SnyderHomes – Texas Lone Star Realty Blog

Tary,

Smart Real Estate News & Commentary by Chris McLaughlin, May 17, 2010

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Webinar: Donald Trump’s and Robert Kiyosaki’s Secret Weapon

When: Tuesday, May 18, at 3 PM ET, NOON PST

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Housing market diagnosis: Bi-polar

Bi-polar is what comes to mind when diagnosing the post-homebuyer tax credit market. On one hand, sales and prices are rising, indicating recovery. On the other hand, so are interest rates and repossessions, which most certainly do not. And then there are the millions of foreclosures that need to be sold but haven’t yet been listed — so-called shadow inventory — that could derail a real recovery if they hit the market in floods. The result means, negative short-term but turning positive by the end of 2010.  “In the short run, I see a mini-collapse,” said Richard DeKaser, an independent housing market analyst and founder of Woodley Park Research who correctly predicted a downturn back in 2005 when he was chief economist for National City Corp.

There are some strong negatives dragging on the market. 1. Intermittently increasing interest rates 2. Bank repossessions surpass a million homes in 2010. 3. More than a quarter of borrowers are “underwater,” meaning they owe more than their homes are worth. 4. “Strategic defaults” close to 31% of all foreclosures in March — where underwater home owners walkway even when they can still afford to pay. And the scary truth: Right now, there could be more than 4.5 million homes that are ready to be sold but not on the market, also called “shadow inventory,” according to a recent report by Barclays Capital. This so-called shadow inventory is a recent phenomenon. In the past, inventory was either tight or it wasn’t. But now, with home prices so low and so many foreclosures on the market, both homeowners and banks have been waiting to put properties on the market.  But as more sellers put their homes up for sale, supplies increase, which will depress prices again. Rinse and repea  t ad infinitum. That vicious cycle could cause prices to bounce up and down for years, low or no appreciation and more homeowners in negative equity.

Obama aide: U.S. economy still needs further boost

The U.S. economy has begun to climb out of the worst downturn since the 1930 Great Depression but still needs additional steps by the federal government to stem a crisis in the job market, a senior economic adviser to President Barack Obama said on Sunday. “What we need now is not the withdrawal of support, but further targeted actions that will help the private sector come back more strongly,” Christina Romer, chairwoman of the White House Council of Economic Advisers, said in prepared remarks for a commencement ceremony at the College of William and Mary in Williamsburg, Virginia.

Romer urged Congress to pass a series of measures Obama has proposed to jump-start growth, including the establishment of a lending fund to spur credit to small businesses and providing cash-strapped cities and states with aid to help them avoid layoffs of teachers and other local employees. With the U.S. unemployment rate just under 10 percent, the Obama administration is juggling the need to spur economic growth with pressure to rein in ballooning U.S. budget deficits. The latest government report on the job market showed that the jobless rate ticked up two tenths of a percentage point to 9.9 percent as discouraged workers began looking for work again. Romer, an expert on the Great Depression, used much of her speech to compare the current economic crisis to the long downturn of the 1930s.  Republicans have sharply criticized the stimulus package, calling it an example of overreach by the government and contending that it failed to do enough to spur jobs growth.

Diana Olick – Home Mortgage Interest Deduction In Play

“The Administration isn’t officially considering it, maybe not “actively” considering it, not even taking a side on it per se. According to “staff” it was just a “musing.” At a small conclave of reporters, no cameras allowed, the Secretary of Housing and Urban Development was reportedly asked about the mortgage interest deduction, the importance of home ownership and the seeming shift of focus from owning to renting. That last bit is huge in itself, as pretty much every President dating back to Herbert Hoover and the Home-Loan Discount Banks pushed people to own own own.  Some argue that it was this push to the “ownership society” by President’s Clinton and Bush that caused at least some of the housing crisis, and at the very least pushed Fannie Mae and Freddie Mac to push the envelope of responsible lending.  Secretary Donovan reportedly offered that modifying the deduction could result in deficit reduction and, as the Wall Street Journal notes, “rebalancing federal housin  g policy.”

The mortgage interest deduction, which appears on about 41 million U.S. tax returns, is a huge political hot button, and the more questions the Secretary got, the quicker he tried to get out of the conversation. No, there is “no official position” on the deduction. But the question didn’t come from the ether. A couple of economists from Harvard and Wharton suggested last week that the housing bubble was not caused entirely by faulty mortgage lending, but perhaps more by housing policy going back decades. Their conclusion was to focus on modifying the mortgage deduction.  According to the Congressional Joint Committee on Taxation, between 2009 and 2013, the federal government will lose roughly $600 billion from the home mortgage interest deduction.”

Threat of Shadow Inventory Diminishing: Barclays

Analysts at Barclays Capital say the industry’s ominous shadow inventory is close to topping out.  New research published by the firm says the supply of homes nearing REO status, defined as 90 or more days delinquent or in the process of foreclosure, will peak this summer and then begin falling gradually as the market becomes stable enough to absorb 130,000 distressed properties a month. “While we expect REO levels to remain elevated, the trickle of homes from foreclosure into REO implies moderate levels of inventory reaching market,” Barclays said in its report.

The company estimates the current REO supply to be 478,000 and expects it to rise to 536,000 by late 2011. Barclays’ delinquency pipeline snapshot shows that as of February, there were 2.4 million mortgages at least 90 days past due and 2.1 million more already winding through the foreclosure process, which combined makes up a shadow inventory of 4.5 million. It’s a daunting tally and could grow larger as foreclosure alternatives are exhausted, but Barclays’ model forecasts 4.7 million distressed sales over the next three years, with 1.6 million coming in 2010, 1.6 million in 2011, and 1.5 million in 2012. The research firm notes, however, that an orderly liquidation of shadow inventory will require both “more robust household formation and job growth.”  Barclays forecast that the industry is only a few months away from reaching peak levels of shadow inventory.

Commercial Market Still Struggling

While the commercial real estate market may not have fully recovered, National Association of Realtors® Chief Economist Lawrence Yun identified some developing, positive trends in the market that could eventually lead to recovery at the “Economics Issues and Commercial Business Trends Forum.”  Yun said jobs only began increasing a couple of months ago and are still below peak. The commercial market has seen a few improving trends in recent months. The market is experiencing an increase in transactions due to more distressed properties available, and prices are beginning to stabilize. Yun believes within the next year more lending will slowly become accessible to commercial property owners.

Two commercial sectors showing the most promise are manufacturing and multifamily. Manufacturing activity and employment have risen recently and because household formation is also rising, the multifamily sector will likely fare the best during this economy. Despite some of these promising trends, the commercial market is still experiencing high vacancy rates and rent concessions. “All real estate is local, but I expect to see vacancy rates bottoming out and rent rising by next year,” said Yun.  He also warned against some of the possible risks commercial practitioners may experience in the future such as high interest rates and inflation, as well as increased taxes for commercial real estate investors. During the session, Yun was joined by two leading economic experts, Diane Swonk, Mesirow Financial; and Brendan Reilly, Commercial Mortgage Securities Association. The panelists agreed that an improving economy and job creation continue to be the two main factors when it c  omes to restoring the commercial real estate market.

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Now on to our real estate investing education section …

Huh? HUD Reform Could Create Chaos

It probably comes as no surprise that the lending industry has…and will continue…to undergo dramatic changes in response to the financial strain and economic meltdown however, one recent proposal is putting a lot of lenders up in arms. Specifically the “Strengthening Risk Management through Responsible FHA Approved Lenders” report published on April 20,2010 which essentially lays out the new plans designed to help FHA lenders and brokers comply with upcoming regulatory changes.

While that all sounds straightforward enough, the devil is in the details. According to industry experts, after December 31,2010, the FHA broker approval process will be eliminated from HUD responsibility and oversight. Savvy brokers might wonder who will now be in charge of the approximately 8,000 current FHA brokers that will be left without direct supervision under HUD. According to the same report, beginning in 2011, FHA approved lenders will be responsible for approving brokers…and held accountable for the brokers FHA originations.

Hmmm…let’s take a moment to break this down into plain language terms.

By eliminating roughly 8,000 brokers from HUD’s direct responsibility without reducing HUD’s audit staff, the remaining 3,000 FHA lenders are likely to be exposed to greater scrutiny and oversight. If that wasn’t enough, here are few more highlights coming soon to an office near you.

May 20,2010 – Yes, this week marks the first step in the reform process. Beginning 05/20/10, lenders will be directly responsible for the approval and oversight of new brokers (12/31/10 for current FHA approved brokers). There does seem to be a decided lack of clarity. Confused yet?

You aren’t alone. To date, HUD has not provided lenders any specific guidance on how to oversee a brokers activity.

December 31,2010 – This is the final date where Quality Control audits will be required for broker approval. After that date, the broker will require FHA lender approval to participate. Lenders are expected to pass the QC requirements to the broker in an effort to reduce regulatory requirements.

To learn more or to view the document for yourself visit:

http://edocket.access.gpo.gov/2010/pdf/2010-8837.pdf

See you at the top!

Chris McLaughlin

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Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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Finally, a blog for Real Estate professionals that want up-to-the-minute news, & how it impacts us and our market…

http://www.shortsalesriches.com/blog

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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

–

Loss Mitigation Training Institute LLC

206 E. Pine Street

Lakeland, FL

33801

US

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“Experience shows, it all depends on where you live.  I would love to do some research for you and send you an email that will tell you what homes are for sale now, what homes have sold recently, and how long homes are taking to sell in your neighborhood.  So you can feel secure in the knowledge that you have the most accurate information.  This timely information will tell you right away how your market is right now!  I imagine that information would be of value to you, would it not?”

Tary S nyder 512-892-6800 tsnyder@snyderhomes.com

Just received this morning from  Chris McLaughlin.

Tary,

Just when you thought things were turning the corner…looks like we could be in for a double dip recession.

Don’t take my word for it … why do you think the FHA recently gave the green light for property flipping to FHA buyers?  They know things are going to get worse, so they need to start moving more properties ASAP.

Here’s why:

#1 While the subprime crisis may be showing signs of stabilizing, the ARM crisis is just beginning to rear its ugly head.

According to one business journalist:

“The big wave of Option ARM resets has yet to come, and given the drop in home prices, refinancing won’t be realistic.”

Look for more short sales coming in 2010.

#2. Municipal Defaults: yep, local towns and counties are feeling the pinch with foreclosures and tax defaults draining their coffers.  And when a town goes broke, it will put their resident’s property even further underwater.

Look for more short sales coming in 2010.

#3.  Commercial Real-Estate Collapse: The second largest chain of malls has already declared bankruptcy.  Obligations needing refinancing in the commercial market are in the trillions.

And most of them, even with positive cash flows, are as underwater as residential mortgages.  As these businesses crash, they will cause even more unemployment.

Look for more short sales coming in 2010.

#4.  Loan modifications aren’t working.  Unless and until there is meaningful principal reduction, most people getting a loan modification will stop making their payments if they are $100,000+ upside down on their home.  And there are A LOT of people upside down.  Look for lots of “jingle mail,” where the homeowner just sends back the keys, in 2010.

Look for more short sales coming in 2010.  But look for a lot more buyers now that FHA has given the green light.

Are you seeing a theme yet?

Look, you can either be a victim of this economy, or you can swing it to your advantage by learning the easy way to find and rapidly resell short sales.

Yep, I said easy, because with our newly revised Short Sales Riches system for 2010, it’s done for you automatically.  You just have to get the machine started, then it runs on autopilot for you.

Find out more in our fr-ee webinar tomorrow (Saturday) at 3 PM ET, NOON PST:

https://www2.gotomeeting.com/register/165487443

But do it quick, because as of this writing, tons of other investors are gobbling up seats.

Don’t miss out on the hottest opportunity that real estate salespeople and investors are using to survive this market… like Warren Buffet is surviving.

Chris McLaughlin

Loss Mitigation Training Institute LLC

206 E. Pine Street

Lakeland, FL

33801

US