REO

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Short Sale Automation … The Paperless, Easy Solution.  Join us

TODAY at 3 PM ET, NOON PST as we unveil a new

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Home prices falling

According to Fiserv, a division of Moody’s Economy.com, the average home price in the United States will fall by about 6% by September 2011.  Most of the projected home price decline will occur during the usually slow summer months of 2010. After that, prices should begin to stabilize, according to Fiserv, and stay almost flat through fall of 2011. The main reason for continued decline, according to Mark Zandi, economist and co-founder of Economy.com, is foreclosures — the same thing that’s plagued markets for the past three years.  He figures there are at least 4.5 million mortgage loans either in foreclosure or clearly headed in that direction. When that additional inventory hits the market, it will provide numerous choices for buyers and encourage sellers to drop their listing prices.  The end of two federal programs, which have been propping up markets, will also tamp down prices. The Fed’s program to buy mortgage securities lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates, and a month after that, the homebuyer tax credit will start to expire.  Of course, home prices are ultimately decided by employment. “If [the job market] improvement is stronger than expected, prices will get better. If it’s weaker than expected, prices will be worse,” Zandi said.

Jobless claims up

The Labor Department said in its weekly report that there were 496,000 initial job claims filed in the week ended Feb. 20, up 22,000 from a revised 474,000 the previous week,. The prior week, there were 442,000 claims filed.  A consensus estimate of economists surveyed by Briefing.com expected new claims to fall to 460,000. The government said 4,617,000 people filed continuing claims in the week ended Feb. 13, the most recent data available. That’s up 6,000 from the preceding week’s revised 4,596,500 claims for a jump of more than 12% over the past two weeks. A Labor Department official said the unexpectedly large rise could partly reflect a backlog of claims that were unable to be processed in four Mid-Atlantic and New England states because of heavy snowfall. Still, the increase is likely to amplify concerns that the job market is weakening, potentially slowing the economic recovery.  Dan Greenhaus, chief economic strategist at Miller Tabak, said the claims data has been unusually distorted in recent weeks. As a result, “we are concerned about the upward pressure on initial claims but not overly concerned.”  The four-week average, which smoothes volatility, rose by 6,000 to 473,750.  The four-week average has risen by about 30,000 in the past month, raising concerns that job cuts are continuing. Initial claims had fallen sharply over the summer and fall but the improvement has stalled since the year began.

New home sales down

The Census Bureau says the seasonally adjusted annual rate of new home sales fell 11.2% to 309,000 last month, compared with a revised rate of 348,000 in December.  It was the lowest rate since the government began keeping records in 1963 and comes after declines in November and December.  The drop surprised many industry analysts. A consensus of economists surveyed by Briefing.com had expected January sales to rise to an annual rate of 354,000. “Some people were expecting a surge in demand because of the tax credit,” said Patrick Newport, an economist at IHS Global Insight. “But that surge isn’t materializing.”  New home sales fell in all U.S. regions except the Mid-west, where sales edged up 2.1%. The Northeast was the hardest-hit last month, with sales plunging more than 35%.  “Distressed inventory continues to hit the market at cut-rate prices, drawing potential buyers away from new product,” said Mike Larson, real estate analyst at Weiss Research. “And let’s face it, the job market is nothing to write home about, either.”  There were an estimated 234,000 new homes for sale at the end of December, according to the report. At the current sales rate, it would take 9.1 months to sell through that inventory. That’s up from December, when there were 8.1 months of inventory on the market. Prior to December, inventory levels had been steadily declining since May 2009. IHS Global Insight’s Newport said he also expects sales to pop this spring. However, he may reduce his full year forecast for new home sales in light of Wednesday’s report. “Builders are putting up homes,” he said. “But what these numbers are telling us is that those homes aren’t selling.”

Manufactured Goods Jump 3%

The Commerce Department reported Thursday that orders for durable manufactured goods jumped 3 percent in January, the biggest increase since a 5.8 percent increase last July. However, excluding transportation, durable goods orders fell by 0.6 percent, a weaker showing than economists had expected.  The strength came mostly from a surge in demand for commercial aircraft, while demand for autos, machinery and a host of other products fell last month, indicating manufacturing is still facing hurdles that could slow the economic recovery.  The drop in orders excluding transportation followed solid gains of 2 percent in both December and November.  Analysts were not too concerned by the drop in demand outside of aircraft, noting that the government revised higher the increase in orders excluding transportation in December to show a gain of 2 percent, stronger than the initial estimate of a 1.4 percent rise.  Paul Ashworth, an economist at Capital Economics, said the January durable goods report provided further evidence that “the manufacturing sector is enjoying a healthy rebound, driven by restocking and a sharp turnaround in world trade.”  The 0.6 percent drop in orders outside of transportation reflected a big 9.7 percent plunge in demand for machinery, which offset a 1.9 percent increase in orders for primary metals such as steel.  Orders for non-defense capital goods, excluding aircraft, fell by 2.9 percent in January following solid gains in the two previous months. This category is considered a proxy for business plans to invest in new equipment to expand and modernize.

MBA proposes forbearance program

The Mortgage Bankers Association (MBA) says it has developed a concept for a new forbearance program that would allow qualified borrowers who had lost their jobs to remain in their homes while they seek new employment.  According to the proposed program, loan servicers would reduce the borrower’s mortgage payment to an affordable amount for up to nine months while the homeowner looked for employment.  “The vast majority of new distressed borrowers we are seeing involve the loss of income,” said John A. Courson, MBA’s President and CEO.  “This program is designed to buy those borrowers time to find a new job, after which they could hopefully qualify for a loan modification.” Loan servicers who participate in this program would reduce monthly payments to an affordable level based on household income, and borrowers would be initially evaluated for the forbearance program using a model that assumes the borrower will be reemployed within nine months of losing his or her job at 75 percent of the borrower’s previous salary.  The borrower would be reevaluated as to employment and income status every three months for a total forbearance of nine months.   Once reemployed, the borrower would be evaluated for a modification under the Obama Administration’s Home Affordable Modification Program (HAMP). “Recent statistics show that the average unemployed U.S. worker stays unemployed for between six and seven months,” added Courson.  “That is a long time for a borrower with a dramatic drop in income to stay current on their mortgage.  Further, borrowers with such a precipitous drop in income can’t qualify for most loan modification programs, so we are looking for ways to allow those borrowers to keep their homes while they look for another job.”

Now on to our real estate investing educational section…

LinkedIn LifeHacks for Realtors & Investors

By now nearly every real estate agent, broker or investor in the nation has a LinkedIn account…but are you making the most of it? According to LinkedIn, the majority of people create a profile, invite a few friends and family then let it go dormant. Learn how to supercharge your LinkedIn profile and let it begin really working for you with these quick tips:

1. Pick a professional name. Select the title or name you want to use for all of your business dealings to put on your LinkedIn profile. Be sure to make sure your name shows up on the Google search results whenever you perform a search for that name. Because LinkedIn is a large website that is constantly indexed by Google, your LinkedIn profile should show on the first page.

2. Pimp our your profile. LinkedIn comes with a standard “my blog” and “my website” links on the profile page…rather than use these rather lame and generic equivalents, put them both to maximum productivity by customizing each. Simple log into LinkedIn, click on the “edit” button then “other”. The system will now allow you to customize the phrase so people can more easily find your business. For example, replace with your name and city or type of real estate you specialize in for enhanced search engine visibility and marketing.

3. Add the options. Link to your Facebook account (remember, use a strategic name!) and import your Wordpress blog into your LinkedIn profile page. Not only does it keep the content fresh and focused in one easy to access location but it reduces the amount of time you spend updating information. Another important option to consider is LInkedIn’s Direct Ads campaign where you can target professionals for as little as $50 per month. It works a lot like Google’s adwords but for LinkedIn. Find out more at https://www.linkedin.com/directads/start.

4. Include your email contact list. Sounds like a no-brainer but a surprising number of people fail to follow through with this one simple step! If you are like most real estate agents, chances are you have hundreds or even thousands of email contacts in your address book. Put them to good use!

5. Join a group. There are many LinkedIn groups ranging from specialized interest areas, geographic location or simply to share and expand networking connections. While some shudder at the thought of joining a link-building group, keep in mind these are all willing participants who act like virtual networking promoters on steroids. Six degrees of separation demonstrates the best connections are often those most distant from our typical circle of influence so take time to develop both close and far connections.

If this sounds like a lot of work, don’t despair. Find out how to put Social Media to work for your professional goals without the hassle or headache.  Join us tonight at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/819732522

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

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

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

About the author:

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

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

Forward this e-mail to your friends!  Then they can subscribe directly at the following link:  http://www.smartrealestatenews.com/

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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

Woops!  We had a major gotowebinar meltdown yesterday … and

we apologize!  The technical glitches have been fixed and gotowebinar assures us it won’t happen again!  So we’re bringing back an Encore:

Short Sale Automation … The Paperless, Easy Solution.  Join us

tomorrow (Thursday) at 3 PM ET, NOON PST as we unveil a new

way to manage what used to be chaos:

 https://www2.gotomeeting.com/register/231942947

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

11.3 million homes underwater 

According to DSNews.com a new study released by First American CoreLogic Tuesday, more than 11.3 million residential properties were in negative equity at the end of 2009. That equates to 24 percent of all homes in the United States with mortgages, up from 23 percent, or 10.7 million homes, at the end of last year’s third quarter. All told, the nation’s homeowners are a combined $801 billion underwater. First American says an additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity. Together, negative equity and near-negative equity mortgages accounted for nearly 29 percent of all residential properties with a mortgage nationwide.  As of the end of last year, Nevada had the highest percentage negative equity, with 70 percent of all of its mortgage properties underwater. It was followed by Arizona (51 percent), Florida (48 percent), Michigan (39 percent) and California (35 percent).

Among the top five states, the average negative equity share was 42 percent, compared to 15 percent for the remaining states. In numerical terms, California (2.4 million) and Florida (2.2 million) had the largest number of negative equity mortgages accounting for 4.6 million, or 41 percent, of all negative equity loans.  “Negative equity is a significant drag on both the housing market and on economic growth. It is driving foreclosures and decreasing mobility for millions of homeowners,” said Mark Fleming, chief economist with First American CoreLogic. “Since we expect home prices to slightly increase during 2010, negative equity will remain the dominant issue in the housing and mortgage markets for some time to come.”

Freddie Mac loses $6.5 billion

Government-owned mortgage financing firm Freddie Mac lost $6.5 billion in the fourth quarter, up from a loss of $5.4 billion a year ago. The company lost $21.6 billion for the year, an improvement from 2008 losses of $50.1 billion.  Freddie said it ended the quarter with a positive net worth of $4.4 billion, which means that for the third straight quarter it did not need another injection of government cash. Net worth compares a company’s assets to the value of its liabilities.  A year ago Freddie needed $30.8 billion in federal cash as mounting foreclosures on the mortgages Freddie owns or guarantees hurt the company’s finances.  Since the start of the conservatorship Freddie has received $50.7 billion in taxpayer dollars, while Fannie has received $60.9 billion.  Together, Fannie and Freddie own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.  The two companies loosened their lending standards for borrowers during the real estate boom and are reeling from the consequences. Nearly 4% of Freddie’s borrowers have missed at least three payments.

Consumer confidence down

The Conference Board, a New York-based research group, said its Consumer Confidence Index fell to 46.0 in February from 56.5 in January.  According to a Briefing.com consensus survey, economists expected the index to fall slightly to 55.0 from 55.9. The index, which is based on a survey of 5,000 U.S. households, is closely monitored because consumer spending drives two-thirds of the nation’s economic activity.  The overall index remains at historically low levels and is the lowest since April 2009. A reading of above 90 indicates a stable economy, while 100 or greater is an indication of strong growth.  February’s present situation index, which indicates how consumers feel about current economic conditions, hit a 27 year low of 19.4, according to the Conference Board. That means that consumers feel things are worse now than they were during the throes of the financial crisis in the fall of 2008. Expectations for the future also took a turn for the worse in February. The expectation index, a measure of consumer outlook over the next few months, fell to 63.8 from an upwardly revised 77.3 in January. Only 16.7% of consumers expect to see an improvement in business conciliations over the next 6 months, down from 20.7%. Some 15.3% of those surveyed expect business conditions to get worse over the next six months.  The outlook for the labor market was even more bleak. The percentage of those who expect fewer jobs to become available jumped to 24.6% from 18.9% in January. And only 9.5% of those surveyed anticipated an increase in their incomes, compared to 11.0% in January.

Mortgage rates to rise?

The Fed has been buying mortgage-backed securities since late 2008. But next month it plans to finish its purchase of $1.25 trillion in mortgages, and that could be bad news. There is wide agreement that the removal of this support will mean higher mortgage rates, which could hit housing prices and sales hard. Some even worry that it could cause the broader economic recovery to stall.  The program was the largest single injection of cash into the economy by the Fed during the financial crisis, and it will be the longest-lasting source of funds as well. Even though the Fed intends to stop buying mortgages, few people expect that the central bank will start selling them to private investors any time in the next few years.  even if the Fed holds onto the mortgages it has already purchased, the act of no longer buying additional mortgages is likely to raise mortgage rates in the coming weeks.

Experts say a jump of at least a quarter to a half percentage point is likely.  San Francisco Federal Reserve President Janet Yellen warned of higher rates in a speech Monday.  Fed Chairman Ben Bernanke is likely to take questions about the Fed’s mortgage program when he testifies about economic conditions on Capitol Hill Wednesday and Thursday.  The worries about the Fed pulling back support for housing are compounded by the end of up to $8,000 in tax credits for home buyers. To qualify, buyers face an April 30 deadline to sign a sales contract.  Dean Baker, co-director of the Center for Economic and Policy Research, argues that the Fed’s program and tax credit for home buyers “ended the free fall in home prices.”  But he thinks that the removal of this support could mean that home prices could start to drop by as much as 1% a month again. He also thinks mortgage rates could climb by as much as a percentage point in the coming months.

Banks not lending

While top-tier banks are recovering at a faster clip, last year the rest of the industry posted their sharpest decline in lending since 1942, suggesting that the industry’s continued slide is making it harder for the economy to recover.  According to a quarterly report from the Federal Deposit Insurance Corp, banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.  FDIC Chairman Sheila Bair said banks are “bumping along the bottom of the credit cycle” and that the number of bank failures in 2010 will likely eclipse the 140 recorded last year.  The struggling U.S. banking industry remains a problem for policy makers eager for banks to lend again. Lawmakers on Capitol Hill and administration officials have pushed banks to lend, particularly in light of the billions in taxpayer aid injected into the financial industry over the past two years. Banking groups and their members counter that they’re under pressure from regulators to be more prudent and that demand from struggling consumers and businesses isn’t there.  Initiatives such as the Obama administration’s $30 billion small-business lending program will rely on banks making loans at a time when many of those same firms are wrestling with a rising tide of commercial real estate problems or being told to add to their reserves by regulators.  The FDIC said that the decline in loan balances in the quarter hit all major categories—from construction to commercial loans and residential mortgages—with the exception of credit card loans.  It remains unclear whether the sharp decline in loans outstanding stems from banks’ tightening standards and a fear of lending or from weak demand from potential borrowers spooked by the downturn. Another cause could be banks actively reducing the size of their loan portfolios, creating a natural decline.

MBA – mortgage applications down

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 19, 2010 decreased 8.5% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 7.3% compared with the previous week.  The Refinance Index decreased 8.9% from the previous week. The seasonally adjusted Purchase Index decreased 7.3% from one week earlier, putting the index at its lowest level since May 1997. The unadjusted Purchase Index decreased 3.6% compared with the previous week and was 13.4% lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 1.6%.  The four week moving average is down 2.1% for the seasonally adjusted Purchase Index, while this average is up 3.2% for the Refinance Index.  The refinance share of mortgage activity decreased to 68.1% of total applications from 69.3% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.7% from 4.4% of total applications from the previous week.

NAR – No commercial real estate recovery before 2011

According to the National Association of Realtors (NAR), fallout from the recent recession continued to negatively impact commercial real estate sectors in the fourth quarter, and things are not going to get better anytime soon.  “With the job market expected to turn for the better later this year, we’ll see rising demand for office and warehouse space, but that isn’t likely before 2011,” said Lawrence Yun, NAR chief economist. Yun notes that commercial vacancy rates remain high in most market areas and are depressing rents.  The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 700 local market experts, suggests a flattening level of business activity in upcoming quarters with 55% of members expecting the market to improve in the second quarter.  The SIOR index rose 0.2%age point to 35.5 in the fourth quarter, compared with a level of 100 that represents a balanced marketplace. This is the first gain following 11 consecutive quarterly declines. Although some indicators show that a decline in commercial property values is beginning to flatten, 86% of respondents report prices are below replacement costs.  Nearly nine in 10 survey participants said new commercial development is virtually nonexistent in their market areas, and rent concessions are reported almost everywhere.

Now on to our real estate investing educational section…

Fiscal Survival of the Fittest

Survival of the fittest applies to economics as well as biology – in fact, some would argue the concept is better applied to the financial arena than any other area of study. Unfortunately, it’s a fact few Americans want to face head on…it goes against the steady diet of “American ingenuity” and the (false) belief that any child born in the good old USA can grow up to be anything they want. While there are exceptions to every rule, survival of the fittest is an economic trend currently undergoing the equivalent of an ice-age extinction as one era gives rise to an entirely new one. Research by consulting firm McKinsey found a few unsettling statistics that demonstrate the depth of the problem:

Over 70 percent of currently employed Americans work in jobs for which there is low or declining demand. This includes both blue collar and white collar. Competition for jobs that cannot be shipped overseas (healthcare for example) has created high competition which is driving down wages and promoting part-time, per diem and other “job sharing” situations.

Mainstream stores are doing double-takes as consumers shift spending habits. Not only are brick and mortar stores under heavy competition from online retailers like Amazon but the bleak economy is finally taking a toll. Violating one of the core marketing principles ‘never undercut your own product’, heavy weight’s ranging from Proctor & Gamble to Macy’s are rolling out discount versions of their more expensive popular items. Cost of Tide got you down? Don’t worry, you can now buy Tide Basic…a discount version. Research shows 1/2 of Americans have already reduced spending and 1/3 plan to do so permanently with 18 percent of consumer switching from name brands to generics in the past two years alone.

So, how are Americans spending their money both today and into the near future?

1. Nearly 34 percent of the average household income goes toward housing. Expect this trend to continue as people downsize into affordable housing options.

2. Just over 19 percent goes toward entertainment and/or miscellaneous items…however, as a discretionary item this is subject to volatility.

3. Roughly 17 percent goes toward transportation – a number experts expect to hold steady as people opt for more affordable options.

4. Just under 13 percent goes toward food; a necessity to be sure but one that is subject to “replacement” purchases as people opt for hamburger instead of steak during tough times.

5. Approximately 11 percent on retirement and personal insurance.

6. Nearly 6 percent on healthcare.

Even a precursory look at where Americans spend their money tells the average investor where to spend theirs…housing, entertainment, transportation, food, financial products and healthcare. Those are the big six that run the American economy. Now stop and consider which are available to the average “little guy” investor…stocks and bonds for healthcare, insurance and finance have been decimated in recent years. The auto industry? Please! Now that’s it’s been nationalized you can count on the same efficiency that brought you the driver license office to run the auto industry. Food is notoriously volatile and forget direct intervention unless you have an unusual level of gardening know how. No, the answer remains the same today as it did 100 years ago…real estate. It’s not easily outsourced, it’s not subject to the market manipulations of stocks and bonds nor is it entirely dependent upon your ability to work yourself into an early grave. It simply requires a willingness to adapt to the new economic environment like all other species that learn to thrive or barely survive.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

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

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

About the author:

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

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

Forward this e-mail to your friends!  Then they can subscribe directly at the following link:  http://www.smartrealestatenews.com/

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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

TONIGHT Learn How To Generate Massive Leads … with Facebook, Twitter, YouTube, LinkedIN, and

Social Media!  Come watch what everyone is excited about … the Proven Social Media Lead Machine!

When: Wednesday, February 17, 2009 at 9 PM ET, 6 PM PST

Where: https://www2.gotomeeting.com/register/698867362 

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

Delinquencies up

According to credit reporting agency TransUnion, 6.89% of mortgage payments were 60 or more days past due in Q409 – up from 4.58% in the final three months of 2008. The previous record delinquency rate was 6.25% in the third quarter of 2009.  FJ Guarrera, vice president of TransUnion’s financial services business unit, says the fourth-quarter uptick was due in part to normal seasonal spending shifts. Consumers are more likely to have trouble paying bills during the last few months of the year as they run low on cash because of holiday spending.  But he says that even accounting for normal season patterns, there is some reason to be concerned about the pace of increase moving higher. “To see continuing growth in the first quarter would certainly raise an eyebrow.” 

TransUnion tracks mortgages that are two months past due as an indicator of potential foreclosure, because of the difficulty involved in coming up with three payments to bring an account current. The agency said the delinquency rate stayed highest in Nevada, at 16.2%, and Florida, at 14.9%. Arizona and California, the other two states hit hardest by the housing crisis, were third and fourth, at 11.3% and 11% respectively.  The highest growth rates compared with the third quarter were in the District of Columbia, Louisiana and Delaware.  Guarrera noted that many homeowners still have adjustable rate mortgages written in late 2006 or early 2007 due to reset to higher rates in coming months, and that could drive foreclosures even higher, especially in areas where home prices have fallen to the point where values are lower than mortgages. “We’re not out of the woods yet,” he said.

Government jobs ballooning

Amity Shlaes at Bloomberg.com points out the growth of government.  In the 1990s, former President Bill Clinton and House Speaker Newt Gingrich managed to reduce the federal workforce to less than 2 million, excluding the postal service.  But from January 2000 to January 2010 — first under President George W. Bush after Sept. 11, then under Barack Obama — the number of non-postal employees in the federal government grew 15 percent, to 2.18 million from 1.89 million. The rise came in Homeland Security positions, Veterans Administration jobs, Justice Department posts, and so on.  This increase would mean less if the private sector had grown as well. But over the same period, private-sector employment decreased by 3 percent, to about 107 million from about 110 million. In short, the relative picture changed. 

Jobs with Uncle Sam aren’t just more numerous than they used to be. They’re better. Wages and benefits for federal civilian workers were more than double the average total compensation in the private sector: $119,982 versus $59,909. In the treacherous period between December 2007 and mid-2009, the number of federal employees earning more than $100,000 doubled, rising to 66,500 or so.  The new relative appeal of a government job sends a message that private-sector work, especially self-employment or a job at a start-up, may not be worthwhile. Recent wipeouts of big businesses and the recessionary struggles of smaller ones only reinforce that message. So do politicians’ occasional disparagement of “risk.”  Shlaes concludes:  Today, the U.S. economy has more competition than it did in the 1950s.  So the kind of policy change that would affect the jobscape, such as eliminating the capital-gains tax and simplifying the income tax, is necessary.  But you won’t hear about those radical measures in the Reid-McConnell jobs debate of February 2010. That’s a shame, because right now there are young people deciding whether they will be employers or mere employees.

DSNews.com – 33 months of coming foreclosures

The Standard & Poor’s (S&P) report we mentioned yesterday in connection with short sales also said the hidden supply of REOs and pending foreclosures will likely take 33 months – or nearly three years – to clear if liquidation rates hold steady.  Even more unsettling is that S&P called its estimate “conservative” because the company’s analysis was based on the number of properties the company believes to be lurking in the shadows right now – repossessed homes that banks have not put on the market and already delinquent mortgages that will likely turn into foreclosures. S&P’s assessment does not take into account any loans that have yet to show serious signs of distress. The ratings agency did not give a specific number of loans in its calculated shadow supply, but said the original balance of currently seriously delinquent and REO loans stands at $426.3 billion. An earlier study by Amherst Securities estimates the dark cloud to hold about 7 million loans, while First American CoreLogic puts it at 1.7 million.  Analysts at Standard & Poor’s said in the report, “It is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market.”

New home construction up

The Commerce Department announced today that construction of new homes climbed to an annual rate of 591,000 during the month, up 2.8% from December’s revised rate of 575,000.  Economists surveyed by Briefing.com expected January housing starts to rise to an annual rate of 580,000. The number of building permits issued during January fell 4.9% to a seasonally adjusted annual rate of 621,000. Economists had predicted building permits would fall to 620,000.  “It’s a positive surprise on all fronts and shows that overall demand has moved higher. That’s an important element to watch as we move through a cycle going from incentive-based to more organic growth,” said Craig Peckham, equity trading strategist at Jefferies & Co. in New York. 

Groundbreaking for single-family homes rose 1.5 percent last month to an annual rate of 484,000 units after declining 3 percent in December. Starts for the volatile multifamily segment increased 9.2 percent to a 107,000 unit annual pace after rising 12.6 percent in December.  New building permits, which give a sense of future home construction, fell 4.9 percent to 621,000 units last month after rising to a 14-month high of 653,000 units in December, the Commerce Department said. That’s compared to analysts’ forecasts for 620,000 units.  The inventory of total houses under construction fell 2.3 percent to a record low 503,000 units last month, while the total number of units authorized but not yet started eased 0.9 percent to 94,300 units.

MBA – loan applications down

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, decreased 2.1 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 0.5 percent compared with the previous week.  The Refinance Index decreased 1.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 4.0 percent from one week earlier.  The unadjusted Purchase Index increased 1.0 percent compared with the previous week and was 18.4 percent lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 1.1 percent.  The four week moving average is down 1.2 percent for the seasonally adjusted Purchase Index, while this average is up 1.8 percent for the Refinance Index.  The refinance share of mortgage activity decreased to 69.3 percent of total applications from 69.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.4 percent from 4.5 percent of total applications from the previous week. The survey covers over 50 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990 = 100.

Now on to our real estate investing educational section…

Are YOU a Broker and Not Even Know It?

When it comes to taxes, the Internal Revenue Service defines a Broker differently than most state or business regulations; in fact, you do not even need a Broker’s license for the IRS to classify you as a broker for tax purposes. Take the following quick quiz to find out if you are a broker and not even know it according to the IRS:

1. Do you routinely sell, exchange, purchase, rent or lease real property?

2. Do you offer to sell, exchange, purchase, rent or lease property for others on a regular basis?

3. Do you negotiate the terms of real estate contracts for yourself or others on a regular basis?

4. Do you list real estate for sale, lease or exchange on a repeat or regular basis?

5. Do you procure prospective buyers and/or sellers on a consistent basis?

If you answered “yes” to the above questions then you might be considered a real estate broker for tax purposes. To determine if you qualify as a “real estate professional” you must satisfy three independent tests including:

1. The 51% Test. Do you spend more than half your working time each year toward your real estate business or activities?

2. 751 Hour Test. In addition to spending 51% or more of your work time in real estate related activities, do you spend at least 751 hours annually in the same pursuit?

3. Material Participation Test. Do you activity participate in the activities related to your real estate profits and losses?

If you answered “yes” to all three of the above questions, you may qualify as a real estate professional by IRS standards and are therefore eligible to take the real estate professional exemption which provides more than $25,000 offset for losses. All real estate related losses or deductions can be claimed including an offset against other earnings, exclusive of income limits, making this an extremely valuable tax strategy for high income earners.

See you at the top! 

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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

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Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
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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
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Foreclosures down – but not for long

Foreclosure rates fell in January compared with the previous month, but remained sharply higher than a year ago, according to a new report by the foreclosure tracking Web site RealtyTrac.  The month-to-month decrease in foreclosures is most likely a temporary improvement, said Rick Sharga, vice president of marketing at RealtyTrac, and has to do with the holiday season.  “Because of the holiday season, offices that do the processing are closed,” said Sharga. “The drop in foreclosures [in January] is something we’ve seen a couple of years now. I don’t think this the beginning of a downward trend.”  The number of Americans receiving foreclosure notices was down 9.7 percent in January from December 2009, but 15 percent higher than last January. In all, 315,716 properties generated a foreclosure notice. That means one in every 409 homes in America received a foreclosure notice. (Foreclosure notices are defined as a default notice, bank repossession or auction sale notice.)  Real estate Web site Zillow.com also released a report last night that found one in five US mortgages were “underwater” during the fourth quarter. The ten states with the highest foreclosure rates were little changed from the previous month. According to the RealtyTrac report, Nevada remains No. 1, with one in every 95 properties in the state getting a foreclosure notice, even though the state showed a 18 percent decrease in foreclosures from the previous year.  Arizona ranked second with one in every 129 households receiving a notice, followed by California (one in 187 households), Florida (one in 187 households) and Utah (one in every 231 households).  South Dakota had the lowest rate, with one in every 25,820 properties receiving a foreclosure notice.

Jobless claims drop

According to the Labor Department, there were 440,000 initial jobless claims filed in the week ended Feb. 6, down 43,000 from a revised 483,000 the previous week.  Economists were expecting initial claims to drop to 465,000, according to a consensus estimate from Briefing.com.  The 4-week moving average of initial claims, which smoothes out volatility in the measure, was 468,500. That’s down 1,000 from the previous week’s revised average of 469,500. The government said 4,538,000 people filed continuing claims in the week ended Jan. 30, the most recent data available. That’s down 79,000 from the preceding week’s revised 4,617,000 claims.  Economists were expecting continuing claims to have declined 2,000 to 4,600,000.  The 4-week moving average of continuing claims was 4,603,500, a drop of 17,750 from the preceding week’s revised average of 4,621,250.  As usual, many economists say the decline in continuing claims reflects a growing number of filers who have dropped off the jo  bless rolls into extended unemployment benefits.

Commercial real estate is the next crisis

The Congressional Oversight Panel said in a report that mounting commercial real estate losses could endanger the banking system and thwart economic recovery.  A total of $1.4 trillion in commercial real estate loans will require refinancing in the next four years, and more than half of those loans are underwater, written for properties whose value has dropped like a rock.  The expected losses when loans go bad could hit between $200 billion to $300 billion and threaten 3,000 small and mid-size banks with a disproportionate share of commercial real estate assets on their books, according to the panel.  The report is intended to “wave a red flag” to the White House and Congress that the commercial real estate loan market is going to get a lot worse before it gets better.  “We’re at a point where even as TARP is ramping down another major challenge in our economy is ramping up,” said Elizabeth Warren, the oversight panel’s chairwoman. “We need to start now, before the system is  on the brink of collapse to figure out a plan,” she added.  The panel’s research found that 2,988 banks are heavily invested — with more than three times their assets tied up — in commercial real estate loans. Of that number, 2,500 banks each have less than $1 billion in assets.  The panel offers a number of possible solutions for policymakers to head off a commercial real estate crisis, including stress tests for banks, injecting capital into these small banks, buying their toxic assets, or guaranteeing loans.

White House Council of Economic Advisers issues annual report

The annual report by the White House Council of Economic Advisers will be delivered to Congress today, and will look at the actions President Obama took to deal with the recession over the past year.  The report will examine the current economic crisis, including the steps the government took to shore up the financial and housing markets. It also looks at the need to reduce the federal government’s deficit and to tackle long-standing problems such as health care costs, climate change and living standards.  Obama has made job creation his central focus in his second year in office. He has recently traveled the country promoting tax credits for small businesses, the source of many new hires. And on Tuesday, he brought together congressional leaders to push for a bipartisan agreement on legislation to boost hiring.  Council Chairwoman Christina Romer expects an average of 95,000 jobs a month to be created in 2010 and the nation’s GDP to expand at a 2.5% rate.  Romer called the report “a page-turner.” Good to hear – if it’s like everything else coming out of the White House these days it’ll be an enthralling work of fiction.

NAR – Home sales surge

According to the latest survey by the National Association of Realtors (NAR), sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.  Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate 1 of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008. Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.  Lawrence Yun , NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels t  rending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”  NAR President Vicki Cox Golder , owner of Vicki L. Cox & Associates in Tucson, Ariz., said near-term market conditions will remain favorable. “Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.

Double dip in house prices?

According to data compiled by Zillow, a real estate sales and data services provider, there are signs that the feared “double-dip” in house prices may have taken hold of US housing prices in as many as one in five major housing markets.  While some individual markets have experienced a bottoming out and increase in prices, 29 of the 143 markets Zillow tracks is now showing signs of a possible double dip in home values. In those markets, home values have flattened or have begun to decrease again after showing at least five consecutive monthly increases during 2009 — what Zillow called early signs of what could a double dip.  The Zillow Home Value Index put the national median price at $186,200 in Q409, a 5% decrease from Q408. Compared to Q309, prices declined 0.5% during the last quarter of 2009. The index is a measure of median home values of all single-family residences, condominiums and cooperatives, both on the market and not for sale. Q409 marked the 12th consecuti  ve quarter of year-over-year declines, Zillow said.  “The good news is that, for those markets that will see a double dip in home values before reaching a definitive bottom, this second dip will not be a return to the magnitude of depreciation seen earlier, but rather will look more like a modest aftershock of the earlier downturn,” said Zillow chief economist Stan Humphries.

Now on to our real estate investing educational section…

The Return Attribution of Real Estate

More money has been made in real estate than all industrial investments combined.

— Carnegie

Traditional investors often overlook real estate in preference to stocks or bonds but even a precursory examination of the return attribution of real estate provides sufficient evidence to support the inclusion of real estate in even the most conservative portfolio. In fact, there is a large body of evidence that demonstrates a 15 percent investment of real estate considerably reduces total portfolio risk…a fact not lost on large retirement funds who have historically invested between 15 to 20 percent into real estate. The return attribution of real estate contains both unique and common characteristics when compared to other investment vehicles each of which will be detailed below:

Capital Appreciation – Without a doubt, capital appreciation combined with leverage has made well maintained real estate a favorite among investors for generations. The long term growth in value is similar to that typically associated with equity asset classes but with increased use of leverage.

Bond-Like – Persistent and predictable cash flow from rental real estate mimics interest paid on bond coupons or similar investments. Investors seeking safety coupled with long term income often look to real estate in order to diversify from bonds or annuities.

Performance & Credit Profile – This frequently overlooked aspect of real estate investment cannot be underestimated in importance especially in a tight credit market; real estate has a credit profile much like the credit rating of a bond. Residential versus commercial holdings and the quality of the location, tenant etc all enter into the credit profile of the property. Savvy short sale investors learn how to maximize the credit profile in order to increase leverage and overall return for the entire portfolio.

Externalities – These are outside influences that impact the desirability and value of a property. Common examples include physical attributes unique to each property, zoning, etc… Even during the most dramatic economic decline, these attributes are what make some properties retain (or increase)  in value even as others rapidly lose valu

Tax Benefits – Real estate enjoys very favorable tax benefits including the use of depreciation, capital gains, tax exempt status, the ability to sell/transfer some tax benefits and other incentives designed to maximize investment potential.

Inflation Hedge – Real estate has historically outperformed nearly all other asset classes during period of inflation. Not only does it tend to act as a hedge against inflation but it tends to hold value during deflationary periods as well. Once the “bubble” has popped, real estate reverts back to its former norm as consumers reign in spending and focus on the basics of shelter, food and medicine.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

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

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

About the author:

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