NAR - short sales key to solving crisis
Stabilizing and restoring the health of the housing market is
critical to a broader economic recovery, according to a white
paper released yesterday by the Federal Reserve Board. Many of
the issues and recommendations outlined in the paper support key
principles established by the National Association of Realtors
(NAR) to help revitalize the housing industry and economy.
The white paper, The US Housing Market: Current Conditions and
Policy Considerations, calls for increased lending to
creditworthy home buyers and more loan modifications, mortgage
refinancings, and short sales to reduce the rising inventory of
foreclosed homes and help stabilize and revitalize the housing
industry; an approach long recommended by NAR to help spur the
housing market recovery. “As the nation’s leading advocate
for homeownership and housing issues, NAR knows that a strong
housing market recovery is key to the nation’s future economic
strength,” said NAR President Moe Veissi. “Improving access
to affordable mortgage financing for qualified home buyers and
investors and aggressively pursuing more loan modifications and
short sales is necessary to help reenergize the housing market
and spur an economic recovery.”
For homeowners who are unable to meet their mortgage obligations,
NAR has urged lenders and servicers to quickly approve reasonable
short sale offers so these people can avoid foreclosure. The
short sale process can be time-consuming and inefficient, and
many would-be buyers end up walking away from the transaction.
“Loan modifications and short sales help stabilize home values
and neighborhoods, and limit the losses incurred by lenders, the
federal government and taxpayers, which is good for everyone,”
said Veissi.
Jobs report strong
Non-farm payrolls jumped 200,000 in December, according to the
Labor Department, pushing the jobless rate to a near three-year
low of 8.5%. Economists polled by Reuters expected a gain of
150,000. "Today's figure should not come as a great surprise,"
said Todd Schoenberger, managing director of LandColt Trading,
adding that recent macro data had been pointing to good results.
"The wildcard is January as retailers trim seasonal staff. An
upside surprise for this month will validate the argument that an
economic recovery is, indeed, talking place." The report comes
after a handful of employment reports on Thursday that boosted
sentiment as the number of planned layoffs at US firms fell to
its lowest level since June last year, according to the report
from consultants Challenger, Gray & Christmas. Private sector
employment climbed 325,000 in December, much stronger than
expected, according to payrolls processor ADP.
Bove - mortgage refinancing will hurt banks
Speculation that a new mortgage refinancing plan may be
introduced drove bank stocks higher Thursday, but noted banking
analyst Dick Bove believes investors actually got it wrong. He
told Larry Kudlow that a program like that would actually
“harm” banks. “It’s bad for banks, it doesn’t help
them in any way, shape or form,” Bove said. The speculation
was fueled by reports that suggested the White House may be
preparing a new trillion-dollar plan to refinance home loans.
However, administration officials told CNBC’s Dana Olick that
they are not considering a $1 trillion refinancing program. The
fact that bank stocks went up on the possibility of such a
program makes no sense whatsoever, Bove said. In fact, he thinks
a mortgage refinancing plan would cause banks to lose money.
“If you add up all the sources of profit or loss,” he said,
“they lose more than they gain.” So why did the banks, like
Bank of America, shoot up higher? Bove thinks it was a simple
misreading of what a mortgage refinancing program would do for
the banking industry.
He believes investors may have thought it might affect
foreclosures, putbacks to the banking industry and the service
income of the industry. However, Bove said it would do none of
that. “It harms the banking industry,” he said. “All it
is, is taking a lot money from one class of people and giving it
to another class of people under the theory that the second class
of people would spend the money more than the first class." And
banks aren't the only ones which could be hurt, Bove said. Only
21% of the mortgages in the US are held by the banks. 55% held by
Fannie Mae, Freddie Mac and mortgage pools, and the remainder is
held by investors, he said. "So the net affect is the people you
are taking the money away from are the taxpayers and the
investors."
Unemployment down
The Labor Department said Friday that employers added a net
200,000 jobs last month and the unemployment rate fell to 8.5%,
the lowest since February 2009. The rate has dropped for four
straight months. The hiring gains cap a six-month stretch in
which the economy generated 100,000 jobs or more in each month.
That hasn't happened since April 2006. For all of 2011, the
economy added 1.6 million jobs, better than the 940,000 added in
2010. The unemployment rate averaged 8.9% last year, down from
9.6% the previous year. Economists forecast that the job gains
will top 2.1 million this year.
The December report painted a picture of a broadly improving job
market. Average hourly pay rose, providing consumers with more
income to spend. The average work week lengthened, a sign that
business is picking up and companies may soon need more workers.
And hiring was strong across almost all major industries.
Manufacturing added 23,000 jobs. Transportation and warehousing
added 50,000 jobs. Retailers added 28,000 jobs. Even the
beleaguered construction industry added 17,000 workers. A more
robust hiring market coincides with other positive data that show
the economy ended the year with some momentum. Weekly
applications for unemployment benefits have fallen to levels last
seen more than three years ago. Holiday sales were solid. And
November and December were the strongest months of 2011 for US
auto sales. Many businesses say they are ready to step up hiring
in early 2012 after seeing stronger consumer confidence and
greater demand for their products.
Olick - renter nation
"Despite record low mortgage rates reported today and rising
affordability in most US housing markets, rent is the new reality
for former home owners and new households alike. For some it is
post-traumatic stress from the housing crash, for others it is
the inability to get financing to buy a home. Either way, the
rental market continues on its tear. In the last quarter of
2011, the apartment sector saw its largest quarterly increase in
occupied stock of the year, according to Reis, Inc. The vacancy
rate dropped to 5.2%, the lowest since 2001 and lower than the
last cyclical drop in 2006. This bucks the historical seasonal
weakness typical of the colder months of the year. The fourth
quarter also tends to be a weaker leasing period, according to
Reis, given that most households make moving decisions in the
second and third quarters.
This surge in occupancy pushed asking and effective rents up 0.4
and 0.5% respectively, which Reis calls the only disappointing
figures for the sector, missing expectations. Reis blames that on
slow economic growth and still high unemployment. 'Higher
quality properties in the most desirable locations posted rent
gains in excess of 5-10%, while class B/C properties, catering to
lower income tenants, found it relatively more difficult to raise
rents,' notes Victor Calanog, head of research at Reis. Nowhere
is that more evident than in the Washington, DC metro area where
rents are way up across the city, and developers are rushing to
erect new multi-family buildings and rehab old ones. 'Everybody
wants to be in DC,' beams Richard Key, district manager for
Camden Property Trust, one of the largest publicly traded
multifamily REITs in the nation. 'Whereas in other markets there
are deals, when you get to DC area, all the REITs want to be
here, and so we're all competing for the same piece of land, and
that's driving the price up. That is really is a challenge for
us.' Key is convinced that there has been a fundamental shift in
attitudes toward home ownership that will last for several more
years. He is not concerned that the pendulum will swing back to
buying, just as all that new rental stock hits the market around
2014. Camden has seen rents on its DC properties rise over 5% in
just the past year. 'The nice part is we haven’t seen a drop
in occupancies with that rent growth, and so the hope is that
we’re able to maintain our historical occupancies and continue
to see that 5, 6, gosh, 7% is not out of the question in the next
couple of years,' says Key.
Washington, DC will likely see those higher rents because home
prices didn’t fall very high during the housing crash and are
already rebounding. It and Detroit were the only major markets
posting annual gains on the latest S&P/Case-Shiller Home Price
Index. Other markets, like Las Vegas, where home prices are
rock-bottom thanks to a huge supply of foreclosures, the rental
market is tougher for developers and landlords. As for renter
society, it is also being fueled by tight mortgage underwriting.
Rates may be at record lows, but only if you can get them. In a
paper released Wednesday, Federal Reserve Chairman Ben Bernanke
noted, 'Continued efforts are needed to find an appropriate
balance between prudent lending and appropriate consumer
protection, on the one hand, and not unduly restricting mortgage
credit, on the other hand.' Until that balance is found,
potential home buyers will stay on the sidelines, those sidelines
being rental apartments. A new twist to watch, however, may be
that rental nation will go single family. With so many bank
owned homes left to clear, and so many in government and the
private sector looking at bulk rental investments, apartments may
have big competition in the same neighborhoods where they used to
compete against single family buyers."
IRS audits millionaires
The Internal Revenue Service (IRS) audited one in eight
millionaires who filed taxes last year while only auditing 1 in
100 individuals earning less than $200,000 in an effort to
"assure that there's equity in the system." Just 1 in 100
individuals earning less than $200,000 had their income tax
returns examined, the IRS said. The 12% of millionaire earners
audited in 2011 was appreciably higher than the 8% who were
audited in 2010. IRS officials said the high ratio was part of an
effort to demonstrate that tax laws are applied fairly. "That
has been something we've concentrated on to assure that there's
equity in the system, to assure that those at the lower end of
the spectrum know that those at the higher end of the spectrum
are subject to the same rules and enforcement as everyone else,"
Steven Miller, deputy IRS commissioner for services and
enforcement, said in an interview. In recent weeks, President
Barack Obama and congressional Democrats have sought to boost
taxes on the wealthy as a way to pay for jobs programs, a theme
they are expected to continue in this presidential and
congressional election year. IRS spokeswoman Michelle Eldridge
said the growing portion of millionaire earners' returns audited
is not related to politics. Yeah right. Message to Americans:
Achieve the American dream and we'll audit you.
WSJ - business using more space
The US office market showed modest signs of improvement in the
last three months of 2011, as employers slowly expanded in an
uncertain economic climate. The national office-vacancy rate
stood at 17.3% in the fourth quarter, slightly down from 17.4%
three months earlier, according to real-estate research firm Reis
Inc. But the rate remains stubbornly high, down just slightly
from the post-downturn peak of 17.6%, reached in mid-2010. The
office market generally reflects employment trends and companies'
views on growth over the next few years. With job growth slow,
companies have been reluctant to add new space.
The sector is still struggling with high levels of vacancy not
seen since the early 1990s, a hangover from the sharp pullback by
businesses during the downturn. The amount of space occupied by
businesses fell by 137 million square feet from 2008 to 2010,
according to Reis, which tracks 79 metropolitan areas. By
contrast, employers occupied just an additional 20.7 million
square feet in all of 2011. "We're not seeing huge moves down in
vacancy," said Chris Connelly, who heads the Chicago office for
CBRE Group, a commercial-real-estate brokerage. "We're just
niggling away at it." Overall rents have been creeping up, with
landlords seeking an average rent of $27.97 per square foot per
year in the fourth quarter, up 0.4% from the third quarter.
Still, markets vary widely, depending on whether they are home to
growing industries. Cities hard-hit by the housing crisis, such
as Las Vegas and Phoenix, have among the highest vacancy rates in
the country, above 25%. Meanwhile, growth in the technology and
energy sectors has accelerated a recovery in areas such as
Northern California and cities in Texas. Last month, landlord
Brookfield Office Properties Inc. signed a 141,000-square-foot
lease in Houston with Italian energy company Eni SpA, which is
taking a space that is 42% larger than its current lease,
according to Brookfield. "If those drivers aren't there, you're
probably pretty much seeing a very slow, gradual recovery," said
John Sikaitis, director of office research for brokerage Jones
Lang LaSalle.
Stabilizing and restoring the health of the housing market is
critical to a broader economic recovery, according to a white
paper released yesterday by the Federal Reserve Board. Many of
the issues and recommendations outlined in the paper support key
principles established by the National Association of Realtors
(NAR) to help revitalize the housing industry and economy.
The white paper, The US Housing Market: Current Conditions and
Policy Considerations, calls for increased lending to
creditworthy home buyers and more loan modifications, mortgage
refinancings, and short sales to reduce the rising inventory of
foreclosed homes and help stabilize and revitalize the housing
industry; an approach long recommended by NAR to help spur the
housing market recovery. “As the nation’s leading advocate
for homeownership and housing issues, NAR knows that a strong
housing market recovery is key to the nation’s future economic
strength,” said NAR President Moe Veissi. “Improving access
to affordable mortgage financing for qualified home buyers and
investors and aggressively pursuing more loan modifications and
short sales is necessary to help reenergize the housing market
and spur an economic recovery.”
For homeowners who are unable to meet their mortgage obligations,
NAR has urged lenders and servicers to quickly approve reasonable
short sale offers so these people can avoid foreclosure. The
short sale process can be time-consuming and inefficient, and
many would-be buyers end up walking away from the transaction.
“Loan modifications and short sales help stabilize home values
and neighborhoods, and limit the losses incurred by lenders, the
federal government and taxpayers, which is good for everyone,”
said Veissi.
Jobs report strong
Non-farm payrolls jumped 200,000 in December, according to the
Labor Department, pushing the jobless rate to a near three-year
low of 8.5%. Economists polled by Reuters expected a gain of
150,000. "Today's figure should not come as a great surprise,"
said Todd Schoenberger, managing director of LandColt Trading,
adding that recent macro data had been pointing to good results.
"The wildcard is January as retailers trim seasonal staff. An
upside surprise for this month will validate the argument that an
economic recovery is, indeed, talking place." The report comes
after a handful of employment reports on Thursday that boosted
sentiment as the number of planned layoffs at US firms fell to
its lowest level since June last year, according to the report
from consultants Challenger, Gray & Christmas. Private sector
employment climbed 325,000 in December, much stronger than
expected, according to payrolls processor ADP.
Bove - mortgage refinancing will hurt banks
Speculation that a new mortgage refinancing plan may be
introduced drove bank stocks higher Thursday, but noted banking
analyst Dick Bove believes investors actually got it wrong. He
told Larry Kudlow that a program like that would actually
“harm” banks. “It’s bad for banks, it doesn’t help
them in any way, shape or form,” Bove said. The speculation
was fueled by reports that suggested the White House may be
preparing a new trillion-dollar plan to refinance home loans.
However, administration officials told CNBC’s Dana Olick that
they are not considering a $1 trillion refinancing program. The
fact that bank stocks went up on the possibility of such a
program makes no sense whatsoever, Bove said. In fact, he thinks
a mortgage refinancing plan would cause banks to lose money.
“If you add up all the sources of profit or loss,” he said,
“they lose more than they gain.” So why did the banks, like
Bank of America, shoot up higher? Bove thinks it was a simple
misreading of what a mortgage refinancing program would do for
the banking industry.
He believes investors may have thought it might affect
foreclosures, putbacks to the banking industry and the service
income of the industry. However, Bove said it would do none of
that. “It harms the banking industry,” he said. “All it
is, is taking a lot money from one class of people and giving it
to another class of people under the theory that the second class
of people would spend the money more than the first class." And
banks aren't the only ones which could be hurt, Bove said. Only
21% of the mortgages in the US are held by the banks. 55% held by
Fannie Mae, Freddie Mac and mortgage pools, and the remainder is
held by investors, he said. "So the net affect is the people you
are taking the money away from are the taxpayers and the
investors."
Unemployment down
The Labor Department said Friday that employers added a net
200,000 jobs last month and the unemployment rate fell to 8.5%,
the lowest since February 2009. The rate has dropped for four
straight months. The hiring gains cap a six-month stretch in
which the economy generated 100,000 jobs or more in each month.
That hasn't happened since April 2006. For all of 2011, the
economy added 1.6 million jobs, better than the 940,000 added in
2010. The unemployment rate averaged 8.9% last year, down from
9.6% the previous year. Economists forecast that the job gains
will top 2.1 million this year.
The December report painted a picture of a broadly improving job
market. Average hourly pay rose, providing consumers with more
income to spend. The average work week lengthened, a sign that
business is picking up and companies may soon need more workers.
And hiring was strong across almost all major industries.
Manufacturing added 23,000 jobs. Transportation and warehousing
added 50,000 jobs. Retailers added 28,000 jobs. Even the
beleaguered construction industry added 17,000 workers. A more
robust hiring market coincides with other positive data that show
the economy ended the year with some momentum. Weekly
applications for unemployment benefits have fallen to levels last
seen more than three years ago. Holiday sales were solid. And
November and December were the strongest months of 2011 for US
auto sales. Many businesses say they are ready to step up hiring
in early 2012 after seeing stronger consumer confidence and
greater demand for their products.
Olick - renter nation
"Despite record low mortgage rates reported today and rising
affordability in most US housing markets, rent is the new reality
for former home owners and new households alike. For some it is
post-traumatic stress from the housing crash, for others it is
the inability to get financing to buy a home. Either way, the
rental market continues on its tear. In the last quarter of
2011, the apartment sector saw its largest quarterly increase in
occupied stock of the year, according to Reis, Inc. The vacancy
rate dropped to 5.2%, the lowest since 2001 and lower than the
last cyclical drop in 2006. This bucks the historical seasonal
weakness typical of the colder months of the year. The fourth
quarter also tends to be a weaker leasing period, according to
Reis, given that most households make moving decisions in the
second and third quarters.
This surge in occupancy pushed asking and effective rents up 0.4
and 0.5% respectively, which Reis calls the only disappointing
figures for the sector, missing expectations. Reis blames that on
slow economic growth and still high unemployment. 'Higher
quality properties in the most desirable locations posted rent
gains in excess of 5-10%, while class B/C properties, catering to
lower income tenants, found it relatively more difficult to raise
rents,' notes Victor Calanog, head of research at Reis. Nowhere
is that more evident than in the Washington, DC metro area where
rents are way up across the city, and developers are rushing to
erect new multi-family buildings and rehab old ones. 'Everybody
wants to be in DC,' beams Richard Key, district manager for
Camden Property Trust, one of the largest publicly traded
multifamily REITs in the nation. 'Whereas in other markets there
are deals, when you get to DC area, all the REITs want to be
here, and so we're all competing for the same piece of land, and
that's driving the price up. That is really is a challenge for
us.' Key is convinced that there has been a fundamental shift in
attitudes toward home ownership that will last for several more
years. He is not concerned that the pendulum will swing back to
buying, just as all that new rental stock hits the market around
2014. Camden has seen rents on its DC properties rise over 5% in
just the past year. 'The nice part is we haven’t seen a drop
in occupancies with that rent growth, and so the hope is that
we’re able to maintain our historical occupancies and continue
to see that 5, 6, gosh, 7% is not out of the question in the next
couple of years,' says Key.
Washington, DC will likely see those higher rents because home
prices didn’t fall very high during the housing crash and are
already rebounding. It and Detroit were the only major markets
posting annual gains on the latest S&P/Case-Shiller Home Price
Index. Other markets, like Las Vegas, where home prices are
rock-bottom thanks to a huge supply of foreclosures, the rental
market is tougher for developers and landlords. As for renter
society, it is also being fueled by tight mortgage underwriting.
Rates may be at record lows, but only if you can get them. In a
paper released Wednesday, Federal Reserve Chairman Ben Bernanke
noted, 'Continued efforts are needed to find an appropriate
balance between prudent lending and appropriate consumer
protection, on the one hand, and not unduly restricting mortgage
credit, on the other hand.' Until that balance is found,
potential home buyers will stay on the sidelines, those sidelines
being rental apartments. A new twist to watch, however, may be
that rental nation will go single family. With so many bank
owned homes left to clear, and so many in government and the
private sector looking at bulk rental investments, apartments may
have big competition in the same neighborhoods where they used to
compete against single family buyers."
IRS audits millionaires
The Internal Revenue Service (IRS) audited one in eight
millionaires who filed taxes last year while only auditing 1 in
100 individuals earning less than $200,000 in an effort to
"assure that there's equity in the system." Just 1 in 100
individuals earning less than $200,000 had their income tax
returns examined, the IRS said. The 12% of millionaire earners
audited in 2011 was appreciably higher than the 8% who were
audited in 2010. IRS officials said the high ratio was part of an
effort to demonstrate that tax laws are applied fairly. "That
has been something we've concentrated on to assure that there's
equity in the system, to assure that those at the lower end of
the spectrum know that those at the higher end of the spectrum
are subject to the same rules and enforcement as everyone else,"
Steven Miller, deputy IRS commissioner for services and
enforcement, said in an interview. In recent weeks, President
Barack Obama and congressional Democrats have sought to boost
taxes on the wealthy as a way to pay for jobs programs, a theme
they are expected to continue in this presidential and
congressional election year. IRS spokeswoman Michelle Eldridge
said the growing portion of millionaire earners' returns audited
is not related to politics. Yeah right. Message to Americans:
Achieve the American dream and we'll audit you.
WSJ - business using more space
The US office market showed modest signs of improvement in the
last three months of 2011, as employers slowly expanded in an
uncertain economic climate. The national office-vacancy rate
stood at 17.3% in the fourth quarter, slightly down from 17.4%
three months earlier, according to real-estate research firm Reis
Inc. But the rate remains stubbornly high, down just slightly
from the post-downturn peak of 17.6%, reached in mid-2010. The
office market generally reflects employment trends and companies'
views on growth over the next few years. With job growth slow,
companies have been reluctant to add new space.
The sector is still struggling with high levels of vacancy not
seen since the early 1990s, a hangover from the sharp pullback by
businesses during the downturn. The amount of space occupied by
businesses fell by 137 million square feet from 2008 to 2010,
according to Reis, which tracks 79 metropolitan areas. By
contrast, employers occupied just an additional 20.7 million
square feet in all of 2011. "We're not seeing huge moves down in
vacancy," said Chris Connelly, who heads the Chicago office for
CBRE Group, a commercial-real-estate brokerage. "We're just
niggling away at it." Overall rents have been creeping up, with
landlords seeking an average rent of $27.97 per square foot per
year in the fourth quarter, up 0.4% from the third quarter.
Still, markets vary widely, depending on whether they are home to
growing industries. Cities hard-hit by the housing crisis, such
as Las Vegas and Phoenix, have among the highest vacancy rates in
the country, above 25%. Meanwhile, growth in the technology and
energy sectors has accelerated a recovery in areas such as
Northern California and cities in Texas. Last month, landlord
Brookfield Office Properties Inc. signed a 141,000-square-foot
lease in Houston with Italian energy company Eni SpA, which is
taking a space that is 42% larger than its current lease,
according to Brookfield. "If those drivers aren't there, you're
probably pretty much seeing a very slow, gradual recovery," said
John Sikaitis, director of office research for brokerage Jones
Lang LaSalle.
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