Prices of US single family home plunged by the largest annual amount since records began. The S&P/Case Shiller index of 20 metro cities fell 2.5% in December from November, which is a more rapid pace than the 2.3% decline in the previous period. David Blitz, the chairman of the S&P’s index committee, offered a bleak outlook: “There are very few, if any, pockets of turnaround that one can see in the data… Most of the nation appears to remain on a downward path.”

The financial markets hit an eleven year low yesterday… as concerns over nationalization and a protracted recession came to light. But some investors got a bit of comforting news from Bank of America’s CEO, Ken Lewis, today.

Lewis posted a memo on his company’s Intranet, stating that a larger state by the US government in his company is unlikely and is not even under discussion. “I have said repeatedly that our company does not need further assistance today and I don’t believe we’ll need any more in the future…That includes the potential conversion of the government’s preferred shares into common shares that would dilute existing shareholders.”

Lewis’ comments come on the heels of the widely reported 40% stake by the government in Citigroup that is currently under consideration. In that case, Citigroup reportedly has approached the government with a plan to convert the $45 billion in preferred shares into a new convertible stock which can then be converted over to common equity. This might not call for additional money from the government, but instead it would boost Citigroup’s “tangible common equity,” or TCE.

The TCE is a measure of a bank’s capital and therefore strength. As the Obama administration begins to “stress test” the nation’s banks, many believe that the TCE will be a key measure of the health of a bank and is even more important than Tier 1 capital ratios. Currently Citigroup’s TCE is 1.5% of assets, but regulators want to see a TCE of at least 3% of more.

Mortgage finance company Freddie Mac said it will allow some borrowers to rent out their homes after losing them to foreclosure.

 The goal of the new policy, announced Friday, is to prevent properties from becoming vacant so they won’t fall into disrepair.

Freddie Mac also said it will allow renters to remain in their homes even if their landlord enters foreclosure. The McLean, Va.-based company currently has about 8,500 properties in the foreclosure process, but many of those are vacant.

“Keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in the housing market,” said Freddie Mac Chief Executive David Moffett.

As many California communities have discovered, foreclosures can be a blight on neighborhoods.

Under Freddie Mac’s new policy, tenants and former property owners need to demonstrate that they have enough income to pay the rental bill. Freddie Mac also said it would consider reinstating a mortgage for those borrowers who can qualify for a modified loan.

Also of note:

Both Fannie Mae and Freddie Mac also said today they would extend a previously announced suspension of evictions through the end of February. Fannie and Freddie combined own or guarantee about half of the $10.6 trillion in outstanding U.S. home loan debt.

It will be interesting to see how this plays out and how quickly. I’d love to hear from anyone who ends up renting back their former residence.

Here is a great article published in Realty Times interviewing Dwan Bent-Twyford on why short sales are a great option for both real estate investors and distressed homeowners. Ms. Twyford is interviewed by Peter Mosca, President and Founder of  BAK Communications. Enjoy

Mosca: In your book “Short-Sale Pre-Foreclosure Investing,” you list your mission statement as, “to teach others how to successfully buy and sell property and increase their quality of life. The seeds you sow today will be the harvest you reap tomorrow.” Could it be said anymore succinctly?

Bent-Twyford: I like that mission statement. I’ve had it for many, many years and I still feel the same way. I just spend so much time trying to help people have a better quality of life. When you read business magazines like Forbes and they always talk about how everyone accumulated new wealth, the number one way is always through real estate and that’s a great thing. Even in a market like this, when people think things are so bad in the market is so horrible and the sky is falling and property values are dropping, that’s good news for real estate investors and people who have a real estate license. Adapt to the market changes. For example, we always wholesale properties, meaning we get them under contract and flip them to somebody else. Because the market is down, equity is down, people owe what their houses are worth, we’ve had to adjust what we do to be able to still make money and be on top during this market.

Mosca: How have you adjusted?

Bent-Twyford: A really important need in the market now is learning how to do short sales, or negotiating with the bank to take less than what’s owed against the property. There are millions and millions of foreclosures or people behind on payments and the number is growing and growing every day. Most of those houses don’t have equity because people took out creative loans, interest only loans, borrowed 100 percent of their money and then when their payments reset and the markets dropped everyone lost the equity in their property.

By doing short sales, we are able to build the equity in and are wholesaling as much as we ever did and we always have. The only real difference for us is that we are wholesaling mostly to landlords now instead of rehabbers. Rehabbers sell to retail buyers and retail buyers are having a hard time getting credit and landlords are buying up as much as they can because they’re getting the house for 50 percent of the value. The most important thing is the price. The price dictates everything. You can take the worst house in the world, sitting right smack in the middle of a railroad track and in the worst the neighborhood and it will still sell if it’s priced right.

Mosca: In your book you encourage readers to “help homeowners in distress and get a deal for yourself.” Can you talk a little bit more about how you can make yourself a little money but also help people out at the same time?

Bent-Twyford: The thing about short sales that is so great is that when we are able to negotiate with the bank to accept the short sale, the homeowners don’t lose their house at the foreclosure sale. It helps the homeowner because they do not end up with a foreclosure on their credit report. We are able to buy the house for 50 percent of the value and give the homeowners some money to move and get a fresh start. For example, I get a $200,000 house for $100,000, I can turn around and sell it to a landlord for maybe $140,000. I’ve made 40,000 bucks which is a great deal for me, the homeowner did not get a foreclosure on their credit report, and the landlord just got a house $60,000 below market so everybody wins.

Remember, when your house goes all the way to the foreclosure sale where you lose your house and the bank takes the best of your property, at that point the foreclosure on your credit report can drop your credit maybe 150 to 175 points. That is a lot. With a short sale, the bank will put it on your credit report in different ways. They might put short sale, they might put satisfied, they might put satisfied by a short sale so when we are negotiating with the bank we ask the bank to put it down on the credit as being satisfied. That way, it looks as if the homeowners sold the house and satisfied the loan.

Mosca: In your book you talk about the biggest mistake new investors’ make is offering too much for a property. Can you speak to this aspect of the process?

Bent-Twyford: When we do short sales, we only offer the bank 35- to 40-percent of the retail value. With a $200,000 house that is actually worth $200,000, my first offer would be $75,000 or $80,000. I know that seems really, really low but as I’m going through my short sale process, I’m going to submit information to the bank, I’m going to present a really good package. I’m going to show the bank all the reasons why they should take less on my deal right now as opposed to letting it go to the foreclosure process, possibly bankruptcy, eviction and a month on the market once they try to retail it. I’m going to try to build a case and show them all the reasons why they should take less than try to buy that house for 50 percent of the value.

Mosca: What makes up that good package? How do you make it so the bank will work with you?

Bent-Twyford: First, we don’t want to be doing any sprucing. Remember, I’m trying to get the bank to take less than what’s owed. We don’t want anyone to be painting and sprucing and making it look any better. I want it to look as bad as possible. The gist of it is when we put a package together, we actually put together and prepare three offers. On the $200,000 house, again as an example, I know I’m going to offer $80,000. I may come back on my second offer and raise it to $92,000.

Then, with my third offer, I really want to try and buy this house so I offer $100,000. I’m going to raise my offer a couple times, so I’m leaving room to negotiate and appear flexible. I’m going to actually present three independent packages, each one from a different point of view. My first package is going to be all about the homeowner, their distress, what’s happening in their lives, any disrepair their house might have and anything that might help build an emotional attachment between the bank rep and my homeowner. Then when they come back with a counter offer, I’m going to talk about the area, the market, all the things on the news, the bailout and all the bad things. Then when they come back and I go in for my final offer, I’m going to say this is my last offer and present to them a timeline that lays out how much money they are losing since the very first missed payment.

Mosca: Understanding that particular market is valuable because while you’re paying $.50 on the dollar, in your example, the market might actually be worth .38 or .43 cents on the dollar.

Bent-Twyford: Absolutely. A lot of times when we do short sales the bank will take so long to get back to us that by the time they get back to us, we have to go back in and lower our offer because the offer of $100,000 was good three months ago but now I can’t pay more than $85,000. One of our goals in having the three package concepts is to get through those three offers inside of 30 days and try and get the bank to say “yes” now, not in three months.

Mosca: what is your golden nugget?

Twyford: My nugget is for the homeowners. If you’re a homeowner, do not let the banks bully you. Banks are in no position to pull you right now. They don’t want your house. They are not in the business to own real estate. They are in business to lend money. They have so many properties right now and are not in the position to be bullying you around. Call the banks up and work something out.

If you’ve been considering buying your first home, buying a new home or looking to add a holding to your existing real estate investment portfolio, short sales and REO properties should definitely be on your list for further examination. Here are five excellent reasons to broaden your horizons and work with your real estate professional to explore both short sales and REO properties:

1. Inventory is plentiful – Banks have an excessive amount of REO inventory on the books and quite simply, they want to sell it. This makes the market very buyer-friendly and places you in a position to acquire a property at below-market value.
2. Rental Rates vs. Mortgage Payments – The correction in housing prices have brought mortgage payments much more in-line with rental rates in many areas. For the home buyer and real estate investor, this presents a very favorable scenario as cash flow is more likely today and tomorrow. A great time to buy a rental property in the right area.(Be sure to check vacancy rates, crime stats, etc.)
3. Time is of the essence – When looking at properties that are short sales, there is a definite time constraint with the seller, imposed by the bank. You and your agent/broker may find that you stand an excellent chance of picking up a property in short sale when it’s close to the bank’s deadline. Have your agent/broker do some legwork and call the lender to get the scoop.
4. Specialization – With the increase in short sales and REO properties on the market due to the economy, there are many real estate professionals who specialize in these areas. If you’re going the route of bidding on a short sale or REO property, it’s extremely beneficial to have the assistance of a seasoned professional who has relationships with banks and is familiar with the bidding process. An unfamiliar agent/broker can end up wasting your time in the bidding process if they don’t understand the legwork involved in helping you submit a competitive quote. When you’re buying something as substantial as real estate, this increase in specialization is an added benefit for every buyer.
5. Find your niche – Believe it or not, there are many buyer and agents/brokers alike who won’t deal or even look at short sales and REO properties. This means that as an educated buyer working with a savvy professional, you’re narrowing the pool of bidders for your dream home. Do your homework, understand the bidding process and establish your boundaries for a successful bidding process. Teaming with a real estate professional who specializes can only improve your short sale and REO buying experience.

9. President-elect Barack Obama won’t tell the city to drop dead. Experts say his proposed stimulus package could provide a boost to the city.

8. We won’t lose the 285,000 manufacturing jobs that did between 1969 and 1976. In fact, we have only 93,400 left. A diversified economy with strong health care and education sectors could hold the city up, if cuts aren’t too harsh.

7. More New Yorkers have a stake in the city. Home ownership has climbed to 33% from 26% in 1975.

6. More women are working. Dual incomes could provide a buffer for families affected by layoffs.

5. The police force remains well above the 1970s levels, despite looming cuts.

4. Cities are hip, which was not the case in the 1970s, when Americans flocked to the suburbs.

3. There’s nowhere else to go. We may be struggling, but look at London and Lansing, MI.

2. There’s immigrant power. The growth rate of these newcomers to the city may be slowing, but they’ve helped turn many once struggling sections into vibrant neighborhoods.

1. New York is more “Sex and the City” than “Taxi Driver”

Some other comments in the article:

“the city’s unemplyment rate will hit 9%” -Fiscal Policy Institute

“the city will lose 175,000 jobs, including 38,000 Wall Street jobs” – NY State Comptroller

“Wall Street bonuses will be cut in half” – NY State Comptroller

“City real estate transaction taxes are forecast to fall 29% in fiscal 2009″ – City of NY’s November 2008 Plan

“City business tax revenues are forecast to drop 14% in fiscal 2009″ – City of NY’s November 2008 Plan

“Local residential construction will fall 43%, to 20,285 units” – New York Building Congress

Some alarming numbers here, and there will be more of this to come. The media will keep pounding these negative sentiments down our throats until we are blue in the face. Yes it is reality, but their job is to make a situation as negative as possbile. What are they saying about the real estate market right now? It is the worst market in history. Well that depends on who you ask. Are you asking buyers or sellers? A seller will tell you that this is the worst market in history. If you are trying to sell (and I hope you are, because I will buy you are going to get a fraction of what you would have received if you sold in 2006.

If you are buying you would consider this one of the best markets in history. Houses all over the country are being sold for pennies on the dollar even in big, bad, isolated Manhattan. The Manhattan real estate market will be down 15% in 2009 and another 4% in 2010.

Are you a buyer or a seller? If you are one of the individuals feeling it out there. Contact me. I would love to help!!

To your future.

“The nation’s unemployment rate bolted to 7.2 percent in December, the highest level in 16 years, as nervous employers slashed 524,000 jobs, capping one of the worst years in modern history for American workers.

The Labor Department’s report, released Friday, underscored the grim toll the deepening recession is having on workers and companies. And it highlights the difficulty President-elect Barack Obama faces in resuscitating the flat-lined economy. This year has gotten off to a rough start with a flurry of big corporate layoffs, pointing to another year of hefty job reductions.

For all of 2008, the economy lost a net total of 2.6 million jobs. That was the most since 1945, when nearly 2.8 million jobs were lost. Though the U.S. labor force has more than tripled since then, losses of this magnitude are still being painfully felt.

With employers throttling back hiring, the nation’s jobless rate averaged 5.8 percent last year. That was up sharply from 4.6 percent in 2007 and was the highest since 2003.

While economists were forecasting even more payroll reductions in December — around 550,000 — job losses in both October and November turned out to be deeper than previously estimated. Revised figures showed employers slashed 584,000 positions in November and 423,000 in October.

The unemployment rate, meanwhile, rose from 6.8 percent in November, to 7.2 percent last month, the highest since January 1993. Economists were expecting the jobless rate to rise to 7 percent.

Losses were widespread in December. Construction companies slashed 101,000, and manufacturers axed a a whopping 149,000 jobs. Professional and business services got rid of 113,000 jobs. Retailers eliminated nearly 67,000 jobs, and leisure and hospitality reduced employment by 22,000. That more than swamped gains in education and health care, and the government.

All told, 11.1 million people were unemployed in December.

Employers are chopping costs as they try to cope with dwindling appetite from customers in the U.S. as well as in other countries, which are struggling with their own economic problems.

Not only are employers cutting jobs; they also are cutting workers’ hours. The average work week in December fell to 33.3 hours, the lowest level on records dating to 1964.

And the number of people who work part time — a category that includes those who would like to work full time but whose hours were cut back or those who were unable to find full-time work — jumped to 8 million in December, from 7.3 million in November.

Workers with jobs saw modest wage gains.

Average hourly earnings rose to $18.36 in December, up 0.3 percent from the previous month. Economists were expecting a 0.2 percent increase. Over the year, wages have increased 3.7 percent, although high prices for energy and food earlier this year made people feel like their paychecks weren’t stretching that far.

The U.S. recession, which just entered its second year, is already the longest in a quarter-century, and is likely to stretch well into this year. The fact that the country is battling a housing collapse, a lockup in lending and the worst financial crisis since the 1930s make the current downturn especially dangerous.

G&K Services Inc., which provides uniforms and facility services, on Friday said it is eliminating 460 jobs as it aims to trim costs amid weak demand. And late Thursday, Intermec Inc., which makes electronic devices for tracking inventory, said it plans to cut 150 jobs, or 7 percent of its work force.

Earlier this week, drugstore operator Walgreen Co., managed care provider Cigna Corp., aluminum producer Alcoa Inc., data-storage company EMC Corp. and computer products maker Logitech International all announced major layoffs to cope with the recession.

All the problems have forced consumers and companies alike to retrench, feeding into a vicious cycle that Washington policymakers are finding difficult to break.

Obama says a bold approach is needed to bust through this cycle and revive economy.

“I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible,” he said Thursday.

“If nothing is done, this recession could linger,” Obama warned. “The unemployment rate could reach double digits.”

Obama, who takes over Jan. 20, is promoting a massive package of tax cuts and government spending that could total $775 billion over two years. With add-ons by lawmakers, the package could swell to $850 billion, his advisers say.

Even with a new government stimulus and the Federal Reserve’s decision to ratchet down a key interest rate to an all-time low, the unemployment rate is expected to keep rising. Some economists think it could hit 9 or 10 percent at the end of this year.”

Lawrence Yun, NAR chief economist, said a weakening was inevitable. “Mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November,” he said. “December’s housing market activity could be comparably lower due to ongoing problems in the economy, so a real estate-focused stimulus plan is urgently needed.”

Regionally, the index showed these statistics for November:

Northeast down 7.2 percent
Midwest down 6.7 percent
South down 2.2 percent
West down 2.4 percent

According to Fortune Magazine, my market, New York City, is projected to be down 15% in home value in 2009, and down another 4% in 2010.

And the good rate news has lenders busier than they’ve been in a year. The Mortgage Banker’s Association index of mortgage application activity held steady this week at 1,257.7, which is its highest level since July 2003.
And this dip in interest rates is not stopping anytime soon. Expect interest rates to dip below 5% by Q2.

To your future -

I help people like you and me.

There are many reasons why a homeowner would need my assistance:

Pending divorce? Many times, couples need to sell their house because neither one will be able to afford the mortgage payment once the divorce is final.

Death in the family? Are you the executor of an estate of a deceased family member and you need to sell the house quickly?

Job relocation? Was a family member’s job recently relocated to another part of the country and you need to sell quickly in order to buy your new house in your new town?

Financial hardship? Have you come to a point where you can’t afford your current mortgage payment because of an adjustment on your loan? Job loss?

Whatever your situation is, I can help. Unfortunately, more and more homeowners are faced with the need to seek me out to help them get out of their current debt obligation. I can save them from the bank foreclosing on their home. I can negotiate a “short sale” with the bank so that you can get on with your life and not have your credit ruined with a foreclosure on your record. Please stay up to date with these entries, as I will be updating you on what is currently happening in today’s real estate market on both a national and regional level.
I will also be focusing on the “short sale” – what it is, how it can be advantageous to you, and what your other options are to preserve your financial future.

To the future -