S&P Indices to Host Teleconference on U.S. Residential Home Prices Speakers to Include Profs Robert Shiller and Karl Case and Dr. David Blitzer

Who:
Dr. David Blitzer, Managing Director and Chairman of the Index Committee, S&P Indices
Prof. Robert Shiller, Professor of Economics, Yale University Prof. Karl Case, Professor of Economics Emeritus at Wellesley College and Founding Partner of Fiserv Case Shiller Weiss, Inc.

What:
A discussion on the current state of the U.S. residential housing market, as well as the potential for a stronger year for housing in 2012. No RSVP Required.

The December 2011 data for the S&P/Case-Shiller Home Price Indices is set to be released publicly at 9am EST on Tuesday, February 28^th. Fourth quarter results for the S&P/Case-Shiller National Composite Index, which represents home prices from all 9 U.S. Census Divisions, will also be released.

When/Where:
Tuesday, February 28^th at 10:00 a.m. EST; Live Teleconference.  Details can be found below.

Live-Dial-In-Numbers:
US/Canada Toll Free: 1-866-803-2143; US/Canada/All Others Toll: 1-210-795-1098
UK Toll Free: 0800-279-3953; UK Toll: 44-20-7108-6248

Conference ID#: 6172498; Passcode: SPCIQ

To View the Slide Presentation

URL: http://www.mymeetings.com/nc/join
Conference Name: PH6172498; Passcode: SPCIQ

Participants can also join the event directly by clicking here:https://www.mymeetings.com/nc/join.php?i=PH6172498&p=SPCIQ&t=c

Live Streaming (Audio Only)
URL: http://event.on24.com/r.htm?e=405855&s=1&k=CA9E708F692822CD8EDBCDA66BB04604

Replay Information:
U.S./Canada toll free #: 1-866-417-5769; U.S./Canada/All others toll #: 1-203-369-0737
Replays will expire on Tuesday, March 6, 2012

Replay Web Streaming: (Slides & Audio)
URL: http://www.mymeetings.com/nc/join
Conference ID#: PH6172498; Passcode: SPCIQ
Replay will expire on Thursday, March 29, 2012

To access the Net replay of this call, all parties may join at:

https://www.mymeetings.com/nc/join.php?i=PH6172498&p=SPCIQ&t=r

Consumer Sentiment Moves Off Of Highs:

Americans turned less optimistic about the economy in early February on worries about falling income even as their outlook on the jobs market rose to a record high, a survey released on Friday showed.

The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell back in February with a preliminary score of 72.5 that is 2.5 pts lower than January’s score of 75.

Current conditions, and more precisely a negative tone towards current finances, was the heaviest drag. Even though optimism towards the job market kept up, the CSI was unable to hang on to sentiment expressed last month. Market expectations averaged to 74.5.

The optimism in their job outlook is encouraging though and is certainly reflective of the steady string of better than expected Initial Weekly Jobless Claims and the recent decline in the national Unemployment Rate.  As these trends in lower Unemployment continue, look for the Consumer Sentiment to regain some ground.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -26 basis points from last Friday to the prior Friday which moved mortgage rates higher on a week-over-week basis.  That also marked a -68 basis point drop in MBS pricing from our all time high on 02/02/12.

Mortgage backed securities (and therefore mortgage rates) moved sideways during the week with only minor movements in reaction to the 10 year and 30 year U.S. Treasury auctions.  But MBS did sell off on Friday on news that Greece would come through with another austerity package that would qualify them for additional bailout funds.

The Greek story has been an important one for mortgage rates.  Mortgage rates are artificially too low due to increased demand for U.S. bonds as a pure “safety play” against a European financial collapse.  A default by Greece would start a “domino effect” of other countries defaults too.  So, any positive news that a default is postponed will cause our rates to increase.

Today? 

Fed Releases Orders Related to Banks in Mortgage Settlement

The Federal Reserve Board released today the orders related to the previously announced monetary sanctions against five banking organizations for unsafe and unsound processes and practices in residential mortgage loan servicing and processing. The Board reached an agreement in principle with these organizations for monetary sanctions totaling $766.5 million on February 9, 2012.

ABA: Statement on Proposed Bank Tax

“The banking industry strongly opposes the $61 billion bank tax included in President Obama’s budget proposal. Despite claims to the contrary, the facts on TARP are very clear: Taxpayers have profited $13 billion from their investments in banks through the program and Treasury predicts they will see a lifetime positive return of more than $20 billion. Given that non-bank programs are responsible for all of TARP’s losses, this would simply be an arbitrary tax with no regard to where losses actually occurred.

Related articles

• Foreclosure Filings Hit 4 Year Low: (michael-mcdevitt.com)
• Consumer Sentiment Increases Again: (michael-mcdevitt.com)
• Pending Home Sales Hit 19 Month High: (michael-mcdevitt.com)

Refinance Applications Surge 26.4% as Rates Set New Lows

Mortgage applications jumped 23.1 percent on a seasonally adjusted basis during the week ended January 13, 2012.  The increase in the Market Composite Index, a measure of loan application volume maintained by the Mortgage Bankers Association (MBA) reflected improvements in both the purchase and refinance business following the traditionally slow Christmas and New Year holiday period.  On an unadjusted basis the index increased 38.1 percent.

The Refinance Index increased 26.4 percent from the week ended January 6 to its highest point since August 8, 2011.  The seasonally adjusted Purchase Index rose 10.3 percent, returning to pre-holiday levels.  The unadjusted Purchase Index was up 28.4 percent from the previous week and was 2.2 percent higher than during the same week in 2011.

The four-week moving average for each index also increased; the Composite Index increased by 5.99 percent, the seasonally adjusted Purchase Index by 1.96 percent and the Refinance Index by 7.0 percent.

Refinancing took an 82.2 percent share of all application activity, up from 80.8 percent the previous week and the highest share since October 22, 2010.  Applications for adjustable rate mortgages (ARMs) constituted represented a 5.6 percent share of applications, up two basis points from the previous week.

“Interest rates dropped last week due to continuing anxieties regarding the fragile economic situation in Europe,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “With mortgage rates reaching new lows, refinance volume jumped and MBA’s refinance index reached its highest level in the last six months.  Purchase activity also increased as buyers returned to the market after the holiday season.”

With the exception of jumbo loans (with balances over $417,500) interest rates continued their downward trend. Three of the rates, in fact, hit the lowest level in the history of the MBA applications survey.  The jumbo rate – for 30-year fixed-rate (FRM) loans – increased to 4.40 percent from 4.34 percent with points decreasing to 0.37 from 0.47 point.  The effective rate also increased.

Thirty-year FRM with conforming (under $417,500) balances hit a new low, decreasing to 4.06 percent with 0.48 point from 4.11 percent with 0.41 point. The effective rate also decreased.

Rates for FHA guaranteed 30-year FRM were at 3.91 percent with 0.59 point, the lowest FHA rate in the history of MBA’s application survey, down from 3.96 percent with 0.72 point.  The effective rate also decreased from the previous week.

The third all-time low is the 3.33 percent rate with 0.39 point for the 15-year FRM.  This was a drop from 3.40 percent with 0.37 point rate the previous week.  The effective rate also decreased.

The average contract interest rate for 5/1 ARMs was unchanged at the record low 2.90 percent established the previous week.  Points decreased to 0.45 from 0.49.   The effective rate also decreased from last week.

All rates quoted are for 80 percent loan-to-value originations and points include the application fee.

 MBA’s covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.

Jobs Data Points The Way To Stronger Housing:

Real Estate used to be about location, location, location. Now it is most certainly about jobs, jobs, jobs.

We received some welcome news on the jobs front last week:

The private sector added a seasonally adjusted 325,000 jobs during the month, up from 204,000 in November, payroll-processing firm ADP said:

It marked the biggest monthly gain since December 2010, and was stronger than expected. Economists surveyed by Briefing.com were forecasting a gain of 180,000 jobs for the month.  And the great news is that half of the gains were made by small business (companies with fewer than 50 employees).

Headline National Unemployment Rate Drops to 8.5%:

Growth in manufacturing jobs helped offset a loss in government positions, while wages edged higher and the length of the work week also lengthened a bit. Job gains came from a variety of quarters: Transportation and warehousing surged by 50,000, the couriers and message industry rose 42,000, and retail added 28,000. Manufacturing grew by 23,000 and the hospitality industry continued its brisk pace, adding 24,000 jobs in December and 230,000 over the past year at food and drinking establishments.

What Happened to Rates Last Week:

Growth in manufacturing jobs helped offset a loss in government positions, while wages edged higher and the length of the work week also lengthened a bit. Job gains came from a variety of quarters: Transportation and warehousing surged by 50,000, the couriers and message industry rose 42,000, and retail added 28,000. Manufacturing grew by 23,000 and the hospitality industry continued its brisk pace, adding 24,000 jobs in December and 230,000 over the past year at food and drinking establishments.

How To Calculate ROI For Real Estate Investments:

ROI Analysis Graph

Return on investment, we’ve all heard it… or as most of us, known as ROI, is an accounting term that indicates the percentage of invested money returned to an investor after the deduction of associated costs. For the non-accountant, this may sound confusing, but the formula may be simply stated as follows:

{Investment Gain – Investment Cost} / Cost of Investment = ROI

But while the above equation seems easy enough to calculate, a number of variables including repair and maintenance expenses and methods of figuring leverage – the amount of money with interest borrowed to make the initial investment – come into play, which can affect ROI numbers.

The article below explains the two methods by which ROI calculations are made:

The Cost Method and the Out of Pocket Method

The Cost Method

The cost method calculates ROI by dividing the equity by all costs.

As an example, assume a real estate property was bought for $100,000. After repairs and rehab of the property, which costs investors an additional $50,000, the property is then valued at $200,000, making the investors’ equity position in the property 200,000 – (100,000 + 50,000) = $50,000.

The cost method requires the dividing of the equity position by all the costs related to the purchase, repairs and rehab of the property.

ROI, in this instance, is .33 % – $50,000 divided by $150,000.

The Out of Pocket Method

The out of pocket method is preferred by real estate investors because of higher ROI results.

Using the numbers from the example above, assume the same property was purchased for the same price, but this time the purchase was financed with a loan and a down payment of $20,000. Out of pocket expense is therefore only $20,000, plus $50,000 for repairs and rehab, for a total out of pocket expense of $70,000. With the value of the property at $200,000, the equity position is $130,000.

The ROI, in this case, is .65 % – $130,000 divided by $200,000. The result is just one percent less than double the first example. The difference, of course, is attributable to the loan – leverage as a means of increasing ROI.

Equity Is Not Cash 

Before the ROI, cited above, may be realized in actual cash profits, the properties must be sold. Often, a property will not sell at its market value. Frequently, a real estate deal will be consummated at below the initial asking price, reducing the final ROI calculation for that property. Keep in mind, also, that there are costs associated with selling a real estate property – again, there may be expenses needed for repairs, painting or landscaping. The costs of advertising the property should also be added up, along with appraisal costs and the commission to the real estate broker.

Both advertising and commission expenses may be negotiated with the service provider. Real estate developers, with more than one property to advertise and sell, are in a better position to negotiate favorable rates with media outlets and brokers. ROI on multiple sales, however, with varying costs for advertising, commission, financing and construction present complex accounting issues that are best handled by an accountant.

Property Cash Flow

An investor may have $30,000 in equity in a commercial rental property for which he paid $10,000 for an ROI of 300%. The property also yields $500 a month in rentals, for a total of $6,000 annually. That’s a 60% ROI on the property’s cash flow – $6000 divided by the $10,000 cost of investment.

Complications in Calculating ROI

Complications in calculating ROI can occur when a real estate property is refinanced, or a second mortgage is taken out. Interest on a second, or refinanced, loan may increase, and loan fees may be charged, both of which can reduce the ROI, when the new numbers are used in the ROI equation. There may also be an increase in maintenance costs and property taxes, and an increase in utility rates if the owner of a residential rental or commercial property pays these expenses.

Complex calculations may also be required for property bought with an adjustable rate mortgage (ARM) with a variable escalating rate charged annually through the duration of the loan.

The Bottom Line

Calculating ROI on real estate can be simple or complex, depending on all the variables mentioned above. In a robust economy, real estate investments, both residential and commercial, have proven to be very profitable. Even in a recessionary economy, when prices fall and cash is scarce, many bargains in real estate are available for investors with the money to invest. When the economy recovers, as it invariably does, many investors will reap a handsome profit.

For income tax or capital gains tax purposes, however, real estate property owners are urged to get professional tax advice from a reliable source before filing. Property tax is another factor in the equation when calculating return – if a property owner believes a property tax assessment is too high, in most cases, the assessment may be challenged and often a judgment is made in favor of the challenger.

Consumer Sentiment Increases Again:

Consumer Sentiment Increased for the Third Straight Month

Confidence among U.S. consumers rose more than projected in November, offering additional support to the biggest part of the economy.  It was the third straight month of increases in consumer sentiment.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, from 60.9 in October. The median estimate of economists surveyed by Bloomberg News called for a reading of 61.5.

U.S. consumers are entering the holiday shopping season with a more optimistic outlook than they had a month ago, largely because of a recent decline in gas prices, according to the widely watched index.

Consumer Sentiment is very key to the housing industry.  As consumers feel more confident in their expectations about the economy, they are more likely to finally make the move to purchase their next home.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -54 basis points from last Friday to the prior Friday which moved mortgage rates higher. As we have reported for the past several weeks, bonds have been trading in reaction to what has been going on in Europe and have largely ignored the U.S economic data. Last week certainly followed that trend.  Bonds (which include mortgage backed securities) sold off (causing rates to rise) as Greece appointed a new Prime Minister and on news reports that the Italian Prime Minister would step down.  This helped to remove some uncertainty from the market place and investors removed some funds from the safe-haven of bonds. On the domestic front, we had a luke-warm 30 year U.S. Treasury auction and Initial Jobless Claims and Consumer Sentiment were much better than expected. These also pressured MBS lower.

What to Watch Out For This Week:


The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date	Economic Release
15-Nov	NY Empire State Manufacturing Idx
15-Nov	Producer Price Index (MoM)
15-Nov	Prod Price Index (YoY)
15-Nov	Prod Price Index ex (MoM)
15-Nov	Prod Price Index ex (YoY)
15-Nov	Retail Sales (MoM)
15-Nov	Retail Sales ex Autos (MoM)
15-Nov	Business Inventories
16-Nov	MBA Mortgage Applications
16-Nov	Consumer Price Index (MoM)
16-Nov	Consumer Price Index (YoY)
16-Nov	Cons Pr Idx Ex (MoM)
16-Nov	Co Price Index Ex (YoY)
16-Nov	Net Long-Term TIC Flows
16-Nov	Total Net TIC Flows
16-Nov	Capacity Utilization
16-Nov	Industrial Production (MoM)
16-Nov	NAHB Housing Market Index
16-Nov	EIA Crude Oil Stocks change
17-Nov	Building Permits (MoM)
17-Nov	Continuing Jobless Claims
17-Nov	Housing Starts (MoM)
17-Nov	Initial Jobless Claims
17-Nov	Ph Fed Manufacturing Survey
18-Nov	Leading Indicators (MoM)

 

 

 

 

 

 

 

 

 

 

 

 

 

Employment Picture Improving And Pressured MBS

While unemployment levels will continue to be a major concern and a drag on our economy, several reports showed some improvement last week. The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

“This is the single biggest factor in housing. Regardless of interest rates – people simply don’t purchase homes when they are unemployed or are concerned about their employment picture. This is why the following data is welcome news for the housing industry.”

The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

Non-farm Payrolls jumped up to 103K in September, from the revised previous month’s result of 57K, the U.S. Department of Labor reported. The results considerably exceeded forecasts of 73K growth. The change in total non-farm Payroll employment for July was also revised upward from 85K to 127K.

Average Hourly Earnings increased to 0.2% in September, following a 0.2% drop in August. On an annual basis Average Hourly Earnings remained flat at 1.9% for the second consecutive month in September.

Average Weekly Hours increased to 34.3 in September from 34.2 in August, despite forecasts of remaining at the same level.

In a separate report, the ADP Private Payroll data which measures U.S. non-farm private business sector hirings increased by 91K in September, after rising 89K in August. This was higher than market forecasts of only a 75K increase.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -130 basis points from last Friday to the prior Friday which moved mortgage rates upward. This was in reaction to a slew of much better than expected U.S. economic data.

“One of the main reasons that mortgage rates are so low (we hit our historical low on 09/22/11) is due to concern over a perceived weak economic recovery. So, when the market sees data that is better than expected (and even shows economic growth), MBS sell off which causes mortgage rates to rise.”

We received much better than expected news out of both the manufacturing and servicing sectors with strong ISM data. The improvement in the non-farm and private payroll data also pressured MBS.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date	Economic Event
9-Oct	Columbus Day
11-Oct	IBD/TIPP Economic Optimism (MoM)
11-Oct	FOMC Minutes
12-Oct	MBA Mortgage Applications
13-Oct	Continuing Jobless Claims
13-Oct	Initial Jobless Claims
13-Oct	Trade Balance
13-Oct	EIA Crude Oil Stocks change
13-Oct	Monthly Budget Statement
14-Oct	Export Price Index (MoM)
14-Oct	Import Price Index (MoM)
14-Oct	Import Price Index (YoY)
14-Oct	Retail Sales (MoM)
14-Oct	Retail Sales ex Autos (MoM)
14-Oct	Reuters/MI Consumer Sentiment
14-Oct	Business Inventories

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities that are the only thing government and conventional mortgage rates are based upon.

Related articles

• Employment Picture Brightens: (michaeltmcdevitt.wordpress.com)
• Pending Home Sales Jump: (michaeltmcdevitt.wordpress.com)
• Mortgage Rates Rise Slightly Heading Into The Weekend (michael-mcdevitt.com)
• Mortgage Delinquency Rates Decline: (michaeltmcdevitt.wordpress.com)

5 Tips For Real Estate Pro’s To Get To Icon Status

As you can tell this post is geared towards those already in the field and I wanted to cover something that is asked time and time again by employees, affiliates and colleagues. As a real estate agent, you may not automatically think of yourself as an entrepreneur, but really, that’s what you are!  You’re building your brand, clientele and entire livelihood from the ground up.  While your business is similar to others in the real estate field, it’s up to you to establish yourself as a legit business and bring growth and success; and that’s a large task!

So, what are some of the key steps you can take to really set yourself up as a solid business, a real estate expert or even an icon in the field?

Now, you may think, “Okay, I can see myself as an entrepreneur, but an icon?  I’m not so sure…”  We’re all aware that to have a dynamic business means to constantly be pushing yourself to continual growth; so aiming for the status of icon in your real estate market or even on a national level can be just the thing to urge you to constantly strive for more.

Does this seem overwhelming yet?  Well, take a deep breath.  Becoming an icon doesn’t happen overnight and will take consistency and a daily committment to provide the best and most innovative service to your clients.

Recently, entrepreneur.com gave five great tips that will help boost you to that iconic level.  Of course, I’ve modified them to make them real estate specific, so take a few minutes to review how you can take your business to the next level!

1. Start blogging- Blogging is a great way to establish yourself as an expert.  You can easily provide pertinent information about your real estate market, your listings, home buying or selling tips and even community events.  Giving people the information they want about the real estate market, their home and the community will keep them coming back for more.  The more you blog on a consistent basis, the more people will begin to see you as a trusted expert in your field and in your community.

2. Market yourself- In being your own brand, marketing is key to your success.  While you may not feel comfortable with self-promotion; it’s really the only way to market your business since you are your business.  Marketing your services, your field of expertise, even your awards or recognitions allows others to get to know you, your values and what you will be able to do for them.  This is just another way to establish yourself as an expert and give an open door to becoming an icon.  Exposure brings recognition, which breeds familiarity and establishes trust.  It’s just how our minds work!

A great way for real estate agents to do this is through a one sheet marketing approach.  We’ve created this for a few of our clients and its been a huge success!  A one sheet is simply a sheet of paper that gives a brief synopsis of who you are, your certifications, area of service, expertise or anything else you want to highlight about you and your business.  They’re perfect for leaving at an open house, giving to potential clients and handing out with your marketing presentation.

3. Create Compelling Content- Whether you’re blogging, writing a buyer or seller page for your website or creating your print marketing material; your content should be compelling.  That means sentence structure and grammar should be impeccable and the topics or advice you are presenting should be up to date and interesting.  Visitors to your website or blog will know when something’s just been thrown on a page, and that will send the message that you are okay with doing the minimum just to get it done.  Why not show how much you care about your business and your customer service ethics through great content?  It will help set the tone for your entire business.

4. Create Products- Did you know that real estate agents can have products too?  While you’re not trying to sell them to make a profit, having products or tools to provide for your clients can help set you apart. Giving your client or potential clients something extra is unexpected, sets you apart and establishes yourself even more as an expert.

5. Take it to the Next Level– Now that you’re seen as an expert in your community, boost yourself to icon by taking it up a notch.  If you’re passionate about selling homes or helping people avoid foreclosure; do all you can to grow in your area of expertise.  Begin to register yourself as an expert on real estate sites or other marketing avenues and network, network, network! Credibility is a key component to being viewed as a leader and expert. Real estate conventions are always looking for speakers in a specific field and the more you put yourself out there, the more likely you are to have opportunities on a national level. Imagine how sought after you’ll be in your community after receiving national recognition!

I know this may seem like a lot to take in and a lot of hard work; and it is!  Reaching your goals will take time, dedication and a focus on the end results.  Remember, taking it a day at a time is key!  You won’t become an icon, or even seen as a real estate expert overnight, but you’ll be encouraged by those daily “wins” and as you see your business begin to grow.

There are certain actions that can be taken and if interested, contact me, I recently launched a mentorship program limited to only a handful of individuals and I can guarantee recognition in basically any syndication including FOX, CNBC, ABC, MarketWatch, The Wall Street Journal, Newsweek, and the list goes on. Credibility is a key component to being viewed as a leader and expert. As in doing anything, there is a process to it. Just like there is a process to become a doctor or lawyer. This will give you a head start, but I can show you exactly how to be one of the leading experts in your area, guaranteed. Just contact me for details. Be blessed and make it a productive day!

Fannie Mae: September Economics and Mortgage Market Analysis

Leading indicators for home sales point to subdued housing demand. Respondents to the Fannie Mae National Housing Survey indicate a continued shift of sentiment toward renting and away from ownership, at least in the near term. In the second quarter, 26 percent of Americans were worried about their job stability. When combined with the 9 percent of unemployed households, more than a third of the potential workforce was worried about their employment status – hardly a strong support for housing demand.

After rising for two consecutive months, pending home sales (contract signings of existing homes) fell in July, which bodes poorly for existing home sales in August and September. Pending home sales generally lead the existing home sales data by one or two months. However, the link between contract signings and closings has weakened lately such that the gains in pending home sales in recent months have not materialized into contract signings. Low appraisals compared to contract prices and concerns about the economy may have led to contract cancellations and delays. Also, some contracts have had to be cancelled because the potential buyers could not sell their current homes.

September Economic Developments
September Economic Forecast
September Housing Forecast

Housing Market Update: Consumer Confidence Rises

Confidence among U.S. consumers rose in September from the lowest level since November 2008 as Americans’ views of current economic conditions improved.The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 57.8 this month from 55.7 in August. The median estimate of economists surveyed by Bloomberg News called for a reading of 57. The group’s measure of consumer expectations six months from now dropped to the lowest level since May 1980.

The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, increased to 74.5 from 68.7 the prior month.

This is very important to the housing industry because it it not interest rates but the consumer’s outlook on the economy that drives demand for housing.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -68 basis points last week which helped to move mortgage rates higher from last Friday to the prior Friday.  Mortgage rates were pressured due to some inflationary economic news.  Both the Producer Price Index and the Consumer Price Index showed increases which is inflationary and mortgage rates do not react well to any inflationary data.  We also saw better than expected Consumer Sentiment which is also usually bad for mortgage rates.

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

Date	Time	Economic Release
19-Sep	10:00	NAHB Housing Market Index
19-Sep	10:30	Barack Obama Press Conference
20-Sep	8:30	Building Permits (MoM)
20-Sep	8:30	Housing Starts (MoM)
21-Sep	7:00	MBA Mortgage Applications
21-Sep	10:00	Existing Home Sales (MoM)
21-Sep	10:00	Existing Home Sales Change
21-Sep	10:30	EIA Crude Oil Stocks change
21-Sep	14:15	Fed Interest Rate Decision
21-Sep	14:15	Fed’s Press Conference
22-Sep	8:30	Continuing Jobless Claims
22-Sep	8:30	Initial Jobless Claims
22-Sep	10:00	Housing Price Index (MoM)
22-Sep	10:00	Leading Indicators (MoM)

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

To Build Or Not To Build? How A Strategic Return To The Sector Could Yield Huge Returns For The Savvy Investor.

. . . . a tough question in light of today’s stubborn economic recovery.  Even though we’ve spotted a few bright spots on the economic horizon (a shrinking foreclosure rate, a growing cash-investor class taking advantage of bargain distressed property prices, rising values of existing commercial properties), tepid job growth and an inventory of unsold REOs seem to negate any optimism. Arguably, the building industry has suffered as much as any other sector. Construction of new homes, one key indicator of economic health, posted its largest decline in the past few decades and finds itself struggling with rising material costs in an environment not conducive to raising prices to cover costs. While conventional wisdom suggests that investors should distance themselves from the building and construction industry, first impressions could be misleading. A strategic return to the sector could yield great returns for the smart investor. The secret lies in pinpointing specific demand and if enough demand exists to drive growth. UCLA’s Anderson School of Business’ recent findings echo findings from a number of other sources indicating a consumer “shift” is occurring to affordable rental units from the traditional single family home. Higher down payment requirements, tight credit and other factors make renting a more practical choice for current homeowners and the growing segment of “Echo Boomers” – defined as children of Baby Boomers born between 1975 and 2000. Fannie Mae estimates that the currently available 15.2 million rental units will not meet the growing demand for affordable housing for this group in the future. Similarly, on retail and office market fronts, analysts predict shortages in retail office spaces as businesses expand. While the fate of the traditional single-family home may be unclear at the present time, the need for affordable apartments and commercial square footage is increasing. Demand exists. The economic downturn crippled the construction industry. The credit vacuum created by the voluntary exit of lenders and the FDIC shutdown of banks with non-performing construction loans brought building to a virtual halt. New project starts diminished and ongoing developments that lost financing stalled. These factors combined to stymie the supply of units brought to market. Now that demand is showing signs of returning, some mothballed projects may begin to make sense at today’s prices. The initial infrastructure work leading up to construction (permits, environmental studies, plans, etc.) that comprise the up-front costs and take years to complete, new investors can now obtain for pennies on the dollar. Private equity funds and large banks are once again injecting new capital into projects. Activity is increasing at construction sites nationwide to meet projected demand, providing much-needed jobs to their immediate communities. We recently completed a development project that was able to sell at attractive current levels based on the fact that we saved on both the land cost as well as benefited from existing infrastructure. This in addition to the short time frame from investment to repayment, made the difference. The key factor is to begin in the areas that were located within good markets and avoid those areas that were on the outer rim of the growth pattern.  If the project is well located it should achieve a fair return using very conservative projections. Is it time to build again? The answer depends on finding the right location at the right price at the right time when land is cheap and the up-front costs have already been absorbed by previous investors. The heavily discounted infrastructure and approvals, in my opinion, are the key elements.

Related articles

• The 25 Highest-Yielding REITs (fool.com)

National Home Price Index Rises:

The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.

According to FHFA, their national Housing Price Index for purchases rose 0.9% and is the third consecutive month of home price increases and shows that the housing market does have some real fundamental “bright spots”.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -40 basis points last week which helped to move mortgage rates higher from last Friday to the prior Friday.  We had enjoyed a string of four consecutive weeks of mortgage rate declines until last week.  Mortgage backed securities pulled back from their highs in reaction to a very good week for the stock market and lower than average demand for our country’s debt in the form of Treasury bond sales.

The Economic News is NOT All Bad…

Granted, the headlines are not pretty.  Our government seems committed to making the greatest number of mistakes possible, but I am here to tell you that underneath all of that, small businesses are really making things happen!  This is a VERY good thing.

At McDevitt Capital, we are busier than we ever have been, and since most of my loans are to small businesses, this is a positive for the economy. Many of the CDC’s I know are also having very good years (CDC’s are companies that administer the seconds on SBA 504 loans). If the SBA is busy, then again, small businesses are working. There is almost a mini-boom happening in franchising right now. It seems like every franchise out there is very busy which again, means new businesses are starting. This means jobs are being created. I am also seeing another big trend-a lot of boomers are quitting corporate America for good, cashing out or rolling over their IRA’s and starting their own businesses. Now financial planners may cringe at that point, but the owners I speak to are putting it this way, “These large companies I have invested in don’t seem to be very “with it” and with so many risks, I feel better controlling my own destiny”.

I say all of this not to debate investment strategy but to share what I am seeing in the front lines, in the trenches of this economic battle. There are warriors out there, small business men and women and they are cautious, but they are determined and they are not backing down. As a small business owner myself, I acknowledge that there are dangers ahead, not the least of which is our Government’s essential bankruptcy, but I also see opportunities everywhere and I am attacking those opportunities because sometimes, the best defense is a strong offense and I am not alone.

So take what you hear on the news with a grain of salt and know that there are people fighting the good fight. Maybe you are one of us. Take heart!  Because behind the news, on every street corner, the fight goes on. And these warriors will find a way to win. Opportunities abound today, in spite of or possibly because of, the broader economic news. Properties are cheap, rates are low, and there are some people doing very well. Those stories are all around you and THAT is what will keep America going. Entrepreneurship lives on and with it, lies the hope of this economy. We are America, and we are not dead yet!

Have a great weekend!

Michael McDevitt

P.S. If you know a small business owner or investor cheer them on!  If they need money, make sure to let them know about me. My former mentor and commercial partner is closing more commercial loans than anyone in the country and we are successfully bringing capital from around the country to the small business owner or investor. I can pay referral fees as well! Give me a call today at 888.950.9910 Ext.100!

Related articles

• Obama: Small-Business Owners Key to Recovery (portfolio.com)
• Alternative Financing Services Are Available To Small Businesses (businessinsider.com)

Fed: Risk of Recession “Quite Low”

According to William Dudley, the president of the Federal Reserve Bank of New York, the risk of a double-dip recession is still quite low.

Dudley said that only some of the the restraints on growth, such as high oil prices and Japan‘s earthquake in the first half of the year, can be considered temporary.

“The risks have risen a little bit, but I think we very much still expect the economy to recover. We expect … growth to be significantly firmer than it was during the first half of the year,” he said. “But obviously there is some concern.

The central bank‘s policy-setting Federal Open Market Committee (FOMC) took the unprecedented step last week of promising to keep interest rates near zero for a set period of time—at least until mid-2013. The Fed also said it was weighing other options to help strengthen a weak recovery.

Dudley said that market interest rates fell after the announcement, “which should help provide some additional support for economic activity and jobs.” The president of the New York Fed has a permanent voting position on the FOMC and plays a prominent role within the U.S. central bank.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +21 basis points last week which helped to move mortgage rates lower from last Friday to the prior Friday.  We did pull back from our our best levels of 2011 which occurred in the middle of the week.  The gains were primarily due to much weaker than expected economic news as well as continued concern over weakness in Europe.

How And Why Commercial Loan Modifications Are Completely Attainable By Real Experts

It’s entirely possible for struggling commercial-property owners to obtain a loan modification, Capital Mitigation Group is a commercial-foreclosure-prevention firm that specializes in modifying rates, terms and amortization schedules. They employ a vareity of Seasoned Commercial Mortgage Pro’s including bankers/brokers, asset managers, negotiators, mitigators, certified auditors, underwriters and attorneys displaying an ecleptic group on a mission. 

The problem is that most commercial-mortgage borrowers don’t know the proper way to ask, I don’t think that it’s not the borrowers’ fault, think about it. Did the clients faciliatate their own loan? No, of course not, they use a professional, so it only makes sense to do the same in attempting to modify. I say this because Commercial is very different than Residential, with Residential you have these huge conglomerates called Fannie Mae and Freddie Mac that basically own all the paper on conforming loans. Commercial loans on the other hand are usually the banks own money.

The point I’m tyring to make is the borrower discloses their Personal Financial information, if it is disclosed innacurately I’m going to have a hard time trying to convince the underwriters at the bank how and why your financials are unusually different from when you applied 4 months ago. If someone sued you would you represent yourself in court?  If you have very complex financials would you file your own taxes? No, lawyers speak a different landguage and certain CPA’s understand Tax Strategy and know how to disclsoe income and expense information in a manner that allows their clients to pay the least amount of money,  We do the same thing.

Obtaining a loan modification can be difficult, especially if the loan is what’s known as a commercial mortgage-backed securities loan, or CMBS loan. CMBS loans are often tricky to modify, because the original issuer of the loan is no longer involved and the beneficiaries are individual and institutional investors, often scattered across the globe.

A CMBS loan, usually in default, is regularly managed by a loss-mitigation specialist known as a special servicer. It’s easy for commercial-property owners to get discouraged when trying to obtain a loan modification from a special servicer, because the negotiation process can resemble talking to a wall.

With my experience in the commercial finance industry, special servicers were essentially limited to accepting or rejecting the borrower’s offer. They usually are prohibited from making a counteroffer or disclose why a borrower’s offer was rejected. As a result, I’ve experienced first hand that borrowers have often given up after a couple of rejected offers.

CMBS loans, which total about $36.5 billion, was issued in Arizona with little improvement in the value of commercial real estate, Arizona could be headed for more serious problems economically if a high percentage of CMBS loan defaults end with foreclosure. Currently, about $3.5 billion of CMBS loans in AZ have already filed Notice of Defaults.

The value of outstanding CMBS loans is $800 billion Nationwide. More than 60 percent of those loans were issued between 2005 and 2007, when commercial real estate was heavily overvalued. Most commercial-mortgage loans don’t face a serious risk of foreclosure until they reach maturity, usually after 10 years… usually. The meaning behind this is that foreclosures seen so far among commercial properties barely scratch the surface of the problem.

There is no question in my mind that the worst has yet to come in Commercial Real Estate. The situation isn’t hopeless, Capital Mitigation Group specializes, for a fee, the structuring of a loan-modification proposal based on deals special servicers have accepted in the past.

While Capital Mitigation Group has a business model that is relatively unique, it isn’t the only company in this business that has successfully prevented a CMBS loan from being wiped out by foreclosure.

A landmark case decided in 2010, a Maricopa County Superior Court judge held that a receiving commercial investment company could sell seven Arizona apartment complexes formerly owned by the by a “investor group” based in California, without requiring the assigned special servicer to foreclose on the properties.

An “investor group” financed the purchase of the seven apartment properties with a $164.5 million CMBS loan in 2007 and subsequently defaulted on the loan. By allowing a new buyer to assume the CMBS loan, rather than wiping out the debt and forcing the buyer to pay cash, the court protected bond holders connected with the loan and prevented the seven apartment properties from losing at least $50 million in combined value, so I’ve read.

Since Capital Mitigation Group has opened millions in CMBS loan restructures / modifications and are using a variety of methods which include term extensions, discounted payoffs, interest-rate reductions, forbearance agreements and extension of adjustable rates to fixed rates for underwater properties.

Unless more commercial-building owners can work out deals with their lenders to avoid foreclosure, the real-estate and lending crises are likely to continue for years to come and Capital Mitigaiton Group is a provider that ensures success.

Investment funds and pension plans, too, will suffer if more CMBS loans cannot be modified. Because of its early successes with obtaining commercial loan modifications, Capital Mitigaiton Group has expanded.  Capital Mitigation Group intends on expanding and being very selected in candidates. CMG also offers, for a fee, the opportunity to be a Net Branch and leverage and use ALL of our Marketing Platforms, Customer Database Management / CRM, Forms and Tools, and a variety of very useful training.

For more information send me a message.