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Todays Behind the Scene Economy Update

"The Big Picture"

March 2010

 

There is a race in Washington D.C. right now.  It's a race by legislators and regulators to see who can do more to protect the American consumer.

 

The United States is now in the third year of a foreclosure crisis unprecedentedly since the Great Depression with no end in sight.

 

According to the U.S. Census Bureau: 130.6 million housing units in the US; 18.9 million are vacant and Housing Vacancies and Homeownership Report, in fourth-quarter 2009 there were some 75.3 million owner-occupied housing units in the United States, with 67.6 percent of all households being homeowners.

The homeowner vacancy rate increased to 2.7 percent from 2.6 percent in the third quarter, the U.S. Census Bureau said in a report today. There were 2.09 million empty properties on the market, up from 1.99 million, according to the report.

The rate gained even as the number of properties listed with brokers declined because the survey includes bank-owned homes for sale without a realtor. Foreclosures probably will reach 3 million this year, surpassing the record of 2.82 million in 2009, according to Irvine, California-based RealtyTrac Inc.

Mortgage loan delinquency increased for the 11th straight quarter, according to a study released by Chicago’s Trans Union. With this increase, the ratio of borrowers 60 or more days past due hit an all-time national average high of 6.25 percent during the third quarter of 2009. The company said this statistic is usually seen as a precursor to foreclosure. While year-over-year, mortgage borrower delinquency is up approximately 58 percent, this year’s third quarter also marked the third consecutive period the delinquency rate increase has decelerated, the company said.

 

Home loan delinquency rates in the United States have now surpassed 10 percent. When you factor in homes already in the foreclosure process, the total rate of noncurrent mortgages sits at 13.3 percent. This rate indicates that more than 7.2 million mortgage loans are now behind on payments with another one million properties already taken back by banks and in REO status. Recent analysis shows that states with most noncurrent loans are: Florida, Nevada, Mississippi, Arizona, Georgia, California, Indiana, Michigan, Illinois, and Ohio. Those with the fewest include: North Dakota, South Dakota, Alaska, Wyoming, Montana, Nebraska, Vermont, Colorado, Oregon, and Washington. Total delinquent loans by portfolio at December 31, 2009 were comprised of $26.8 million of commercial mortgage and commercial business loans, $6.7 million of residential mortgage loans and $941,000 of consumer loans. Delinquent loan balances by number of days delinquent were: 31 to 59 days - $3.2 million; 60 to 89 days - $2.5 million; 90 days and greater - $28.7 million.

The voluntary plans by servicers, however, were called “extend and pretend” plans by critics, who said servicers simply were setting up repayment plans with late fees and other charges rolled into them, without ever actually reducing a borrower’s debt. Re-default rates on those loan modifications have been high as a result. Approximately 70% of people who go through mortgage modification have an increase in their balance.  Within 1 year, almost 45% of modified loans become “delinquent.” 7-9% reaches 60-day delinquency within just the first three months after modification, which for all intents means the borrower didn’t make the first post modification payment. What will the 2 and 5 year markers look like? This is a long, stressful process, and it appears to leave nobody better off, except perhaps the servicers who get some nice fees and a subsidy from the government.

If you owned a house that's now worth a lot less than what you owe on your mortgage, would you walk away from the home and default on the mortgage? If so, you'd have plenty of company. In 2009, Reecon Advisors released a national survey indicating that nearly one out of 10 homeowners, 9.2% or 7.4 million, would likely choose to default if they were in that situation. And today, we're seeing more and more evidence that some people are beginning to do just that. They're choosing to "strategically default" on their mortgages.

First American Logic did a recent study that suggests when a home falls below 75% of the amount owed on the mortgage; the homeowner begins to think about walking away, even if he or she can pay the mortgage.

First American CoreLogic said more than 11.3 million -- or 24 percent of -- residential properties with mortgages in the United States had negative equity at the end of the fourth quarter of 2009.

For the typical underwater borrower in the United States, it will take until late 2015 or early 2016 for negative equity to disappear.

In certain markets, it will take another five to 10 years or even longer to return to positive equity. Detroit is not projected to recover even by 2020 because of its depressed economy.

Although house price appreciation will offset negative equity over time, amortization (the paying down of loan balances) will in most cases be a more significant remedy to negative equity, First American CoreLogic said. Over the next 10 years, the average loan balance will decrease by an annual rate of 3.3 percent. Home prices are expected to increase at a 3 percent annual rate over the next decade.

For many in the hardest hit areas, working out ashort sale is frequently not an option when the home value is so low that a buyer starts considering walking away.  Stricter guidelines from the Treasury Department may get the banks to make a faster decision and put short sales back on the table as an option. Always check with your bank to discuss your options before thinking about a short sale or walking away. Some banks, especially a smaller community bank or a credit union, may be willing to work out a deal. In fact, some banks have even been willing to negotiate a reduction in mortgage principal, so it never hurts to ask as you develop your strategy.

One out of 10 homeowners is past due, in default or in some level of foreclosure today.  Studies show that roughly 50% of delinquent homeowners avoid contact with their lender, hoping the problem will go away. A record 15.02 percent of all mortgages were at least one payment behind or in foreclosure as of the end of the fourth quarter, according to the latest delinquency survey from the Mortgage Bankers Association. And over 50 percent of the homeowners that had revisions to their mortgage last year are back into default today. However, 90-day + delinquencies now account for more than half of all delinquencies outstanding, the highest share in the history of the MBA survey. In Florida, 26 percent of mortgages were one payment or more past due, while 20.4 percent were 90 days or more past due or in some stage of foreclosure.

Nevada was the second worst state, with 24.7 percent of mortgages one payment or more late, and 19 percent 90 days + late or in foreclosure. Nearly 5 million houses and condos, of which the mortgages are delinquent, will go through foreclosure over the next few years, a new study by John Burns Real Estate Consulting Inc. concludes. This represents more than half of the 7.7 million households now behind on their mortgage payments. The situation is worst in Arizona, California, Florida, and Nevada. Burns calculates that there is an inventory equivalent to 27 months of sales in Orlando, 24 months in Miami, and 18 months in Las Vegas.

 

President Barack Obama issued an executive order recently creating a new financial fraud task force. The federal task force will be led by the Justice Department and is composed of senior-level officials from more than 25 federal departments and agencies, including the Treasury, HUD, the Securities and Exchange Commission (SEC), Federal Bureau of Investigations (FBI), Federal Reserve, FDIC, the Federal Housing Finance Agency (FHFA), and Homeland Security, among others. Investigations will be coordinated with partners at the state and local level, as well.  More than $1 trillion has been written off during the current crisis regarding mortgage fraud. By the end of 2009 the FBI forecast that they will have over 70,000 cases open. Today, over 260 investigators focus on people that work in the business, 18 mortgage fraud task teams, more than 50 working groups, over 1,000 FBI agents and dozens of federal prosecutors across the county.

 

Center of Responsible Lending - A new foreclosure starts every 13 seconds, equaling nearly 6,500 a day.... CRL estimates that by 2012 at least 9 million new foreclosures will cost $1.9 trillion in lost home equity to 92 million families. One in every 45 housing units in the United States was the subject of a foreclosure notice during the year just ended (2009).  RealtyTrac has estimated that the number of foreclosure filings in 2010 will rise to 3.5 million. That creates a shadow inventory for 2010 about 2.4 million homes. That is the total of about 1.7 million repos resulting from 2010 filings plus a 700,000 unlisted REO carries over from 2009. How many of these are actually listed remains to be seen.

 

Five-year Option Adjustable Rate Mortgages taken out in 2005, that is, are due to reset in 2010. It's hard to get perfect statistics on how many Option ARMs are out there, because banks were not required to report this product specifically. According to BusinessWeek, approximately 1.3 billion borrowers took out approximately $389 billion in Option ARM home loans during 2004 and 2005. According to Fitch Ratings, up to 80 percent of Option ARM borrowers only pay the minimum payment. Added, then, to the overall decline of the housing market, is the negative amortization problem.

Recent reports have indicated that there are almost 3 million active, interest-only loans with a total value of almost $1 trillion, with loans of about $500 billion set to reset within the next 30 months.  Fitch Ratings determined $134 billion of loans which will recast in 2011.  This "payment shock" a hike often 63% higher than the minimum payment, indicates a greater risk of default.

 

Household Survey Data

In February, the number of unemployed persons, at 14.9 million, was essentially unchanged, and the unemployment rate remained at 9.7 percent.

 

Friday February 5, 2010, the US Bureau of Labor Statistics (BLS) provided the latest unemployment numbers for January 2010 and President Obama is “singing” Hallelujah. Things look better.

 

The number of long-term unemployed (those jobless for 27 weeks and over) was 6.1 million in

February and has been about that level since December. About 4 in 10 unemployed persons have been

unemployed for 27 weeks or more. (See table A-12.)

 

The actual unemployment number has really gone above 17.5% since, like the 400,000 people no longer looking for work in January 2010, join the millions who have given up looking for work over the last several months and using Washington Math, they are not “counted as unemployed.” It will be interesting to see how many more mortgages considered safe will be under pressure when unemployment checks run out on another 5 million recipients by this June.

 

As the end of February HAMP (which includes non-Fannie Mae and Freddie Mac mortgages) had finalized modifications on only 168,701 loans out of the 1.354 million who had been extended invitations to participate in the program. When first announced, this program was to help 3 to 4 million.

 

FDIC - U.S. bank closures reached 200 banks nationwide in 2009— more than in any single year since 1992. December 8, 2009 the FDIC’s “problem” bank list swelled nearly 33% to 552 from 416 banks in the previous quarter. Georgia suffered 29 bank failures in 2009 and already closed four more in 2010. FDIC Chairman Sheila Bair stated recently that the cost of bank failures between 2009 and 2013 will reach about $100 billion. February 2010 sixteen banks have failed, and I expect the total to exceed the 140 institutions that were shut down by regulators last year.  Closures in 2009 cost the Federal Deposit Insurance Corp. an estimated $36.4 billion as the regulator covered losses on bad loans before selling institutions to other banks. The failed banks had assets of $171.9 billion, for an average loss rate of 21%. Analysts now expect 200 or more banks to fail this year.  March 29th. 41 banks have been closed by FDIC.

 

The volume of commercial and multifamily mortgage debt maturing in 2010 and 2011 is relatively low, according to the Mortgage Bankers Association's (MBA) 2009 Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes. Of the $1.45 trillion balance of outstanding mortgages held by nonbank investors, only 13% of the total ($183.9 billion) will mature in 2010, and 7% ($99.8 billion) will mature in 2011. The survey also found that maturities vary considerably by the type of investor holding the loan. Between 2010 and 2014, $770bn in commercial loans will be on properties in negative equity, and may need to be written down, according to a study by Foresight Analytics, a real estate research firm. The report is likely to only add to the woes surrounding the current commercial real estate (CRE) sector. The firm projects 36% of the $270bn set to mature will be under water in 2010. Afterward, Foresight said, that figure will only continue to increase. It’s projected to increase to 49% in 2011, 63% in 2012, 61% in 2013 and still above half at 57% in 2014.

 

 

 

 

Half of all commercial mortgages to be underwater - Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, says that by the end of 2010 about half of all commercial real estate mortgages will be underwater.  “[The mortgages] are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending."  As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010. 

 

According to the analyst firm Fiserv, U.S. housing prices will decline by 11.3% by July of this year. U.S. home prices fell 12 percent in 2009 to a median of $173,500, a greater decline than 2008’s 9.5 percent drop, according to Chicago-based NAR.

 

Bankruptcy filings in 2009 reach 1.44 million as consumers and businesses dealt with unemployment, foreclosure and tight credit. A total 1,435,425 bankruptcy petitions were filed in the 50 states and Washington D.C. That figure increases to 1,446,967 when Puerto Rico, Guam and the Virgin Islands are taken into count.

Nationwide, the bankruptcy rate was up 32% in 2009 compared to 2008 and reached the highest level since the 2005 bankruptcy law change. Forecast would be 1.75 million bankruptcy filings for 2010 roughly 6,000 daily... Such a filing rate would represent only a 17% annual increase, and the current year-over-year increases on a monthly basis are running around 20%

 

What does all this mean? No one has the crystal ball to predict what 2010 will truly look like.  What we do know, it will look much like what we have experienced in 2009, high loan defaults, more short sales and even foreclosures.  As new laws and regulations change, the consumer will be well protected, education and have easy means to file complaints if they feel that they have not been treated fairly.

 

Real estate professionals must continue to keep their edge to remain competitive and evaluate their services often to stay on top of the ever-changing real estate environment.  The majority of our business will be working with various banks, lenders and their outsourced companies meaning that we will have to handled our transactions in a professionally, ethically and timely manner in providing superior services to all parties.

 

Real estate professionals are in the "homeownership business" and we are experiencing a community crisis.  We must strive to sustain, preserve and promote homeownership.  Homeownership is a national priority and affects our local economy.

 

Banks use five mathematical formulas to determine whether or not they will modify a mortgage. And all five must meet each lender's individual criteria.  They are: Your front-end debt-to-income, meaning your housing expenses as a part of your monthly earnings; your back-end debt-to-income, which takes into account your total debt, including credit cards, car loans and what-have-you; your pre-modification cash flow; your post-mod cash flow; and the net present value of the modification versus that of a foreclosure. For that last test, if the lender will make more money by foreclosing rather than altering the terms of your mortgage, it probably will foreclose.

The S&P study... The latest estimates are for another five million delinquent mortgages to go through foreclosure (or alternatively, short sales) over the next few years. Currently, there is an estimated 7.7 million households in some stage of pre-default delinquency.

Thus, whatever grudging progress that has been made in clearing out some of the excess housing inventory will likely suffer a set back as these 5 million homes come out of the shadows and enter the real estate inventory of homes of for sale. 5 million homes represent approximately one year's sales.

The WSJ reports that the problem is “largely concentrated in Arizona, California, Florida and Nevada. The shadow inventory is equivalent to 27 months of sales in Orlando, 24 months in Miami and 18 months in Las Vegas.”

Posted with permission by aurthor Cathy McDaniel

Educator, Author, Consumer Advocate

Todays Behind the Scene Economy Update

February 2010

 

There is a race in Washington D.C. right now.  It's a race by legislators and regulators to see who can do more to protect the American consumer.

 

The United States is now in the third year of a foreclosure crisis unprecedentedly since the Great Depression with no end in sight.

 

According to the U.S. Census Bureau: 130.6 million housing units in the US; 18.9 million are vacant and Housing Vacancies and Homeownership Report, in fourth-quarter 2009 there were some 75.3 million owner-occupied housing units in the United States, with 67.6 percent of all households being homeowners.

The homeowner vacancy rate increased to 2.7 percent from 2.6 percent in the third quarter, the U.S. Census Bureau said in a report today. There were 2.09 million empty properties on the market, up from 1.99 million, according to the report.

The rate gained even as the number of properties listed with brokers declined because the survey includes bank-owned homes for sale without a realtor. Foreclosures probably will reach 3 million this year, surpassing the record of 2.82 million in 2009, according to Irvine, California-based RealtyTrac Inc.

Mortgage loan delinquency increased for the 11th straight quarter, according to a study released by Chicago’s Trans Union. With this increase, the ratio of borrowers 60 or more days past due hit an all-time national average high of 6.25 percent during the third quarter of 2009. The company said this statistic is usually seen as a precursor to foreclosure. While year-over-year, mortgage borrower delinquency is up approximately 58 percent, this year’s third quarter also marked the third consecutive period the delinquency rate increase has decelerated, the company said.

 

Home loan delinquency rates in the United States have now surpassed 10 percent. When you factor in homes already in the foreclosure process, the total rate of noncurrent mortgages sits at 13.3 percent. This rate indicates that more than 7.2 million mortgage loans are now behind on payments with another one million properties already taken back by banks and in REO status. Recent analysis shows that states with most noncurrent loans are: Florida, Nevada, Mississippi, Arizona, Georgia, California, Indiana, Michigan, Illinois, and Ohio. Those with the fewest include: North Dakota, South Dakota, Alaska, Wyoming, Montana, Nebraska, Vermont, Colorado, Oregon, and Washington. Total delinquent loans by portfolio at December 31, 2009 were comprised of $26.8 million of commercial mortgage and commercial business loans, $6.7 million of residential mortgage loans and $941,000 of consumer loans. Delinquent loan balances by number of days delinquent were: 31 to 59 days - $3.2 million; 60 to 89 days - $2.5 million; 90 days and greater - $28.7 million.

The voluntary plans by servicers, however, were called “extend and pretend” plans by critics, who said servicers simply were setting up repayment plans with late fees and other charges rolled into them, without ever actually reducing a borrower’s debt. Re-default rates on those loan modifications have been high as a result. Approximately 70% of people who go through mortgage modification have an increase in their balance.  Within 1 year, almost 45% of modified loans become “delinquent.” 7-9% reaches 60-day delinquency within just the first three months after modification, which for all intents means the borrower didn’t make the first post modification payment. What will the 2 and 5 year markers look like? This is a long, stressful process, and it appears to leave nobody better off, except perhaps the servicers who get some nice fees and a subsidy from the government.

If you owned a house that's now worth a lot less than what you owe on your mortgage, would you walk away from the home and default on the mortgage? If so, you'd have plenty of company. In 2009, Reecon Advisors released a national survey indicating that nearly one out of 10 homeowners, 9.2% or 7.4 million, would likely choose to default if they were in that situation. And today, we're seeing more and more evidence that some people are beginning to do just that. They're choosing to "strategically default" on their mortgages.

First American Logic did a recent study that suggests when a home falls below 75% of the amount owed on the mortgage; the homeowner begins to think about walking away, even if he or she can pay the mortgage.

4.5 Million Underwater Homeowners
One out of four homes are worth less than their outstanding mortgage about $2.9 trillion dollars.  So, how many people have crossed that critical threshold where their home falls below 75% of the amount owned on the mortgage? About half of that group, 5.3 million borrowers, is 20 percent or more underwater. For 2.2 million, the property is worth less than half the mortgage balance and an additional 2.3 million mortgages were approaching negative equity, meaning they had less than five percent equity. The next report on negative equity is due out in mid-February. If prices continue to fall in the hardest-hit areas of the country, that number could top 5 million by the middle of 2010. First American estimates that it would cost about $745 billion, slightly more than the TARP bailout of the banks, to restore all underwater borrowers. Can the government afford to even think about that? Probably not.

For many in the hardest hit areas, working out ashort sale is frequently not an option when the home value is so low that a buyer starts considering walking away.  Stricter guidelines from the Treasury Department may get the banks to make a faster decision and put short sales back on the table as an option. Always check with your bank to discuss your options before thinking about a short sale or walking away. Some banks, especially a smaller community bank or a credit union, may be willing to work out a deal. In fact, some banks have even been willing to negotiate a reduction in mortgage principal, so it never hurts to ask as you develop your strategy.

One out of 10 homeowners is past due, in default or in some level of foreclosure today.  Studies show that roughly 50% of delinquent homeowners avoid contact with their lender, hoping the problem will go away. And over 50 percent of the homeowners that had revisions to their mortgage last year are back into default today.

 

President Barack Obama issued an executive order recently creating a new financial fraud task force. The federal task force will be led by the Justice Department and is composed of senior-level officials from more than 25 federal departments and agencies, including the Treasury, HUD, the Securities and Exchange Commission (SEC), Federal Bureau of Investigations (FBI), Federal Reserve, FDIC, the Federal Housing Finance Agency (FHFA), and Homeland Security, among others. Investigations will be coordinated with partners at the state and local level, as well.  More than $1 trillion has been written off during the current crisis regarding mortgage fraud. By the end of 2009 the FBI forecast that they will have over 70,000 cases open. Today, over 260 investigators focus on people that work in the business, 18 mortgage fraud task teams, more than 50 working groups, over 1,000 FBI agents and dozens of federal prosecutors across the county.

 

Center of Responsible Lending - A new foreclosure starts every 13 seconds, equaling nearly 6,500 a day.... CRL estimates that by 2012 at least 9 million new foreclosures will cost $1.9 trillion in lost home equity to 92 million families. One in every 45 housing units in the United States was the subject of a foreclosure notice during the year just ended (2009).  RealtyTrac has estimated that the number of foreclosure filings in 2010 will rise to 3.5 million. That creates a shadow inventory for 2010 about 2.4 million homes. That is the total of about 1.7 million repos resulting from 2010 filings plus a 700,000 unlisted REO carries over from 2009. How many of these are actually listed remains to be seen.

 

Five-year Option Adjustable Rate Mortgages taken out in 2005, that is, are due to reset in 2010. It's hard to get perfect statistics on how many Option ARMs are out there, because banks were not required to report this product specifically. According to BusinessWeek, approximately 1.3 billion borrowers took out approximately $389 billion in Option ARM home loans during 2004 and 2005. According to Fitch Ratings, up to 80 percent of Option ARM borrowers only pay the minimum payment. Added, then, to the overall decline of the housing market, is the negative amortization problem.

Recent reports have indicated that there are almost 3 million active, interest-only loans with a total value of almost $1 trillion, with loans of about $500 billion set to reset within the next 30 months.  Fitch Ratings determined $134 billion of loans which will recast in 2011.  This "payment shock" a hike often 63% higher than the minimum payment, indicates a greater risk of default.

 

Well, Friday February 5, 2010, the US Bureau of Labor Statistics (BLS) provided the latest unemployment numbers for January 2010 and President Obama is “singing” Hallelujah. Things look better.

 

Mark Twain once said: “Facts are stubborn things, but statistics are more pliable”. The US Bureau of Labor Statistics (BLS) has made that remark a reality.

 

According to the BLS, the US lost another 20,000 jobs in January. However, the BLS reported that the unemployment rate dropped from 10% of the labor force to 9.7%. How is that possible, more people lose their jobs, but the unemployment rate goes down? That is the Washington Math. To add insult to injury the BLS also revised its statistics and says now that since the recession began an extra 1.2 million jobs have been lost. Instead of the 7.2 million jobs previously reported lost. Therefore, actually 8.4 million jobs have been lost. You would think that this “mistake” admission would cause the actual unemployment rate to go up. But who is counting anyway.

 

The numbers game gets worse. December’s job losses alone were revised from 85,000 lost jobs to 150,000. This is an unbelievable revision and shocking when presented with such remarkable proof. This is a 76% error which the BLS, the President and most of the media has ignored. With those numbers, the unemployment rate for December was really about 10.2% (not counting the people no longer looking for work, more on that below) The numbers games coming from Washington has become so ridiculous that it is best to ignore what they say. None of these upward corrections caused the BLS and President Obama to revise the unemployment numbers for December 2009 upwards, as they should have been.

 

To the contrary, President Obama, while admitting that the BLS reported 9.7% unemployment numbers for January 2010 are still too high, then said that the decline is a sign that the economy is improving. Furthermore, in January 2010, the BLS admits that 400,000 unemployed people stopped looking for work; hence they are not longer counted as “unemployed”. Mark Twain would definitely be proud of these statistics. The actual unemployment number has really gone above 17.5% since, like the 400,000 people no longer looking for work in January 2010, join the millions who have given up looking for work over the last several months and using Washington Math, they are not “counted as unemployed.”

 

FDIC - U.S. bank closures reached 200 banks nationwide in 2009— more than in any single year since 1992. December 8, 2009 the FDIC’s “problem” bank list swelled nearly 33% to 552 from 416 banks in the previous quarter. Georgia suffered 29 bank failures in 2009 and already closed two more in 2010. FDIC Chairman Sheila Bair stated recently that the cost of bank failures between 2009 and 2013 will reach about $100 billion. February 2010 sixteen banks have failed, and I expect the total to exceed the 140 institutions that were shut down by regulators last year.  Closures in 2009 cost the Federal Deposit Insurance Corp. an estimated $36.4 billion as the regulator covered losses on bad loans before selling institutions to other banks. The failed banks had assets of $171.9 billion, for an average loss rate of 21%. Analysts now expect 200 or more banks to fail this year.

 

The volume of commercial and multifamily mortgage debt maturing in 2010 and 2011 is relatively low, according to the Mortgage Bankers Association's (MBA) 2009 Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes. Of the $1.45 trillion balance of outstanding mortgages held by nonbank investors, only 13% of the total ($183.9 billion) will mature in 2010, and 7% ($99.8 billion) will mature in 2011. The survey also found that maturities vary considerably by the type of investor holding the loan. Between 2010 and 2014, $770bn in commercial loans will be on properties in negative equity, and may need to be written down, according to a study by Foresight Analytics, a real estate research firm. The report is likely to only add to the woes surrounding the current commercial real estate (CRE) sector. The firm projects 36% of the $270bn set to mature will be under water in 2010. Afterward, Foresight said, that figure will only continue to increase. It’s projected to increase to 49% in 2011, 63% in 2012, 61% in 2013 and still above half at 57% in 2014.

 

According to the analyst firm Fiserv, U.S. housing prices will decline by 11.3% by July of this year. U.S. home prices fell 12 percent in 2009 to a median of $173,500, a greater decline than 2008’s 9.5 percent drop, according to Chicago-based NAR.

 

Bankruptcy filings in 2009 reach 1.44 million as consumers and businesses dealt with unemployment, foreclosure and tight credit. A total 1,435,425 bankruptcy petitions were filed in the 50 states and Washington D.C. That figure increases to 1,446,967 when Puerto Rico, Guam and the Virgin Islands are taken into count.

Nationwide, the bankruptcy rate was up 32% in 2009 compared to 2008 and reached the highest level since the 2005 bankruptcy law change. Forecast would be 1.75 million bankruptcy filings for 2010 roughly 6,000 daily... Such a filing rate would represent only a 17% annual increase, and the current year-over-year increases on a monthly basis are running around 20%

 

What does all this mean? No one has the crystal ball to predict what 2010 will truly look like.  What we do know, it will look much like what we have experienced in 2009, high loan defaults, more short sales and even foreclosures.  As new laws and regulations change, the consumer will be well protected, education and have easy means to file complaints if they feel that they have not been treated fairly.

 

Real estate professionals must continue to keep their edge to remain competitive and evaluate their services often to stay on top of the ever-changing real estate environment.  The majority of our business will be working with various banks, lenders and their outsourced companies meaning that we will have to handled our transactions in a professionally, ethically and timely manner in providing superior services to all parties.

 

Real estate professionals are in the "homeownership business" and we are experiencing a community crisis.  We must strive to sustain, preserve and promote homeownership.  Homeownership is a national priority and affects our local economy.

 

Cathy McDaniel

Educator, Author, Consumer Advocate

 

 

 

 

 

If putting a dent in your home's heating and cooling bills is a priority, then adding insulation needs to be at the top of your to-do list. It's a relatively affordable home-improvement project, and the savings can be felt almost immediately. Some DIYers can even tackle the project themselves over a weekend.

For a 2,200 square foot home, adding insulation to an attic can cost from $1,000 to $2,500 including labor, depending on how much you put in and how easy it is to install. Effort and expense go up when you add insulation to exterior walls or around hard-to-reach ductwork. A federal energy tax credit worth up to $1,500 can help defray the cost.

It all comes down to R-value

Insulation is measured in R-value, the resistance to heat flow. The higher the number the better the insulating power. The U.S. Department of Energy recommends R-values (http://www1.eere.energy.gov/consumer/tips/insulation.html) between 30 and 60 for most attics. Take a peek in yours. If your insulation is level with or below the attic floor joists, then you probably need more.

There are different types of insulation, including fiberglass, cellulose, mineral wool, spray foam, foam board, and cotton batting. The most familiar is pink fiberglass roll insulation. If you're not sure what's best suited for your home, check with an insulation contractor. Just about all insulation qualifies for the energy tax credit (more below) as long as its primary purpose is to insulate-insulated siding, for example, doesn't count-and it brings your home up to recommended R-value guidelines.

Energy Star (http://www.energystar.gov/index.cfm?c=home_sealing.hm_improvement_insulation_table), a joint program of the DOE and U.S. Environmental Protection Agency, suggests R-38 insulation for most attics (or about 12-15 inches, depending on the insulation type). In colder climates, R-49 may be required. The DOE's online calculator (http://www.ornl.gov/sci/roofs%2bwalls/insulation/ins_16.html) can recommend R-values for all areas of your home's "envelope": attic, walls, floors, basement, and crawl spaces.

Generally, most homes built before 1980 have inadequate insulation. The easiest insulation to add is blown loose-fill insulation. You'll probably need to hire a contractor. Since insulating an attic isn't too complicated, you can get quotes-at least three-by phone. However, get a copy of the quote in writing before work starts, and be sure it specifies R-value. Michael Kwart, executive director of the Insulation Contractors Association of America (http://www.insulate.org/), recommends rolled insulation for do-it-yourselfers. New insulation can be added on top of existing insulation.

Savings and sustainability can add up

Depending on where you live and how much insulation you already have, adding more can trim heating and cooling costs anywhere from 10% to 50%. A homeowner in the Northeast with an uninsulated attic, for instance, can save about $600 a year by adding about 15 inches of insulation (R-38) between the rafters, according to the Energy Department. Just 6 inches can net annual savings of about $200.

The $1,500 federal tax credit (http://www.energystar.gov/index.cfm?c=tax_credits.tx_index) can be applied toward 30% of the cost of insulation installed in your primary residence during 2009 and 2010. Let's say you spend $1,760 on enough R-38 roll fiberglass to insulate the attic of your 2,200 square foot home. That's $40 per 50 square feet retail, a fair estimate. You'll be able to subtract $528 (30% of $1,760) straight off the top of your tax bill, as long as you paid more in federal taxes than you're claiming in credits. Since a typical homeowner won't be able to use up the entire tax credit on insulation alone, the remainder can be applied to other qualifying energy-efficiency upgrades like new windows (http://www.houselogic.com/articles/tax-credits-replacing-windows-doors-and-skylights/) or roofing (http://www.houselogic.com/articles/tax-credits-replacing-your-roof/). Just keep in mind that the total credit claimed for all of these improvements can't exceed $1,500 for the two-year period.

Save receipts, and if a contractor did the work, get a receipt that's itemized. Labor costs, typically 25% of the total bill, according to Kwart, don't count toward the tax credit. There's no need to file receipts when you claim the credit on Form 5695, but the IRS could ask you to cough one up later. Also hold on to product stickers from packaging that show R-values and manufacturers' certification statements that attest to tax-credit worthiness. Check manufacturers' websites for a copy of the statement. If you're building a new home, you're out of luck; only existing homes qualify for this tax credit, which can't be carried over into future years.

Adding insulation is just the beginning

In conjunction with adding new insulation, conduct a whole-house energy audit (http://www.houselogic.com/articles/professional-energy-audits-the-costs-and-benefits/) to find other ways to reduce power consumption and save even more on monthly bills. Caulk around drafty windows and doors, and stop gaps in siding and the foundation, says Matt Golden, president and founder of San Francisco-based Sustainable Spaces (http://www.sustainablespaces.com/). Reducing a home's air leakage by 25% can lower annual energy costs by about $300, according to the Lawrence Berkeley National Laboratory (http://www.lbl.gov/).

 This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.

Gil Rudawsky has been covering business and consumer issues as a reporter and an editor for 18 years, most recently as a business editor at the Rocky Mountain News. He lives in a house built in the 1930s, and always keeps the home's character in mind when making upgrades.

With all the chaos and confusion that the news has been reporting you may not feel that this is a good time to be buying a house.  The truth is that if your finances are in order, this is the perfect time to buy a home.  New homebuyers who qualify for the Federal  Housing Tax Credit and obtain the record low interest rates will save substantially.

The Tax Credit is being extended to first time homebuyers, defined as those who haven't owned a principal residence in the past three years.  This credit does not have to be repaid and is 10% of the price of the home up to $8,000.  Who in their right minds would throw away that kind of cash if they could buy a home right now?

Adding to your incentive are the low interest rates available to buyers.  Dependent upon your credit rating and down payment amount, some buyers are obtaining interest rates as low as 5% on a fixed rate mortgage.  The savings in your monthly mortgage payments are remarkable.  Many find that owning is less expensive than renting. Of course, it is also a buyer's market as people who made poor decisions in purchasing more home than they could afford are trying to get out from under their debt.  Inventory is high and sellers are eager to sell; it is the perfect combination.

This is the time to take a close look at buying a home.  Things couldn't be better if you are in the market to purchase.  Give Chandra Hall a call today and let her help you find the perfect home.

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