short sale investing

Smart Real Estate News & Commentary by Chris McLaughlin November 29, 2011

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Home prices fall

The S&P/Case-Shiller index of property values in 20 cities dropped 3.6% in September from the same month in 2010 after decreasing 3.8% in the year ended August, the group said today in New York. The median forecast of 32 economists in a Bloomberg News survey projected a 3% decrease.  “We continue to expect home prices to fall through mid- 2012,” said Anika Khan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We still have an oversupply of existing homes, and distressed transactions continue to drive down home prices.”  Estimates in the Bloomberg survey for the price change ranged from declines of 2.7% to 3.9%. The Case- Shiller index is based on a three-month average, which means the September data were influenced by transactions in July and August.  The year-over-year decline in September was the smallest in seven months.  Home prices adjusted for seasonal variations fell 0.6% in September from the prior month, the biggest decrease since March, after falling 0.3% in August. Unadjusted prices also decreased 0.6% from August as 17 of 20 cities showed declines.

Only Washington, New York and Portland, Oregon, showed gains.  Atlanta, Las Vegas and Phoenix posted new post peak lows in September, the report showed.  The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.  Eighteen of the 20 cities in the index showed a year-over- year decline, led by a 9.8% drop in Atlanta.  Detroit showed the biggest year-over-year increase, with prices rising 3.7% in the 12 months to September. Property values in Washington were up 1%.  Nationally, prices decreased 3.9% in the third quarter from the same time in 2010. They increased 0.1% from the previous three months before seasonal adjustment and dropped 1.2% after taking those changes into account.

MF Global money pops up in Britain

About $200 million in customer money that vanished from MF Global is believed to have surfaced at JPMorgan Chase in Britain, according to people briefed on the matter. The discovery could be the most significant breakthrough in a month long hunt for the missing funds.  During MF Global’s last chaotic days, the brokerage firm overdrew an account at JPMorgan, according to another person who is close to the matter. Some investigators now believe the firm used customer funds to patch at least some of the hole, which would have been a significant breach of federal law.  MF Global transferred the roughly $200 million in the days before the firm filed for bankruptcy, said the people, who requested anonymity because the investigation was incomplete.  Some investigators suspect that the transfer to JPMorgan was the first major misuse of customer money at MF Global, the commodity brokerage powerhouse once run by Jon S. Corzine, the former Democratic governor of New Jersey. Authorities are also looking into whether JPMorgan initially questioned the source of the cash and sought proof from MF Global that it was complying with regulations, one of the people said.  The authorities believe MF Global failed to give JPMorgan full documentation for the cash, the people briefed on the matter said. But the bank’s concerns hardly mattered because the money had already been transferred to the account in Britain. It is unclear whether investigators can recover the $200 million.

New home sales up, prices down

New home sales rose in October, but are still trending to a low annual rate, according to data released Monday by the US Commerce Department.  Sales of new single-family homes last month were at a seasonally adjusted annual rate of 307,000. That’s up slightly more than 1% from the revised September rate and nearly 9% above the October 2010 rate.  The median sales price of new homes sold in October was $212,300, below the $213,300 price in September but up from $204,200 in October 2010. The average sales price of $242,300 in October was down from $248,400 in September and from $254,400 in October 2010.  But, as IHS economist Patrick Newport noted, the market conditions for single-family home sales are bad.

Tight credit for builders, falling home prices and high foreclosures and delinquencies continue to hold the new-home market back.  “This is shaping up to be the worst year on record for the single-family housing market,” Newport said in a note. He cited that data for new home sales, single-family housing starts and single-family permits will set record lows this year.  Builders say there has been marginal improvement in some markets with better economies.  “While this trend is encouraging, overall sales activity is still well below normal due to the effects of overly tight credit conditions for builders and buyers, the continued flow of distressed properties on the market and inaccurate appraisal values on new homes,” said Bob Nielsen, chairman of the National Association of Home Builders.  There was a 6.3-month supply of new homes at the current sales pace in October.

US deficit deadlock similar to Europe, Barney Frank blames you

Europe’s deepening debt crisis is echoed in the United States by the inability of President Barack Obama and Congress to strike a bipartisan deficit deal.  On both sides of the Atlantic, leaders are having a hard time making tough, unpopular decisions. And things come together only at the very last minute, if at all, while the global economy hangs in the balance.  What happens in Europe is important to Americans. It has already taken an economic toll on US exporters — from reduced consumer demand in Europe for their products and from a rising dollar against the euro.  The worse things get in Europe, the more likely the contagion could spread to the US  Right now, the situation looks much graver overseas, with Europe teetering on the brink of a new recession.  With their backs against the wall, and with some economists warning of an imminent collapse of the euro, European leaders are racing to find a grand bargain to keep their monetary union from fracturing. But time is running out.

The United States isn’t quite that close to the edge of the cliff. Last week’s failure of the so-called congressional supercommittee to strike a deficit-cutting deal to lower future government borrowing underscored that Congress is bogged down in inter-party strife, likely meaning that no deal on jobs, spending and taxes is likely until after next November’s presidential election.  The two parties were blaming each other for the deadlock. Republicans slammed Democrat Obama for not doing more to prod an agreement.  And one top Democratic lawmaker even suggested that “the public cannot be totally absolved of responsibility.”  “They elected us,” Rep. Barney Frank, D-Mass., senior Democrat on the House Financial Services Committee said at a news conference Monday called to announce his retirement after more than three decades.  “Congress is not some autonomous entity that parachuted through the dome,” Frank said. “We were elected.”

Olick – new homes face pressure

“Sales of newly built homes are bouncing around a bottom, but prices are now at the lowest level of the year.  The median price of a new home came in at $212,300 for October, which is up from a year ago, but October of 2010 represented the big fall after the end of the home buyer tax credit.  The fact that October of this year saw the lowest price of the year so far is not good news going forward. What this means for the nation’s big builders have the analysts split.  ‘While we continue to believe prices may fall slightly from current levels, we believe pricing is essentially near its trough, and therefore should result in minimal impairment charges for the builders in 2012,’ writes Michael Rehaut at JP Morgan.  ‘New home prices are still at a 31% premium to existing home prices (vs. 14% historically), and given the high level of existing home inventory, we expect pricing pressure to remain,’ notes Dan Oppenheim at Credit Suisse.  New home sales are still at half the normal historical levels, and they are in for more fierce competition in 2012, specifically, foreclosures.

Banks are ramping up the repossessions again after year-long delays in the process, and that will mean inventories of distressed properties will rise.  These rock-bottom priced properties may or may not compete with new construction, depending on geographical area, but they will bring overall existing home prices down, and that will do nothing good for consumer confidence.  Inventories of new construction are approaching healthy, at just a 6.3 month supply (far better than that of existing homes at an 8 month supply). In raw numbers, they are actually at a record low of 162,000 (or at least since the data tracking began in 1963). Unfortunately, that’s not helping prices in and of itself.  ‘The bigger picture is that house prices are still being weighed down by the huge number of discounted existing homes coming onto the market,’ writes Paul Diggle at Capital Economics. ‘New home sales will also be held back by the weaker pace of economic growth that we are expecting next year. Admittedly, at some point activity in the new homes market will have to rebound to reflect underlying population growth. But that is still a few years away yet.’

So will the big builders continue to slash prices in order to compete?  Can they?  ‘Commodity prices remain elevated, and that doesn’t give builders much room to cut prices too much without really sacrificing profit margins again,’ says Peter Boockvar at Miller Tabak.  That’s why analysts are being very selective in their approach to the home builders and are ‘muting’ their outlooks for 2012.  ‘This is shaping out to be the worst year on record for the single-family housing market,’ says Patrick Newport at IHS Global Insight. ‘New home sales (data start in 1963), single-family housing starts (data start in 1959) and single-family permits (data starts in 1960) will all set record lows in 2011. Existing home sales may avoid the cellar, but only because a third of them are selling at ‘distressed’ prices.’  So what will get housing back on a strong foundation for growth? All the analysts agree: Job growth.”

US credit outlook downgraded

In the wake of the Congressional debt committee’s failure to find agreement, Fitch Ratings affirmed the United States’ top-notch credit rating on Monday but revised its rating outlook to “negative,” down from “stable.”  That change indicates that the agency sees a slightly greater than 50% chance that it will downgrade the country’s AAA rating within two years.  In affirming the rating, Fitch said the US economy is still the most productive in the world and the government has “unparalleled financing flexibility.”

The US bond market is the largest and most liquid in the world and the dollar is the global reserve currency — held by banks worldwide and a staple in international transactions.  But the agency cited its “declining confidence” that Congress would enact “timely fiscal measures” to put the country’s public finances on a sustainable path.  It also noted that a worsening in the economic outlook would further mar the fiscal picture.  As it is, Fitch estimates that US debt held by the public will hit 90% of GDP by the end of the decade, up from about 70% today. And interest payments on the debt would likely consume more than 20% of tax revenues.  “Failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade of the US sovereign rating,” the agency said in a written statement.  Last week, the two other major ratings agencies — Moody’s and Standard & Poor’s — said the so-called super committee’s failure did not in itself affect their credit ratings for the country.  Moody’s affirmed its AAA rating. And S&P, which downgraded its US credit rating this summer because of the “political brinksmanship“ in the debt ceiling debate, said it would keep its rating for US bonds at AA-plus for now.  Both agencies had previously assigned a negative outlook on their US rating.

NAR – growth in commercial markets next year?

Commercial real estate markets have been relatively flat this year, but improving fundamentals mean a more positive trend is expected in 2012, according to the National Association of Realtors (NAR).  NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS, Inc., a source of commercial real estate performance information.

-  Office Markets
Vacancy rates in the office sector are expected to fall from 16.7% in the current quarter to 16.1% in the fourth quarter of 2012.  The markets with the lowest office vacancy rates presently are Washington, D.C., with a vacancy rate of 9.3%; New York City, at 10.3%; and New Orleans, 12.8%.  After rising 1.4% in 2011, office rents are forecast to increase another 1.7% next year. Net absorption of office space in the US, which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be 20.2 million square feet this year and 31.7 million in 2012.

-  Industrial Markets
Industrial vacancy rates are projected to decline from 12.3% in the fourth quarter of this year to 11.7% in the fourth quarter of 2012.  The areas with the lowest industrial vacancy rates currently are Los Angeles, with a vacancy rate of 5.2%; Orange County, Calif., 5.7%; and Miami at 8.4%.  Annual industrial rent should decline 0.5% this year before rising 1.8% in 2012. Net absorption of industrial space nationally should be 62.0 million square feet this year and 41.2 million in 2012.

-  Retail Markets
Retail vacancy rates are likely to decline from 12.6% in the current quarter to 11.8% in the fourth quarter of 2012.  Presently, markets with the lowest retail vacancy rates include San Francisco, 3.7%; Long Island, N.Y., and Northern New Jersey, each at 5.7%; and San Jose, Calif., at 6.0%.  Average retail rent is seen to decline 0.2% this year, and then rise 0.7% in 2012. Net absorption of retail space is seen at 1.2 million square feet this year and 13.5 million in 2012.

-  Multifamily Markets
The apartment rental market – multifamily housing – is expected to see vacancy rates drop from 5.0% in the fourth quarter to 4.3% in the fourth quarter of 2012; multifamily vacancy rates below 5% generally are considered a landlord’s market with demand justifying higher rents.  Areas with the lowest multifamily vacancy rates currently are Minneapolis, 2.4%; New York City, 2.7%; and Portland, Ore., at 2.8%.

Average apartment rent is projected to rise 2.5% this year and another 3.5% in 2012. Multifamily net absorption is likely to be 238,400 units this year and 126,600 in 2012.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin October 19, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Short sales gaining popularity

US home prices may get a boost from an unlikely source: a pickup in sales of properties in default before they reach the stage where they are repossessed by the bank and sold.  There has been a “dramatic shift” in banks’ willingness to sell a property for less than the mortgage balance to avoid foreclosing, said Ron Peltier, chairman and chief executive officer of HomeServices of America Inc.  The short sales typically change hands at a discount of about 20% to homes not in financial distress, compared with a 40% price cut for bank-owned homes, according to RealtyTrac Inc. Short sales jumped 19% in the second quarter from the prior three months while foreclosure sales were flat, the data seller said.  “Banks have become much more supportive of short sales,” said Peltier, whose Minneapolis-based company is a unit of Warren Buffett’s Berkshire Hathaway Inc. “That’s better for the lenders, who have smaller losses on a short sale, and it’s going to be better for homeowners, who won’t have as much psychological distress as a foreclosure.”

Distressed sales brokered by HomeServices used to be 60% foreclosures and 40% short sales, Peltier said in an interview. Now, that ratio has flipped, according to the CEO.  “There’s a huge backlog of homes in default that the banks want to get rid of,” said Thomas Popik, research director for Campbell Surveys in Washington. “They don’t want to be homeowners.”  Banks are being more agreeable to short sales as foreclosures slow following a yearlong probe of so-called robo- signing, or pushing through unverified default documents. Foreclosure filings have fallen for 12 straight months through September as banks work through a backlog of paperwork, according to RealtyTrac.  Almost a third of all home transactions in August were foreclosures or short sales, according to the National Association of Realtors.

Goldman Sachs posts loss

Goldman Sachs posted a loss that was even worse than expected of 84 cents a share on a 33% drop in investment banking revenue from a year ago.  Wall Street had expected the company to post only the second quarterly loss since Goldman went public in 1999, but estimates were for just 16 cents a share in the red.  Shares, though, rebounded from earlier losses after company officials insisted the firm was well-positioned after the economy recovers and financial markets stabilized. Goldman stock rose 1% in premarket trading.  Goldman posted $3.59 billion in revenue, a decrease from $8.90 billion a year ago when it posted a profit of $2.98 a share.  Analysts had expected revenue of $4.29 billion.  Investment banking revenues came in at $781 billion, a one-third fall from the third quarter in 2010 and a 46% drop from the previous quarter. Financial advisory revenues were $523 million, up a bit from the same quarter last year.  Goldman’s loss-driver was its Investing & Lending division, which holds stocks, bonds, loans and private equity assets as long-term investments.  The division reported negative revenue of $2.48 billion as the value of those assets dropped sharply. Goldman’s stock investment in Industrial and Commercial Bank of China alone generated more than $1 billion of paper losses.  Goldman was also hurt by big declines in bond trading and investment banking revenue.  Its fixed income, currency and commodities client trading business reported $1.73 billion in revenue, a 36% decline from a year earlier.

Federal officials and banks try to hammer out a mortgage deal

Officials and big banks are working on a plan that would make refinancing available to some borrowers whose houses are worth less than their loans, so long as they are current on mortgage payments, the Wall Street Journal reported.  Such borrowers typically are not able to refinance because they lack equity in their homes. The plan would apply only to mortgages owned by the banks, the Journal said, citing people familiar with the matter.  Federal officials have been trying to broker a settlement with the five largest mortgage servicers — Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo — the Journal said.  It is not clear how many borrowers would qualify for help, the paper added.  Officials are pushing for a plan in a bid to break a legal impasse with big banks over alleged foreclosure abuses and ease problems in the housing market, the paper said.  Discussions are still fluid and any final outcome is uncertain. Talks between government officials and the banks are expected to continue this week.

Oil down

Oil fell for a second day in New York after China said its economy grew at the slowest pace in two years and US crude stockpiles were forecast to increase.  Futures dropped as much as 0.5%, extending yesterday’s 0.5% decline, after China’s statistics bureau said the economy grew at 9.1% in the third quarter, less than predicted. An Energy Department report tomorrow may show US crude inventories climbed for a second week, according to a Bloomberg News survey. Technical indicators indicate prices may have advanced too fast to be sustainable.  “The number from China is getting a bit worse than before,” said Ken Hasegawa, an energy trading manager at broker Newedge Group in Tokyo, who forecasts prices will decline $5 a barrel. “If the recovery of the economies in Europe and the US is getting worse, then the economies of China and Asia will show some damage.”  Crude for November delivery fell as much as 40 cents to $85.98 a barrel in electronic trading on the New York Mercantile Exchange. It was at $86.10 at 2:45 p.m. Singapore time. Yesterday, the contract lost 42 cents to $86.38, the lowest settlement since Oct. 13. Prices are down 5.8% this year.  Brent oil for December settlement on the London-based ICE Futures Europe exchange dropped as much as 45 cents, or 0.4%, to $109.71 a barrel. The European benchmark contract was at a premium of $24 to US futures. The difference narrowed 16% yesterday, the most since June 16.

Rentals surge

Despite the most affordable buying market in decades, households across the country are slowly choosing rentals versus homeownership, signaling a positive economic trajectory for the multifamily sector, according to Freddie Mac’s October 2011 economic outlook report released Monday.  In the year ending June 2011, the Census Bureau reported a net increase of 1.4 million households that moved into rental housing, a 4% rise in the number of tenant households.  The US homeownership rate fell about 1.5% over the past year, according to Freddie Mac’s report.  Hessam Nadij, managing director of research and advisory services for Marcus & Millichap, said in the August issue of HousingWire magazine that “apartments, which are considered part of the commercial real estate sector, are well ahead of retail, office properties and industrial properties in the recovery because of the release of pent up demand.”  Much of the rental demand is from household heads under 30 years old who have decided to postpone homeownership in favor of renting during uncertain economic times, according to the report. Owner rates for those under 25 years old fell 4.4% to 21.9% while rates for those 25 to 29 years old fell 7% to 34.7%.

Bank of America Merrill Lynch estimated a net decline of 1.2 million homeowners since 2007, alongside a net increase of 3.4 million renters. Americans expect home prices to continue to fall, according to a recent Fannie Mae National Housing Survey. Another Fannie survey released in August also predicted a rise in renters.  Financing for rental housing is becoming more readily available. Frank E. Nothaft, Freddie Mac vice president and chief economist, attributed the rise in lending to low mortgage rates, improving apartment-sector economics and the return of traditional lenders that had curtailed activity during the recession. Nothaft said this year’s multifamily loan origination volume is “stronger” than last year’s.  Texas is the hottest market for apartments this year. A majority of the growth is coming from the Dallas-Fort Worth metro area, according to, a unit of RealPage, Inc. The North Texas region started more than 7,300 new units, according to the firm’s mid-year data.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin September 19, 2011

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

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

NAR urges more short sales

In a letter sent to the US Department of Housing and Urban Development, the Federal Housing Finance Agency, and the US Department of the Treasury, the National Association of Realtors (NAR) responded to the agencies’ recent request for input and offered its recommendations for selling REO properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration. According to NAR, improving access to affordable mortgage financing for qualified home buyers and investors and committing additional resources to loan modifications and short sales will help reduce current and future inventories of real estate owned (REO) properties held by government agencies. NAR urged the agencies to create an advisory board as they explore new options for selling foreclosed properties to ensure that efficiently disposing of agency REO properties will minimize taxpayer losses and reduce the negative effects that distressed properties have on local real estate markets.

To prevent further REO inventory increases, NAR also recommended that the agencies take more aggressive steps to modify loans and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure. Phipps said that while federal programs have been put into place to help keep families in their homes, many of these have fallen short of expectations, and advocated that those resources be applied toward modifying loans and expediting short sales, which are typically less costly than foreclosure. “Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.”

NAR is also concerned about proposals that include lease-to-own elements. Phipps said that agency policies should first be focused on keeping families in their homes through loan modifications or short sales if that’s a better option, and that the agencies should not expedite foreclosures so that those properties could be included in a lease-to-own program. He added that any lease-to-own programs should not be administered by the government, but instead should include the participation of local investors or nonprofits that can manage the specialized needs and challenges of the local market.

Boehner calls for tax reform

House Speaker John Boehner, in a high-profile speech, called on a special congressional “super committee” to consider tax reforms that would close loopholes but not raise rates—or tax revenues—as part of its bid to cut the US deficit. Boehner’s address to the Economic Club of Washington was a comprehensive statement of Republican economic principles as Congress works to bring down the stubbornly high 9.1% unemployment rate and tame the national debt. Boehner attacked “short-term gimmicks” and said a proposed tax credit for businesses that hire new workers would have little impact if employers were worried about other government policies. Washington’s energies would be better channeled toward reducing regulations on business, he said. “Let’s be honest with ourselves. The president’s proposals are a poor substitute for the pro-growth policies that are needed to remove barriers to job creation in America,” Boehner said. Boehner said the newly created “super committee” of congressional Democrats and Republicans should try to simplify the tax code in order to trim at least $1.2 trillion from annual budget deficits over 10 years. But that overhaul should not bring more revenue to the government and the committee should focus only on spending cuts and benefit reforms to trim deficits, Boehner said. The overhaul should yield a top rate of 25% for both income and personal taxes, Boehner said later on CNBC, down from their current level of 35%.

Olick – flood of foreclosures headed this way

“New foreclosure starts rose sharply in August, signaling a slew of foreclosed properties will be dumped on the already bloated housing market in early 2012. ‘Notices of Default,’ the first stage of the foreclosure process, rose 33% month-to-month, according to a new report from RealtyTrac. Much of this was driven by a huge jump in the numbers from Bank of America, as reported here on the blog Tuesday. ‘The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems,’ said James Saccacio, chief executive officer of RealtyTrac. ‘It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.’

As always, the numbers vary locally, with default notices up more than 40% month-over-month in New Jersey (42%), Indiana (46%) and California (55%). The numbers are still down from August of 2010, but that was a near-record high month before any of the ‘robo-signing’ documentation problems were uncovered. While the jump is significant, it may just be the tip of the iceberg. After posting my blog on Bank of America Tuesday, a spokesman there responded, ‘We are on an ongoing path to return foreclosures to normal levels. Strong gains like that from July to August demonstrate our progress – primarily in judicial states — clearing more volume to advance to foreclosure once we pass the numerous quality controls we have in place and exhaust all options with homeowners. Our progress each month builds upon foreclosure levels lower than the market realities would dictate.’

The market realities are a far higher number of delinquent loans that have not yet even made it to foreclosure starts. There were 4.38 million delinquent loans recorded in July by Lender Processing Services, which does not include the 2.15 million in the foreclosure process. This latest jump, fed by Bank of America, may push other major loan servicers to do the same. ‘I wonder if this will signal a move by the lenders and servicers to stop waiting for the final settlement with the government to take place and re-start foreclosure proceedings on all those seriously delinquent loans?,’ asks RealtyTrac’s Rick Sharga. While settlement talks, lawsuits and investigations slog on, the big bank servicers are working to get the troubled loans through the process and off their books, and frankly that is the best course of action. The mortgage and housing market crash was a man-made disaster, but just like any hurricane or tornado, you cannot rebuild until you’ve cleared away the mess.”

US Postal Service proposes cuts

The US Postal Service, struggling to cut costs and conserve cash, says it wants to end overnight delivery of letters and postcards and will study about 250 processing sites for possible closure. The agency, which lost more than $3 billion last quarter, has said it must downsize drastically or will be forced to stop delivering mail by the end of next summer. Overseen by Congress and a regulator, it funds its services with postal-related revenue and does not get any taxpayer dollars. Delivering First Class mail in two to three days instead of one to three days could save about $3 billion by 2015, the agency said. The change would allow it to close facilities, cut back on overnight work and eliminate about 35,000 jobs. The Postal Service has struggled to offset falling mail volumes as consumers correspond by email and pay bills online. Personnel costs for its half a million employees are among the factors driving the agency out of business. In June, the agency stopped making biweekly payments into a retirement fund and, in July, it said it was considering more than 3,600 post offices for potential closure. It also wants to stop Saturday delivery to save cash. While the agency has some ability to consolidate and cut costs, officials are relying on Congress for serious structural reforms. The Postal Service said Thursday’s proposal would not require congressional approval but it would still need broader changes to get on a path toward financial health.

Mortgage rates at record lows

Fears over the European debt market pushed fixed mortgage rates to record lows this past week, according to Freddie Mac’s Primary Market Mortgage Survey. The 30-year, fixed-rate mortgage fell to a new bottom of 4.09%, down from 4.12% last week and 4.37% from a year ago. Meanwhile, the 15-year, FRM hit a record low of 3.3%, down from 3.33% last week and 3.82% last year. The 5-year, Treasury-indexed hybrid adjustable-rate mortgage averaged 2.99% this week, up from last week’s average of 2.96%. A year ago, the 5-year ARM hit 3.55%. In addition, the one-year ARM fell to 2.81% from 2.84% last week and 3.40% a year ago. “Continued investor concerns over the state of the European debt markets kept US Treasury bond yields low and allowed mortgage rates to ease once more this week,” said Frank Nothaft, vice president and chief economist for Freddie Mac. “In comparison, the average interest rate of mortgage outstanding in the second quarter was 5.28%. By refinancing into today’s 30-year fixed mortgage, homeowners could shave almost $1,715 a year in interest payments on a $200,000 loan.” Bankrate also reported falling mortgage rates this past week. Based on the firm’s analysis, the 30-year, FRM fell to 4.32% from 4.35% a week ago, while the 15-year, FRM hit 3.44%, down from 3.48%. The 5/1 ARM fell to 3.07% from 3.10%.

Zandi says 40% chance of recession

Back down into recession or finally up toward recovery, Moody’s Analytics Chief Economist Mark Zandi says the inflection point for the economy will likely occur in the coming months and before the 2012 election. Zandi said Thursday there is a 40% chance the economy will slide back into recession within the next year. Real GDP during the first half of 2011 increased at nearly 1% annualized rate and job growth slowed from close to 200,000 new positions per month to barely positive at the end of the summer. “This is not sustainable. Unless spirits improve soon, businesses will ramp up layoffs, consumers will pull back and the economy will fall into another recession,” Zandi said in a research note. Zandi said the problems threatening the economy is a laundry list of outside and artificial forces created by the struggling economies in Europe and the “psychologically debilitating events in Washington,” such as the recent debt crisis debacle and subsequent Standard & Poor’s downgrade.

But at its core is housing. Before a Senate subcommittee Wednesday, Zandi said the US economy faces an overhang of 1.25 million vacant homes and roughly 3.5 million loans in the foreclosure process or more than 120-days delinquent. Signs of restarting foreclosures in the recent report from RealtyTrac was a good sign of progress, Zandi said. “Housing generally is a major source of growth early in recovery. Two years into a recovery housing should be a tailwind to growth and of course it’s not. It’s a drag. Housing is not adding to growth,” Zandi said. “It’s subtracting.” Some monumental litigation sagas could be resolved in the coming months to help both the banks and the government-sponsored enterprises to address housing going forward. These include the servicing settlement between banks and the 50 state attorneys general and the mortgage securities lawsuits between, again, the banks and the Federal Housing Finance Agency. With the banks able to put their mortgage woes behind them, the economy might be able to move forward.

“The inflection point will come sooner than later,” Zandi said. “The AG, servicer has been slow and arduous, but I think it will be solved well before the next election, hopefully in the next few months. I’m hopeful the FHFA lawsuit will be resolved over the next few months. A few cases may be extended after the election and be ongoing for many, many years. But I’m hopeful that the fallout of the suit is well before then.” The US banking system as a whole is in reasonably good shape, he said. Many small banks will fail, and Bank of America continues to shift businesses and executives around, but credit has been made available. Commercial and industrial loans are up as much as 6% from last year. Auto loans and small business loans are also on the rise. “I don’t think the banking system is a real problem with the economy. There is an issue of writing first mortgages but I don’t think it’s capital. I think it’s more litigation risk and putback risk,” Zandi said.

DSNews.com – slowdown in cash investors

It’s Home price depreciation over the past few years has made housing more undervalued relative to incomes than ever before, yet home sales have continued to decline. Even more striking is that the dampened activity can be largely attributed to a weakening in demand from cash buyers and investors, triggered by the more uncertain investment climate, according to the researchers at Capital Economics. The firm has found that since January, the number of homes purchased by cash buyers and investors has fallen by 26%. Over the same period, purchases by first-time and repeat buyers have risen by just 2%. Widespread negative equity and high unemployment are preventing first-time and repeat buyers from filling the hole left by cash buyers and investors, Capital Economics notes. That imbalance translates to weak home sales numbers. Based on the Case-Shiller house price index and compared to the 1975-2010 average, the research firm says housing is now around 23% undervalued against disposable income per employee and disposable income per capita. These are both record lows. As Capital Economics said, the weak labor market and outstanding loan balances that exceed property values are keeping first-time and repeat homebuyers on the sidelines, even with mortgage rates at all-time lows.

Moreover, the firm’s analysts note that mortgage rates have yet to respond in full to the decline in 10-year Treasury yields to 2%. It is possible that 30-year mortgage rates will soon fall below 4%, according to Capital Economics. If so, the firm says the monthly mortgage principal and interest payment on a median priced home bought with an 80% loan would fall to a record low of 13% of median income. That would compare with the 20-year average of 20%. For cash buyers and investors, the weaker economic and investing climate is clearly taking its toll on housing demand, according to Capital Economics. The resulting fall in home sales has offset recent declines in the number of homes for sale, leaving housing inventory still high relative to demand, the research firm explained. And there’s nothing in the cards to suggest a resurgence to bring activity closer to normal levels. All this at the same time that home prices appear to be close to stabilizing, Capital Economics notes. Although, the firm says home prices have yet to respond fully to the recent weakening in consumer and investor demand.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

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http://www.reomillionaireclub.com

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http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin September 15, 2011
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Default notices spike

A report by RealtyTrac says first-time default notices were filed on 78,880 homes last month, marking a nine-month high and up 33 percent from July. It was the biggest increase since August 2007.  Even so, notices were down 18 percent from the same month last year and were down 44 percent from the monthly peak reached in April 2009 during the tail end of the recession.  The rise in default filings did not suggest that a new foreclosure problem was on the horizon, but that some of the backlog related to documentation problems was being worked out of the system, said Rick Sharga, senior vice president at RealtyTrac.  Foreclosure activity was halted temporarily late last year due to claims that lenders relied on “robo-signing,” where documents were signed without reviewing the case files.

Total foreclosure filings—which include default notices, scheduled auctions and repossessions—were sent to 228,098 homes, a 7 percent increase from July but down 33 percent from August 2010.  Bank repossessions fell 4 percent to a six-month low of 64,813 homes. Repossessions have come down 37 percent from the peak of 102,134 hit in September 2010.  Nevada once again had the highest state foreclosure rate with one in every 118 homes receiving a foreclosure filing in August. Nevada has held the top spot for over four years.  Even so, Nevada saw a 3 percent decrease in filings as scheduled auctions and bank seizures eased.

Unemployment, inflation surge

The weekly jobless claims number, which is closely watched as an indicator for employment trends, unexpectedly rose 11,000 to 428,000, well ahead of estimates of 411,000.  The number of people applying for unemployment benefits jumped last week to the highest level in three months.  The four-week average, a less volatile measure, rose for the fourth straight week to 419,500.  The economy added zero net jobs in August, the worst showing since September 2010. The unemployment rate stayed at 9.1 percent for the second straight month.  Businesses added only 17,000 jobs in August, which was a sharp drop from 156,000 in July. Government cut 17,000 jobs. Combined, total net payrolls did not change.

The consumer price index, meanwhile, gained 0.4 percent when including volatile food and energy prices, after an increase of 0.5 percent in July. The so-called core CPI, though, gained 0.2 percent, which was in line with expectations.  Consumers paid more for a range of goods and services last month, pushing up inflation and squeezing Americans’ purchasing power.  For the 12 months ending in August, the core index surged 2 percent, the biggest year-over-year increase in nearly three years. That’s at the top end of the Federal Reserve’s informal inflation target. It could limit the central bank’s ability to take further steps to try to revive the economy.  Food prices rose 0.5 percent, the biggest increase since March. That was due to higher prices for cereals and dairy products. Energy costs increased 1.2 percent.

Senate hears risks of Obama’s plan

As the Obama administration works to construct a plan to refinance millions of underwater borrowers into lower-rate mortgages, a Senate subcommittee heard the hidden risks and difficulties of building such a program yesterday.   Nearly 11 million borrowers currently owe more on their mortgage than the home is worth, according to CoreLogic. Nearly every panelist testifying Wednesday said these borrowers along with the overhang of more than 1.25 million vacant homes and 3.5 million loans in the foreclosure process to be the obstacle holding back the housing recovery and the overall economy.   Senators Barbara Boxer (D-Calif.) and Johnny Isakson (R-Ga.) reiterated before the subcommittee the need to adopt their version of the plan, which would eliminate the loan-to-value restrictions and fees for refinancing Fannie Mae and Freddie Mac loans into lower rates.

The first problem is that the program would also cost the Federal Reserve $4.5 billion in the reduction of interest payments on mortgage-backed securities it bought during the credit crisis of 2008, leaving a $600 million net loss to taxpayers.  Second, David Stevens, the CEO of the Mortgage Bankers Association, told the subcommittee that no proposal addresses the representation and warranty risk of refinancing a mortgage. If the Obama administration’s program does not force Fannie and Freddie to waive its right to force lenders to buy back the refinanced mortgage should it slip into default, lenders may not participate.  Many panelists suggested the Obama administration should simply revamp and expand the Home Affordable Refinance Program, but Stevens pointed out that the private sector has refinanced roughly 4 million mortgages, nearly four times the amount of public programs.  A slew of other obstacles remain for refinancing borrowers so deep underwater. Stevens said existing requirements under the “To-Be-Announced” market and current tax law make pricing securities with loans in excess of 125% LTV nearly “insurmountable.”

Industrial output up slightly more than forecast

U.S. industrial production rose 0.2 percent in August, slightly better than forecast, as a solid gain in manufacturing offset a drop in utility output, a Federal Reserve report showed.  August’s industrial output gain followed an unrevised 0.9 percent jump in July. Economists polled by Reuters had expected a 0.1 percent gain in August output.  Utility output fell 3.0 percent in August after rising 2.8 percent amid a July heat wave.  But manufacturing production rose 0.5 percent, with consumer durables rising a healthy 1.3 percent as automotive production rose. This followed an unrevised 0.6 percent rise in July factory output. Mining output rose 1.2 percent after a 1.1 percent rise in July.  Capacity utilization, which gauges firms’ performance relative to their full potential, edged up to 77.4 percent in August, from a downwardly revised July reading of 77.3 percent.

Southern California sales up

August home sales in Southern California rose 8.6% from July, but the outlook going forward is murky with August sales far below historic averages, DataQuick said Wednesday.  The month of August was an improvement from July with 19,654 homes and condos selling in the counties of Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That compares to 18,090 sales in July and 18,541 sales from a year ago.  August was the first month since mid-2010 to report a year-over-year gain in Southern California home sales.  “Scratch beneath the surface and there’s not a lot to cheer about this month. Home sales were up from a year earlier but remained far below average. Many would-be buyers can’t find financing, and others who want to make a move now are stuck because they owe more than their homes are worth,” said John Walsh, president of DataQuick. “Financial markets are increasingly choppy, the political outlook is incredibly murky and consumer confidence remains poor. Needless to say, it’s not an environment ripe for stabilizing the housing market.”  The San Diego Housing Market Monitor report, which is produced by The Berkland Group, also found pending home sales in San Diego rose 7% in August, while actual sales increased 4%. When comparing last month to a year earlier, San Diego sales still fell 3%.  Distressed home sales made up 46% of all sales in the area in August.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Join my Facebook Fan Page: http://www.mclaughlinchris.com