Moody’s Commercial Property Price Index down

According to the Moody’s REAL Commercial Property Price Index (CPPI), commercial real estate property prices slipped 5.1% in July, down 30.8% from the same time last year. The month’s decline put values 38.7% below the October ‘07 peak, and sales counts also declined from the previous month, with just over 300 transactions totaling $3.6bn in July. The Eastern region is holding up better than the rest of the nation in apartment prices, but are at their lowest recorded level in the Southern region. San Francisco’s office property market was hit the hardest, declining 27% over the past year. Florida’s apartment index continues to fall, already down nearly 50% from its peak. The deteriorating commercial property prices come at the same time a Moody’s Economy.com analyst projects at least another decade will pass before housing prices return to peak 2006 levels.

Commercial mortgage-backed securities rally

The market for commercial mortgage-backed securities (CMBS) rallied last week following new guidelines addressing loan modifications within real estate mortgage investment conduits (REMICs). The new tax rules may increase modifications within CMBS by lifting a tax penalty on changes made to commercial mortgage pools after their inclusion in a securitization vehicle. The reach of the new rules may not go very deep, and won’t likely help some underwater borrowers, according to researchers at Bank of America Securities - Merrill Lynch (BAS-ML). “[O]ur view is that for loans that are deep underwater, and there are many of these, the new guidelines would not help,” BAS-ML researchers said in market commentary. “Loans where the borrower is already turning over the keys and not even attempting to initiate discussions with the servicers come to mind.”

SSA raises verification fees – encourages fraud?

The Social Security Administration (SSA) plans to raise its fees for verifying mortgage borrowers’ identities, from $0.56 to $5.00 per verification on October 1. While this may seem to be simply another one of the cash squeezes on the private sector, Rep. Kay Granger (R-Texas) pointed out in a letter to SSA commissioner Michael Astrue that the fee increase has the potential to discourage lenders from using the administration’s Social Security Number Verification Service (SSNVS), and open the door for mortgage fraud abuse. Jay Meadows, CEO of Rapid Reporting agrees: “With lower loan production and lenders’ increased focus on cutting costs, this fee increase could have a highly detrimental impact on the mortgage industry, as well as the US and global economies. While unfortunate, it’s a definite possibility that lenders will avoid using these higher priced CVSB-based Social Security number authentication, even though it’s a reliable way to protect against ident
ity fraud.”

Unemployment driving foreclosures, but personal debt down

Data from the Equifax credit bureau suggests that high unemployment is pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures. A record 7.58 percent of homeowners with mortgages were at least 30 days late on payments in August, up from 7.32% in July. August saw the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89% of mortgages were 30 days past due in August 2008, and in August 2007 the rate was 3.44%. The rate of subprime mortgage delinquencies is now above 41%, up from about 39% in each of the prior five months. August bankruptcy filings were up 32 percent from a year earlier, compared with a 35 percent year-over-year increase in July.

At the same time, however, the proportion of credit card accounts at least 60 days past due was down in August for the third straight month, while subprime card delinquencies also fell. The improvement in delinquency rates partly reflects risk-aversion among issuers, which have cut the number of cards by 82 million, or 19%, over the past year, while slashing credit limits by $721 billion, to about $3.6 trillion. Total consumer debt is down more than $300 billion, or almost 3 percent, from its peak in September 2008, said Dann Adams, president of Equifax's Consumer Information Solutions group, while the savings rate is nearing 5 percent, "a level we haven't seen in years."

Unemployment benefits extended

Over the past year, Congress has twice voted to extend unemployment benefits, and it looks like it’s going to extend them again as the recession wears on and unemployment continues to rise. Under a bill the House is set to take up today, more than a million people, living in states with jobless rates higher than 8.5%, could receive an additional 13 weeks of unemployment benefits. The extended benefits would apply to an estimated 314,000 people about to exhaust their benefits by month's end and to more than a million who will stop getting checks by the end of the year, according to the House Ways and Means Committee.

And it may not stop there...workers in other states could qualify if their state is expected to hit an 8.5% unemployment rate soon or meets other criteria. In most states, unemployed people receive 26 weeks of state-funded benefits, but depending on where they live, they will get federally funded extensions for a total of 79 weeks. The bill will be fast-tracked though the House, where it is expected to pass easily. Who is going to pay for it? The cost will be offset by extending, for one year, an employer-paid federal unemployment tax that has been in place for the past three decades, and by requiring that newly hired employees are reported with a start date, which would reduce unemployment insurance overpayments.

Now on to our real estate educational section...

Are You Living a Financial Fairy Tale?

Once upon a time, there lived a red-blooded American who was taught to study, work hard and save money in order to succeed. Assured that health, wealth and happiness would soon follow he set out to earn his way in the world with a blushing bride and bouncing baby by his side.

On the path to progress he found it increasingly more difficult to accommodate the ever changing workforce but thanks to modern machinery, his blushing bride was able to join him in the work force while leaving the baby with relatives. Their combined income was sufficient to take an annual vacation, send junior to summer camp and still have enough remaining for a few luxuries now and then.

But alas, all was not well in the land of the red, white and blue. Each year taxes took more of the combined household income while the cost of living continued to rise. The “tax free” date moved from March to April and eventually to the end of May before the average American began to earn money that would not go toward paying taxes. The husband and wife worked harder than ever as they were forced to become more productive and do the job that used to take two or even three workers. Left to his own, Junior skipped school, didn’t do his homework and routinely got into trouble. The once happy household was left tired, tense and terrified of their financial future….but why? Simple. They failed to understand the changes taking place in the world around them.

Find out if you are living a financial fairy tale or truly understand the economic reality surrounding you and your family with these simple questions:

1. Do you have more than one source of income that is not based upon working for a living?

2. Are you financially dependent upon two or more people in the household earning an income in order to pay your basic bills and set aside funds for investing?

3. Do you regularly sit down and calculate the tax consequences of working over-time, accepting a promotion or other “wage increase”.

4. Are you properly positioned for defensive economic earnings should the government increase taxation or withholding on benefits like health insurance, 401k or other long term investments?

5. Do you regularly calculate the cost of inflation five, ten and even twenty years into the future when establishing your savings and investment goals?

6. Are you hedged against liability, lawsuits and the threat of loss for both your personal and private investments?

7. Do you understand the “need for speed” when it comes to investing in tough times? Remember, the time value of money changes...make sure your investment methodology does too.
Short sales can help you achieve financial self-sufficiency without working yourself into an early grave. It’s one of the last remaining avenues available to average Americans searching for sensible investments in uncertain times.