unemployment

Smart Real Estate News & Commentary by Chris McLaughlin August 19, 2010

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Fix A Flip Re-Opens … all new content, all new case studies.  This is

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When: Thursday, August 19th at 8:30 PM ET, 5:30 PM PST

Where: https://www2.gotomeeting.com/register/618365627

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Homeowners pessimistic

According to the Zillow Second Quarter Homeowner Confidence Survey, U.S. homeowners were less confident about the value of their homes in the second quarter, with one-third believing home prices had not yet reached a bottom.  Homeowners were more pessimistic about the short-term future of home values in their local market than they had been in the previous three quarters, with 33% believing home values in their local housing market had not yet reached a bottom, while 38% believed they had already reached a bottom.  Nationally, 28% of homeowners said home values in their local real estate market would decrease in the next six months, up from 20% in the first quarter.  Additionally, less than one-third, or 30%, believed home values in their local market would increase, down from 42% in the first quarter. 

Zillow said less than a quarter, or 24%, of homeowners said their home had increased in value in the past year, compared with 27% in the first quarter. In reality, 34% of homes increased in value in the second quarter, according to the Zillow Q2 Real Estate Market Reports.  27% of homeowners believed their own homes’ values would increase in the next 12 months, 35% believed they will stay the same, 12% expected a decrease and 26% did not know.  Of those who expected their homes’ values to increase, the median expectation was a rise of 6%, although that varied by geography.   Despite the increasing pessimism, a large number of homeowners were anxiously awaiting the opportunity to sell. Indeed, 5% of U.S. homeowners said they were very likely to put their home on the market in the next six months if they saw signs of a real estate market turnaround.  Zillow said this translated into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of 2009.  “As these homeowners hear news of stabilization in home values, they put their homes on the market, driving up inventory and keeping a cap on home value appreciation,” Humphries said.

Jobless claims jump

The Labor Department says that initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 in the week ended Aug. 14, the highest since mid-November.  Analysts polled by Reuters had forecast claims slipping to 476,000 from the previously reported 484,000 the prior week, which was revised up to 488,000 in Thursday’s report.  The four-week average of new jobless claims, considered a better measure of underlying labor market trends as it irons out week-to-week volatility, rose 8,000 to 482,500, the highest since early December.  The number of people still receiving benefits after an initial week of aid fell 13,000 to 4.48 million in the week ended August 7 from an upwardly revised 4.49 million the prior week. Analysts polled by Reuters had forecast so-called continuing claims rising to 4.50 million from a previously reported 4.45 million.  The insured unemployment rate, which measures the%age of the insured labor force that is jobless, was unchanged at 3.5% during that period.  The number of people on emergency benefits increased 260,105 to 4.75 million in the week ended July 31.

Olick – Refi boom could break smaller banks

” To summarize, refinance applications are way up, up 17%, while purchase applications are on life support, down 3.4% from the previous week and down nearly 39% from a year ago. Refis now make up a full 81.4% of all mortgage applications, up from 78.1% the previous week, and at their highest level since January of 2009.  With home prices way down and mortgage interest rates hovering near record lows, you would think more buyers would get off the fence and sign a contract, but continued weak consumer sentiment is hold them back. You would also think that the bright side to all this is that all this refinancing is putting more money in the average, struggling American’s pocket. 

But then I read this note from FBR’s Bob Ramsey, who believes the rate on the 30-year fixed could go as low as 4%, with the following implications:  ‘If rates continue to fall, a refi boom could swamp banks and thrifts with cash flows with no obvious place to invest. With newly issued agency MBS yielding approximately 3.5%, banks and thrifts face considerable reinvestment risk.’  Thrifts, he says, are better positioned to handle the risk than regional banks, because, ‘better efficiency provides a significant buffer to weaker revenues.’  The less efficient regionals, he says, are most at risk and adds:  ‘Further, if rates remain low for an extended period, we would expect an increase in bank M&A activity as challenging prospects convince some to sell, and others choose to consolidate and grow earnings by cutting duplicative costs.’  I had thought that most borrowers who could had already refinanced by now, but he says that, for some unknown reason, is not the case.  “We believe approximately half of conforming borrowers have both the economic incentive and equity to refinance.”  It seems that in today’s housing finance market, for every upside, there is a downside.

GM tries to break away from the government

General Motors Co. filed registration papers Wednesday for an initial public stock offering, laying the groundwork for the car maker to begin cutting its ties to the U.S. government, its majority owner.  GM outlines a business plan that intends to leverage its massive global scale, strength in fast-growing emerging markets such as China and a balance sheet cleaned up by Chapter 11. At the same time, the company warns it faces many risks, such as continuing losses in Europe and a significant underfunding of its pension obligations.  GM’s plan to return to the public markets includes preferred stock, which the company will sell to raise funds, along with common shares, which will be sold exclusively by some of GM’s current shareholders, including the U.S. government. The company said no dividend is currently planned to be paid on the common shares. 

The IPO will allow the U.S. Treasury to begin selling the 61% stake it holds in GM after last year’s $50 billion U.S. government bailout of the company.  Another holder of GM shares, the United Auto Workers, also is expected to sell some of its stock during the IPO, according to people familiar with the situation.  The IPO, expected later this year, is anticipated to raise $10 billion to $15 billion but possibly more. An expected price range for the shares will be determined closer to the sale.  For the government to recoup its full investment GM must achieve a stock-market value of $70 billion—10 times GM’s market capitalization before the company headed into bankruptcy-court protection in June 2009, and at least $30 billion more than the market value of Ford Motor Co.

Now for our real estate education section…

Best Real Estate Resources You Never Knew Existed

By now everyone has heard of Zillow but when it comes to serious real estate related research, here’s how to find the best of  the best…the type of data the experts use to create those ground-breaking reports and hard hitting case studies. Whether you are working on your next commercial enterprise or simply want to stay abreast of the latest and greatest real estate related information, tap into sure-fire resources to access the best data available.

1. Put a Ph.D to work. Search thousands of doctoral dissertations to see who is working on relevant housing and commercial development related projects. Sponsored by the Office  of University Partnership and the US Dept of Housing and Urban Development, this is a goldmine of research:

http://www.oup.org/ddrg/ddrg_profilesearch.asp

2. Free Information resources. Need a few good resources but don’t have the time or money to hire a writer? Use these free foreclosure related resources to educate consumers and help them make informed decisions about the best course of action when it comes to keeping, selling or buying a home. Produced by the Making Home Affordable Program in conjunction with HUD, they are designed for maximum readability in both spanish and english.

http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure

3. Social Media & Uncle Sam – Your good old Uncle Sam has finally taken the plunge and is now available via Facebook and Twitter. Find out about the most recent research, grant and tax credit opportunities, new programs and much more with instant updates via your favorite social media site.

http://www.facebook.com/pages/Washington-DC/HUD-USER/183685747712?v=wall

http://twitter.com/HUDUSERNEWS

4. Taxing Tips – It’s a topic we would all rather avoid but make it as painless as possible by tuning in for great tips right from the source. IRS.gov has it’s very own real estate tax center…a topic of profound importance to every real estate investor.

http://www.irs.gov/businesses/small/industries/article/0,,id=185194,00.html

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin August 18, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/ 

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

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

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

Fix A Flip Re-Opens … all new content, all new case studies.  This is

one webinar that you don’t want to miss!

When: Thursday, August 19th at 8:30 PM ET, 5:30 PM PST

Where: https://www2.gotomeeting.com/register/618365627

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

22 cities in danger of double dip

A new report from Moody’s Economy.com singled out 22 cities that are at risk of slipping back into a recession in as early as three months. To come to this conclusion, the economists considered dwindling progress in employment, housing starts, home prices and industrial production.  The at-risk cities are spread across the country, ranging from Missoula Montana to Mobile Alabama, though more than half of the cities are in the South, and five are concentrated in the Midwest.  “With chances of a national double-dip recession now estimated at about one in four, several metro areas will probably experience their own downturns in the first half of 2011,” said economist Andrew Gledhill, author of the report.  Private sector hiring has been tapering off in recent months compared to the start of the year, triggering Moody’s to boost its forecast for a national double-dip from a 20% chance to 25% chance.   In the 22 identified metro areas, Gledhill said private sector hiring is particularly sluggish, increasing the chances of a slowdown.  Without a substantial pick-up in hiring, Gledhill said the number of cities in danger of a double-dip recession could grow, possibly reaching the triple-digits.  “There was a time when all 384 metro areas were in a recession. We probably won’t get to that point again, but given the growing risk of another national recession, we’re on the lookout for more metro areas that will be weakening substantially on several levels over the next six months to a year,” Gledhill said.  He added that a handful of metro areas, particularly those that are industrial economies, are also suffering from a recent falloff in manufacturing.

MBA – Refinance Activity Increases

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 13.0% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 12.4% compared with the previous week.  The Refinance Index increased 17.1% from the previous week and was the highest Refinance Index observed in the survey since the week ending May 15, 2009. The seasonally adjusted Purchase Index decreased 3.4% from one week earlier. The unadjusted Purchase Index decreased 4.6% compared with the previous week and was 38.6% lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 2.6%.  The four week moving average is up 0.1% for the seasonally adjusted Purchase Index, while this average is up 3.2% for the Refinance Index.  The refinance share of mortgage activity increased to 81.4% of total applications from 78.1% the previous week, which is the highest refinance share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity decreased to 5.7% from 5.9% of total applications from the previous week.

Obama’s tax hike

With Obama’s tax plan in place, people making more than $195,550 in taxable income ($200,000 in adjusted gross income) and joint filers with taxable income over $237,300 ($250,000 in adjusted gross income) would be pushed up from the current 33% and 35% tax brackets into 36% and 39.6% brackets next year.  “It comes down to the greater your earnings, the greater the tax hit,” said Robert Kerr, senior director of government relations at the National Association of Enrolled Agents. “But it’s all relative. For someone used to spending that money — whether on a big family or expensive habits — it’s impossible to say how much they would be impacted.”  Say you’re a single filer with a taxable income of $250,000. This year, you owed $67,617 in income tax under the 33% bracket. Under the new system, you would pay $67,912 in taxes next year, a slight increase of $295.  But those people making more than $300,000 are going to owe additional amounts in the thousands. For instance, if you make $382,650 you’ll owe an extra $4,095 in income tax.  Single filers with $500,000 in taxable income would owe Uncle Sam an additional $9,492 from this year’s tax bill. Meanwhile, joint filers with taxable income of $700,000 would owe $232,396 in 2011, an extra $17,088 from $215,308 in 2010.  Those Americans lucky enough to be earning millions each year, whether filing as individuals or jointly, could end up seeing increases in the six-figures.  A single filer with a million dollars in taxable income would owe $32,493 more than in 2010, While joint filers with the same income would owe $30,888 more than they paid in 2010.  For single filers making $5 million in taxable income, get ready to hand over $1,944,137 for the 2011 tax year, an increase of $216,493 from $1,727,644 in 2010.  And a joint filer with an income of $5 million is likely to see his tax bill go up more than $200,000 next year.

HSBC to sell mortgage unit?

HSBC Bank USA is considering the possible sale of its US-based mortgage unit, HSBC Mortgage Corp., and notified employees Monday of the possible options being considered although no firm timetable for a potential decision was provided. The bank, the U.S. subsidiary of London-based HSBC Holdings Plc, bases much of its US operations in New York state.  Options for the mortgage subsidiary include “a sale, merger or other business combination,” according to a statement from the bank, which also said the mortgage company may look to sell substantially all of its assets. It’s also possible that no changes at all will be made, the bank said.  Bank spokesperson Neil Brazil stressed to the press that HSBC is not looking to exit US mortgage originations, but is instead assessing how it conducts its mortgage business in the United States.  HSBC’s mortgage operations currently employ roughly 1,500 in the US, according to the company, and the company was the 21st largest mortgage originator in the US during 2009.  But Europe’s largest bank has been moving to reduce its exposure to unsecured lending and exiting unprofitable businesses for the past two years, transferring its North American consumer finance operations into a run-off portfolio following heavy losses from subprime lending.  Beyond considering options for its US-based mortgage business, the bank is in the process of divesting from other assets and recently announced that a deal to sell the remainder of its vehicle finance loan portfolio, which totaled $4.3 billion at the end of June, would close in Q310.

Record low rates again

According to the Zillow Mortgage Marketplace weekly update, The national, 30-year fixed-mortgage rate (FRM) slightly decreased from a week earlier, reverting back to the record low average of 4.28% set two weeks ago.  , 30-year rates vary regionally, of course, but the majority of states witnessed a deflation. Most large states saw a decline in rates: California’s current rate of 4.33% is down from 4.34% last week; New Jersey’s at 4.26% is down from 4.28%; Pennsylvania’s at 4.32% is down from 4.33%; Illinois’ at 4.3% is down from 4.34%, and Florida’s at 4.21% is  down from 4.24%.  Rates substantially decreased in New York to 4.25% from 4.41% and Texas to 4.19% from 4.29%. Rates increased in Massachusetts to 4.22% from 4.28%.  Zillow reported the national average rate for 15-year fixed home loans remained flat at 3.86%, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 3.23%.  Zillow’s rates are based on real-time mortgage quotes from lenders registered with, but not exclusively bound to the company. The national average comes from thousands of daily quotes given to anonymous borrowers through their website. State averages are also available.

Now for our real estate education section…

Low-Down on Government Loans

Sometimes it seems the more things change the more they stay the same especially when it comes to the mortgage industry. However, this time it really is a bit different especially given the major upheaval in the mortgage market. With the majority of mortgage loans now guaranteed by the U.S. government, it is a good idea to review what is available and to whom. Here is the low down on government loans as of August of 2010.

Basic FHA Loan (Home Mortgage Insurance – HUD/FHA) – This program has grown into a heavy hitter within the industry despite the fact that it doesn’t lend money directly to buyers (in most cases) but rather insures or underwrites the loans.

Condominium Unit Purchase (Mortgage Insurance – HUD/FHA) – Similar to the Basic FHA loan above, this is designed with condo owners in mind.

Manufactured Home Loan Insurance (HUD/FHA) – Like the basic FHA and condo loans above, this program is designed for borrowers interested in the purchase of a mobile or manufactured home.

Hope for Homeowners – The media made a lot out of this little program which turned out to be a much smaller than originally anticipated. Designed to help people avoid foreclosure, the program provides new, 30 year fixed interest rate mortgages for those that cannot afford their current payments. Stringent requirements have limited the number of eligible participants.

Rural Housing: Farm Labor Housing Loans and Grants – Once a major program within the federal government, the reduction in family farms has made this an all but forgotten program but one worth looking into for anyone interested in purchasing a family farm. Loans (and a limited number of grants) are available for land, housing, machinery and other assets required to buy, build and operate a farm.

VA – Home Loans – Interest Rate Reduction Refinancing Loan – Once considered the domain of veterans, this guarantee service also provides funding for the family of service members as well as veterans and others. Additionally the VA provides vendee loans for anyone interested in purchasing a VA foreclosure.

Section 203k Rehabilitation Mortgage Insurance – Interested in a major fixer-upper? Section 203k may be the right mortgage for you; once the main mortgage is obtained, this program provides the funding needed to make necessary repairs and upgrades to the property. Section 203h is a closely related program that provides funding for repairs and rebuilding due to natural disasters or other emergencies.

Home and Property Disaster Loans – The Small Business Administration may not be the first agency that comes to mind when you need a mortgage after a disaster but don’t be so quick to mark this one off the list; the SBA is able to assist small business owners, homeowners and even some renters after an area has been declared a disaster.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin August 5, 2010 

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

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

Check out the latest YouTube testimonial for No Flip Riches, the perfect

business system to work alongside Short Sales Riches and Fix A Flip:

http://www.youtube.com/watch?v=cOkHLN22nqs

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

20 million underwater mortgages by 2012?

More than 14 million borrowers were underwater as of Q110, and with a further 10.8% decline in house prices expected relative to Q409 levels, another 6 million borrowers are likely fall into negative equity by the end of 2011, according to commentary today by Deutsche Bank.  The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.  The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences.  The existence of recourse — when a lender is able to pursue a borrower’s other assets — also acts as a disincentive against strategic default. 

Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans. Underwater borrowers are more likely to default in non-recourse states. The greater the negative equity, the higher the cumulative default rate.  “Walk away or strategic default from a house with negative equity makes economic sense, especially in locations that have less expensive rentals,” Deutsche Bank researchers said.  “Many existing academic studies model homeowners’ default decision based on the theoretical hypothesis that a borrower would exercise a default when it is in-the-money, i.e., when the borrower’s house has negative equity. Therefore, a homeowner with negative equity would default even though they can still afford to make their mortgage payments.

Final tax credit lift in prices

According to Clear Capital’s Home Data Index Market Report, July house prices gained 8.1% from the same point last year, slowing somewhat from the 8.8% growth measured in June as the effect of the homebuyer tax credit begins to fade.  July house prices increased 7.9% from the previous three months, an improvement from the 5.2% growth seen in June. Alex Villacorta, senior statistician at Clear Capital said home prices are continuing their growth from the beginning of the year.  “This trend indicates that the initial upward momentum created by the tax credit expiration is being sustained,” Villacorta said. “While quarterly gains are showing strong momentum across the country, these recent price advancements are just the latest turn in a volatile housing market that has seen ‘W’ shaped price trends over the last two years.” 

Morgan Stanley analysts warned that data from these large indices should be taken with a grain of salt as local markets can deviate from one another despite larger macro trends. Scott Sambucci, vice president of data analytics at Altos Research, brought up similar concerns when he predicted further declines through 2010.  Prices in the West have been stable compared to rest of the market, increasing 2.7% in July. It has bounced between a 1.6% drop to the latest gain in July since the start of 2010.  On the metropolitan statistical area (MSA) level, Charlotte, North Carolina demonstrated more stability than the nation, much like the West. Prices there declined only 13% since its peak in the middle of 2007, while, national prices have dropped more than 30% since its height in the middle of 2006.

Jobless claims up

The Labor Department says there were 479,000 initial jobless claims filed in the week ended July 31, up 19,000 from a upwardly revised 460,000 the previous week.  The weekly figure is the highest since April 10, when 480,000 initial claims were filed.  The number of claims was higher than the 455,000 claims expected in a consensus estimate of economists surveyed by Briefing.com.  The 4-week moving average of initial claims, which is calculated to smooth out volatility, was 458,500, up 5,250 from the previous week’s upwardly revised average of 453,250.  The government said 4,537,000 people filed continuing claims in the week ended July 24, the most recent data available. That’s down 34,000 from the preceding week’s upwardly revised 4,571,000 claims.   Economists surveyed by Briefing.com were looking for 4,530,000 ongoing claims.  The 4-week moving average for ongoing claims climbed by 25,750 to 4,575,500 from the preceding week’s upwardly revised 4,549,750.  The latest claims data has little bearing on the government’s closely watched employment report for July, due on Friday, as it falls outside the survey period.

Beazer homes posts larger loss than expected

Beazer Homes USA posted a bigger-than-expected quarterly loss as the expiration of the federal homebuyer tax credit caused orders to plunge in May and June.  For the third quarter, Beazer reported a loss of $27.8 million, or 41 cents per share, compared with the loss of 25 cents per share expected by industry analysts, according to Thomson Reuters.  Last year, the company reported a loss of $28 million.  Homebuilding revenue jumped 52 percent to $339.9 million.  Analysts on average expected the company to post revenue of $325.1 million, according to Thomson Reuters.  Home closings rose 73 percent to 1,643 homes as buyers and builders alike rushed to close on home sales before the tax credit’s June 30 deadline.  But orders fell 32.5 percent to 1,037 homes.  “Homebuyers continue to be concerned about employment, the impact of additional foreclosures and general conditions in the economy,” said Chief Executive Officer Ian McCarthy. “We believe employment growth and improved consumer confidence remain the keys to a sustainable recovery in the homebuilding industry.”  Atlanta-based Beazer, the eighth-largest homebuilder in the United States, operates in 16 states.

Tax the rich?

If Congress fails to act in extending the Bush tax cuts, taxes on most Americans would go up next year — adding $1,541 to the average household payment, by one estimate.  Taking that money, a total of $135 billion, out of the pockets of consumers and small businesses could be a devastating blow to the fragile economy.  Every American who pays federal income taxes would see them increase if the tax cuts expire, according to the nonpartisan Tax Foundation. A typical middle-class family with a median income of $63,366 would pay $4,964 in taxes next year if the cuts expire, well above the $3,423 tax it would pay if cuts were extended.  President Obama and Treasury Secretary Timothy F. Geithner want to continue the tax cuts for lower income people, but have made it clear they want big tax hikes on job creators – successful investors and entrepreneurs – by letting the Bush tax cuts expire in 2011. This is despite the troubling persistence of unemployment greater than 9 percent.   

According to Caroline Baum of Bloomberg, squeezing the rich is no way to spur the economy.  “What we do know, empirically, is this: Over time, federal revenue as a share of gross domestic product has stayed fairly constant at 17.9 percent. That’s true if the top marginal tax rate is 91 percent (1950s), 50 percent (early 1980s) or 35 percent (2000s). Now the government wants to take money from the rich and give it to the poor. “They are wrong,” Laffer says. “It doesn’t work that way. The rich can change the volume, timing, composition and location of their income. Poor people can’t.” The rich have the luxury to respond to incentives, to opt for more work and less leisure when the return on work is greater. They are motivated to take risks, maybe start a business, invent something, and get even richer while giving others the opportunity, through hiring, to do the same. 

The opposite is true for low-income workers. When the government raises taxes, someone struggling to put food on the table for his family may have to go out and get a second job to maintain his level of take-home pay. For this socio-economic group, higher taxes translate to more work.  The goal should be to incentivize individuals to work hard, save and invest in the future. It’s about growing the pie.  I, for one, would like to see the debate shift from class warfare over tax rates and targeted tax relief to tax reform. Either scrap the tax code and introduce a simple flat tax with no deductions, or scrap the IRS and move to a consumption tax.  If you want to get money out of politics, there’s only one way to do it. Take the tax code out of Congress’s hands.”

Now for our real estate education section…

Crisis Control

Real estate is like any other business…sooner or later you will encounter a crisis. It may come in the form of a nationwide financial meltdown that disrupts funding for millions or something as simple as an overtly negative individual. Whatever the form, learning how to mitigate damages and restore a positive attitude is a key component to success.

1. Don’t be Defensive. Many old-timers will tell you dog can smell fear…the same applies to an audience whether it be your banker or a real estate seminar. People understand power and often turn against those that are perceived as weak or on the defensive. Remember, actions speak louder than words so guard your voice, words and body language.

2. Never Repeat a Negative Question. Rather than reinforce a negative question, try to rephrase it or move ahead. It’s better to take a small hit than give more time to an issue unless it is absolutely essential.

3. Never Blame Others. It puts you in a bad light and tends to make people distrust you…plus, it leaves people wondering what you might say about them behind their backs.

4. Don’t Argue. You might be right but the chances of convincing someone else decrease the more they defend their position to you. Instead, validate their position and explain your own thinking or simply move ahead. Not only does it conserve energy but it frees your mind from the feeling of dependence and allows you to see things from a different perspective.

5. Irrelevant Questions. This is perhaps one of the most frustrating situations for an investor or real estate pro to encounter…endless, tiresome and totally irrelevant questions. Unlike overly aggressive, negative or argumentative clients it’s not possible to simply “agree to disagree” and move on; instead, you must assume the person simply doesn’t understand or has a different agenda. If it’s possible to anticipate where they went wrong, try to bail them out to help them “save face”…it shows concern and sensitivity.  For those with their own agenda, try to determine if it is “helps” or “hurts” your position then act accordingly.

6. Plan for Murphy’s Law. Remember Murphy? Whatever can go wrong will go wrong so plan ahead for it. Put contingencies in place especially when it matters the most. For example, when planning an open house be sure to plan for inclement weather. Putting together a big media blitz, find another venue to publish in case the first falls through. Taking out a private loan, have a second on standby.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
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About the author:

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

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

Smart Real Estate News & Commentary by Chris McLaughlin July 22, 2010 

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Failed HAMP may benefit from HAFA

With the amount of canceled trial modifications in the Home Affordable Modification Program (HAMP) passing permanent conversions, some are anticipating that the Home Affordable Foreclosure Alternatives (HAFA) program will be more effective in keeping homeowners out of foreclosure.  As you’ll recall, HAFA was designed to give borrowers who failed to make those payments a chance at a short sale or deed-in-lieu of foreclosure.  Based on survey data of the eight largest HAMP participants, the Treasury found that 45% of the canceled trials from HAMP are in an alternate modification. More failed HAMP modifications could enter HAFA after falling into delinquency after the conversion into permanent status.

For modifications that have been permanent for more than six months, 6% have fallen into 60-plus day delinquency again. The default rate, or the percentage of modified loans that are now 90 or more days delinquent, is less than 2% at six months after the conversion. Cary Sternberg, president of Excellen REO, an asset management firm and subsidiary of Titanium Solutions, said that HAMP was designed for those who want to stay in their home, but as prices continue to deteriorate, more homeowners are looking for a way out, either through short sale or deed-in-lieu.  “Then comes HAFA. In recognition of the fact that some borrowers simply could not make payments even if the payment were lower, a more dignified exit strategy was created,” Sternberg said.  “It is too early to tell what the success rate of the HAFA program will be, but I am betting it will be far better than HAMP,” Sternberg said. “HAMP is a Band-Aid, HAFA is an exit strategy.”

Dodd-Frank Act bad for business

Surprise!  The Dodd-Frank Act signed yesterday by President Barack Obama could have a range of unintended consequences on the mortgage securitization market, according to various commentaries.  Standard & Poor’s (S&P) president Deven Sharma warned the legislation could expose rating agencies to greater liability for — and lawsuits over — ratings of mortgage-backed deals.  According to Barclays Capital analyst Joseph Astorina, Moody’s Investors Service, Fitch Ratings and S&P “have instinctively pulled back from the new issue securitization market until they are better able to asses this new liability.”  The law’s reforms concerning securitization are designed to remove the incentive of the “originate-to-distribute” model, according to a client alert from law firm K&L Gates. 

Other “unintended” consequences cannot be known until the legislation is enforced, noted accounting firm Deloitte in commentary.  “By way of example, a driving element of the law has been to address the ‘too big to fail’ issue, reducing the risk that large firms might take excessive risk because they are in effect guaranteed to be bailed out in the event of a failure,” the firm said. “But because this is an extremely complicated problem, no one actually knows what the consequences of the new law will be — the new systemic regulator will probably make this a central issue as it sharpens its mandate in the coming months.”

Jobless claims up

The Labor Department says there were 464,000 initial jobless claims filed in the week ended July 17, up 37,000 from a revised 427,000 the previous week.  The number of claims was much higher than expected. A consensus estimate of economists surveyed by Briefing.com expected new claims to rise to 445,000.  The 4-week moving average of initial claims, which is calculated to smooth out volatility, was 456,000, up 1,250 from the previous week’s revised average of 454,750.  The government also said 4,487,000 people filed continuing claims in the week ended July 10, the most recent data available. That’s down 223,000 from the preceding week’s upwardly revised 4,710,000 claims.  Economists surveyed by Briefing.com expected ongoing claims to edge lower to 4,600,000 from the unrevised 4,681,000 in the previous week.  The 4-week moving average for ongoing claims fell by 21,500 to 4,567,000 from the preceding week’s revised 4,588,500.

Commercial real estate coming back?

Analysts have been warning for months that commercial real estate could be the next shoe to drop in the subprime mortgage collapse that came to a head in 2008, but there may be some good signs in the thawing of securitization markets and indications that investors are ready to come to auction when properties are on the block.  Marc Halle, managing director of real estate investments for Prudential Financial executives, acknowledged that distressed conditions are likely to intensify in the market but does not expect to see “wholesale foreclosures.” Instead, real estate investment trusts could become a more attractive asset class in a slowing economy as interest rates stay low and REIT dividends remain solid.  The banks are expected to launch $1.4 billion in two offerings of commercial mortgage-backed securities, according to a report Wednesday in the Wall Street Journal, which cited sources familar with the planned sales. 

The offerings pale in comparison to the more than $1 trillion coming due in maturing debt over the next five years, but offer some glimpse that Wall Street may be getting back on board.  Uncertainty among borrowers regarding whether banks will go back to more normalized lending practices is at the root of criticism against the Frank-Dodd financial regulations that President Obama signed Wednesday.  Banking analyst Dick Bove, at Rochdale Securities, said there is a persistent rumor that the Federal Reserve is looking at loosening capital requirements. Bove, a harsh critic of the new law, said that would be a welcome development.  “It demonstrates that the Fed understands that it must help the banks so that the banks can help the economy,” Bove said in a note to clients. “It implies that the Fed will not be very hasty in putting into effect the onerous rules being mandated by the banking legislation. If the Fed truly understands this, the outlook for banking and, more importantly, the economy is beginning to change in a positive manner.”  Banks themselves have been voicing some slightly encouraging sentiment regarding the direction of commercial real estate.

20% of Americans suffered major economic loss

The new Economic Security Index, constructed by Yale political scientist Jacob Hacker and a team of researchers, estimates that 20% of Americans suffered a significant economic loss last year – the highest level in the past 25 years.  The Index looks at the interaction of three key variables that have a direct bearing on a person’s economic security: income loss, medical expenses and debt.  The ESI defines people as economically insecure when their situation meets two criteria. First, within a year’s time they have lost 25% or more of their available gross income. Available gross income is the money they have left over after paying for medical costs and debt. Second, they don’t have enough in an emergency fund or other liquid reserves to make up the difference.  According to the index, which tracks Census Bureau data since 1985, 12.2% of Americans were economically insecure in 1985. By 2009, Hacker and his team estimate that 20.4% of Americans could be classified that way. The actual number of people affected increased by more than half, from 28 million in 1985 to roughly 46 million by 2007, the last year for which hard numbers were available.  In the past, some economists, such as Stephen Rose of the moderate-progressive think tank The Third Way, have conducted research that counters the broadly negative view about how the middle class has fared economically over the years.

Now for our real estate education section…

How to Price Any Property for Maximum Profits

Although the classic definition of the “right price” is whatever a willing buyer is willing to pay a willing seller (yes, we know it’s redundant), pricing is also a value proposition. In order to price a property for maximum profits, it’s essential to understand how to communicate and evaluate the value proposition to both the buyer and the bank.

What to Measure

1. Capacity – Any given area or builder has a set capacity. The more less capacity, the higher the price assuming demand is in place. During the height of the real estate boom, savvy builders capitalized on desirable locale’s by creating a sense of urgency related to capacity…often to the detriment of the eventual buyers who later learned there was a glut of unsold condo’s or other properties waiting in the sideline. However, despite the recent decline in real estate, many markets and specific neighborhoods remain highly desirable with limited capacity.

2. First Offering – Closely related to capacity is the concept of “first offering”. Face it, everyone likes something that is “brand new” but have you ever stopped to ask yourself why? A new house or neighborhood is somewhat “unproven” but the excitement of being “first” tends to create anticipation that can be tapped into. Take a note from developers that routinely price high to create a sense of value, then discount to provide customers a sense of a “good deal”.

3. Enhanced Value – Everyone likes to feel like they are appreciated and nothing says “appreciation” like a free upgrade or other valuable service. Make a list of amenities included in the sale of the property and/or consider including a few low-cost additional enhancements. Popular ones include free lawn-care for a year, electronic device or home warranty.

What to Exclude

1. Acquisition Cost – Without a doubt, this is one of the most common mistakes made by novice investors; the tendency to use acquisition cost as a basis for the sales price of a property. As millions of Americans have learned, what you pay for a property may have little to no bearing on the eventual price of a property….good and bad. Although the media is filled with horror stories about people that paid too much for a property (of more often…obtained bad financial terms), there are equally impressive numbers of people that made a lot of money after paying very little for a property. Price the property based upon value…not acquisition cost.

2. Expenses – If acquisition cost is the most common errors, surely expenses are the next. The tendency to add up the cost of repairs, insurance, broker and agent fees, taxes and other expenses in order to derive a figure is outdated at best and limiting at worst. Again, price the property based upon perceived value rather than cost or expenses. It’s often possible to perform inexpensive upgrades that dramatically alter the appearance (and desirability) of a property for very little investment. Don’t deny yourself the benefit of a fully priced property if in fact, it’s possible to price higher.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

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