U.S. Home Prices `Bouncing Around’ Bottom, Economist Case Says

I love economists.  I think I missed my calling, especially after reading Superfreakonomics.  Take a bunch of data and make a statement about what you think will happen then throw in a few waivers that it might not.  Not a bad gig.  I’ll admit I am a data junkie to an extent and do enjoy their prognostications and considered analysis.  What’s the difference; stocks, real estate, industry, economies…they all go up and down and we don’t always know why, especially before it happens.  Monday morning quarterbacking is a lot easier.

None the less this article reminds me of the fact that all real estate is local.

The fact that the NAR’s affordability index reached an all time high doesn’t matter if home buyers can’t get loans.

I offer investors, home sellers and buyers some very effective workaround solutions to this problem and it doesn’t involve dealing with a bank.  This is a good time for “subject to” or “mortgage assignment” programs.  Contact me to learn more!

I hate it when unemployment and inflation deviate from the FOMC’s objectives, the nerve…

Here’s the Bloomberg story:

U.S. Home Prices `Bouncing Around’ Bottom, Economist Case Says

By Kathleen M. Howley – Jan 25, 2011

U.S. home prices have reached a bottom and may be set to rise in the first half as buyers take advantage of increased affordability, said Karl Case, the economist who co-founded the S&P/Case-Shiller home price index.

“Prices have gone flat, bouncing around at what I think is essentially a bottom,” Case, a retired professor of economics at Wellesley College, said in a radio interview today on “Bloomberg Surveillance.” “We’re really going to have to wait to see what the spring market brings.”

The S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent in November from a year earlier, the biggest 12- month decrease since December 2009, the group said today in New York. The Federal Housing Finance Agency, which measures sales financed with mortgages backed by Fannie Mae and Freddie Mac, said separately that prices slid 4.3 percent from November 2009.

An abundance of inexpensive homes and an expanding economy will support housing demand as it enters the so-called spring selling season when the bulk of transactions typically occur, said Case, who created the price index with Yale University Economics Professor Robert Shiller. The National Association of Realtors’ affordability index, a gauge of median income against home prices, reached an all-time high of 184.5 in November.

Housing ‘Bargains’

“There are bargains out there,” said Case. Affordability will entice first-time buyers to jump into the market “if jobs are created at a pretty good clip,” he said.

The unemployment rate dropped to 9.4 percent last month after reaching a seven-month high of 9.8 percent in November, according to the Bureau of Labor Statistics. The jobless rate has remained above 9 percent for 20 months and will probably average 9.3 percent this year, according to a Bloomberg News survey of economists.

Consumer confidence in January climbed to the highest level in eight months as Americans became more optimistic about job prospects, according to a report today by the Conference Board. The share of people who said they intended to buy a home rose to 2.2 percent, the New York-based private research group said. That was the second consecutive gain after November’s 1.7 percent, which matched an all-time low set at the end of 2009.

The Federal Open Market Committee today began a two-day meeting in Washington that culminates with a policy statement at around 2:15 p.m. tomorrow. Since reducing its target federal funds rate to near zero in December 2008, the central bank has used its balance sheet as a monetary policy tool. Its assets have tripled to $2.43 trillion from $873 billion in February 2008.

The Fed probably will push forward with its plan to buy $600 billion in securities to stimulate the economy, based on the minutes to last month’s meeting released on Jan. 4. The recovery’s pace is likely to “remain modest, with unemployment and inflation deviating from the committee’s objectives for some time,” according to the minutes.

A real estate boom pushed prices in the 20 cities covered by the Case-Shiller index to a record high in July 2006 after almost doubling in six years. The benchmark tumbled 33 percent from its peak to an April 2009 low that put homes at 2003 prices. It has gained 3.3 percent since then.

— With assistance from Ken Prewitt in New York and Shobhana Chandra in Washington. Editors: Kara Wetzel, Rob Urban

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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Why Emotion, Not Knowledge, Is the Catalyst for Change

Here is an interesting concept that pertains to memory, emotions and the impact of your (any) message or event in general.

At a seminar this past week I was told that we remember and retain things to the degree we tie emotion or our feelings (state or condition we are in) at the time we receive the information. A simple test is to ask yourself can you remember where you were and what you were doing when you heard about the Sept 11 attack?  Most of us can, just like a generation before can remember JFK’s assassination.  Significant, uncommon, irregular, scary, fear or joy and pleasure inducing events affect our physical state and the message and surroundings are all attached together.

If you think about it, it’s inter-related and interesting to consider how your body language is a give away (a poker “tell”) to how a speakers message is being received & following the logic above to conclusion a hint as to how well the message will be remembered and retained.

When you’re interested, motivated, excited your body posture is upright, alert, open and you’re probably leaning forward.  When you’re tired, bored, uninterested you show it with slumped posture, sagging shoulders, avoiding eye contact and probably day dreaming about what you’d rather be doing anyway….  Your mind collects, registers, associates and categorizes the inputs together:  message + excitement or fear (heightened state of alertness or emotion) = impactful piece of data being added to the database.  This message will be retained longer and recollected easier.   Contrast that with being bored and disinterested you are unattached, tuned out will likely not hear much less retain anything of significance from that event and your brain will attach all those inputs together in its filing system.

This reminds me of a recent story on 60 minutes about people with super memory.  These people remember all kinds of detailed information about their past, and can recall it by specific date.  You could give them a date in their past and they can tell you what happened to them or what they were doing on that day.  Very interesting, I recommend watching it.  When asked how they do it they all said we don’t know we just do it, we get a picture or an image of that day.  They would go and sort through their memory’s filing system say by a particular day of a month then by the year (i.e. Jan 22 then by year, 2005, 2000, 1984, etc.).  None of them thought themselves odd, different or unique yet they have this incredible memory and seemed to have similar ways of categorizing and filing things away in their minds.  (I thought it also interesting that all the men identified so far were left handed.)  When given a date they would first remember something significant to them that happened on that day – it could have been about a relationship, a sporting event, a performance or a pair of shoes.  They had particular what I guess you could call “tags” or triggers in their memory.  Hmmm, the human mind is a very interesting and powerful thing.

Here’s the article from Fast Company:

Why Emotion, Not Knowledge, Is the Catalyst for Change

By Dan Heath and Chip Heath

At a Mother’s Day dance in 1999, Karen Gatt, 26, hit bottom. Weighing almost 300 pounds, feeling ugly and humiliated, she wanted nothing more than to slink to a corner and avoid attention. “I spent a lot of that night just looking around the room at all the other women, staring and admiring the clothes they wore, how their hair was done so nicely, and how beautiful they all looked… . They looked the way I wanted to look. They smiled the way I wanted to smile… . As I looked at their faces, something inside of me clicked. From that precise moment, I knew I had to change my life.”

She did. She lost 150 pounds, kept it off, and wrote a book about her experience called The Clothesline Diet. It’s a familiar narrative arc — a searing emotional moment that sparks a life change. One famous therapist describes this as a three-step sequence: A person sees something that makes her feel a particular way, and as a result is motivated to change. See-feel-change.

Actually, it wasn’t a therapist who said that. It was John Kotter, now a professor emeritus at the Harvard Business School. And he was talking about organizations, not people. It’s not just individuals like Karen Gatt who have emotional turning points; it’s organizations like yours. If you want change, close out of PowerPoint and start looking for the right feeling.

Curt Lansbery, CEO of North American Tool, a manufacturer of industrial cutting machinery, turned to emotion when nothing else seemed to work. Lansbery was frustrated that his employees weren’t maxing out their 401(k) investments, even though the company matched a percentage of what employees contributed. “They do not realize how much free money they are leaving on the table by not participating,” he says.

So one year, at the annual 401(k) enrollment meeting, he brought in a big bag, unzipped it, and upended it over a table. Cash started pouring out. Conversation came to a halt.

Lansbery had tabulated exactly how much money his employees had failed to claim the year prior: $9,832. Now it was sitting in front of them. He gestured at the money and said, “This is your money. It should be in your pocket. Next year, do you want it on the table or in your pocket?” There was a stunned silence.

When the 401(k) enrollment forms were distributed a little later, there was a flurry of signups, including Kelli Harris, a purchasing agent. “You always find reasons not to save money,” she says. “The money sitting in front of me made me realize I need to start doing this.” See-feel-change.

Healthy greed motivated Lansbery’s employees to save, but it was a darker emotion — disgust — that eventually sparked a change at Cedars-Sinai Medical Center. As reported in SuperFreakonomics, a urologist named Leon Bender became frustrated when he took a South Seas cruise and observed that the crew was more diligent about hand-washing than the staff at his own hospital. Frequent hand-washing by doctors and nurses is one of the best ways to prevent patient infections, and studies estimate that thousands of patients die every year from preventable bacterial infections.

Bender and his colleagues tried a variety of techniques to encourage hand-washing, but the staff’s compliance with regulations was stuck around 80%. Medical standards required a minimum of 90%, and Cedars-Sinai was due for an inspection from the accrediting board. They had to do better.

One day, a committee of 20 doctors and administrators were taken by surprise when, after lunch, the hospital’s epidemiologist asked them to press their hands into an agar plate, a sterile petri dish containing a growth medium. The agar plates were sent to the lab to be cultured and photographed.

The photos revealed what wasn’t visible to the naked eye: The doctors’ hands were covered with gobs of bacteria. Imagine being one of those doctors and realizing that your own hands — the same hands that would examine a patient later in the day, not to mention the same hands that you just used to eat a turkey wrap — were harboring an army of microorganisms. It was revolting. One of the filthiest images in the portfolio was made into a screen saver for the hospital’s network of computers, ensuring that everyone on staff could share in the horror.

Suddenly, hand-hygiene compliance spiked to nearly 100% and stayed there. (Which suggests, secondarily, that the screen saver is a vastly underutilized tool for social change.)

Knowledge is rarely enough to spark change. People have to want change. Say it’s your job to lure companies to set up shop in Detroit. That’s no easy mission. Ordinarily, economic development folks are fountains of facts: School statistics. Workforce data. Infrastructure info.

What if you focused instead on creating a spark of desire? Imagine showing off a series of photos, starting with one of a huge, beautiful home with the caption: “Here’s what $250,000 will buy you in Detroit. And here’s the red-brick factory building you can buy for one-tenth of its cost in Boston. And here are the experienced workers whom you could hire for $12 an hour.” Suddenly, the business owner starts to feel a little twinge of desire. Detroit is far from perfect — but, man, think of what we could afford to do there!

This focus on feeling is unnatural in the business world, where we tend to cling to the rational and factual. But knowing something isn’t enough. The obese know they need to lose weight, employees know they need to save, and doctors know they need to wash their hands.

It takes emotion to bring knowledge to a boil.

Dan Heath and Chip Heath are the authors of the No. 1 New York Times best seller Switch: How to Change Things When Change Is Hard, as well as Made to Stick: Why Some Ideas Survive and Others Die.

A version of this article appears in the February issue of Fast Company.

A version of this article appears in the February 2011 issue of Fast Company.

– Larry, In Deed

Banks Repossess 1 Million Homes in 2010

So you think 2010 was tough on homeowners….here comes 2011.

Banks Repossess 1 Million Homes in 2010

Published January 13, 2011 | Associated Press

The bleakest year in the foreclosure crisis has only just begun.

Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and more will miss payments as they struggle with job losses and loans worth more than their home’s value, industry analysts forecast.

“2011 is going to be the peak,” said Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc. The firm predicts 1.2 million homes will be repossessed this year by lenders.

The outlook comes after banks repossessed more than 1 million homes in 2010, RealtyTrac said Thursday. That marked the highest annual tally of properties lost to foreclosure on records dating back to 2005.

One in 45 U.S. households received a foreclosure filing last year, or a record high of 2.9 million homes. That’s up 1.67 percent from 2009.

For December, 257,747 U.S. homes received at least one foreclosure-related notice. That was the lowest monthly total in 30 months. The number of notices fell 1.8 percent from November and 26.3 percent from December 2009, RealtyTrac said.

The pace slowed in the final two months of 2010 as banks reviewed their foreclosure processes after allegations surfaced in September that evictions were handled improperly. Under increased scrutiny by the government, lenders temporarily halted taking actions against borrowers severely behind on their payments.

However, most banks have since resumed their eviction processes, and the first quarter will likely show a rebound in foreclosure activity, Sharga said.

Foreclosures are expected to remain elevated through the year as homeowners contend with stubbornly high unemployment, tougher credit standards for refinancing and falling home values. Sharga said he expects prices to dip another 5 percent nationally before finally bottoming out. The decline will push more borrowers underwater on their mortgages. Already, about one in five homeowners with a mortgage owe more than their home is worth.

The pain likely will be the most acute in states that have already been hit hard. That includes former housing boom states Nevada, Arizona, Florida and California, along with states that are suffering most from the economic downturn, including Michigan and Illinois.

Nevada posted the highest foreclosure rate in 2010 for the fourth straight year, despite a 5 percent decline in activity from the year before. One in every 11 households received a foreclosure filing last year in the state. In December, foreclosure activity increased 18 percent from November with a 71 percent spike in bank repossessions.

Arizona and California also showed sharp December increases in the number of homes banks took back, at 52 percent and 47 percent, respectively. Arizona, along with Florida, finished the year at No. 2 and No. 3 for the highest foreclosure rates.

One in every 17 Arizona households got a foreclosure filing last year, while one in 18 received a notice in Florida.

California, Utah, Georgia, Michigan, Idaho, Illinois and Colorado rounded out the top ten states with the highest foreclosure rates.

More than half of the country’s foreclosure activity came out of five states in 2010: California, Florida, Arizona, Illinois and Michigan. Together, these states recorded almost 1.5 million households receiving a filing, despite year-over-year decreases in California, Florida and Arizona.

RealtyTrac tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.

 

 

 

 

 

 

 

 

 

The year of the Real Estate Investor – 2011

This confirms the writing on the wall, 2011 is going to be huge.

U.S. Foreclosure Filings May Jump 20% in 2011 as Crisis Peaks

By Dan Levy and Prashant Gopal – Jan 13, 2011
BLOOMBERG

The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said.

“We will peak in foreclosures and probably bottom out in pricing, and that’s what we need to do in order to begin the recovery,” Rick Sharga, RealtyTrac’s senior vice president, said in an interview at Bloomberg headquarters in New York. “But it’s probably not going to feel good in the process.”

A record 2.87 million properties got notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier, the Irvine, California-based data seller said today in a report. The number climbed even after a plunge in filings in the last part of the year — including a 26 percent drop in December — as lenders came under scrutiny for their practices.

Foreclosures have weighed down U.S. housing prices as the nation’s unemployment rate is stuck at more than 9 percent. Home values may rise 0.6 percent for the year, the first annual jump since 2006, according to Fannie Mae, the largest U.S. mortgage buyer. They have fallen as much as 33 percent since peaking in 2006, based on the S&P/Case-Shiller Index of 20 cities.

Banks seized more than 1 million homes in 2010, according to RealtyTrac. That was up 14 percent from a year earlier and the most since the company began reports in 2005.

About 3 million homes have been repossessed since the housing boom ended in 2006, Sharga said. That number could balloon to about 6 million by 2013, when the housing market may “absorb the bulk of distressed properties,” he said.

Foreclosure Pipeline

“What makes this almost inevitable is the fact there are 5 million seriously delinquent loans not yet in foreclosure,” Sharga said. “They’ve got to eventually get in the pipeline unless the homeowners cure the defaults.”

The foreclosure crisis is the biggest threat to U.S. economic growth, according to Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania. Lender delays in processing defaults may prolong a decline in home prices, he said in an interview this week.

As many as 250,000 foreclosure filings that would have occurred at the end of 2010 were delayed by the ongoing probe into lender practices, according to RealtyTrac. Those proceedings will be pushed into this year, resulting in an “ugly” first quarter, Sharga said.

Attorney General Probe

Attorneys general in all 50 states are investigating whether banks and loan servicers used faulty documents and signatures on loan documents, a process that has come to be known as robo-signing. Companies including JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc. halted some repossessions as they reviewed their procedures.

Foreclosure filings in December totaled 257,747, the lowest monthly tally since June 2008. The number fell 2 percent from November and 26 percent from a year earlier, the biggest annual decline in RealtyTrac records.

In Florida, among the states most affected by delays because the courts oversee foreclosures, filings plunged 54 percent from a year earlier to the lowest level since July 2007.

Total U.S. filings in the fourth quarter fell 8 percent from a year earlier to 799,064. The tally for the three-month period was the lowest since the fourth quarter of 2008.

Nevada had the highest U.S. foreclosure rate in 2010 for the fourth consecutive year, with more than 9 percent of the state’s households receiving a filing. Arizona was second at 5.7 percent and Florida third at 5.5 percent.

California’s rate was 4.1 percent, Utah’s was 3.4 percent and Georgia’s was 3.3 percent. Michigan, Idaho, Illinois and Colorado rounded out the top 10.

Five States

Five states accounted for 51 percent of the U.S. filing total, with almost 1.5 million. California led with 546,669, down almost 14 percent; Florida was second at 485,286, down 6 percent; and Arizona was third at 155,878, down 4 percent.

Illinois ranked fourth at 151,304 and Michigan was fifth at 135,874, both down about 15 percent from 2009.

Georgia, Texas, Ohio, Nevada and New Jersey also ranked among the top 10, said RealtyTrac, which sells data from counties representing 90 percent of the U.S. population.

 

 

Real estate funds defy forecasts with 27.6% 2010 gain

Funds increase their dividends and benefit from discounted commercial properties and REIT’s.  A good year for Real Estate Funds, the key to 2011 will be to watch what’s in their portfolios…. my personal reading of the tea leaves suggests commercial and residential real estate are in for a very rocky year to come.  If the funds are holding the underlying asset that has been financed in the past 2-5 years that could be problematic, however if they are buying up all the properties financed in the same period for pennies on the dollar it will indeed be another good year.

Real estate funds defy forecasts with 27.6% 2010 gain

By Matt Krantz, USA TODAY
Despite rumors of an upcoming collapse in commercial real estate, real estate mutual funds continue to bring home solid returns.

Investors bracing for part two of the financial crisis, this time in commercial real estate, missed out on a 27.6% gain, according to Lipper, by real estate mutual funds in 2010. These funds capitalized on discounted prices for commercial property and real estate investment trusts as well as lucrative dividend yields.

“There was less of a distressed environment (for commercial real estate) than many perceived,” says David Lee, portfolio manger of the T. Rowe Price Real Estate fund, one of the top-performing real estate funds last year, returning 29.9%.

Using 2010 as a guide, investors are closely watching trends going into 2011 that might influence real estate mutual funds, including:

Changing dividend yields.

Shifting real estate demand amid economic recovery.

Improving health of real estate companies

And of course, the caveat ( I love analysts and stock predictions, you can always find one telling you what you want and that you should have sold after the stock has plunged, didn’t you listen to their predictions after all?)

But commercial real estate funds face dangers. REITs’ dividend yields are less attractive as Treasury yields rise, Florance says. Many commercial real estate companies, meanwhile, face debt payments the next four years that could become onerous if the economy isn’t healthy, Lindemann says. “It would be very surprising … if we saw another year of such significant outperformance.”

Here’s the story from USA Today.

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