Foreclosures Spread

Click on the title to link. I cannot imagine that anybody reading this blog would be surprised by this, but an interesting article about how foreclosures have "spread" into areas there were previously not as affected. Of course there is probably no area unaffected, per se. But interesting to read about, none the less. This kind of news will continue throughout the year.

Housing Market Holding Back Economy

Click on the title to link. Not sure we completely agree with this. There are plenty of things holding the economy back (unemployment, inflation, socialism, etc.). But this certainly is not helping, no doubt.

8 Keys to the Mortgage Market in 2011

Click on the title to link.

We find it quite funny how the government seems to think that more and more regulation is the answer (see Keys #1 and #2). This has proven so far to help some, yet make doing and getting mortgages extremely difficult. At times it has prevented folks from getting a mortgage that would be very helpful to them, or has punished folks by making it more expensive for the customer or us. It's not right. Does the government honestly think that "mortgage disclosure reform" is the answer? Are you kidding me? Yeah, that was the reason for the real estate/mortage mess. If they honestly think that then we are in big trouble.

Numbers 3-8 are so "pie in the sky" right now that it is almost laughable. Basically they are saying everything needs to get back to what it was and then it will be alright. Wow, that really insightful "keys" you all came up with. Not going to happen, folks.

There is one primary key to the mortgage market this year and that is the Federal Reserve (Key #8). Their "Quantitative Easing" plan is so full of holes that it could not hold water if it wanted to. Frankly, we are relatively convinced that the Reserve does not know what exactly to do because they are running out of options. Flooding the economy with Billions of dollars is not going to lower rates. It is, in fact, going to raise rates (as it has quickly done). Then when inflation kicks in what is going to happen? Rates will go higher, faster. Why the Feds do not seem to get this is utterly beyond us. But it's simple economics.

Home Values Down $9 Trillion Since 2006

Click on the title to link. This is an interesting article. Sucks to read about it, frankly, but you should also keep in mind that home values were inflated due to the bubble. The people this really stinks for are those who bought their homes at the peak of the bubble, or those who refinanced at that same time.

Has The Fed Done It, Again?

Click on the title to link. The short answer is, yes. This is an article I found today by Jim Jubak which adds to the foder of what we posted yesterday. The Fed's, in our opinion, have no clue what they are doing and have made a huge mistake in flooding US dollars into the economy (unless, of course, you want to devalue the dollar). This is a huge issue that is coming down the pipe, people. You need to educate yourself on this so you are prepared. We do not mean to sound gloom and doom, but this is a major concern.

Will The Fed Self Destruct?

Click on the title to link. The fact that the Feds are flooding the economy with $600 billion to "revive" the economy will, in our opinion, only kill the economy. Why? Because you cannot devalue the dollar like the Feds are going to do with their plan. Inflation will go through the roof, rates will go up, the cost of goods will go up, people will have to spend more to get less, etc. This is a stupid move by the Feds.

And just to be clear, it does not matter whether you are a Rep or Dem. You better wake up to reality regardless because this is a bad move by the Feds that may show temporary, early signs that are positive. But the storm is coming (unfortunately).

The Jobs Picture Continues to Worsen

By Robert McHugh, Ph.D.
November 6th, 2010

Let’s look at some of the Fundamentals of the economy which eventually leak into the market at some future equilibrium price in the future:
The Bureau of Labor Statistics, a division of the Labor Department, announced Friday, November 5th the results of their employment survey and statistics for the month of October 2010. Using just their numbers, they reported that non-farm payrolls rose 151,000 in October. However, they goosed this figure by 61,000 make believe, guestimated, assumed, non-counted fictitious jobs they presume were created by new businesses they think started up, net of businesses that closed down. That brings the non-farm payroll figure down to 90,000. But, of that 90,000 reported new jobs, 35,000 were in temporary service jobs. So, if we take that figure out, we are down to 55,000 new jobs created in October. However, the U.S. needs to create 150,000 new jobs every month just to accommodate population growth, which means that once again, job creation fell short by 95,000 in October. In other words, the employment picture got worse.

The BLS reported that the unemployment rate, by their convoluted calculations, remained at 9.6 percent, 14.8 million good folks out of work. However, they purposely chose to not count 2.6 million unemployed folks who wanted work, looked for full time work within the past 12 months, but did not look during the most recent 4 weeks for one reason or another. For 1.2 million of those 2.6 million, the reason was they were so discouraged, they figured, “why bother.” The BLS 9.6 percent figure would have risen to 11.28 percent by including those 2.6 million, no arguing the truth there. That is really the number that should be reported. But worse, the BLS does not count the underemployment rate. There were 9.2 million folks who wanted to work full time, but were denied that opportunity involuntarily, by having their full time hours cut back, or by settling for a part-time job while they continue their search for full time work. If we add those good folks to the unemployment ranks, we find that the underemployment rate was 17.2 percent. That means more than one out of every six employable people were either unemployed or stuck in a part-time job when they wanted full time work.

Then there is the immeasurable group of folks who have full-time work, but in a job that is below their skill level, and at a pay rate below what they had in previous full-time work. Add to them those who have full time work on salary (do not qualify for hourly overtime pay), but work more hours now than they did before to cover the responsibilities of fellow workers who got laid off, but also did not get a salary increase. Not sure how many of these good folks are out there, burning out, giving up quality of life just to keep their jobs. Then there are those who have full time work, but have not been given raises because their employers suggested they be happy at their current wage or else they will be replaced by someone else willing to work the same job for less. Call this entire paragraph the “quality of work” work decline, which I do not believe anyone has a handle on. But if you talk with friends and neighbors, empirically there are a ton of folks in this category, a category whose numbers have increased dramatically since the Bear Market started.

All this adds up to an employment picture that is grim, and getting worse. The impact of course is on consumer spending, which accounts for 70 percent of GDP. The only solution out of this mess is a massive income tax rebate and tax cut, placing the QE2 Dollars the Fed is printing, into the hands of households, and not Wall Street where QE2 is going. If households got the money, they would lower their debts, and increase their spending. That increase in spending would boost small business revenues. Small businesses (who are responsible for 70 percent of hiring) would then start hiring to handle the increase in sales. Small businesses would then spend more, boosting sales of large corporations. Large corporations would then add jobs and go to Wall Street for capital. Wall Street’s profits would grow from investment banking operations, rather than the Trading accounts QE2 are designed to goose. At every level, government tax revenues would get a piece of the action. Voila, prosperity for all!

If I were king, this is what I would do. I would cancel QE2, as that will have no positive impact on the economy or employment. I would then do QE3, a one time only event. It would be designed to choke start a dead economy and deteriorating employment picture that will eventually lead to a Great Depression.

I would have the U.S. Treasury issue at least $5.0 trillion of new Treasury note securities, short to intermediate term, up to 5 years in maturity. This term is chosen because this economic “trickle up” plan would reap returns to the Treasury in the form of massive tax revenues by year five without the necessity to raise income tax rates, rather while actually lowering income tax rates, when this debt could be retired. I would then sell these $5.0 trillion of securities in the open market, with the Federal Reserve as buyer of last resort, providing demand if necessary. Even if the Fed buys all of these securities, it is okay because the Treasury will be retiring them within five years anyway from the increase in tax revenues it will accrue from a growing and prospering economy.

Then I would take that $5.0 trillion and rebate 1 to 2 years of income taxes to households (not businesses), with a minimum rebate of $25,000 since many folks were unemployed and do not have income over the past two years. Small businesses would end up getting the rebate because there are many who file subchapter S returns that flow to household tax returns. I would then require that half the rebate be used to pay down debt. This would result in stronger financial balance sheets for households and lending institutions. Banks getting their loans repaid would see their non-performing assets decline, and see their loan portfolios decline. That would improve their capital ratios and their liquidity. In conjunction with improved household financial positions, this would put banks in the mood to be accommodative in lending practices, which would help the economy. This would strengthen the FDIC’s reserve position as fewer banks would fail.

Households would then take the rest of the money, and feel more confident about the future, and likely spend on items they have been holding back on due to necessary austerity. This would boost small business sales, which would result in job creation to accommodate the increase in sales. This would increase small business’ demand for the products and services of large corporations. Large corporations would then turn to Wall Street firms for capital and loans, boosting Wall Street’s profits, not from Trading schemes courtesy of the Fed, but from growth in aggregate demand, the economy. Local, State and Federal government entities would get a piece of the action at each level, increasing their tax revenues, allowing them to retire debt and increase infrastructure spending which would create more jobs.

This results is prosperity for all, a growing pie, growing aggregate demand. With the increase in tax revenues, the Treasury then retires the $5.0 trillion of newly issued debt that kick-started this economic recovery plan. The Fed sells its securities back to the Treasury, and the U.S. Dollar retains its value.

This will not happen, because both political parties seem intent on solving economic problems with a top-down approach, where they give trillions of Dollars printed out of thin air to Wall Street who then take the money and earn increased Trading Account profits with mega-purchases and profit-taking sales of stocks and other financial instruments, like some wealthy drunk at the casinos. A great deal of this money will get destroyed, disintegrate at a coming stock market plunge, and the wealthy Wall Street Trading machine will end up leaving the gambling table broke once again, with all the money from the Fed gone for good, leaving a trail of a devalued Dollar, rising unemployment, falling home prices, failing banks and businesses, bankrupt families – the next Great Depression. That will lead the Central Planner’s to the bright idea where sovereign nations merge into a new Union of Western States, including North America and Europe, in an attempt at one world government they falsely hope will fix the mess they created. Unfortunately this is probably the path we are on.

Recession or Recovery?

Click on the title to link. This is an interesting article as it talks about how this "recovery" sure feels and looks like a recession. Don't kid yourself into believing that we are in "recovery" mode. We are smack-dab in the middle of a recession still. Do you feel recovered? This is one of the first articles we can remember seeing that actually admits to this.

Adding more reason to believe this...the Fed Reserve is desperate to get the economy going. So much so that they are talking about printing 6-7 trillion dollars worth of money to flood the economy with cash in the hopes that it will stimulate people to spend. The problem with that stupid idea? Inflation will sky rocket, rates will go with it, and the value of the dollar will plummet. They are in a mess and don't know what to do.

Need To Refi, But Your House Is Underwater?

Click on the title to link. This is an article about two government options if your house is underwater. The thing about these two options is they are not as easy to get as they may make them sound. There has been numerous articles about how these two programs have not really accomplised what they were intended to. But they are, none the less, options.

If you are currently on an FHA or VA loan then you can also refi onto another VA or FHA loan at a lower rate without having to get an appraisal. This would eliminate any "underwater" issues.

The Recession Drags On...

Click on the title to link to this article. An interesting article about how in several states the recession is either clearly still in force, or was much later than the advertised mid 2009 that came out recently. Interestingly enough New Mexico is listed as one of those states.

The Recession Is Officially Over! Sure It is.

Click on the title to link. This article is proof that numbers do sometimes lie. On paper this recession may be "over", but that is the most ridiculous thing considering so many other factors (unemployment, poverty level, people are not spending, etc.). This "recession" or whatever you want to call it is not over, despite what the numbers may say.

In an MSN poll, 87% of people said they do not think the recession is over, and still are pessimistic about the economy. So what do you think?

Albuquerque Foreclosures Surge

Not sure if you saw it or not, but there was an interesting article in the Albuquerque Journal on Sunday about how foreclosures in the metro area have doubled from where they were at this time last year. Again, the sound our broken record, this should be expected by anybody reading this blog regularly. It could get worse because 2011 is supposed to be the peak of foreclosures nationally. Here are some interesting points:

* There were 4,970 foreclosures in Albuquerque in 2009.
* There have been 4,574 foreclosures in Albuquerque between Jan and June of 2010.
* There were 2,688 in all of 2008.
* The unemployment rate in Albuquerque has doubled to 9.2% since 2008 (22,000 jobs).
* Albuquerque is one of 154 metros nationwide to see foreclosures increase this year.
* One out of every 80 households is in foreclosure in Albuquerque.

Mark Boitano , who has been instrumental in fighting against tax lightning, said Albuquerque has seen the "perfect storm" leading to our current economic problems. We totally agree; it is more than just foreclosures. Many of those foreclosures are a result of the other contributing factors. They are home depreciation, a stupid appraisal law that has brought in values lower than reality (at times), unrealistic lending guidelines, a dysfunctional federal hom loan modification system (to say the least), and tax lightning.

All of this then contributes to folks hunkering down, which depresses the real estate market even more, which drepresses the economy even more, and so on. It's a vicious cycle. And all signs point to the fact that it is going to loom for the foreseeable future. As Boitano said in the article, "We're not even at half-time yet."

Mortgage Reality Check

Some of you may have seen this on ABC News. It is a good video about the difficulties of getting a mortgage now-a-days with all the new regulations, and stingy banks. Now is, without a doubt, the most frustrating time we have seen in 9 years to obtain a mortgage. We hae always told our clients that lenders do not lend in logic, they use guidelines that often make no logical sense. The problem now is many of they have transitioned into the illogical. Not only do they use strict guidelines they are now venturing outside of the guidelines and asking for stupid things (and we mean really stupid sometimes). And often, unfortunately, it is due to laws that our terrible Congress has passed that are intended to make it "safer and easier" on you the consumer. Instead it has done the exact opposite (typical).

All of this said, you have to be careful not to let this video (and our statements) prevent you from pursuing a mortgage. There may never be another time when the perfect storm hits like it has right now. What is the perfect storm? Increadibly low rates and a dismal sellers market. You can get more house for the dollar than ever before. So from a purchase stand point it has never been better.

The same applies to refinancing. Yes, getting a mortgage can be (will be) a pain in the butt. But (no pun intended) rates are so low that you just cannot pass them up. We have seen our fair share of stupidity by lenders and law makers. However, we are here to help you navigate through the rough waters. This is why it is important you work with somebody who has your best interest at heart. You can work with a bank, but you have no buffer to help you understand why they are needing what they need. And you have nobody there to walk you through it. We often explain to people up front what issues may arise because we have seen it so much. Surprises come, no doubt. But if we can anticipate most of the garbage thrown at us all then it makes for a much smoother loan. That's our role for you.

The Depressed Real Estate Market

Click on the title to link. This is a good article about how the real estate market is not budging despite the fact that rates are at 50 years low. This is not surprising since we saw that the last round of first time buyer incentives really did not do a whole lot to stimulate the market. The fact that rates this low is not moving the market is not a good sign. It shows that people are sitting back and waiting to see what happens, mainly because of our current Administrations fiscal policies (in our opinion). We have been saying that reports of recovery have been grossly overstated; this is a great example of why.

Is There A Housing Shortgage Looming?

Click on the title to link. This is an interesting article about how there may actually be a housing shortage in the "nearer" future for some markets. What's interesting is they put New Mexico in that category because they say we are one of the more stable and "recovered" markets. Although we do not fully agree or see that (see yesterday's posts), New Mexico is a very desirable state for folks to live in and we could foresee a future shortgage due to the fact that new construction is so very low right now. But we are not close to that being the case, in our opinion. Still an interesting article, however, that is not far fetched.

Signs of Life?

The front page of the Albuquerque Journal's Business Outlook yesterday read, "Signs of Life". It was regarding the recent report by Moody's ranking Albuquerque among the top 10 healthiest commercial markets in the nation.

The opening sentence reads, "The tide may have turned for the local commercial real estate market." Well you will have to excuse us if, once again, we seem to be dousing this fire with "reality water". Is the commercial market better in Albuquerque? It probably is. However, the signficant moves in our market have come from industrial, limited-service hotel and full-service hotel. We would not exactly say those are indications that "the tide may have turned." But why not? Because the article also says, "The office market is where commercial real estate in Albuquerque clearly reveals substantialdistress from the economic recession." This is, in our humble opinion, are far bigger indicator of what is really going on with the commercial market here.

They all work together, don't get us wrong. But when you have such a huge portion of the commercial market as office space that is going to have a more substantial effect than some of the other areas. It's good news that those other areas are increasing. But it is equally bad news that the office market is struggling so greatly. As the article also says, "...market health is a relative commodity in commerical real estate..." It just seems a bit irresponsible to say "the tide may have turned" when clearly many, many people are still nose deep in it. We know several people who would not only say the market has not turned, but it is worse. As the article said itself, market health is a relative commodity.

Higher Inflation

Inflation is going to be going up. It is inevitable because the government has to do something to try and pay for all the garbage legislation they are passing. When you combine higher inflation with higher taxes you get poor people with no jobs. This is a major issue staring us in the face. Here is a quote by Federal Reserve guy, ...

what we're trying to do is encourage output growth and production, and through that channel, get inflation to move higher.

Not good at all, but it's comin'.

Foreclosure Activity Rising

Click on the title to link. Another article that should not surprise those of you reading this blog regularly. Foreclosures are going to continue to get worse for another year, roughly. Albuquerque is still in a slow recovery stage. The market is still down here and will continue to be so until buyers increase. However, folks are not very interested in buying right now because they are in a holding pattern. The vicious cycle continues.

Cities Still Waiting For Recovery

Click on the title to link. Here is the article that ties in with the interactive map we just linked to. We find it funny how so many articles have talked about our "recovery", yet here is an article saying the exact opposite. Again, false positives...
And let us tell you first hand, the purchasing of homes right now is still way down. Are people buying homes? Of course, but not many. And the higher end market (homes over the 400K range, roughly) are sitting for at least a full year, if not longer. We see it getting worse (possibly much worse) before it gets better.
So what's our deal, are just "half empty" folks? Not at all. However, you have to objectively look at what is happening in our country right now and face reality. We don't see much good at this time.

Shrinking Home Prices

Click on the title to link. This is a great interactive map of the country showing you what areas are still in decline (almost all), and what areas are in recovery. The good news...compared to many other areas, Albuquerque and the surrounding area has done fairly well (although it's all relative). The bad news...although this map indicates some areas are in recovery, we still contend they are false positives because we are not coming out of this faltering economy anytime soon. This Administration and Congress are leading us into financial bankruptcy as a country, mark our words. No country, institution, or person can spend like we are; it is not sustainable.