Fannie Mae Expects Slow But Sure Housing Growth in 2015

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A view shows the Fannie Mae logo at its headquarters in WashingtonWhere the U.S. housing market is concerned, Fannie Mae chief economist Doug Duncan said he is anticipating overall weaker home sales in 2014 than in 2013. But he expects that overall home sales in 2015 will post their best performance since 2007 despite seeing only moderate growth for the year.

The forecast on the state of the nation’s housing market and on the overall economy were included in the Fannie Mae Economic & Strategic Research Group’s October 2014 Economic Outlook, published on Thursday.

“We lowered our expectation for housing starts just slightly to one million units for 2014, but our view of mortgage originations has not changed,” Duncan said. “Our estimate for 2013 was in line with the recent release of 2013 data under the Home Mortgage Disclosure Act, and our projection of total production in 2014 is little changed at approximately $1.1 trillion. For 2015, we are cautiously optimistic that ongoing labor market improvements, low mortgage rates, rising inventories, and some easing of lending standards will boost home sales by roughly 5.0 percent. However, we still believe housing will continue along its upward grind rather than have the breakout year some are expecting.”Economic-Growth-Financial-Crash

Economic growth has been slow on a global scale this year, but that has not dimmed the outlook for the U.S. economy, according to the findings of Fannie Mae’s ESR Group. Real economic growth in the U.S. seems poised to exceed 3.0 percent for the second half of 2014, which is expected to provide a solid basis for continued growth into 2015.The slow global economic growth may prevent the Federal Reserve Board from making any interest rate policy changes until Q3 2014, it has not prevented a positive outlook for the economy in the U.S.

“Given the expected strengthening economic activity in the U.S. in the second half of the year, we continue to expect to finish just above 2 percent growth for all of 2014,” Duncan said. “The risks are tilted to the downside due to current geopolitical events in Russia, Ukraine, Hong Kong, and the Middle East, as well as the economic slowdown in the Eurozone, China, and Japan. However, recent data suggest these factors have not significantly swayed American consumers. Real consumer spending is poised to pick up in the second half of 2014 from the first half, due in large part to improving labor market conditions, continued declines in gasoline prices, and a subdued pace of inflation.”

Posted By Brian Honea DSNews

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“Is it Better to Buy Foreclosures or From Distressed Sellers?” – ASK the P.I.G.

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James, one of our subscribers, recently posted the following question on our website: “Would it be better to purchase homes from distressed sellers, or to buy foreclosures?” As always, an excellent and insightful question, which is why I chose to answer it as a part of this month’s “ASK the P.I.G.” series.

This is definitely an easy question in my book, because I think it is undoubtedly far and away better to purchase from motivated sellers, and NOT homes that have been foreclosed on. The biggest and most compelling reason is because purchasing from motivated sellers gives you so many more options in regards to both purchase and exit strategies.

When you find homes with distressed sellers BEFORE they have gone to foreclosure (a.k.a. PRE-foreclosures), you have a litany of options that you could pursue. If it’s overleveraged, you could do a short sale, which allows you to have influence on the appraisal and gives you a 4-6 month time frame to try and find another buyer. If the seller is only a few months behind on payments, another option could be taking it subject to the existing mortgage, making up the back payments, and either renovating for resale or renting it out for cash flow. If there is equity in the property, you have the option of wholesaling for an assignment fee, or negotiating partial or full owner financing, a lease option, and the list goes on and on.

However, when you purchase an REO property from the bank (typically listed by a Realtor), you basically have one option, and that’s to buy it or not buy it. They will perform a BPO and/or appraisal, and will set the price at the current market value, which leaves little to no equity for most buyers. You also typically need to have cash, because you are oftentimes competing with other cash buyers, and the Realtor will require a proof of funds letter AND an earnest money deposit. That’s not exactly what you call creative real estate investing.

Another key benefit to dealing with motivated sellers is the lack of competition. Even the neophyte entrepreneur understands the basics of supply and demand, and so if you have hundreds or thousands of buyers looking at a small supply of good deals on the MLS, the competition will inevitable drive up the price. However, if your marketing has generated a motivated seller lead that no one else knows about and isn’t on a public MLS website, it gives you a great deal of control to structure the deal in a way that is most advantageous to you and your investing business.

To check out my full response to James, watch the video above…and then leave your thoughts or comments below.

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Institutional Investors, All-Cash Buyers Enjoy Larger Average Discounts

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All Cash home buyerAll-cash buyers and institutional investors were able to purchase residential homes at a larger discount rate from the average market value at the time of purchase than the average rate for all U.S. homebuyers in the third quarter, according to RealtyTrac’s U.S. Institutional Investors & Cash Sales Report for Q3 2014.

RealtyTrac reported that the average price paid for homes by institutional investors, which are defined as entities that purchase at least 10 properties in a year, was at $159,389 in Q3 – a discount of 15 percent from the average market value at purchase of $187,637. Cash buyers enjoyed nearly a 10 percent discount in Q3, with an average purchase price of $227,905 paid for a home, according to RealtyTrac. The average market value at the time of purchase for cash buyers was $252,640 in Q3.

Both discounts for institutional investors and all-cash buyers were well below the average rate for all buyers, according to RealtyTrac. All buyers paid an average price of $278,040 for a home in Q3, a discount of only 4.3 percent from the average market value at purchase price of $290,531.

All-cash home sales in the third quarter represented a large share of distressed sales, making up 54.6 percent of transactions involving homes currently bank-owned or in the process of foreclosure.distressed home

Overall, all-cash sales accounted for 33.9 percent of single-family and condo sales in Q3, a decline from 36.9 percent in Q2 and unchanged from the same period a year ago. RealtyTrac reported that cash sales were concentrated at the lowest and highest extremes of the housing market, accounting for 64 percent of home purchases made under $100,000 and 41 percent of purchases made above $2 million.

The share of single-family and condo sales made to institutional investors dropped to a four-year low of 4.3 percent in Q3, down from 5.0 percent in Q2 and 5.3 percent in Q3 2013, according to RealtyTrac.

Posted By Brian Honea DS News

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Short Sale Tax Break Signed into Law

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Homeowners who had short sales in 2014 can now breathe a giant sigh of relief, as the Mortgage Debt Forgiveness Act was signed into law by President Barack Obama.

Under the Mortgage Debt Forgiveness Act, any mortgage forgiveness achieved in a short sale is not counted as income for homeowners whom banks allowed to sell their homes for less than the amount of their mortgage.

The Act was due to expire in 2014, but was extended by recent votes in Congress. The Mortgage Debt Forgiveness Act passed by a wide margin in the House of Representatives three weeks ago and passed 76-16 in the Senate two weeks ago… But the Act wasn’t made official until President Obama signed it into law, which he did last week.

The extension only applies to short sales conducted in 2014. Any further extension of the short sale tax break would need to be taken into consideration by the newly elected members of Congress when the Congress begins its 2015 session in January.

According to a recent estimate from RealtyTrac, the average short sale has an estimated mortgage forgiveness of $88,456.tax breaks

And according to a further data provided by RealtyTrac, there have been more than 121,700 short sales through October of this year, with a total mortgage debt forgiveness of nearly $10.8 billion.

RealtyTrac also estimated that the potential taxes on the average short sale to be $22,114, which would have brought the total tax liability to $2.7 billion.

When the Senate passed the Mortgage Debt Forgiveness Act, the National Association of Realtors hailed the vote. “NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment,” NAR President Chris Polychron said.

“Realtors strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed,” Polychron added.

“We are grateful to Sens. Debbie Stabenow, D-Mich., and Dean Heller, R-Nev., and Reps. Tom Reed, R-N.Y., and Charlie Rangel, D-N.Y., for championing the provision.”

By Ben Lane- Housingwire.com

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Resolutions Stink! You Need a New Year’s COVENANT!

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free-happy-new-year-2015-clipartYes, it’s that time of the year once again. With the changing of the calendar, and a fresh 365 out in front of us, there are a few traditions that we all must endure. For the past few days you’ve probably had to scribble out 2014 more times than you can count. The NCAA and its high-paying sponsors have force-fed you a full course of meaningless college bowl games. You’ve been subjected to endless dieting & health club commercials with promises to help you shed those holiday pounds. And of course, it wouldn’t be January in America without talk of making a New Year’s resolution.

 Don’t get me wrong. I think that goals are one of the most important and integral steps in achieving positive change in a person’s life. And there was probably also a time in our history when the word “resolution” actually meant something to people. After all, Webster’s Dictionary defines the term as, “the act of determining upon an action or course of action” and the root word resolute is defined as a “firmness of purpose.” Sounds pretty impressive, doesn’t it?

 However, somewhere along the way, this powerful term of solemn commitment and dogged determination became more of a weak suggestion or impotent recommendation (remember those two dozen U.N. Resolutions passed against Iraq a few years ago?). Perhaps it took place around the same time that “until death do us part” became “until something better or more exciting comes along.” Or maybe it was some time after we witnessed yet another political campaign promise “change”, only to quickly turn back to business as usual as soon as their feet hit the Beltway. With so many promises broken, and so few people who say what they mean and mean what they say, is it any surprise that we find it so easy to break these annual pledges to ourselves?new-years-resolution-be-more-awesome

 So this year, as we begin a new year in each of our lives, let’s go ahead and strike the word “resolution” from our vocabulary and truly start anew. I propose that we choose a different term to describe our new year’s commitment to modify our behavior. Except this time, I think we should choose one that packs a little punch, and includes a true commitment to lifelong change. I think it’s time for all of us to make our very first New Year’s Covenant.

 The term “covenant” is actually not a new concept at all, but rather the revival of an age-old one. In ancient times, when men made a covenant, they would cut the flesh of animals and walk in a figure- 8 pattern between the torn pieces of flesh. This action signified a bond “unto death” and the commitment had two components. First, the covenantor was submitting himself or herself to a literal death as punishment for breaking the covenant, thus suffering the same fate as the sacrificed animals. Second, the act signified a death to one’s selfish agenda and ego-centrism. From the time of the covenant commitment, life became less about the individual’s comfort, and more about a commitment to the vow that they had made.

 Somewhere along the way, resolution became something you try. A covenant is something you’re willing to die for. It’s that type of tenacity and unflinching determination that brings about true and lasting change in our lives. No challenge, setback, or misstep will keep you from fulfilling your covenant promise. If you fall, you get back up. If you fail, you give it another go. If people tell you that you can’t, you just smile politely and walk away telling yourself, “Yes, I can. Yes, I can!” That type of true, passionate resolve will ensure that you see your goals accomplished and your dreams become reality in this new year…and many more years to come!covenant

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