufacturing. The engineers will specialize in batteries, system controls, software and energy storage to work on electric vehicles in Detroit and eight other cities: Boston; Chicago; Cincinnati; Columbus, Ohio; Milwaukee; Raleigh and Durham, N.C.; and San Jose, Calif. 

The company has cut staff substantially since 2001. And the new workers will only replace a fraction of the employees lost to the recession. Ford had 61,000 U.S. employees at the end of 2010, according to a company spokeswoman. That’s down from 76,000 at the end of 2007, and 163,000 employees 10 years ago.  But Ford has been posting improved sales and U.S. market share in the last two years. Its U.S. sales were up 20% in 2010, enough to add 1.2 percentage points to its market share, according to Autodata.  A survey of 200 top auto executives from around the globe, by accounting firm KPMG, is expecting Ford to add additional global market share over the next five years.

Judges berate lawyers in foreclosure crisis

With judges looking ever more critically at home foreclosures, they are accusing lawyers of processing shoddy or even fabricated paperwork in foreclosure actions when representing the banks.  Judge Arthur M. Schack of New York State Supreme Court in Brooklyn has taken aim at an upstate lawyer, Steven J. Baum, referring to one filing as “incredible, outrageous, ludicrous and disingenuous.”  But New York judges are also trying to take the lead in fixing the mortgage mess by leaning on the lawyers. In November, a judge ordered Mr. Baum’s firm to pay nearly $20,000 in fines and costs related to papers that he said contained numerous “falsities.” The judge, Scott Fairgrieve of Nassau County District Court, wrote that “swearing to false statements reflects poorly on the profession as a whole.”  More broadly, the courts in New York State, along with Florida, have begun requiring that lawyers in foreclosure cases vouch for the accuracy of the documents they present, which prompted a protest from the New York bar. The requirement, which is being considered by courts in other states, could open lawyers to disciplinary actions that could harm or even end careers. 

The role of lawyers is under scrutiny in the 23 states where foreclosures must be reviewed by a court. The situation has become especially heated for high-volume firms whose practices mirror the so-called robo-signing of some financial institutions; in these cases, documents were signed without sufficient examination or proper notarization.  In the most publicized example, David J. Stern, a lawyer whose Florida firm has been part of an estimated 20% of the foreclosure actions in the state, has been accused of filing sloppy and even fraudulent mortgage paperwork. Major institutions have dropped the firm, which has been the subject of several lawsuits, and 1,200 of the 1,400 people once at the firm are out of work.  The Florida attorney general’s office is conducting a civil investigation of Mr. Stern’s firm and two others.

Goldman Sachs – more disclosure

Goldman Sachs plans to start disclosing more financial information to investors, including how much of its revenue comes from trading and investing its own money, a person familiar with the matter said.  The change comes after years of complaints from investors, analysts and others that the bank does not disclose enough information about exactly how it makes money.  Goldman has prepared a 63-page report after a more than eight-month internal review, the person said. The results of the review are set to be released publicly on Tuesday, he added.  Many investors have complained that Goldman Sachs is a “black box” and that forecasting how its earnings will change over time is extremely difficult.  The bank’s willingness to change is the latest sign of how financial reform and investor pressure are spurring banks to change the way they do business. Morgan Stanley said earlier on Monday it was planning to spin off a unit that trades the firm’s own money.  The bank’s chief executive, Lloyd Blankfein, reported the results of the report to about 470 of Goldman’s senior employees on Monday, the source said.   Goldman Sachs plans to release fourth quarter 2010 results on Jan. 19. Those results will include the extra detail that the bank plans to start reporting regularly.  The story was originally reported by the Wall Street Journal.

Olick – pension funds threaten foreclosures

“Mortgage, housing and banking analysts took the weekend to pontificate on the ramifications of last Friday’s decision by Massachusetts’ highest court to void two foreclosures due to improper paperwork.  A coalition of state pension funds took a different tack: They fired a shot across the bow of the big banks.  Under the leadership of New York City Comptroller John Liu, funds from New York, Connecticut, North Carolina, Oregon and Illinois sent a letter to Bank of America, JP Morgan Chase, Citibank and Wells Fargo, demanding that the big banks ‘conduct an independent review of Company’s internal controls related to loan modifications, foreclosures and securitizations and to include a report to shareholders with findings and recommendations in the Company’s 2011 proxy statement.’  The pension funds hold a collective $5.7 billion worth of stock in the four banks, and the letter makes that point very clear. Of course that’s really just a small pittance given that the banks are collectively worth well over $600 billion.

Yes, if the funds sold their interests, the banks would take a hit, but in the new world of big bank losses, that’s just a tap.  And the banks don’t seem all too concerned about Liu’s coalition, and this isn’t the first time he has made demands. In November he tried to get a shareholder vote on an audit of the same thing. That didn’t work.  With a new Republican House on their side, the big banks are unlikely to be afraid of a few pension funds, unless of course this becomes the tip of the iceberg. Bank of America already got a pretty sweet deal on loan put-backs from Fannie and Freddie.  As for the Massachusetts ruling, most of the analysts over the weekend agreed that it would not set the standard for voiding all of the nation’s many foreclosures; it would, however, engender many many more lawsuits that will slow the process considerably.”

Oversight Committee investigates housing finance

Three of six major upcoming investigations by the House Oversight and Government Reform Committee involve housing finance issues.  New House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) said recently that he’ll lead six major investigations over the next three months, according to news reports and Patton Boggs’ “This Week in Washington” report. They include the role of Fannie Mae and Freddie Mac in the foreclosure crisis, the effect of business regulations such as the new Dodd-Frank Act on the economy and the Financial Crisis Inquiry Commission’s failure to identify the origins of the  meltdown.  Issa wants the government to acknowledge its contributions to the housing slide and end taxpayer support for Fannie and Freddie. He supports ending federal subsidies to the two entities, which have been under federal conservatorship since September 2008, transitioning them to private firms that compete on a level playing field with other firms. The Treasury is to issue a report in February, giving the administration’s guidance on what it thinks should be done with the government-sponsored enterprises.  In a Jan. 7 letter to the ranking Democrat on the House Oversight and Government Reform Committee, Elijah Cummings (D-Md.), Issa also suggested that he might look into the Home Affordable Modification

Program known as HAMP. HAMP was expected to help 3 million to 4 million homeowners but has fallen woefully short. The letter was in response to Cummings’ request that Issa hold a hearing on the foreclosure crisis.  Issa has also been critical of the government’s role in federal bailouts during the financial crisis. Issa and incoming Republicans have pledged to run a more transparent Congress, according to a report in The Hill. Last year, he earned an award from the Project of Government Oversight for publicly releasing hundreds of thousands of documents related to the American International Group (AIG) investigation, detailing the government’s decision to pay billions of dollars to AIG counterparties.

WSJ – help with down payments back in style

A growing number of state and local governments are now offering what are called “down payment assistance programs,” grants or low- and no-interest loans to first-time buyers or those who haven’t owned a house in a few years. The number of programs, now somewhere around 1,000 nationally, has increased 3% to 5% in the last six months alone, estimates Marc Savitt, president of the National Association of Independent Housing Professionals, an advocacy group.  And, in a stark reversal, some banks are now far more willing to work with borrowers who need down payment assistance, buyers who were considered too risky 18 months ago. State housing agencies say they’re seeing the biggest spike in lender interest since before the housing downturn. Florida’s down payment assistance agency now works with 65 lenders, up 12% from a year ago, says a spokeswoman; in North Carolina, the number of participating lenders has grown 22%.

For would-be buyers who qualify, this is a boon. Even with prices depressed, in and around expensive cities like New York and San Francisco, a 20% down payment is out of reach, yet that’s what many banks require.  These programs are targeted at low- and middle-income buyers who have either never owned a home, or haven’t owned one in a few years. And then the benefits are substantial: Typically, the programs offer up to $80,000 in loans with interest rates from 0% to 2% to people with little or no money to put down. And then, because participants often have to get their mortgage through the programs’ preferred lenders, the primary mortgage rates are also low, often 0.75% to 1% lower than average rates. That can be a better deal than Federal Housing Administration-insured mortgages, which require annual mortgage insurance and an upfront fee, and may have higher interest rates.  Even for cash-strapped states like California, these programs are apparently worth the cost. This is a way to boost homeownership, something they say leads to more jobs and higher home prices. “It promotes affordability, gets people into homes and improves the economy,” says a spokesman at the California Housing Finance Agency. To fund the programs, many states and municipalities are using money raised by selling municipal bonds. Also helping: A program funded by the Department of Housing and Urban Development increased its support to local down payment assistance programs by 16% in its last fiscal year to $44 million. 

Not everyone is convinced of the wisdom of these programs, particularly for the lenders. “Borrowers who don’t put any of their skin in the game – or very little of it – are more risky,” says Keith Gumbinger, a vice president at HSH.com, which tracks mortgage data. Such borrowers tend to have higher incidents of default—even if they have prime credit. Not so, says Scott Stern, CEO of Lenders One, a mortgage banker cooperative. Assisted buyers are a lower-risk proposition these days, mostly because banks are still lending to borrowers with high credit scores and detailed income documentation.

Now for our real estate education section…

It’s a Bird, It’s a Plane – It’s a Super Phone! (Or is it?)

Pssst- wanna know a secret? Your mild mannered cell phone is about to get a whole lot smarter thanks to super-fast 4G…or is it?

Despite the recent rash of media hype, the first round of new smart-phones (aka super phones) may not live up to expectations of an adoring public. Here’s the down and dirty on the new super phones to help you sort out the fact from fiction about your favorite phones.

Secret #1 – Smart phones have been available for ages…elsewhere. For those of you that travel overseas to tech savvy nations like Japan, Korea, Dubai, Taiwain, the idea of a smart phone is old news. In fact, chances are you have been nothing short of flabbergasted by the relative antiquity of domestic cell phones after using the overseas equivalent.

Bottom line for the tech savvy agent or investor – Don’t get excited yet! The new smart phones are not yet ready to go head-to-head with their foreign counterparts although they are a major improvement on the dinosaurs currently in use. Chalk it up to progressive upgrades and planned obsolescence.

Secret #2 – Differing definitions. According to industry insiders, there is a great deal of variation in what exactly constitutes a 4G Network. In fact, according to a recent report by the Wall Street Journal, the failure of the International Telecommunications Union to establish a set standard and/or working definition for 4G allowed AT&T to begin calling their 3G network a 4G network instead. Angered by this perceived breech, T-Mobile decided to follow suite and then go on an anti-AT&T campaign. Not surprisingly, AT&T has launched a counter-campaign claiming T-Mobile has the “wrong numbers” for their own 4G speeds.

 Bottom line for the tech savvy real estate agent or investor – don’t believe the hype or rush out to purchase a new phone only to later encounter 3G speeds. Verizon and Sprint were the primary carriers involved in building the newly emerging 4G platform with AT&T and others anticipated to follow suite soon.

Secret #3 – All the hype might be displaced. Experts predict a rapid transfer from netbook, laptop and cell phones to tablets…especially once they are 4G enabled. Currently only a few tablets have full access but that is also expected to change as early as the 2nd half of 2011. For those that aren’t in a major rush, it may be worth the wait to have full access to all your computing, calling and other needs in one portable product.

Bottom line for the tech savvy real estate agent or investor – compare the pros and cons of a second generation tablet versus yet another cell phone before making a final decision.

See you at the top!

Chris McLaughlin
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All Rights Reserved.

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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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Mid-Day Market News & Commentary by Chris McLaughlin, December 30, 2008
http://www.shortsalesriches.com/welcome.html

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You really can make a huge six figure income … even a 7 figure income … with no money out of your pocket in the deepest recession our country has ever faced.  How?  Just register now for our fr’ee webinar unveiling the strategies to use in this economy…all tonight at 9 PM ET: 

https://www2.gotomeeting.com/register/638209573

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This should come as no surprise to most of our readers: home prices posted an 18% drop for October of last year, the biggest drop ever since the Standard & Poors/Case-Shiller 20 city housing index was created.  The 10-city index fared a bit worse, dropping 19.1%.  And there areas really got wacked: Phoenix dropped 33%, Las Vegas slid 32%, and San Francisco declined 41%. 

The Conference Board announced that its Consumer Confidence Index dropped 38 in December from a revised 44.7 in November.  The low number surprised economists: a survey of 62 number crunches estimated that the reading would come in around 45.   

But in good news for consumers, General Motors announced that it would once again offer zero percent financing for the next several weeks.  This comes on the heels of the announcement that GMAC was approved as a bank, therefore eligible to tap into $5 billion of the $700 billion of TARP funds. 

 

Now, on to our real estate investing education section…

Discounting Hedonic Pricing Models

Short sale investors interested in obtaining the lowest possible price should learn to turn the tables on rapid rate increases by discounting hedonic pricing models to their benefit. Hedonic pricing essentially works like this; instead of calculating the increase in a price of a home as inflationary, the “upgrades” and other enhanced “quality” measures are calculated independent of the base price of the home. While this is a valid method of taking quality improvements into account especially during periods of economic growth, it does little to account for increased “liabilities” during periods of economic or financial contraction.

Let’s demonstrate by using a basic example; Buyer A and Buyer B both purchased 3 bedroom, 2 bath homes on 1/3 acre lots with city utilities. Each home is 1500 sq. feet living area and is 3 years of age. Home A is a “bare bones” affordable housing model with laminate counter-tops, inexpensive carpet and off the shelf fixtures throughout. Standard bathtub, windows, doors and other items were used. The cost of the home was $100 per square foot or roughly $150,000 plus the price of the lot. Buyer B also purchased a home of the same size but with granite countertops, imported Italian tile, upgraded windows and custom features throughout. Upgraded appliances, a large in-ground pool, whirlpool spa tubs and other upgrades resulted in a cost of $300 per square foot or a selling price of $450,000 plus the price of the lot.

So far so good. Unfortunately, as the economy begins to stagnate items originally deemed highly desirable quickly become undesirable as the cost of maintenance and repairs outpaces the ability of homeowners to sustain these items. This is where short sale investors are likely to reap major benefits. Deep discounts of common upgrades or former enhancements are possible by keeping these rules of thumb in mind:

1.     If it requires high maintenance it is a liability and should be deeply discounted. In-ground pools are a prime example. Not only do they increase electric bills when heating but cleaning supplies and maintenance contracts can easily cost $100-$250 per month. Items that require regular out of pocket costs should be deeply discounted as potential liabilities for a property. Aggressive pricing estimates would deduct the cost of repairs, maintenance and even potential removal of the item.

2.     If it requires minimal maintenance but adds no additional value it should be discounted by comparing a standard pricing model. For instance, those beautiful granite countertops don’t save money or increase functionality to the home therefore they are of no more “real” value when selling than laminate or less expensive alternatives. Make a point of going through the home and putting together a comprehensive replacement price list based upon standard “off the shelf” alternatives for all items that do not activity save money or represent major buying incentives in the new economy.

We had so many positive comments about our top 5 positive things about the market … so we’re going to post it again for you:

As 2008 draws to a close and short sale investors look to 2009 the question on everyone’s mind is whether or not the economy will continue its downward spiral or experience a recovery. Despite the considerable abundance of doom and gloom reporting in the media, there are a few bright spots that aren’t receiving the full attention deserved. Short sale investors searching for a silver lining in an otherwise cloudy economic environment would do well to focus on these current trends:

1. $40 per gallon oil and $1.65 per average gasoline. How low will it go and how long it will last is subject to debate but one thing is certain; those who rely upon gasoline and oil are experiencing a bit of much needed relief in the form of lower prices.

2. Low Mortgage Rates & Dropping LIBOR Rates. The cost of money is cheap – not just inexpensive but downright cheap. Make no mistake about it, real interest rates are the lowest in decades and make it less expensive than ever to borrow money to build a short sale empire. It is possible to buy more house for less money while simultaneously spending less on taxes and insurance. It’s a win-win-win situation for those with the courage to buy when others are selling.

3. Huge Fiscal Stimulus. Coming soon to a federal budget near you is a huge fiscal stimulus package destined to become one of the largest in history. Bridges, roads, hospitals, schools, utilities and other mega-projects are slated to spur the economic growth needed to jump-start the economy. Whether you believe the stimulus package will work or worsen the long term economy, one thing is certain; those workers will need affordable and convenient housing for long term projects. Short sale investors would do well to make a mental note of future road plans, schools and other large building projects in the target areas of interest. Whether you buy low and sell high or wait for the path of progress to reach you, it is a position of strength rather than weakness.

4. Long Term Lag-Times. The global decline in commodities and other tangible assets will eventually lead to long term shortages with tremendous upside profit potential for short sale investors. Remember, there is a lag time between the supply and demand which will result in high demand and low supply once the economy stabilizes. Everything from basic building materials to mineral rights, timber and even natural gas holdings will be impacted. Savvy short sale buyers would do well to realize the long term potential inherent in their holdings.

5. More Renters. Foreclosures aren’t over…in fact, due to legislative restrictions on the number of “bad loans” and tangible assets a bank may have on the books at any given point in time, the current bail-out simply provided the liquidity required for banks to prepare for the 2^nd stage of the growing mortgage meltdown. Most experts agree that what began as a sub-prime mess is expanding into ARM’s, low/no Doc loans and even prime mortgages in response to rising unemployment, falling stocks and bonds plus a plethora of other economic problems hit the average homeowner.

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See you at the top!

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

P.S.:

Are you ready to get 2009 rolling?  Then it is time to come to our LIVE “Recession Proof Real Estate Investing” webinar tonight – at 9 PM ET:

https://www2.gotomeeting.com/register/638209573

P.S.S.:

Have you seen the hilarious “Short Sale Kid Gets a Holiday Haircut.”  Don’t miss this challenge issued by Nathan Jurewicz:
http://www.youtube.com/shortsalesriches