Short sales gaining popularity
US home prices may get a boost from an unlikely source: a pickup
in sales of properties in default before they reach the stage
where they are repossessed by the bank and sold. There has been
a “dramatic shift” in banks’ willingness to sell a property
for less than the mortgage balance to avoid foreclosing, said Ron
Peltier, chairman and chief executive officer of HomeServices of
America Inc. The short sales typically change hands at a
discount of about 20% to homes not in financial distress,
compared with a 40% price cut for bank-owned homes, according to
RealtyTrac Inc. Short sales jumped 19% in the second quarter from
the prior three months while foreclosure sales were flat, the
data seller said. “Banks have become much more supportive of
short sales,” said Peltier, whose Minneapolis-based company is
a unit of Warren Buffett’s Berkshire Hathaway Inc. “That’s
better for the lenders, who have smaller losses on a short sale,
and it’s going to be better for homeowners, who won’t have as
much psychological distress as a foreclosure.”
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Distressed sales brokered by HomeServices used to be 60%
foreclosures and 40% short sales, Peltier said in an interview.
Now, that ratio has flipped, according to the CEO. “There’s
a huge backlog of homes in default that the banks want to get rid
of,” said Thomas Popik, research director for Campbell Surveys
in Washington. “They don’t want to be homeowners.” Banks
are being more agreeable to short sales as foreclosures slow
following a yearlong probe of so-called robo- signing, or pushing
through unverified default documents. Foreclosure filings have
fallen for 12 straight months through September as banks work
through a backlog of paperwork, according to RealtyTrac. Almost
a third of all home transactions in August were foreclosures or
short sales, according to the National Association of Realtors.
Goldman Sachs posts loss
Goldman Sachs posted a loss that was even worse than expected of
84 cents a share on a 33% drop in investment banking revenue from
a year ago. Wall Street had expected the company to post only
the second quarterly loss since Goldman went public in 1999, but
estimates were for just 16 cents a share in the red. Shares,
though, rebounded from earlier losses after company officials
insisted the firm was well-positioned after the economy recovers
and financial markets stabilized. Goldman stock rose 1% in
premarket trading. Goldman posted $3.59 billion in revenue, a
decrease from $8.90 billion a year ago when it posted a profit of
$2.98 a share. Analysts had expected revenue of $4.29 billion.
Investment banking revenues came in at $781 billion, a one-third
fall from the third quarter in 2010 and a 46% drop from the
previous quarter. Financial advisory revenues were $523 million,
up a bit from the same quarter last year.
Goldman's loss-driver was its Investing & Lending division, which
holds stocks, bonds, loans and private equity assets as long-term
investments. The division reported negative revenue of $2.48
billion as the value of those assets dropped sharply. Goldman's
stock investment in Industrial and Commercial Bank of China alone
generated more than $1 billion of paper losses. Goldman was also
hurt by big declines in bond trading and investment banking
revenue. Its fixed income, currency and commodities client
trading business reported $1.73 billion in revenue, a 36% decline
from a year earlier.
Federal officials and banks try to hammer out a mortgage deal
Officials and big banks are working on a plan that would make
refinancing available to some borrowers whose houses are worth
less than their loans, so long as they are current on mortgage
payments, the Wall Street Journal reported. Such borrowers
typically are not able to refinance because they lack equity in
their homes. The plan would apply only to mortgages owned by the
banks, the Journal said, citing people familiar with the matter.
Federal officials have been trying to broker a settlement with
the five largest mortgage servicers — Ally Financial, Bank of
America, Citigroup, J.P. Morgan Chase and Wells Fargo — the
Journal said. It is not clear how many borrowers would qualify
for help, the paper added. Officials are pushing for a plan in a
bid to break a legal impasse with big banks over alleged
foreclosure abuses and ease problems in the housing market, the
paper said. Discussions are still fluid and any final outcome is
uncertain. Talks between government officials and the banks are
expected to continue this week.
Click Here!
Oil down
Oil fell for a second day in New York after China said its
economy grew at the slowest pace in two years and US crude
stockpiles were forecast to increase. Futures dropped as much as
0.5%, extending yesterday’s 0.5% decline, after China’s
statistics bureau said the economy grew at 9.1% in the third
quarter, less than predicted. An Energy Department report
tomorrow may show US crude inventories climbed for a second week,
according to a Bloomberg News survey. Technical indicators
indicate prices may have advanced too fast to be sustainable.
“The number from China is getting a bit worse than before,”
said Ken Hasegawa, an energy trading manager at broker Newedge
Group in Tokyo, who forecasts prices will decline $5 a barrel.
“If the recovery of the economies in Europe and the US is
getting worse, then the economies of China and Asia will show
some damage.” Crude for November delivery fell as much as 40
cents to $85.98 a barrel in electronic trading on the New York
Mercantile Exchange. It was at $86.10 at 2:45 p.m. Singapore
time. Yesterday, the contract lost 42 cents to $86.38, the lowest
settlement since Oct. 13. Prices are down 5.8% this year. Brent
oil for December settlement on the London-based ICE Futures
Europe exchange dropped as much as 45 cents, or 0.4%, to $109.71
a barrel. The European benchmark contract was at a premium of $24
to US futures. The difference narrowed 16% yesterday, the most
since June 16.
Rentals surge
Despite the most affordable buying market in decades, households
across the country are slowly choosing rentals versus
homeownership, signaling a positive economic trajectory for the
multifamily sector, according to Freddie Mac’s October 2011
economic outlook report released Monday. In the year ending June
2011, the Census Bureau reported a net increase of 1.4 million
households that moved into rental housing, a 4% rise in the
number of tenant households. The US homeownership rate fell
about 1.5% over the past year, according to Freddie Mac's report.
Hessam Nadij, managing director of research and advisory
services for Marcus & Millichap, said in the August issue of
HousingWire magazine that “apartments, which are considered
part of the commercial real estate sector, are well ahead of
retail, office properties and industrial properties in the
recovery because of the release of pent up demand.” Much of
the rental demand is from household heads under 30 years old who
have decided to postpone homeownership in favor of renting during
uncertain economic times, according to the report. Owner rates
for those under 25 years old fell 4.4% to 21.9% while rates for
those 25 to 29 years old fell 7% to 34.7%.
Bank of America Merrill Lynch estimated a net decline of 1.2
million homeowners since 2007, alongside a net increase of 3.4
million renters. Americans expect home prices to continue to
fall, according to a recent Fannie Mae National Housing Survey.
Another Fannie survey released in August also predicted a rise in
renters. Financing for rental housing is becoming more readily
available. Frank E. Nothaft, Freddie Mac vice president and chief
economist, attributed the rise in lending to low mortgage rates,
improving apartment-sector economics and the return of
traditional lenders that had curtailed activity during the
recession. Nothaft said this year's multifamily loan origination
volume is "stronger" than last year's. Texas is the hottest
market for apartments this year. A majority of the growth is
coming from the Dallas-Fort Worth metro area, according to, a
unit of RealPage, Inc. The North Texas region started more than
7,300 new units, according to the firm’s mid-year data.
Click Here!
See you at the top!
Martin Crawford
US home prices may get a boost from an unlikely source: a pickup
in sales of properties in default before they reach the stage
where they are repossessed by the bank and sold. There has been
a “dramatic shift” in banks’ willingness to sell a property
for less than the mortgage balance to avoid foreclosing, said Ron
Peltier, chairman and chief executive officer of HomeServices of
America Inc. The short sales typically change hands at a
discount of about 20% to homes not in financial distress,
compared with a 40% price cut for bank-owned homes, according to
RealtyTrac Inc. Short sales jumped 19% in the second quarter from
the prior three months while foreclosure sales were flat, the
data seller said. “Banks have become much more supportive of
short sales,” said Peltier, whose Minneapolis-based company is
a unit of Warren Buffett’s Berkshire Hathaway Inc. “That’s
better for the lenders, who have smaller losses on a short sale,
and it’s going to be better for homeowners, who won’t have as
much psychological distress as a foreclosure.”
Click Here!
Distressed sales brokered by HomeServices used to be 60%
foreclosures and 40% short sales, Peltier said in an interview.
Now, that ratio has flipped, according to the CEO. “There’s
a huge backlog of homes in default that the banks want to get rid
of,” said Thomas Popik, research director for Campbell Surveys
in Washington. “They don’t want to be homeowners.” Banks
are being more agreeable to short sales as foreclosures slow
following a yearlong probe of so-called robo- signing, or pushing
through unverified default documents. Foreclosure filings have
fallen for 12 straight months through September as banks work
through a backlog of paperwork, according to RealtyTrac. Almost
a third of all home transactions in August were foreclosures or
short sales, according to the National Association of Realtors.
Goldman Sachs posts loss
Goldman Sachs posted a loss that was even worse than expected of
84 cents a share on a 33% drop in investment banking revenue from
a year ago. Wall Street had expected the company to post only
the second quarterly loss since Goldman went public in 1999, but
estimates were for just 16 cents a share in the red. Shares,
though, rebounded from earlier losses after company officials
insisted the firm was well-positioned after the economy recovers
and financial markets stabilized. Goldman stock rose 1% in
premarket trading. Goldman posted $3.59 billion in revenue, a
decrease from $8.90 billion a year ago when it posted a profit of
$2.98 a share. Analysts had expected revenue of $4.29 billion.
Investment banking revenues came in at $781 billion, a one-third
fall from the third quarter in 2010 and a 46% drop from the
previous quarter. Financial advisory revenues were $523 million,
up a bit from the same quarter last year.
Goldman's loss-driver was its Investing & Lending division, which
holds stocks, bonds, loans and private equity assets as long-term
investments. The division reported negative revenue of $2.48
billion as the value of those assets dropped sharply. Goldman's
stock investment in Industrial and Commercial Bank of China alone
generated more than $1 billion of paper losses. Goldman was also
hurt by big declines in bond trading and investment banking
revenue. Its fixed income, currency and commodities client
trading business reported $1.73 billion in revenue, a 36% decline
from a year earlier.
Federal officials and banks try to hammer out a mortgage deal
Officials and big banks are working on a plan that would make
refinancing available to some borrowers whose houses are worth
less than their loans, so long as they are current on mortgage
payments, the Wall Street Journal reported. Such borrowers
typically are not able to refinance because they lack equity in
their homes. The plan would apply only to mortgages owned by the
banks, the Journal said, citing people familiar with the matter.
Federal officials have been trying to broker a settlement with
the five largest mortgage servicers — Ally Financial, Bank of
America, Citigroup, J.P. Morgan Chase and Wells Fargo — the
Journal said. It is not clear how many borrowers would qualify
for help, the paper added. Officials are pushing for a plan in a
bid to break a legal impasse with big banks over alleged
foreclosure abuses and ease problems in the housing market, the
paper said. Discussions are still fluid and any final outcome is
uncertain. Talks between government officials and the banks are
expected to continue this week.
Click Here!
Oil down
Oil fell for a second day in New York after China said its
economy grew at the slowest pace in two years and US crude
stockpiles were forecast to increase. Futures dropped as much as
0.5%, extending yesterday’s 0.5% decline, after China’s
statistics bureau said the economy grew at 9.1% in the third
quarter, less than predicted. An Energy Department report
tomorrow may show US crude inventories climbed for a second week,
according to a Bloomberg News survey. Technical indicators
indicate prices may have advanced too fast to be sustainable.
“The number from China is getting a bit worse than before,”
said Ken Hasegawa, an energy trading manager at broker Newedge
Group in Tokyo, who forecasts prices will decline $5 a barrel.
“If the recovery of the economies in Europe and the US is
getting worse, then the economies of China and Asia will show
some damage.” Crude for November delivery fell as much as 40
cents to $85.98 a barrel in electronic trading on the New York
Mercantile Exchange. It was at $86.10 at 2:45 p.m. Singapore
time. Yesterday, the contract lost 42 cents to $86.38, the lowest
settlement since Oct. 13. Prices are down 5.8% this year. Brent
oil for December settlement on the London-based ICE Futures
Europe exchange dropped as much as 45 cents, or 0.4%, to $109.71
a barrel. The European benchmark contract was at a premium of $24
to US futures. The difference narrowed 16% yesterday, the most
since June 16.
Rentals surge
Despite the most affordable buying market in decades, households
across the country are slowly choosing rentals versus
homeownership, signaling a positive economic trajectory for the
multifamily sector, according to Freddie Mac’s October 2011
economic outlook report released Monday. In the year ending June
2011, the Census Bureau reported a net increase of 1.4 million
households that moved into rental housing, a 4% rise in the
number of tenant households. The US homeownership rate fell
about 1.5% over the past year, according to Freddie Mac's report.
Hessam Nadij, managing director of research and advisory
services for Marcus & Millichap, said in the August issue of
HousingWire magazine that “apartments, which are considered
part of the commercial real estate sector, are well ahead of
retail, office properties and industrial properties in the
recovery because of the release of pent up demand.” Much of
the rental demand is from household heads under 30 years old who
have decided to postpone homeownership in favor of renting during
uncertain economic times, according to the report. Owner rates
for those under 25 years old fell 4.4% to 21.9% while rates for
those 25 to 29 years old fell 7% to 34.7%.
Bank of America Merrill Lynch estimated a net decline of 1.2
million homeowners since 2007, alongside a net increase of 3.4
million renters. Americans expect home prices to continue to
fall, according to a recent Fannie Mae National Housing Survey.
Another Fannie survey released in August also predicted a rise in
renters. Financing for rental housing is becoming more readily
available. Frank E. Nothaft, Freddie Mac vice president and chief
economist, attributed the rise in lending to low mortgage rates,
improving apartment-sector economics and the return of
traditional lenders that had curtailed activity during the
recession. Nothaft said this year's multifamily loan origination
volume is "stronger" than last year's. Texas is the hottest
market for apartments this year. A majority of the growth is
coming from the Dallas-Fort Worth metro area, according to, a
unit of RealPage, Inc. The North Texas region started more than
7,300 new units, according to the firm’s mid-year data.
Click Here!
See you at the top!
Martin Crawford
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