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

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Foreclosures fall

According to RealtyTrac, the online marketplace of foreclosed properties, foreclosure filings fell 33% In May from a year earlier and 2% month-over-month. The number of homes repossessed (referred to as REOs or real estate-owned properties) in May also declined to 66,879, down 3.8% from April and 29% year-over-year.  The huge year-over-year drop in foreclosures doesn’t necessarily mean the housing market is staging a recovery, however.

James Saccacio, the CEO of RealtyTrac, says the declines are likely due to lingering effects of the “robo-signing” scandal, which broke last September, when it was discovered that banks were playing fast and loose with foreclosure documents.  There’s another factor at play, as well. The banks can’t sell the homes they’ve already seized so they aren’t as incentivized to repossess more homes.  “There’s weak demand from buyers, making it tough for lenders to unload their REO inventory,” said Saccacio. “Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month.”  The banks don’t want to take on the expense of maintaining the homes — property taxes, heating costs, repairs and insurance — if they can’t sell them quickly.  Selling off the inventory of repossessed homes is crucial to the housing market.

The steepest drops in filings have come from judicial states, ones in which the courts are involved in repossessions. In these states, where foreclosure proceedings are subject to the scrutiny of the courts, it appears banks are taking special care to make sure they’ve stamped out the last vestiges of the robo-signing issues.  Nevada, where most cases are handled outside of court, continued to be foreclosure central. One of every 103 households received a notice of some kind in May. However, that was an improvement of 23% compared with May 2010. Arizona, with one filing for every 210 households, and California, one for every 259, were second and third.  The judicial state of Florida, where the housing market is no better, has seen a much greater drop-off in filings over the past year, down 62%. It now has the eighth highest foreclosure rate, of one filing for every 461 households. A year ago, it was in the top four, along with the other “Sand States.”

Nearly 50% of Americans see another recession coming

According to a new NBC News/Wall Street Journal poll, nearly half of all Americans, and two-thirds of Republicans, believe the country is headed back into recession. A 54% majority disapproves of Obama’s handling of the economy.  “The public is incredibly pessimistic about the future,” said Peter Hart, the Democratic pollster who conducts the NBC/WSJ poll with his Republican counterpart Bill McInturff.  President Obama’s overall job approval dipped back to 49% from 52% in May. That signals that the popularity boost he received after the special forces raid that killed Osama bin Laden has faded.  the challenge facing the president was evident when voters are asked whether they intend to support him or the Republican candidate in 2012. Obama led by a narrow 45 to 40 margin, down from 49% to 30% in May.  The survey showed continued deep concern about government spending; some 63% said Washington should focus more on reducing the deficit even if it slows economic recovery, and a 45% plurality of Americans believe the 2009 economic stimulus didn’t help the economy.  On raising the federal debt ceiling, Americans are split. A 39% plurality said it should not be raised, while 28% said it should be and 31% said they didn’t know enough.

Housing starts up

The number of permits for future housing construction jumped to a seasonally adjusted annual rate of 612,000 last month, up 8.7% from the revised rate of 563,000 in April, the Commerce Department said.  It was the highest monthly rate since December and was much higher than expected, with economists surveyed by Briefing.com looking for a 548,000 permit rate.  Permits for single-family homes, viewed as a more stable indicator of new homebuilding activity than permits for multi-family home construction, ticked up 2.5% from April to a rate of 405,000.  Housing starts, the number of new homes being built, rose 3.5% in May to an annual rate of 560,000 units from a revised 541,000 in April, the Commerce Department said.  Economists had expected an annual rate of 540,000 units, according to consensus estimates from Briefing.com.  Construction of single-family homes rose 3.7% to a rate of 419,000.

While permits are typically viewed as an indication of builders’ confidence in the housing market, the big jump in permits could have had a lot to do with seasonality, even allowing for the government’s adjustment, said Doug Roberts, chief investment strategist for Channel Capital Research.  Roberts said that this is the prime time of year to begin construction, given the better weather. And given the flooding and bad weather in April, many builders may have gotten off to a late start — leading to a jump in permits and housing starts last month.  “These are the months where the most construction occurs, so this increase could be more of a seasonal blip,” he said.

Financial regulators face limits

Under a bill released Wednesday by the House Appropriations Committee, the U.S. Securities and Exchange Commission would be denied a dramatic funding increase for the 2012 fiscal year.  The Republican-led committee’s bill would also strip the newly created consumer financial watchdog of its independent funding, subjecting it to the politically charged budget process starting in 2013.  “This new agency created by the Dodd-Frank legislation has not yet been fully constituted and many questions remain as to its authority and mission,” the committee said in a statement.  The funding for the SEC would be kept steady at $1.2 billion for the fiscal year that starts Oct. 1, according to the bill. The Obama administration had asked for a $222 million bump in funding for the agency that was given more responsibility to police markets in last year’s Dodd-Frank financial reform law.  Republicans are trying to attack the overhaul of financial regulations by denying funding to agencies responsible for overseeing the reforms.

Olick – foreigners jump into real estate market

“Falling home prices may be plaguing the US economy, but they are candy to foreign investors, who already have a weak dollar on their side.  Buyers from overseas spent roughly $41 billion on US residential real estate last year, a bump up from the previous year. US real estate agents report a surge this Spring especially, as foreign buyers see continued pressure on home prices and ample bargains.  ‘I don’t think they’re so concerned about the prices dropping as they are about getting value for their money,’ says Rick Ambrose, a Coldwell Banker agent in Lake Mohawk, NJ.  Ambrose and his colleague Mary Pat Spekhardt recently hosted two groups of Japanese investors searching for homes on the scenic lake just about an hour outside of New York City.  ‘They can work here, be close to the city, be close to their corporations and still feel like they’re on vacation. I think that’s really what grabbed everybody. That’s what got them,’ says Spekhardt.  The group of about 35 from Japan also toured properties in Las Vegas and Los Angeles, which are more popular choices among foreign investors.

A new survey by Trulia.com that tracks searches from potential foreign buyers found LA ranked number one in potential interest traffic, trailed by New York City, Cape Coral, Fl, Fort Lauderdale, FL and Las Vegas.  The greatest interest is from buyers in the UK, Canada and Australia.  ‘Prices now in the US are generally 30-40% off from the peak.  In addition, the weakness of the dollar gives the Japanese an advantage, as it does the Europeans, of another 20-25% off, so they’re seeing real bargains and opportunities,’ notes Ambrose.  The interest is pretty widespread, with Brazilians trolling Miami and Russians and Chinese hunting in Chicago, according to Trulia’s survey.  What’s so interesting to me, though, is that foreigners are so much more ready to jump into the market now than US investors. Granted, they have, as noted, the weak dollar on their side, but they also seem to have a longer term view. US buyers are so afraid to lose a little in the short term on paper, they don’t realize they could gain a lot in the long term. Of course foreign buyers are largely using cash, which many US buyers are lacking. Credit, or lack thereof, is playing against the US investor.  Prices in Miami are actually beginning to recover, especially in the condo market, thanks to foreign buyers, so much so that the foreigners are beating out the Americans.

I remember all the rage a long time ago when the Japanese were buying up commercial real estate in New York City.  Everyone was so appalled. Not so much now, even up in Lake Mohawk, NJ…’It isn’t popular. It is unforeseen territory, and it’s unique. I think it’s a very smart choice. It’s not where everyone is looking,’ says Spekhardt.”

Data hopeful for the economy?

Initial claims for state unemployment insurance slipped 16,000 to 414,000, the Labor Department said on Thursday, suggesting the jobs market was regaining some momentum after stumbling badly in May.  Initial jobless claims remained above the 400,000 level for a tenth straight week. Economists say claims would need to drop below that level to offer a clear sign of an improving labor market.  U.S. financial markets, however, were little moved by the data, which was eclipsed by concerns Greece could default on its debt.  “The broader theme we have to look at is that the pace of job destruction is slowing but the pace of job creation is also a bit tepid,” said Ian Pollick an economic strategist at TD Securities in Toronto. A report earlier this month showed U.S. employers added a scant 54,000 workers to their payrolls in May, with the jobless rate rising to 9.1%.  The report on jobless claims showed the number of Americans who continued to receive benefits under regular state programs after an initial week of aid eased to 3.68 million from 3.70 million in the week to June 4, the latest week for which data is available.  Under all benefit programs, including emergency benefits extended by Congress, 7.4 million were on the rolls in the week ended May 28, down about 200,000 from a week earlier.  The data suggested the long-term unemployed were finding it somewhat easier to find jobs, although if May’s dismal pace of job creation continues their hopes could be dashed anew.

Home builders confidence low

The National Association of Home Builder’s sentiment survey fell three points in June to 13, as builders face not only competition from distressed properties, but rising costs of materials. Fifty is the line between positive and negative sentiment on the survey.  “Roofing, copper, wallboard, vinyl siding and other components have made it extremely difficult to construct a new home and sell it at a price that covers the costs,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.  Builders reported weaker confidence in current sales and buyer traffic, which in turn pushed them to revise their sales outlook over the next six months.  The “expectations” component of the survey dropped four points to tie a record low set back in February of 2009.

As the big banks, Fannie Mae and Freddie Mac ramp up short sales and foreclosures and funnel ever more distressed properties onto an already overflowing market, pressure on home prices continues unabated.  Prices nationally fell 5.1% in the first quarter of this year compared to one year ago, according to the S&P/Case Shiller Home Price Index. Researchers there declared the “double-dip” in prices for the first time since home prices began recovering with the help of the home buyer tax credit in 2009.  “Potential new-home buyers are being constrained by difficulty selling their existing homes, stringent lending requirements, and general uncertainty about the economy,” notes the NAHB’s chief economist David Crowe. “Economic growth must pick up in order for housing to gain the momentum it needs to get back on track.”

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 May 26, 2011

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Foreclosure supply drags market down

According to a report from RealtyTrac, the online marketer of foreclosed properties. Las Vegas has so many foreclosures that 53% of all the homes sold in Nevada are in some stage of foreclosure.  Foreclosures represent 45% of sales in California and Arizona, and 28% of all existing home sales during the first three months of 2011.  What’s more, the homes are selling at steep discounts, especially so-called REOs, bank-owned homes that have been taken in foreclosure procedures.  The average REO cost on average about 35% less than comparable properties, according to RealtyTrac.  But in some areas, the discounts were ever greater: In New York State, the discount for REOs was 53% during the first quarter. And it was nearly 50% in Illinois, Ohio, and Wisconsin.  Short sales sold at an average 9% discount.  Including both REOs and short sales, Ohio had the biggest discount of any state, at 41%.  There were 158,000 deals involving distressed properties nationwide during the first quarter, less than half the nearly 350,000 during the same period two years earlier.  With the slowed sales pace, it will take three years to burn through the inventory of 1.9 million distressed properties, according to Rick Sharga, a spokesman for RealtyTrac.  “Even if you look at REOs alone, it will take 24 months to clear them and that’s without any new foreclosures at all coming into the system,” said Sharga.

Economic growth stagnant

Gross domestic product, the broadest measure of the nation’s economic health, grew at an annual rate of 1.8% in the first quarter, according to the Commerce Department. That is unchanged from the original reading released a month ago, and well below the 3.1% pace of economic growth in the final three months of 2010.   Economists surveyed by Briefing.com had predicted that GDP would be revised up to 2% growth in Thursday’s report.  The report showed consumer spending slowed even more than originally expected, as consumption grew at only a 2.2% rate, a significant slowdown from the original 2.7% estimate. But that was partly offset by businesses adding more to inventories than originally reported.  The Commerce Department calculates GDP as a measure of goods and services produced in the United States. The number is often revised multiple times. This is the second reading for the first quarter.

Investors bullish

According to a new survey conducted by Move Inc., more investors are bullish about home prices in the coming year and are beginning to aggressively hunt for residential real estate investments in their own backyards.  The firm’s real estate investor survey found 22% of investors are bullish about home prices going up in the next six to 12 months, a slight uptick from prior periods. About 53.5% expect home prices to remain relatively the same.  However 22% is a much higher share of the market than expected, prompting Move Inc. to conclude in its survey report that “local markets may be heating up with renewed investor interest and activity.”  Based on survey results, Move concluded 69% of investors believe they’ll have an easier time finding investment properties in the future, while 43.5% believe it may be harder. Some 62% are paying more attention to local home values, with the expectation that it may be time to jump off the sidelines.  Even though first-time homebuyers are often considered the ones to watch when it comes to jump-starting a lagging housing market, 65.5% of the investors who responded to the Move survey said they expect first-time homebuyers to have trouble qualifying for mortgages in an era of heightened underwriting, making it easier for them to nab good deals.  About 18.5% expect to invest using cash-only, and 80.5% expect to receive cash discounts from sellers.

Jobless numbers rise

New U.S. claims for unemployment benefits unexpectedly climbed to 424,000 last week from a revised 414,000 in the prior week, pointing to a painfully slow improvement in the nation’s job markets, while the Labor Department revised the prior week’s claims number up from an originally reported 409,000.  Economists surveyed by Reuters had forecast that claims last week would decline to 400,000, rather than rise.  The four-week moving average of unemployment claims, considered a better measure of trends since it smoothens out weekly variations, eased slightly to 438,500 from a revised 440,250.  Last week marked the seventh straight week in which claims topped the 400,000 level, indicating that payroll growth is soft and may continue to be so for some time. A department official said there were no exceptional factors to account for the rise in last week’s claims.

WSJ – California and Illinois expand foreclosure probe

California Attorney General Kamala D. Harris and Illinois Attorney General Lisa Madigan said they had issued subpoenas to Lender Processing Services Inc. (LPS) as part of their investigation of questionable foreclosure practices, including so-called robo-signing, when employees approve legal documents without proper review. Ms. Madigan’s office said it also issued a subpoena to Nationwide Title Clearing Inc., a mortgage-industry services provider.  The Illinois subpoenas seek information about the companies’ clients, practices and relationships with foreclosure law firms, Ms. Madigan said. California didn’t provide details on the specific information requested, but Ms. Harris’s office said in a release it was seeking documents and written answers to questions in relation to the probe.  Nationwide Title said the company hadn’t received its subpoena and that it would cooperate with any investigation. The company’s documents and procedures have been thoroughly audited and examined for accuracy, the company said in a statement. “We have every reason to believe that this issue will be short-lived and will be quickly resolved,” said spokesman Jeremy Pomerantz. A spokesman for LPS declined to comment, saying the company hadn’t yet received the subpoenas.  The latest actions represent an expansion of investigations of questionable foreclosure practices begun last fall. For months, state and federal officials and banks have been attempting to negotiate a settlement to an investigation of questionable mortgage-servicing practices in 50 states. But the two sides remain far apart, with the banks proposing $5 billion in total penalties and some government officials seeking $20 billion or more.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 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 May 23, 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

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

Banks hold property, hurt sales

All told, the nation’s biggest banks own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider.  In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.  Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales.  With the spring home-selling season under way, real estate prices have been declining across the country in recent months.

Although sales have picked up a bit in the last few weeks, banks and other lenders remain overwhelmed by the wave of foreclosures.  In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac.  In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one. Before the housing implosion, the inflow and outflow figures were typically one-to-one.  “It remains a heavy weight on the banking system,” said Mark Zandi, the chief economist of Moody’s Analytics.  “Housing prices are falling, and they are going to fall some more.” Over all, economists project that it would take about three years for lenders to sell their backlog of foreclosed homes.  As a result, home values nationally could fall 5% by the end of 2011, according to Moody’s, and rise only modestly over the following year.

US is in worse financial shape than Europe

According to David Walker, head of the Comeback America Initiative, the US is spending $4 billion a day more than it is taking in, putting the country on an unsustainable fiscal path perpetuated by both Democrats and Republicans.  Solving America’s problems will require a combination weighted toward spending reductions but one that also will require spreading the taxation burden around more evenly, said Walker, the former US comptroller general.  “We’re not growing enough and we’re not going to grow our way out of this problem,” he said in a CNBC interview. “We would have to have double-digit real GDP growth for decades to grow our way out of this hole.”  Walker’s organization promotes fiscal stability and is warning that the US is trailing many other developed nations in terms of getting its fiscal policies in order.  In fact, according to an index that Comeback America developed, the US is in worse shape from a fiscal standpoint than debt-plagued nations such as Italy or Spain.

With the nation hitting its $14.294 trillion debt ceiling and in need of an extension, Congress is debating the proper mix of tax increases and spending cuts so that the US does not end up like weaker euro zone nations such as Greece, Spain and Portugal that are in danger of debt defaults.  Walker leans more towards the spending-cut side, but also sees inequities in the tax structure that must be corrected to help generate revenue.  “We have to broaden the base—51% of Americans don’t have any income taxes,” he said. “That’s not acceptable in a democracy.”  The richest Americans are paying just 18% income tax rates even while the top marginal rate is supposed to be 35%, he said.  Straightening out the imbalances will be a tough choice for politicians and, Walker said, will be an integral part of next year’s presidential campaign.  “The 2012 election is going to have to be about what’s the proper role for government,” he said. “How are we going to solve our financial problems?”

Olick – who will buy the foreclosures?

“Not to sound like a broken record, but only when we work through the vast inventory and shadow inventory of foreclosed properties, can home prices bottom and housing recover overall. Obviously certain markets are more burdened by the distress than others, but it’s a universal truth.  In April, however, the%age of investors and all-cash buyers in the market dropped a bit. Investors have been buying the lion’s share of foreclosures, as first-time home buyers continue to play a very small role in housing’s recovery. First-time buyers should be about 40% of the market, but realtors say they are now about 36%. They made up nearly half of the market last Spring, but that was all thanks to the home buyer tax credit.

In addition to a tough job and mortgage market, first-time buyers are also looking at a lot of work when buying a foreclosed property.  I found this survey from Campbell/Inside Mortgage Finance particularly interesting this month:  ‘For the month of April, 45% of foreclosed properties were damaged and not inhabitable without renovation. Because mortgage financing is generally not available for foreclosed properties that need major repairs, investors often buy these properties for cash. Fifty-five% of damaged foreclosed properties were bought by investors in the month of April, while only 27% were bought by first-time homebuyers.’  That also tells me that barely 18% were bought by move-up buyers.  Investors want to rehab these places and flip them as soon as possible, but today they are being forced to put them up for rent as first-time buyer demand is still weak.  The share of first time buyers is there, but they are not in the distressed market as much as they need to be to absorb that inventory.”

Oil down to $98/barrel

Oil prices fell below $98 a barrel today as the dollar strengthened, making crude more expensive for traders with other currencies, and sentiment was shaken by worries about Europe’s debt crisis.  Oil has dropped from a 30-month high near $115 a barrel on May 2 amid gains in the dollar and signs that U.S. gasoline demand is waning.  In other Nymex trading in June contracts, heating oil fell 6.32 cents to $2.8551 a gallon and gasoline dropped 4.13 cents to $2.8945 a gallon. Natural gas futures rose 0.5 cent to $4.235 per 1,000 cubic feet.

WSJ – more mortgage scrutiny

State attorneys general are stepping up their investigations of mortgage-industry practices by probing for potential misdeeds when banks originated home loans and packaged them into securities, according to people familiar with the examinations.  New York State Attorney General Eric Schneiderman has issued subpoenas to four bond-insurance companies as part of his expanding probe of mortgage-securitization practices, people familiar with the matter said.  At the same time, California Attorney General Kamala D. Harris is expected to announce Monday a new law-enforcement effort aimed at mortgage-industry practices, people familiar with the initiative said. The effort will cover a range of activities, from loan origination to the packaging of mortgages into securities, and will include both civil and criminal prosecutions, these people said.  The subpoenas are the latest sign of how state and federal officials are stepping up their scrutiny of the mortgage machine. Federal prosecutors, for instance, are using tools such as the Civil War-era False Claims Act in an effort to recoup government losses on soured mortgage loans. The tools available to Mr. Schneiderman include the state’s Martin Act, which doesn’t require prosecutors to prove intent to defraud. The Martin Act has been used by Mr. Schneiderman’s predecessors to address a variety of alleged misconduct by Wall Street.  Bond insurers have argued they were deceived by banks about the quality of the loans they guaranteed. They have pushed banks to repurchase troubled mortgages and gone to court when that effort has failed.

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 February 16, 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

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

Apartment starts up

Housing starts, the number of new homes being built, rose 14.6% to an annual rate of 596,000 in January, up from 520,000 in December, the Commerce Department said.  While that was better than the 540,000 housing starts economists had expected for the month, it was “all due to apartment building,” said David Crowe, chief economist with the National Association of Home Builders.  Construction of buildings with five units or more, which tends to be volatile month-to-month — gave the overall number a big boost when that category alone surged 80% in January.  Meanwhile, construction of single-family homes — which is viewed as a more stable indicator of new homebuilding activity — was flat. Given fierce winter storms across much of the country, it’s an encouraging sign that category did not actually decline, Crowe said.  Meanwhile, the number of permits for future housing construction fell to an annual rate of 562,000 last month, down 10.4% from 627,000 in December, the Commerce Department said.  The reading fell short of forecasts, with economists surveyed by Briefing.com looking for 575,000 permits.

GOP hammers budget

House Republicans hammered President Obama’s 2012 proposed budget on Tuesday, telling Treasury Secretary Tim Geithner that tax increases included in the plan are unacceptable.  “Because they kill jobs, those tax increases are dead on arrival in this House,” Rep. Kevin Brady of Texas told Geithner, who was testifying before the Ways and Means Committee.  Ways and Means Chairman Dave Camp of Michigan and other Republicans said the president’s plan to let tax breaks expire for the upper-income Americans would end up hurting small businesses. They say many small business owners pay their business taxes by filing as individuals, putting them in the nation’s top tax brackets.  “There’s disappointment on our side that the president’s budget brings up some of the same tax hikes on America’s small business that Congress, even when both chambers were controlled by Democrats, already rejected,” Camp said.  Earlier in the day, House Speaker John Boehner also criticized the president’s budget proposal for not cutting enough.  Boehner pledged that Republicans would address reshaping entitlement programs, such as Medicaid and Social Security, when they release their budget blueprint this spring.  “Republicans will not punt,” said Boehner. “Everything’s on the table. We will put forward a budget that deals with the big challenges that face our country…I have no doubts that all of these issues [Social Security and Medicare] will be on the table.”

MBA – mortgage applications decrease

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 11, 2011 decreased 9.5% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 7.9% compared with the previous week.  The Refinance Index decreased 11.4% from the previous week and is the lowest Refinance Index recorded in the survey since the week ending July 3, 2009. The seasonally adjusted Purchase Index decreased 5.9% from one week earlier. The unadjusted Purchase Index decreased 0.9% compared with the previous week and was 18.2% lower than the same week one year ago.  “Mortgage rates remained above 5% last week, up almost a full%age point from their October lows, and refinance volume continued to drop,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Applications for home purchases also declined on a seasonally adjusted basis.  Buyers have not returned to the market as rising rates have reduced affordability, to some extent.”  The four week moving average for the seasonally adjusted Market Index is down 4.5%.  The four week moving average is down 1.9% for the seasonally adjusted Purchase Index, while this average is down 6.2% for the Refinance Index.  The refinance share of mortgage activity decreased to 64.0% of total applications from 66.6% the previous week. This is the fourth straight week the share has declined. The adjustable-rate mortgage (ARM) share of activity increased to 6.0% from 5.9% of total applications from the previous week.

Producer prices rising

Core producer prices in January rose to their highest rate in more than two years, hinting at a build up in inflation pressures as the recovery gathers pace, a potentially troubling development for the Federal Reserve.  The core producer price index, excluding food and energy, rose 0.5%, the highest since October 2008, the Labor Department said today.  The rise, which exceeded economists’ expectations for a 0.2% gain, reflected a jump in pharmaceutical preparations, which accounted for 40% of the increase.  The rise in core PPI comes at a time when a surge in commodity prices has caused most advanced economies to raise red flags on inflation.  The Federal Reserve has so far shown little concern about a pick-up in price pressures and officials have repeatedly said core consumer inflation remains too low for comfort.  The government is expected to report on Thursday the core consumer price index, excluding food and energy, rose 0.1% in January from December. Overall CPI is seen up 0.3% after rising 0.5% in December.

Olick – foreclosure sales rise in key states

“Last week a foreclosure report from RealtyTrac showed the process was still completely skewed by the so-called ‘robo-signing’ (faulty paperwork) issues at some of the nation’s largest mortgage servicers that were uncovered last fall. Another report today from ForeclosureRadar.com, which only tracks a few states out West, shows some important micro-moves that will have a big impact on the Spring housing market.  ForeclosureRadar.com shows that foreclosure sales, that is, either bank repossessions or sales to third parties (usually at the courthouse steps and often investors) jumped dramatically in January from the previous month in some crucial states.  In California, bank repossessions jumped 51.5%, in Arizona 56.2%, in Nevada up 36.8%.  ‘We have not seen this level of activity on the courthouse steps for months,’ says Sean O’Toole, CEO and Founder of ForeclosureRadar.com.

‘The increase in foreclosures is just in time to provide a fresh supply of entry level homes for the spring home buying season.’  More inventory is not what this housing market needs, especially not what home builders need, and especially in those hard hit states where there is already do much foreclosure and builder inventory. Home builder sentiment hasn’t budged in four months, according to a new report today from the National Association of Home Builders. One of the main reasons for the chronic low confidence is competition from foreclosures.  Something else important to note is something I’ve mentioned before, but really became clear in January’s numbers. Notices of Default (NOD), the first phase of the foreclosure process, fell off dramatically in January in California especially. 

“Remember, December was a holiday month, and a holiday moratorium month,’ mortgage consultant Mark Hanson tells me. “There may have been 14 or 15 [work] days in December, therefore, in California with 23.5K NOD, that’s 1680 per day. In January there were 21 days and 25.1K NOD. That’s only 1195 a day.’  So bottom line. Average daily NOD rate for CA fell from 1680 per day to 1195 per day from December to January, or 29%, according to Hanson.  Why are the banks holding off? Likely trying to be ultra-careful to avoid lawsuits, or trying to manage the pipeline as they now pump out the foreclosure sales. One thing we do know, the drop in NOD’s is not because the market/economy suddenly turned around. They’re coming.”

WSJ – banks demand bigger downpayments

The down payments demanded by banks to buy homes have ballooned since the housing bust, forcing many people to rethink what they can afford and potentially shrinking the pool of eligible buyers.  Last week, the Obama administration called for gradually raising down payments to a minimum of 10% on conventional loans, meaning those that can be bought or guaranteed by mortgage giants Fannie Mae and Freddie Mac. And mortgage data show that private lenders are already pushing sharply higher the required down payments, mainly to mitigate their risk as home prices continue to fall.  The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages, according to an analysis for The Wall Street Journal by real-estate portal Zillow.com.

That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.  The move to force home buyers to lay out more cash is driven mostly by banks, who have found that larger down payments discourage delinquencies by increasing the buyers’ exposure to loss and reducing the impact of declining prices.

Many home buyers placed little, if anything, down during the boom.   A 2009 Federal Reserve Bank of St. Louis study concluded buyers who made smaller down payments were more likely to default during “unfavorable economic circumstances, such as a housing market slowdown or job loss.”  Higher borrowing costs and heftier down payments could send housing prices falling further. Last week, 30-year fixed mortgage rates rose to 5.05%, their highest level since April. “If there is a scenario where the government talks about raising down payments to 20% on conventional loans, you would absolutely crush the housing market,” said Peter Norden, chief executive of Real Estate Mortgage Network Inc., an Edison, N.J., brokerage.  For now, borrowers who can’t afford such amounts are flocking to alternative programs, such as loans for veterans or those backed by the Federal Housing Administration, creating a parallel—and growing—nonconventional mortgage market for riskier borrowers and those who don’t qualify for conventional loans. 

FHA-backed mortgages, which require 3.5% up front, made up about half of loans for home purchases last year, according to housing-research firm Zelman & Associates, but borrowers often pay higher interest rates and must pay private mortgage insurance, often driving their monthly payments higher.  “There’s no question that the tightening of criteria unquestionably prices households out of the market,” said Zillow economist Stan Humphries. “The middle ground buyer is the one having to fight to get a conventional mortgage.”

Now for our real estate education section…

Cultivating Ambition – Generation Y

Generation Y, the young adults poised to enter the real estate market for the first time in coming years and one of the most important cohorts for the much anticipated real estate recovery, is typically associated with being lazy, unmotivated and lacking in basic work ethics but is that the reality? According to recent research conducted by Trulia, Generation Y is the one cohort MOST interested in owning a home. They just want to do it a bit differently than their parents.

In fact, nearly 90% cite home ownership as a major priority but for entirely different reasons than what has traditionally been considered a reason to purchase a property and with first-time home buyers making up nearly50% of residential property purchases, it’s a good idea for investors and realtor to understand the mindset driving this generation.

1. Affordability. Generation Y understands the value of locking in low prices in order to afford a desirable lifestyle over the long term. Low interest rates, bargain prices and uber-cool pads are just a few of the features driving their interest. Make it your priority to help them land mortgage options within their budget to create a win-win situation.

2. Shunning the Suburbs. Yes, you heard it here first. Generation Y has a distinctly different impression on what constitutes desirable housing than their parents. It’s all about urban settings as 88 percent reported the desire to be close to amenities, reduce the commute and enjoy the convenience of living close to work and other attractions.

3. McMansions are Out – Generation Y wants small spaces with minimal maintenance. Big yards are a nuisance – just give them enough to have a fire pit and someplace to get some sun. The ability to walk to stores, work or banking is a preference they are willing to pay for but forget formal living rooms and soaker bath tubs; Generation Y wants to live the simple life without having to depend upon big car payments, big paychecks or Big Brother to get by. Add a media room to go with that please.

4. Pets Matter – Generation Y isn’t nearly as interested in school districts since online learning is a viable option should they decide to have children. Forget golf courses…leave those for the grandparents. On the other hand, pet parks are a big perk for their four legged friends while doubling as a great place to work out and meet with other like-minded individuals.

See you at the top!

Chris McLaughlin
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All Rights Reserved.

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About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 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
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