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

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Foreclosures spread

According a report released Thursday by RealtyTrac, one out of every 9 homes in Las Vegas received some kind of default notice in 2010.  But there is a silver lining: The foreclosure rate is actually dropping in Vegas, down 7% compared to the end of 2009.  In fact, rates fell in all top 10 foreclosure markets of 2010. In No. 2 Cape Coral, Fla., for example, filings dropped 28%. In third place Modesto, Calif., they fell 13%; and forth place Phoenix dipped 7%.  But even as foreclosures fell in the worst-hit areas, they rose in 72% of the 206 metro areas covered by RealtyTrac’s report.  Foreclosures have spread beyond the original bubble cities as the economy melted down. Unemployment rates spiked nearly everywhere, and people out of work can’t make their mortgage payments.  As a result, there is now a cohort of metro areas that didn’t enjoy the housing boom but are now enduring double-digit foreclosure spikes.

For example, Houston foreclosures grew by 26% — the biggest jump by any of the 20 largest metro areas — to one for every 62 households. The city suffered from a bleak job picture, with unemployment rising to 8.6% in November from 8.1% a year earlier.  Atlanta rose to 25th place with a 21% jump in 2010 filings following a 42% spike in 2009. And Salt Lake City filings ballooned by 30% in 2010, good for 27th place.  Bubble state cities still dominate the top of the list, however, accounting for 19 of the 20 top markets. And the easing in these worst-hit markets may be temporary, said Rick Sharga, spokesman for RealtyTrac.  He forecasts a foreclosure rise again in the Sand States this year as banks restart their engines. Overall, he thinks, foreclosures should plateau and stay at about the same level throughout 2012. “Until jobs come back, we won’t see much of a change,” he said.

Initial jobless claims higher

There were 454,000 initial jobless claims filed in the week ended Jan. 22, the Labor Department said today.  That was up 51,000 from the 403,000 claims filed the week before, and much worse than the 410,000 claims economists surveyed by Briefing.com had expected.  Jobless claims have bounced around for months, dipping below the 400,000 mark four weeks ago. Soon after, they began rising again. Since the weekly figures can be volatile, economists look at the four-week moving average to smooth out the week-to-week choppiness. That figure rose 15,750 to 428,750 from the previous week, showing a slightly worse job market.  Continuing claims — which include people filing for the second week of benefits or more — rose to 3,991,000 in the week ended Jan. 15, an increase of 94,000 from the week before.

Olick – what’s behind the new sales surge?

“No, I’m not about to throw a huge bucket of water on a really nice monthly stat that is infusing a modicum of hope in the housing market. I just want to put it all in perspective.  New home sales surged 17.5% in December, month-to-month, according to the Commerce Department, and that brought inventories way down to a 6.9 month supply (the total number of new homes for sale also fell to the lowest level since 1968). Prices of new construction actually bumped up significantly as well, up 8.5% year over year.  It’s important to remember that this particular data series is based on contracts signed in December and not closings, as the Existing Home Sales survey from the National Association of Realtors is. So what happened in December?  From the last week in November, into December, the rate on the 30 year fixed mortgage surged more than half a%age point, briefly touching 5%.

That clearly had the effect of pushing some fence-sitters to the buy side, worried that rates might go even higher, and they would be priced out of the market. Rates have since flattened below 5% with not much going on. The urgency is gone.  To put all this in perspective, while 17.5% seems like a big number, the actual number of homes that sold in December was 22,000, with November being revised down to 20,000. ‘So December is the second worst month in recorded history behind November,’ notes JT Smith of Aristar Funding. He also notes that 23% of the sales were of vacant lots.  The strange number in the report is a huge 72% jump in sales month to month out West, ‘strangely where most of the excess existing home inventory is,’ says Miller Tabak’s Peter Boockvar. I’m wondering if the surge out West isn’t due to the fact that foreclosure sales were halted, so buyers turned to new construction.  ‘Net-net, housing continues to bounce along the bottom, as we’re well aware that a bubble of the extend we had takes many years to work through,’ adds Boockvar.  It will be telling to see if this sales pace can hold on and improve, as banks ramp up foreclosures and start putting them back on the market.”

Deficit hits $1.5 trillion

New budget estimates released yesterday predict the government’s deficit will hit almost $1.5 trillion this year, a new record.  The daunting numbers mean that the government will have to borrow 40 cents for every dollar it spends.  The new Congressional Budget Office estimates will add fuel to a raging debate over cutting spending and looming legislation that’s required to allow the government to borrow more money as the national debt nears the $14.3 trillion cap set by law. Republicans controlling the House say there’s no way they’ll raise the limit without significant cuts in spending, starting with a government funding bill that will advance next month.  The CBO analysis predicts the economy will grow by 3.1% this year, but that joblessness will remain above 9% this year. Dauntingly for President Obama, the nonpartisan agency estimates a nationwide unemployment rate of 8.2% on Election Day in 2012. 

The latest figures are up from previous estimates because of bipartisan legislation passed in December that extended Bush-era tax cuts, unemployment benefits for the long-term jobless and provided a 2% payroll tax cut this year.  That measure added almost $400 billion to this year’s deficit, CBO says.  The deficit is on track to beat the record of $1.4 trillion set in 2009. That figure reflected huge outlays from the Wall St. bailout. The nonpartisan budget agency predicts the deficit will drop to $1.1 trillion next year.  “The fiscal challenge confronting us is enormous. To solve this problem, it will require real compromise and a great deal of political will,” said Budget Committee Chairman Kent Conrad, D-N.D. “We need to have both sides, Democrats and Republicans, willing to move off their fixed positions and find common ground.”

Google to get out of real estate

Massive search engine, Google, will take down real estate listings from Google Maps on Feb. 10.  Brian McClendon, vice president Google Earth and Maps, broke the story on the company’s LatLong blog yesterday and said the real estate listing feature is simply not popular enough to justify its existence.  Google first announced the tool in July 2009. Surfers using Google Maps gained the ability to find properties for rent or sale when searching locations.  “We’ve learned a lot and been excited to see real estate companies use Google Maps in innovative ways to help people find places to live,” McClendon said…yet we recognize that there might be better, more effective ways to help people find local real estate information than the current feature makes possible.  We’ll continue to explore this area.”  Four months after Google launched its real estate listing services, HousingWire broke that the Web firm planned to launch a mortgage pricing tool, the fate of which remains unclear.  Competition also pulled too much traffic from the tool, McClendon added.  Indeed, Web-based real estate information company Zillow is reporting record-breaking traffic, by logging more than 13 million unique users in the traditionally slow real estate month of December.

Now for our real estate education section…

Cash Buyer Myths

One of the most persistent myths in the real estate business involves the concept surrounding a cash buyers. In fact, even seasoned real estate agents and other professionals often succumb to these same myths and misperceptions. Today we are going to spend some time sorting out the facts from the fiction surrounding cash and shed some light on this elusive topic.

Myth #1 – Cash buyers are all rich. WRONG! Cash buyers come in all shapes, sizes, gender and income brackets so stop limiting your client roster due to an out of date mindset. The reality is that many buyers with average incomes are able and willing to pay cash. Common examples can include the sale of a prior property, inheritance, 401k or other withdrawal and even cash advances from other sources including signature loans or credit cards. Don’t place restraint on buyers by assuming cash is out of the question.

Myth #2 – Cash is King. Well, this certainly holds true in many instances but not always. For example, in some situations a seller may actually wish to hold a note as when providing owner financing over a long period of time. In fact, early pay-off is considered a risk to this type of portfolio due to the reduced interest earnings over the lifetime of the loan.

Myth #3 – Cash Can’t Compete with ROI. In the past this was often the case but with real ROI”s in the low single digits, cash deals have investors squealing with delight. For example, let’s assume an investor pays $50,000 cash for a house that rents for $500 per month. Setting aside 2 months worth for taxes and insurance, this investor still recognizes a 10% annual return excluding appreciation! Not a bad investment considering the alternative of leaving it in the bank earning two to three percent.

Myth #4 – It Takes a Lot of Time to Save Enough Cash. While it is true that trying to save up enough cash to buy a property for cash can take years, it is equally true that it doesn’t have to. The key is to set your sights on what will provide quick cash and then use the profits to fund future endeavors. One of the most critical mistakes made by novice investors is trying to shoot for the stars the first time out. Better yet, rather than trying to fund the purchase of a property all on your own, seek out a partner or provide bird dog services for other investors. Not only will it allow you to earn extra income to pay down bills and pad your investment portfolio, but you will also obtain valuable insight and experience without having to take on excessive risk.

Myth #5 – Cash Kills the Tax Advantages. Buying for cash may not allow some buyers to obtain a mortgage interest deduction but most of the other meaningful tax advantages are still available. Even more importantly, the streamlined time and cost associated with a cash purchase is often more than worth the savings. After all, it doesn’t make a lot of financial sense to spend a dollar in order to save 35 cents. For those that are using real estate as a method to make money, maximizing profits while minimizing expenses is the clear leader in tax strategies; cash allows that plus much 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)

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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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin January 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–> http://www.twitter.com/mclaughlinchris

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Thomas Edison failed, by his count, over 6,000 before he got bright enough to have his own light bulb. How many times will you fail at real estate investing before you become a success? If you’ve failed miserably three or four times, you ain’t done much yet. Regardless, your days of frustration and failure are now behind you. Take a look why:

http://www.foreclosureauctionquickcash.com/blog/

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Rural defaults rise

Seeking to buoy a strained rural economy in the midst of the recession, the then-Democrat dominated Congress ordered up a huge increase in federal mortgage guarantees for small-town home buyers as part of the 2009 economic stimulus package.  A newly released audit has found that the rural loan program, administered by the United States Department of Agriculture (USDA), was plagued by lax government oversight and many of the same sloppy banking practices that fed the broader mortgage debacle.  Although the auditors looked at only a tiny sample of the 133,053 loan guarantees made in 2009, they estimated that tens of thousands might have been done improperly and warned that a wave of defaults might be looming. 

Analysts said the problems echoed those exposed earlier in the mortgage crisis, with banks seemingly eager to collect fees for loans in which they retained little or no risk.  The audit estimated that more than 10% of the loans made possible through the program might have been to borrowers who were not eligible because they did not meet the minimum financial requirements and might not have had the means to pay them back. In many instances, lenders improperly calculated income figures for borrowers. The audit, released last week by the office of the USDA inspector general, Phyllis K. Fong, also found that USDA officials failed to detect the errors.  The report did not say whether any lenders appeared to have intentionally skirted the rules.   “In a couple years, when these loans are going bad, everybody’s going to say, ‘Oh me, oh my, how did this happen?’ ” said Christopher Whalen, managing director of Institutional Risk Analytics, a bank rating and consulting firm. “There’s no surprises here.”

Inflation up

The Consumer Price Index, a key measure of inflation, increased 1.5% over the past 12 months ending in December, up from 1.1% in November, the Bureau of Labor Statistics said.  On a monthly basis, CPI rose 0.5% in December, marking a significant pick-up from the 0.1% growth seen in the previous month, and the largest move since June 2009. Economists surveyed by Briefing.com had expected a 0.4% rise in December.  Sharply higher prices at the pump pushed overall consumer prices up to their fastest pace in a year and a half, though core prices, which strip out volatile food and energy costs, barely budged, a Labor Department report showed.  Core consumer prices gained 0.8% in 2010, the slowest calendar year pace since the department started keeping records in 1958. 

Inflation could tick up later this year as prices for commodities such as oil, grains and cotton have risen sharply in recent months. Grain prices hit a 2 1/2 year high earlier this week after the government said corn, wheat and soybean harvests would come in below previous estimates. Oil prices have risen due to strong demand in large, fast-growing developing countries.  Companies could be forced to pass on some of the higher raw material costs to consumers. But so far, there is only limited evidence that that is occurring.  On Thursday, the government said food prices at the wholesale level rose by 0.8% last month, after a 1% jump in November. But the price of food on supermarket shelves moved up only 0.1%. Economists say it can take 6 months to a year for price increases at the wholesale level to affect the consumer index.  The Federal Reserve said in a survey released Wednesday that “competitive pressures” had limited the ability of companies to pass on higher prices.

CNBC’s Olick -  the foreclosure dump

“It’s coming, no question.  [Yesterday's] report from RealtyTrac serves as a warning to big banks, Fannie, Freddie and local communities; The foreclosure glut is coming, and they’d better be ready to get rid of that glut in a big way.  2010 saw a record number of bank repossessions, over a million, even with a big drop in volume toward the end of the year, thanks to the robo-signing scandal and ensuing foreclosure freezes.  ‘Early indications in January were that this robo-signing related delay will be over by the end of first quarter if not sooner,’ says RealtyTrac’s Rick Sharga. ‘I think we’re going to see a significant spike in foreclosure activity early in 2011, and that will contribute in part to 2011 being a record year.’  Sharga estimates as many as a quarter of a million foreclosures that should have happened in 2010 will now be pushed into the 2011 numbers, and added to an already huge supply of bank owned properties.

The four biggest banks already have close to $7 billion worth of foreclosed properties (REO) on their books, and Fannie and Freddie have about $24 billion collectively. While REO sales make up about one third of all sales in the current market, there is an estimated 3 year supply.  There are obviously many incentives to buy REO’s, number one being the price discount, as well as some other programs offered by the government; but there are a lot more downsides.  Just today I read an article in the Wall Street Journal of witches in Salem being hired to remove the negative spirits from foreclosed homes.  Other similar burgeoning businesses include Feng Shui experts, etc.  There’s always somebody ready to profit from distress.  HousingWire today reports on a study by Field Asset Services that finds rehabbed REOs spend five fewer months on the market, 69 days compared to 222 days. Many investors buy foreclosures and do the rehab themselves, but for regular home buyers, clearly having the home renovated, with no sign of the preceding trouble, is a huge added value.

Through its Neighborhood stabilization Program, the Department of Housing and Urban Development has provided $7 billion in grants to local governments and nonprofits; that money can be used to rehab foreclosed properties, or, to bulldoze them.   I also know there have been many discussions brewing within the government and at the banks with hedge funds looking to buy up bulk foreclosures. So far no big deals we know of, but they’re coming for sure. The government may even be considering incentives to get more investors to buy foreclosures, which I blogged about last month.  As the numbers mount, the GSE’s and the banks will have to put more resources into unloading these properties, especially as new Spring organic housing supply comes on the market. If they choose to slash prices even more, the dip in overall home prices may fall deeper than expected.”

Retail sales up in December

Overall sales rose 0.6% last month to $380.9 billion, the Commerce Department said. Sales were expected to have gained 0.7%, after rising 0.8% in November, according to a consensus of economists surveyed by Briefing.com.  Month-to-month sales, excluding autos, rose 0.5% in December, falling short of the forecast for an increase of 0.6%.  Retail sales rose 7.9% in December, compared to the year-ago month, according to the government. Retail sales rose 6.6% for the full-year 2010, compared to 2009.  Non-store sales, which are primarily online sales, rose 2.6% month over month in December, the biggest percentage gain for any sector in the report. Other strength was reported among building supply merchants, health care retailers and gasoline stations.  Dragging on the report were sales at local merchants, down 1.3%. Also lower were sales at general merchandise stores, as well as electronics stores and food stores.  The report is closely watched by economists, with holiday sales serving as a barometer for the progress of economic recovery.

Bernanke – no recovery before Fannie and Freddie revamp

Speaking yesterday to the Federal Deposit Insurance Corp., Federal Reserve Chairman Ben Bernanke said he doesn’t expect much recovery in the housing market before the Obama administration releases its recommendations for the future of Fannie Mae and Freddie Mac, expected soon.  He also said the Fed’s bond-buying program, known as quantitative easing, has helped fuel economic growth and strengthened the stock market.  However, Bernanke admitted that one of the biggest challenges to repairing the battered residential real estate market in the nation is in finding a workable solution to reducing the dominance of the GSEs in mortgage finance. 

This situation, he said, is set against a backdrop of emerging signs of economic recovery.  And while stocks are up, some economists think the Fed’s policy of purchasing Treasury securities with the proceeds of other maturing securities, does little for overall growth.  Madeline Schnapp, director of macroeconomic research at TrimTabs said the program’s “impact on GDP and jobs has been anemic at best.”  Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, voted against all policy decisions the Federal Open Market Committee made in 2010. He believes the monetary accommodation boosts “the risks of future financial imbalances” and will result in “long-term inflation expectations that could destabilize the economy.”

Industrial output up

A Federal Reserve report shows that industrial output rose by a stronger-than-expected 0.8% in December.  The increase was the largest since July and was above a median forecast for a 0.5% increase in a Reuters poll and followed a downward revision in November’s output growth to 0.3% from an originally reported 0.4% gain.  Utility output in December rose 4.3% over November, while manufacturing and mining output each rose 0.4%.  Capacity use, a measure of how fully firms are using their resources, rose to 76.0%—the highest since July 2008—from an upwardly revised 75.4% in November, but remained well below its long-run average.  Officials at the U.S. central bank tend to look at utilization measures as a signal of how much “slack” remains in the economy—how far growth has room to run before it becomes inflationary.

WSJ – Mortgage rates down

Home-mortgage rates declined for a second straight week, according to data released Thursday by Freddie Mac, but the housing market continued to face headwinds from a supply glut and the struggling employment situation.  The average 30-year fixed-rate mortgage fell to 4.71% in the week ended Jan. 13, reaching a four-week low, Freddie Mac said. The rate was 4.77% in the prior week and 5.06% in the prior year, according to Freddie Mac, a buyer of residential mortgages.  To obtain the latest rate, the mortgage required payment of an average 0.8 point. A point is 1% of the mortgage amount, charged as prepaid interest. 

The 15-year fixed-rate mortgage averaged 4.08% in the latest week, with an average 0.7 point, down from the prior week’s 4.13% and the year-ago rate of 4.45%.  Low rates could help a still-troubled housing market, which has been hobbled by persistent employment weakness and a large supply of homes.  Rates on five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.72% in the latest week, with an average 0.7 point, down from 3.75% in the prior week and 4.32% last year. Also, one-year Treasury-indexed ARMs averaged 3.23% in the most recent week, with an average 0.6 point, down from 3.24% in the prior week and 4.39% a year ago.

Now for our real estate education section…

How to Hack Your Tablet & Other Cool Tools of the Trade

This week, as we explore technology and other tools to help boost productivity while saving time and money, it is only natural that we should turn to tablets. After all, tablets like the iPad or Samsung Galaxy are the hottest gadgets of the year even with the somewhat limited capacity. Yes, there are literally tens of thousands of great gadgets and widgets available but after you eliminate the games,  duplicated content and serious limitations associated with domestic tablets…well, many people are simply not sure it is worth the investment to purchase one.

Fortunately, it is possible to have your tablet and all the conveniences. For example, one of the most commonly cited limitations is the inability to use the tablet as a cell phone to send and receive calls. Rather than having to lug little devices all over town or have technology hanging off ever angle of your body when at the beach, the ideal device allows the user to perform any and all routine tasks with ease. So, how do you get around this limitation? There are actually two different ways:

1. Order an international version. For example, the Samsung Galaxy offered in the domestic US market disables the calling feature while the international version allows full featured calling. Pay attention to the exchange rate and sales to grab a good deal on the full version without having to limit the full functionality of the device.

2. Do it Yourself. Hack your own tablet to enable it to make calls. For example, upgrade the firmware by visiting http://samfirmware.com and then following the steps to implement the modification by following the directions via xoa developers or other similar sites. For direct access visit http://forum.xda-developers.com/showthread.php?t=838250&page=7.

3. Banking on the Go. Making calls is convenient but why stop there? Banking applications allow real estate agents to send/receive earnest money deposits or just balance their bank account anytime/anywhere.

4. Jailbreak! It didn’t take iPad owners long to realize the OS is the same as the iPhone…conveniently, this allows users to use known iPhone hacks to upgrade or modify their iPads to run popular applications or other features. One of the most sought after hacks is the ability to install Flash in order to play games or run programs that would otherwise be off limits. Yes, this means you can now play Farmville, Watch Hulu or read the Wall Street Journal without limit.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin December 7 , 2010

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

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

The B of A Equator Loop Hole Revealed TODAY! 

Watch this videoNOW to get your B of A short sales approved:

 http://www.shortsalesriches.com/cmd.php?Clk=4037846

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MBA – mortgage applications down 

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 3, 2010 decreased 0.9% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 22.8% compared with the previous week, which included the Thanksgiving Holiday.  The Refinance Index decreased 1.4% from the previous week. This is the fourth weekly decrease for the Refinance Index which reached its lowest level since June 2010. The seasonally adjusted Purchase Index increased 1.8% from one week earlier. This is the third weekly increase for the Purchase Index which reached its highest level since early May 2010.

The unadjusted Purchase Index increased 21.3% compared with the previous week and was 12.0% lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is down 8.0%.  The four week moving average is up 2.8% for the seasonally adjusted Purchase Index, while this average is down 10.9% for the Refinance Index.  The refinance share of mortgage activity increased to 75.2% of total applications from 74.9% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 5.7% of total applications from the previous week.

Tax cuts

Much of the attention since the deal was announced Monday night has been focused on extending the Bush tax cuts for the rich and minimizing the estate tax.  But other provisions in the $800 billion deal, including the payroll tax holiday and child tax credit, will greatly assist ordinary Americans. And those who are unemployed will benefit from an extension to file for federal jobless benefits through 2011.  Many people will find the payroll tax holiday, which shaves 2 percentage points off the 6.2% levy on workers, more generous than President Obama’s Making Work Pay tax credit.  For instance, a family earning $70,000 would see $1,400 more in their paychecks if the deal is approved. That’s $600 more than the current Making Work Pay credit. 

Meanwhile, those with children in college could continue to collect a tuition tax credit of up to $2,500, instead of seeing the credit fall to its pre-Recovery Act level of $1,800. Also, those who don’t pay federal income tax could continue to qualify for a refundable credit of up to $1,000.  For lower-income Americans, the $1,000 child tax credit provision would offer a big financial boost. The deal would continue to allow those who earn as little as $3,000 to receive the credit, assisting 10.5 million families, according to the White House.  If the Bush tax cuts were to expire, the middle class would have up to $200 more in taxes taken out of their paychecks starting in January, said Curtis Dubay, senior policy analyst at The Heritage Foundation, which advocates for free enterprise. And lower-income folks would see their tax rate jump to 15%, from the current 10%.  “There’s really nothing to complain about” for lower-income and middle-class Americans, Dubay said.

Olick – recovery: faith or a good deal?

“The good news is that more Americans say they are willing to consider buying a foreclosed property; the bad news is that they’re expecting a bigger discount on that property than ever before.  A new survey from online real estate sites RealtyTrac and Trulia finds 49% of those surveyed said they would be ‘at least somewhat likely to consider purchasing’ a foreclosure, up from 45% last May; however, 2/3 of those respondents are expecting at least a 30% discount to real market value, and 1/3 expect a 50% discount.  So much for house prices finding a bottom any time soon.  The reason behind the discount is clear: Risk.” 

“A growing number of Americans think that the process of buying a foreclosure is more risky than ever. There’s your impact of the big bank robo-signing scandals. And those scandals, which helped to diminish faith in the mortgage market overall, also pushed back the housing recovery, at least according to the survey.  Suffice it to say that faith is not abundant among today’s potential home buyers, but that doesn’t exactly mean they’re immovable. Credit Suisse reported the first ‘uptick’ in buyer traffic in November since last April: ‘We heard varying reasons for the slight bounce in traffic, with some agents surprised and unsure of the real cause. One clear theme was the attractiveness of low mortgage rates and the fear of rising rates, which we think led some buyers to decide to act. In addition, many buyers emerged from their summer/fall sabbatical to see some of the bargains firsthand.’”

Consumer borrowing up

The Federal Reserve said yesterday that consumer credit rose at an annual rate of $3.4 billion in October, the largest increase since a $5.7 billion gain in July 2008. Consumer credit was also up in September.  But the strength in both September and October is being heavily influenced as the result of a recently enacted law that makes the government the primary lender to students.  The increase of $3.4 billion in overall credit surpassed the flat reading that economists had expected. The gain translated into a 1.7% rise and followed a 0.6% increase in September. Those were the first back-to-back monthly gains since mid-2008. Consumer credit had fallen for 19 straight months before the rise in September. 

For October, the borrowing category that includes auto loans and student loans rose 6.8% following a strong 7.6% increase in September.  Much of that gain was powered by student loans from the federal government. The law change makes the government the primary lender to students. Previously, the federal government had been the guarantor of student loans that were being provided by private lenders.  Some of the strength last month also came from a rise in auto loans, reflecting stronger auto sales. A separate report Tuesday showed that consumers with less than rock-solid credit were starting to get car loans again as lenders loosen standards a bit.  The report from Experian, a credit reporting agency, showed that loans going to subprime buyers rose 8% in the third quarter, compared to the third quarter of 2009. It was the first year-over-year increase since 2007.

Private mortgage modifications at 1.5 million

Hope Now, a private sector mortgage alliance, said the mortgage industry has completed more than 1.54 million permanent loan modifications for homeowners from January through October, as foreclosure suspensions affected foreclosure sales and starts.  For October, mortgage servicers completed about 101,000 proprietary loan modifications and 24,000 Home Affordable Modification Program, or HAMP, modifications for an estimated total of 125,000. 

“There were anomalies in the October data that affected 60-day plus delinquency, as well as foreclosure, metrics which we believe may be largely attributed to widespread foreclosure delays across the country,” said Faith Schwartz, executive director of Hope Now.  Several large mortgage servicers nationwide delayed foreclosures in light of the robo-signing controversy. Hope Now said foreclosure starts dropped 16% to 205,000 and sales were down more than 41% 69,000, respectively while the number of homeowners more than 60 days delinquent increased slightly to 3.4 million.  Here are the highlights:

-  Proprietary loan modifications decreased by 117,000 in September compared to 101,000 in October.

-  60-plus days delinquencies increased to 3.4 million in October compared to 3.2 million in September.

-  Foreclosure starts decreased from 245,000 in September to 205,000 in October.

-  Completed foreclosure sales decreased from 118,000 in September to 69,000 in October.

-  Loan modifications outpaced foreclosure sales in October 125,000 to 69,000.

Now for our real estate education section…

Seasonal Promotions & Incentives

Searching for a few fun ideas for seasonal promotions and incentive programs? Whether you need a little something to say “Thank You” to a business partner or simply want to spread a bit of holiday cheer among your Facebook fans, gift cards are one of the hottest holiday trends of the year. But not just any gift card will do; find out which rank the highest among consumers and which are oh so “last year” with this quick guide to gift card and giving:

Top Ten

According to research conducted by GiftCardRescue, the top ten most desired gift cards include:

1. Walmart (a terrific option for those that work with first-time homebuyers but skip it if you work with the luxury class).

2. Amazon.com (always a winner especially with middle and upper middle class).

3. Target (a solid selection that doesn’t scream “discount” store but with a much more limited selection than other online retailers or larger superstores).

4. Visa, Mastercard and American Express (pre-paid credit cards are rising in popularity especially for holiday travel or emergency funds).

5. Lowes &/or Home Depot (nothing says DIY like a gift card from a big box hardware store. Practical and appreciated).

6. Costco (a terrific selection for small business owners or office partners).

7. Best Buy (just make sure one is conveniently located before giving this gift).

8. Starbucks (java -need we say more?).

9. Walgreens & CVS (sooner or later everyone gets the sniffles or wants a few photos made).

10. Bed Bath & Beyond (a nice choice for house warming gifts).

Quick Tips

Remember, gift cards are typically considered a valid business expense especially when used to promote business, in conjunction with other incentives and/or as part of a larger marketing campaign. Get creative and reduce taxes at the same time while giving a gift they will really appreciate. It’s fast, simple and convenient.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin November 11, 2010

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Foreclosures fall 9%

According to a report released by RealtyTrac, Foreclosure filings of all kinds, including notices of default, notices of auctions and notices of auction sales, dropped 4.4% during October, but it’s not because fewer people are losing their homes. Instead, the market is seeing a temporary stay from banks freezing foreclose auctions to review loan documents.  The drop in repossessions came after increases in four of the six previous months, topped by an all-time high in September, when 102,000 people lost their homes. In October, 93,246 homes were repossessed. 

Rick Sharga, Senior Vice President of RealtyTrac, believes there could be a further drop-off in November, because the impact of the freeze was not fully reflected in the October report.  While that may result in further declines in bank repossessions, Sharga expects it to take many months before overall foreclosure rates really improve. There is still a very large backlog of borrowers who stopped paying their mortgages long ago but who have not yet been served with a single foreclosure filing and so are not being counted in RealtyTrac’s statistics.  “Today, servicers are waiting longer and longer to put people in foreclosure,” said Sharga. “It’s not unusual for someone in default go six to nine months without receiving a notice of default.” 

Obama’s fiscal commission releases their preliminary proposals

In a surprise move, Erskine Bowles and Alan Simpson, co-chairs of the fiscal commission, recommend spending cuts beginning in 2012, as well as tax reform and other ways to reduce the deficit by $4 trillion over the next decade. Three quarters of the $4 trillion would be achieved through spending cuts — including defense — and the rest from more tax revenue.  Among the proposed defense cuts: Freeze noncombat military pay at 2011 levels for three years to save $9.2 billion and reduce overseas bases by one-third to save $8.5 billion. It would also direct $28 billion in cuts already proposed by Defense Secretary Robert Gates toward deficit reduction.  Outside of defense, the report recommends eliminating 250,000 contractors, saving $18.4 billion, and freezing federal pay for three years, saving $15.1 billion.  The 18-member commission, which will make formal recommendations to Obama on Dec. 1, has been closely watched by budget experts since its first meeting in April.  The panel’s proposals are not likely to be adopted by Congress wholesale, but they are expected to influence the debate in coming months as Congress tackles the nation’s unsustainable long-term debt.  Other details:

- Set targets for revenue and spending (capped at 21% of GDP, limit federal spending to 22% of the economy and eventually to 21%).

- Slow spending ($200 billion in domestic and defense spending cuts in 2015)

- Reform tax code (lower income tax rates, simplify the tax code, abolish the Alternative Minimum Tax)

- Change Social Security (make Social Security solvent over 75 years)

- Control health care costs (growth in total federal health spending to the rate of economic growth plus 1%)

MBA – don’t cut back buyer incentives

Michael D. Berman, CMB, Chairman of the Mortgage Bankers Association, issued the following statement reacting to options contained within a draft proposal from the co-chairs of the National Commission on Fiscal Responsibility and Reform.  “Given the fragile state of the nation’s housing market, now is not the time to be scaling back incentives for homeownership.  The mortgage interest deduction is one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain.  “We are also concerned about proposals to tax dividends and capital gains at ordinary tax rates, which would seriously impact investment in commercial real estate.   “We share the widespread concern over the growing national debt and want to help identify reasonable solutions, but we cannot support proposals that would chip away at the foundations of the real estate market.”  

Republicans aim at Volcker rule

After winning control of the House of Representatives in last week’s midterm elections, Republicans are ramping up efforts to weaken the prohibition on proprietary trading.  Mr Volcker and a group of Democratic senators led by Carl Levin of Michigan wrote to the FSOC to urge a strong application of the new rules.  He said the language was “clear and strong, and I am hopeful the regulators will implement it accordingly”.  But much of the industry is hoping for the opposite.  Although the Dodd-Frank financial reforms passed by Congress last July enshrine the ban in law, there is considerable latitude for regulators to decide what activity is allowed.  Regulators can decide to enforce narrow exemptions for market making and a broader ban on principal investments.  Short-term proprietary trading is prohibited; banks are also limited to owning 3 per cent of a hedge fund or private equity fund, an investment that must not exceed 3 per cent of the banks’ tier one capital.  Spencer Bachus, the favourite to replace Barney Frank as chairman of the House financial services committee, wrote to the Financial Stability Oversight Council to question the “doubtful” benefits and warn regulators not to spark an “exodus” of talent from US banks.

Olick -

While notices of default, the initial stage of the process, fell about 2 percent, the big drop was in bank repossessions, down 9 percent from the previous month.  This was thoroughly expected; in fact I expected a bigger drop, of course, because of the big bank foreclosure freezes.  “The numbers probably would have been higher except for the fallout from the recent ‘robo-signing controversy — which is the most likely reason for the 9 percent monthly drop we saw September to October and which may result in further decreases in November,” writes RealtyTrac CEO James J. Saccio.  I asked the company’s chief economist, Rick Sharga, why we didn’t see a bigger drop. He explained it away with timing of paperwork and also noted the unexpectedly short duration of many of the freezes. 

I also asked Sharga, who pointed out that the overall numbers have been coming down over the past several months, if perhaps the foreclosure crisis was easing, thanks to slight improvements in the job market. Yesterday, the Mortgage Bankers Association’s weekly application report noted that the jump in applications “aligned” with improved jobs numbers.  “You’re being a little optimistic,” Sharga replied.  Imagine that, y’all, me, optimistic.  But then he pointed out a strange trend in the numbers that I hadn’t noticed before.  The initial default notices have been running at about the same volume as the bank repossessions. Historically those would not run so evenly. Either you’d have a big surge of new defaults and the servicers would need time to work through them all, or there would be fewer new defaults as the servicers get them all sold and/or repossessed.  The fact that the numbers are running the same tells Sharga “that the lenders and servicers are trying to manage the level of distressed inventory available on the market to help stabilize prices.” They are not issuing the notices of default, so home owners become more delinquent before they get that first default notice.  I’m quite sure the big banks will refute this theory, tell me that they send out letters and letters and notices and notices, and granted, neither I nor Rick Sharga have any proof that the banks have any active mandate to manipulate the numbers. It just does seem a bit of a coincidence that these numbers would run so parallel for so long.  So what does it mean?  A lot more borrowers than you might think are sitting in their homes without making payments and without facing any consequences.  Makes you wonder why so many of them leave?

Now for our real estate education section…

The Low Down on Developments & Raw Land

The majority of short sale real estate investors focus on single family homes but that doesn’t mean you should ignore the potential of raw land and/or developments. Should the right opportunity present itself, both are potentially lucrative investments that can be well worth the extra time and effort. However, there are some serious considerations to keep in mind; some which might make it less desirable than what meets the eye…and some which make a given property much more desirable than what meets the eye!

Timing is Everything!

You have heard it said that real estate is all about location…and that is true…however, raw land and developments are also heavily contingent upon timing. Buying right before a big boom might yield instant riches but also incur a heavy risk. Buying after a bust may require a bit of waiting with equally impressive long term results. They key is to understand which will benefit your specific situation the most. Always be sure to include the long term tax consequences of the carry cost including property taxes.

Assets or Liability?

Right now there are an abundant number of vacant lots in half-finished subdivisions scattered across the nation; are they good investments or not? There really isn’t a simple answer; in part, it depends upon the assets versus liabilities inherent to each individual parcel. For example, does the property front a paved road or is it likely to receive a paving assessment in the future? The same applies to utility access including water, septic and electricity. Is the impact fee paid or not? Each of these considerations is capable of dramatically influencing the total price versus appeal of a given property. For example, two lots in the same neighborhood are up for sale. Each is one acre however, one sits on a paved road and has a well/septic installed so therefore avoids a $10,000 impact fee plus the cost of the well/septic. The other is located on a dirt road so will incur at least $5,000 for a paving assessment plus a $10,000 impact fee and another $6,500 for a well and septic. The second parcel will cost over $20,000 just to meet the same asset level as the first property.

How to Find a Diamond in the Rough

Wondering how to find one of these diamond in the rough properties? It’s not always as difficult as you might imagine. A few good places to begin include classified advertisements for mobile homes or abandoned properties (both of which often have existing well/septic and other improvements), surplus and government land sales for back taxes and/or unpaid paving or utility assessments and bankruptcy filings for developers.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–