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

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Short sales spike in Los Angeles

Foreclosed homes and short sales are making up an increasingly large chunk of the housing market in Los Angeles, moving toward 50% in Glendale, according the latest real estate figures.  Sales of distressed homes made up 47.5% of total sales in Glendale in September. In Burbank, the ratio was almost 34%.  The figures were far higher than a year ago, when distressed homes made up about 36% of total sales in Glendale and nearly 16% in Burbank.  The trend started in August as banks ended their self-imposed foreclosure moratoriums.  Short sales saw the most dramatic rise in Burbank, skyrocketing from about 4% in September last year to almost 18% last month.  In Glendale, the sale of bank-owned properties jumped from a little less than 11% in September 2010 to about 21% last month.  Average home sale prices continued to tumble in September with Burbank taking the biggest hit, dropping $87,530 when compared to September 2010.  The average price in Burbank was $446,655, a 19.6% slide from $534,185 in September 2010.  The number of new home sales also took a hit in September, decreasing from 74 a year ago to 56 last month. There were 63 new listings in September, dipping from 67 in September 2010.  Glendale fared better, though it was still in decline. The average home sale price was $504,244, a 7.1% decrease from $540,258.  New home listings decreased by 15, from 102 in September 2010 to 87 last month. New sales dropped slightly from 64 to 61.  In La Cañada Flintridge, the average home sale price was about $1 million in September, a 2.7% drop from roughly $1.1 million the same month last year.   In the La Crescenta-Montrose area, the bright spot was the number of new home sales, which came in at 37, up from 29 last year. But the average home sale price was $516, 621, about a 1% dip from $520,964 last year.

Real debt battle looming in 2012

Dec. 23, 2011, is the legal deadline for Congress to approve at least $1.2 trillion in savings over 10 years to avoid an equal amount of across-the-board spending cuts, as part of a deal reached during debt talks in August.  But a series of even more important events will dovetail following the November 2012 presidential election to create what some are calling a “perfect storm” for the nation’s economic affairs.  “A whole lot of things happen in late 2012 and early 2013,” said James Horney, a fiscal policy expert with the liberal Center on Budget and Policy Priorities.  Looming at the top of the list is the scheduled expiration of sweeping Bush-era tax cuts that in 2001 and 2003 lowered taxes across the board. President Barack Obama has called for extending these cuts for families earning less than $250,000 while taxing everyone else.  Also by the end of 2012, Congress will have to decide on fixing a glitch in the Alternative Minimum Tax so that middle-class Americans are not forced to pay a tax that originally was aimed only at the upper middle class.  Taken together, the future of these two tax policies could make for a multi-trillion-dollar swing for the Treasury, either in the way of higher revenues or more rapidly escalating debt.

By the end of 2012, Congress and Obama likely will need to increase the government’s borrowing authority. A battle over the US credit limit nearly led to a government default on its debt in August. Republicans used the debt limit increase as leverage to win $917 billion in spending cuts over 10 years.  The Nov. 6, 2012, elections, when the United States will elect a president, all members of the House of Representatives and one-third of the Senate, are a big wild card, with the outcome likely to influence the outgoing Congress. It will sit until the new Congress is sworn in the following January.  “At that point,” said Horney, the United States might “be in a better situation (than this year) to get some kind of an agreement” on fiscal matters.

WSJ – lack of attractive inventory

The housing market, which has struggled with an oversupply of homes for years, is facing a new problem: a lack of attractive inventory.  There were more than 2.19 million homes listed for sale at the end of September, down 20% from a year earlier, according to a new report from the real-estate website Realtor.com. That is the lowest level since the company began its count in 2007.  The report is the latest sign of how the US housing market can’t seem to catch a break. While falling inventories are typically a sign of health, because reduced competition can boost prices, that isn’t the case right now.  Instead, real-estate agents say, people are pulling their homes off the market rather than try to sell them at today’s discounted prices. At the same time, banks have been more slowly moving to take back properties through foreclosure ever since processing irregularities surfaced last fall, temporarily reducing the supply of foreclosed properties. The shrinking supply isn’t driving up prices because demand is soft.

Yet there is still a substantial “shadow” supply of foreclosures and other distressed homes, estimated to be more than one million, that is likely to stream onto the market in the coming years. The pent-up supply is another constraint on any of the price gains that might normally occur when supply falls.  The decline in inventory also suggests that there are fewer opportunities for buyers and sellers to strike deals. That can further chill sales, as buyers become afraid to overpay while sellers are similarly cautious about under-pricing their homes.  In Detroit, the inventory of homes for sale was down by 28% from a year earlier, according to Realtor.com. Listings were down by 49% in Miami, by 48% in Phoenix and by 46% in Orlando, Fla. Housing inventory was down from one year earlier in all 146 markets tracked by Realtor.com except for Denver and El Paso, Texas.  The Realtor.com data include only single-family homes, townhouses and condominiums listed for sale on more than 900 multiple-listing services across the country. They don’t include unsold homes listed as “for sale by owner” or other properties that don’t find their way onto the multiple-listing services.

Manufacturing slows

The New York Fed’s “Empire State” general business conditions index was little changed, up a hair at minus 8.48 from minus 8.82 the month before. Economists polled by Reuters had expected a reading of minus 4.0.  The survey of manufacturing plants in the state is one of the earliest monthly guideposts to US factory conditions. Manufacturing has helped support the economic recovery, though the pace of growth has slowed this year and some regions have contracted.  New orders rose to 0.16 from minus 8.0, while inventories were up at minus 8.99 from minus 11.96. Despite the flat reading, new orders were still at the highest level since May, hinting some stabilization may be underway.  Employment gauges were mixed. The index for the number of employees rose to 3.37 from minus 5.43, but the average employee workweek index fell to minus 4.49 from minus 2.17.  The outlook for the coming months worsened, with the index of business conditions six months ahead dropping to its lowest level since February 2009 at 6.74 from 13.04 last month.

Soft outlook for homebuilders

Fitch Ratings believes homebuilders could face negative rating actions in the coming months as the economy slugs through a weak recovery.  Fitch analysts issued the negative rating warning at a time when weak employment and consumer confidence are pummeling the housing market, keeping homebuyers on the sidelines.  Robert Curran, managing director and lead homebuilding analyst for Fitch, said for the first time in a long time, housing “is not fulfilling its role as a key impetus to the early stages of an economic recovery.”   Curran said the pressures have already prompted Fitch to downgrade Beazer, KB Home and Pulte in recent weeks.  “The outlook does not look promising either with home prices likely to remain soft over at least the next few quarters,” said Curran. “Stagnant employment and declines in real income may also pile on the already formidable pressure homebuilders are feeling.”  Curran said analysts will be watching several key indicators closely—namely balance sheets, land deals, development and liquidity.  Yet, on the more positive side, Toll Brothers posted a third-quarter profit of $42.1 million, or 25 cents a share, on revenue of $394.3 million. The luxury homebuilder earned $27.3 million, or 16 cents a share, for its year-ago fiscal third quarter.  In the first half, homebuilder PulteGroup spent $640 million acquiring land and executing development activities. The company expects to spend nearly $1.1 billion on land and development this year, up from $980 million in 2010.

Sales up, confidence down

A strange economic trend appears to be emerging with American consumers. Retail sales have been trending higher while consumer confidence is at a 30-year low.  Retail sales grew 1.1% in September, the fastest pace since February, we learned on Friday. Even excluding strong auto purchases, the figures were better than expected. Data for earlier in the summer was also revised for the better. All this, even in the midst of stock market tumult and fears of another recession.  Meanwhile, those same economic concerns are still weighing on confidence. Consumer confidence plunged more in October than expected, according to the Thomson Reuters/University of Michigan index. It’s now at the lowest measure since May 1980.

How is this contradiction possible? Howard Davidowitz, president of Davidowitz & Associates says it’s simple. “We have got a bifurcation that keeps getting bigger and bigger,” he explains to Aaron and Henry in the accompanying clip.  What accounts for the increase in sales is the top earners in the country are doing fine. “Ten% of the consumers account for 40% of the spending,” he says. This group is primarily made up of college graduates who are not suffering from massive unemployment. In fact, unemployment for that segment of the population is under 5%.  But there’s another larger group that’s struggling to get by, which explains the consumer worry. “Eighty% of consumers are in a depression,” says Davidowitz.  It’s this growing gap between the haves and have-nots that is responsible for the Occupy Wall Street movement, says Davidowitz.

CMBS market stalls

The market for bonds backed by commercial real estate recovered over the last 18 months but growth in the third quarter has stalled, said property market researchers Friday.  “There’s been a little bit of a stumble in the third quarter,” said Ben Thypin, director of market analysis for Real Capital Analytics, a commercial real estate research firm, in a presentation at the Appraisal Institute’s annual fall conference in San Francisco.  He said he’s expecting little growth in the issuance of commercial-mortgage-backed securities in the third quarter, and that total volume this year will likely end up around $35 billion. New CMBS issuance will likely remain at that rate through 2012, he said.  Still, that’s a big improvement over a couple of years ago.

The dollar volume of CMBS deals in just the first half of 2011 was more than twice what it registered in 2010, increasing to $25.7 billion from $12.7 billion in all of 2010, according to Matt Anderson, managing director of  Trepp, a provider of commercial mortgage information, analytics and technology.  “There were hopes that volume might reach $50 billion this year,” he said, but those have been tempered by the shakiness of European economies and concerns that the US could enter a double-dip recession.  Especially considering that commercial banks, which usually lend about half their capital for commercial real estate markets, are on the retreat, the CMBS market is a linchpin to CRE recovery, according to Anderson.  The number of banks with a concentration of investment in commercial real estate was more than 2,500 in the first quarter of 2007, but by the first quarter of this year had fallen to about 900 “and that’s probably headed lower,” he said.

Still, CRE markets are past the worst in terms of delinquencies and distressed properties, and the volume of properties in trouble has remained fairly steady over the last year or more, he said.  While CRE sales volume has fallen to less than half its level in 2007, all segments of the market have clocked gains over the past year, according to data from Real Capital Analytics.  Senior living properties saw more than a fourfold increase in sales volume in the first half compared with the first six months of 2010, followed by hotel and multifamily properties. About $23.1 billion in apartment properties in changed hands in the January-June period.  Apartments exist in a “parallel universe” from other CRE properties because of their access to Fannie Mae and Freddie Mac financing, said Thypin.  “The foreclosure crisis in the single-family market has helped the apartment market,” he said.  Both Thypin and Anderson agreed that the state of the economy will be crucial in determining how the market moves in the coming months.  “We’re looking at a fragile recovery in commercial real estate markets,” said Anderson. “It’s very much capital driven, not so much fundamentals-driven.”  The market is going to be fairly rocky in the short term, but compared to other assets, commercial real estate is a good buy, he said.

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 12, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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MBA – mortgage applications up

Mortgage applications increased 1.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 7, 2011.   The Market Composite Index, a measure of mortgage loan application volume, increased 1.3% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 1.3% compared with the previous week.  The Refinance Index increased 1.3% from the previous week.  The seasonally adjusted Purchase Index increased 1.1% from one week earlier. The unadjusted Purchase Index increased 1.2% compared with the previous week and was 2.9% lower than the same week one year ago. The increases were driven mainly by the government loan category, with the Government Purchase index up 2.4% and Government Refinance index increasing 9.9%. The Conventional Purchase and Refinance indexes increased 0.1% and 0.2%, respectively.

The four week moving average for the seasonally adjusted Market Index is up 1.56%.  The four week moving average is down 0.51% for the seasonally adjusted Purchase Index, while this average is up 2.15% for the Refinance Index.  The refinance share of mortgage activity remained unchanged at 79.1% of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.0% from 6.4% of total applications from the previous week.  The average loan size of all loans for home purchase in the US was $210,863 in September 2011, down from $212,736 in August 2011. The average loan size for a refinance was $237,632, down from $241,323 in August.  The largest purchase loans were made in the Pacific region at $ 302,110. The largest refinance loans were also made in the Pacific region at $ 339,592.

Pennsylvania state capital declares bankruptcy

The Harrisburg, Pa., city council passed a resolution Tuesday night authorizing a Chapter 9 bankruptcy filing, a city official said today.  Harrisburg faces a $300 million debt crises tied to a project to revamp its incinerator and has been plagued with cash flow problems.  Mark Schwartz, the council’s attorney in this matter, said on Wednesday that the bankruptcy filing would give the city ”bargaining power” with its creditors and with the state, which is considering a takeover plan.  The bankruptcy court for the middle district of Pennsylvania confirmed on Wednesday it had received a faxed bankruptcy petition from Harrisburg, but that it has not been filed yet.

The state legislature is considering a bill that would call for an eventual takeover of the city and the forced implementation of a fiscal rescue plan.  In July, the city council rejected a state-approved rescue plan, which called on it to renegotiate labor deals, cut jobs, and sell or lease its most valuable assets, including the incinerator and parking garages.  In August, the council rejected a similar plan that had been crafted by Mayor Linda Thompson, saying that both plans were overly burdensome for Harrisburg residents and did not ask enough of the county, bondholders, and the bond insurer, Assured Guaranty.

MBA issues housing forecast

The Mortgage Bankers Association (MBA) expects to see mortgage originations fall from an estimated $1.2 trillion in 2011 to $900 billion in 2012. The drop will be driven by a significant decline in refinance originations, while purchase originations will increase only slightly. The economy will see another year of anemic growth in 2012, and then will grow somewhat faster in 2013. Refinance originations are expected to fall despite low mortgage rates as economic uncertainty lingers and fewer eligible borrowers remain.  Following are the key points of the latest MBA forecast:

-  Real GDP growth will be 1.3% in 2011, which began with a dismal 0.4% growth in the first quarter and 1.3% growth in the second quarter. We expect the second half to average around 1.8%, but even that is on shaky ground, with a weak labor market, volatile financial markets, and looming risks of a spillover from the European debt crisis. We expect 2012 to continue in a similar fashion, showing growth of around 1.7%, as Europe enters a recession of its own and the US economy flirts with a shallow recession until midway through 2012. There should be a modest recovery in 2013 with growth reaching 2.4% for the year.
-  The unemployment rate will increase slowly until the second quarter of 2012, hitting 9.3%, from the current level of 9.1%. It is expected to be around 9.1% for 2011, 9.3% for 2012, and 9.1% for 2013. Even though both economic and job growth are in positive territory, they are still insufficient to lower the unemployment rate in the near term.
-  Fixed mortgage rates are expected to remain low by historical standards, finishing 2011 at around a 4.5% average for the year, falling slightly to 4.4% for 2012 and climbing back up to 4.9 by 2013.
-  Total existing home sales will stay around the 4.9 million unit pace for 2011 and 2012, before increasing slightly to 5.2 million units in 2013 as the broader economy recovers. The recovery in the new home sales will have a comparably slow start, and may well be slow for most of 2012, but will show some meaningful increases in 2013.
-  Home price measures that exclude distressed transactions have stabilized, and certain markets are showing year-over-year appreciation. FHFA’s national repeat transactions home price measure, which does not distinguish between distressed and non-distressed sales, will continue to decline before starting a reversal in mid to late 2012, but will vary by state and home value.
-  Purchase originations will likely decrease in 2011 from 2010, totaling $400 billion from an estimated $472 billion in 2010. Seeing as 2012 will likely be another year of slow economic growth, purchase originations will increase to slightly around $412 billion for the year. As the economy picks up a little more speed in 2013 and home sales and home prices also start to increase, purchase originations are expected to increase to $770 billion for the year.
-  Despite lower mortgage rates towards the end of the year, refinance originations in 2011 will be lower than in 2010, falling to $783 billion from an estimated $1.1 trillion, as there were fewer eligible borrowers left to refinance. We expect this “burnout” to continue through 2012 and 2013, even as rates remain below 5%, with refinance originations falling steadily to $495 billion and then $332 billion, respectively.

Oil up

Oil prices inched up above $86 a barrel Wednesday, supported by a weaker dollar even as concerns persisted about the sovereign debt crisis in Europe and the International Energy Agency slightly lowered its demand growth forecasts.  By early afternoon in Europe, benchmark crude for November delivery was up 70 cents at $86.51 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 40 cents to settle at $85.81 in New York on Tuesday.  In London, Brent crude was up $1.23 to $111.96 a barrel on the ICE Futures exchange.  The euro gained on the dollar after the release of fresh data showing that industrial production in the 17 countries using the common European currency rose unexpectedly in August, easing concerns that the region was heading back into recession in the third quarter.

A weaker dollar tends to lift the price of commodities such as oil by making it cheaper for investors holding other currencies.  The euro was up to $1.3806 from $1.3669 late Monday in New York, while the dollar weakened to 76.58 yen from 76.66 yen.  The Paris-based IEA said it was now expecting global demand to rise to 89.2 million barrels a day this year — 1 million barrels more than in 2010 — and to 90.5 million barrels a day in 2012. Compared with last month’s forecasts, these revisions were lower by 50,000 barrels a day for 2011 and by 210,000 barrels a day for 2012.

DSNews.com – west coast foreclosures fall

New foreclosure actions in states along the country’s West Coast returned to levels in line with prior months during September, according to ForeclosureRadar, a California-based company that tracks every foreclosure in its five-state coverage area.  The leveling off in September follows a strong surge in foreclosure starts during the month of August in the western states of Arizona, California, Nevada, Oregon, and Washington, and puts new foreclosure tallies far below the numbers seen at the peak of each state’s foreclosure activity.

ForeclosureRadar reports California has seen a drop in activity of 56% since its peak, from 58,623 notice of default filings in March of 2009 to 25,778 today.  Arizona shows a similar swing in notice of trustee sale filings, from 14,722 in March of 2009 to 5,982 filings last month – a decrease of 59.4%.  Washington has experienced the greatest decline of all, with 71.5% fewer notice of trustee sale filings today than at their peak in June of 2009.

Foreclosure sales were mixed last month, with declines in Arizona, California, and Nevada, while Oregon and Washington both showed increases.  Despite declines in three of the five states, ForeclosureRadar notes that the percentage of foreclosure sales that went to third parties, typically investors, was at or near peak levels.  In California, third parties purchased a record 27.4% of all foreclosure sales last month.  In Arizona, that number was even higher at 38.3%, also a record.  Nevada was just shy of its record, set in August at 29.1%.  Sales to third parties in Washington were up 15.6%, a record for this year.  Oregon was the only state to show a decrease, down from 15.5% in July to 6.0% last month.  “While foreclosure activity returned to its normal course in September, we fully expect to see more volatility like we saw in August as banks continue to work in fits and starts through robo-signing and other issues,” said Sean O’Toole, founder and CEO of ForeclosureRadar.  “It’s almost unfathomable that four years into this crisis there would still be so much uncertainty on how to best deal with the trillions in bad mortgage debt that was created during the credit bubble,” O’Toole added.

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 26, 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

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

20 city home price index up?

The Standard & Poor’s/Case-Shiller 20-city composite home price index, which will be released on Tuesday, likely rose 1.2% in July from the previous month, a Zillow Inc. forecast showed. The Case-Shiller, a key housing price index that covers 20 US metropolitan areas, likely fell 4% in July from the year-ago period, Zillow said. The S&P/Case-Shiller 10-city index is expected to show the same month-over-month increase compared to June, while also registering a decline of 3.4% from a year earlier. “The market is full of conflicting signals right now with August consumer confidence down by 25%, July pending homes slipping, and the four-week moving average of mortgage applications also dipping,” said Zillow Chief Economist Stan Humphries in a statement.

Humphries’ expectations for the Case-Shiller index were initially much weaker, but were bolstered recently by two indicators. The Zillow home value index, a key factor in its Case-Shiller forecast, rose 0.12% in July, and August home sales rose 7.7%, well ahead of expectations. Still, uncertainty is plaguing the market and will exert a drag on housing, according to Humphries. “I still believe that the continued fears about a Greek default, weak employment growth and low consumer confidence will ultimately translate into weaker housing performance in the back half of this year,” he said. “Looking ahead, expect fading monthly momentum in Case-Shiller.”

Gold to fall much further?

The price of gold, which has fallen in recent weeks as part of a broader market sell-off, has even further to fall, Marc Faber, author of the Gloom Boom, and Doom Report, said Monday. “We overshot on the upside when we went over $1,900,” said the fund manager, who has 25% of his portfolio in gold. “We’re now close to bottoming at $1,500, and if that doesn’t hold it could bottom to between $1,100-$1,200.” US gold suffered its biggest daily drop in more than five years on Friday. John Woods, Chief Investment Officer at Citi Private Bank, said that he believes gold will fall to around $1,400 before continuing its long-term rise. “It was massively over-bought in the last couple of weeks and now it will get over-sold,” he said. “I don’t think the long-term trend is broken.” While the spotlight has been on Greece and the euro zone in recent weeks, Faber believes that the sell-off is actually being prompted by a slowdown in China. “Asian markets are weak, Asian currencies are weak and economically sensitive stocks are weak because there’s a more meaningful slowdown in China,” he said. Some observers have warned that the true scale of China’s debt is much larger than official statistics suggest, as much is held at the local government level after a huge stimulus following the post-Lehman slowdown.

Housing permits up

CreditSights notes a 3% rise in single-family housing permits in August that could be cause for a small sign of hope. In its monthly housing monitor report, the independent research firm said housing “continues to hover on the sidelines with minor shifts up and down.” The firm doesn’t expect meaningful upticks until the country sees improved employment, more consumer confidence and mortgage market changes. Construction activity remains anemic with starts slipping 5% to a seasonably adjusted and annualized rate of 571,000 in August. The decline was driven by a 12% drop in multifamily units, but single-family home construction also slowed by one percentage point.

The rise in building permits — a forward-looking economic indicator — gives a glimmer of hope that more construction activity is on the way. Still, the big national homebuilders have been reticent to add to the housing stock with most stepping away from any aggressive building. Lennar Corp. recently said weak demand coupled with tight lending puts the housing market in a holding pattern. KB Home on Friday reported a wider third-quarter loss on fewer deliveries, but also noted orders are up. In August, homebuyers closed on a seasonally adjusted annualized rate of 5.03 million homes. Existing homes sales rose 7.7% for the month. CreditSights said some home purchases may have been pulled forward as buyers seek to close purchases before flood insurance and conforming loan limits expire at the end of September.

Investors remain a key part of the market with 22% of transactions in August, and 29% of all transactions were cash deals that avoided the mortgage market altogether. Investors looking for good deals in the distressed market helped push the median price of homes down for the second consecutive month to $168,000, the CreditSights report said. The firm predicts more housing price declines, but notes “the fact that sales were up at all is surprising against a back drop of extreme weakness in the financial markets during the month of August.” The cancellation rate jumped to 18% from 16% as appraisals coming in below the agreed selling price and mortgage qualification issues become typical.

SEC considers charges against S&P

The staff of the Securities and Exchange Commission is considering recommending civil legal action against the Standard & Poor’s debt ratings agency over its rating of a 2007 collateralized debt offering. S&P has been under fire for its recent downgrade of US debt, as well as several bad calls it made leading up to the financial crisis and economic meltdown that began in 2008. The unit’s president stepped down last month. McGraw-Hill Cos., which owns S&P, said Monday that it received a Wells Notice from the SEC’s staff on Thursday. In issuing Wells notices, the SEC enforcement staff gives companies the chance to make the case why charges are unwarranted. That means a formal decision by SEC commissioners to file charges may not occur. S&P said it has been cooperating with the commission and plans to continue cooperating on the matter.

WSJ – interest rates lower still

The 30-year fixed-rate mortgage dipped below 4%, possibly triggering a refinancing boom for many of the same borrowers who already have taken advantage of rock-bottom interest rates. According to a survey by Credit Suisse on Thursday, lenders were offering an average rate of 3.91% on 30-year fixed-rate mortgages to borrowers who paid “points,” or fees, worth 1% of the loan balance. Wells Fargo & Co. advertised on its website Friday afternoon a 3.875% rate on a 30-year fixed-rate mortgage, with fees of 1% on the loan. Lou Barnes, a mortgage banker in Boulder, Colo., refinanced four borrowers on Thursday into 30-year fixed-rate mortgages at 3.875%. “At this point, the only people being helped are those who need it the least,” he said. For the home-sales market, low rates will help make homes more affordable, but may not boost home buying if consumers are worried about the economy. “Today, the buyers’ concern is the falling value of homes,” said Mr. Barnes. “I’ve had potential buyers say: ‘I don’t care if rates are zero if prices are going to fall again.’”

Geithner warns about Europe

US Treasury Secretary Tim Geithner warned Saturday that the sovereign debt and banking crisis in Europe represents “the most serious risk now confronting the world economy.” In an official statement to the International Monetary Fund, Geithner also discussed the need to both support the US economy in the short term and take steps to lower the nation’s long-term deficits. But his strongest comments were directed at Europe, where the specter of a default by the Greek government has upset financial markets around the world. The nation’s long-standing debt problems are threatening to spill over into the European banking system, with possible repercussions for the fragile US economy. While he praised the actions European leaders have taken so far, Geithner said more needs to be done to create a “firewall against further contagion.” “The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally,” the Treasury chief said. “Decisions as to how to conclusively address the region’s problems cannot wait until the crisis gets more severe.”

Christine Lagarde, the newly appointed managing director of the IMF, urged policymakers in developed nations to take urgent and coordinated action to address what she called a “crisis of confidence” in the global economy. The US government must act now to reduce long-term deficits while being careful not to hurt the nation’s fragile economy by cutting spending too aggressively, she said.

Olick – FHFA under fire

“Given that the conservator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) has been wielding incredible power of late in deciding how much the two mortgage giants can and cannot charge in guarantee fees and whom they can and cannot refinance, it was particularly disturbing to learn the that same FHFA has been deemed, dare I say it, incompetent, at least in one of its oversight capacities. The FHFA’s Office of Inspector General has released a scathing report that points to understaffing and inefficiency at the mortgage giants’ regulator. ‘FHFA-OIG has identified shortfalls in the Agency’s examination coverage, particularly in the areas of Real Estate Owned (REO) and default-related legal services,’ the report begins. Translation: ‘Robo-signing’ paperwork issues. ‘FHFA has too few examiners overall to ensure the efficiency and effectiveness of its examination program,’ the report continues. Apparently just about a third of the FHFA’s 120 non-executive examiners are accredited federal financial examiners, and there is nothing in the works there to ‘improve this condition.’

But wait, there’s more: ‘FHFA, to its credit, has sought to address these challenges. Although this is a positive response, FHFA has expressed concern that its current hiring initiative will neither enable it to overcome its examination capacity shortfalls nor ensure the effectiveness of its 2011 reorganization.’ So the FHFA is having trouble getting new examiners, because, logically why would anyone want to go work for an agency that regulates two entities that are supposed to be eliminated over the next five years? Still, it’s not exactly comforting to hear that there’s no one, or at least too few people, minding the store…the store which finances more than half of the nation’s home mortgages. Fannie Mae had no comment.”

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

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin September 21, 2011

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MBA – applications increase

Mortgage applications increased 0.6% from one week earlier, according to data from the Mortgage Bankers Association’s   Weekly Mortgage Applications Survey for the week ending September 16, 2011.  The Market Composite Index, a measure of mortgage loan application volume, increased 0.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 25.2% compared with the previous week, which included the Labor Day holiday. The Refinance Index increased 2.2% from the previous week. The seasonally adjusted Purchase Index decreased 4.7% from one week earlier. The unadjusted Purchase Index increased 17.1% compared with the previous week.

The four week moving average for the seasonally adjusted Market Index is down 3.15%. The four week moving average is down 0.54% for the seasonally adjusted Purchase Index, while this average is down 3.91% for the Refinance Index.  The refinance share of mortgage activity increased to 78.3% of total applications from 76.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.7% from 7.3% of total applications from the previous week.  During the month of August, the investor share of applications for home purchase was at 5.7%, a slight increase from 5.5% in July. This change was led by an increase in the Pacific region. In addition, the share of purchase mortgages for second homes increased to 6.0% in August from 5.9% in July.

Weak holiday season for retailers?

A new forecast by the research firm ShopperTrak indicates that sales will likely not be as high as last year and that shoppers won’t be hitting the stores as much.  Retail sales for the November and December period are expected to rise 3% during what is traditionally the most critical period of the year for retailers.  That would be below last year’s 4.1% sales rise.  Shoppers have been cautious about spending through 2011, faced with uncertain economic conditions, rising gas prices and high unemployment.  This means many consumers are still seeking out bargains, buying essential goods over discretionary items and curtailing purchases for themselves.  Another reason retailers may not be jolly this year is that a measure of customer traffic in the stores is expected to be down 2.2% over the holidays. With shoppers hitting stores less frequently or deciding to make online purchases instead, this means retailers will be under even more pressure to get consumers to buy when they are out at the malls.  Holiday sales and traffic traditionally make up about 20% of annual retail activity, according to ShopperTrak.

ShopperTrak says specialty shops that sell low-end clothing and accessories may feel the need to cut prices to compete with discount chains, but that upscale stores will likely be able to cash in on consumers looking for goods they feel will hold up over long-term use.  The retail analyst expects clothing and accessories sales to rise 2.7% over the holidays, but for its traffic to dip 1.1% compared with a year ago.  Electronics and appliance sales are expected to rise 1.2% from the previous year, but traffic is predicted to fall 4.9%. ShopperTrak says the category will likely be hurt as consumers do comparison shopping and then buy online, as well as the lack of any “hot” holiday product that will draw in more shoppers. The demise of many of the nation’s consumer electronics chains, such as Circuit City, has also left consumers with fewer places to shop.

Olick – spec building is back, with a catch

“With consumer confidence weak and getting weaker, and demand for housing showing no signs of resuscitation, home builders today are not only changing their building models, they’re changing their business models; that includes returning to a practice that brought many of the builders down in the first place.  During the heydays of the housing boom, builders put up as many homes as they could finance, with little regard to future demand because there were plenty of buyers milling about their model homes. They built on spec (speculative), assured that they could sell easily, and they could, until they couldn’t.

Over the past few years, spec building was close to non-existent, especially for small to mid-sized private builders. For one thing, they couldn’t get the financing for it, for another, they had no assurance that they could sell the properties in a timely, cost-efficient manner. But now the pendulum may be swinging back again, not due to demand, but due to the new consumer in today’s market.  ‘A lot of the buyers today are not comfortable contracting on a home and then going back and putting their house on the market,’ says Bruno Pasquinelli, a private builder in Dallas, Texas. ‘They are afraid they can’t sell their home, so what they do is put their home on the market, wait until it’s under contract and then they go out and find a house that’s nearly ready for occupancy, so if you don’t have finished inventory on the ground, or close to being finished, you are going to lose a large segment of demand.’

Pasquinelli’s CBJENI Homes is focusing mostly on spec townhomes, as single family are more risky, but he’s gone from about 10-15 homes 2 and a half years ago to 70-80 homes today. He is dependent on private equity, as the banks are still too skittish, but his business is coming back steadily.  ‘It’s important which neighborhoods you build spec housing in,’ Pasquinelli cautions. ‘It should be an ‘A location’ where you know there’s demand. I choose to do it where I’m not competing against publics.’  The publics continue to suffer, but their size and ability to move cash and cut costs, helps them weather downturns like this one.  ‘The one good thing about our business is you can control cash flow by how much land you buy, so we’ll adjust accordingly,’ said Hovnanian CEO Ara Hovnanian. ‘We know the market is concerned, but we’re comfortable, and we absolutely don’t think we will run out of cash at the end of 2012.’  Since 1998, roughly four million more homes were built than needed,’ according to Paul Dales at Capital Economics. That means builders will have to try new strategies to stay in play. Spec is clearly one that targets skittish move-up buyers, like Bill Muros, who already has an existing home to sell.  ‘We don’t want to carry two houses. Our home is paid for, but we don’t want to own two houses, doesn’t make sense.’”

Middle class down this decade

The first decade of the 21st century will go down in the history books as a step back for the American middle class.  Last week, the government made gloomy headlines when it released the latest census report showing the poverty rate rose to a 17-year high. A whopping 46.2 million people (or 15.1% of the US population) live in poverty and 49.9 million live without health insurance.  But the data also gave the first glimpse of what happened to middle-class incomes in the first decade of the millennium. While the earnings of middle-income Americans have barely budged since the mid 1970s, the new data showed that from 2000 to 2010, they actually regressed.  For American households in the middle of the pay scale, income fell to $49,445 last year, when adjusted for inflation, a level not seen since 1996. And over the 10-year period, their income is down 7%.

Unlike the richest Americans, middle class families have most of their wealth tied up in the equity of their homes, which took a beating in the recession. And high unemployment has left many people with little or no other income at all.  At the same time that Americans had less cash to spend, they were also being hit with rising prices for some crucial items. Even accounting for inflation, it still costs more to buy a home, fill your gas tank, go to the doctor and put food on the table than it did only 10 years ago.  And not only is it more expensive to live a middle-class life, it costs more to get there too. The price of a college education — still considered the ticket to higher wages and a better lifestyle — has surged over the last decade, even in spite of the recession.  Facing these burdens, the American Dream is undergoing stark changes, with fewer people choosing to buy homes and more young people postponing their own independent lives. The census data showed about 14.2% of all young people ages 25 to 34 are still living in their parents’ homes this year, compared to about 11.8% before the recession began in 2007.

A tale of two housing markets

In America, it’s starting to feel as if there are two housing markets. One for the rich and one for everyone else.  Consider foreclosure-ravaged Detroit. In the historic Green Acres district, a haven for hipsters, a pristine, three-bedroom brick Tudor recently sold for $6,000 — about what a buyer would have paid during the Great Depression.  Yet just 15 miles away, in the posh suburban enclave of Birmingham, bidding wars are back. Multi-million-dollar mansions are selling quickly. Sales this August were up 21% from the previous year. The country club has ended its stealth discounts on new memberships. And Main Street’s retail storefronts are full.  In the housing market inhabited by most Americans, prices have fallen 30% or more since the peak in 2007. That’s a steeper decline than during the Depression. Some people have had their homes on the market for a year without a single offer.  Almost a quarter of American homeowners owe more on their house than it’s worth. Another quarter have less than 20% equity. About half of homeowners couldn’t get a mortgage if they applied today, says Paul Dales, senior US economist for Capital Economics.

But then there is the other housing market, occupied by 1.5% of the US population, according to Zillow.com. The one with outdoor kitchens and in-home spas; with his-and-her boudoirs and closets the size of starter houses. The one that is not local but global, with international buyers bidding in all cash. And where the gyrations of the stock market are cause for conversation, not cutting expenses.  In this land of luxury properties, the Great Recession seems over. Prices of $1 million-plus properties have risen 0.7% since February, according to Zillow. Prices of houses under $1 million have fallen more than 1.5%.  Normally, these two segments of the housing market rise and fall together. But now, they’re moving in opposite directions.  “Luxury is the best performing segment of the housing market right now,” says Zillow.com chief economist Stan Humphries.

Across the country, prices on high-end homes fell after the subprime crash in the fall of 2008. The price on the $25 million mansion became $20 million, then $15 million. Such “bargains” are pushing more luxury buyers to commit to more deals.  There are other factors, too. In Detroit, a recovering auto industry is helping propel high-end sales. All those car executives who have helped turnaround the American auto industry used to rent. Now they are using their performance bonuses to buy homes.  Wall Street’s recovery has brought back the market for mansions in the Hamptons, on Long Island, where the number of closings has returned to the 2007 level, and for luxury co-ops in New York City. And because of social-network riches in Silicon Valley, twice as many homes have sold for $5 million or more this year than last.  But in the other housing market, an apartment tower built in 2007 in San Jose, Calif., recently converted to all-rental. The building had not sold a single unit. In Miami, a city that exemplifies the foreclosure epidemic, idled cranes dot the skyline. Unemployment shot up again this summer from 12% to 14%, a level not seen since the energy crisis in 1973. There are so many two-bedroom condos in gated communities with golf courses, private pools and rustic jogging paths that you can pick one up for $25,000, 66% off the price five years ago. But luxury condos priced at $1 million or more are selling as rapidly as they did during the boom.  “In the 20 years that I have been in South Florida real estate, I have never seen a greater divide between those who have and those who have not,” says Peter Zalewski, founder of the real estate firm Condo Vultures.

Delinquencies down

Mortgage loan delinquencies fell almost 12% in August from a year earlier, according to data released Tuesday by Lender Processing Services Inc.  That reading comes on the heels of news barely three weeks ago that the combined delinquency rate on mortgages held by major banks fell to 6.68% in the second quarter, the lowest level since the third quarter of 2009, according to Federal Deposit Insurance Corp. data.  The FDIC insures deposits at 7,513 national banks.  The total U.S. delinquency rate, indicating loans more than 30 days past due but not in foreclosure, dipped to 8.13% last month, according to the LPS data.  That was a 2.5% decline from July, when the delinquency rate registered 8.34%, according to month-end mortgage performance statistics from LPS’s database of some 40 million mortgage loans.  About 4.25 million properties were at least 30 days delinquent but not yet in foreclosure in August, with 1.9 million of those at least 90 days past due.  Meanwhile, the foreclosure pre-sale inventory rate, which measures the number of properties that have entered the foreclosure process but not yet been sold, rose 8.2% from a year earlier, to 2.15 million properties.  Florida, Mississippi, Nevada, New Jersey and Illinois had the highest percentage of loans in delinquency or foreclosure. The states with the lowest rates of non-current loans were Montana, Wyoming, Alaska, South Dakota and North Dakota.

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