Wake Up America!

AMERICA - IT IS TIME TO GO TO WORK

VOTE IN NOVEMBER

GDP REPORT - Breadking News

2nd quarter 2009         - 0.7%

3rd quarter 2009            2.2%

4th quarter 2009             5.6%


1st quarter 2010              2.7%

2nd quarter 2010             1.7%

3rd quarter 2010              2.6%

4th quarter 2010               3.1%


1st quarter 2011               0.4%

2nd quarter 2011              1.3%

3rd quarter 2011               1.8%

4rd quarter 2011               3.0%


1st Quarter 2012       Advance Estimate     2.2%

                                 Second Estimate        1.9%

                                 Third Estimate           1.9%


2nd quarter 2012 Advance Estimate July 27th

Are You Better Off Today than you Were in 2010?

As housing goes …. So goes the economy!

Foreclosures

The following graphs clearly show that more foreclosures are on the way. Banks are manipulating the release of these foreclosures and this action may give a false sense of market elation. Remember, foreclosures not only deeply impact a family, the sold prices are lower which has a ripple effect throughout the market.

On Friday, I will show you a graph on contract failures which is a direct result of the Dodd-Frank legislation. This legislation seems to have a clear impact on the foreclosure process.

Dodd-Frank was signed into law in July 2010. The graph showing the completed foreclosures had a definite trend until the 3rd Qt of 2010. Then the amazing drop off and leveling off of foreclosures being concluded as foreclosures remain high.

As you may know, a foreclosure affects the credit rating by about 100 to 150 points of the homeowner. A foreclosure remains on your credit report for at least seven years.

You can still buy a house during that period but higher interest rates and higher down payments most likely will be imposed.

Most families will pursue a rental home. The foreclosed home is purchased by an investor which in return rents out the home. Why not just keep the family in their home and have them pay something toward the mortgage until their situation changes for the better. The difference can be tacked on to the end of the mortgage or forgiven by the lender. The loss would be less to the bank, the market would not be impacted and most of all, families are not uprooted and cast aside.

The concept is simple but the implementation is probably impossible due to government regulations!

Wake Up America!!!                        I say it over and over again …………..

As Housing goes so goes the Economy.

2011 & 2012 Shadow Inventory

March 2011

March 2012











The foreclosure process has slowed down but the steps in building the shadow inventory has remained the same. The first step in the foreclosure process is someone has to be 90 days delinquent on paying their mortgage. The foreclosure process is initiated and then the bank forecloses on the property.


The house becomes a REO on the market or the house is owned by the bank and not yet ready for sale --- the shadow inventory.

The map illustrates the shadow inventory by state. It seems that the shadow inventory has increased over the past year. Thus, the supply of homes on the market is manipulated by withholding these foreclosures.

Once the foreclosure has been listed for sale, I am finding that home buyers are having a difficult time winning bids. Why ---- investors with cash! The banks are rejecting home buyer offers and waiting for investors that offer cash. The bank would rather take the money and run and not offer a mortgage. The bank also removes a liability from their books.

CNN Money Graphs

Until someone listens:      As Housing goes ...so goes the Economy!!

Short Sales!

Short Sales are on the increase! A short sale is when a homeowner wants to sell their house at a price below what they owe on their mortgage ---- "underwater". They have to sell their house below what they owe because that is what the market will bear at that point in time. At that point in time, the homeowner doesn't know if the house will appraise for the list price nor do they know if their bank will approve the sale.

In many cases, the homeowners are still up-to-date on their mortgage but must sell for numerous reasons. What I have seen thus far is that short sales are not an easy proposition and difficult to negotiate since the lender, as a third party, is sitting up in the bleachers just watching and waiting.

Why the increase since 2008? Our economy! As the unemployment increased the homeowner decision was delayed. In some cases, the homeowner found a job and life continued on. But in most cases, the homeowner didn't find a job nor work and overtime the mortgage payment became an issue. It will be the same problem with making rent payments! There is a delay from the time someone is out of work to the time a short sale is contemplated. Thus the increase in short sales over the past 3-4 years.

As housing goes.....................so goes the Economy!

Is Housing Being Tanked By Design?

This is why prices have tanked over the past several years. The foreclosure sale has been used in appraisals and thus brings down the prices in the neighborhood. When prices decrease, homeowners begin to reach the underwater stage. If the shadow inventory would be released, the housing market would relapse into a dark hole ------just when the market has stabilized based on the Case-Shiller index. I know in Charlotte, the market has improved. Is the lack of attention on housing by design because as housing goes so goes the economy. So housing is being tanked by design?   

Case-Shiller Price Index From 2007-2012

Since the 2009 graph was published the price index has declined for all of the cities included in the Case-Shiller Index. 

The positive - through 2011 to 2012, there is a stabilization of pricing and in some cases, an improvement. This is good news for sellers and not so good news for buyers on the fence. Buyer fears of job loss, the economy and commitment will cause them to miss out on the best time to buy a home in our life time! Unless of course YOU decide to counsel your contacts!

The negative - for several cities i.e. Las Vegas --- how long do you think it will take for the home prices to regain their value? 

2010 Population Growth and Population Statistics

                                                           Las Vegas, NV                 Nevada                             United States

Total Population                                   651,564                        2,659,705                           308,455,134

Square Miles                                      115.36                             109,825.99                               N / A

Population Density                              5,648.00                            24.20                                     87.20

Population Change Since 1990           147.19%                       121.26%                                 24.02%

Population Change Since 2000              36.19%                            33.10%                                  9.61%

Forecasted Pop Change by 2014          6.38%                               6.11%                                   4.52%

The housing demand in the '90's was astounding. Demand caused home prices to skyrocket. Thus the bubble and the price declines. Las Vegas housing prices are in serious trouble for "decades".  

And now? This graph does not include the last 2.5 years of price adjustment. I will strive to find this information to show the pricing trends. There are several cities which the pricing trends improved in 2009. It will be interesting to see the price trends for Dallas and several other cities.

Family Formations --- Demand

Without a question, the great recession has changed our society. Not even discussing the change in our standard of living but the fact is that there is a "flat-line" projection for household growth. New households have mirrored the population growth trend line but the significant departure has been over the past 4-yrs. New family formations are typically postponed during recessions but this "great recession" has effected the core of our society. However, even with a bad economy and a lack luster economic growth forecast, the housing market is changing. The above graphs represent demand and it clearly shows a pent-up demand. The result of this....................... not good for anyone.

Lack Of Housing Inventory

The last graph in this week's series on housing inventory shows the trends in residential remodeling. Since 2004, remodeling has been relatively consistent with the peaks and valleys until early 2011. A significant change in the trend for remodeling in the west and mid-west. I have always concluded that housing trends started in the west and traveled east --- let's see in the near future if the northeast and south will follow the significant upward remodeling trend.

Lowes Home Improvement

 

Home Depot



I am not a stock broker and will not enter the stock market but the two largest home improvement retail companies reflect movement in the remodeling industry. We experienced this same trend in the 1980's recession but mortgage interest rates were 18%. Today, a borrower with a credit score of 640 can get a 3.25% rate!!

Just some thoughts:

1. homeowners are getting their homes ready to sell

2. homeowners have decided to stay put and make cosmetic improvements for enjoyment

3. homeowners are having to make accommodations for other family members moving back in

4. homeowners want to "update" their homes

4. foreclosed homes require remodeling and repair

In my opinion, a significant spike in remodeling is not good for the housing industry!!! This is representative of a "for sale" inventory problem - new and existing homes. We are starting to see multiple offers for homes. This will pressure home prices higher.

Housing Inventory

The total inventory of homes for sale is down compared to any other point in time. What do you think would happen if "fear" was removed from the home buying sector? The lack of a national strategy and addressing the underlining housing issues through strengthening of the economy is causing a different housing problem. Government always overacts but in this case, the lack of action may further damage the housing industry for years to come. As Housing Goes........................So Goes the Economy.

Pictures are Worth a Thousand Words

If the following graph is accurate, why would you not advise someone to buy a home rather rent? Because they don't have any money but good credit or even marginal credit? Do you know that there are at least four home ownership programs that address these hurdles. Why not investigate the opportunities. At the very least, you will find out what you need to do if you want to buy instead of rent. Pass this information along to your contacts. Spread the word, the market is changing.

LA Times: "Shortage of homes for sale creates fierce competition"

by CalculatedRisk on 6/10/2012 01:15:00 PM


From Alejandro Lazo at the LA Times : Shortage of homes for sale creates fierce competition


“When the expectation is that prices will fall further, marginal sellers will try to sell their homes immediately. And marginal buyers will decide to wait for a lower price. This leads to more inventory on the market.

But when the expectation is that prices are stabilizing (the current situation), sellers will wait until it is convenient to sell. And buyers will start feeling a little more confident.


This leads to less inventory on the market.”



I thought it would be good to provide a third party report on the housing supply problem. The above makes sense. The problem is that prices will start to move up. The following chart shows the latest release of the S&P/Case-Shiller (CSI) home price indices. As you will note, most of the cities are showing a positive change from March/February 2012. I would expect this trend to continue in a positive direction due to the lack of supply!

Supply's Impact on Price

The overall Charlotte market is in the sellers market range with 3.7 months supply of homes listed for sale. Remember, listings or homes coming into the inventory are also less. You would think that this would be a great time for the banks to release their shadow inventory. More supply would further balance the market. For the Area 13 sub-market, these homes are around Lake Norman and typically priced high.

Check your local market and please post your findings. It might be valuable information for you or for someone you know that wants to buy of sell.  

Inventory & Average Closed Days - Charlotte Market

The charts illustrate the most recent data for Charlotte and two other key micro-market areas. Without a question, the lack of supply is affecting the seller-buyer relationship. In Charlotte, the market has clearly shifted to a “sellers market”. Homes are not staying on the market for very long. Buyers have less to choose from and they now have to make concessions if they want to move forward with the buying of their home. It will take some time for the buyers to realize this shift.

Every metro area has micro-markets with varying conditions. The LN area is north of Charlotte and is following the shift toward a seller’s market. Generally there is a balanced market before tipping toward a seller or buyer. This shift has happened quickly and without fanfare.

The reason why Area 13 remains high is that this MLS area boarders Lake Norman and the price point is well above $750,000 – still a difficult sale but even this area has shifted significantly.

The result of this shift will be higher prices and appreciation, a solid start to a housing recovery in Charlotte.

Existing Homes for Sale -- Inventory

WASHINGTON (April 19, 2012) – Existing-home sales were down in March but continue to outpace year-ago levels, while inventory tightened and home prices are showing further signs of stabilizing, according to the National Association of Realtors®.


Total housing inventory at the end of March declined 1.3 percent to 2.37 million existing homes available for sale, which represents a 6.3-month supply at the current sales pace, the same as in February.


THE KEY STATEMENT: Listed inventory is 21.8 percent below a year ago and well below the record of 4.04 million in July 2007. Listing a home for sale adds to the available inventory of existing homes for sale.

In other words, less homes are being listed today and with the months supply of existing homes for sale already low, we are seeing a significant change in the market. The lack of inventory will stabilize home prices.

What I can't figure out is why the lack of listings?
But, I will guess!
1. The inventory of foreclosures is high but not being released by banks
2. Homeowners are not making a change in their housing needs - fear of the future
3. Job creation is down and less people are relocating for new jobs
4. Homeowners are waiting for prices to increase
4. Pent-up demand is starting to take effect and "good" homes are selling and not being replaced
5. New home construction has increased but only marginally.

What kind of economy is it when no one wants to sell a home and no one wants to buy a home?????

Case Shiller is the leading expert in tracking home prices in the major US metro areas. What is interesting is the 40% swing from the "bubble" peak to the "bottom" in 2009. Where was the media in covering the rebound of housing prices? Nationally, the price indices had a sharp rebound in late 2009 - late 2010. If you compare this trend to the GDP, it mirrors economic improvement and consumer confidence. This didn't last long!!

If you look carefully, you see the trend lines starting to turn as the economy again showed some strength in the 4th quarter of 2011. We are now at a significant tipping point.

However, remember this is a composite of 20 and 10 cities, each market has it's own unique characteristics.  In Charlotte, the lack of supply is starting to influence prices. The roller coaster ride continues.

8.2% Unemployment

So much for the experts. With the jobs numbers on Friday, the true unemployment is much higher than the current 8.2% which is well above the projections. OK, the experts were wrong ---- now what?

Are you better off than LAST YEAR??

This is a "lame-duck" year for all politicians. They are trying to keep their jobs rather than legislate solutions. However, regulations impacting us everyday continue to be implemented without checks and balances.

Are we heading into another recession?
Pray for the best and prepare for the worst!

This week is about real estate but I couldn't pass up a great graph.

GDP REPORT

2nd quarter 2009      - 0.7%
3rd quarter 2009         2.2%
4th quarter 2009          5.6%

1st quarter 2010          2.7%
2nd quarter 2010         1.7%
3rd quarter 2010          2.6%
4th quarter 2010          3.1%

1st quarter 2011            0.4%
2nd quarter 2011          1.3%
3rd quarter 2011           1.8%
4rd quarter 2011           3.0%

1st Quarter 2012                     Advance Estimate                       2.2%

                                               Second Estimate                          1.9%

                                               Third Estimate

Are You Better Off Today than you Were in 2010?

As housing goes …. So goes the economy!