SWFL Real Estate Investing

I had a great time doing this show. The let me tell the story of what created this debacle. It is a perspective that you need to hear if you are part of or Interested in the SWFL REAL Estate Market

This aired the week of 01/16/11.

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•         Certificates of title: 1318

–        May 2010: 1015

–        June 2009: 1231

•         Mortgage related foreclosures in June 2010: 890

–        May 2010: 847

–        June 2009: 1756

•         Homesteaded foreclosures were 55 percent of the filings per the Lee County Clerks office

•         Wells Fargo took the lead in Lis Pendens Filings for June

•         BOA was Second in Lis Pendens Filings for June

•         JPM was second in Lis Pendens Filings for June

•         Fannie Mae got 17.6% of the Certificates of title

The trend still continues that the backlog of cases is being disposed of. The backlog broke 20,000 this month. The better that gets, the better it gets.

•         Another Year over year and month over month reduction in the lis Pendens filings.

•         This was the second month since the foreclosure trend accelerated that we disposed of more cases via a certificate of title than was filed as a Lis Pendens. This will be a significant tipping point if this trend continues.

•         The Certificates of title are dominated by Fannie with 164 

•         The Filings are dominated by BOA and Wells.

•         Per data collected by the Lee Clerk of the Court Almost 50 percent of the lis Pendens filed are homesteaded properties.

Month on Month and a year on year reduction in Lis Pendens Filings

•         Total Filings: 1830

–        Last month was1896

–        June of 2008 was 2390

•         Total Deed Conveyed: 1231

Notes

•         The Foreclosure Trend is showing signs of the right side of the bell forming. Most cyclical patterns within the SWFL Real Estate market exhibit sharp ascending and descending tipping points. I would expect the foreclosure trend to mimic this pattern. All other trend lines (locally) that I have studied and track tend to emulate this.

•         We are still caught in a negative feedback loop.

•         The vast majority of the Auctions are 2008 cases. With some 2009 cases beginning to make it thru to the courthouse auctions. Smaller lenders and private entities still appear to be able to foreclose and obtain the deed within 6 months. The larger national lenders are the clog within the system. One could only hope this is due to attempts to modify the defaulting borrowers.

•         I think the upward climb in BOA/Countrywide and Wells/Wachovia is due to the Option Arm/Alta A Resets

•         BOA/Countrywide is in the lead with a total of 460 this month.

•         Wells/Wachovia 215

•         CITI group has 67

•         US Bank 120

•         Bank Of New York 87

SWFL REIA members has access to a detailed report with charts and grapths.

1973 Mortgage Foreclosures filed

this is a reduction over the last month

849 Certificates of Title were conveyed by the Clerk of the Court to foreclosing entitles

Fannie Mae had no deeds conveyed last month per the moratorium

The Trend appears to be moving down. This has to be evaluated each month as the SWFL REIA destroyed the crystal ball last year in May.

The effect of resets is widely spoke of, the impact can not be speculated as we are into this crisis far enough for drastic action to be taken. I expect RESO TRUST 2.0 to emerge shortly. The problem will be a forced fix. We recently reviewed the balance sheets of the Top 4 banks I the country. The picture was quite scary. Even more so with the ground level data from this market, factored into what constitutes “Assets” on those balance sheets.

The lenders are on average losing at least 70 percent of the principal balance loaned on each REO sold. A 50 Percent Principal write down followed by the resumption of interest payments sounds like a much better deal.

Expect a flood of REO’s. The auction numbers on the court house steps last month was impressive. A hat tip, to Charlie Green and staff. Expect some national media coverage on this as well.

Hopefully the recent changes in Banking Regulations will allow the banks more room to maneuver during this crisis.The cash requirement for banks has just fallen by 33%. The Bank Act provides that each Bank must hold total capital equal to at least 5 percent of its total assets, provided that in determining compliance with this ratio, a Bank’s total capital shall be calculated by multiplying its permanent capital by 1.5 and adding to this product any other component of total capital. See 12 U.S.C. 1426(a)(2). See also 12 CFR 932.2(b). The Bank Act also requires that when total capital is calculated without application of the multiplier of 1.5, a Bank’s total capital must equal at least 4 percent of its total assets"

Now for The BRIGHT News:  Lee County sales counts MTD/YTD '09 are up over 100% over Jan 2008 - though pricing is falling like a rock. Inventory of SF/CND has fallen almost 1,000 in less than 60 days.  Affordability is its own driving force - the better it gets, the better it gets.

• Foreclosure Filings went up from last month. For full disclosure, I expected the filings to remain under last months. There is supposed to be a voluntary moratorium on Homesteaded foreclosures. I will have detailed data on Homesteaded versus Non-Homesteaded later in Jan. I have a program being written.
• The Foreclosure filings did not break the last top of the trend. That is a good thing. These numbers will bounce around. It is the nature of numbers.
• There appears to have been a late month push to get a lot of Foreclosures filed. On 12/31/08, 169 Lis Pendens were filed.
• We know there is a backlog of Mortgages in Default that have not been filed on. This makes analysis of the trend difficult to say the least.
• Expect a lot of deeds to be conveyed into the New Year. The Clerks office has been gearing up for it.

1. When you plan your detailed action steps, include both positive contingencies and negative contingencies for yourself and/or business models
   
2. See the Macro picture. However you should focus on the Micro picture. Louis Pasteur said, “Fortune favors the prepared mind”. The great Yogi Berra said it best “You've got to be very careful if you don't know where you are going, because you might not get there”
   
3. Be prepared to aggressively seize opportunity. In this market, positive opportunities are far out numbered by the negative opportunities? Try not to let the positive opportunities pass you by.
   
4. Do not depend on the Government or the Banking Industry to have a precise plan. The Government is usually the last to come to the party in the boom-bust learning curve. They know even less than the Banking industry about the market. Look at the Banking Industry (there are many quality bankers, please do not take this as a slam on all bankers). Short Sales make perfect sense, until you realize you are dealing with the cooking of a balance sheet and not a sound business model.
   
5. Do not waste your time fighting Forecasters, The Unhappy, Journalists and Economists. Most are entertainers at best. Again, to quote Yogi Berra “There are some people who, if they don't already know, you can't tell 'em.” A friend who mentored me in the mortgage business always said. “Focus on what you can close.” Those are wise words. You are either part of the solution or the problem; spend your time with the solutions of the world.
   
6. Stack Cash, You will be happy you did!
   
7. Reduce overhead; Ramen Noodles are not so bad after all!
   
8. Do not forget, that we live in Paradise. You could be shoveling snow right now.
   

The document to the right is a comparison of foreclosure numbers by area’s of Cape Coral. While the numbers from the yahoo map, do not match the SWFL REIA’s internal database. It is close enough to derive some trends. Numbers and data being what they are, they will never be perfect. The yahoo numbers are in the ballpark.

We study these trends to add value to the membership.

This subject begs to be studied in depth………

Please share any and all, thoughts, suggestions and criticisms to jeff@swflreia.com

October Lis Pendens and Foreclosure Update

 Compiled and analyzed by: Jeff Tumbarello. Director, SWFL REIA

• Eliminate or Stop a Foreclosure Action
• Avoid a Foreclosure Judgment
• Avoid a Deficiency Judgment
• Seek to Proactively Engage the Lender in Modifying its Mortgage

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click here to order the DVD and Do-it-yourself Package now!

Are you a hedge fund or other financial entity that needs “real time” data and analysis for Due Diligence in the SWFL Real Estate market?

Are you a Bank or Mortgage Lender with defaults and a need to better understand the market, so as to minimize losses?

I have consulted for various Firms in the acquisition of Mortgage Securities. I can also work outside of the area. It is merely getting the proper data and spending some time on the ground.

For More info email Jeff@swflreia.com or call 239 671 8248

Number of deeds conveyed by the clerk of the court via foreclosure action 1210

Number of Mortgage related Lis Pendens 2156

The trend is changing. The deeds being conveyed is starting to gain momentum.

Notes Lis Pendens Filings

•         We had a reduction from July to August. The key to watch is the next 2 months

•         September is the last month of QTR 3. The Filings have showed a pattern of a month increase and a 2 month decrease followed by another increase. Another factor there might be pressure to show an improvement in QTR 4 for Year End numbers.

•         I would wait to pass judgment on the filings trending down until September and October are in books.

•         The homestead percentage from July was updated. The Lis Pendens filings where a homestead exception are trending down by percentage. One reason for this is the lenders willingness to work out a modification with HOMEOWNERS

Notes Deeds Conveyed

•         The lenders taking back deeds this month are the primary drivers of REO sales within the Market

•         Expect more downward price pressure in high foreclosure markets where there is proportionately lower sales activity. IE Lehigh Acres

•         The count of deeds jumped dramatically. This is due to the court system streaming things a few months back.

•         The good news is the REO’s are what the market wants.

•         More good news, some lenders are choosing to rent versus sell.

•         Hat tip to Charlie Green and his staff as well as the judicial side. There does not appear to be a staffing up from recent years. They are handling hugely exponentially growing work load

SWFL REIA members have access to an 11 page report with detailed charts and graphs. This available thru our password protected member’s pages. You can also purchase the report for $19.99 if you are not a member. Email jeff@swflreia.com for more details or call 239 247 5061

For membership info http://www.swflreia.com/membershipinfo.html

Do you have more Questions?

•         You can email at jeff@swflreia.com

•         Or call 239 671 8248

•         If you wish to have more in depth data and analyses, please email or call with your requirements to get a quote.

First things first, most days I get some sort of prediction from someone about the state of the housing market. I have found that most of these are either driven by an agenda or by emotion. There is too much speculation as to what tomorrow may bring, when today is here, right in front of you. We usually will not know what happened today until tomorrow. So why even focus on tomorrow, when you have today! Use what you learned yesterday.

It is often a waste of time and resources to speculate what will happen tomorrow in any sort of detail. With an empirical base of facts and historical references you can deduce a range of outcomes that tomorrow may bring. If are using all of those ranges in your business model, then good for you. If you are using one of those ranges, you are playing roulette. If the range of outcomes is based on anything but empirical facts, then you are playing “Russian” roulette.

What is empirical? In economics, "empirical" generally refers to statistical or econometric analysis of numeric data. Other forms of observation-based hypothesis testing are not considered to be "empirics."

The use of the adjective empirical, especially in scientific studies using statistics, may also indicate that a particular correlation between two parameters has been found, but that so far, no theory for the mechanism of the connection is known.

Below are some thoughts based upon empirical evidence.

Plan on, a good portion of the mortgage transactions, (2004 thru 2006) to default. We (SWFL) are at 2003 pricing. So people who bought houses in that time frame……

Most people buy houses, not HOMES. A HOME is the house you can and will pay for as long as it does not break you.

People who live in houses well..........

It really boils down to; do you make your decisions from emotions’ or logic? For 95 percent of the world it’s all emotions.

Foreclosure has become quite acceptable. You will be amazed in the coming years (today even) what a bankable loan is. The current generation of bankers gave away the income stream for fee’s years ago. We will be seeing these cycles until that business model changes. Would you rather have 4 percent of the loan balance or the interest? Making money on the interest spread of a portfolio is what banking was all about, not fees.

This is the aftermath of a mania; we have been doing this since recorded history was born.

Watch and learn, so the next one does not bite you. That is about all you really can do. We as people have a predisposition go from greed to fear and vice versa. The speed of the world and pop culture are amplifying these tendencies.

Welcome to the aftermath of Fractional Banking on Steroids, AKA CDO, SIV, etc. Pick your financial poison. We really do not know how bad it is because the Fed quit publishing M3 in 2005. It’s not pertinent anymore, LOL.

What is M3?

The different types of money are typically classified as Ms. the number of Ms usually range from M0 (narrowest) to M3 (broadest) but which Ms are actually used depends on the system. The typical layout for each of the Ms is as follows:

• M0: Physical currency. A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. M0 is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency.
• M1: M0 + demand deposits, which are checking accounts. This is used as a measurement for economists trying to quantify the amount of money in circulation. The M1 is a very liquid measure of the money supply, as it contains cash and assets that can quickly be converted to currency.
• M2: M1 + time deposits, savings deposits, and non-institutional money-market funds. M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions. M2 is a key economic indicator used to forecast inflation.
• M3: M2 + large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets. This is the broadest measure of money and is used by economists to estimate the entire supply of money within an economy.

In the end, the worse it gets everywhere else, the better it should become here as the “Refugee Retirees” flee again to our Paradise. Go back thru history, 1991 thru 1993 was a time that lots of people moved to SWFL.

So what is going on today?

Here is a snapshot of Cape Coral, July 1-23^rd 2007 versus 2008, SFR home sales

2007

·        102 sales

·        Money in motion 28,968,595

·        Average sale 284,006

·        Median sale 239,500

2008

·        227 sales

·        Money in motion 41,136,410

·        Average Sale 181,218

·        Median sale 142,300

That is a 222 percent increase in the number of SFR Home Sales. The Average sale price is down. That means Cape Coral is affordable again. The money in motion is up. Money in motion defines the market. Title companies, the Government and Insurance companies obtain revenue by money in motion.

It certainly looks like you could make some money in Cape Coral.

FYI, in a declining market, you should strive to do business below the average price and price per SQFT. Instead of predicting what tomorrows market may be bring…. Yesterday data shows the way.

This is encouraging. The world empirically is never as good or as bad as it seems on the streets and in the media. The world is either cyclical by design or maybe the experiment just works better that way.

Any input, corrections and suggestions is greatly appreciated.

SFR sales are doing great. These sales are golden; these people will not regret their purchase.

Here are the numbers; judge for yourself

 01/01/08 thru 7/14/2008 SFR SOLD

2006 Sold: 1804 AVG  $331,875 

2005 Sold: 2336  AVG $336,146 

2004 Sold: 1748  AVG $234,037 

2003 Sold: 1236 AVG  $200,014 

2002 Sold: 806   AVG  $182,468 

2001 Sold: 638  AVG   $162,114 

2000 Sold: 576  AVG  $142,486 

In June 59 percent of the Cape Coral SFR sales were conveyed by a Corporation. The vast majority of those being banks. Rents are starting to creep up. It’s not all bad out there. There is a market to do business in, If you choose to find it.