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2014 Housing Changes and Predictions:

New lending rules will limit the number of working class buyers. By now, you have likely heard of the new mortgage rules that are going into effect January 1, 2014. As you know, the people who put these rules in place (Congress via HUD) believe these new guidelines provide greater consumer protections and will prevent a similar collapse we had in 2007.

The truth of the matter is, when a lender originates a mortgage that they are going to resell to Fannie or Freddie, the lender will have to raise their lending standards before they can approve the loan. As you can imagine, advocates for “affordable housing” are looking at these higher standards and having a fit. They don’t like these new standards because essentially, it begins limiting loans to high risk buyers with standards they aren’t going to be able to meet.

Regardless of what side you fall on in the Realolitical discussion (Realolitical = Realestate + Political) of affordable housing vs. stricter lending, the end result is fewer working class buyers in 2014 than we have had any time after the 2007 collapse.  

Unemployment is predicted to remain at about 8% for 2014. The CBO (Congressional Budget Office) is a bit pessimistic for 2014 when it comes to unemployment. They are expecting unemployment to remain around 8% which means employment conditions will likely remain the same. This means that if we take a look at the hard number, we should be seeing about 300,000+ jobless claims weekly for all of 2014. This number will change according to seasonal work requirements but, essentially, 300K jobless claims weekly.

Long terms jobless benefits have not be renewed for 2014. Approximately 1 million people this week will NOT get their jobless benefits. These people will be forced to get creative with making ends meet. For many, the risk of foreclosure just became more real than it ever has been in the past. Right now, Congress is in heated debate about extending long term jobless benefits and it might get passed however, it may not happen in time to save many from foreclosure as Congress debates.

Approximately 52% of the American public are on the Government roll. In other words, the majority of Americans are surviving by taking the tax payments of the working public. This begins a paradigm shift in our country that will be very hard to stop. In fact, it makes our country more like Europe than we have ever been before. NOTE: France’s President this week won a legal victory which will see both individuals and companies that make more than 1 million dollars, pay 75% tax rate on that income for the next 2 years. So, in essence, if you make 1 million dollars, you will pay $750,000.00 of that to the government to pay your fair share in taxes. The really sad part is, even with this tax rate, it doesn’t even put a dent in France’s debt….they are still at serious risk of insolvency.  

The bullish stock market will come to a grinding halt. In 2013, the Federal Reserve announced it will begin tapering off it’s Quantitative Easing bond purchasing program in 2014. Now, this is a very complicated monetary policy to explain but, essentially, it means that the Federal Reserve is going to stop printing money in order to stem off inflation concerns. Essentially, the Federal Reserve believes that too many dollars are in the system and in order to prevent out of control inflation, they need to pull back. Many analysis agree that the Quantitative Easing program is the lynch pin in the stock markets bull market for the past 2-3 years. Some are concerned that, without the Federal Reserve pumping money into the market….the market will collapse because our economy isn’t as strong as they thing it is. In other words, the Federal Reserve seems to be drinking the White House’s political kool-aid. The scary part of all of this, foreign countries are beginning to sell off their dollars. By doing so, our dollar weakens and inflation begins to get serious.

Finally Obamacare destroys the insurance industry and millions find out they are going to pay more for insurance than they ever had before. Sure, Obamacare advocates like to tell people that 2 million people signed up however, what they fail to tell you is that more than half of those are either 100% tax payer subsidized or a percentage thereof. They also forget to tell you that nearly 6 million lost their insurance in November and December of 2013 due to the new minimum insurance standards and that 30-40 million are at risk of losing their insurance once the employer mandate goes into effect. Everyone knows Obamacare isn’t financially solvent and the fact the law is raising premium for both individuals and employers, it’s believed that many will simply lose coverage or end up paying inflated prices they can’t afford.

So….add it all up and I do believe that in 2014, we will see absolutely no positive change for the real estate industry. If anything, we will see our industry grow stagnant and in some areas of the country, see increased inventories, lower prices and increases in short sales and REOs. I do believe high demand micro markets that aren’t over developed will be little safe havens but, unfortunately not enough of those exist to prop up the real estate market as a whole.

It's coming up on 2012 and I wanted to take a look at some predictions I had made for 2011 and just how well I did....or didn't do.

In my blog, "More Housing Predictions for 2011 part 2" one of my predictions was, "Lack of substantial job growth"

Well, I would say I was pretty on target for that prediction. I had mentioned that I didn't believe the underlying problems to the economy were going to be addressed and therefore, we couldn't expect a robust recovery, if one at all.

In my blog, "More Housing Predictions for 2011 part 2" one of my predictions was, "Government Home Retention Programs prevent a Real Estate Bottom."

Once again, I would say I was pretty darn accurate about real estate not hitting a bottom. The Federal Government hasn't released any new statistics on the recent success or lack of success on their foreclosure prevention programs however, with the increasing or steady number of NODs and Foreclosures, I would suspect that we haven't hit a bottom yet and yes, a lot can be laid at the feet of our government who is instructing banks to avoid foreclosing. I remember at the start of 2011, when I was out doing relocation assistance negotiations, people had been in their homes for 4-6 months before I showed up....now it's more like 14-24 months......no bottom in sight anytime soon.

In my blog, "More Housing Predictions for 2011 part 2" one of my predictions was, "Energy Prices will Rise to Un-precedent levels"

Now, on this prediction, I can't really say I was spot on but, I can say I was close. You see, we never made it to $5.00 a gallon for gas but, commodity prices in general are skyrocketing. In fact, most commodities like, cotton, sugar, gold and others are reaching record levels or surpassed record levels. This is obviously a sign of inflation concerns, higher cost, weak dollar. So, I won't say I was spot on but, I will say I was on track with this one.

In my blog, "More Housing Predictions for 2011 part 2" one of my predictions was, "Credit Tighterning"

I predicted that credit tightening would continue and it would become increasingly harder for the average citizen to get a loan......have you tried to get a loan lately......you better have a 650 fico and at least 15% down.

In my blog, "More Housing Predictions for 2011 part 2" one of my predictions was, " Unforeseen National Crisis"

More specifically, I predicted that obviously I can't predict a unforessen national crisis but, I am glad to say that on this prediction, I was wrong. At least, I am not aware of a "national crisis" of global concern.

All said and done, I would say I was pretty accurate....maybe a little skimpy on details but, 2012 predictions are coming and I assure you, I will detail those predictions up.

Because the last prediction I wrote last week was such a success, I thought to myself, why don’t I blog a bit more about my predictions so, here it is.

I predict that 2011 may actually end up seeing the highest number of foreclosures in our nations recorded history.

Reason # 1: Lack of substantial job growth.

 I do believe that with the extension of the Bush tax cuts the Federal Government passed a couple weeks ago, our Government instilled some…….just some…..confidence in the business community to spur a very modest growth. You have to keep in mind, the extension of the Bush tax cuts was a tax hike prevention or, in other words, the business community is at a wash, one way or another. To elaborate a bit further, the business community had already been working under the cuts with no growth so, an extension of the cuts isn’t going to do much to grow the economy because, it really doesn’t change the underlying systemic fundamental problems. I am not saying that we should have allowed the tax cuts to expire because if that had happened, we would have made problems worse by raising taxes on everyone in a distressed, possibly depressed economy. I am for the cuts but, I don’t believe they are going to make that big of a difference because, the true problems are not addressed. The cuts were nothing more than a lesser of 2 evils.

Reason # 2: 5, 7 and 10 year ARMS (Adjustable Rate Mortgages) adjust in 2011.

During the height of the sub-prime mortgage bubble, we saw people getting  5, 7 and 10 year ARMS. Take 2011 and count back  5 years and you get 2006, the early days of the bubble build up, 7 years back you get 2004, when sub-prime lending was really breaking out of it’s shell and of course, 10 years back, 2001 when people hadn’t even heard of sub-prime lending. My point is, in 2011, 3 different types of very popular sub-prime, bubble building ARMS are going to reset, this is more resetting than we have every seen during this crisis. I can’t even imagine the carnage.

Reason # 3: Government Home Retentions Programs Prevent a Real Estate Bottom.

HAMP is the single greatest home retention failure of this Obama White House. 75% or more HAMP participants default out and end up in foreclosure however, what HAMP does do is buy these people time. In some cases a year or more. So, John Smith, homeowner is 3 months behind, applies for HAMP which takes an additional 2 months to get preliminary approval, John pays his preliminary discounted mortgage regularly for 5 months and then defaults off, 6 months for the bank to catch up with the default and file foreclosure paperwork and 3 months to foreclosure and evict, then 6 months before the home hits the market. Add it all up and you get 25 months or 2 years before a home hits the market from the time the homeowner defaults. So, look at it this way, Government has contributed 2 years worth of underlying inventory to an already 3-5 year inventory of distressed property simply because Government wants to save people’s homes in the name of reelection. This is bad no matter how you cut it.

Reason # 4: Energy Prices will Rise to un-precedent levels.

It was just 2 days ago that BP (British Petroleum) announced that they are re-working their 2011 budget with the premise that gas prices in the US will rise to $5.00 a gallon. Fuel cost effects every aspect of our daily lives. It’s not just how much you pay at the pump. It’s how much it cost the truck delivery man to deliver the goods to your local grocery store. Over 90% of the goods you buy at a grocery store get there from a truck and that truck can only get there when it fuels up its tanks. If that fuel increase goes up on that trucker we can expect to see prices for individual goods to increase as well. A absolute correlation between prices of goods and price of logistics is fact and this is a law of supply and demand that can’t be broken.

Reason # 5: Risk of inflation becomes a real concern in 2011.

Instead of speculating about inflation, 2011 will be the year we actually start talking about what percentage inflation will rise. Increased trade deficits, continual devaluing of the US Dollar, continual movement towards a green agenda and, high federal debt will move inflation up. This will be done in order to stem off a collapse of the dollar because of continual devaluation.

Reason # 6: Credit Tightening.

As a direct result of the foreclosure fall out that I predict will occur in 2011, we will see an increased credit tightening. Now, personally, I don’t see this as a bad thing, I am of the opinion, a home is not a right, it’s something you earn and if you can’t earn it, you don’t deserve it. None the less, since the Community Re-investment Act, this country has been on a drunken binge of “everyone deserves credit” and it had everything to do with our real estate bubble however, times are changing and banks are going to have no choice but to tighten credit standards so they can reduce their risk for losses. This will increase housing inventories and work towards a further across the board housing price drop but, it gets us closer to a bottom and the ability to rebuild.

Reason # 7: Unforeseen National Crisis.

It was once told to me that luck favors those who are prepared and bold. Unfortunately, this Country as a whole is not prepared and our threshold to make big bold global decisions has all but disappeared since the Obama administration has taken a apologetic, appeasement stance on the World stage. This has done nothing but embolden our enemies and provided safe havens in countries that are less than cooperative. I can’t predict an unforeseen national crisis but, I can imagine a “what if’ scenario and it’s not pretty. The best I can say here is that we should be preparing for the worse and hoping for the best but, that is most definitely not happening with most Americans, let along our Government.

In conclusion:

Any one of the above reason I listed is enough to truly hurt the housing industry. If you couple all of these things together in one hit, it stands to reason, can the housing recovery even take place in 2011. My opinion is no, a housing recover won’t take place in 2011 because if we were to resolve any one issue, we would still have 6 others threatening the recovery. In other words, the housing industry has too many uncertainties, Government influence and, was much more devastated by the Community Reinvestment Act and sub-prime lending than anyone wanted to really tell the American public. I hope for the best but, I have prepared for the worse.   

Housing Predictions for 2011

Normally, I am not in the business of predicting trends, simply because I believe all real estate is local. However, due to the economic condition of the Country and World, I do believe 2011 will be a year that either makes or breaks the real estate industry in the next 3-5 years.

A Government divided:

It is my opinion that a divided Federal Government is a lesser of many other possible evils. As we learned from the first 2 years of the Obama White House, a Government who is unified under one party banner is a Government run amuck. The citizens of this great Nation saw laws pushed through that in a time of a divided Government wouldn’t of had a chance in their current form. To broaden the perspective a bit more, I see a divided Government as a check and balance on the party agendas and special interest groups. Granted, with the size of the Government we have now, we will always have corruption and back room deals but, it is fairly certain now, with debts at their current levels, our Country can’t continue with the size of Government we currently have. In other words, a small Federal Government means less spending, less debt and a better ability to route out corruption, prosecute offenders and return God given freedoms back to the citizens.

By now, you may be wondering what a divided Federal Government has to do with housing in 2011. I predict that as a part of posterity measures that will be introduced by Tea Part Republicans we will see a draw back if not a complete withdrawal of many of the current failed housing recovery programs. I don’t know exactly what the fall out of these programs will be but, I submit for your contemplation that, we will see an increase in foreclosure inventories. An increase in foreclosure inventories means further drop in prices and hopefully a bottoming out so that we can rebuild the industry.

Local Government Bankruptcies:

I really do believe that 2011 may be the year we see small local Governments fail and declare bankruptcy. We are see huge debts that are causing local Government to straddle the line of financial failure and continued debt spending. With continued public pressure and Federal Government spending cuts, many of these debt heavy local Government could find themselves with no options other than Bankruptcy. Local Government will cut all spending except for necessary public works, like utilities and law enforcement. As part of their local Government spending cuts, unions will find themselves in courts fighting tax payers for their pensions and services will suffer.

This scenario will directly impact housing because buyers will keep their money in their pockets due to the uncertainty that will be created. Housing prices will further drop, equity will be lost, foreclosure inventories will rise.

In conclusion:

For many of us, this sounds like a epic tale of the fall of a great nation in history however, for some of us, we are able to see the signs, read them and understand what they mean.

Granted, the future is never written in stone and we do live in a Country with the most resilient people in the World so, I am optimistic.

How can I be so optimistic you may ask, well………it’s because I know this Country has within it’s awesome foundation a faith in all that is good and therefore, an ability to make tough decisions that will put us back on the right track. In the meantime, it could be hard, it could get nasty, we may see our fellow man hurt and suffer but, we will unite, we will come together and re-learn what it means to be charitable, what it means to be close to family, what it means to look out for one another. I believe we are a divinely inspired Country and as these times turn our face back into the light of inspiration our minds will be centered on the greatness of God and the darkness of the future lights up and becomes much less daunting otherwise.

The catalyst for a man to make a permanent change is when he is on the edge of an abyss. The abyss seems to be coming more into view.

I woke up this morning and started looking over all of my favorite business news websites and I saw that the headlines for today was something like…..,

“Economic Growth at a Standstill, Revised Government reports 2^nd Quarter Growth Down Sharply”

I get asked often, “who is your business” because, people want to know, is housing recovering. My reply to this question is normally,

“The worse the economy gets, the better my business. I am Bentley shopping have you seen the new Bentley Continental GT?”

Everyone laughs in nervous anticipation thinking I was joking and that any minute now I am going to say something to diffuse the un-comfortableness floating in the air like a lead balloon but, I don’t. My point with my reply is, the economy isn’t growing, it’s not even set to grow. In fact, the economy is actually set to fail and fail big. People are amazed or even combatively when I say these things, it’s almost as if they are walking around in a drug educed stupor with the thought bubble floating over their head that reads something like,

“YES, WE CAN” or “HOPE” and even better, “CHANGE”

The economy reminds me of that scene in the movie Constantine where Keanu Reeve’s character “John Constantine” has a face to face encounter with the angel Gabriel who want’s to make the human race earn the love of God by hastening the coming of Satan’s son. Gabriel explains her madness by elaborating that the human races is capable of such incredible triumphs but, through her years of observing us, she realizes that we only change when we are on the event horizon of total destruction or despair. She goes on further to say, she will bring further our destructions so that we can rise to the occasion and be found worthy of God’s love and grace.

Yes, it’s a sick, crazy understanding of human nature but, what could we ever expect from a being (an angel) who has felt as a 2^nd class race for eternity? You need to understand the concept from Gabriel’s point of view. She knows, God has put her and her race as 2^nd, in behind humans which in her eyes have done nothing but, thrown Gods incredible grace back in his face whereas, she and the other angels have served and will serve for eternity without such love or forgiveness.

In many ways, this battle that Gabriel struggles with, in the movie, is suppose to be a reflection of the concept of communal grace or collective salvation and manifest destiny.

In other words, Gabriel can’t be saved from these wretched horrible, less than desirable position behind humans unless everyone can be saved and she believes it’s God’s will and that she is doing God’s work and come hell or high water, she is going to make it happen.

Now, let me ask you, do you believe this theology could be present in our current Government leadership?

Yeah, I know….the movie analogy is a bit fanciful and maybe a bit ridiculous but, it’s a good analogy none the less.

Is it possible that our Government is being lead to bring forth fundamental change in the way of transforming our country into a socialist utopia where Government knows best. Is it possible that some in our Government feel it’s their destiny to make these changes and they are doing a good work by following what they believe is God’s will for their lives? Is it possible that some in our Government are working towards this transformation by creating a environment of total destruction so that they can rise up as our saviors and cleanse us of this evil capitalism that we suffer from?

Here is what I know. I know that Franklin Roosevelt announced in a radio program that he believed in a 2^nd Bill of Rights, of which, this administration has succeeded in accomplishing a few of those items.

The specific right I want to focus on is “The right of every family to a decent home.”

2^nd Bill of Right # 2: The right of every family to a decent home;

Once again, the politicians realized you can’t just give people a home but, you can collapse the housing industry and everyone who has a home and paying a mortgage can keep their homes regardless if they pay or not because, the government can raise taxes, create bailouts or take over banks and simply cancel out the homeowner’s debt at the expensive of the tax payer.

Let’s be clear, the Progressive agenda to move away from our constitution or to transform our constitution has been in the works for a long time. With the Progressive control of the White House and both houses of Government, we are simply seeing a fast forwarding of their agenda.

Make no mistake, you can’t have a housing recovery without jobs and from my point of view, this Government hasn’t done anything to increase jobs. In my opinion, they have done what they can to kill jobs and that leaves me with a question…………..why.

The next time your asked about your business, the next time someone ask you when you think we will recover from this economic crisis I hope you remember this blog, I hope you ask yourself do you really know what is happening in our Government that will forever impact our industry and how we do business.

This isn’t a Republican vs. Democrat argument, this is a Constitution vs. Progressive argument of which, both go to the core beliefs that you may have about this divinely inspired country.