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Home Values at or Near Pre-Recession Highs in 1000+ U.S. Cities…or Are They?

Ask any Realtor, name the single most important  economic impact to housing and they will tell you, its jobs. Yes, it really is that cut and dry, you must have a job to get and keep a home. So, a recent article by RISMedia really caught my attention as it announced “Home Values at or Near Pre-Recession Highs in 1000+ U.S. Cities”. You see, I don’t understand how this can be, especially when you look at our employment numbers.

Back…right before the recession, our lowest unemployment number was 4.4% in May of 2007 and for all of us, the talk of a bubble was rumored to be some crazy economic conspiracy theory. During this time, we had NINJA loans and taxi cab drivers flipping 300,000 homes on the side with their interest only loans. To the best of my knowledge, those times haven’t returned and in fact, our unemployment rate is 6.3% and that doesn’t include the “real” unemployment number which includes all of those that dropped out of the workforce.

First, I asked myself, when was the last time we had a 6.3% unemployment rate and what was housing doing then? Well, the last time we had anything close to a 6.3% unemployment rate was back in September / October 2008, when the recession was getting into full swing. Housing then was terrible, prices were falling, foreclosure were skyrocketing and the industry started talking more and more about short sales. So, why is this 6.3% unemployment rate any different?

Truth is, it’s not. Regardless of your political persuasion, a 6.3% unemployment rate is still a 6.3% unemployment rate and as such, we really should be seeing similar housing prices and trends to what we saw back in 2008. So, why aren’t we?

In my opinion, the biggest single reason why housing isn’t acting the same as it did in 2008 is because of the loss mitigation techniques employed in recent years by many of the “to big to fail” servicers who contributed to why we had a bubble in the first place. Let me be more specific

When a bank gives John Smith a loan for a home, the bank relies on the fact that John will be able to pay back that loan and, build equity. A lot of people don’t understand, the bank needs both things to happen otherwise they loose out big. You can build equity at least 2 ways. First, you build equity by forced savings when you make a mortgage payment each month. Secondly, you build equity if home prices rise, either way, you build equity. For many Servicers (Banks), who gave out risky loans, their clients like John Smith, bought a home he couldn’t afford and therefore, couldn’t build equity and before you know it, John was in a negative equity situation, that is, he owed more on the home than what it was worth. Now, sadly, these banks have lost money however, it’s not really the “banks” money so much as it’s the money of the banks depositors…you and me. Well, some banks, lent out so much money that they were actually concerned that if a run was to happen on their bank, they literally wouldn’t have the cash on hand to actually pay people back on their deposits. That’s right, you could have ended up going to the ATM to withdraw your money and the ATM has no money to give you. Granted, it’s a bit more complicated but, you get the idea.

In order to lessen the impact or mitigate the loss of these bad decisions, many banks moved these non-performing assets or clients like John Smith to shell companies called NBS’s or Non-Bank Servicers. This way it looks like they took the loss on their books and that they are “recovering” and doing much better. The reality is, they have these NBS’s hold these NPA (Non-Performing Assets) in this shell company by offering clients like John Smith some type of deal to “save their home from foreclosure”. These schemes will keep the homeowner in the home for years if necessary, just to prevent the foreclosure. Obviously the more foreclosure a bank has on it’s spreadsheets, the worse the finical condition it appears to be in and WallStreet isn’t having that.

So, here is where it gets very interesting. Let’s say, you have a neighborhood where 25% of the homeowners are upside down, granted….we all know that’s actually a very low number for most of us. The vast majority of the country is still in a Negative Equity situation and per the article I referenced above, it eludes that only about 30% or less of America is in positive equity so that means that 70% of us still haven’t recovered. None the less, let’s say that 25% of a neighborhood is upside down and of that 25%, let’s say 70% of them are owned by Great Bank. Well, Great Bank knows the law of supply and demand and then decides to do some “save my home” schemes and hold foreclosure at bay by offering to keep homeowners in their home at all cost. Sounds ok…right?

Well, it’s not ok because, what they are doing is artificially creating a bubble by using loss mitigation techniques through NBS’s. That’s right, you see an increase in prices, even thought unemployment hasn’t gotten good enough to warrant the price increase in a free market therefore, it’s a bubble. At the very least, you will see a turbulent few years of peaks and valleys in prices because the bank is slowly, trickling inventory on the market as prices rise to capitalize and lessen their loss. Keep in mind, because they own so much inventory in that particular neighborhood, they are literally able to control the price by simply controlling their own inventory and therefore, they can pick and choose which neighborhoods win and which suffer a foreclosure influx.

Now, take that and add the new QL (Qualified Loan) guidelines release this year, the pull back of QE (Quantitative Easing), the further tightening of credit markets with bank to bank lending and what do you end up with? You end up with a completely unjustified housing price bubble that you better be concerned with.

Sure, right now, it doesn’t seem that it’s too bad but, if this continues through the circular selling season and into the fall or even winter of 2014….I would be very cautious…very cautious.

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Russia Took Aim at US Housing and Fired Warning Shot.

The claims may be inflammatory however, Hank Paulson, former US Treasury Secretary during the 2008 financial crisis that saw the bursting of the American housing bubble says he was approached by Chinese senior leadership who claimed that during our 2008 financial crisis, they wanted to partner with China to sell Fannie Mae and Freddie Mac securities in hopes of further crippling the US financial markets.

Hank Paulson, “Here I’m not going to name the senior person but, I was meeting with someone…. This person told me that Chinese had received a message from the Russians which was, “Hey Let’s join together and sell Fannie and Freddie securities on the market” The Chinese weren’t going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fannie and Freddie into conservatorship.”

For many years now, I have been writing blogs on just how terrible our debt crisis is. I have been land blasted by the progressive liberal left that argue we don’t have a debt crisis and my fears are unfounded….or even worse, the stuff of conspiracy theories. I have stayed true to my believe that having so much of our debt controlled or in the hands of foreign countries that aren’t allies of America is dangerous and one day, may come back to haunt us. The quote from former Secretary of the Treasury further strengthens my position that wars in the future will expand to more than just ground forces taking over a sovereign nation however, digital warfare and economic warfare will become more common in this new century.

If you don’t see the urgency of our debt crisis and how our uncontrolled spending could be a fatal shot to our economic health as a country….just ask Russia what their opinion is. Based on this communication Hank had with China, our enemies see our debt crisis as an opportunity to bring us down. The fact that Hank would come out and say this now should be eye opening, it should shake this country to it’s very foundation. Lady Liberty will be crushed under the mighty weight of debt….a burden she isn’t naturally strong to carry.

My point, is that our Liberty, our Freedom, our America can only survive, thrive, prosper when we as a country are not vulnerable to outside economic warfare. Our problem is, economic warfare is preventable, it’s easily remedied by controlling our spending however, like a meth addict, what is it going to take for us to hit our preverbal bottom….what do we have to go through before those dependent on the system wake up and ask themselves not what your country can do for you but, what can you do for your country?

By then, it may be too late.

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I have received several emails and contacts from agents asking about a newly formed group that is soliciting memberships by the name of US REO.  They are asking for over $2000 annual in dues to "join their membership".  Their benefits are nicely laid out on their web site and there is nothing there that I can see that is worth 10% of their $175.00 per month dues.  I can find most of what they offer for much less or free for that matter.  We network with other REO Pros right here so why would you want to pay them for this service?  It seems like every one of these "member only" groups has a claim somewhere that would make you think that they can expose you to vendors and lenders to get REO Listings so let me ask you this, WHO HAVE YOU PAID TO GET LISTINGS?  I have been listing and selling REO's for over 20 years and have never once gotten a listing from a pay to play or "platinum" upgrade from any platform.  I get them the old fashioned way.  I send out resumes and signe up for BPO & REO sights each and every month, month after month, year after year, and work my way up the food chain.  I have two successful REO Branches and even in this slow time I am still listing and selling multiple REO's every month. 

 

BUYER BEWARE....If someone wants you to pay an annual fee, monthly dues, or upgarde fee only do this when they can guarantee you work. I bet not one of them will make this guarantee. I know I have been there and done that and all I got was less money in my bank account. Getting listed on some directory on someones web site is NOT going to get you business.  Good old prospecting will.

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Hyperinflation on it's way.

The threat of hyperinflation is more real as Russia and China announce that they are renouncing the U.S. Dollar for and will use domestic currency in bilateral trade.

So, what does that mean to you, average American.

Well, first you need to understand that the only reason the US Dollar was chosen to be the World reserve currency is because, no other currency in the World was as stable as the US Dollar.

Now, that has all changed. With the Fed doing these “Quantatative Easements” which is essentially monetizing the debt, the world is wising up and moving out of the dollar.

It just dosen’t make any monetary sense for these countries to hold onto US Dollars because they are loosing money due to the fact the Fed is monetizing the debt. To make this a bit more real for you to understand, imagine for a second, you and I are countries. So, let’s say…..I want to sell you something, anything but, you can’t pay for it right now, you need to pay for it in six months, when we ultimately settle. Now, here is the problem. If your currency that you pay me in isn’t stable and it’s value drops 10% over that 6 months well, I just lost 10% on my deal.

Now, translate that to how America is purchasing money from China in the form of loans. China isn’t going to continue to loan because even if they charge us higher interest rates, we are devaluing our money so quickly, they still end up loosing millions, billions and possibly trillions of dollars before the bill is even due!

So, what does China do? They start selling off their dollars by renouncing the dollar and moving all their trade deals to their own domestic currency. In other words, they will flood global markets with so many dollars that instead of seeing dollar values drop 10% over 6 months, we can see it drop 10% in hours.

In other words, domestic US prices of goods and services will skyrocket equal to the amount of loss and because this will create panic with in the US financial system, you will see a run on banks which we all know, they don’t have the cash to pay out because of the real estate bubble bursting.

I am normally not a doomsday type of person however, when countries start announcing that they are no longer trading their goods and services in US Dollars but, instead they start selling those dollars to try and recoup whatever they can, I am afraid we may have slept through the wak up call.

The point is, the more Quantatative Easement we do, the more we end up screwing foreign countries and the less powerful our dollar becomes against other currencies. The biggest fear is that ultimately our country could end up moving towards a more socialist society in response to this mistake the Feds are making.

The IBT reports:

“We agreed to expand the possibilities for application of national currencies during trade and economic contacts,” said Russian Prime Minister Vladimir Putin after holding talks with the Chinese premier Wen Jiabao.

However, the move is not aimed at challenging the dollar but to protect their economies, as the countries started exploring other options in the wake of the global financial crisis.

With Russian ruble already trading on the Chinese exchange, yuan trade in Moscow is expected to begin in early December.

The bilateral trade between the two countries is estimated to reach above $50 billion by the end of 2010, according to the Russian government. A major chunk of the trade is transacted in US dollars currently.

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