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NAR – existing home sales decline

According to the National Association of Realtors (NAR), Existing-home sales, (completed transactions that include single-family, townhomes, condominiums and co-ops), fell 3.8% to a seasonally adjusted annual rate of 4.81 million in May from a downwardly revised 5.00 million in April, and are 15.3% below a 5.68 million pace in May 2010 when sales were surging to beat the deadline for the home buyer tax credit.  There were notable regional differences in home sales. “A large decline in Midwestern existing-home sales can be attributed partly to the flooding and other severe weather patterns that occurred, but this also implies a temporary nature of soft market activity,” Lawrence Yun, NAR chief economist, explained.  The national median existing-home price for all housing types was $166,500 in May, down 4.6% from May 2010. Distressed homes³ – typically sold at a discount of about 20% – accounted for 31% of sales in May, down from 37% in April; they were 31% in May 2010.  NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said a number of proposals being considered in Washington could further jeopardize the housing recovery. “We’re concerned about the flow of available capital, including a possible rule that would effectively raise minimum down payment requirements to 20%,” he said. “We don’t need to throw the baby out with the bath water – increasing down payment requirements would effectively shut many qualified families out of the market. What we critically need is a return to the basics of providing safe mortgages to creditworthy buyers willing to stay well within their budget.”

Bernanke not likely to make big changes

Federal Reserve Chairman Ben Bernanke is unlikely to announce a major change in monetary policy at his second-ever news conference later today, but investors will hang on his every word for clues on whether the Fed will scale back its presence in financial markets, analysts said.  The central bank will release quarterly economic forecasts and analysts expect them to be revised lower to reflect the recent weakness, but they said Bernanke will be quick to say he sees an acceleration in the recovery.  “I’m sure he’ll predict one,” John Wraith, fixed income strategist at Bank of America Merrill Lynch (BAML), said. “I’m sure he won’t announce any reversal of the stimulus.”  The Federal Open Market Committee is likely to take the formal decision to end the second round of quantitative easing – a program under which it pumps liquidity in markets by buying assets – at the end of June but to leave the reinvestment policy in place, according to analysts from Barclays Capital.  Mark Olson, former Fed governor, said he would be surprised if the FOMC did not vote unanimously to stay the course and that he does not expect big changes in the Fed’s statement.

The Fed’s statement is due at 12:30 pm New York time and Bernanke’s news conference is expected to start at 2:15 pm.  The statement is likely to say that headline inflation was pushed higher by a rise in commodity prices but that these have fallen back somewhat and inflation expectations remain stable, Barclays Capital analysts wrote.

MBA – mortgage applications drop

After experiencing a 13% surge in mortgage applications, the mortgage market lost steam last week with applications dropping 5.9% for the week ending June 17.  While homeowners rushed to refinance earlier in the month, that trend reversed itself, with the refinance index and purchase index falling 7.2% and 2.8%, respectively, the Mortgage Bankers Association said Wednesday.  In addition, the four-week moving averages for the market index and the refinance index are up 0.4% and 0.8%, respectively, while the seasonally adjusted purchase index is down 0.7%.  Refinancing activity cooled as the refinance share of mortgage activity fell to 69.2% of total applications from 70% the previous week. In addition, the adjustable-rate mortgage share of activity fell to 5.9% from 6.1% the prior week.  Meanwhile, the average interest rate on the 30-year, fixed-rate mortgage grew to 4.57%, up from 4.51% a week earlier. The 15-year fixed-rate mortgage also rose to 3.70%, up from 3.67% a week earlier.

Mortgage lender CEO sentenced

Paul Allen, 55, the former CEO of Taylor, Bean & Whitaker, or TBW, pleaded guilty in April to one count of making false statements and one count of conspiring to commit bank and wire fraud.  He was sentenced to more than three years in prison.  The Justice Department said the fraud scheme contributed to the failure of TBW, which was one of the largest privately held U.S. mortgage lending companies, as well as the bankruptcy of Alabama-based Colonial Bank, which was one of the 50 largest U.S. banks.  Former TBW Chairman Lee Farkas, who was convicted on April 19 on 14 counts of fraud for his role in masterminding the scheme, is scheduled to be sentenced on June 27. The Securities and Exchange Commission (SEC) also has a civil action pending against Farkas in the Eastern District of Virginia.  Allen’s co-conspirator Sean Ragland, a 37-year-old former senior financial analyst at TBW, was also sentenced today by Judge Leonie Brinkema to three months in prison.  Four other senior officials with TBW and Colonial Bank have also been sentenced to time in prison ranging from three months to eight years for their role in the fraud.

Assistant Attorney General Lanny Breuer said Allen “concealed TBW’s staggering deficits through false financial reports, which ultimately caused investors to lose more than $1.5 billion.”  He said the sentencing sent a “strong message that corporate fraud by senior executives will not be tolerated,” but also showed that plea deals like Allen’s — under which he provided “substantial assistance” to government investigators — would be taken into account at sentencing.  According to court documents and information presented at trial, Allen and Ragland distributed materially false documents to investors in Ocala Funding, a TBW multi-billion dollar lending facility, from early 2005 through August 2009.  As a result, investors in Ocala Funding lost more than $1.5 billion, while Colonial Bank lost $900 million.

Olick – on the distressed property sales drop

“The share of distressed sales in May, that is foreclosed properties and short sales (when the property is sold for less than the value of the loan), fell to 31% of all sales from 37% in April. Investors, who purchase a large share of these distressed properties, also represented a smaller share in May. So what’s going on?  We know there is still a huge supply of bank owned (REO) properties, and we also know that banks are pushing short sales on many more properties than ever before. But they are also pushing REO sales, thanks to new sales incentives from lenders and the GSE’s (Government-Sponsored Enterprises).  ‘Realtors and mortgage loan officers nationwide are driving mid-to-high end organic, short and distressed sales on the fear that buyers will be unable to qualify for loans once the QRM (Qualified Residential Mortgage) rules are in place requiring 20% down,’ says mortgage market analyst Mark Hanson, describing new rules being considered for risk retention by banks (part of the banking overhaul legislation passed last summer).

Some bloggers though, writing in to me after the existing home sales report, claimed that Fannie and Freddie are holding on to REOs, trying to game home prices. Fannie strongly disputes that.  ‘Fannie Mae doesn’t have a shadow inventory of REO properties that are available to be sold. As soon as we acquire a property, we quickly identify a market competitive price, determine whether to make any necessary repairs and list the property. In the first three months of 2011, we sold a record number of REO properties, selling more properties than we acquired,’ said Amy Bonitatibus, Fannie Mae spokeswoman.  ‘We watch taxpayer dollars like it’s our own money. We have an immense responsibility to get the most possible value from each REO property we sell. We are committed to stabilizing neighborhoods and preserving communities across the country,’ she added.

In fact, Fannie Mae recently launched another program of financial incentives to Realtors to sell REO properties. A note from analysts at Goldman Sachs, titled Foreclosure Sales: Federally Backed Lenders Shifting to Net Sellers, states:  ‘Although these entities could hold property off the market to reduce the negative effects of distressed properties on house prices, they do not appear to be doing so…in Q1 the GSEs and FHA became net suppliers of foreclosed properties to the market for the first time since 2009. Moreover, if the temporary slowdown in REO sales over the last two quarters ends, the federal entities seem likely to add roughly 30% to the sales of fore loses property over the next year as compared with the previous four quarters.’

Bottom line, in order for this housing market to recover, the distressed properties need to go, whether by short sales or REO sales. The distress is driving the fear, which in turn keeps buyers on the sidelines. We need investors, and we need first time buyers, and I will say it until I’m blue in the face: These buyers need better access to credit.”

Oil down

Oil prices fell below $94 a barrel today after a crude supply report reflected mixed signs about U.S. demand and the dollar strengthened against other currencies.  By early afternoon in Europe, benchmark oil for August delivery was down 82 cents to $93.35 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 54 cents to settle at $94.17 on Tuesday.  In London, Brent crude for August delivery was down 41 cents to $110.54 a barrel on the ICE Futures exchange.  The American Petroleum Institute (APA) said late Tuesday that crude inventories fell 81,000 barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 2.0 million barrels.  Inventories of gasoline dropped 1.5 million barrels last week, surprising analysts who had forecast an increase of 1 million barrels. Distillates fell 541,000 barrels, the API said.

May delinquencies down

U.S. mortgage delinquencies are faring much better compared to one year ago, according to Lender Processing Services’ “First Look” report released yesterday.  The report provides month-end mortgage performance statistics from LPS’ loan-level database of nearly 40 million mortgages. The Jacksonville, Fla.-based firm will release more detailed reporting in its upcoming “Mortgage Monitor” report, which comes out at the end of this month.  According to the report, 7.96% of U.S. home loans were 30 days past due but not in foreclosure in May, down a staggering 18.3% compared to the same month in 2010. This figure is down a slight 0.1% from April. LPS estimates there are 4.2 million mortgages in delinquency status, with 1.9 million seriously delinquent, meaning 90-plus days past payment.  Foreclosure pre-sale inventory, on the other hand, continued to stay above last year’s averages. Inventory was up 4.11% last month compared to the year ago period, totaling 2.2 million homes.

Florida posted the highest percentage of noncurrent loans statewide in May, followed by Nevada, Mississippi, New Jersey and Illinois. The states with the least percentage were, in descending order, Montana, Wyoming, Alaska, South Dakota and North Dakota.  In other recent news, LPS recently lowered its second quarter earnings estimate by 31% based on the sluggish mortgage market.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
portfolio of nearly 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Join my Facebook Fan Page: http://www.mclaughlinchris.com

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–>

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

WSJ – government will stay in the housing market for a long time

A weak start to the spring housing season, which could be underscored later this week by reports on sales of new and previously owned homes, is raising the prospect that the U.S. government will dominate the mortgage market for a long time.  The fragile housing market is complicating Washington’s stated goal of dialing back its support after it has reduced stakes in the financial-services and auto industries. The slide in home prices in turn is weighing on the economic recovery, and it threatens to hamper a bipartisan push to unwind the emergency support policymakers enacted three years ago.  Falling prices are eroding consumer confidence and hindering job mobility by leaving millions of borrowers trapped in homes worth less than what they owe. A glut of bank-owned foreclosures has slowed residential construction, damping a major source of job growth. In some markets, the share of buyers paying in cash for homes has hit its highest levels in years, a red flag that prices could fall below “fair value” due to a lack of credit.  Fannie Mae and Freddie Mac, government-sponsored entities intended to foster mortgage lending, face a hard balancing act. They are trying to restore sound lending standards without choking off access to mortgages.

Together with the Federal Housing Administration and federal agencies, Fannie and Freddie are behind nine in 10 new mortgages. The firms don’t make loans; instead, they buy them from lenders, repackage them for sale to investors as securities, and offer guarantees to make investors whole if borrowers default.  Congress has boosted the size of loans that the firms can buy, making it easier for borrowers in more expensive coastal housing markets to qualify for loans. But those steps have crowded out the private sector, leaving investors with fewer loans to buy and either hold or pool into securities that don’t have government guarantees.  The Obama administration and Republican lawmakers have embraced efforts to encourage private investors into the mortgage market by curbing the government’s role. Officials want to increase the fees that Fannie and Freddie charge lenders and reduce the maximum loan sizes eligible for government backing. The limits are set to decline modestly at the end of September to roughly $625,500 from the current $729,750 maximum in high-cost areas such as New York and Los Angeles.

But market advantages for government entities are only part of the problem. Stable housing prices, more than anything else, would make it easier for private lending to return.  Moreover, the economics of securitization don’t work right now. Interest rates are low and investors are demanding high returns, which mean that mortgage-bond deals have made little if any profit for the firms that arrange them. Tight underwriting standards for “jumbo” mortgages—ones too large for government backing—have prompted banks to keep those relatively safe and profitable loans on their books.  “There’s a misunderstanding in the market, an irrational belief that says private capital will emerge” if government-supported mortgage lending looks too expensive, says David Stevens, chief executive of the Mortgage Bankers Association who headed the FHA for two years until March.  Trying to “crowd-in” private money could be dicey if there aren’t broader structural changes to rebuild confidence, so investors don’t have to price in a hefty “uncertainty premium.”  To be sure, some academics say Fannie and Freddie should more aggressively reduce their role in supporting housing markets and test whether private investors will pick up the slack without substantially shocking housing markets.  Historically, most mortgages that weren’t held on bank balance sheets were issued as securities and backed by Fannie, Freddie, or the FHA. During the past decade, investment and mortgage banks jumped in and began issuing their own mortgage-backed securities. These private-label bonds, issued by the likes of Bear Stearns and Countrywide Financial, comprised riskier loans.

Because the banking sector isn’t large enough to hold more mortgages without expanding its deposit base, securitization markets are an integral part of any lending expansion. The private-label market seized up four years ago as investors faced big losses on investments that turned out to be far riskier than advertised. Just two new privately issued mortgage-bond deals have come to market since, one in April 2010 and another in February, and both consisted of mortgages to extremely qualified borrowers.  Investors are looking for standardized contracts that govern private-label deals, better loan disclosures and easily enforceable provisions to kick back loans that don’t meet agreed upon standards. They also want to eliminate conflicts of interest in the collection of loan payments, known as mortgage servicing.  Lawsuits between bond insurers, investors and issuers over the soundness of the underlying mortgages, and disputes over whether ownership of mortgages was properly assigned, further underscore the market breakdown. “There’s pretty much nobody that’s not being sued,” said Ryan Stark, a director at Deutsche Bank Securities, at an industry seminar last month.Regulators have addressed some of those problems with a flurry of rules, but some of them could also complicate a revival.

Policymakers are right to worry over indefinite government stewardship of the mortgage market, which makes laying the foundation for a functioning market all the more pressing. If it’s lacking, housing won’t exit a destructive cycle: one where prices fall because credit isn’t flowing, and where credit doesn’t flow because housing is weak.

Gasoline down, but not going much lower

Gasoline prices have dropped to $3.64 a gallon nationally from a peak of $3.98 in mid-May, according to AAA. Diesel prices at the pump have fallen more slowly but are beginning to catch up and are now averaging $3.97 a gallon.  “We may get down to that $3 to $3.25 neighborhood for some states that have lower taxes and cheaper supply,” said Tom Kloza, chief oil analyst at OPIS. But the coasts, specifically the Northeast, will not see as much relief because of its dependence on higher grade imported oil. The loss of Libya’s light sweet crude output continues to crimp those supplies.  “The price of the sweetest, lightest, least troublesome crude is to a great extent determining the price of gasoline on the coast. I do think you’re going to see prices drop more in the nation’s interiors. Chicago, Detroit, Minneapolis, Ohio. They saw some of the most spectacular increases. They’re going to drop more. For the coasts, and the country as a whole, we’re not really going to drop that much unless we see Brent prices come off,” Kloza said.

Andy Lipow, president of Lipow Oil Associates, said gasoline could fall as much as another $0.10 a gallon nationally by July 4, but after that, the situation is uncertain. “We could see further declines, but I think that’s heavily dependent on how the situation in Greece pans out and affects the value of the euro to the dollar,” he said.  He and Kloza said if Greece were to default, Brent would immediately drop because of the potential ripples across Europe’s economy. “If you’re hoping for $2.50 to $2.75 gas prices, you probably don’t realize it, but you’re hoping for a recession,” said Kloza.  An improving economy could also keep prices high. Kloza said his concern is that oil and gasoline could be pricier next winter and spring, if the global economy improves and supplies tighten.

Olick – investors using cash, credit shrinking

“Nothing like getting to work on a Monday morning and finding no fewer than four dismal reports on the housing market in my ‘Inbox.’  It’s not like anyone thought housing recovered over the weekend (that was pretty clear from the precious few ‘Open House’ signs in my neighborhood at least), but the outlook is deteriorating, and we’re just a day away from getting what is expected to be a weak report on existing home sales for May.  Let’s start with home prices from Fannie Mae’s Economics and Mortgage market Analysis Group, which predicts additional home price declines through the third quarter before flattening out at the end of 2011. ‘Ultimately, the labor market holds the key to a housing recovery, but job growth is needed in order to activate housing demand,’ said Fannie Mae Chief Economist Doug Duncan. ‘Hiring delays will continue to push out timing for the housing rebound.’  Okay, not exactly a shock, but never a good thing to hear analysts say, ‘growth is stalling.’

Now to a new point about investors, from the May Housing Market report from Campbell/Inside Mortgage Finance, which tracks several indices:  ‘The closely-watched survey’s traffic index for first-time homebuyers fell from 51.7 in April to 45.3 in May, while the traffic index for current homeowners fell from 56.1 to 44.8. Meanwhile, the traffic index for investors fell from 55.3 to 54.6. Any index value less than 50 indicates a decrease in traffic from the previous month.  The HousingPulse Survey’s Distressed Property Index, a key measure of the health of the U.S. housing market, fell slightly to 46.7% in April, although sales of distressed properties continued to account for nearly half of the market.  The monthly HousingPulse Survey also showed the proportion of first-time homebuyers in the housing market rose to 37.3% in May, from 35.7% in April. First-time homebuyers have difficulty getting mortgage financing and current homeowners are often locked into properties with negative home equity. That leaves investors to take up the slack,’ says research director for Campbell, Thomas Popik.

The trouble is that investors can’t get financing easily and are largely forced to use cash. In fact 74% bought with cash in May. The survey found a drop in investor activity in May from 23% to just over 21% of purchases. Most investors are using personal funds, like retirement funds, home equity lines of credit and savings accounts, which in itself is concerning; hedge funds and other larger investors make up a much smaller share of buyers, mainly in coastal regions.  All this weakness in housing continues to push more potential buyers to rent.  ‘As we have previously predicted, the U.S. apartment market has been recovering at an astounding pace,’ said Dr. Peter Muoio, senior principal of Maximus Advisors. ‘The sector will continue to benefit from the growing preference for renting over homeownership as well as rapid growth of the young adult population. We predict that vacancies will continue to decline while effective rents grow robustly during the next two years due to limited development of new multifamily properties during the recession.’

And there’s your bright side, if you happen to be an investor in the multi-family sector. I do think that the rental phenomenon will be temporary, but by temporary I mean a decade, not a year. Housing affordability is already enticing enough to bring the buyers back. We are still waiting for the mortgage market to sort itself out.”

Debt situation is like the sub-prime crisis

Monetary policy has been “the great enabler” that central banks used to keep interest rates at “absurdly low levels for years now” and this has encouraged politicians to believe that sovereign debt is “a lot cheaper than it really is,” says David Stockman, former director of the Office of Management and Budget.  “Politicians have not been willing to take the tough steps to impose the pain, the austerity and the tough trade offs that are required to control this,” Stockman said.  But things are changing as the Chinese aren’t buying as much sovereign debt because they have to take care of “their own inflation spiral,” and the Federal Reserve will have to end its second round of money printing soon, he added.  “The current situation is like the sub-prime mortgages crisis of a few years ago,” Stockman said.

Monetary stimulus, or quantitative easing, is officially due to end at the end of the month and talk of more stimulus has been rife, though to date Ben Bernanke, Federal Reserve chairman has kept silent on the issue, despite the debt ceiling deadline of August 2 nearing for Congress to agree on raising it further.

“The day of reckoning is rolling in, it may not be today or this week or this month but we’re very much towards the end of what can be sustained,” Stockman warned.  “In other words the balance sheets of the big countries have been used up. We’ve used ours, we don’t have any balance sheet room left. The ability of the central banks to monetize this debt which they have is coming to an end,” he added.

Prices up and down in midsize markets

Mid-sized cities, much like their larger counterparts, are experiencing a similar phenomenon where home prices are constantly fluctuating up and down.  It’s called a catfish recovery, Altos Research said yesterday. And in a catfish recovery, home prices bob up and down, making it hard to predict when a real recovery or downturn will officially take hold.  In Altos’ 20-city composite report on mid-sized cities, the research agency found home prices increased in 19 of 21 mid-cities surveyed last month. The mid-cities median price rose 1.11% in May, hitting $254,046, compared to $251,247 in April.  The mid-sized cities experiencing the largest increases were Orlando, Fla., Boise, Idaho, and Boulder, Colo., all of which saw price gains above 5.5%.  Altos concluded in its latest report that “headlines are still talking about a double-dip in housing and the mid-cities numbers provide further evidence of strength in prices across the board. The S&P/Case-Shiller numbers will report the same price strength in the late summer and early fall.”  The only mid-sized markets to report declines in the past three months were Honolulu, with price declines in the 2.64% range; Reno, Nev., which experienced a 0.33% decline; and Charleston, S.C. with a 0.24% drop.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
portfolio of nearly 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

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

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

Mortgage refinance up

Mortgage applications increased 7.8% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending May 13, 2011.  The Market Composite Index, a measure of mortgage loan application volume, increased 7.8% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 7.1% compared with the previous week. The Refinance Index increased 13.2% from the previous week and is at its highest level since the week ending December 10, 2010.  The seasonally adjusted Purchase Index decreased 3.2% from one week earlier. The unadjusted Purchase Index decreased 3.3% compared with the previous week and was 1.7% lower than the same week one year ago.  “The 30-year fixed mortgage rate is now 53 basis points below its 2011 peak, and has decreased for five straight weeks,” said Michael Fratantoni, MBA’s Vice President of Research. “Over this five week span, the refinance index has increased by about 33%. Refinance application volumes remain about 50% below the most recent peak last October. ”  The four week moving average for the seasonally adjusted Market Index is up 3.6%.  The four week moving average is down 2.9% for the seasonally adjusted Purchase Index, while this average is up 7.2% for the Refinance Index.  The refinance share of mortgage activity increased to 66.7% of total applications from 63.1% the previous week.  This is the largest refinance share observed since late January. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3% from 6.5% of total applications from the previous week.

Commodity prices down

Commodity prices crashed yesterday as disappointing housing data and a stronger dollar pushed already nervous investors out of the market.  Crude oil for June delivery lost 0.47%, falling 46 cents to $96.91 a barrel, while gold dropped 0.71%, or $10.60, to $1,480.00 an ounce. Silver declined 64 cents to $33.49 an ounce, a loss of 1.88%.  The stronger dollar and weak economic numbers are the primary factors driving commodity markets at the moment, according to Daniel Flynn, an energy trader at PFG Best.  The broad underlying fear is that the U.S. economy is slowing down, and traders have a slew of data to back that theory.  And Flynn specifically pointed to the end of the Federal Reserve’s second round of bond buying, eurozone debt worries and the political battle over the debt ceiling as destabilization factors.  ‘We’re in a correction mood on crude and gasoline … and it’s kind of wait and see on these other issues,’ Flynn said.

Olick – can lack of inventory save housing?

“The current supply of homes on the market is the best indicator of the future health of the housing market.  Let me say that again: Inventories matter.  Despite the fact that inventories of newly constructed homes fell to a 7.3 month supply in March from an 8.2 month supply in February, builders put 10.6% fewer holes in the ground in April.  You would think that all this new job creation, which usually goes hand in hand with housing starts, would push the starts up. Nope, both starts and permits fell in April.  Now a lot of folks are blaming this phenomenon on the weather, with tornadoes and rain throughout much of the Southeast. ‘The National Climatic Data Center reported that April ‘was an historic month for severe weather across the Southeast region,’ If we exclude the 23% m/m fall in housing starts in the South, overall starts would have risen to 599,000,’ notes Capital Economics’ senior economist Paul Dales.  I’m sorry, but I really don’t buy the weather story. Yes, I’m sure it had some effect, but permits were also down 4%, and home builder confidence is stuck in the basement, with builders reporting weak buyer traffic and a drop in sales expectations over the next six months. This does not make a builder build.

So back to my inventory issue.  A drop in inventories isn’t making the builders build, but what about the existing market inventories? The Realtors reported a small 1.5% rise in overall existing homes for sale in March, but the higher sales pace brought the months supply down to 8.4. Yes, I know, a four to six month supply is considered ‘healthy.’  We keep saying that existing home inventories are way too high, which is a roadblock to builders and to price improvement. Well guess what? The inventories are only high in some respects, given this bizarre, historic and bifurcated housing market in which we operate.  A new report from Redfin shows new listings of existing homes dropping across the nation compared to a year ago. Seattle listings down 20%, Chicago down 17%, Boston down 7% and Atlanta down 21% to name a few. When you look closer at what type of inventory they’re talking about, it’s the regular, non-distressed inventories that are falling the hardest. Bank-owned new listings are down too, but that’s largely thanks to all the robo-signing delays. It’s simple math. Sellers are afraid of still-falling prices.

‘In most of the major markets, at least on the coasts, we’re seeing inventory down 20 to 35%, so regular homeowners are not going to list their homes at these prices,’ says Redfin CEO Glenn Kelman. ‘If you had a home to sell, you’d probably wait a year if you could. You’d have to have a hole in your head to list it now because prices are down.’  Yes, there are a lot of distressed properties out there in some markets. Las Vegas is the only major market that saw an increase in inventories of homes for sale, but that’s because upwards of three quarters of that market is distressed homes. REO (bank owned) and short-sale inventory is high and will likely get higher in the coming months as banks process more foreclosures and push through short sales more efficiently. But organic, non-distressed sellers are holding off, and that is actually creating a phenomenon we haven’t seen since the housing boom.  ‘We’ve had bidding wars in Seattle, Portland, San Francisco, Atlanta, Washington DC, across the U.S. We have seen increased demand and limited supply, especially for those pretty homes that are listed by regular owners rather than the distressed inventory that’s listed by the banks,’ claims Kelman.  I have to say I believe him, because in my DC neighborhood, where there are very few foreclosures if any, there are also precious few listings. I’ve been watching my local listings for years, from boom to bust, and the current pickings are slim.

So dare I say it? Could this inventory issue be the catalyst to home price stability? I’m not talking about the big bad foreclosure markets, but the rest of the country, where demand is rising and the number of listings are falling. I hate to go back to that boring old theory of supply and demand, but might it actually prevail?”

New York mortgage probe

New York’s attorney general is investigating three Wall Street banks for their roles in the mortgage crisis that led to the downfall of the economy.  Attorney General Eric Schneiderman has requested meetings with staffers from Bank of America, Morgan Stanley and Goldman Sachs.  These and other Wall Street banks have been blamed by lawmakers and the public for exasperating the recession through their backing of risky home loans, and then bundling those loans into mortgage funds that were traded on the markets.  For example, during a congressional hearing in 2010, lawmakers lambasted Goldman CEO Lloyd Blankfein for his firm’s practice of buying parts of risky mortgages and then placing bets against those same mortgages.  Prosecutors have ramped up pressure against Wall Street finance companies to bring them to task for the roles they allegedly played in causing the economy to implode through a series of risky investments and over-leveraging.  Federal prosecutors sued Deutsche Bank on May 3, claiming that its MortgageIT unit made tens of thousands of bad loans and then fooled the Federal Housing Authority into insuring them. The government says that the scheme stuck taxpayers with having to pay hundreds of millions of dollars.  Deutsche Bank could face claims of at least $1 billion.

Delinquencies rise in April

Mortgages 30 or more days delinquent or in foreclosure totaled 6.38 million in April, a 2.3% increase from the previous month, according to Lender Processing Services (LPS).  The LPS “first look” monthly mortgage performance report showed a sudden increase in troubled loans in April after an 11% monthly drop in March. However, delinquencies are still 16.3% below levels seen one year ago. Overall, 7.97% of all loans in the LPS database are 30 or more days delinquent.  Of the 6.38 million properties in 30-day delinquency or worse, 4.2 million are not in foreclosure. There are also 1.9 million loans 90 days or more delinquent but not in foreclosure.  These mortgages are the exact ones making up the shadow inventory of foreclosures that are keeping downward pressure on home prices and stalling out a recovery.  According to another data provider, CoreLogic, the shadow inventory has declined slightly over the past year.  CoreLogic defines the shadow inventory as mortgages in at least 90-day delinquency and currently transitioning from foreclosure to REO. This supply of properties currently not on MLS systems but winding through the foreclosure process fell to 1.8 million in January 2011, down from 2 million the year before.  But this inventory will continue to see incoming loans for some time.  “In addition to the current shadow supply, there are nearly 2 million nondelinquent or current negative equity loans that are more than 50% upside down that will likely become shadow supply in the near future,” CoreLogic said.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month

   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 150 high-value, high-profit
      properties

    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     420 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!

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

      closed 2,786 sides for a closed sales volume of

      $392,912,927!  

    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building

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

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

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

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

Mortgage Applications Up

Mortgage applications increased 5.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 15, 2011.  The Market Composite Index, a measure of mortgage loan application volume, increased 5.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 5.9% compared with the previous week. The Refinance Index increased 2.7% from the previous week. The seasonally adjusted Purchase Index increased 10.0% to its highest level since December 3, 2010, driven largely by a 17.6% increase in Government purchase applications. The unadjusted Purchase Index increased 10.9% compared with the previous week and was 11.4% lower than the same week one year ago. 

“Purchase application volume jumped last week largely due to another sharp increase in applications for government loans. Borrowers were likely motivated to apply for loans before the scheduled increase in FHA insurance premiums,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “Refinance activity increased somewhat, as rates dropped to their lowest level in a month towards the end of the week.”  The four week moving average for the seasonally adjusted Market Index is down 2.9%. The four week moving average is up 2.5% for the seasonally adjusted Purchase Index, while this average is down 5.7% for the Refinance Index.  The refinance share of mortgage activity decreased to 58.5% of total applications from 60.3% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.5% from 5.9% of total applications from the previous week.

For Fannie/Freddie lenders to approve a mortgage to finance purchase of a condo, a large majority of the units — 70% — have to be already sold or under contract to individuals. Before 2009, the threshold was 51%.  If more than 30% are still owned by the company that built the complex or sponsored its conversion from rental units, the mortgage will be denied, no matter how qualified the buyer is.  Fannie and Freddie have also increased their emphasis on income relative to debt.  If someone’s total debt payments exceed 45% of income, the mortgage will be denied. In 2009, the limit was 55%. 

Some borrowers lost homes to foreclosure but then diligently rebuilt their financial health. Despite high credit scores, ample assets and income and steady employment, lenders are not allowed to finance their Fannie/Freddie mortgages if their foreclosures happened any time within the past seven years.  Before spring last year, the wait time was five years.  Fannie and Freddie also have gotten stricter in how they factor in missed payments on credit cards, auto loans and other debts in which the balances do not have to be paid off every month.  They used to be okay with a missed payment or two. Now, one missed payment will hit your debt-to-income ratio, because banks will add 5% of your outstanding loan balance to the debt part of the calculation.

Gold tops $1500

Gold prices topped a record $1,500 for the first time ever yesterday, shattering an important psychological barrier as investors seek out investments thought to be safe during times of upheaval.  The price spike also comes against the backdrop of market uncertainty that has sent investors looking for an alternative to the weak U.S. dollar. And gold has been the marquee beneficiary.  Standard & Poor’s lowered its outlook for America’s long-term debt to “negative” from “stable,” based on uncertainty surrounding the nation’s fiscal problems.  That’s exactly the type of news that creates a flight to safe haven assets like gold. 

Gold futures for June delivery hit an intraday record of $1,500.50 an ounce near midday, before retreating to settle at $1,495.10 an ounce — also a new record.  The price of gold has tracked steadily higher in recent months, as a cavalcade of unsettling world events created uncertainty in global markets.  Since the start of the year, investors have been forced to consider the implications of a Japanese tsunami, earthquake and nuclear disaster. That’s in addition to a spike in crude prices and a slew of revolts in the Middle East and North Africa.  Inflation — which gold is often used to hedge against — has been rising sharply in emerging economies and is becoming more of an issue in Europe.

Mortgages harder to get

Banks are reluctant to make loans without the Fannie and Freddie guarantee, and loans backed by them account for just about every mortgage written these days.  In 2009, the agencies lifted the minimum credit score that borrowers must have from 580 to 620. That’s probably for the best.  But they’ve pushed through a host of other requirements as well, and that means real estate deals don’t get done, even for some relatively low-risk borrowers.  “You can have one Fannie/Freddie guideline you violate and that gets you rejected,” said Alan Rosenbaum of GuardHill Financial.  According to the Federal Reserve, a quarter of all mortgage loan applicants get denied. Many other potential homebuyers never even try to get loans, said Jerry Howard, president of the National Association of Home Builders.

Slow comeback for offshore drilling

One year after BP’s Macondo well blew out – claiming 11 lives and sparking a ban on deepwater drilling — 11 new deepwater and 49 shallow water drilling permits have been issued, according to the federal agency that oversees offshore drilling.  That’s far less than usual. But given that most of these new permits have come in the last few months, it’s a welcome sign for many in the industry who feared for their livelihoods.  The government had stopped granting permits to drill new oil and gas wells, saying it needed time to reform a regulatory agency that was rife with conflicts of interest and too lax in its oversight. 

Those reform efforts are ongoing. So far they have included splitting the agency into two parts to separate the revenue collection division from the enforcement unit, strengthening safety and environmental requirements and hiring more inspectors.  Permits for shallow water wells resumed last summer, albeit it at a slower pace than many in the industry would have liked. The first deepwater permit since the spill was issued in February.  According to the U.S. Energy Information Agency, Gulf oil production will drop by 190,000 barrels a day in 2011 and 2012 due to permitting delays and natural field declines.  In total, the country produces just under 10 million barrels of oil a day and consumers use about 19, according to EIA.  Most Americans support increased offshore drilling. 69% are in favor of expanding the practice, up from 49% right after the spill.

National delinquency rate drops

The national delinquency rate continued to fall in March, according to the “First Look” report from Lender Processing Services, down to 7.8%.  The report provides month-end mortgage performance statistics from LPS’ loan-level database of nearly 40 million mortgages. The Jacksonville, Fla.-based firm will release more detailed reporting in its upcoming “Mortgage Monitor” report, which comes out at the end of this month. 

The delinquency rate has consistently decreased throughout all of 2011.  March’s figure is down 11.6% compared to February and down 19.4% compared to March 2010. This still accounts for an estimated 4.1 million homes that are 30-plus days delinquent, LPS reported. Approximately 2 million of those are seriously delinquent, meaning 90-plus days delinquent but not in foreclosure.  There are also an estimated 2.2 million homes that make up the foreclosure pre-sale inventory, LPS said.  Florida posted the highest percentage of noncurrent loans statewide in January, followed by Nevada, Mississippi, New Jersey and Georgia. The states with the least%age were, in descending order, Montana, Wyoming, Alaska, South Dakota and North Dakota.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 150 high-value, high-profit
      properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     420 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!

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

      closed 2,786 sides for a closed sales volume of

      $392,912,927!  
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

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

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

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And watch Nathan’s hilarious video all about the hype surrounding this launch:

http://www.shortsalekid.com

 **********************************************************
Foreclosure mess scares off homebuyers

The ongoing controversy surrounding foreclosures is taking its toll as homebuyers refused to look at distressed properties in October, and foreclosure sales suffered from delays, according to the latest Campbell/Inside Mortgage Finance Monthly Survey.  Both the share of home purchases involving distressed properties and average prices for foreclosed properties fell last month, the survey found.  News reports that major servicers were pulling REOs off the market, including some already under contract, spooked would-be homebuyers. The monthly survey found that 14% of owner-occupant homebuyers and 6% of investors refused to view foreclosed properties in October. Homebuyer fear was worse for short-sale properties where 30% of owner-occupant buyers, and 20% of investors refused to view these homes. 

Servicing problems disrupted both short sales and REO sales. Survey results show that 24% of closings scheduled for October were delayed or canceled due to issues with short sales, while 12% were delayed or canceled due to REO title issues.  Although distressed properties have dominated home sales for much of 2010, recent foreclosure problems helped trigger a dip in their share of the market last month, according to the survey. In October, distressed properties accounted for 44.3% of transactions tracked in the latest survey — down from 47.5% in September.  “It’s clear that decreased homebuyer demand for distressed properties has resulted in lower prices,” said Thomas Popik, research director for Campbell Surveys.  “With the foreclosure ‘fraud’ issue still out there, buyers are skeptical to purchase a REO. Until the fraud mess gets cleared up, most of our clients are second guessing their interest in REO properties,” reported a Florida real estate agent responding in the latest survey.

October home sales down

According to the RE/MAX National Housing Report released Friday, October home sales slid 9.8% from September and 30.2% compared to the year-ago period as seasonal slowdowns and the expired homebuyer’s tax credit took their toll.  Activity in October is in line with “the usual summer-to-fall selling pattern,” falling from September, according to RE/MAX.  Out of the 54 metropolitan areas surveyed, only Burlington, Vt., experienced a year-over-year increase in home sales activity. Sales were up 59.3% compared to 2009.  “It’s understandable that sales are lower than the same time last year since the data was artificially inflated in October 2009 by homebuyers rushing to take advantage of the tax credit,” said Margaret Kelly, CEO of RE/MAX. “We’re pleased that despite all the market swings, home prices have remained stable.”  

Home prices nationwide fell 0.68% in October compared to the same period in 2009. RE/MAX said 35 of the surveyed areas actually witnessed a price increase, while 18 witnessed a price decrease.  The inventory of houses on the market in October dropped 5.7% from September and 1.1% from October 2009. There is now a 9.7-month supply of houses on the market, according to the report. RE/MAX considers a six-month supply of home equilibrium between buyer and sellers.

The bill comes due for states

States have borrowed $41 billion from a federal fund to cover unemployment checks for their jobless residents, and now the bill is coming due.  Some 31 states will have to shell out an estimated $1.4 billion in interest payments on these loans next year. They had been spared this expense because of an obscure provision of the 2009 Recovery Act that expires on Dec. 31.  The burden to cover this cost will fall mainly on businesses, who will see their unemployment taxes rise. But states will be hit too since the increased expense will likely deter companies from hiring new employees.  “To escape the recession, we need economic recovery,” said Rochelle Webb, the president of the National Association of State Workforce Agencies and head of Arizona’s unemployment insurance system. “If local employers are facing increased taxes, they are going to say they can’t afford to expand their businesses.”  States use taxes from employers to pay 26 weeks of jobless claims. But the tax revenue hasn’t kept up with the huge spike in unemployment, forcing many states to borrow from the federal unemployment trust fund.  To pay the federal fund back, states have been raising taxes on companies. Two dozen states hiked such levies in 2010 and more are looking to do so again in 2011.  But the interest payments on the federal loans cannot be paid from these standard unemployment taxes. Some states have automatic “solvency” taxes that kick in. in others, lawmakers are wrestling with how to cover the tab — at a time when budget shortfalls are already a problem.

Olick – which way are mortgage rates going?

“You can’t time mortgage rates any more than you can time the stock market, but that hasn’t stopped any number of my friends and colleagues from begging me to tell them if rates are going up or heading further down.  I have no idea.  What I do know is that borrowers are more sensitive now to mortgage rates than ever before in my memory, even as rates continue to hover near record lows.  All you have to do is look at last week’s data on mortgage applications from the Mortgage Bankers Association. Rates jumped up over a quarter point, and applications to refinance plummeted 16.5%. Applications to purchase a home, which you would think would be far less sensitive to weekly rates, also dropped, albeit just 5%, but that was after many weeks of increases. 

I thought it might be interesting to take a look at how applications run with rates. Take a look first at the last three months of rates compared to refis. You can see a definite correlation that when rates go down, applications go up. That’s an easy one because a lot of refinancing is really just gambling with time.  Now look at the same comparison to purchase applications. You would think, again, that home buyers, looking at the big picture, would not move dramatically over a small shift in rates, but they do seem to move accordingly. This just tells me that home buyers today are more nervous, sensitive and cash-strapped than ever before.  So now to the question we all want answered, as we all try to figure out the Federal Reserve’s moves in quantitative easing II, where are rates going on the 30-year fixed (by far the loan of choice today)?

Peter Boockvar, Miller Tabak:  ‘In the short term, because of the Fed’s almost daily influence in the US treasury market with their asset purchases, it has gotten very difficult to predict where the 10-year and thus mortgage rates go from here, but I think the bond market action in response so far is a sign that they are going higher. That raises of course a huge risk for the Fed. Over the past 10 years, the average spread between the 10 year US Treasury yield and the average 30-year mortgage rate according to Bankrate.com is 155 bps, and as of today we are at 167 bps with Bankrate 30-year rates at 4.55% and the 10-year at 2.88%, so pretty close to average. Over the next 2 weeks the Treasury comes to market with more auctions and that will be key short test of sentiment to the current level of interest rates in light of recent events.’”

Banks short $100-$150 billion

The top 35 US banks will be short of between $100 billion and $150 billion in equity capital after the new Basel III global bank regulations are imposed, with 90% of the shortfall concentrated in the biggest six banks, according to Barclays Capital.  The BarCap study assumes the banks will need to hold top quality capital equal to 8% of their total assets, adjusted for risk.  This 8% tier one capital ratio, a key measure of bank strength, provides a one point cushion against falling below the effective global minimum of 7% set in September by the Basel Committee on Banking Supervision.  The Basel III reforms will hit banks in two ways – by gradually tightening the definition of what counts as tier one capital; and by forcing banks to increase the risk adjustment for big swathes of their businesses.  Banks can respond by increasing their capital through retained earnings or equity issuance or they can cut their risk-weighted assets through sell-offs and by cutting back on risky business lines.  Analysts say it is hard to predict the impact of the reforms on US banks because they have to apply Basel III risk-weighted asset changes as well as an earlier Basel II set of rules that European banks have been following for years.  Analysts at CLSA, an arm of Credit Agricole, estimate the 14 biggest US global and regional banks will need a total of $41 billion to achieve the same 8% tier one ratio, if both the Basel II and III changes are included.

Now for our real estate education section…

Beat the Decade of Decay

Have your investments beat the decade of decay? It’s a question every serious investor needs to ask or otherwise, you may be one of the millions of Americans at risk for a long delayed retirement or worse…no retirement at all. Take this starting statistics as an example of why the past decade has been responsible for a decline in the standard of living:

$100,000 from the year 2002 is now only worth $87,000 in just 8 short years!

At the same time, the cost of many items you use every day has gone up…dramatically. Insurance, healthcare and tuition have experienced double digit inflation. Food, fuel and commodities are approaching triple digit increases. Meanwhile, “safe” investments like Treasury Bonds are actually negative after adjusting for inflation. It’s no wonder many people are wondering what they can do to beat the decade of decay. Fortunately there are still some solutions available to those interested in restoring their financial future.

1. Invest a portion of your portfolio into foreign currencies or assets -including real estate. Markets can be volatile so unless you are an experienced investor, FOREX is not the place to get your feet wet. On the other hand, the extra-low cost of land makes foreign real estate an especially attractive investment for many small business owners, retirees or just those that would like to hedge their bets.

2. Invest in natural resources. Gold, oil, gas, wheat, corn and even water are just a few areas that have experienced explosive growth. Of course, the stock market has experienced more than its share of ups and downs much less junior stocks, OTC and other areas often dominated by emerging natural resource companies. Of course, there is another way to invest in natural resources…direct ownership! It doesn’t take a lot to generate impressive returns; some gas and oil leases pay anywhere from a few hundred dollars per acre to $20,000 per acre in additional income each year…and you still own the land!

3. Invest in fast cash. Investing in short sale real estate is one way to use small amounts of money to generate large returns in a short period of time while remaining in control of the risk. Where else can you generate double or even triple digit returns in a matter of months (sometimes only weeks)…all in your spare time?

4. Invest in the present – not the past. Forget what worked in the past…that was yesterday and even if it worked once, there is no guarantee it will work again. Sure, stocks have gone up but they also go down when you expect it least. The same applies to precious metals, money market accounts and nearly every other investment classification. Although there is a proper time and place for each of these, one investment remains a cornerstone to every portfolio…real estate. High leverage, low risk and an above average level of control make it a mainstay for investors large and small.

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
–

Real Estate News & Commentary by Chris McLaughlin, May 29, 2009

http://www.shortsalesrichesturbocharged.com

It’s LIVE! The Launch of the Year has begun .. find

out tonight what all the fuss is about at 7:00 PM ET, 4:00

PM PST tonight (Friday):

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Rise in mortgage rates threatens the housing market

Mortgage rates have risen to their highest level in the last 3 months. The average rate for a 30-year fixed mortgage jumped to 5.44% yesterday. This is in line with the steep increase in the yields of long-term treasury bonds. The 30-year rate was at a record low of 4.78% in April. The decision of the Federal Reserve to buy $1.25 trillion of mortgage securities and $300 billion in Treasury Notes this year led to a drop in mortgage rates early this year. Lower rates, in turn, led to an increase in mortgage applications. Analysts are now worried that the surge in mortgage rates could impact the economy adversely by curbing consumer spending. Mahesh Swaminathan, a mortgage strategist at Credit Suisse Group, says, “”The spike in rates has the potential to derail a lot of things.” According to Credit Suisse, a rise of 0.1% in mortgage rates translates into a 1% increase in home prices. Higher rates will hit home prices and sales. Ben Bernanke, Chairman of the Federal Reserve, referred to early signs of economic recovery as “green shoots” in an interview recently. T.J. Marta, a financial analyst, says, “If the Fed does not step in, you are going to see the ‘green shoots’ get frost bite.”

Recession hits shopping malls

Shopping malls in the U.S. are turning into ghost towns. A number of demographic factors along with the pressures of economic downturn are affecting the sector. General Properties, one of the largest shopping mall companies in the country, filed for bankruptcy last month. Department stores which occupy malls have been badly hit. Rating agencies have downgraded debt securities of leading retailers such as Macy’s and J.C. Penny to “junk” grade. Sears Holdings, a large consumer of mall space, is likely to close 23 stores in the next couple of months. According to Green Street Advisors, a real-estate research firm, in the 12 months ended March 31, shopping malls in the U.S. posted a 6.5% decline in tenants’ sales. Industry experts believe that a mall is in danger of failure if its annual sales per square foot figure falls below $250. By that rule of thumb, over 84 malls are already in the “dead” list. If the retail sector does not show signs of revival, Green Street estimates that over 100 properties will find a place in the dead-mall list by the end of this year. Burt P. Flickinger III, managing director of Strategic Resource Group, a research firm, says, “The shopping-center bankruptcies and the REIT bankruptcies are the ticking time bomb that people aren’t talking about.”

It is taking longer for receivables to get converted into cash

Cash is king, particularly in times of recession. According to The Hackett Group, an advisory firm, the 1,000 largest companies in the U.S. took 39.7 days to collect on sales in the fourth quarter of last year, as against 36.4 days a year earlier. In the first quarter of this year, the figure rose to 39.5 days. Inventory on hand rose to 31 days worth of sales in the first quarter of this year as against 28.2 days in the last quarter of last year. As companies look to conserve cash by delaying payments to vendors, they cause ripples of pain across the supply chain. Mark Tennant of The Hackett Group said, “If you make the wrong thing and sales reduce, you sit on it for a long time.” Companies are looking at cash flow management as an important management objective and some companies are tying executive bonus to cash flow.

Is recession abating?

Economists have predicted that the recession in the economy will end in the last quarter of this year. Chris Varvares, president of the National Association of Business Economists (NABE), says, “While the overall tone remains soft, there are emerging signs that the economy is stabilizing.” New data from different agencies seem to support NABE’s prognosis. According to the Commerce Department, new orders for durable goods rose 1.9% in April, the biggest increase in the last 16 months. A recent report from the Labor Department shows a drop in initial claims for state unemployment insurance by 13,000 to 623,000 in the week ended May 23. James Masi, chief fixed income strategist at the investment banking firm Stifel Nicolaus, said, “The data is consistent with the view that the rate of contraction is slowing, but we are still working our way through a recession. We haven’t hit a bottom yet.”

Oil price rise may impede economic recovery

Oil prices have risen 48% to $65 per barrel in the last five weeks. Oil, being an essential commodity in any economy, becomes dearer as its demand grows on account of recovery in the global economy. In addition, the U.S. dollar has depreciated against a basket of currencies in the last 5 weeks. A weak dollar leads to an increase in cost of imports including oil. Oil hit a record high of $147 per barrel last summer. While the current level is nowhere near $147, analysts are worried that the prospects of economic recovery may get hampered if oil prices continue to rise. With unemployment at a high, consumers are not in a position to absorb raising costs. Gasoline prices go up by 2.4 cents for every one dollar rise in crude. James Hamilton, an economics professor at the University of California, San Diego, says if the gasoline price increases, it could “postpone some of the recovery we’d been hoping for.”

Now on to our real estate investor education tips section…

Quick Tips to Making Money in a Down Economy

Still don’t believe real estate is the road to wealth in a down economy? History has demonstrated it time and time again but for those die-hard disbelievers, ask yourself a few simple questions….what else is likely to make money? Manufacturing? Maybe but who has the funds to buy? Retail?

Perhaps but discretionary spending is down…and falling fast – so fast in fact, that Americans actually turned a negative three percent savings rate into a positive five percent savings within the past two years. Think the financial market will come to the rescue – that’s a bet millions of American’s and other nations across the world are increasingly considered one of the most risky bets around.

So, what’s left? Well, real estate for one. Yes, it’s true real estate has dropped but that is actually the silver lining in what was an otherwise unrealistic pricing cloud. Here is a simple way to start small and build a secondary income, retirement fund or other financial goals for your family’s future..

Set aside the funds for your first down-payment. Whether you pull a little extra from savings, work a second job, take out a little loan or sell a few items is up to you…just put your hands on some extra cash that will provide enough to purchase your first short sale property. Not sure where to begin? Try all of the above or take time to evaluate whether or not you have access to any forms of private money – after all, with interest rates paying three percent or less in many instances – there are bound to be a few associates that would love the ability to get a real rate of return on their money.

Make offers – lots and lots of offers. There is an old saying in real estate – “You make money when you buy not when you sell”. Beginners to the short sale arena need to have a few solid “wins” under their belt before moving on to “bigger and better” deals. That means buying a major bargain…and buying a major bargain means putting out a lot of offers to see who takes the bait. Learn how to negotiate the right contract for your long term investment goals

Set a profit potential. For example, let’s assume you find a motivated seller who purchased a $200,000 home that would fetch a $150,000 once some deferred maintenance and upkeep was performed. Assuming you will have transaction fees and other expenses associated with the sale of the home, determine in advance what percentage of the price you will offer. Common examples are included below:

Private Investment Funds – 30 cents on the dollar. However, these are bundled bids that entail large numbers of properties and streamlined paperwork. Individual investors should not expect this type of extremely deep discount…although you could get lucky once in awhile.

Representative Groups – 50 cents on the dollar. Typically smaller than private investment funds, these are still larger than individual investors and may be able to take advantage of larger group deals.

Individual Investors – 50 to 80 cents on the dollar. Depending upon your total credit score, net worth, number of prior investments etc..

Establish your network. If you intend to hold or rent the property your network of realtors, brokers, tax experts and appraisers may be different than if you intend to flip or rent. Either way, begin establishing a team of trusted advisors and experts you can count on to help before, during and after the sale.

See you at the top!

Chris McLaughlin

http://www.shortsalesrichesturbocharged.com

PS:

It’s LIVE! The Launch of the Year has begun .. find

out tonight what all the fuss is about at 7:00 PM ET, 4:00

PM PST tonight (Friday):

https://www2.gotomeeting.com/register/133423498

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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 and Supervising Broker of one of Florida’s
largest Real Estate firms, running 4 different
offices, supporting nearly 450 agents, uniquely
positioning him to help thousands of investors
make money in the biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
* On twitter: http://twitter.com/mclaughlinchris
* On facebook:
http://www.facebook.com/addfriend.php?id=709199143

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This is your year, right??  Let’s make it happen!  Forget the headlines, forget all the negativity, and forget all the turmoil.  More millionaires are created during times like these than any other time … so are you ready to make it happen?  If so, be one of the 34 spots that we have left for our Tuesday night webinar entitled “Recession Proof Real Estate Investing: How to Buy Property with no out of pocket costs!”

The link is right here, so jump on this now:

https://www2.gotomeeting.com/register/655619177

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Citigroup and Morgan Stanley were in talks over the weekend about combining their brokerage division.  The Associated Press reported that Morgan Stanley may pay up to $3 billion for a 51% stake in Smith Barney, and then Morgan Stanley would be given five years to buy the rest of the brokerage firm.   This wouldn’t be the only change for brokerage firms lately, as Merrill Lynch sold to Bank of America amid all of the turmoil in the banking world.

In bailout news, the U.S. Senate may be voting this week to authorize the incoming Obama administration to tap the remaining $350 billion in TARP funds.  But the outgoing President was a bit defensive about the criticism of his administration’s handling of the event, and said that wouldn’t be asking Congress for it unless Obama wanted him to do so.  Bush noted: “I readily concede I chunked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression.”

And in welcome news to those Realtors and investors that are driving clients around looking for short sales and foreclosures, oil fell below $38 a barrel.  The continued slide is due to weak earnings from corporate America as well as concerns about macroeconomic issues that will reduce demand for oil and gas.

Now on to real estate investor education …

Short Sale Real Estate Versus Municipal Bonds

Outside of federal bonds, municipal bonds have historically been considered one of the safest places to park your cash especially in preparation for retirement; but, are they really as safe as they appear? If 2008 didn’t convince you of the futility of holding paper instruments or glorified promissory notes rather than hard assets, then perhaps a cold-hard look at the number may. 

Let’s examine muni bonds compared to real estate; how much cash flow can you realistically expect to generate from each? There was a time not all that long ago when financial advisors would pull out fancy charts showing how your retirement account would grow by 10 percent annually and viola’ …you would be wealthy and well established once retirement age arrived simply by contributing to your 401-K or setting aside a relatively modest fund each month.

Over the years those 10 percent returns were replaced with 8 percent returns on the charts but still a relatively robust expectation. As of 2008 the analysts and financial advisors are more likely to hide those charts or spend an extensive period of time talking about “historic norms” since the returns are elusive and principle loss is the name of the game for 2008 and beyond.  The fact is, today the average muni investor is happy to squeeze out 3 percent returns from those “safe” bond portfolio’s or dividend accounts.

Think about it…at 3 percent you aren’t even keeping pace with the government estimated rate of inflation…and you can expect to be “locked in” to that rate for 5, 10 or even 20 – 40 years. With the current rate of economic stimulus being pumped into the economy, few experts believe the rate of inflation will remain at the current “low” of 5 percent.

Now let’s compare cash flow – after all, the numbers are what really matter. To generate $1,500 per month income from  muni bonds at the current rate you would need to have invested $600,000; it’s worse for dividend paying stock since taxes would be required….plus, stocks are subject to dramatic increases and decreases putting your principle at risk should you be required to liquidate. On the other hand, short sale investors could easily generate $1,500 of income per month with as little as ONE paid in full piece of property used as a rental to generate retirement income. In fact, by investing the same $600,000 into short sale real estate rather than muni bonds or dividend paying stock a real estate investor could realistically expect triple, quadruple or even greater returns than those allotted by bonds.

The benefits don’t stop there! In addition to easily outperforming bonds, short sale real estate provides tremendous tax advantages over the life of the home and future price appreciation that keeps pace with inflation. As tangible assets, real estate can be used as collateral for other loans or expenses, increases net worth, generate monthly income in the form of rental real estate plus much more. Now as yourself, which makes more sense: $600,000 investment to generate $1,500 per month return or buying short sale real estate capable of producing multiples of that amount each and every month?

As tough economic times continue into 2009 and beyond, investors from all walks of life need to take steps to protect their own financial interests. Don’t leave your hard earned money in the hands of the same people that created this crisis; instead, crunch the numbers and find ways to grown your own income. One of the advantages of investing in short sale real estate is the ability to begin with next to nothing; you don’t need to have $600,000 sitting around in a bank account…in fact, millions of people have learned how to start small with just one or two homes and build a satisfying 2^nd income, retirement account or long term portfolio in their spare time.

——-

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/blog

P.S.: Don’t miss out on our upcoming webinar on Recession Proof investing this Tuesday at 9 PM ET!  There’s only 34 spots left, so jump on this now:

https://www2.gotomeeting.com/register/655619177

P.P.S.: If you wanted to get in on the Seven Figure REO product, sorry we’re SOLD OUT!  Congrats to the lucky folks who jumped on it when we told them to!

But there is a launch by our friend Mike Collins..get information on what he’s doing before that goes away too!

https://rehablist.infusionsoft.com/go/tvsmash/NJur1

—

——
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 on Tuesday night at 9 PM ET: 

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

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CNBC reported today that several private equity firms are circling the wagon to purchase IndyMac Bancorp, the huge bank that went belly up because of the subprime mess that is now run by the Federal Deposit Insurance Corporation (FDIC).  The prospective buyers include J.C. Flowers & Co., Dune Capital Management, and Paulson & Company.   In the small world of finance, IndyMac was founded in 1985 by Angelo Mozillo and David Loeb, who later went on to found Countrywide Financial, which is now owned by Bank of America.  Looks like the initial management team setup both companies for failure, huh?

And if you thought the housing mess was limited to just the United States, think again.  Reuters reported today that prices dropped 8.7% in England and Wales for 2008 and are expected to fall further. 

Now on to our real estate investing education section…

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.

——–

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 tomorrow night – Tuesday – 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

Mid-Day Market News & Commentary by Chris McLaughlin, October 10, 2008
http://www.shortsalesriches.com/welcome.html

LEARN THE 12 STRATEGIES FOR SHORT SALES RICHES ON OUR WEBINAR THIS COMING MONDAY!

Join us this Monday at 9 PM EST, 6 PM PST:

https://www2.gotomeeting.com/register/663312500

RSVP early as spaces are limited and it fills up FAST!

—-

Another crazy & volatile day today on the stock market with the Dow Jones Industrial Average plunging at one point nearly 700 points.  The market has literally plunged 21% in just 10 trading days, highlighting the lack of confidence that investors and consumers have in the world’s financial system.   At noon the Dow was down almost 400 points. 

President Bush spoke earlier today: “We are a prosperous nation with immense resources and a wide range of tools at our disposal,” the President said.  He spoke of the $700 billion Bailout package, noting that “The plan we are executing is aggressive. It is the right plan. It will take time to have its full impact. It is flexible enough to adapt as the situation changes. And it is big enough to work.” 

Some real estate transactions are also falling victim to potential homeowners that might have lost a lot of their downpayment in the last week.  The National Association of Home Builders reported that contract cancellations have spiked to 30% versus its more standard rate of 20%.  And of course during the housing boom this rate was as low as 5%.  

But, as Donald Trump noted on Larry King’s CNN, there’s never been a better time to buy a house…so I expect more and more investors pulling money out of the stock market and buying secure assets like homes that they can rent.

Now, on to our real estate investor education section …

What About those New FDIC Limits? Wolves in Waiting

One of the most common reasons to begin buying real estate via short sales is a lack of viable alternatives…what else are you going to do with your money? Stocks? Bonds? Savings Accounts? Not only are each of these options subject to major downturns but they are becoming increasingly risky due to a loss of purchasing power due to rising inflation as well as the potential for collapse. The bailout isn’t working and your financial survival may depend upon owning hard assets. So, what about liquidity and cash savings? Consider your options carefully…

The newly increased FDIC insurance limits have been making headlines for days – reportedly as a major boon to individual investors and savers. Now individuals can place up to $250,000 (up from a former $100,000) into bank accounts that are fully insured by Uncle Sam. For those seeking safety (and who isn’t?) it might seem like great news…don’t believe a word of it. Here is what the media isn’t telling you…

1.     The increased FDIC insurance limits are set to expire at the end of 2009. What will you do with your money then? No, you won’t be putting them into savings bonds – see #2 – and you may have noticed a decidedly un-bullish trend on Wall Street.

2.     Savings Bonds have been severely limited. In a nearly unprecedented move earlier in the year, the United States Treasury set major restrictions on the purchase of Treasury Bonds allowing only $5,000 of any one type during the year and making paper bonds more difficult to purchase than ever before.

3.     Bad Balance Sheets Acquire New Funds! Here is where you need to do your homework and understand what is taking place. In the past, large investment banks operated very differently than those that hold your checking and savings account. They had different rules and the funds didn’t mix. With the demise of the investment banking model and the recent consolidation of major investment banks with regular banks, the massive liabilities and bad debt held by the investment bank is now being “offset” by the newly acquired assets of regular banks. Those “real funds” –ie, your savings accounts and other hard-earned money – held by the bank, are now being used to prop up the balance sheets of former mega investment banks with the full “faith and credit” of the United States government which has now agreed to guarantee your funds up to $250,000…at least until the end of next year.

Unfortunately, there are a few potential problems with this scenario:

The FDIC only has enough reserves to cover one mega bail-out. Afterwards, their options are either to continue to print money out of thin air…which could lead to hyper-inflation…or only pay a percentage of guaranteed funds. Either way – you lose.

During times of severe financial crisis, banks control your money – not you. They get to decide how much of it you can withdraw at any one point and time and how frequently.  

The same reason banks don’t want to lend money to one another…and nations are beginning to cut back as well…is the same reason you should think twice about “lending” your hard earned money to these same big investment banks. Yes, it might help offset their balance sheets and stabilize the economy but at what cost to your financial future?

Remember, real estate has real or intrinsic value. It provides shelter, safety and satisfaction during times of financial and economic uncertainty. It can be traded, sold, swapped, lived in, farmed, mined or worked in during any type of situation. Paper based stocks and bonds can – and have – lost all their value practically overnight. Bank accounts can become worthless and even governments can rise or fall. Hard assets like real estate or commodities perform the best during times of economic difficulty but few people have the ability to store up vats of grain or barrels of oil in the back yard.

Frightened by future economic prospects? Think twice about building a big savings account and put it into something tangible like short sale real estate instead!

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.: 

Join us for our fr’ee Webinar Monday night at 9 PM EST/ 6 PM PST that will reveal the Top 12 Strategies on Getting Rich with Short Sales:

https://www2.gotomeeting.com/register/663312500

P.P.S.: If you really want to get started building your wealth, now that recognize that your 401(k) isn’t going to do it, what are you waiting for?  Take action today! A journey of a thousand miles begins with a single step. Take that step right now by clicking here:

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