Home price trend…Florida job prospects…

CNN: Unanticipated home price declines in November.

NEW YORK (CNNMoney) -- Home prices posted a steep, month-over-month drop in November, falling 1.3%, according to the latest S&P/Case-Shiller 20-city report. Prices fell in 19 of the 20 cities the index covers.

Prices are down 3.7% from a year ago, and off 32.8% since they peaked in the summer of 2006. The index is currently only 0.6% above its March, 2011 low. "Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall," said David Blitzer, spokesman for S&P.

The drop in home prices was more than housing bear Peter Morici, professor at the University of Maryland Smith School of Business, anticipated. He had forecast a 0.8% drop. "We've had more robust sales activity in the housing market lately," he said.

Morici thinks recent home price weakness stems at least partially from the fact that more sellers have accepted the weak market conditions and are putting their homes up for sale. Retirees and other home owners had postponed sales, trying to wait out the decline. "Sooner or later, you have to get rid of that house," he said.

Most difficult place to find another job? Florida!

NEW YORK (CNNMoney) -- If you lose your job in Florida, chances are you won't find another one any time soon.

The Sunshine State has the highest rate of long-term unemployment in the nation. Some 53% of jobless Floridians were out of work for more than six months in 2011, according to Brookings' Hamilton Project, which crunched Census data

"During the boom, the Florida economy was going gangbusters," said Sean Snaith, economics professor at the University of Central Florida. "We lost hundreds of thousands of jobs."

Although the market is starting to loosen up, there are four jobseekers for every open position in Florida, said Mason Jackson, chief executive of the WorkForce One career center in Fort Lauderdale. Businesses are still hesitant to hire because of continued uncertainty in the economy. "If we filled every job we could find, 75% would still be unemployed," Jackson said.

The housing market continues to weigh on the Florida economy and its job market. More than one in five borrowers are behind in payments, while 44% of homeowners owe more than their property is worth.

This prevents homeowners from moving away to look for work, said Tony Villamil, dean of St. Thomas University's School of Business in Miami.

"They are locked in their homes," he said.

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To any home owners reading this: If selling your home may be a consideration in the next 36 months, we should discuss the information contained in the two news releases, above, and the other housing and economic factors that may have an impact on your present and future real estate plans.

Call me directly at 561-602-1258

Thanks for reading…Steve Jackson

––For Every Two Homes Available for Sale, There Is One “In The Shadows”––

 

CoreLogic® (NYSE: CLGX), a leading provider of information, analytics and business services, reported today that the current residential shadow inventory as of October 2011 remained at 1.6 million units, representing a supply of 5 months. This was down from October 2010, when shadow inventory stood at 1.9 million units, or 7-months’ supply, but approximately the same level as reported in July 2011. Currently, the flow of new seriously delinquent loans into the shadow inventory has been offset by the roughly equal flow of distressed (short and real estate owned) sales.

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on multiple listing services (MLSs) that are seriously delinquent (90 days or more), in foreclosure and real estate owned (REO) by lenders. Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed non-listed properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official metrics of unsold inventory.

Data Highlights:

• As of October 2011, shadow inventory remained at 1.6 million units, or 5-months’ supply and represented half of the 3 million properties currently seriously delinquent, in foreclosure or in REO.
• Of the 1.6 million properties currently in the shadow inventory (Figures 1 and 2), 770,000 units are seriously delinquent (2.5-months’ supply), 430,000 are in some stage of foreclosure (1.4-months’ supply) and 370,000 are already in REO (1.2-months’ supply).
• Florida, California and Illinois account for more than a third of the shadow inventory. The top six states, which would also include New York, Texas and New Jersey, account for half of the shadow inventory.
• The shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006. A healthy housing market should have less than one-month’s supply of shadow inventory, which would be an easily absorbed stock of distressed assets with little or no discernable impact on house prices, unless the inventory was geographically concentrated.
• Despite 3 million distressed sales since January 2009, a period when home prices were declining at their fastest rate, the shadow inventory in October 2011 is at the same level as January 2009.
• Because shadow inventory is often concentrated in suburban and exurban submarkets, where distressed sales compete with new construction sales, it is one of the reasons why new home sales continue to be weak. In normal times, new home sales account for 12 percent of all sales, but they are currently running at 7 percent of all sales.
• Based on current estimates of the visible inventory (both distressed and non-distressed), the shadow inventory is approximately half of all visible inventory listings. For every two homes available for sale, there is one home in the “shadows”

“The shadow inventory overhang is a large impediment to the improvement in the housing market because it puts downward pressure on home prices, which hurts home sales and building activity while encouraging strategic defaults,” said Mark Fleming, chief economist for CoreLogic.

The full report can be found at http://www.corelogic.com/ShadowInventoryOct2011.

 

I do follow CoreLogic reporting every month…however, there are other, credible, estimated of the shadow inventory of 3-4 times what CoreLogic reports. And this is what is going to keep our values from increasing any time soon.

Thanks for reading…Steve Jackson

Call me directly at 561-602-1258

What if the Federal deficit was your household debt?

Will the Govt. force you to declare bankruptcy as a result of a short sale?

Short sales are becoming more common, banks are becoming more accommodating, and the process has shortened up quite a bit…but that could change if the tax break that currently does not force homeowners who do short sales to claim the forgiven debt on their tax returns is not extended.

On December 31st, 2012, the Mortgage Debt Relief Act, also called the Mortgage Forgiveness Debt Relief Act, will expire if changes are not made to the legislation. When this happens, the “deficiency”, or difference between what your bank ‘nets’ on your short sale and what you owed, if forgiven, once again, will be viewed as taxable income.

This  will  make short sales far less attractive to nearly every distressed property owner. And it could slow down the short sale market long before the end of this year, because “short sales take a while to get approved. If there isn’t an extension of this legislation by June or July, there probably won’t be as much incentive to do short sales in the latter months of 2012 as short sales with some lender can exceed six months from start to finish.

Additional fallout could take the form of more strategic defaults once short sales are no longer an option, warn analysts. If homeowners stand to lose money in the form of additional taxes on the “forgiven” debts on their homes, they may simply opt to walk away from the property at some point. Of course, in the case of strategic defaults – or other forms of foreclosure as well – lenders can pursue the delinquent borrowers for the difference between the amount that they owed on the property when they stopped paying and the amount the lender was able to make when the property was sold. These debts are often difficult to collect, but some lenders opt to wait years before pursuing them in the hopes that former homeowners to get back on their feet and once again have some assets to go after.

Some banks sell the debts to third-party collections companies. Even if this part of the debt is ultimately written off, it can create tax problems years down the road for homeowners because when the debt is written off it may be considered income to the homeowner.

We are hoping that the Mortgage Debt Relief Act will be extended long before it expires on December 31 of this year. If the legislation is not extended, many homeowners may be forced to declare bankruptcy in order to avoid paying income taxes on their “forgiven” debts.

If you are in a position where you think a short sale may be an option for you, please give me a call sooner rather than later.

Thanks…Steve Jackson

561-602-1258 – Direct

email: ShortSale@thejacksonteam.com

Foreclosure/Short Sale…1099 differences

  The following is from a great blog post entitled; IRS Form 1099-A, 1099-C and the Cancellation of Debt in Foreclosure on The Accounting Consortium blog:

Okay, so misinformation and confusion about the tax implications of foreclosure arising from the cancellation of debt seems to be piling up. In particular, folks seem most confused by the receipt of Form 1099-A from lenders who have taken property back in foreclosure.

First, remember the basic principle: Cancellation of debt MAY result in taxable ordinary income.

Second, because a foreclosure is viewed as a “sale of property,” if you let real estate go in foreclosure and it results in a cancellation of debt, then that foreclosure may be a taxable event.

There are three exceptions:

1. First, if the property lost in foreclosure is a principal residence-literally the home in which you live-then the cancellation of the debt (“COD”) generally won’t be taxable. This is a result of the Mortgage Forgiveness Debt Relief Act of 2007.

2. Second, if your are “insolvent” at the time that the debt is cancelled (not at the time of the foreclosure, but more on this below) then you will not be taxed. Insolvency is a simple balance sheet test: If your liabilities exceed your assets, you are insolvent. Don’t over think it. You will have to submit IRS Form 982 with the tax return in the applicable year in order to demonstrate that insolvency.

3. Third, if the debt is cancelled as a result of a bankruptcy filing, then there is also no tax. (This is one of the reasons I call bankruptcy “the ultimate mortgage modification tool.”)

So what about this Form 1099-A business? Form 1099-A is the form that the lender sends you (and the IRS) that documents that the lender has accepted real property in partial satisfaction of a secured debt. It does not create the tax liability. It is not documentary evidence of cancellation of debt. It is a tax neutral document.

The document that causes the problem is the IRS Form 1099-C. This is the one that tells you that the bank has cancelled the debt. It has two effects: First, it can be used as evidence in a later lawsuit by the lender to refute an allegation that the debt is still due and owing. It is not proof; it is just evidence, or as lawyers like to say, it is “probative but not dispositive.” Second, it will likely give rise to the possibility of a taxable event precisely because it constitutes a statement by the lender that the debt has actually been cancelled. (The above exceptions still apply, but how you need to deal with the problem will change.)

Remember: Foreclosure doesn’t ‘per se’ cancel the debt; it merely satisfies that part of the total debt which is equal to the value of the property.

Here’s the down and dirty of it: You are not likely to receive a Form 1099-C from a foreclosing lender on a recourse obligation because they want to hold out the possibility of recovering a deficiency for as long as they can. (Assuming, of course that the anti-deficiency laws allow it…But that’s a whole different topic that I won’t get into here.)

So since only part of the debt is paid by the foreclosure, and since you’ve only received a 1099-A, without that 1099-C, the claim stays alive until it dies by some other means. Prudent tax pros generally counsel that it is wise to provide some sort of estimated liability if the property has been lost to foreclosure, and you still haven’t received her 1099-C. I tend to disagree with that somewhat, because there is no COD tax until the debt is actually cancelled, and the debt isn’t cancelled until the lender or the law says it is. Estimating the liability based on an assumption that recourse debt will be cancelled eventually may create a need to amend the return later if the lender comes after you. Of course, if the debt is unambiguously non-recourse, meaning that no deficiency is possible, then it makes sense to go the estimate route because the debt is now cancelled by operation of law.

Last, an issue related to this is the difference in bankruptcy dischargeability status between a mortgage debt owed to a lender, and an income tax debt owed to the government. They are not treated the same in bankruptcy: If you owe the bank and you file, then the debt is immediately dischargeable. But if you wait until you have filed the tax return and income tax on the COD (cancellation of debt) is actually assessed, then it is no longer as easily discharged in bankruptcy. Because back income taxes are not dischargeable until two years after the tax return was last due and ten months (approximately…it’s actually 280 days) after the tax is “assessed,” if you wait to file bankruptcy until after you have filed your tax return, you have converted an immediately dischargeable mortgage deficiency owed to a bank into a tax debt owed to the government that you will have to live with through that waiting period before you can dump it in bankruptcy… Capiche?

Because these problems involve the interplay between basic contract law, mortgage and anti-deficiency laws (all of which are state law issues), and federal tax law, these can be gnarly problems to sort out. Unfortunately, not many attorneys understand them, and not a whole lot of tax pros either. This is because no one’s ever lost money on a real estate investment before now. Well, that’s not really true of course, but we are seeing things that are changing history, and testing the limits of most general practitioners. If you think you may have a tax problem arising from a past or pending foreclosure, make sure you seek professional advice from someone who understands the issues. It will vary from state to state, due to the differences in anti-deficiency legislation.

If you would like to schedule a confidential meeting to explore your foreclosure avoidance options, please call me directly at 561-602-1258 or email me at: SSinfo@thejacksonteam.com

Thanks for reading…Steve Jackson

2 month payroll tax reduction=30 years of increased mortgage payments!

 

The temporary extension of the payroll tax (and extended unemployment benefits) is being funded with fees from new Fannie and Freddie mortgages. BUT…these fees are not 1 time fees…these fees are not just for 2 months…these fees are not for 10 years (as mistakenly understood by the media)…these fees are for THE LIFE OF THE LOAN! 30 years if one keeps the mortgage!.

How in the world does this make sense? Add costs to an integral part of the WEAKEST part of our economy…add costs to the segment of our economy that almost all agree will have to spearhead any real recovery! And, with all of the political grandstanding about “getting the govt. out of mortgages”,..they have now tied the financing of this bill to ongoing underwriting of mortgages by Fannie and Freddie.

And now that the politicians have dipped into the Fannie/Freddie new loan pocketbook, I shudder to think of what they’ll try to fund through new loan fees to home buyers going forward.

Voice your opinion of this tactic when you exercise your right to vote!

 

Thanks for letting me vent…Steve Jackson

2012

To help you celebrate and reflect here is a collection of quotes to start the new year.

Year’s end is neither an end nor a beginning but a going on, with all the wisdom that experience can instill in us. -Hal Borland

In the New Year, may your right hand always be stretched out in friendship, but never in want. -Irish toast

Your Merry Christmas may depend on what others do for you … but your Happy New Year depends on what you do for others. -Author unknown

Your success and happiness lies in you. Resolve to keep happy, and your joy and you shall form an invincible host against difficulties. Helen Keller

We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year’s Day. Edith Lovejoy Pierce

One resolution I have made, and try always to keep, is this: To rise above the little things. John Burroughs

We spend January 1 walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives…not looking for flaws, but for potential. Ellen Goodman

Be always at war with your vices, at peace with your neighbors, and let each new year find you a better man. Benjamin Franklin

May the best of this year be the worst of next. Unknown

Resolve to make at least one person happy every day, and then in ten years you may have made three thousand, six hundred and fifty persons happy, or brightened a small town by your contribution to the fund of general enjoyment. Sydney Smith

Tax advantages of home ownership

There are many advantages to owning a home. For instance, it offers the pride of ownership, provides an overall sense of accomplishment, and is a place where you and your family will build many lasting memories. Also, real estate opens the door to many tax benefits as well. Let’s discover some of the following ways that owning a home generates tax advantages.

• Mortgage Interest & Points: If mortgage debt is $1,000,000 or less, married couples filing jointly can deduct the full amount of their interest. Otherwise, those filing separately can write off up to $500,000 worth. This also includes second homes or adjacent land to your main residence. Points on either a home purchase or refinance can also be deducted, but these must be amortized for the latter.
• Property Tax Deductions: All state and local taxes regardless of how many properties you own can be deducted, up to the alternative minimum tax required by law. Funds that are held in escrow accounts can only be written off once the taxes are paid.
• Private Mortgage Insurance (PMI): A portion of PMI can also be deducted if household income is less than $109,000 per year or $54,500 for those filing separately.
• Interest On Home Equity Loans: As long as you have the necessary equity in your home to secure the required debt, you can write off the interest on a loan of up to $100,000 for those who are married filing jointly, or $50,000 when submitted separately.
• Working From Home: That’s right! Even those who use a portion of their home for work purposes are able to deduct a percentage of the home’s depreciation, utility/maintenance costs and insurance. This is one you definitely want to review with your tax professional to make sure you are getting the maximum available to you.
• Home Improvement Interest: This is a tricky one, as you can write off the interest on any capital improvements made to your home, which will increase value and/or prolong the life of your home. This includes certain types of restorations or additions made to the home with no cap on the investment. However, you will not be able to deduct minor patching or cosmetics made to the home.
• Capital Gains/Selling Costs: As long as you have lived in your primary residence for at least 2 of the last 5 years, you are permitted to sell your property for up to $500,000 of profit for married couples filing jointly, or $250,000 for singles with absolutely no tax penalties. However, if you end up selling for an amount above either threshold, you can subtract the amount of closing/selling costs that you incurred from your total gain. Those who fall outside of the 2 out of 5 year limitation may be granted an exception given certain unique circumstances such as health problems, relocating for work or other such occurrences.

When deciding whether to rent or buy, it pays to consider the tax benefits of homeownership and to discuss these with your tax professional. Especially for those who are entertaining the thought of buying instead of renting, it is very important to consider the long-term impact that owning real estate can have on your overall financial future. There are advantages whether you are buying for yourself or investing in properties for additional income. Contact us today to discuss what your best options are.

Drawn by me...for you

      
        


                 














Merry Christmas…Happy Holidays!

NAR…”OOPS”!

I think it's time to tell everyone what I have known for a long time now...What the acronym NAR actually stands for. I know that they would like you to believe that it is 'National Association of Realtors', but the real truth, revealed to all recently is that NAR stands for: 'Numbers Aren't Real'!

The NAR US Housing Home Sales Figures were artificially inflated by at least 11% per year for the period of 2007-2010. Nice work NAR! They said there were a few "errors' in data collection and interpretation". And I think that it goes back to BEFORE 2007...why did they only go back and revise to that year? “Sales were weaker than people thought (or were lead to believe by NAR reports),” said chagrined NAR spokesman Walter Malony. Data firm CoreLogic accused the NAR of over-counting home sales back in May of this year. At the time, the organization insisted that any issues with their numbers would be “relatively minor.” Unfortunately, NAR economist Lawrence Yun has revised that prediction to say that the changes in reporting will be “meaningful,” adding that “this means the housing market’s downturn was deeper than what was initially thought”. 

Being in the business every day for a long time now, I began to see a slowdown in the 1st half of 2006 and an 'accelleration' in price and volume declines right at the beginning of 2007. My analysis shows that the air started to come out of the bubble, at least in Palm Beach County, right at the end of 2005. I could go in to their methodology and poke a thousand holes in it...but I'd bore everyone but myself.

The readers who regularly read my blog posts will know that I don't "toe the line" when it comes to the NAR/FAR, etc. Coincidentally, a blog post I wrote just about 5 weeks ago, http://winstontrails.blogspot.com/2011/11/if-they-keep-predicting-market.html skewers the NAR for their inept (intentionally misleading) comments.

Below are the charts that reflect the adjustments.

                    

 

 

 

 

 

 

So...what does this all mean?  Why now? And what is the effect of this revision?

Well, I think the "why now" question can be answered by NAR being called out on their numbers by CoreLogic a few months ago.

But the "what does this all mean" question has many possible answers depending upon the angle it is being viewed from. My obvious, but cynical, view is that the NAR and administration can now more easily report "improvments" in home sales. The new sales figures will be compared to the re-benchmarked historical sales and will paint a rosy housing and economic picture going forward. And if the reporters (TV and print) continue to just repeat data rather than dig in to the meaning of the data, the re-benchmarked (lower) figures will fade into distant memory...and the 'improving home sales numbers' will be evidence of our 'robust and recovering' economy.

Lastly, what does this effect? This question is better answered by a formally trained economist, but I have to believe that these numbers somehow impact GDP in a negative sense, retroactively.

If you've read this far, I commend you! Seriously though, if you are considering your options, whether it be selling or purchasing real estate, call me. You don't want to take the chance of ending up getting advice and consulting with an NAR drone who is taught to memorize "objection handling dialogs' and sales tactics.

My direct line is 561-602-1258 or

As always…thanks for reading,

Steve Jackson

Loan Modification...who really benefits?

Over the past 3 years, banks have been given trillions of dollars from Congress (otherwise known as the US taxpayers) to motivate them to modify their home loans as the housing bubble collapsed. However, very few people have actually had their loans permanently adjusted, and instead, banks have been pursuing foreclosures at enormous rates.

Our opinion is that when it comes to loan mods, the homeowner who needs to be wary. On the surface, having the ability to lower ones payments an underwater mortgage certainly looks like a great deal, but we also know that the banks are on the edge of collapse due to the fact that the states and the courts are showing many of these entities do not have the proper documentation and ownership to actually foreclose on property.

The issue at hand is ownership of title, and rightful ownership of the actual note. When banks made their original loans to home buyers, they had the simple contract of title and note. However, when they sold the note to investments banks, who then separated the note from the title, and bundled these obligations with hundreds of others to create the RMBS, they simply put the title into a dummy holding company called MERS, and there was no longer a true and legal chain of ownership of the lien.

As time went on, some courts began to realize that the original banks, or the servicing agents who were simply collecting monthly mortgage payments, did not have the legal right or proper paperwork to foreclose on someones property.

So now, as a last ditch effort to compile the proper paperwork to satisfy the courts, banks are now suddenly offering loan modifications so that homeowners will by default, re-affirm the loan and justify a chain of ownership to the banks they did not have at the time of the foreclosure proceedings. Another important back-door trick of the banks is that they offer these "trial" loam mods, requesting all manner of financial documentation. And to get a loan modification, the homeowner needs to show income and assets enough to sustain payment on the lower payment. So most homeowner will go to great lengths to find and disclose and affirm assets and income that the bank may not have known about otherwise. Now, the banks know what assets to go after when they terminate the "trial" modification and foreclose instead.

In an article by Bruce Krasting on one of my favorite blogs, Zerohedge, he makes this assessment of the modification offers to homeowners:

One possible response would be to get all troubled borrowers to reaffirm their debt, the second is to get the trouble borrowers back to paying something on the mortgage, even if it were a fraction of what was formerly owed on a monthly basis. A loan modification would achieve both results. When a borrower signs up for a loan mod they sign new papers. A portion of this process will re-establish any loan balance that is due. The language in the mod could have new foreclosure terms that eliminate the banker’s problem with past tainted documentation. Once a borrower makes a few months of new lowered payments they are, in effect, confirming their acceptance of the new terms.

Most Mods go bust in six months or are cancelled for any number of reasons by the lender. So on the surface it would seem little is accomplished from the lenders perspective. But we think the lenders motivation for doing a loan mod is not to get a borrower to a monthly payment that they could realistically pay, but rather the motivation is to circumvent the foreclosure trap the lenders are in. A mod could legally resolve the problems.

To us, it appears to be a strong possibility that the banks and institutions that desire to foreclose on property are offering these modifications NOT as a means to help homeowners, but rather as a way to create new paperwork that will stand up in court, as well as uncovering assets and income that the banks may not have known existed, allowing the banks to foreclose and move on.

That being said, we have heard of homeowners that have received advantageous, permanent, modifications and are happy, keeping up with their payments, and keeping their home.

As we always recommend, any tie your bank want documents from you or wants you to sign anything, contact a well educated and experienced real estate attorney.

You can also call us to discuss your options and the relative benefits/drawback to each...

or call me on my direct line at 561-602-1258

Thanks for reading...Steve

And we thought 2012 was going to be the year…

From a Forbes.com article written December 8th, 2011:Morgan Brennan, Forbes Staff

Cities Where Home Prices Are Falling Dangerously

The folks at Local Market Monitor, a Cary, NC-based real estate research company, compiled a list of the cities that suffered relatively big home price hits this year with more projected through the next 12 months. LMM sifted through market data for more than 300 Metropolitan Statistical Areas (MSAs) and Metropolitan Divisions (MSADs), as defined by the U.S. Office of Management and Budget.  The company, which releases quarterly housing market reports, crunched home prices from October 2010 through September 2011 and calculated price projections through September of next year. For its projections, LMM took into account job growth and unemployment rates, population growth, sales and rental prices, and something called “Equilibrium Home Price,” which is a gauge of where the average home price should realistically lie based on economic data versus where it actually is…

Every one of the 13 markets that made our list suffers from a glut of foreclosures. “Foreclosures are continuing to weigh down home prices in hard-hit foreclosure markets as the average sales prices of foreclosure-related sales drop,” explains Daren Blomquist of RealtyTrac, an Irvine, CA-based foreclosure listing site…

A foreclosure–studded state where home prices continue to get hammered is Florida.  Orlando and Jacksonville lost 11% and 9% of their home values this year, with 9.4% and 7.7% losses predicted in months to come.  The Metropolitan Division that includes West Palm Beach (West Palm Beach-Boca Raton-Boynton Beach, FL), Home Price Drop from Oct. 2010 to Sept. 2011: -8.5%, Projected Home Price Drop through 2012: -8.7%, also landed on our list.

Ingo Winzer, founder and president of Local Market Monitor, says two things are driving the dive in Sunshine State markets: too much inventory and not enough jobs.  Construction backstopped a sizeable chunk of Florida’s local economies, as developers built spec homes for an anticipated deluge of Baby Boomer snowbirds that, thanks to the current economy, have yet to retire. “First, a lot of homes were built, maybe more than should have been built, and second, while population growth in Florida will eventually sop up those properties, right now there’s no work so we have large numbers of homes sitting empty…causing prices (to continue to) fall,” he says.

As I consult with sellers, we go through the following exercise to determine whether to sell now or wait:  If we take the average value in the report, $211,000, factor in the projected decline, then factor in a hoped-for annual appreciation of 3.5% from then on, for a seller to just break even with what they would get with a sale today, they will have to wait until the end of 2016! So…if there is a need/desire to sell in the next 3 years…don’t wait and hope, now is the time.

If you are one of the “should I stay or should I go” owners…lets meet at my office (or your home) and see what decision is best for you.
Call me at 561 –602-1258 or

Merry Christmas From Aunt Fannie and Uncle Freddie

  Fannie Mae and Freddie Mac are suspending evictions of foreclosed properties from Dec. 19 through Jan. 2, 2012.

The government-sponsored enterprises are the first institutions this holiday season to announce their annual moratoriums, which is a common practice in the housing sector to provide families a greater measure of certainty during the holidays.

During this period, legal and administrative proceedings for evictions may continue, but families living in foreclosed properties will be permitted to remain in the home.

The suspensions apply only to eviction lockouts related to REO properties owned by Fannie Mae and Freddie Mac and will not affect other pre- or post-foreclosure processes.

  “The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” said Terry Edwards, executive vice president of credit portfolio management at Fannie Mae, in a statement.

“No family should have to give up their home during this holiday season," he said.

Report: We Live in One of the Best Markets for Investment in Rental Property

DALLAS, Sept. 13, 2011 /PRNewswire/ -- THIRD QUARTER 2011 UPDATE -- HomeVestors of America, Inc., known as the "We Buy Ugly Houses®" company, and Local Market Monitor, Inc., a leading forecaster of real estate markets, today released the Third Quarter 2011 update of the "HomeVestors-Local Market Monitor Best Markets to Invest in Rental Property"…The ranking is intended to help inform real estate investors of current rental property investment opportunities based on their potential future relative returns.  The ranking is updated quarterly.

 The ranking forecasts the expected performance of rental  properties, specifically single-family homes maintained as rental properties.   The ranking is calculated based on three-year forecasts of home prices (reflecting underlying home-price appreciation potential) and gross rents (as a proxy for potential investor cash flow).

Ingo Winzer, president and founder of Local Market Monitor, Inc., said: "A sharper than expected fall in recent home prices, which are down almost 5% in the last year, has led us to lower expectations for future prices.  At the same time, however, higher inflation and slow but steady job growth should boost future rents.  The desirability of investing in rental properties is therefore positive.

"The Future Relative Returns for large markets suggest that Las Vegas and Detroit are still very risky, highly speculative markets that could have a big payoff only if the local economy rebounds faster than we expect.  The most interesting markets are in Florida and Arizona, where home prices have still not bottomed out but rents will eventually be supported by renewed population growth; investors in these markets must take a long-term view but will be rewarded if they can tolerate high vacancies for a few years."

David Hicks, co-president of HomeVestors of America, Inc., added: "What we're seeing in the marketplace reinforces the results of the latest ranking.  Our franchises in West Palm Beach, Atlanta, Phoenix, Dallas, Fort Worth and Tucson all report a marked increase in investor interest in rental property opportunities.  Investors are recognizing the potential for homes in these markets to produce above-average financial returns." 

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We have been consulting with potential investors quite a bit lately. At certain price-points we have been finding many properties returning 10%+ cash-on-cash returns…that’s without accounting for tax benefits and the potential (albeit long-term) for appreciation.

If you’d like to discuss how to diversify some investments out of low-paying CD’s or volatile equities…call me on my direct line at 561 602 1258 or send an email.

Thanks for reading…Steve Jackson

Explanation of how our corrupt central banking system works

A Thanksgiving message to our readers

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FHA going the way of Lehman?

I heard this morning that the Federal Housing Authority (FHA), the government agency that insures residential real estate loans, has lost nearly all its cash reserves to cover losses. Since last year, these reserves have fallen from $4.7 billion to $2.6 billion.

Federal law requires it to maintain a reserve of 2% of the $1.2 trillion of loans it currently has outstanding. Reserves will fall from 0.5% to 0.24% by 2012. Independent analysts say that the agency is underestimating loan losses by at least $50 billion.

That means the FHA will need a bail out next year, and therein lies the problem. In its current gridlocked mode, it is highly unlikely that congress will approve the multibillion dollar refunding of a controversial federal agency. The “let the chips fall where they may” crowd seem to have the upper hand. The FHA currently insures one third of US mortgages, up 560% since 2006, largely through the demise of its private competitors. No insurance means no loans. For you and I that means lower home prices.

The FHA specializes in loans with less than 5% down. With home prices in a six year nosedive, more than half of these are now underwater. With $30 billion in liquid capital and $1.2 trillion in outstanding guarantees, it now has a 43:1 leverage ratio. Sound familiar? The shorthand for this is that the FHA is basically a government version of Lehman Brothers just waiting to happen.

This is a big concern here. locally, as a large percentage of the first-time buyers are FHA buyers. the under $200k market market is currently very healthy, but these under $200k homes are being purchased either all cash by investors or FHA by 1st time buyers…even some of the higher price buyers are using FHA loans as they are happy to have to have only a 3.5% down payment coupled with historically low rates…take away FHA? That would have a tremendously negative effect here in Palm Beach County.

If they keep predicting a market bottom…eventually they’ll all be right!

 

Just to say it at the outset of this post…why don’t any of the reporters, be it newspaper, online outlets or television, ever do any research and ask any tough questions when they continue to interview and quote the “experts” regarding housing?

Case in point: Here is a headline of an article/interview of Zillow chief economist, Stan Humphries, 18 months ago:

As Housing Market Nears Bottom, Pent-Up Supply Waits

And here is the prediction directly from the article: We forecast that the nation will hit a bottom in home values in the third quarter of this year, (which would have beenJuly-Sept 2010) but that there will be negligible appreciation in home values for three to five years after we’ve reached bottom…

Case-Shiller, an oft quoted research firm has this on-the-money prediction from an interview from November 30th 2009:

U.S. home prices are unlikely to fall much further in the next year even after a “discouraging” report on values in September, said Karl Case, the co-creator of the S&P/Case-Shiller Index.

“If I were betting even odds, I’d bet that we don’t have much further decline, but that we bounce along the bottom,” Case, a retired professor of economics at Wellesley College, said today in a Bloomberg Television interview…

And then here is a quote from an interview Shiller did less than 60 days ago: SHILLER: “House Prices Probably Won’t Hit Bottom For Years”

And the icing on the cake has been our own chief economist(s) of the National Association of Realtors:

04/2006: We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations.”, NAR

07/2006: “Right now we are on course for a soft-landing in housing.”, NAR

10/2006: “The worst is behind us, as far as a market correction. This is likely the trough for sales. When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.”, NAR.

12/2006: “At least the bottom appears to have already occurred. It looks like figures will be improving.”, NAR.

01/2007: “It appears we have established a bottom” David Lereah, NAR Chief Economist.

07/2007: “Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year.”, NAR

11/2007: “I don’t anticipate any further major sales declines,” Yun said. However, the NAR didn’t anticipate the sales declines of the past two years, and it’s been predicting a bottom nearly every month since early 2006. (from Marketwatch)

02/2008: Reuters reports that “The NAR’s chief economist, Lawrence Yun, said the market is ‘scratching the bottom,’ with sales holding at a deflated rate of around 5 million units for the past several months.”

02/2008, There is no chance of a large price decline in Rockford, Lawrence Yun told a crowd of more than 400 at Cliffbreakers, 700 W. Riverside Blvd. There is not a price bubble in Rockford., BusinessRockford.com (see July, 2009 news report below)

07/2008: There are signs of pent up demand . I think we are very near to the end of the housing downturn, Yun said.

12/2008: I would not have done anything different. But I was a public spokesman writing about housing having a good future. Ex-NAR Chief Economist Lareah.

04/2009: “We are close to the bottom, says Lawrence Yun, chief economist for the National Association of Realtors. Once home sales begin to rise that could boost home buying confidence and get others off the sidelines.”

04/2009: The “worst may be over” in parts of the West, said Lawrence Yun, NAR Chief Economist.

07/2009: Follow up from 2/08 quote above: BusinessRockford.com – The local housing market showed few signs of rebounding in the first half of 2009, with sales of single-family homes and condominiums falling nearly 20 percent and median sale prices falling in all but two of the Rock River Valley’s largest municipalities... In Rockford, the median prices of the 61104 ZIP code are down 52.3 percent from the first six months of 2008, dropping from $64,950 to just $31,000.

Now, more than ever, it is so important to work with an agent that will consult, diagnose and recommend solutions based upon a multitude of factors…with the MOST important one being; what is in YOUR best interest.

In the past several years, I have ‘converted’ many buyers into renters, but also, some renters into buyers, because that's what we decided, together was the best option for them. I have also dissuaded many sellers from becoming landlords by default and putting tenants in their homes while waiting for “prices to go up’ because they didn’t want to “give their house away”. On the flip side of that coin, I just had a conversation with a prospective client yesterday and we decided AGAINST selling, as the cash-flow the home would generate, along with the tax benefits of renting outweighed the prospect of home value declines…their time horizon was sufficiently long to mitigate the risk when compared to the monthly cash flow.

If you would like to discuss all of the factors that you should be considering, whether it be on the selling or buying side, please call me at 561-602-1258

 

Thanks for reading,

 

Steve

The 'Art' of pricing in a declining market...

Back in the good old days of real estate, pricing a property was fairly straight forward; Determine if your clients top priority was time or price, analyze what similar homes have been selling for, graph out appreciation rate and absorption rate, and pick you pricing point. But it is all different today. Pricing your property right is always important, but in a declining like we have here in Palm Beach County, a proper pricing strategy is going to be the single most important factor in whether you will be able to sell. During a pre-listing interview I tell prospective sellers that a good portion of the their contribution to getting their home sold will be done on the day we decide on an initial listing price. (The other 2 components that sellers have control of and responsibility for are condition and accessibility.)

Here are 3 reasons why pricing your property right from the start is more crucial now than it has ever been:
Time: Odds are that, if you really want or need to sell, that your home will eventually sell. And when it sells, it will probably be at the property’s market value at the time of the sale. Pricing correctly from the outset significantly increases the chance for a faster sale with less inconveniences and a greater financial return. A newly-listed home will generate an initial surge of activity. This activity peaks in the third week after listing. By overpricing you deter interest in your home when activity is usually at its peak.

More importantly, overpricing in a 'declining' market will put a seller in the unenviable position of 'chasing the market down' when it comes to price adjustments.

Competition: Buyers educate themselves by viewing many homes online BEFORE they even talk to an agent or step foot into a home, so they will know, up front, what is a fair price in the current market. In actuality, the FIRST showing with a buyer happens online...if that goes well, then you have a good chance that they will schedule an appointment with their agent to actually walk through your home. If your home is not competitive in price with those they have seen in their research, it will not even make the showing list and will probably not sell. Buyers typically look at home within a $10,000-$15,000 price range. If your home is not priced within the correct range, it very likely will not be exposed to its potential or to the maximum amount of targeted buyers.

Reputation: Overpricing, especially in a market like this- where competition for buyers is at a historical peak, causes most homes to remain on the market too long. Buyers, aware of a long exposure period, are often hesitant to make an offer because they fear "something is wrong" with the house. After too many months on the market, the only buyers who will see your property are those that are new to the market, and your property will be labeled as “overpriced.” Buyers and their agents always look for “days on market” when searching the Multiple Listing Service (MLS) listings. Day-old bread, leftovers, and overstocks are always discounted. The longer your home is on the market, the lower the price you will eventually be offered.

The Bottom Line: No matter how much you may appreciate your home and its particular special features, the buyers ultimately set the price by what they are willing to pay for the property. Overpricing in today’s market, either by you or by an agent willing to suggest a higher price in order to obtain the listing (what we ethical agents refer to is when an agent is said to be "buying a listing") , begins a chain of events that often works against you. This market is bad enough, and you most certainly do not need anything else hampering your efforts to sell. In a down market, if you are willing to price at or just below the level where homes like yours have recently sold, you will be able to sell your house. The flip side of this reality is that if you are unable or unwilling to price your home at or below current market value, you may just be better off not putting it on the market at all.

Seriously discuss the pricing issue with your agent...objectively review recent sales as well as current on-the-market properties. Try to view all of the information from a buyers perspective, you'll end up getting more money in the end...

One of the best blogs I have the pleasure of reading is: Of Two Minds by the blogger Charles Hugh Smith. His post today falls right in line, and more eloquently expounds on, my earlier post regarding the new ‘underwater' re-fi plan announced Tuesday. Read it in its entirety, below.

 Obama's Re-Fi Plan: The Perfection of Debt-Serfdom

How better to corral restive underwater debt-serfs than to herd them into accepting a new, "better" set of lifelong servitude shackles?
President Obama is taking credit for a new government plan to "save homeowners." That is of course pure propaganda to mask the plan's true goal: the perfection of debt-serfdom. The basic thrust of the plan is straightforward: encourage "underwater" homeowners whose mortgages exceed the value of their homes to re-finance at lower rates.
The stated incentive (i.e. the PR pitch) is to lower homeowners' monthly payments via lower interest rates.
This is the Federal Reserve's entire game plan in a nutshell: don't write off any debt, as that would reveal the banking sector's insolvency, but play extend-and-pretend with crushing debtloads by lowering the cost of servicing the debt.
The key purpose of this "plan" is to leave the principle owed to banks on their books at full value while ensnaring the hapless debt-serf (the "homeowner") into permanent servitude to the banks.
If the net worth of your home is a negative number, then what exactly do you own? You have the right to occupy the shelter, and you own the debt. So how is this any different from a lease? There is no equity, and no equity being built: there is a monthly payment in return for the right to occupy the dwelling.
The difference is the leaseholder can move at the end of the lease with no debt obligations. The underwater "homeowner" debt-serf is trapped by his/her mortgage into what amounts to lifetime servitude to the holders of the mortgage.
All the plan does is perfect this debt-serfdom. In a truly capitalist, transparent, free-market economy in which assets were always marked to market, then mortgages that are grossly misaligned with the market value of the house would be written down and the mortgage holders forced to book the loss.
Over-leveraged lenders, i.e. the "too big to fail" banks which dominate the U.S. mortgage market, would see their capital reduced to zero by the writedowns. They would be declared insolvent and liquidated. Their shareholders and bondholders would book losses.
But these losses are unacceptable in our crony-capitalist/cartel-capitalist Status Quo, so the "solution" to systemic insolvency is to manipulate the debt-serfs to keep paying, and thus keep the unicorn-and-pixies valuations of real estate on the banks' books at full value. (also…it moves the responsibility for any of these refinanced loans that default on to the backs of Fannie and Freddie …the US taxpayer)italics mine
This is the same game that Japan's lenders and Central State have played for two decades, and it remains the heart of their failed policies and decaying economy. In Japan, lenders papered over their bad debts with all sorts of back-door machinations: they extended new loans to debtors so the debtors could continue to make interest payments, they created zombie accounts filled with delinquent loans that were still kept on the books at full value, they wrote new loans at near-zero rates so interest payments were lowered, and so on--the same ploys and games being played by the Federal Reserve, the Federal government's housing lenders (Fannie and Freddie) and the banks.
The propaganda machine is running at full throttle, of course, with the usual parade of toadies and lackeys trotted out to say what a great and wonderful thing this plan is for poor homeowners. But industry analyst Ken Rosen inadvertently revealed the real motivation for the plan: to keep underwater homeowners from "walking away" in so-called "strategic defaults." underwater homeowners thrown lifeline by Obama (Mercury News).
Why is strategic default anathema to the Status Quo? Because the abandoned house will eventually have to be sold on the market, and at that point its true value revealed. The mortgage holder will then be forced to book a stupendous loss, and the inflated-paper "asset" on the books vanishes.
The Big Lie here is implicit: "your house will someday come back in value, so hang in there, debt-serf." No, it won't. The bubble has popped, and the mania has left town. Housing will retrace to pre-bubble valuations circa 1996-98.
As usual, the Plan is all about managing perceptions and political theater: we're here to help the little guy, the struggling homeowner; we are in charge, we have a plan, we're competent, this will fix the housing market.
Too bad they're all lies. Perception management is not the same as actually solving the underlying problem, yet perception management is the Status Quo's response to every problem.
The perfection of debt-serfdom is now complete. First, make student loans "necessary" for the "good life" and then make that debt permanent and unbreakable. In other words, institutionalize debt-serfdom and lifelong servitude to the financial sector.
The re-fi "plan" herds potentially rebellious mortgage debt-serfs into new corrals, with the incentive of slightly lower interest rates. The lifetime of servitude to financial Overlords remains firmly in place. That's the "plan."

Earning 1/2% on your money? Is that good enough?

Would it help if you got a 10% annual return, or more, on the money that is sitting in a CD or IRA? Well, in a certain segment of today's real estate market, with the proper due diligence, you should easily be able to do that.

As a result of the housing bust, we are looking at an entire generation of renters going forward.

Did You know?

The proportion of U.S. households that own homes is at its lowest point since 1998. When the housing bubble burst four years ago, 31.6% of households were renters. Now, its at 33.6% and rising. Since the housing downturn nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard's Joint Center for Housing Studies and The Associated Press.

All told, nearly 38 million households are RENTERS. And  you can get a nice return, even before accounting for tax benefits and possible future appreciation, from providing housing for just a few of those renters.

College costs are going through the roof...but, how would you like to have someone else fund your childs college education? One strategy that I recommend to my clients is to buy one rental property for each child as close to when they are born as possible (or before). If you buy the right property you can have it paid off by the tenants in 18 years...there's your kids college fund...and more!

If you are not happy with your IRA returns or the CD rates...maybe it's time to look at a well-thought-out property purchase...we can even show you how to buy rental properties inside of your IRA.

Call my direct line at 561-602-1258

Thanks for reading,

Steve Jackson

The Administration is playing the HARP again

Today, in Las Vegas (appropriate place to announce this new gamble of taxpayer money), the President announced a reworked HARP (home affordable refinance program) that will allow for quicker/easier refinancing of underwater mortgages...no longer will HARP be encumbered by the measly 125% of market value...all restrictions are off!

Here are some of the details as reported earlier today:

• The changes announced Monday are intended to benefit homeowners who have continued to make mortgage payments, even as home values have sunk, but lack at least 20% equity to refinance and take advantage of today's low interest rates. The revisions could also help some owners who are underwater, owing more than their homes are worth.
• To be eligible, homeowners must have a mortgage sold to Fannie Mae or Freddie Mac on or before May 31, 2009. They also must be current in their payments and without any late payments in the past six months.
• Freddie and Fannie have also agreed to eliminate some fees on loans that run 20 years or less and lower them on longer-term mortgages. The exact amount won't be known for several weeks.
• In some cases, borrowers will also no longer need a new appraisal on the home, which should reduce refinance costs.
  DeMarco says the changes will not only help borrowers but will also lower risk to Freddie and Fannie because fewer borrowers will eventually default. (they actually think that refinancing a 50% underwater loan to save a few points off of an interest rate will have any measurable effect on default rates? they need to talk to the average person on that one). Freddie and Fannie own or guarantee almost half of all U.S. home loans and were taken over by the government in 2008 to prevent their collapse.

So...lets say you bought a $300,000 home here back in 2005. Financed 100% of it,as was all the rage back then...your payments of P and I are about $1800. Fast forward to today...that $300,000 home is now worth about $150k...you are upside-down $150,000. BUT, they'll refinance you at about 4.11% today...a payment of about $1450. Now, a $350.month savings is nothing to sneeze at...but is it enough to keep you writing those checks every month while still $150K upside down?

And here is the kicker: DeMarco says lender resistance is less likely now than in the past because there's less risk that lenders will be asked by Freddie and Fannie to take back loans that go sour if the mortgage-finance giants find that lenders made mistakes when they made the loans. So...what this means is that all of those millions of underwater loans with faulty paperwork (transfers/falsified affidavits and signatures etc) under risk for a buy-back call from Fannie and Freddie can now be wiped clean and fresh with a new refinance loan package that Fannie and Freddie will now give their blessings to and fully assume responsibility for (because it was re-financed and re-written to their new guidelines). Sooo...all those 'future defaulting loans' will now be fully on the backs of the taxpayers! Another back-door bank bailout.

As I have posted before...there are much better ideas for fixing this housing problem...I posted my own about 18 months ago...

But...it'll buy a lot of votes before anything hits the fan!

Is a SLARP next (student loan affordable refinance program)?

And that's just MY jaded view of it...

Thanks for reading,

Steve

Have a loan with BofA? NOW IS THE TIME TO DO A SHORT SALE!

If you have a loan with BofA and owe more on your loan than your home is worth…DO NOT WAIT…CALL ME TODAY

(you’ll see why below)

Below is a partial screen-shot of an email that I recently received from Bank of America.

 

They are offering a MINIMUM of $5,000 paid to you, the short sale seller, at closing…and possibly as much as $20,000!

BUT…we only have about 6 weeks to get started.

Really, no kidding…if you have a Bank of America (Countrywide too) loan and are upside down…this is a great opportunity.

My direct # is 561-602-1258…if you reach my voicemail, leave me a message…or you can also send me a text to that number.

 

Thanks for reading…Steve Jackson