Financial and Investment News

According to the newest real estate numbers, the Big Island of Hawaii and Kauai house sales have dropped by as much as forty percent from the same time last year.
All in all, it seems that the primary reason for that is a majority of possible real estate buyers have become much more careful amid the latest economic climate. The credit crises has not helped matters much either.
All in all, the raw numbers do not look great at this point in time: house sales (grand total) on the Big Isle descended 41.3 percent to 64 from 109, while the average sales price descended almost twenty percent from the same time last year.
In the meanwhile, new Condo unit purchases dipped some 17.2 percent to 24 from 29, and the median sales price was reduced by over fifty percent to $226,200 from $463,000. These are fairly shocking numbers, and they come from the Hawaii Information Svc.
Despite all of this, the Kauai real estate picture is remarkably better than that, as luck would have it.
Despite the fact that the total house sales there dipped a similiar 40% level like the Big Isle of hawaii, Kauai had a seventeen percent increase in the median sales price from this time last year. All the while, Condo unit
sales on Kauai dropped an eye popping 41.7 while the medium sales price took a steep 45 percent drop during that particular time period.
In my own view, Kauai Real Estate will quite possibly hold up pretty well over the long term because of the limited quantity of land and ever-increasing restrictions on different types of property development.

The President has unveiled a package which represents an early Christmas gift to homeowners caught up in the nation’s foreclosure crisis.

The proposal is an outgrowth of something called the Hope Now Alliance, which represents officials in both the public and private sectors. Under the deal, interest rates will be frozen for 5 years for people who would be risking foreclosure if their adjustable rates grew at the end of their lock-in period.

“Hope Now is an example of government bringing together members of the private sector to voluntarily address a national challenge without government subsidies and without government mandates,” said President George W. Bush.

According to the President, 1.2 million homeowners may ultimately benefit from the program, which is coordinated in part by Treasury Secretary Hank Paulson and Housing Secretary Alfonso Jackson.

The program is voluntary, meaning that only those homeowners who ask for help will receive it. By calling a toll-free hotline number, homeowners can be put in touch with those who can assist them avoid foreclosure.

Meanwhile, the Federal Housing Administration is starting a new program called FHA-Secure which assists in the refinancing of adjustable-rate home loans.

Bush noted that the feds are taking action “to make the mortgage industry more transparent, reliable and fair. Later this month, the Federal Reserve intends to announce stronger lending standards that will help protect borrowers.”

Bush added, “Congress needs to temporarily reform the tax code to help homeowners refinance during this time of housing market stress. Under current law, if the value of your house declines and your bank forgives a portion of your mortgage, the tax code treats the amount forgiven as taxable income. When you’re worried about making your payments, higher taxes are the last thing you need.”

The housing industry is experiencing its worst slump in decades and may not recover until the middle of 2008

As both the rate of United States house foreclosures plus the rate of houses that are entering into the foreclosure process rose to a record in the 3rd quarter of this year, aggravated by dropping or stagnant house prices as well as increasing premiums,
the Commander & Chief Executive launched an effort today to decrease these foreclosures, which some experts claimed was a good beginning yet would not, by itself, solve all the problems relating to the rather depressed real estate housing market.
The program in question would essentially freeze low teaser mortgage rates for 5 years for the two million or so odd home owners with ARM loans facing steeper payments, according to the Reuters online news Network. Almost
a million American homes are in the process of foreclosure, unfortunately. In addition to this,
The percentage of loans in the actual foreclosure process rose to 1.69 percent of loans outstanding.
Overall, various issues with payments on all kinds of mortgages drove up the pace of homes entering foreclosure, according to certain trade groups.
Furthermore, some experts have warned that the Sub-prime mortgages are not the only ones failing: 2nd mortgages, hybrid intermediate-term ARMS, and of course the much critized Pay Option ARM are likewise feeling the pich to a considerable extent.
These 3 loan types were chiefly thought to be ‘prime’ so they have been overlooked, but could likely haunt the financial markets for many years.

According to a news story reported by the Associated Press,
The number of house owners receiving foreclosure notices reached an all-time high this spring,
being particularly propelled by issues regarding the now infamous subprime loans.
All in all, The Mortgage Bankers Association or MBA stated today that mortgage-holders beginning the
foreclosure process in the spring quarter this year reached 0.65 percent, which is, shockingly,
the 3rd straight quarter that this quantity has set an all-time high.
Unfortunately, the delinquency rate was likewise up substantially during this same period,
 rising to some 5.12 percent of all the loans, up nearly 3/4 of a percentage point from the same period last year.
Obviously, that could mean yet another record setting foreclosure rate for the next quarter.
This poor performance has been apparently driven by 2 major factors — major job losses in the states of Ohio, Michigan & Indiana
as well as the collapse of the formerly booming real estate markets in such states as California and Arizona.
Sadly enouph, The Midwest in particular has been severely affected by a loss of jobs in manufacturing, such as in automobiles.
During a 5-year real estate boom, the prices in some areas of the country, like Florida and California, for example, surged upward. Unfortunately, this created
 a dangerous speculative bubble as investors bid up the price of houses so as to swiftly resell them for a big profit.
With house sales falling however, the quantity of unsold homes rising as prices continue to stagnate, some speculators want to default on their loans
and basically cut their losses. In addition to all of this,
up to two million ARM loans are scheduled to reset this year at much higher interest rates, which will make monthly payments in certain cases to go up threefold,
a problem which is particularly major in the market for subprime mortgages. Sorry I couldn’t add any good news on this topic.

As reported recently in ‘The Economic Times’, the subprime loan problem that has been hammering the American
economy of late has also sent ripples worldwide, with a  mild correction occuring to global equity markets
in recent weeks. Even countries such as India are feeling the heat and are affected, unfortunately.
But what exactly is this thing all about?
Well in a nutshell, the home loans offered by banks and various real estate finance firms are subject to capital standards that are prescribed by regulators. This essentially requires them to back
 the risk in lending with an adequate level of owned capital. The growth in the mortgage business of a firm is therefore limited by the amount of capital available. and this includes undistributed profits as well.
 Pursuing a more aggressive growth rate would require new capital to be raised from time to time, and this has a tendency to limit the attractiveness of the firm in the equity market.
As the Economic Times reported, to overcome this particular problem the firms in question began to sell the loans which they originated through a process sometimes known as securitisation. This big word just means the carving out of
 pools of home loans with varied risk & return characteristics and selling down the same through certain structures to new investors in basically the same way that a bond is traded in the debt market.
Now the mortgage firms by becoming originators of mortgage loans who sell down the assets at a profit to other investors — often mutual funds, insurance firms, hedge funds and so on therefore improve their return on equity without having to continually raise new capital.
Wow, talk about playing games with money!
 The CDOs are usually sold at a yield lesser than the contracted yield with the individual home mortgages therefore deriving a profit equivalent to the difference between the net present values of the cash flows at the 2 yields.

The subprime fiasco in America a therefore a result of the excesses built into the system originally created by pushing the balance between risk and return beyond reasonably levels. Aggressive American banks were offering well priced home loans to subprime borrowers while hoping that the boom in the real estate market
would continue and the security cover will be more than enouph when repossession & ultimate sale becomes necessary on loan default caused either by too much unemployment or increasing interest rates. So far, it hasn’t been.
 

Time to start blogging today.
In a recent article in the highly respected publication ‘The Washington Post’
entitled “Commercial Real Estate Sell-Off Puts Investors in a Tricky Position”
as reported by esteemed journalist Dina ElBoghdady on June 16,
it was noted that in the last 7 years or so, stocks of publicly traded commercial real estate firms had soared over one hundred and sixty percent, which actually far outpacing the wider market.
Then in the early part of the current year, the shares simply slipped, dropping around fourteen percent rouphly since the early part of February.
Why is this, many are asking? Dina and the Washington Post, as well as other trade journals and newspapers can only speculate on this.
However, it is quite obvious that many investors are simply grabbing their money and running, despite the fact that commercial real estate stocks are considered a staple of a well-balanced portfolio by many financial and investing experts & analysts.
 These shares are usually considered to be a sort of hedge against inflationary pressures since investors can collect some sizeable
 dividends which then actually tend to increase in the higher inflation time periods as landlords raise their rents (is that cynical, do you think?)
Als, after real estate assets go up in value, the investors get a share of the profit after the properties are eventually sold.
So what is the best course of action for most individuals who are playing the game right now but don’t want to lose their shirt?
Well, for smaller investors, the article goes on to say, the most affordable and also the most effective method for gaining said exposure to commercial real estate is simply through real estate investment trusts, which are also sometimes referred to as REITs. The majority of the firms involved own a mixture of buildings and such.
Yet certain investors in this game have flat-out confused the housing & commercial sectors, particularly after trouble surfaced earlier in the year regarding subprime home mortgages, which tend to service individuals who have flawed credit & likewise other riskier types. More information can be found over on the Real Estate Blog Just keep to fundamentals while you are building your portfolio. In general, though I think that the market will go well for most individuals in the coming financial quarters.