real estate investing

Smart Real Estate News & Commentary by Chris McLaughlin November 21, 2011

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Home sales probably fell again

Sales of previously owned homes in the US probably declined in October for a second month as falling property values failed to sway buyers, economists said before a report today.  Purchases decreased 2.2% last month to a 4.8 million annual rate, according to the median forecast of 65 economists surveyed by Bloomberg News.  Unemployment hovering around 9%, falling appraisals and strict lending rules will probably keep hurting demand even after homes lost 32% of their value from the 2006 peak and mortgage rates sank to record lows. The end of a temporary halt on foreclosures stemming from faulty seizures may push more homes on the market and trigger even more price decreases.  The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ sales estimates ranged from 4.6 million to 5.05 million following September’s 4.91 million pace.  Housing, the industry that induced the recession, is still struggling to stabilize as home prices slump. The median value of an existing house fell 3.5% in September from a year earlier to $165,400, according to NAR data. The value plunged from a July 2006 record of $230,300 to a low of $156,100 in February.

A growing glut of seized properties threatens to drag prices down further. In the third quarter, US lenders started foreclosures on more homes, the first increase in a year, as bank moratoriums that clogged the pipeline dissipated. There were 3.48 million previously owned homes for sale in September, above levels before the recession began in 2007.  Sliding prices and growing unemployment have discouraged household formation and left some people with loans that prevent them from boosting outlays on other goods and services. With the housing market weighing on growth, Federal Reserve officials have called for more accommodative policy.  Fed Bank of New York President William C. Dudley said last week that if the central bank opted to purchase more bonds to lower interest rates and stimulate the economy, “it might make sense” for much of those to consist of mortgage-backed securities, which would have a “greater direct impact on the housing market.”

Super-committee about to fail?

With the US congressional joint select committee on deficit reduction — or “super committee” as it has become known — needing to agree on cuts of $1.5 trillion within the next 48 hours, HSBC analysts are predicting Washington will agree to put off making tough decisions.  “Difficult decisions may be delayed. The super committee may come up with a procrastination plan that specifies targets for spending cuts and revenue increases, but leaves the details to congressional committees to write the necessary tax and spending legislation,” Kevin Logan, chief US economist at HSBC, wrote in a research note as the deadline neared.  With time running out, Logan said he expects the difficult decisions to be kicked back to the very congressional committees who couldn’t agree on a deficit reduction plan in the first place.  With the deficit battle likely to dominate in a presidential election year, Logan is not optimistic. “Failure to come up with the required deficit reduction will, in theory, trigger across-the-board spending cuts called sequestration from January 2013,” he wrote.  This is likely to mean that the markets focus will turn from Europe’s debt woes to America’s huge debt pile, something the credit rating agencies will react to sooner or later, according to Logan.  “The rating agencies might be tolerant of this for a while, but failure to make clear progress could lead to downgrades of the US sovereign credit rating at some point next year,” he added.

Another foreclosure wave coming

The US housing market may be in for yet another crush of foreclosures, according o the Center for Responsible Lending.  About 2.7 million households that took out mortgages between 2004 and 2008 have already lost their homes to foreclosure. Now, there are 3.6 million more homeowners at “immediate, serious risk” of default. And this number does not even include loans that began before 2004.  While the majority of Americans who have lost their homes or are seriously delinquent are white, foreclosure rates for minority borrowers are twice as high. In fact, 25% of all black and Hispanic mortgage holders are in trouble compared to 12% of white borrowers.  The Center for Responsible Lending says minorities were more likely to receive high-cost, subprime loans than other borrowers, which helps to explain why they are at more risk. African-Americans and Latinos with good credit (above 660) were three times more likely to receive high interest rate loans as white borrowers with the same rating.

MF Global money probably “just gone”

Hundreds of millions of dollars of customer funds missing from MF Global is probably just gone.  A lawyer briefed on the progress of the investigation being undertaken by various government regulators tells me that investigators now believe MF Global used customer money to make trades, such as buying sovereign debt securities.  Earlier this week, there was hope the money would turn out to be held as collateral in an account with one of MF Global’s creditors, such as JP Morgan Chase or Deutsche Bank. But that does not now seem to be the case.  “What the investigation is focusing on now is who, if anyone, knew it was client money,” the lawyer tells me.  MF Global used customer funds in a variety of ways, he says. In the futures business, MF Global was allowed to use “idle” cash in customer accounts to make investments on its own behalf. It would buy bonds and keep the coupon on them. The higher the coupon, the more profitable this was for the company.  The firm would also “borrow” from its clients accounts, posting collateral such as US Treasurys. But as the New York Times has reported, the firm stopped backing the loans from customer accounts sometime in October. Basically, they just took the cash out.  If this is right, it is probably impossible to recover the missing funds.

Moody’s warns French credit rating may be in trouble

A rise in interest rates on French government debt and weaker growth prospects could be negative for the outlook on France’s credit rating, Moody’s warned in a report on Monday, adding to pressure on European debt markets.  Worries that France has the weakest economic fundamentals among the euro’s six AAA-rated countries have drawn the euro zone’s second largest economy into the firing line in the debt crisis this month.  The rating agency said the deteriorating market climate was a threat to the country’s credit outlook, though not at this stage to its actual rating.  “Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,” Senior Credit Officer Alexander Kockerbeck said in Moody’s Weekly Credit Outlook dated November 21.  “As we noted in recent publications, the deterioration in debt metrics and the potential for further liabilities to emerge are exerting pressure on France’s creditworthiness and the stable outlook (though not at this stage the level) of the government’s Aaa debt rating,” the Moody’s note read.  The yield differential between French and German 10-year government bonds rose above 200 basis points last week, a new euro-era high.  Moody’s said that at that spread level, France pays nearly twice as much as Germany for long-term funding, adding that a 100 basis point increase in yields roughly equates to an additional three billion euros in yearly funding costs.

Freddie Mac clamps down on short sale fraud

Freddie Mac will force parties involved in a short sale to sign affidavits making them liable for their negligent or intentional misrepresentations in the deal, an effort to be sure it’s an arms-length transaction, according to guidance released Friday.  The new affidavit will go into effect Jan. 1, but Freddie is asking servicers to implement the change immediately to fight fraud. However this, and other changes, are meant to expedite the process of getting borrowers in default relocated.  In August, the government-sponsored enterprise alerted real estate agents to the rise in shady short sale deals. The main concern is flopping. There is a growing trend of real estate agents on the buy-side of the deal failing to disclose other bids on the property, rigging the sale at a lower price.  The fraudsters can then flip it, sometimes the same day, and pocket the difference.

In the third quarter, Freddie completed 11,744 short sales and deeds-in-lieu of foreclosure, according to its financial statement. It completed nearly 33,500 of these two foreclosure alternatives in all of 2011.  CoreLogic noted an increase in property fraud in 2011 tied specifically to flopping.  “With this change, you will have more information to identify potential mortgage fraud and a clearer understanding of the intent of all parties involved in the real estate transaction,” Freddie said in the guidance to mortgage servicers.  The guidance put out Friday also trimmed other rules to help servicers speed up the loss-mitigation process.  The GSE also required all amounts paid in the transaction, including anything going to the borrower, be documented fully in the HUD-1 Settlement Statement.  Freddie eliminated the requirement that borrowers more than 120 days delinquent have to list their home for sale before becoming eligible for a deed-in-lieu.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin October 27, 2011

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New foreclosure plan

Big investors are showing interest in an evolving Obama administration plan to sell off foreclosed homes, although the government will have to make the offer sweet enough to coax private funds. The White House is assessing how best to encourage private companies and investors to snap up foreclosed properties held by the government and convert them into rentals. Officials want private partners to take over as much as $30 billion in single-family properties that are currently on the books of government-run Fannie Mae, Freddie Mac and the Federal Housing Administration. Several money managers with large fixed income funds are interested, according to sources, and a request for ideas on how to construct a program received nearly 4,000 responses. The foreclosure conversion program would come as the next step to complement other government supports for housing, including an expanded refinance program announced on Monday.

The main question for prospective investors, which include broker-dealers and firms already overseeing similar rental programs, is the type of financing the government will make available—an issue officials are still struggling with. “In order to get a better bid, there has to be some incentive involved to get qualified investors involved,” said Ron D’Vari, co-founder and chief executive of NewOak Capital. “The reality is not a lack of interest, but so far it looks like a lack of financing.” Incentives could include low interest rates, tax benefits or some type of rental assistance, said D’Vari, a portfolio adviser who has been involved in mini-bulk auctions of real estate-owned properties, or REOs, in California. REO properties are those acquired by a lender, whether a bank or the government, after an unsuccessful auction attempt. Fannie Mae, Freddie Mac and the FHA own about 250,000 properties, close to a third of the country’s REO pool.

One key challenge would be finding big enough blocks of properties in specific geographic areas that could be sold at one time. Analysts say this is what it would take to make the program attractive to large institutional investors. The transaction and liability costs property managers will face as they try to bring deserted units back up to code also pose a hurdle. The government also needs to determine how it will protect taxpayers, and it might explore ways to pair up with investors and allow Fannie Mae, Freddie Mac and FHA to keep some type of an ownership stake in the rental properties. A public-private partnership, somewhat along the lines of a program the Treasury tried to use to soak up toxic bank assets during the financial crisis, would allow the government to gain from the sales. Fannie Mae, Freddie Mac and the FHA have already undertaken some small efforts to reduce the backlog of foreclosed homes. They have donated a few vacant properties for demolition and have held some small auctions. Having already received $141 billion in taxpayer support since being seized by the government in 2008, Fannie Mae and Freddie are under enormous pressure to make sure they maximize the returns from the properties they hold. “This has got to be thought out. Fannie and Freddie would need to assess if they are getting the return they need from a rental,” said Ken H. Johnson, a real estate professor at Florida International University. Johnson said one way to get over the hurdle would be for the two agencies to be given an explicit mission of market stabilization.

2.5% growth, jobless claims hold steady

US economic growth increased at its fastest in a year in the third quarter as consumers and businesses set aside fears about the recovery and stepped up spending, creating momentum that could carry into the final three months of the year. At the same time, slightly fewer people sought unemployment benefits last week, though level remains elevated above 400,000. Though part of the increase came from the reversal of temporary factors that had restrained growth, the expansion was a welcome relief for an economy that looked on the brink of recession just weeks ago. U.S. gross domestic product expanded at a 2.5% annual rate in the third quarter, the Commerce Department said in its first estimate on Thursday. That was a big acceleration from the 1.3% pace in the April-June quarter and matched economists’ expectations. Consumer spending in the last quarter was the strongest since the fourth quarter of 2010, while business investment spending was the fastest in more than a year. Even though consumer spending was stronger, businesses were slow in stocking up their warehouses. The peppier spending and a slower pace of inventory accumulation by businesses will lay a base for a solid fourth quarter, but a slowdown in Europe and the exhaustion of pent-up U.S. demand could leave a weak spot early in 2012. And the recovery’s pace is still too weak to lower a jobless rate that has been stuck above 9% for five straight months.

Olick – new sales increase, prices tank

“Sales of newly built homes in September came in well over expectations, and stocks of the big builders took a little tick up on the news. They then dropped off pretty precipitously, as analysts weighed in on what is behind that nice headline number. First of all, these particular monthly numbers are based on signed contracts to buy a home, not closings, which provide the numbers for existing home sales. This data set is extremely volatile due to how small the survey pool is. And then of course you have these huge seasonal adjustments, which are important given housing’s distinct seasonality, but they can really skew the reality. So, the headline number is that sales (signed contracts) rose 5.7% from a seasonally adjusted annualized rate of 296,000 in August to 313,000 in September. Take out the seasonal adjustment, and don’t annualize (the expectation of how many homes will sell this year based on the monthly rate) and according to the report, builders sold 25,000 homes in August and 25,000 homes in September. No change. The good news is that builders usually sell fewer homes in September than August, and they sold the same, hence the seasonal bump up, the bad news is that 25,000 is a pitifully low number of sales, actually tying a record low.

We can haggle over sales numbers ’til the cows come home (if their home isn’t in foreclosure), but we really need to focus on the pricing numbers. The price of a newly built home fell 10.4% in September year over year to $204,400.00, which is about $200 higher than the low of 2003. Builders are being forced to compete with existing home sale prices, one third of which are distressed properties (foreclosures and short sales). The median existing home sale price in September was $165,400, so that’s still a pretty big premium. Unfortunately, given the high cost of materials these days and difficulty in obtaining construction loans, builders take every dollar drop pretty hard. ‘The pricing issue would generally hit everyone and would result in lower margins (and some additional impairments),’ notes Dan Oppenheim at Credit Suisse. Of course the pricing numbers also have noise in them. ‘Those particular price figures are not adjusted for the mix of new homes being built, so the rate of decline probably also reflects the switch to building smaller homes rather than the so-called ‘McMansions’ that were popular during the boom years,’ writes Paul Ashworth at Capital Economics, who says a turnaround in the new home market may still be a couple of years away.”

Will the super-committee slow spending this Christmas?
The Super Committee has been negotiating behind closed doors since September, and they have until Nov. 23 — that’s the day before Thanksgiving — to reach an agreement on at least $1.2 trillion in deficit reduction measures. Some retail experts fear that further political gridlock in Washington will make American consumers even more hesitant to spend during the busiest shopping period of the year. When the Super Committee was forged out of the debate on whether to raise the debt ceiling, consumers reigned in spending. One of the problems plaguing retailers is a lack of exciting new products to inspire consumers to shop, says Marshal Cohen, chief industry analyst at NPD Group. “There is almost nothing new…to get the consumer excited beyond just the traditional holiday categories,” Cohen says. Against this backdrop, the political discussions could create a big distraction for consumers. And that’s something retailers don’t want when most analysts, including Cohen, expect marginal growth at best this holiday season. It also may be yet another reason for consumers to be downbeat. Numerous consumer surveys have shown that consumers are worried about the economy and about their rising household expenses. One of the latest, a survey conducted by Deloitte, showed that two-thirds of consumers expect the economy to stay the same or weaken next year. As a result many consumers reported that they would be trimming their gift list and 42% said they planned to spend less this year.

Underwater mortgages in Las Vegas fall further

The September median home price in Las Vegas fell 11.5% from one year ago and remains 63% below the peak, according to analytics firm DataQuick. A home that sold for $312,000 during the peak of the housing bubble in November 2006 is now worth $115,000. September was the 12th straight month the median home price fell from the year before. The decline has fallen to levels not seen since the mid-1990s, DataQuick said. “This can be attributed to several factors: home price depreciation; robust sales of low-cost foreclosures; robust sales to investors, who mainly target low-cost properties; extraordinarily low new-home sales (new homes tend to sell for more than resale homes); and higher-than-usual condo resales (condos tend to be the least expensive homes),” DataQuick said.

President Obama gave a speech Monday in Vegas, promoting changes to help more underwater borrowers refinance announced the same day. The Federal Housing Finance Agency will waive some representation and warranty risk, appraisal requirements, and negative equity caps for the Home Affordable Refinance Program. How effective the program is remains in question for the nearly 4 million Fannie Mae and Freddie Mac borrowers underwater. In Vegas, 80% of the local homeowners owe more on their mortgage than the home is worth, according to RealtyTrac. Principal reduction remains the largest tool yet to be taken up by the largest banks or by any government agency on a large scale to combat the negative equity problem in the U.S.

Department of Housing and Urban Development Secretary Shaun Donovan said principal reduction will be a major function of the still pending attorneys general settlement with the largest mortgage servicers. Many Republican AGs and lawmakers say such lengths would only promote strategic default, not entice more people to stay current on their mortgage. Meanwhile, the number of default notices in Vegas increased 190% from July to August, according to DataQuick. More than 4,700 default notices were filed, led by Bank of America, the same findings states along the West Coast found. “It is unclear whether the higher levels of NODs seen in August and September are the beginning of a longer-term upward trend in default filings, which could mean far more distressed properties on the market and more downward pressure on home prices,” DataQuick said.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin October 26, 2011

Forward this e-mail to your friends!
Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

MBA – mortgage applications up

Mortgage applications increased 4.9% week from one earlier, which included the Columbus Day holiday, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 21, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 4.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 4.8% compared with the previous week. The Refinance Index increased 4.4% from the previous week. The seasonally adjusted Purchase Index increased 6.4% from one week earlier. The unadjusted Purchase Index increased 6.1% compared with the previous week and was 2.7% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 3.61%. The four week moving average is down 0.71% for the seasonally adjusted Purchase Index, while this average is down 4.41% for the Refinance Index. The refinance share of mortgage activity decreased to 77.3% of total applications from 77.6% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9% from 5.8% of total applications from the previous week. During the month of September, the investor share of applications for home purchase was at 6.0%, a slight increase from 5.7% in August. This change was led by an increase in the Mountain region. In addition, the share of purchase mortgages for second homes decreased to 5.8% in September from 6.0% in August.

Durable goods demand higher, sort of

The Commerce Department said on Wednesday durable goods orders excluding transportation rose 1.7% after falling 0.4% in August. The rise beat economists expectations for a 0.4% increase. But a drop in demand for transportation equipment as bookings for motor vehicles and civilian aircraft declined pulled down overall orders 0.8%. That followed a 0.1% dip in August and was in line with economists expectations for a 0.9% fall. Transportation orders fell 7.5%, the largest decline since April. The tenor of the report was further strengthened by a 2.4% jump in non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending. That was the largest increase since March. That category increased 0.5% in August, and last months increase was well above economists expectations for a 0.5% rise. The report was further evidence that economic activity picked up in the third quarter after a weak first half. Though manufacturing has slowed in recent months, the September durable goods report pointed to underlying resilience.

Move houses, not mortgages

Rep. Randy Neugebauer (R-Texas) said the Obama administration should be focused on helping the private market move through the backlog of foreclosures instead of merely shifting wealth from investors to borrowers in the new refinancing changes announced this week. The Federal Housing Finance Agency announced new changes to the Home Affordable Refinance Program designed to make it easier for some 4 million underwater borrowers, who are current on their payments, refinance into a lower-rate loan. Most Republicans remained silent on the changes so far as they wait for how much the shift will cost Fannie Mae and Freddie Mac, which already owe taxpayers $142 billion in bailouts. “This is not a housing initiative. This is more of a stimulus plan,” Neugebauer said. “They’re using Fannie and Freddie to stimulate the economy and what we’ve learned is that is not working.”

House Republicans sent a letter to FHFA Acting Director Edward DeMarco last week, asking for the taxpayer cost for HARP 2.0, but his office is still working on that. Fannie and Freddie are working too on the specific guidance for the revamped program, due out by Nov. 15, but already many are doubting how effective the stimulus – as Neugebauer calls it – will be. Neugebauer said the foreclosure process simply takes too long. According to Lender Processing Services, the mortgages currently entering the foreclosure process have been delinquent an average 611 days. “We’ve got a lot of inventory in limbo here, and it continues to freeze the market place and compress prices,” Neugebauer said. Outside of new government cuts and calls to repeal certain provisions under the Dodd-Frank Act, ideas to fix the housing market and spur on a recovery have been scarce. But Rep. Scott Garrett (R-N.J.) will unveil a plan tomorrow to ensure a return of private financing for future mortgages without government support. Neugebauer held several talks with Garrett when developing the plan. While Neugebauer wouldn’t give specifics on the plan just yet, he promised it would provide a concrete plan, something the markets have gone without since the crisis. “I think a lot of the ideas are going to be common sense ideas,” Neugebauer said. “It will give the market some certainty.”

The Obama administration is working on a plan to better liquidate foreclosed properties held by the government through the Department of Housing and Urban Development, Fannie Mae and Freddie Mac. Some, the president said Monday, would be converted into rentals. Neugebauer supported that idea so long as the government doesn’t dictate to private investors what should be rented, what should be sold and when.

Ex-Goldman board member arrested

Rajat K. Gupta, a former Goldman Sachs director and McKinsey & Company chief executive, surrendered to the Federal Bureau of Investigation this morning to face charges of insider trading, the latest development in the government’s multiyear crackdown on illegal activity on Wall Street. In charging Mr. Gupta, the government will tie up one of the biggest loose ends resulting from the investigation into the Galleon Group, which began nearly five years ago at the Securities and Exchange Commission. Since then, more than two dozen people have pleaded guilty or been convicted of swapping illegal tips around company earnings and other major corporate events. Raj Rajaratnam, the Galleon co-founder, was sentenced to 11 years in prison this month for making tens of millions of dollars by trading on confidential tips. Authorities have broadly pursued insider trading on Wall Street, exacting guilty pleas from a chemist at the Federal Drug Administration, among others, as recently as this month. While the majority of those charged have been traders and analysts on Wall Street, Mr. Gupta, 62, is the first to be implicated from the upper echelons of corporate America. The charges are a stunning reversal of fortunes for Mr. Gupta. A native of India, he graduated from Harvard Business School and had a global profile as an adviser to some of the nation’s most iconic companies. He served as a director at Goldman, Procter & Gamble and the parent company of American Airlines. In addition to his professional pedigree, Mr. Gupta was a noted philanthropist, serving in coveted posts with the Bill and Melinda Gates Foundation.

DSNews.com – FHFA says prices fell

FHFA reported yesterday that home prices in the US fell 0.1% on a seasonally adjusted basis from July to August. In addition, the previously reported 0.8% increase recorded for July was revised to reflect no change. The federal agency’s index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac, which in today’s marketplace constitutes the lion’s share of new mortgages. Data released the very same day by Standard & Poor’s showed a 0.2% increase between July and August for the Case-Shiller home price index, which tracks sales transactions in 20 major cities. It should be noted that FHFA’s numbers are seasonally adjusted, while S&P’s are not. After adjusting for seasonal factors S&P’s reading flatlines, with absolutely no change in home prices between July and August, however, S&P stresses that its measurements should be assessed using the non-seasonally adjusted data given the volatility of today’s market.

In addition, Patrick Newport, US economist for IHS Global Insight, points out that the FHFA index incorporates the latest month of data, while the Case-Shiller index is a three-month moving average. According to Newport, FHFA’s single-month analysis makes it the “better barometer.” For the 12 months ending in August, FHFA’s index shows US prices fell 4.0%. The Case-Shiller index recorded an annual decline of 3.8% for the same period. Seasonal shifts are not factored into year-over-year price changes. FHFA says home prices are at roughly the same level seen in February 2004. S&P’s Case-Shiller index puts home prices at circa mid-2003. Paul Ashworth, chief US economist at Capital Economics says FHFA’s index now suggests that even if the housing market did muster a little upward momentum in the spring, that rally has faded quickly over the summer. “Anyone expecting a rapid recovery in prices will be very disappointed,” Ashworth said. “At best, house prices will be unchanged next year and in 2013 too.”

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin October 28, 2011

Forward this e-mail to your friends!
Then they can subscribe directly at the following link:

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*** Join Chris’ Facebook Fan Page–>

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*** Follow Chris on Twitter–>

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

Short sales take off in Mobile, Alabama

Foreclosures and short sales accounted for 40% of all sales in Mobile County for the 12 months that ended Oct. 1, according to the Multiple Listing Service for the Mobile Area Association of Realtors. Twenty-five% of new listings during that same period were distressed properties. In Baldwin County, 43% of all home sales during that period were foreclosures and short sales, according to the MLS, while distressed properties made up 28% of the new listings. The situation is not unique to coastal Alabama. After falling for three quarters, foreclosure activity is slowly ramping up again, according to James Saccacio, chief executive officer of RealtyTrac, an online monitor of the nation’s foreclosure market. “Third quarter foreclosure activity increased marginally from the previous quarter, breaking a trend of three consecutive quarterly decreases that started in the fourth quarter of 2010,” Saccacio said. The increase was fueled by a 14% jump in new default notices, “indicating that lenders are cautiously throwing more wood into the foreclosure fireplace.”

More than 100 coastal properties were scheduled to be sold at foreclosure sale last week. About one-third of them sold at prices from the low $20s to $300,000 or more, with the average about $150,000 or less. Alabama had 1,508 filings in September, according to RealtyTrac.com. Mobile County had 243 foreclosure listings last month with the highest number in the city of Mobile at 167. The average foreclosure sales price was $77,614. Baldwin County had 135 foreclosure listings in September. Fairhope and Daphne had the largest number at 25 each. The average foreclosure sales price was $147,419. Mississippi had 412 foreclosures listings in September. Harrison County saw 61 listings in September with the highest number in Gulfport at 28. Jackson County had 27 listings with the highest in Ocean Springs at 17.

US downgraded again?

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts. The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the US deficit, the bank said in a research note published on Friday. A second downgrade — either from Moody’s or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden. A second loss of the country’s top credit rating would be an additional blow to the sluggish US economy, Merrill said. “The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the report. “Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,” he added. The bipartisan congressional committee formed to address the deficit — known as the “super committee” — needs to break an impasse between Republicans and Democrats in order to reach a deal to reduce the US deficit by at least $1.2 trillion by November 23. If a majority of the 12-member committee fails to agree on a plan, $1.2 trillion in automatic spending cuts will be triggered, beginning in 2013. Those automatic cuts, mostly in discretionary spending, would weigh further on a fragile US economy, Merrill said.

Obama to reveal more housing measures

President Barack Obama will unveil new measures to help US homeowners Monday, in the first leg of a campaign-style swing through western states that may be crucial to his re-election in 2012. Obama will propose actions that do not require congressional approval to help the economy, a White House official said. They include an initiative to help homeowners refinance their mortgages, which Obama will discuss in Nevada, a state hit hard by the housing crisis. The states on Obama’s tour were chosen deliberately. Each has large populations of Hispanics, a voting bloc Obama’s campaign is eager to win over. Nevada and Colorado are “swing states” that alternate allegiance between Republicans and Democrats, making them valuable political prizes in presidential elections. Both could prove critical to Obama’s chances in the November 2012 election. He will use them as a backdrop to make his latest push to boost the weak economy, which remains the biggest obstacle to his hopes of retaining the presidency. According to the White House official, he will also try out a new slogan to put pressure on Congress: “We can’t wait.”

Obama will highlight the result of that work during his Nevada stop. The FHFA intends to loosen the terms of the two-year-old Home Affordable Refinance Program (HARP), which helps borrowers who have been making mortgage payments on time but have not been able to refinance as their home values have dropped. To help underwater borrowers, or those whose loans are worth more than their homes, FHFA plans to scrap a cap that prohibits any homeowners whose mortgage exceeds 125% of the property’s value from participating in HARP, which is targeted at loans backed by Fannie and Freddie. The government is also preparing to reduce the loan fees that the two government-controlled mortgage firms charge and waive fees on borrowers that refinance into loans with shorter terms, according to an administration official. Lenders could begin refinancing loans under the retooled program as soon as December 1, while loans that exceed the current loan-to-value limit will not be able to participate until early next year, according to an official. The program, which was due to expire in June, will be extended through 2013, an official said.

Republicans charge, however, that the White House’s economic policies as a whole have not been effective. “Their policies are in place, and they are demonstrably not working,” Mitch McConnell, the Republican leader in the Senate, said on CNN on Sunday. While away from Washington to advocate for his policies, the president is filling his campaign coffers. During his three-day trip out West he will attend a fundraiser in Las Vegas, two in Los Angeles, one in San Francisco and two in Denver. Republicans, choosing among a field of presidential candidates currently led by former Massachusetts governor Mitt Romney and businessman Herman Cain, accused Obama of focusing more on fundraising than helping the unemployed. “The president is back to doing what he does best — raising money to save his own job,” said Reince Priebus, chairman of the Republican National Committee, in a new advertisement. “Instead of focusing on getting the 14 million unemployed Americans back to work, he’s focusing on protecting his own.”

US firms not hiring, not laying off

The National Association of Business Economics’ (NABE) industry survey found that 59% of the 68 respondents saw no change in their employment levels, up from 49% in July. That was the highest percentage since January last year. The survey was conducted between Sept. 20 and Oct. 5. About 29% of businesses expected to increase payrolls, down from 43% in July. Three% planned to lay off workers, up from zero three months ago. The findings suggest that job growth will probably remain too slow to lower a stubbornly high unemployment rate that has been stuck above 9%. After adding to payrolls at a brisk pace early in the year, businesses have turned cautious as the debt crisis in Europe and acrimony in Washington over budget policy cloud the economic outlook. While the euro zone accounts for about two% of US exports, economists warn the fiscal troubles in the region could trigger a financial crisis that would hit American banks and drag the economy into a new recession.

The NABE survey found that a fifth of businesses had seen a drop in sales because of the European debt crisis, with just under a third expecting the drag to continue through the first quarter of 2012. Amid the economic uncertainty, businesses are cutting back on capital spending. A third of businesses said they were increasing investment in capital, down from 41% in July. About 60% planned no changes to their capital spending budgets, up from 53% three months ago. Business spending in equipment and software has supported the weak economy. While businesses are cutting back on capital spending, they still do not believe the economy will slide into recession. Most respondents expected the economy to grow slowly but not slip back into recession. About 84% expected gross domestic product to grow at an annual pace of about 2% or less.

More foreclosures on the way

Two key indices of home prices likely fell in August, suggesting large numbers of foreclosures and continued high joblessness are acting as a drag on the market, according to a new forecast. The Case-Shiller 20-city composite home price index, scheduled to be released on Tuesday, likely fell 3.8% in August from a year earlier and 0.3% from July on a seasonally adjusted basis, said a forecast from Zillow Inc. chief economist Stan Humphries. The downward trend will continue through the end of the year, he predicts. “We expect to see continued home value depreciation as unemployment and negative equity remain high,” said Humphries. “The large foreclosure pipeline will produce relatively low priced REOs in the market, putting downward pressure on prices going forward, and we do expect the pace at which homes exit this pipeline to pick up in the near-term.” The Case-Shiller 10-City composite index is expected to register a seasonally adjusted decline of 3.5% in August from the previous year, and 0.2% compared to July.

“After showing monthly appreciation earlier this year and building some momentum, recent weak economic data is starting to be reflected in home values,” Humphries said. “Existing home sales have been disappointing, with September sales down 3% from August.” Humphries is bearish on the overall housing market for at least the next year. A survey of more than 100 economists by Pulsenomics shows the median expectation for that group is a decline in the Case-Shiller 20-city index of 2.8% in the fourth quarter from the final three months of 2010. Zillow, on the other hand, is projected a 4.5% decline, and then another 2.5% drop from the fourth quarter of 2011 to 2012. Zillow has a strong track record of accurately forecasting changes in these Case-Shiller indices. Zillow’s July forecast for the non-seasonally adjusted 20-city index was off by just 0.1 percentage point, coming in at 4.0% compared to the actual number of 4.1%.

Base metals rally

Industrial metals rose for a second day in London, extending the biggest rally in two years, as figures showed manufacturing may swell in top global consumer China. Chinese manufacturing may expand in October for the first time in four months after a preliminary index of purchasing managers released by HSBC Holdings Plc and Markit Economics today climbed to 51.1 from September’s final reading of 49.9. Metals also gained as Japanese exports increased more than estimated by economists surveyed by Bloomberg News. “Good data out of China overnight is adding to the positive Monday morning sentiment,” said Ole Hansen, vice president of trading advisory at Saxo Bank A/S in Copenhagen. Copper for three-month delivery advanced $209, or 2.9%, to $7,354 a metric ton by 10:11 a.m. on the London Metal Exchange. The LME Index of the six main metals traded on the exchange increased 4.7%, the most since August 2009, on Oct. 21. Copper for December delivery rose 3.1% to $3.3235 a pound on the Comex in New York.

Imports of refined copper into China rose 17% to 275,499 tons in September from August, customs figures showed today. Shipments were up 14% from a year earlier. Managed-money funds held net-short positions in copper, or wagers on falling prices, totaling 8,294 futures and options contracts as of Oct. 18, compared with 9,489 a week earlier, data from the US Commodity Futures Trading Commission showed. Aluminum for three-month delivery on the LME rose 2.3% to $2,174 a ton. Prices for the lightweight metal are close to the cost of production, Aluminum Corp. of China Ltd. President Luo Jianchuan said, according to a statement posted on the company’s website today. Lead climbed 2.7% to $1,967 a ton and nickel rose 0.9% to $18,960 a ton. Tin advanced 1.3% to $21,950 a ton and zinc gained 3.3% to $1,865.25 a ton.

Obama keeps bashing big banks

President Obama nominated Thomas Hoenig, former chief of Federal Reserve Bank of Kansas City and long-time critic of the largest banks, as vice chairman of the Federal Deposit Insurance Corp. If the Senate approves Hoenig, he would serve on the FDIC board until December 2015. In March, Hoenig said he would retire from the Kansas City Fed, where he served as president for 20 years. He left Oct. 1. Leaving freed him up to sharpen his opinions of the largest financial institutions that he said are directly responsible for the financial crisis in 2008. Those institutions have enjoyed unfair preferential treatment since, he said. “So long as the concept of a (systemically important financial institution) exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril,” Hoenig said in a June speech at New York University.

Since 2008, there have been 398 bank failures, of which 326 were smaller community banks. Jaret Seiberg, an analyst at Washington think tank MF Global, said the nomination is a positive for these smaller institutions. Hoenig has been an advocate for smaller banks and frequently spoke about the cost of regulatory burdens on them, Seiberg added. “It is hard to find a government official who spoke out more forcefully for breaking up the biggest banks than Hoenig during his tenure as Kansas City Federal Reserve president,” Seiberg said. “He believes too-big-to-fail is a serious problem that only can be fixed by making the biggest banks smaller. As FDIC vice chairman, he will have an even bigger platform for this message.”

See you at the top!
Chris McLaughlin

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
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* Long-time authority on real estate investing
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