obama

Colorado kills foreclosure slowdown bill

Legislators who killed a bill requiring that lenders prove they have the right to foreclose on a home say they did so because they tired of laws reforming Colorado’s foreclosure process.  And some rolled their eyes at the ever-present grassroots group that brought it forth — the Colorado Progressive Coalition — suggesting it might have succeeded with different backing.  HB 1156 died in committee two weeks ago on a mostly partisan 8-5 vote, after five hours of testimony, mostly in its favor. One Democrat sided with a majority of Republicans.  Had it passed, it would have stopped a practice that allows foreclosures on just a lawyer’s say-so.  “They need someone other than those groups pushing this stuff,” said Rep. Spencer Swalm, R-Centennial, the vice chairman of the Economic and Business Development Committee, which killed the bill March 13. “But the bottom line, to me, is the big-government, overt intervention in this market.”  Others on the committee told The Denver Post that, in addition to “the same faces supporting and testifying in support,” they voted against the bill because the state already has passed too many laws addressing the foreclosure crisis.  Others decried adding regulation to what they called an overregulated industry.  “Since 2005, the legislature has run and enacted 15 different bills to affect and change the foreclosure process in Colorado,” said Rep. Chris Holbert, R-Parker, the former president of the Colorado Mortgage Lenders Association. “Now is a good time to leave it alone and stop changing things. The process we have in place works fine. Changing things for the 16th time isn’t the right solution.”

QE3 not needed?

A third round of Treasurys purchase is not necessary unless the US economy deteriorates further, according to James Bullard, president of St Louis Federal Reserve Bank.  Recent economic data have signaled that the US economy is doing better than economists think, Bullard told CNBC Tuesday, and a third round of bond buying by the Fed – in a program known as quantitative easing, or QE – is not needed.  “I think QE3 would require the economy to deteriorate somewhat from where it is right now,” Bullard said. “The basic story on the US economy is that we’ve had good news over the last six months or so, especially compared to the recession scenario that was being painted in the August-September time period of last year.”  Injecting too much liquidity into the system will also have the effect of driving commodity prices higher and reducing real spending power, Bullard said.

Olick – no housing recovery?

“Housing was charging back. Spring sprung early. Sentiment among home builders doubled in six months. Any talk that the fundamentals might not be supporting the sentiment was met with harsh criticism. And then suddenly it wasn’t.  A slew of new housing data last week disappointed the analysts and the stock market, and all of a sudden you started to hear concern that maybe housing wasn’t exactly in a robust recovery.  From home builder sentiment to housing starts, to home builder earnings right through to sales of newly built homes, there was not one hopeful headline in any of it (except perhaps if you invest in rentals, as multi-family housing starts made more gains, but that is a contrary indicator to housing recovery).  And then an email from a Realtor in New Jersey: ‘Just reviewed March buyer clicks, Google’s analytics on all the sites we monitor – March is turning out to be the weakest month since last October re: Buyer interest..’  Now we start another week with another disappointment. Pending home sales, a measure of signed contracts for existing homes, not closings, fell half a percentage point month-to-month.  That may not seem like a big deal, but the analysts were looking for a small gain. No doubt the Realtors will point to the solid 9% gain from a year ago, but so much of that gain is based on a change in the foreclosure pipeline.  Last year the foreclosure process stalled. The ‘robo-signing’ mess brought everything to a standstill, and that left investors with little to buy on the distressed side. Foreclosures began ramping up again in the late fall, and that led to a surge in investor buying. Was that the ‘recovery’ we were seeing?

 Investors are still rushing into the market, with distressed sales making up a near-record 48.7% of sales in February on a three month moving average, according to a new report today from Campbell/Inside Mortgage Finance.  Investors are now a full quarter of the market, and they are increasing their activity in short sales (when a lender allows the home to be sold for less than the value of the mortgage).  Don’t get me wrong, investors buying up the distress is necessary to cleanse the market, but it is not real recovery. Mortgage originations are at a 12-year low, despite record low rates. Normal, ‘organic’ home buyers, move-up owner occupants, are not flooding back into this market. Rents are still rising.  Mortgage analyst Mark Hanson runs some disturbing numbers to back up his contention that Q2 will disappoint: ‘Investor sales volume up 37%  year over year for a whopper 69% of all year over year existing home sales gains. First-timers are starting to look weak in Feb. The gains in first-timer and repeat sales can easily be explained by historic rates and weather and can easily reverse in a single month. 

That may be why the home builders, who had been on a streak of gains in confidence, suddenly stopped moving this month. KB Home, which builds lower-priced homes, also came in with wildly disappointing earnings and an 8% drop in new orders. Sales of new homes also disappointed, which one analyst called, ‘puzzling.’  ‘If new homes are not selling, then why are builder confidence and single-family housing permits moving up, and why is the S.& P. home builder index up 80% since last October?’ asks Patrick Newport at IHS Global Insight. ‘Time will tell if builders and investors have gone out on a limb.’  Several other analysts started to question the strength of the recovery as well, with some just hoping that perhaps a warm winter had pulled some demand forward from spring. Despite a miss on existing home sales in February, the headline pointed to, again, big gains from a year ago.  Yes, we are ahead of where we were, but as we’ve noted so many times here on this page, rising foreclosures will put added pressure on this market, and we may not be out of the woods yet.  ‘Despite an extraordinarily mild winter, home sales just plod along at a pace last seen during the mid-1990s,’ notes Mark Zandi in his monthly report from Moody’s Analytics. ‘Thus, the underlying pace of home sales may not yet be strong enough to support a long-lasting upturn by home prices.’  Tomorrow we get the monthly reading on the S&P/Case-Shiller home price index. This index hasn’t been improving nearly as much as home sales, but the ever-hopeful housing lobby keeps blaming that on the fact that prices always lag sales, which is historically true, but what in today’s market has followed history?  Home prices are still falling not because of some lag, but because this housing market is running on sales of distressed properties at the very low end. The rest of the market is still stalled.”

Should we ditch Obamacare?

As the US Supreme Court hears arguments over President Barack Obama’s health care law, the biggest issue is over whether the individual insurance requirement is constitutional.  The court is in the midst of three days of arguments on the Affordable Care Act after 26 states challenged the law. In addition to the question of whether Congress had the authority to enact the individual mandate, the justices must also determine if the rest of the law can stay in place if the insurance mandate is struck down.  Tom Daschle, a Democrat who represented South Dakota during his time in the Senate, wrote in an op-ed in Politico Monday, “Congress was well within its authority in passing the individual mandate to regulate the interstate effects of an industry that is almost 20% of our nation’s economy—more than $2.5 trillion each year.”  Sen. Tom Coburn, M.D. (R) Okla., disagrees with Daschle. He said that Medicare is a perfect example of why the government shouldn’t be in the health care business.  “The problem with health care in America it costs too much and this bill doesn’t do anything to help the costs,” he said. “What it does is it actually makes it much worse.”  He blamed government regulations and lack of “smart state government” for the high cost.  “What we have is a system that ignores market reality, will not use markets to allocate resources and put it back on the individual to make the best choice for their life,” Coburn said.

NAR – pending sales down

Pending home sales were down slightly in February but remain notably above the pattern in the first half of last year, according to the National Association of Realtors.  The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, eased 0.5% to 96.5 in February from 97.0 in January but is 9.2% above February 2011 when it was 88.4. The data reflects contracts but not closings.  The PHSI in the Northeast slipped 0.6% to 77.7 in February but is 18.4% above a year ago. In the Midwest the index jumped 6.5% to 93.8 and is 19.0% higher than February 2011. Pending home sales in the South fell 3.0% to an index of 105.8 in February but are 7.8% above a year ago. In the West the index declined 2.6% in February to 99.3 and is 1.8% below February 2011.  Existing-home sales for March will be reported April 19 and the next Pending Home Sales Index will be released April 26. The Investment and Vacation Home Buyers Survey, covering transactions in 2011, is scheduled for March 29.

Smart Real Estate News & Commentary by Chris McLaughlin March 21, 2012

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Fed to fine banks

The Federal Reserve says that it plans to fine eight additional US bank holding companies for improperly foreclosing on homeowners. The financial firms — EverBank, Goldman Sachs Group, HSBC Holdings PLC, PNC Financial Services Group, MetLife, OneWest Bank, SunTrust Banks and US Bancorp — were not part of last month’s settlement over alleged foreclosure abuses. Suzanne G. Killian, a senior associate director at the Federal Reserve, called the fines “appropriate” during a congressional hearing in Brooklyn, New York. Killian offered few details about the size of the fines or when they will be levied. The nation’s five biggest lenders — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial — last month agreed to a $25 billion settlement with state and federal government agencies last month after a 16-month probe. As part of that settlement, the five banks agreed to reduce mortgages for about 1 million homeowners. They also will pay into a fund that will send $2,000 to 750,000 homeowners who were improperly foreclosed upon. Separately, government regulators last April ordered 14 mortgage lenders and servicers to reimburse homeowners who were improperly foreclosed upon. Since then, letters have been sent to 4.3 million borrowers who were at risk of foreclosure during 2009 and 2010. The deadline for borrowers to seek money under the orders is July 31. So far, nearly 122,000 homeowners have asked for an auditor to review their foreclosures.

North America the next middle east for oil?

Increased production of energy from a number of sources including deepwater drilling, natural gas exploration and Canada’s oil sands could make North America the next Middle East, according to a new report from Citigroup. The bank estimates that total North American energy production will rise from 15.4 million barrels per day in 2011 to almost 26.6 million barrels per day by 2020, boosting gross domestic product (GDP) and creating ripple effects throughout the economy. Citigroup analysts say the US will see large gains in oil production from deepwater drilling, while Mexico will begin to reverse recent declines in output. Production of shale gas liquids will increase by 3.8 million barrels per day by 2020. The report says this new production would amount to about 7% of additional global production, “a higher growth rate than OPEC can sustain.” That increase in energy supply will also be accompanied with a decline in demand. US consumption of oil products has fallen by 2 million barrels per day since its peak in 2005, and the Citi report says demand will fall by another 2 million barrels per day over the next decade.

Citgroup expects the shift in energy supply and demand to increase real GDP by between 2 and 3.3%. It also estimates that some 550,000 new jobs will be created directly in the oil and gas extraction sector by 2020. An additional 2.2 to 2.3 million new jobs will be created from the resulting economic stimulus effects of new production by 2020. In its analysis, Citigroup acknowledges infrastructure bottlenecks and legislation that blocks exports of crude oil of US origin. It also points out that new environmental regulations could prevent the scenario from playing out. But the analysts point out the surge in energy production could be game-changing. “It would not only improve incomes and create jobs, but also improve national energy security and reverse perennial current account deficits.”

MBA – mortgage applications down

Mortgage applications decreased 7.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 16, 2012. The Market Composite Index, a measure of mortgage loan application volume, decreased 7.4% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7.1% compared with the previous week. The Refinance Index decreased 9.3% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The unadjusted Purchase Index decreased 0.6% compared with the previous week and was 1.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.79%. The four week moving average is up 3.25% for the seasonally adjusted Purchase Index, while this average is down 4.31% for the Refinance Index.

The refinance share of mortgage activity decreased to 73.4% of total applications, the lowest since July 2011, from 75.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 5.8% of total applications from the previous week. “With the rate increase last week, refinances are obviously slowing, and the refinance share at 73% is down to its lowest level since last July. With rate/term refinances falling as we go forward, HARP will be a bigger percentage of refinances but will be more concentrated in certain states,” said Jay Brinkmann, MBA’s Senior Vice President of Research and Education. Brinkmann continued, “Some of the largest institutions are reporting that the HARP share of their refinances remained at about 30% last week, but HARP volume is not equal across the country. The states that I started referring to years ago as the sand states that had the worst delinquencies we now should start calling the HARP states for mortgage refinances. We saw big state-level differences in refinance applications for February over January: Florida was up 49%, Arizona was up 61%, and Nevada was up 71%. Refinances in the rest of the country were generally flat or even down. For example, Texas had no change, Colorado was down 3%, Connecticut was up only 2%, and Virginia was up 1%. HARP clearly is a driving force in those states that saw the most defaults and the biggest drops in home equity.”

The average loan size of all loans for home purchase in the US was $225,463 in February 2012, up from $216,888 in January. The average loan size for a refinance was $222,048, down from $227,563 in January. The largest purchase loans were made in the Pacific region at $ 324,606. The largest refinance loans were also made in the Pacific region at $ 305,949.

US exempts EU from sanctions

The United States on Tuesday exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian crude oil, but left Iran’s top customers China and India exposed to the possibility of such steps. The decision is a victory for the 11 countries, whose banks have been given a six-month reprieve from the threat of being cut off from the US financial system under new sanctions designed to pressure Iran over its nuclear program. The list did not, however, include China and India, Iran’s top two crude oil importers, nor US allies South Korea and Turkey, which are among the top-10 consumers of Iranian oil. A US official held up Japan’s estimated 15-22% cut in oil purchases from Iran in the second half of last year as an example for other nations, saying it did so after the “tragedy” of the earthquake that caused the Fukushima nuclear disaster. “Japan was a model,” State Department Special Envoy and Coordinator for International Energy Affairs Carlos Pascual told lawmakers. “If Japan was able to do what it did … that should be an example to others that they could potentially do more.”

Olick – rising rates may not hurt housing

“It was barely a few weeks ago that mortgage rates were sitting at record lows. The idea of rates over 4% on the 30-year fixed seemed a distant memory. And here they are now at 4.05% on the Bankrate.com overnight, thanks to the recent rise in Treasury yields. The housing market, it seems, just can’t catch a break. Or can it? As the economy improves, the job market improves, and that is a key driver for housing. But on the flip side, as the economy improves, investors finally crawl out of the Treasury bunkers, driving yields higher, and mortgage rates generally follow the 10-year Treasury. ‘We will definitely see a freeze up in refi’s immediately but the decision on a purchase still won’t be impacted until rates get at least to 4.5% I believe,’ says Peter Boockvar at Miller Tabak. ‘Assuming a $200k mortgage, going from 4 to 4.5% in mortgage rate adds about $60 per month to one’s payments, and while an extra $700 per year matters, I’m not sure if it’s a deal breaker.’

While rates have moved a good quarter of a% in the past few weeks, most analysts don’t think they’ll go much higher. ‘Mortgage rates were too high anyway, relative to the 10-year Treasury, so I don’t think you will see a parallel shift,’ says FBR’s Paul Miller, who spoke to several bankers today. They told him mortgage volume is good, which helps keep rates competitive. ‘But it does take time for this stuff to flow through the markets,’ he adds. And then there could be one other phenomenon, as described by Freddie Mac’s chief economist Frank Nothaft: ‘When rates tick up, you may see some potential home buyers who have been sitting on the sidelines, suddenly they may get up, as they are concerned that maybe this is the beginning of a trend, and they don’t want to miss out on these 60-year low mortgage rates. In the near term it can encourage buyers.’”

Oil up to $107 per barrel

Oil prices rose to near $107 a barrel Wednesday after a report showed US crude supplies fell unexpectedly, a sign demand may be improving in the world’s largest economy. By early afternoon in Europe, benchmark oil for May delivery was up 49 cents to $106.56 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.49 to settle at $106.07 per barrel in New York on Tuesday after Saudi Arabia said it could pump more oil to cover any shortages. In London, Brent crude for May delivery was up 27 cents at $124.39 a barrel on the ICE Futures exchange. The American Petroleum Institute said late Tuesday that crude inventories fell 1.4 million barrels last week, breaking a two-month trend of growing supplies. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.1 million barrels. Inventories of gasoline fell 1.4 million barrels last week while distillates rose 600,000 barrels, the API said.

LPS – first look report
Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology, data and analytics to the mortgage and real estate industries, reports the following “first look” at February 2012 month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.

Total US loan delinquency rate:7.57%
Month-over-month change in delinquency rate: -5.0%
Year-over-year change in delinquency rate: -14.0%
Total U.S foreclosure pre-sale inventory rate: 4.13%
Month-over-month change in foreclosure presale inventory rate: -0.5%
Year-over-year change in foreclosure presale inventory rate: -0.3%
Number of properties that are 30 or more days past due, but not in foreclosure: (A) 3,781,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:1,722,000
Number of properties in foreclosure pre-sale inventory: (B) 2,065,000
Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 5,846,000
States with highest percentage of non-current* loans: FL, MS, NV, NJ, IL
States with the lowest percentage of non-current* loans: MT, AK, WY, SD, ND

*Non-current totals combine foreclosures and delinquencies as a% of active loans in that state.
Notes:
(1) Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets
(2) All whole numbers are rounded to the nearest thousand
The company will provide a more in-depth review of this data in its monthly Mortgage Monitor report, which includes an analysis of data supplemented by in-depth charts and graphs that reflect trend and point-in-time observations.

Money printing going out of style

The era of quantitative easing—a process by which central banks buy assets such as government bonds to inject funds in the markets—may be coming to an end, according to a survey of fund managers. According to a March survey by Bank of America Merrill Lynch, investors are more upbeat about the future and the prospects for growth and they no longer expect further quantitative easing measures to be taken by the Federal Reserve or the European Central Bank. In the survey, 28% of fund managers said they expected the global economy to strengthen in the next 12 months, up from 11% in February. This was the highest reading since March last year. But the report did find that fund managers still see sovereign debt as the biggest tail risk to the global recovery. Investors do foresee higher inflation, with a net 13% expecting it to rise in the coming year.

WSJ – housing mixed

US home building fell in February, but permits for new construction reached their highest levels in nearly 3½ years, reflecting housing’s uneven and protracted recovery. Home construction decreased 1.1% from January to a seasonally adjusted annual rate of 698,000, the Commerce Department said yesterday. Construction of single-family homes, which makes up more than 70% of housing starts, fell by 9.9% – the largest drop in a year. Meanwhile, multifamily homes with at least two units, a volatile part of the market, posted a 21.1% gain. Still, January’s figures were raised to 706,000 starts overall, a 3.7% improvement from December and the highest level since October 2008.

In a positive sign for future construction, the February data showed new building permits rose by 5.1% from a month earlier to an annual rate of 717,000 – also the highest level since October 2008. The housing sector has been healing slowly after prices collapsed more than five years ago. A National Association of Home Builders (NAHB) report on Monday showed that US home builders’ confidence in the market held steady in March at the highest level since 2007. “The level of activity still remains far short of the pace implied by the NAHB index so we look for further gains over the next few months in both sales and starts,” said Ian Shepherdson, chief US economist at High Frequency Economics. “Housing will add to growth all year, and beyond.”

But Joshua Shapiro, chief US economist at MFR Inc., said that so far, the home builders association’s level of confidence hasn’t been matched by actual construction. “Our view remains that single-family housing starts are in a long-term bottoming process but that an enormous overhang of existing single-family home supply will prevent sharp gains in single-family starts in the near to medium term,” Mr. Shapiro said. NAHB said Monday that its members continue to face obstacles, including tight credit for both builders and buyers and a large inventory of inexpensive, foreclosed homes in many markets. The Commerce Department data showed that housing starts were mixed across four US regions. The Northeast posted a 12.3% decline, while starts in the West dropped 5.9% last month. Starts rose 3% in the Midwest and 1.5% in the South. Actual housing starts, calculated without seasonal adjustments, grew to 48,100 in February from 46,500 in January. Lumber and commodities markets watch those numbers closely to gauge demand.
See you at the top!
Chris McLaughlin

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Smart Real Estate News & Commentary by Chris McLaughlin March 16, 2012

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Whistleblower wins $18 million

Attorney Lynn Szymoniak had spent a career investigating insurance fraud when a bank moved to foreclose on her Florida home in 2008. Almost four years later, the fraud she said she uncovered by combing through mortgage documents earned her $18 million.  Szymoniak, 63, is among six whistle-blowers who will pocket $46.5 million as part of a $25 billion national foreclosure settlement that state and federal officials reached in February with five banks, including Bank of America Corp. and JPMorgan Chase & Co. (JPM), according to the US Justice Department.  Szymoniak’s examination, in which she relied on her experience as an insurance-fraud investigator, led to her claims against banks for submitting fraudulent documents to the federal government asserting that they owned loans insured by the Federal Housing Administration, she said.  The national foreclosure settlement with the five banks, which resolves claims of abusive foreclosure practices, provides mortgage relief to borrowers, pays $1.5 billion to those who lost their homes to foreclosure, and sets standards for how the banks service mortgage loans.

As part of the agreement, whistle-blower claims are being settled for about $228 million, according to court papers filed in federal court in Washington. A group of six whistle-blowers will receive $46.5 million out of that amount, said Alisa Finelli, a Justice Department spokeswoman.  Szymoniak’s foreclosure case began in July 2008 when Deutsche Bank AG (DBK), as trustee for a mortgage securitization trust, sued to seize her Palm Beach Gardens, Florida, home, which was once worth $1.3 million. The bank couldn’t prove it owned her loan and claimed it had lost the mortgage note, she said.  Szymoniak said she was first alerted to problems in the paperwork on her foreclosure when Deutsche Bank said it acquired her mortgage note in October 2008, three months after the bank sued her over the loan.  “So I began doing what I’ve done for years — go out and investigate,” she said. “It was pretty obvious to me that the paperwork was fraudulent.”  Her work quickly uncovered widespread document fraud in the mortgage industry, she said, and eventually led to the filing of her whistle-blower cases in 2010.  The whistle-blower claims resolved in the national settlement include a case filed in Atlanta in 2006 in which banks are accused of defrauding military veterans and the US government.  The banks violated rules under a Department of Veterans Affairs program for refinancing mortgage loans by charging improper fees to veterans, according to the complaint. The banks hid those fees and obtained government guarantees on the loans, according to the complaint.

Inflation leaps, gas leads

The Labor Department said its Consumer Price Index increased 0.4% after advancing 0.2% in January. That was in line with economists’ expectations. Gasoline accounted for more than 80% of the rise in consumer prices last month, the department said.  Outside the volatile food and energy category, inflation pressures were generally contained. Core CPI edged up 0.1% after gaining 0.2% in January. The February increase was below economists’ expectations in a Reuters poll for a 0.2% rise.  The Federal Reserve said on Tuesday that the recent spike in energy costs would likely push up inflation temporarily. Over the long-term, inflation was likely to run at or below the its 2% target, it said.

While the US central bank reiterated its expectation that overnight interest rates would remain near zero until at least through late 2014, it offered no clues on whether it would launch a third round of bond buying or quantitative easing, to keep borrowing costs low to stimulate the recovery.  Last month, overall inflation was pushed up by gasoline prices, which soared 6%, the largest increase since December 2010, after rising 0.9% in January.  Although surging gasoline prices are a strain on consumers, they have so far not caused a sharp pull back in spending, thanks to a strengthening jobs market.  Food prices were flat last month after rising 0.2% in January. Food prices were the weakest since July 2010.  Overall consumer prices rose 2.9% year-on-year after increasing by the same margin in January.  Core consumer prices were last month restrained by apparel prices, which fell 0.9% — the most since July 2006 — after rising 0.9% in January. There were also declines in the prices of tobacco, airline tickets and used cars and trucks.  But new motor vehicle prices rose 0.6% after being flat in January. While housing costs held up, owners’ equivalent rent rose only 0.1% last month after increasing 0.2% the prior month.  In the 12 months to February, core CPI increased 2.2% after rising 2.3% in January. This measure has rebounded from a record low of 0.6% in October and the Fed would like to see that closer to 2%.

Olick – Miami condos – bust or boom?

“South Florida real estate developer Martin Margulies has been sitting on prime ocean-front property for five years, waiting for the condo market to rise from the grave. When the market here crashed in 2007, amid overzealous speculators and an abundance of cheap and easy credit, condo construction ground to a halt. The joke had been that the unofficial bird of Miami was the crane, but that bird flew the coop. Apparently it is now swooping back in.  ‘This is the moment because we’re going to be delivering this property next year, and so by that time there will be good demand, there is good demand now,’ says Margulies, who began construction on a brand new high-end condo tower in December.  And he is right. Foreign buyers, largely from South America, but also from Europe, Russia and China, are flooding into the Miami area, and that has developers rushing to keep up with demand.  ‘The music started again in South Florida,’ says Peter Zalewski of CondoVultures, a Florida real estate data and investment firm. ‘We have an arms race of developers moving into the marketplace trying to put up condos or planned condos in anticipation of a recovery in the next two years or so.’

And they are doing it fast. Twenty five new towers with 5200 units are proposed while there are still 4200 unsold units left from the crash. Sounds crazy, but the foreign demand developers and real estate agents are seeing now is just that hot.  ‘The foreign buyer is coming in looking for wealth preservation or taking advantage of the weak US dollar, or coming in because of problems back home, whether it’s Venezuela or Mexico with the drug war,’ says Zalewski, who has been watching and working this market for the past decade.  Foreign buyers are investing as well as foreign developers, like the Melo group, a family business from Argentina. They began construction last August on the first new tower in Miami in at least four years. A lot of people thought they were crazy, but now the tide has decidedly turned. The Melo’s say they have pre-sold the entire building, and they required buyers to put 50% down. Most of their buyers, again, are foreigners with cash.

This new condo boom, while reminiscent of the recent one, is not built on easy credit. In fact, credit is still very tight here, especially for developers. Martin Margulies tried to get a construction loan for his Hollywood project, the Bellini, but could only get 50% financing along with putting up collateral. He called that ‘onerous,’ and instead took out a personal loan, using his massive art collection as collateral. He says he’s not concerned, as his buyers will be putting down 30% on one to four million dollar units.  ‘The kind of buyers we get they don’t need financing, they’re all cash buyers,’ says Margulies. ‘It’s a lifestyle they have, so they’re not reliant on a bank to give the money.’  Most of the foreign buyers in Miami are renting the properties to locals who have either lost their homes to foreclosure or whose credit is not good enough to get a home loan in today’s tough US mortgage market. The question now is, what happens to all these renters when Florida’s single family housing market recovers and credit opens up again?

Will all these foreign investors want to unload their units at the same time?  ‘You wonder if we’re not kicking the can, where we dealt with the problem at hand by dumping it off to foreign buyers, and now as the domestic buyer starts to move back into the marketplace, is that domestic buyer going to pay the same price that the foreign buyer is willing to pay or take the same chances that the foreign buyer is willing to pay?’ asks Zalewski.  It all sounds frighteningly familiar.”

Industrial output down

The Federal Reserve said Friday that the output of the nation’s factories rose 0.3% last month. That followed even stronger increases in January and December, which combined for the best two month stretch since 1998.  Overall industrial production, which includes output by mines and utilities, was unchanged. Mining activity declined sharply and utilities were flat.  Factory output has risen 17.4% since the depths of the recession in June 2009. It remains 6.7% below its pre-recession peak, reached in December 2007.  Growth at US factories was a little slower in February because auto production edged lower after big gains in December and January. Manufacturers made more electronics, energy products and electrical equipment.  Still, manufacturing has strengthened substantially since last summer, when it faltered because of global supply disruptions caused by the Japan earthquake and tsunami. Factories are benefiting from strong auto sales and growing business investment in machinery and other equipment.

Sales up 14% in San Francisco

San Francisco Bay Area home sales grew 14.2% from last year in February with the region recording 5,702 sales, up from 4,991 a year ago, DataQuick said.  The San Diego-based real estate research firm said sales are up over year-prior levels for the eighth straight month, suggesting a tepid recovery could be under way.  New and existing home prices continue drag, with the February median of $325,500 down 0.3% from $326,000 in January and 3.6% from $337,250 a year ago.  Prices in San Francisco hit their peak of $665,000 in June 2007 before plummeting to $290,000 in March 2009 after the nation fell into a prolonged recession.  Much like the Southern California market, distressed home sales accounted for half of the Bay Area’s resale market in February. Foreclosure sales alone made up 27.4% of all resales in the market, while short sales represented 23.1%.  The average monthly mortgage payment in the Bay Area hit $1,225 in February, down from $1,233 in January and $1,440 a year earlier.

Obama to release emergency oil in front of election?

Britain is poised to cooperate with the United States on a release of strategic oil stocks that is expected within months, two British sources said, in a bid to prevent fuel prices choking economic growth in a US election year.  A formal request from the United States to the UK to join forces in a release of oil from government-controlled reserves is expected “shortly” following a meeting on Wednesday in Washington between President Barack Obama and Prime MinisterDavid Cameron, who discussed the issue, one source said.  Britain would respond positively, the two sources said, and Cameron said a release was worth considering.  “We didn’t make any decision, this has to be discussed broadly. We’ve got to look at this issue carefully, it’s something worth looking at. Short-term should we look at reserves? Yes, we should,” Cameron said during a meeting with students in New York.  “We’d both like to see global oil prices at a lower level than they are.”  Details of the timing, volume and duration of a new emergency drawdown have yet to be settled but a detailed agreement is expected by the summer, one of the sources said.  Other countries may also be approached by Washington to contribute, a further source said, Japan among them.   Rising world oil prices have pushed the cost of gasoline in the US up sharply, threatening to stall economic recovery ahead of Obama’s bid for re-election in November.

Renting jeopardizing affordable housing

More Americans are renting houses instead of buying them, a trend that could disrupt price affordability, analysts say.  With more homeowners unable to secure mortgages and uncertain about future finances, renting is the only sure-fire way to live in a single-family property, according to Capital Economics.  But as more Americans turn to home renting, the influx of demand is set to squeeze the nation’s rental supply, pushing monthly rents even higher.  Paul Dales, senior economist with Capital Economics said that rental vacancy rates will fall again in the future, pushing prices up. The median rent is already up to $712 per month—well above the average monthly mortgage cost of $647, Dales reported.  He estimates vacancies in the home-rental market will push average rental rates up as much as 5% by early 2013, compared to 2.4% in January.  “We expect the annual rate at which rents are rising will rise to 3% this year and remain at that level in 2013,” Dales said. “Assuming that the economic recovery gains firmer footing, in future years there is scope for rents to rise by around 4% a year.”

And as single-family renters head into the market, the supply of rentals is unlikely to meet new demand.  This reality is playing itself out in Denver, where the vacancy rate for home rentals fell from 3.4% in the third quarter to 2.1% in the fourth quarter. At the same time, the vacancy rate edged up slightly from the 2% level reported in the fourth quarter of 2010.  “The vacancy rate went up slightly year-over-year,” said Ryan McMaken, a spokesman for the Colorado Division of Housing. “That doesn’t mean much, though, because when you’re looking at vacancy rates below 3%, the bottom line is that the market is tight. For many people, it’s not easy to buy a house right now, so they’re renting.”

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 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* 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 March 6, 2012

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January on a high for repeat foreclosures

Repeat foreclosures hit an all-time high in January, representing 47% of all starts. Foreclosure starts rose in January suggesting the pipeline is starting to move, according to the latest mortgage monitor report from Lender Processing Services. LPS said foreclosure starts in the first month of 2012 rose 28% from December but fell 11.5% from a year earlier. The data firm says 203,458 starts were recorded in January, compared to 230,023 in January 2011. LPS sees positive changes in the foreclosure pipeline, but  says it’s too soon to call it a trend. When looking at new problem loans, the ratio of troubled mortgages is relatively low nationally but the states with the most seriously delinquent home loans in January included Nevada, Florida, Mississippi, Arizona and Georgia. Nationwide more than 40% of loans in foreclosure are more than two years past due. LPS estimates that refinance opportunities under the new HARP 2.0 are possible for 27.6 million borrowers, but only 6.8 million are probable.

Big Names Rally to Romney

Leading members of the Congress and influential conservatives are showing signs of rallying around Mitt Romney in the presidential race signaling that a coast-to-coast burst of voting on Super Tuesday should mark a moment to start concentrating on defeating President Obama. The endorsements come as the Romney campaign is pressing elected officials and activists in the 10 states that are voting Tuesday and those that do so in the following weeks to help nudge the contest toward a conclusion. A methodical effort is under way among governors, donors and top Republicans to make the case that a long nominating fight could weaken the party’s chances to win the White House, maintain control of the House and gain a majority in the Senate. It is a significant moment for Mr. Romney, but also a critical one for Rick Santorum, who is scrapping for delegates but also trying to win the popular vote in Ohio to revive doubts about Mr. Romney’s appeal among conservative and working-class voters. Newt Gingrich is also fighting to stay in the race, staking the future of his candidacy on a victory in Georgia. Here in Ohio, where voters have developed a well-earned reputation as a bellwether that captures national political sentiments, the primary will help determine the length of the presidential race and the direction of the Republican Party. The state could also provide one of the best opportunities for Mr. Santorum to slow Mr. Romney’s march to the nomination.

Olick: Buying Foreclosures – One Investor’s Key to Success

With potentially millions of foreclosed, bank-owned homes coming to the housing market over the next few years, cash-heavy investors are poised to profit, especially when buying in bulk. The Federal Housing Finance Agency, regulator of Fannie Mae and Freddie Mac, recently announced a pilot property sale program of 2500 foreclosures now on the books of Fannie Mae. Phoenix investor Geoffrey Jacobs is hoping to get in on it. “The ability to buy in bulk adds to our ability to grow our portfolio in a meaningful way in a short period of time,” says Jacobs, principal at Empire Group, which has already bought over 1000 Phoenix-area homes in the past two and a half  years. “When you look at how well these properties lease and the type of  rental yields, it’s a compelling investment.”  When Empire Group first began buying foreclosures in 2009, it farmed out the property management to smaller companies and individuals. Jacobs quickly learned that method was costing precious profit. Just twenty percent of the nation’s 8.7 million single family rental properties are managed by professionals, according to Steve Cook of Real Estate Economy Watch. Individual owner/investors do the bulk of the rest. Owners, according to Cook, may be spending too much time and money on maintenance. Jacobs’ group, however, is very profitable, with 8-9 percent annual returns on his properties. His renters stay, he says, with a 65-70 percent re-up rate. He credits good management and hopes, someday, that his long-term renters will become buyers. Unfortunately, that may take a while, as so many of them need to rebuild their credit. Empire Group has already passed the first round of pre-qualification for the FHFA REO to Rent program and is hoping to clear the second round and start bidding on bulk properties in the next few weeks.

Factory orders fall, as economy staggers once again

New orders for U.S. factory goods dropped in January by the most in over a year as businesses cut orders. The Commerce Department said on Monday orders for manufactured goods fell 1 percent, a less steep decline than the 1.5 percent drop expected by private forecasters in a Reuters poll. Still, it was the biggest decline since October 2010. Many economists think the expiration of some tax breaks on capital spending at the end of 2011 led businesses to bring forward investments. Orders for non-defense capital goods, excluding aircraft fell 3.9 percent in January. This is a closely watched category because it is taken as a sign of businesses’ future spending plans. Shipments for this category declined 3 percent. Business spending and manufacturing have been drivers of the recovery since the 2007-2009 recession.

Home prices fall by smallest margin: Clear Capital

National home prices fell by the smallest margin in 10 months in light of REO saturation increases, a trend that Clear Capital calls “unusual and encouraging.” Prices declined 1.9% year-over-year, according to the firm’s Home Data Index market report. Short-term prices remained stable, falling only 0.6% quarter-over-quarter, highlighting short-term stability over the last few months. All regions showed improvements in yearly and quarterly price drops, while three out of four saw upticks in real estate-owned properties for sale. Clear Capital found that the nation’s top 15 performing metropolitan statistical areas were resilient against higher REO saturation, with six of them showing quarterly price appreciation greater than 2%. Alex Villacorta, Clear Capital’s director of research and analytics, said markets such as Atlanta and Tucson, Ariz., hit hard by the foreclosure epidemic, are filled to the brim with REO properties for sale and will see a falloff in 2013 — if not before.

Ds News: Consumer Credit Points to End of Housing Downturn

Consumer credit data suggests spending will increase and the housing market will begin to emerge from its slump this year, according to Equifax and Moody’s Analytics. Both companies note that as key market data align with pre-recession totals, consumers should anticipate steady economic growth for major credit sectors. Looking across the full spectrum of consumer credit, Equifax and Moody’s found that delinquency rates for auto, bankcard, and consumer finance are back to pre-recession levels. These sectors are expected to contribute to the U.S. economy’s nascent recovery.  The home mortgage lending sector continues to see the highest percentage of delinquencies, the companies’ report notes, even with outstanding mortgage balances (including first liens and home equity lines and loans) having declined by $1 trillion since 2008 and continuing to drop. The companies also note that tighter lending guidelines are reflected in loans made to the prime risk segment. Consumers that fit the bill of a prime risk now account for more than 80 percent of all new mortgage originations.

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 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* 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