This article will give you a breakdown of the state of the real estate market in South Florida

Many Floridians have learned the hard way: All hurricanes have three parts—the front half, the eye and the back half. The eye is a deceiving quiet period at the center of the hurricane. The eye lulls you into believing the storm has passed and all is well.In fact, the back half of a hurricane can be far more devastating than the front half. The front half of a hurricane does a lot of damage and weakens many structures. Then, when the back half hits, houses, buildings and personal property teetering on the brink of failure are utterly destroyed. Moreover, since the wind is coming from the opposite direction, anything strong enough to resist the first half is tested again by the back half.

This is exactly what’s happening in Florida’s housing and financial markets. We are in the eye of the hurricane, and the back half will hit us twice as hard as the front.The front half of the Florida real-estate hurricane was fed by a bidding frenzy that drove prices to a peak far above real demand: Flippers were not buying homes for function, just for trading. And with the Fed’s free-money policy, flippers were leveraging themselves at the same 30-to-1 and 50-to-1 levels as the financial wizards on Wall Street.This artificial demand created an inflated supply of homes. By 2006, the inventory of unsold real estate reached a crisis level . The combination of rising inventory and prices, which had no relation to demand for housing that people wanted to live in, fed the front side of the hurricane.Recently, however, there has been a lull in the windstorm. Would-be buyers are returning to the market.

Over the past few weeks, we’ve been seeing 300% increases in traffic at our open houses from a year ago. Builders and real-estate agents report that offers are up, along with traffic. But this is not the end of the hurricane; it’s still the eye. What the builders and agents neglect to report is that most of the traffic couldn’t qualify to buy. Nor do they report rising rates of pending contracts that fail to close. And they don’t mention the damage being done by falling prices, which put more and more homeowners into negative-equity positions and make it more likely that more property gets pushed back to the lenders. Nor do the builders dare to mention the bulk sales of inventory homes they are making to a new generation of real estate investors with deeper pockets. This nonsense not only forces prices down further; it also creates a new competitor for the builders’ remaining inventories. The bulk buyers still have to sell these homes to end-users.This twist is not all that new, but it is continuing to feed the overall problem of inventory glut. However, this is not what we should be focusing on as we enter the back half of this hurricane.Almost nobody is reporting on how the inventory problem of 2006 has moved from builders to lenders, and how the lenders have no clue about what to do with the surge of defaults and foreclosures. The reason the back half of the hurricane will be such a devastating wipeout: The failure of the lenders to address their issues with defaults is compounding the inventory problem to the point where we will see a tidal wave of inventory hit the market.

As a real-estate agent in South Florida, I have first-hand experience with homeowners defaulting on mortgages and lenders who appear to be far too confused to develop a clear plan for avoiding foreclosure auctions. Buyers now realize lenders are going to take weeks or months to review and respond to offers that often reflect market value but fall short of covering the balance on the mortgage. Such “short sales” should be the easiest way for lenders to move inventory at market prices—but the lenders have not faced reality. And now, most buyers who have had experience with short sales no longer want to look at short-sale properties because of the long and convoluted process. Instead of using this tool to realize market values, the lenders are dumping property into below-market foreclosure auctions, which then creates another new downward spiral for prices.Lenders’ failure to address these issues has forced more defaults, which lead to skyrocketing foreclosure rates. Defaults and foreclosures mean huge expenses for the lender, and significantly lower values. And it gets worse for lenders. In the most extreme examples, lenders cannot foreclose because the documents have not followed the mortgage.

Lenders may be telling Wall Street and Capitol Hill that they are developing plans to keep owners in their homes, but we are seeing the exact opposite in the world of reality. Even when we try to work with lenders, most of the time there is no one at the helm with the authority to process a cup of coffee, let alone the sale of a property in default. The easy answer is to simply let the property flow through to the foreclosure auction, even when that means 30% to 50% less in sale price.

This is not all bad news if your are a prospective buyer. You can buy a property today at 2003 prices with the highest inventory choice in a decade.

Most of the above blog was courtesy of a fellow realtor Mike Morgan up in Jensen Beach Florida.

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One of the main causes of the current foreclosure crisis and economic recession is the insidious power of debt in all its forms. Homeowners took on mortgages for houses they could never afford, while auto loans facilitated people’s own inflated perceptions of themselves and credit card and consumer goods advertisements worked hand in hand to persuade people to buy now and think about how they would pay later.
Now, with the number of foreclosures and bankruptcies rising to record levels, the greatest fear many people have is that their credit scores will drop and they will not be able to borrow as much in the future. Thinking of this sort, though, is still giving in to the false perception that homeowners or consumers should be judged by how much banks will lend to them and how many Chinese-made plastic pumpkins they can purchase compared to their neighbors.

In other words, judging oneself by one’s borrowing capacity results in nothing more then empty human beings who feel they need struggle to buy more just to keep up with other people who are struggling to buy more. When the facade collapses, due to an inevitable job loss, medical crisis, or other financial emergency, far too many people believe that maintaining their credit rating will allow them to solve problems that resulted from their over-reliance on borrowing their way through life.

Even worse, though, is that the credit trap has so ensnared some people that it is almost impossible to get off the track leading them to financial disaster. Making too little money and having too many expenses to begin with, in addition to servicing a large debt burden, is a situation where families are almost guaranteed to end up in bankruptcy or worse. The people who have little choice but to take their borrowing habit to its logical conclusion are relatively smaller than the ones who have a choice, however.

Even the homeowners who have a choice of what purchases to make and how to pay for them, though, are severely disadvantaged. From an early age, every American is exposed to constant advertising and subtle messages that self-worth is dependent on the amount of things they have and size of those items. The pursuit of happiness is defined as the pursuit of machines which are slightly bigger than the machines owned by the neighbors.

In fact, it is the multinational corporations that market these machines that drive people into the willing arms of the multinational banks, which will help people finance their machine purchases. Both institutions work together to chain Americans to perpetual debt servicing payments, or embarrass them financially for nearly a decade through low credit scores or banking blacklists.

With the current recession affecting so many average Americans, hopefully many of them will begin to wake up to this system of credit traps and lifelong debt enslavement. Many homeowners will face foreclosure and families will have to file bankruptcy to escape debt payments they can not meet, but this may only have negative consequences for the banks who create money out of thin air and expect people to pay back interest that never existed in the first place.

TIPS ON PUMPING GAS

I spend a lot of time driving around, so when I got this information from a friend of mine who is in the gas business, I thought this would help us all. Read below and save some money.

“I don’t know what you guys are paying for gasoline…. but here in California we are paying up to $3.75 to $4.10 per gallon. My line of work is in petroleum for about 31 years now, so here are some tricks to get more of your money’s worth for every gallon:

Here at the Kinder Morgan Pipeline where I work in San Jose , CA we deliver about 4 million gallons in a 24-hour period through the pipeline. One day is diesel the next day is jet fuel, and gasoline, regular and premium grades. We have 34-storage tanks with a total capacity of 16,800,000 gallons.

Only buy or fill up your car or truck in the early morning when the ground temperature is still cold. Remember that all service stations have their storage tanks buried ! below ground. The colder the ground the more dense the gasoline, when it gets warmer gasoline expands , so buying in the afternoon or in the evening….your gallon is not exactly a gallon . In the petroleum business, the specific gravity and the temperature of the gasoline, diesel and jet fuel, ethanol and other petroleum products plays an important role.

A 1-degree rise in temperature is a big deal for this business. But the service stations do not have temperature compensation at the pumps.

When you’re filling up do not squeeze the trigger of the nozzle to a fast mode. If you look you will see that the trigger has three (3) stages: low, middle, and high. You should be pumping on low mode, thereby minimizing the vapors that are created while you are pumping. All hoses at the pump have a vapor return. If you are pumping on the fast rate, some of the liquid that goes to your tank becomes vapor. Those vapors are being sucked up and back into the underground storage tank so you’re getting less worth for your money.

One of the most important tips is to fill up when your gas tank is HALF FULL. The reason for this is the more gas you have in your tank the less air occupying its empty space. Gasoline evaporates faster than you can imagine. Gasoline storage tanks have an internal floating roof. This roof serves as zero clearance between the gas and the atmosphere, so it minimizes the evaporation. Unlike service stations, here where I work, every truck that we load is temperature compensated so that every gallon is actually the exact amount.

Another reminder, if there is a gasoline truck pumping into the storage tanks when you stop to buy gas, DO NO T fill up; most likely the gasoline is being stirred up as the gas is being delivered, and you might pick up some of the dirt that normally settles on the bottom.

Hope this is helpful, anyway to save a buck at the pump.

What causes foreclosures?

Your gut instinct may tell you it is not being able to make the mortgage payments. Even though we have been inundated with media coverage about this (i.e. impact of rate resets on ARMs), the truth is:

This is not the primary reason for foreclosures at all.

The main driver of foreclosures is the change in real estate prices.
Excerpt from Boston Globe article:

“The recent spike in home foreclosures in Massachusetts is caused by falling home prices, and not by rising mortgage payments, according to research released yesterday by the Federal Reserve Bank of Boston.

The contrarian report suggests the common understanding of the foreclosure crisis is somewhat mistaken. Unaffordable loans don’t cause foreclosures directly. Even as subprime lending became more common, even when people fell behind on mortgage payments - during the economic downturn in 2001, for example - foreclosures were rare because house prices continued to rise.

In part, people were able to escape trouble by selling their homes at prices high enough to cover their debts. But the research also suggests that troubled borrowers tried harder to make the necessary payments, in the expectation they would profit eventually.

Conversely, when prices started falling, people struggling to make payments had less incentive to find the money. And the value of the home could drop below the outstanding debt, making it impossible to sell. Over the last two years, the number of foreclosures exploded.

Housing price movement “plays a dominant role in generating foreclosures,” the report concluded.

One implication of the report is that current attempts by local and federal officials to help borrowers may be ineffective.

US Treasury Secretary Henry Paulson is negotiating a deal to freeze monthly mortgage payments on some subprime loans by delaying scheduled interest rate increases. Paulson reiterated yesterday the plan could be announced this week.

This proves that the Paulson plan is a phony PR stunt because it does not address the primary cause of the foreclosure problem. Foreclosures are mostly driven by declining homeowner equity—especially negative equity.”

What about interest rate resets ?

Excerpt from Bloomberg article:

“U.S. Treasury Secretary Henry Paulson’s negotiations with banks to freeze payments on certain subprime home loans will offer little aid to borrowers, Barclays Plc and UBS AG bond analysts say.

Few homeowners may qualify for the proposed aid and many are likely to default even before rates reset higher, Barclays analysts wrote in a report today.

Only 12 percent of all securitized subprime adjustable-rate loans in California would qualify for fixed payments under a similar agreement between the state and four mortgage servicers last month, the Barclays analysts wrote, based on an announcement saying the deal applies to borrowers who occupy homes, have been making on-time payments and can’t afford higher rates.

Assuming that half of subprime balances default or are repaid before rate resets, another 30 percent of borrowers don’t qualify because they’ve missed payments and 20 percent of modified loans eventually default anyway, the Paulson plan only eliminates losses of 60 cents per $100 of subprime loans, versus a total that may be as high as $18 to $20, they wrote.”

The extent of home price declines and economic conditions will have a “far greater impact” on the rates of loan modifications and foreclosures, wrote UBS’s Zimmerman, who is also based in New York.

Finally, to gain a better understanding of the US real estate market, I would like to draw your attention to an excellent report published by the General Accounting Office on behalf of the Congressional Committee on Financial Services (released on October 16, 2007). It is 61 pages long, but it is very readable.

I must say that this is by far the most educational document I have read about the real estate market and about what happened to it over the past several years. I don’t think you will find a better source of information about this on the Internet. There has been little/no reference to this report in the media. There are certain things mentioned that many of you may already know about, but it really provides a comprehensive understanding of “what happened”.

By the way, this report cited a recent study that showed three-quarters of the increase in mortgage delinquency over the past two years was driven by the change in home prices.

How about the change in interest rates? How much did that account for?
Only 6%

What are your thoughts ?

Buying foreclosure properties has become a red-hot topic among real estate investors. While the current rise in home foreclosures has a negative impact for some, it has certainly spurred the real estate investment community. Thus, many investors want to know how to buy a foreclosure property as a path to profit.
Here are the basic fundamentals of buying foreclosed real estate .

Foreclosure Homes

A foreclosure home is one that is currently being foreclosed upon by a bank. Foreclosure is a legal process through which the homeowner’s property rights are terminated, usually due to a failure to make the mortgage payments.

Typically, the bank who owns the mortgage will try to sell the home as quickly as possible, sometimes through a public auction. To secure a quick sale of the foreclosure property the bank will often sell at a low starting price as well … and this is what get investors excited about buying foreclosure properties in the first place.

Buying Foreclosure Properties

So, a foreclosed home is basically a property that a bank wants to sell quickly, and is thus a good investment opportunity. But how does one go about buying a foreclosure property to capitalize on such an opportunity?

Here is the basic process of buying foreclosure homes … by the numbers.

1. Tracking Foreclosures In Your Area

Before you can buy a foreclosed property, you have to know it exists. Right? Right! So the first step to buying a foreclosure is to start tracking them in your area.

There are several foreclosure-tracking services you can use. The best way is to use a well educated Realtor who specialises in Foreclosures

2. Choosing a Foreclosed Home to Invest In

Like any other type of investment, buying foreclosure properties carries a certain level of risk. If you buy a foreclosed property that later proves hard to sell, you will be stuck with a mortgage payment longer than you want. Additionally, if you pay too high for the foreclosure, you will reduce your profit potential on selling the property.

So how does one purchase a foreclosure property while minimizing risks? What are the safest deals to go after? Well, like anything else in real estate investing, this is not a black and white issues. There are many factors to consider.

Generally speaking, however, bank-owned properties carry the least risk for investors seeking foreclosed homes. When the bank takes ownership of the foreclosure property, you know that there are not taxes or liens to contend with, and that the home is empty of homeowners.

3. Making Your Offer / Bidding on the Property

So you’ve investigated a particular foreclosure property, line up your financing, and you’re ready to bid on the home. This step normally involves bidding at a foreclosure auction, or submitting a sealed bid to the owner after the foreclosure sale. The key here, once again, is not to bid too high on the foreclosed home. The closer you come to paying the full assessed value of the home, the lower your profit potential on reselling.

When short sales work, they can provide homeowners with an extremely efficient solution to foreclosure. After all, everyone is relatively happy in the end: the bank gets the foreclosure off their books, the homeowners get to avoid sheriff sale and eviction, and the new buyer gets a house for a deal. Often, though, banks have the most to lose from from a specific short sale but are the very party that sabotages the process. With houses falling into default in such large numbers due to the subprime crisis and decline in property values, banks seem to have become paralyzed about attempting short sales. They turn down reasonable offers only to be forced to foreclose on the house and then list it on the open market for a price even lower than what they were offered for the short sale. Mortgage companies are turning down deals that would get them some money to pay off these foreclosed loans and help their clients who can no longer afford the payments. Instead of jumping on such offers, the banks spend more money on their local attorneys to foreclose and then on local real estate agents to sell the property. In the end, they lose even more when property values decline and homeowners damage the houses, so they have to list the properties for even less than they were originally offered. Banks are shooting themselves in the foot in order to avoid helping any of their clients stop foreclosure through the use of a short sale. They know all of the risks of homeowners going into foreclosure: property values decline due to a glut of homes on the market, homeowners may take revenge on the house, court costs and attorneys fees will be paid out of pocket by the banks, and so on. These banks were so responsive to the housing market when creative loans were all the rage, yet they are unable to respond to the fallout of these flimsy excuses to give anyone who could operate a pen a mortgage. Simple incompetence does not explain this failure by the banks; corruption, criminal activity, and a wealth transfer are far more likely. First of all, the banks would have no reason to request bailout after bailout from the federal government if they were actually helping to alleviate the mortgage crisis. By turning down short sales, banks do not have to take a 15% or 25% or higher loss on the loan — they can let it go into foreclosure, then trade that mortgage debt at face value for US Treasury securities. Even with the homes being offered for less than the bank could have gotten from a sheriff sale, the lack of available credit will make purchasing a home more difficult. With so many properties on the market, buyers will not have to settle for damaged, abandoned homes in suburban ghost towns, and they will not be able to get a mortgage to finance the purchase anyway. Property values will have to decline even further and banks will take less on these houses if they ever sell. One thing is almost guaranteed: the banks are setting up for another criminal leveraged buyout, such as the one used in the Bear Stearns deal, but on a much larger scale. Foreclosures are piling up while money is being directed into the Government- Sponsored Enterprises like Fannie Mae and Freddie Mac, which are also in serious trouble due to the foreclosure crisis. Is the unwillingness to help homeowners use short sales a part of the plan to pump and dump the GSE’s and transfer even more public and private wealth to prop up the increasingly insolvent banking system?

Homeowners who have fallen behind on their bills are often in a state of stress and high anxiety, with worries of foreclosure, bankruptcy, and repossession creating a sense of paralysis. This can often lead them to postpone taking any useful step towards saving their homes until it is too late and the possibility of recovering financially is almost nonexistent. The inability to move towards a goal of stopping foreclosure, though, is often caused by any number of irrational fears, all of which may be overcome.

One of the most common fears affecting everyone, but heightened in foreclosure victims, is the fear of rejection. This fear has to do with humans’ affiliation needs, such as the need to feel appreciated, loved, or accepted. Homeowners may often be afraid to pick up the phone and contact their mortgage company because they worry about the possibility of being told there is no help for them. Instead of calling the mortgage company, people suffering from this fear often accept the foreclosure as inevitable and resign themselves to the possibility that they will have to lower their standard of living after losing their home.

Closely connected to the fear of rejection is the fear of looking foolish or making a mistake. In this case, homeowners may fear calling their bank to discuss plans to avoid foreclosure because they feel they do not know enough about how foreclosure works in order to speak intelligently about options to stop the process. They may feel their negotiating skills are not strong enough and that the bank’s representatives will take advantage of them and laugh at their misunderstanding of foreclosure, or that they will mistakenly agree to a program that is not in their best financial interests.

Another very common fear is that of people; it is actually very possible for homeowners working in large cities and living in modern suburbs to feel very anxious when speaking with people they do not know. Combined with a fear of looking foolish or being rejected, being irrationally afraid of people can cause homeowners in foreclosure just to avoid dealing with their financial troubles at all. Even in such specialized situations as calling a mortgage company for help to stop foreclosure , many homeowners may feel uncontrollably anxious and have a problem initiating contact.

Several other fears, including those of failure and success, can have lasting impacts on homeowners attempting to save their homes. The end result of any of these fears, or a combination of them, is often that foreclosure victims procrastinate until the justified, rational fear of losing their home and being evicted is so immediate that it overcomes any of the irrational fears. Irrational fears, though, create psychological problems because there is no actual danger present. After all, the possibility of the bank turning down a repayment plan is nothing compared to the eventual pain of being evicted from a home.

Unfortunately, irrational fears often feel very real, even though they are not grounded in any concrete danger, and most often lead to avoidance behaviors instead of positive change. For example,homeowners who wait until the last minute to seek help can avoid the possibility of being rejected or failing, while homeowners who project blame for their financial hardship into a spouse, boss, or other person do not have to take responsibility for fixing the mortgage and become victims of the outside world.

The more homeowners engage in avoidance behaviors to hide from their irrational fears, the more adept at avoiding pain they will become. And the higher their sense of fear and the more fears they have, the more they will justify their avoidance behaviors as actually being productive. In effect, people create problems for themselves which are only symptoms of the real anxiety-producing fears, but they work on solving these symptoms instead of getting over their fears. This helps create neurotic spirals and reinforces the irrational fears and avoidance behaviors while giving homeowners an excuse to avoid taking any meaningful step to stop foreclosure on their properties.

Confronting and getting over these irrational fears as quickly as possible is one of the most important actions homeowners can take to ensure they have the best chance to save their homes. While a fear of losing a home is entirely justified if the owners have not paid their mortgage for a few months, fearing just picking up the phone and talking to the lender to discuss possible mortgage modification options is irrational. Controlling anxiety is such situations is most vital and the first step is simply recognizing these fears when they begin to manifest themselves in avoidance behaviors and high anxiety symptoms

Information on this blog courtesy of Nick at http://www.foreclosurefish.com/

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Most analysts favor the Case-Shiller Index because it looks at a single home and tracks it historically over time giving a better and more reliable indicator of the health of a home’s value. The drop is the largest drop ever experienced by the 20 city index since its inception in 2000.

The index also tracks a 10 city index which dropped an astounding 11.4 percent which is a record drop since data started being tracked in 1987.Nearly all cities in the index reported losses. Here is a brief list of some of the year over year drops:

Miami: 19.3%

Las Vegas: 19.3%

Phoenix: 18.2%

Los Angeles: 16.5%

San Diego: 16.7%

Tampa: 15%

The only area in the entire index that reported a gain was Charlotte North Carolina coming in at a positive 1.8%. Otherwise, across the board the housing decline is accelerating and picking up steam. Keep in mind that we are still experiencing record mortgage resets and excess inventory. It is looking more and more that we are going to hit analyst predictions of 20 to 30 percent national median price drops once the housing market bottoms out. Let us look at the rate reset chart:

As you can see from the above chart, we still have many more subprime loans to reset which will only increase pressure on prices and also, the excess inventory by builders is again forcing them to cut and slash prices. We’ve never had a run up in real estate as we have witnessed and at the same time, we have not seen a correction take speed this quickly either. No one really predicted housing would go up as quickly as it did so to assume analyst can predict and exact bottom is presumptuous at best.

The peak was reached in July of 2006 and we are now off by 12.5 percent from the peak. Yet the acceleration is picking up. For example, with the current data we see for the last month we saw a 2.35 percent drop from the previous month. I do see continued drops but at a more moderate pace reaching bottom in 2009 and 2010 nationally.

What a great time to get into home.