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

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Mortgage applications decrease

Mortgage applications decreased 5.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA)Weekly Mortgage Applications Survey for the week ending July 22, 2011.  The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4.9% compared with the previous week. The Refinance Index decreased 5.5% from the previous week. The seasonally adjusted Purchase Index decreased 3.8% from one week earlier. The unadjusted Purchase Index decreased 3.4% compared with the previous week and was 2.2% higher than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is down 0.3%. The four week moving average is down 0.5% for the seasonally adjusted Purchase Index, while this average is down 0.3% for the Refinance Index.  The refinance share of mortgage activity decreased to 69.6% of total applications from 70.1% the previous week.  The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8% of total applications from the previous week.

GOP debt bill revisions coming up

House Speaker John Boehner will rewrite his debt ceiling legislation to ensure that it meets his oft-stated pledge to cut spending more than Congress increases the federal borrowing limit after the Congressional Budget Office (CBO) on Tuesday evening estimated that the Budget Control Act of 2011 would reduce deficits by only $851 billion over 10 years.  Boehner’s plan — and a competing Democratic bill in the Senate — are the only live bills this week that would increase the debt ceiling by Aug. 2. The ceiling must be raised by then, when the Treasury Department estimates it will no longer be able to pay all its bills without borrowing.  A House vote planned for Wednesday was pushed back a day following the CBO report.  The CBO said the bulk of deficit savings under Boehner’s original bill — $710 billion — would result from caps on discretionary spending.  The other big chunk of savings — $136 billion — would come from reduced interest costs on the debt.  The spending caps in Boehner’s bill would result in small savings in the early years, but the savings would grow over time.  In addition, the Boehner bill would require that both chambers of Congress vote on a Balanced Budget Amendment but doesn’t require that one be enacted.

Olick – debt and mortgage rates

“As we edge ever closer to D-Day (default day, debt ceiling day, however you choose to see next Tuesday, August 2nd), those of us who live and breathe the housing market are trying to figure out what this will mean to mortgage interest rates.  They are currently bouncing around historic lows and have been for some time. Refinances are surging, as the seven people left who haven’t yet refied are scrambling to do so.  But are we all worried over nothing?  ‘The debt crisis is probably the biggest factor hanging over mortgage rates at the moment,’ says Guy Cecala of Inside Mortgage Finance. ‘Once investors feel there is any uncertainty about the US government’s ability to guaranty its debt, Treasury rates and mortgage rates will start to rise – probably by at least 25-50 basis points.’  That’s the clearest answer I’ve gotten from the many experts we’ve had discussing this on CNBC today. Most just say, ‘We can’t know.’ I’ve been arguing that the debt crisis is not as big a deal as the scheduled drop in the conforming loan limits at Fannie Mae, Freddie Mac and the FHA. Experts say the change from the $729,750 limit in the highest priced markets to $625,000 and the drop back to $417,000 in lower-priced markets will really only affect 5% of homes nationally, but the percentage is far higher in certain local markets.  ‘But some FHA borrowers will be pushed towards the Fannie/Freddie market and higher down payments since the FHA loan limits don’t bottom out at $417k (like the GSE limits do),’ reminds Cecala.

While we all worry about what that lowest rate can be and where, the fact is that while the ‘average rate’ on the 30-year fixed is very low, today’s buyers are not all eligible, especially as those rates require big down payments and super-clean credit.  ‘Those people are not qualifying for the super low rates now, and 30% of our sales now are to cash buyers, investors and foreigners, anyway,’ notes Shari Olefson of Fowler, White, Boggs, who argues we’re missing the point.  ‘The bigger issue with those rates, other than housing and the crisis, is going to be the adjustable rate mortgages. If the rates go up, we are absolutely going to be seeing more defaults and more foreclosures as a result of those adjustable rate mortgages.’  And that’s just what we need, as we are finally now seeing a drop in initial mortgage delinquencies. Given today’s rates, most borrowers with expiring ARMs are actually adjusting to lower rates. And let’s remember that: Rates are historically low, and even a bump up of 50 or even 75 basis points still puts us at very low rates. That’s why, again, we have to look beyond the rate to what the rate effects.

‘A downgrade of US government debt would plausibly raise interest rates, and that would communicate to mortgage rates, but more important would be the effect on confidence and our national spirit, which is so conflicted right now,’ says Robert Shiller of the S&P Case-Shiller home price index. ‘It is harming our sense of confidence that matters more than the direct effects on interest rates.’  Last month 16% of home buyers who signed a contract on an existing home bailed out of that contract before closing. The norm is about a 4% cancellation rate, according to the National Association of Realtors. A real estate agent in Burbank, California says he’s seeing cancellations in the 70% range right now. Is it mortgage rates? Mortgage availability? Appraisals? No, he says. It’s a complete lack of consumer confidence.”

Oops – maybe it’s not so bad

For weeks, President Barack Obama and Treasury Secretary Timothy Geithner have stressed that the US Treasury will run out of room to borrow funds next Tuesday and have warned of dire consequences if Congress does not raise the nation’s $14.3 trillion debt ceiling in time.  But Treasury officials have never said when the government will run out of cash to pay the nation’s bills, and the consensus among Wall Street analysts is that the cash won’t run out until about two weeks after the August debt-ceiling drop-dead date.  “The first risk of a legitimate default is Aug. 15,” said Ward McCarthy, chief financial economist and managing director at Jefferies & Co. “Cash is not going to be an immediate problem. The debt ceiling space is not going to be an immediate problem.”  McCarthy and other Wall Street analysts predict that the Treasury will have enough cash to meet its early-to-mid August obligations, including $23 billion in Social Security payments to the elderly and disabled on Aug. 3.  That view lends credence to claims that some Republicans have been making for days now that the US government will be able to keep functioning and paying its bills even if there is no deal by Aug. 2.

Analysts also expect that the US Treasury will be able to roll over the $90 billion in US debt that matures Aug. 4.  “In all forecasts, it appears as if they have ample cash to cover their obligations,” said Lou Crandall, chief economist with research firm Wrightson.  Wrightson and Jefferies expect the United States would start defaulting on its obligations on Aug. 15, the date the government must pay out $41 billion, including around $30 billion in interest on US debt.  Barclays Capital has said Treasury may run out of cash to pay its bills around Aug. 10, when $8.5 billion in Social Security payments are due.  A Treasury spokesperson on Tuesday had no comment.  Analysts do not expect the credit rating agencies to downgrade US debt if Congress does not raise the limit by Aug. 2 and the government is still able to pay its bills.

WSJ – banks fight over splitting foreclosure tab

US banks trying to negotiate a settlement over the home-foreclosure mess have hit a new hurdle: They are squabbling over how to split the tab.  The lack of a deal so far among the nation’s largest home-loan servicers has already depressed bank stocks, and an extended impasse could further spook investors.  “As time goes on, banks will lose the PR battle,” said Paul Miller, banking analyst with FBR Capital Markets. The terms of a settlement, he said, are less important than getting it done. “They need to get everything behind them.”  As federal and state officials prod banks toward a multibillion-dollar deal to atone for a host of irregularities in foreclosing homes around the US, Wells Fargo & Co. has told government officials it should pay less than Bank of America Corp. or J.P. Morgan Chase & Co., according to people familiar with the situation.

The behind-the-scenes infighting has delayed a resolution and could prolong the months-long uncertainty over the ultimate cost of ending one of the biggest controversies stemming from the financial crisis.  Negotiations already have dragged on past the mid-June target set by US officials, despite shareholder pressure on banks to reach a deal.  Settlement talks with Bank of America, Wells Fargo, J.P. Morgan, Citigroup and Ally Financial Inc. began in March and include a mix of all 50 state attorneys general, the Treasury Department, Justice Department and Department of Housing and Urban Development.  The latest disagreement among banks is a contrast to the largely unified public stance taken by financial firms as they work to put the foreclosure woes behind them.  Wells Fargo contends it should be rewarded for having fewer risky or delinquent mortgages than the other two, people familiar with the matter said.  Citigroup Inc. also has told regulators the structure of a settlement should reflect differences between financial institutions, claiming it should pay less because of its stronger controls on foreclosure practices, these people said.

Durable goods orders fall in June

Orders for durable goods fell 2.1% last month, with the weakness led by a big drop in orders for commercial aircraft, the Commerce Department reported Wednesday. A number of other categories also showed weakness including autos and auto parts. A key category that tracks business investment plans fell 0.4% in June.  The 2.1% decline in June orders came after an even bigger 2.5% drop in April. Orders had risen 1.9% in May. The latest drop was a disappointment to economists who had forecast a slight rise, believing that the disruptions caused by the Japanese natural disasters and the surge in energy prices earlier this year were beginning to wane.  The June decline pushed durable goods orders down to $191.98 billion on a seasonally adjusted basis. That is still 29.1% higher than the recession low hit in April 2009, but it is 21.6% below the high set in December 2007 as the recession was beginning.

Demand for commercial aircraft plunged 28.9% while orders for new cars and auto parts fell 1.4%. Total demand for transportation products fell 8.5% as orders for military aircraft were also done. Outside of transportation, orders would have shown a small 0.1% increase.  Demand for primary metals such as steel rose 1% but orders for heavy machinery fell 2.3% and demand for computers and related products dropped 0.8%.  The category of capital goods excluding aircraft, considered a good proxy for business investment plans, fell for the second time in three months, dropping 0.4% in both June and April.  The Federal Reserve reported recently that auto production fell 2% in June, the third straight month of declines for autos. US automakers have had trouble getting component parts out of Japan. Overall industrial production showed a slight 0.2% rise in June. Gains in mining and utilities offset a flat reading for factory output.  A closely watched gauge of manufacturing activity grew more strongly in June after a sluggish May. The Institute for Supply Management’s manufacturing index rose to 55.3 last month after a May reading that was the weakest in 20 months. A reading above 50 indicates manufacturing is continuing to expand.

DSNews.com – prices stabilizing?

Median prices for REO and short sale transactions continue to decline and have fallen 10% since 2009, according to a new report from CoreLogic.  Distressed sales are taking their toll on market readings of home prices. CoreLogic says when the distress factor is excluded from the equation, home prices are actually beginning to stabilize.  In May 2011, the company’s “excluding distressed sales” price index dropped 0.4% from a year ago, compared to a decline of 7.4% for the all-transactions index. Non-distressed median prices for both existing and new homes are back to 2009 levels, according to CoreLogic.

While the distressed property market has been a prominent factor of the current housing cycle, the analysts at CoreLogic believe that prominence may begin to wane somewhat in the months ahead.  New foreclosure auction filings have dropped significantly since last October, according to the research firm.  At the same time, the industry’s shadow inventory – which is the estimated pending supply of distressed properties – declined to 1.7 million homes in April 2011. That’s down from 1.9 million homes a year ago and down nearly 20% from the shadow inventory peak hit in January 2010.  With these two distressed sale drivers narrowing, CoreLogic says such transactions will likely begin to decline late in 2011 and into 2012.  Although presently the market share for distressed sales remains high, the company has found that geographical sources of distress are shifting and becoming more dispersed.  According to CoreLogic’s report, as of December 2008, four of the top five largest distressed sales markets were all located in California, and the top five markets averaged a distressed sale share of 68%.  As of April 2011, only two of the top five markets were in California and CoreLogic says more importantly, the average distressed share in the top five markets dropped to 56%.

CoreLogic’s data show that Detroit (59%) and Las Vegas (58%) led the nation with the highest share of distressed transactions in April. They were followed by Sacramento (57%) and Riverside (54%) in California and Warren, Michigan (51%).  While much of the focus on distress surrounds the share of sales, CoreLogic says the price discount for REO properties is an equally important factor.  REO price discounts are largest generally outside the markets with the highest share of distressed sales. Miami leads the way with a 62% REO price discount, followed by Chicago (60%), Detroit (60%), St. Louis (60%), and West Palm Beach (58%).  CoreLogic also notes in its report that equity – or lack thereof – remains a primary concern for the industry.  “Depreciation in home prices during the last four years has reduced home equity by more than half to $6.1 trillion and caused a rapid increase in the number of foreclosures,” CoreLogic said in its report.   Nearly 11 million, or 23%, of all residential properties with mortgages were in negative equity at the end of the first quarter of 2011, according to CoreLogic’s assessment.  The company says distribution of negative equity is heavily skewed to a small number of states. Nevada had the highest negative equity percentage in Q1 with 63% of all mortgaged properties underwater, followed by Arizona (50%), Florida (46%), Michigan (36%), and California (31%).

Recession here again?

Burt Flickinger, managing director of retail consultancy Strategic Resource Group, said the US has just entered a 500-day retail recession, and before it’s over, the US will see weaker retail sales, more store closures and even additional retailers joining Borders in bankruptcy.  Helping to drive the trend is a weak labor market, Flickinger said.  Job growth has remained elusive, pushing the unemployment rate to 9.2%. Flickinger also expects more people will be joining the ranks of the unemployed as state and local governments make further cuts to their budgets.  The latest consumer confidence report from the Conference Board showed consumer attitudes perked up from the prior month, but it also captured growing fears about jobs. Those fears are likely to curtail spending, especially when you consider the large numbers of households that are living paycheck to paycheck.

Flickinger also cited the long-term unemployed who will stop receiving extended unemployment benefits this year as another contributing factor. Once the checks stop arriving, these people will have even less money than they do now.  A recent study by Moody’s Analytics estimated that close to $2 of every $10 that went into American’s wallets last year were payments like jobless benefits, food stamps, Social Security and disability. As the jobless benefits expire, about $37 billion will be drained from the nation’s pocketbooks, according to Moody’s.  Couple these trends with sky-rocketing inflation for food and clothing as well as for gasoline prices, which are on the rise again, and you quickly see just how pinched the consumer is.

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

Smart Real Estate News & Commentary by Chris McLaughlin July 14, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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*** Follow Chris on Twitter–>

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Foreclosures fall in Q 1 and 2, but…

According to RealtyTrac, an online marketer of foreclosed properties, foreclosure filings plunged 29% compared with the same period a year ago and were down 25% from the last six months of 2010.  Through June 30, 1.2 million U.S. homeowners — or one in every 111 households — received a foreclosure filing.  The deceleration in defaults continued as the year wore on with second quarter filings — at 608,235 households — marking the lowest quarterly total since the end of 2007, when the mortgage meltdown began.  RealtyTrac’s CEO, James Saccacio, sounded a sour note, however, contending that the drop-off in filings can be traced not to economic improvement or a pick-up in the housing market, but to processing delays brought on by the robo-signing scandal in which it was discovered that bank employees were signing foreclosure documents without following proper protocols.  “[That's what is] pushing foreclosures further and further out — we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later,” Saccacio said.  As a result, it will only prolong the housing slump, he said.  “It would be nice to report that foreclosure activity is dropping as a result of improvements in the economy or the housing market…unfortunately, with unemployment rates inching back up, consumer confidence weak and home sales and prices continuing to languish, this doesn’t appear to be the case.”

Major servicers froze the foreclosure process late last year and are still in the middle of correcting mishandled documents. The servicers became the focal point of investigations from the 50 state attorneys general and have been forced into compliance with consent orders from regulators.  Month-to-month, the process seems to be showing signs of life. In May, foreclosure activity spiked across certain states. And in June, foreclosure filings across the country increased 4% from the month before.  But viewed on a quarterly or larger scale, the process continues to drag. The properties that completed the foreclosure process in the second quarter spent 318 days in the system on average, up from a revised 298 days in the first quarter and 277 days in the second quarter of 2010.  REO properties that sold in the second quarter spent 178 days on the market from the time they were foreclosed, an uptick from 176 days in the first quarter and 164 days one year ago. In New York, REO properties took an average of 309 days to sell.  “Processing and procedural delays are pushing foreclosures further and further out,” Saccaccio said. “This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number.”

Unemployment down, but still above 400,000

There were 405,000 initial jobless claims filed in the week ended July 9, the Labor Department said today. That was down 22,000 from the week before, and lower than the 410,000 claims economists surveyed by Briefing.com had expected.  Initial claims would have been slightly lower if not for the ongoing Minnesota government shutdown. The Labor Department noted that as many as 11,500 of the claims filed in the state of Minnesota were a result of state employees filing for benefits.  There were fewer layoffs in the auto sector, the result of production scheduling changes as Japan’s automakers come back online in the wake of its massive earthquake, said Sam Bullard, senior economist at Wells Fargo.

The four-week moving average of initial claims, calculated to smooth out volatility, also fell. The average was 423,250, or 3,750 claims less than the week before. But continuing claims — which include people filing for the second week of benefits or more — rose to 3,727,000 in the week ended July 9 — higher than economists’ forecasts for 3,700,000 ongoing claims.  The government’s monthly jobs report — the most closely watched indicator of labor market growth — hit a major roadblock last month, as hiring slowed to a crawl and the unemployment rate unexpectedly rose.  The economy gained just 18,000 jobs in June, coming in even weaker than the paltry 25,000 jobs added in May.

Olick – mortgage rates a “trade off”

“For those of you worried that the scheduled expiration of higher loan limits at Fannie Mae, Freddie Mac and the FHA will have a negative effect on the housing market by raising the cost of home ownership, you can be rest assured the chairman of the Federal Reserve is fine with it.  ‘As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis,’ Ben Bernanke told a Congressional Committee today. ‘I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost,’ Bernanke said.

There have been numerous and varied contentions about the future state of the mortgage market once loan limits drop from the maximum $729,750 to $625,500.  The home builders think it will be catastrophic while some economists and academics say it will have little effect, especially at the FHA.  Bernanke admits that jumbo loans will come, ‘at a higher cost,’ but we have to put in perspective what exactly that higher cost will be. Mortgage rates on conforming loans are already near historic lows, hovering around 4.5% on the 30-year fixed. Today’s talk about the potential for QE3 pushed bond yields lower, which in turn keep mortgage rates low.  ‘I think as long as the 10 yr [Treasury] remains in the 2.85-3.15% range, the average 30-year mortgage rate will continue to hover around the 4.5-4.6% range,’ says Peter Boockvar at Miller Tabak. ‘Bonds are little changed on the day but off the lows after the auction.’

The bond market doesn’t seem to think the U.S. is really in danger of defaulting on its obligations, so rates should remain steady. If a jumbo rate is higher, even by a full percentage point, it’s still historically pretty low, and buyers looking at a higher-priced home likely expect to pay a higher interest rate already anyway.  Rather than worry about conforming loan limits, I think we need to be more concerned about proposed rules surrounding mortgage risk retention by banks and what constitutes a qualified residential mortgage (QRM) which would be exempt from risk retention. Bernanke seems to think 20% down for a QRM is the right course. The mortgage industry, largely, does not.”

More stimulus coming

Federal Reserve Chairman Ben Bernanke told Congress yesterday that a new stimulus program is in the works that will entail additional asset purchases, the clearest indication yet that the central bank is contemplating another round of monetary easing.  Bernanke said in prepared remarks that the economy is growing more slowly than expected, and should that continue the central bank stands at the ready with more accommodative measures.  “Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation,” he said “However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate.”

Later, more than one Fed member said he opposed any further easing.  “I will not support further monetary accommodation,” Dallas Federal Reserve Bank President Richard Fisher told reporters after a speech at the Rotary Club of Dallas. “I do not personally see the benefit of more monetary accommodation even if the economy weakens further. Because again, there’s so much liquidity out there, what’s the trigger to put it to work?”

Obama will veto bills to cut flailing HAMP, red tape

The White House budget office advised lawmakers not to push forward with a bill that would reduce funding levels for the Consumer Financial Protection Bureau and terminate the Home Affordable Modification Program (HAMP).  Obama’s budget team released an advisory, saying the White House is opposed to several sections of House Bill 2434, which attempts to establish 2012 funding levels for government financial agencies.  “If the President is presented with a bill that undermines either the Affordable Care Act or the Dodd-Frank Wall Street Reform and Consumer Protection Act through funding limits or other restrictions, or reverses current policies on Cuba, his senior advisers would recommend a veto,” the Office of Management and Budget warned.  The President’s budget team says the bill, in its current form, would kill HAMP, ending the program’s ability to help struggling homeowners into loan modifications, while placing overly strict limits on the Consumer Financial Protection Bureau’s budget.

HR 2434 says “during fiscal year 2012, the board of governors of the Federal Reserve may not transfer more than $200 million to the Bureau of Consumer Financial Protection.” In the past, the Fed has said the bureau needs about $500 million in funding.  The President’s budget office issued a hard line of attack on H.R. 2434 saying the administration “opposes the alteration of the CFPB’s mandatory funding structure as authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which would compromise the Bureau’s independence.”  The bureau goes live July 21, becoming the top cop of the mortgage finance and consumer financial products space.  The President’s office says the proposed bill would limit the bureau’s expenditures undercutting “the agencies statutory responsibility to oversee consumer financial products.”

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

Smart Real Estate News & Commentary by Chris McLaughlin July 7, 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

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

Housing prices slow

A survey of 27 economists showed the battered housing market is facing myriad problems and won’t turn around anytime soon.  Of the 22 who had specific predictions for the closely watched Case-Shiller home price index, the median forecast was for a 3.9% decline in the second quarter compared to a year earlier, and a 2.9% drop in prices over the course of the full year.  Only three economists expect prices to rise this year.  The outlook for 2012 is only modestly better — a 2% increase in home values, with six of the economists forecasting another drop in prices next year.  Economists are fairly evenly split on what it will take to turn the housing market around.  Nearly half were looking for a significant improvement in the labor market to boost housing, while the rest believe it will just take time to work through the inventory of foreclosed homes.  One economist, Kevin Giddis, head of fixed income at Morgan Keegan, said he believed it would take further significant declines in home prices in order to set a true bottom for the market.  Giddis is forecasting a 4% drop in prices this year.  Several others said all of those things need to occur before the housing market can show meaningful improvement.

Job growth up

Payroll processing company ADP said private jobs grew rapidly in June — a figure that was much higher than expected and more than four times higher than the prior month. May’s figures were downwardly revised to 36,000 jobs.  Economists were expecting a gain of just 60,000 private sector jobs, according to consensus estimates from Briefing.com.  Smaller businesses led the charge in June. Small businesses, defined as those with fewer than 50 workers, added 88,000 jobs in June. Medium-size businesses, defined as those with between 50 and 499 workers, gained 59,000.  Larger businesses, with 500 or more workers, added 10,000 jobs last month.  ADP’s chief executive, Gary Butler, said in a prepared statement that June’s data “are a significant improvement,” especially given last quarter’s 1.9% GDP growth.  “Given such strong employment results despite poor GDP, I am optimistic we will see improving job growth in the second half of the year,” Butler said.  The government’s employment figures for June are scheduled for release later today and expected to show that nonfarm payrolls increased 90,000 last month after rising only 54,000 in May.

MBA – commercial/multifamily show turn

The Mortgage Bankers Association (MBA) released its Commercial Real Estate/Multifamily Finance Quarterly Data Book for the first quarter of 2011. First quarter data on the commercial real estate markets show the natural effects of the turn of the real estate cycle. Broader economic indicators were positive in the first quarter, but provided less of a tail wind to commercial real estate markets than they might have. Despite this softness, real estate fundamentals have stabilized and are beginning to show signs of mending. Transaction volumes are picking up, and pricing and loan performance are showing initial signs – inconsistent though they are – of improvement. Any pick-up in economic growth will speed the healing; any slowdown will draw out the cycle.

For most property types, vacancy rates remain elevated, transaction volumes remain muted and property prices remain below their peaks, but the natural ebb and flow of the real estate cycle is beginning to have an effect. Economic growth, coupled with a constriction in new supply in the wake of a real estate downturn, is helping to stabilize and mend the commercial real estate markets. The pace and shape of continued recovery will be driven by the rate of economic growth and by how investors and developers react to the market changes they see and foresee.  The Data Book compiles the most up-to-date information on topics of interest to commercial/multifamily real estate finance industry participants and observers including trends in property sales, originations, delinquencies and mortgage debt outstanding.

Unemployment benefit applications down

The number of people who applied for unemployment benefits last week fell to the lowest level in seven weeks. Applications dropped by 14,000 to seasonally adjusted 418,000, although that is still above levels consistent with a healthy economy.  Below are the states with the biggest changes in benefit applications. The figures are for the week ending June 25, one week behind the national figures.

States with the largest declines:

-  Pennsylvania: Down 4,974, due to fewer layoffs in the transportation, entertainment, and service industries

-  Puerto Rico: Down 1,332, no reason given

-  North Carolina: Down 1,316, due to fewer layoffs in the stone, clay, glass, concrete and textile industries, and in education

States with the biggest increases:

-  New Jersey: Up 6,827, due to layoffs in transportation, warehousing and educational services

-  California: Up 5,375, due to layoffs in services

-  Massachusetts: Up 3,816, due to layoffs in the transportation, trade and educational services industries

-  New York: Up 2,591, due to layoffs in services

-  Connecticut: Up 2,097, no reason given

-  Oregon: Up 1,236, due to layoffs in educational services

NAR – 7 out of 10 renters see ownership as a priority

According to the 2011 National Housing Pulse Survey released today by the National Association of Realtors®, 72% of renters surveyed said owning a home is a top priority for their future, up from 63% in 2010.  Seven in 10 Americans also agreed that buying a home is a good financial decision while almost two-thirds said now is a good time to purchase a home. The annual survey, which measures how affordable housing issues affect consumers, also found that more than three quarters of renters (77%) said they would be less likely to buy a home if they were required to put down a 20% down payment on the home, and a strong majority (71%) believe a 20% down payment requirement could have a negative impact on the housing market.

Over half – 51% – of self-described “working class” home owners as well as younger non-college graduates (51%), African Americans (57%) and Hispanics (50%) who currently own their homes reported that a 20% down payment would have prevented them from becoming home owners.  Pulse surveys for the past eight years have consistently reported that having enough money for a down payment and closing costs are top obstacles that make housing unaffordable for Americans. Eighty-two% of respondents cited these as the top obstacle, followed by having confidence in one’s job security.  The survey also found respondents were adamantly against eliminating the mortgage interest deduction. Two-thirds of Americans oppose eliminating the tax benefit, while 73% believe eliminating the MID will have a negative impact on the housing market as well as the overall economy.

When asked why home ownership matters to them, respondents cited stability and safety as the top reason. Long-term economic reasons such as building equity followed closely behind. On a local level, respondents said neighbors falling behind on their mortgages and the drop in home values were top concerns. Foreclosures also continue to remain a large concern, with almost half of those surveyed citing the issue as a problem in their area.

Retailers have strong June sales

American consumers that were enticed by warmer weather and deep discounts of up to 80% on summer merchandise went on a buying binge in June, helping many retailers deliver robust revenue gains for what is typically the second-biggest shopping month of the year.  Big merchants Target Corp., Costco Wholesale Corp., Limited Brands Inc. as well as teen retailers such as The Buckle were among the companies that posted June results that beat Wall Street estimates. The few stragglers included Destination Maternity Corp. and Bon Ton Stores, which reported declines.  The figures are based on revenue at stores opened at least a year. This measure is considered a key indicator of a retailer’s health because it excludes results from stores opened or closed during the year.  June is the second most important month on a retailers’ sales calendar behind December. During the month, stores typically clear out summer merchandise to make room for fall goods. But this time, it took deep discounts of up to 80% to get shoppers to buy amid worries about the economy.

Analysts fear that retailers have not quite turned a corner. After all, gas prices are still 35% higher than last year at this time.  Moreover, prices in the food aisle remain high and this fall, shoppers will be seeing the price tags of fashion and accessories rise as retailers try to offset higher labor costs in China and soaring prices of raw materials like cotton.  Shoppers’ biggest concerns remain a weak job recovery and stagnant wages. These worries sent consumer confidence to a seven-year low in June, according to the Conference Board’s survey released last week.  In fact, consumer confidence has never been this low in the 24th month of a recovery, according to David A. Rosenberg, chief economist and investment strategist at the Toronto-based money management firm Gluskin Sheff. Historically at the two-year mark, confidence is at 94, not 58.5, which was recorded by The Conference Board’s June survey.

Olick – refinancing drop not good for the economy

“Does anyone remember when the rate on the 30-year fixed mortgage was up around 8%? I do.  Perhaps that’s why it continues to stun me that a tiny shift in our now ultra low rates can have a huge effect on consumer activity, namely refinancing. No question, it is a statement on just how tight and how sensitive our current mortgage market is today.  According to the Mortgage Bankers Association’s weekly survey, ‘The Refinance Index decreased 9.2% from the previous week. The Refinance Index has decreased for 3 consecutive weeks, reaching its lowest level since May 6, 2011.’

The mortgage bankers cite a jump (and by jump, I mean more like a hop) in rates on the 30 year from 4.46% to 4.69%. This is the highest rate since mid-May, they note, which I will note was just two months ago.  Yes, that’s a pretty large jump, but we are still below 5! The trouble is that there is a very small pool of eligible refinancers right now, because 1) so many have already refinanced at these incredibly low rates, 2) many borrowers are still underwater on their homes, which makes them largely ineligible for super low rates and 3) many borrowers don’t have enough equity or the proper credit score to get into a refi that’s worth the cost.  So the refinance share of mortgage applications continues to drop. Why should we care? What we really want is to see purchase applications, because that means people are buying houses, and that number did go up a bit last week although it’s still down for the month of June.

But wait:  ‘The increase in the share of homes being bought with cash and the likelihood that the NAR’s (National Association of Realtors) existing home sales data are being overestimated by between 10% and 20% means that the relationship between mortgage applications and total home sales is not as close as it once was,’ said Paul Dales of Capital Economics, who believes sales figures are still historically low.  But let’s think for a second about what the economy gains from a refi boom? Consumers save more money, which gives them more money to spend. Saving more also gives consumers more confidence in their financial situation, which helps the economy in varied ways. Refinancing can also help some troubled borrowers avoid defaulting on their loans.  I’m not saying I want to see us go back to the days of using our homes as cash machines. I do want to go back to the days when our homes weren’t draining us dry.”

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.

http://www.shortsalesriches.com

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http://www.smartrealestatenews.com

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About the author:

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin July 5, 2011

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Wells Fargo modification outnumber Obama’s 5 to 1

Wells Fargo completed or started trials on roughly 585,000 mortgage modifications through its private programs since the beginning of 2009, more than five times the 101,000 initiated through the Home Affordable Modification Program (HAMP).  HAMP launched in March 2009 but almost immediately drew criticism. Treasury officials admit the more than 3 million modifications initially promised was over estimated. Through May, servicers started roughly 731,000 permanent loan modifications and have been averaging between 25,000 and 30,000 per month this year.  According to a recent poll of housing counselors, only 9% of borrowers who entered the program described it as a “positive” experience.  Homeowners continually blame servicers for mishandling documentation. Overwhelmed servicers point out many borrowers are simply out of reach.  “Avoiding foreclosure is a top priority for us and when customers work with us, we can help seven of every 10 to stay out of foreclosure,” said Teri Schrettenbrunner, senior vice president, Wells Fargo Home Mortgage.

The Treasury points out most of the private programs built since the foreclosure crisis use HAMP as a model. But since mishandled foreclosure and modification processes came to light late last year, new standards were put in place, including a single point of contact that servicers are required to provide throughout the loss-mitigation process.  The Treasury began to clamp down on poorly performing servicers — at least to the extent their contracts with these firms allow. In June, the Treasury announced it was withholding HAMP payments from Bank of America, JPMorgan Chase and Wells.  Schrettenbrunner said the bank continues to build on its primary contact model it established last summer, and the bank has met with 58,000 borrowers at 31 home preservation workshops. Half of those received a decision on the spot or shortly after the event.  Schrettenbrunner said the department continues to “aggressively reach out” to borrowers behind on payments to bridge the communication gap as quickly as possible.  “We also continue to aggressively reach out to customers 60 or more days behind on their home loans via mail and telephone in an effort to engage them,” Schrettenbrunner said.

Spending cuts coming

Lawmakers must raise the nation’s $14.3 trillion legal borrowing limit soon. The Treasury Department says that on Aug. 2 it will run out of money to pay the nation’s bills in full and on time.  That’s only a few weeks away. So what’s it gonna take?  The group of lawmakers who participated in negotiations led by Vice President Joe Biden have already identified more than $1 trillion in budget cuts.  Republicans want far more.  The $1 trillion in cuts would probably be spread out over the next decade or so, meaning roughly $100 billion less in federal spending each year, although the savings might be larger in later years.  Isabel Sawhill, an economist who studies fiscal issues at the Brookings Institution, said the cuts are likely to be focused on non-security discretionary spending, a small section of the budget that includes funding for food inspectors, the FBI and education grants, among many other programs and services people associate with government.  The revenue increases won’t make much of a dent, at least not compared to $1 trillion in spending cuts.  Ending the tax break for owners of private jets, for instance, would only save a few billion dollars, hardly enough to fund the Food and Drug Administration.

Phoenix home sales up

Sales of previously owned homes in the Phoenix area reached a six-year high in May, as investors rushed the market looking for deals.  The area recorded 9,837 home resales in May, up 0.8% from April and 4.9% higher than a year earlier, according to San Diego-based real estate research firm DataQuick.  Sales of homes less than $100,000 rose more than 40% from a year ago and accounted for nearly 40% of all May transactions.  Even as sales rose, the area’s median price point stayed consistent at $120,000 due to pressure from an influx of distressed property sales, which account for two-thirds of the resale market. The $120,000 median price on all resale homes and condos is down 13.7% from last year, with the median falling year-over-year for 11 consecutive months.  The May sales surge continued a trend established in March when Phoenix-area home sales rose 7.3% from the previous year, driven by an increase of absentee buyers. In March, DataQuick reported 10,352 new and resale home and condo sales up 44.3% from February.

Personal bankruptcies down

U.S. consumer bankruptcies fell 8% in the first half of 2011 from the same period last year as households cut debt and the economy recovered, according to data released on Tuesday.  The number of U.S. consumer bankruptcy filings fell to 709,303 in the first six months of 2011 from 770,117 last year, according to a report by the American Bankruptcy Institute.  For June, consumer bankruptcies were down 5% at 119,768, from 126,270 a year ago, the data showed.  “The drop in bankruptcies for the first half of the year shows the continued efforts of consumers to reduce their household debt and the overall pull back in consumer credit,” ABI Executive Director Samuel J. Gerdano said.  The report said the U.S. economy has continued its sluggish recovery from the deep 2007-2009 recession. The U.S. unemployment rate at the beginning of 2011 had dropped to 9% from 9.7% at the start of 2010.

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