The FortuneBuilders Market Insider Monthly Newsletter December 2014
This month, we look at the job market and check in on unemployment rates. Mortgage delinquencies and non-current loans are declining. Then, Fannie and Freddie have been given the okay to sell some REO properties. Also, home flipping sales continue to decline, but what does that mean for you and your market? Unemployment Decreases, But Americans Still Without Jobs Thirty-four states plus the District of Columbia saw a decrease in their unemployment rate, according to the October 2014 Regional and State Employment and Unemployment Summary recently released by the U.S. Bureau of Labor Statistics (BLS). Earlier in the month, BLS reported that the national unemployment rate for October hit a six-year low (5.8 percent) for the second month in a row. The number of jobs, however, fell well short of expectations in October. States Adding the Most Jobs - California - 41,500 jobs added - Texas - 35,200 jobs added - Florida - 34,400 jobs added A report recently released by the Pew Research Center indicates that while the U.S. unemployment rate is low, the number of people not in the labor force is near an all=time high. These people may not be employed and have not searched for work recently, but are not considered unemployed by BLS even though they do not have a job. States Losing the Most Jobs - Nevada - minus 7,300 jobs - New York - minus 5,600 jobs - New Jersey - minus 4,500 jobs Why so many without jobs? Here are a few theories: - The large numbers of retiring Baby Boomers - Those between the ages of 16 and 24 simply don t want a job - Feelings of discouragement about job prospects - Family responsibilities - School or training - Ill health or disability Mortgage Delinquency Reaches 7 Year Low October s delinquency rate, or the rate of loans that are more than 30 days past due but not in foreclosure, reached its lowest level in seven years, according to a recent report by Black Knight Financial Services. The number of non-current loans, which are those that are more than 30 days past due or in foreclosure, also plummeted both month-overmonth and year-over-year, according to Black Knight. The number of non-current loans in the U.S. totaled 3.61 million for October, down 154,000 from September and down 810,000 from October a year ago. New FHFA Policy For Existing REO Inventory The Federal Housing Finance Agency (FHFA) announced a new directive for GSE s existing REO sales. The policy change would allow Fannie Mae and Freddie Mac to sell existing REO properties to any qualified purchaser. Prior to this policy change, in order for a homeowner to buy back their property after foreclosure, Fannie and Freddie required them to pay the entire amount owed on the mortgage. The new directive will allow buy back under a fair market policy that already applies to those purchasing other REO properties, according to FHFA. 2
The combined total of about 121,000 properties would be sold at the company s predetermined fair market value. FHFA director Melvin L. Watt said that the policy expands the number of potential buyers of REO properties and is consistent with the Enterprises practice of requiring fair-market value for those properties. This policy only applies to single-family REO inventory of Fannie Mae and Freddie Mac as of November 25, 2014. What Does This Mean For You? With only 121,000 properties affected I don t see any major changes. What this does do is allow for investors to bid out of the gates without any waiting period for traditional homeowners. Home Flipping Sales Decline Home flipping sales declined to their lowest level since the second quarter of 2009, according to RealtyTrac s Q3 2014 U.S. Home Flipping Report. The sales account for the homes purchased and sold within 12 months. The average gross return on investment for flipped homes in Q3 was 36 percent, a slight increase from 35 in Q2, but a slight decline from 37 percent last year at this time, according to the report. Flipping returned to its historic norm of 4 percent in the third quarter as home price appreciation cooled in many of the hot flipping markets across the country, said Daren Blomquist, VP of RealtyTrac. Meanwhile, the record-high average profits per flip in the quarter demonstrate that flippers are still filling an important niche in an aging housing market with historically low levels of new homes being built. The most successful flippers are buying older, outdated homes in established neighborhoods and rehabbing them extensively to appeal to modern tastes. Top Five Metropolitan Areas With Highest Year-Over-Year Increase: Louisville, Kentucky- 117% Kansas City- 66% Boston- 40% New Orleans- 38% Indianapolis- 35% Top Five Markets For Return On Investment in Q3: Baltimore- 88% Pittsburgh- 79% Detroit 61% Richmond, Virginia- 60% Mobile, Alabama- 59% What Does This Mean For You? This is spot on. The older the market the greater the flip potential. It s been reported that many investors are back in the courthouse auction market and it is a viable source to find deals. Like anything follow the trends and maximize what is given. Implementing a courthouse auction strategy is imperative. The markets with an increase in flipping tend to be those with older, distressed inventory still available that flippers can often buy at a discount and add value to, Blomquist said. Those discounted distressed properties have become harder to find, but a recent jump in scheduled foreclosure auctions could provide more fodder for flippers in the next three to six months. 3
Michigan Begins Tax Foreclosures On 75,000 Distressed Properties County officials in Wayne County, Michigan are beginning tax foreclosure proceedings on approximately 75,000 distressed properties, most of which are located in Detroit. Last year, Wayne County officials began foreclosure proceedings on about 56,000 properties. Only about 20,000 of them, or 36 percent, actually went through the whole procedure, meaning the county helped more than half of those homeowners stay in their homes. The goal is to prevent people from losing their homes, according to Wayne County Deputy Treasurer David Szymanski. I am hopeful that when we go to auction next year on these 75,000 properties that we will only auction about 20,000, Szymanski said. We are working with the Mayor of Detroit on some legislative action that could assist in helping people avoid foreclosure. Out of the 62,000 new foreclosures in Detroit, only 37,000 are reported as occupied. RealtyTrac Launches Expansive Lead Generation Platform RealtyTrac s proprietary foreclosure data was previously farmed to target mailing lists of distressed property owners Now, however the Irvine, California-based data provider has announced the launch of an expanded version of its MEGA Lead Generation Platform. The new expanded platform provides customers with access to more than 118 million U.S. properties while using an online interface to create targeted marketing lists on the fly. The company has exponentially expanded the available universe of properties from a previous 1 million, and added scores of new property attributes to enable even more powerful lead filtering, according to Jamie Moyle, CEO at RealtyTrac. The innovations should up a great deal of new marketing list applications. In order to access data with MEGA Lead Generation Platform, there is a free registration. Customers then pay per property record downloaded. 4
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