When it comes to purchasing real estate — either as a primary residence or as an investment — perception is everything. When reports of telltale economic indicators are released, if Wall Street perceives them as bad, the market takes an immediate tumble. But when the indicators reported come is as expected, the reaction is generally good and we see an uptick in market activity. So it is with real estate.

Four real estate industry related reports have already been released this week, and Wall Street has reacted.

1) The National Association of Realtors announced Monday that existing home sales nationwide were up for the month of February compared to January.
2) On Tuesday, the Standard & Poor’s/Case-Shiller home price index reported the worst decline in home prices since the company started tracking data back in 1987.
3) The Conference Board’s Consumer Confidence Index also came out Tuesday with its analysis showing that consumer confidence in the nation’s economy slid nearly 12 percent in March following a sharp decline in February, and remaining at a five-year low.
4) The U.S. Commerce Department reported that new home sales in February were down 1.8 percent from the month before and 29.8 percent from February 2007, although the median home price of a new home increased 8.2 percent from the previous month, to $244,100.

What does all this mean to anyone looking to the nation’s foreclosure market for a home purchase?

It means that there has never been a better time in recent history to get off the fence and buy that primary residence or investment property you’ve been waiting for. A Wall Street Journal article today reports that many buyers are already doing that in Cape Coral-Fort Myers, Fla., the city with the nation’s highest foreclosure rate in February, according to RealtyTrac. And the foreclosure market is a good resource to tap for the best potential discount available in making that purchase.

Wall Street was happy to hear that existing home sales were up nearly 3 percent between January and February. NAR’s chief economist Lawrence Yun called this encouraging and “another sign the market is stabilizing.” Still, on a yearly basis existing home sales were down almost 24 percent from February 2007, and the national median sales price for all housing types for the month was down 8.2 percent from a year earlier.

The question needs to be asked, though, why did home sales go up suddenly in February after months of wallowing in despair? Could it be because home prices are so far down now that buyers are starting to come out their caves and buy?

As the Associated Press reported Tuesday morning, this latest report by the Case-Shiller index, which tracks prices of single-family homes in 10 metropolitan areas around the country, suggests that prices have either been “growing more slowing or declining for 19 consecutive months.” The company’s 20-city composite index also declined in January from a year earlier, down almost 11 percent. This is the first time that both indexes have dropped by double-digits concurrently, the AP reported.

Las Vegas and Miami had the greatest price drops (both down 19.3 percent), while Phoenix, San Diego, Los Angeles, Detroit, Tampa, San Francisco, Washington, D.C. and Minneapolis all suffered double-digit price declines as well. Many of these are markets that RealtyTrac is reporting as major sources of foreclosure activity for investors and first-time buyers looking for bargains in their real estate purchases.

To add insult to injury The Conference Board released the news that its monthly Consumer Confidence Index revealed a lack of consumer confidence about the nation’s present situation and future prospects for economic recovery. According to the press release, based on the 5,000 U.S. households surveyed, consumer perception about the nation’s economy is generally pessimistic about everything from current business conditions to short-term expectations for the future, the outlook for the labor market and chances to see their incomes increasing in the near future.

All in all, this pessimism is also being reflected in the number of distressed homeowners giving up their homes to foreclosure (or simply walking away from their homes) in order to put the past behind them and start anew.

These latest reports suggest that foreclosures will remain at the forefront of the real estate marketplace in many parts of the country for some time to come. Perception is everything in this market, and for savvy home buyers and investors who spend the time needed to conduct proper research, this is evidence that there is a window of opportunity out there right now to purchase real estate at significant discounts if you move to make appearances become reality.

As foreclosures continue to mushroom, lenders are increasingly turning to the auction block to sell foreclosure properties.

In April, Foreclosure News Report will spotlight the fast-growing foreclosure auction market and cover other hot foreclosure issues.

One of the experts interviewed for the Foreclosure News Report story was Dave Webb, principal of Hudson & Marshall, a major auction firm in Dallas, Texas. Webb believes now is a good time to buy foreclosure properties. Read Webb’s exclusive interview below:

Is now a good time for investors to buy bank-owned foreclosures at auction?
“Bank-owned foreclosure auctions are a great way for buyers to find exceptional values on homes because lenders are anxious to unload these properties. Everything runs in cycles. In the late 1980s, Houston looked like a ghost town because of the oil bust. It looked like what Detroit looks like now. Now homes that sold for $30,000 are selling for $100,000 in Houston. Eventually all markets do come back. I think it’s a good time to buy bank-owned foreclosures.”

You have some auctions coming up soon, tell us about it?
“I’ve got nearly 800 bank-owned properties to sell in Michigan starting March 25 through March 30. We’ll be selling 100 to150 properties a day in the metro Detroit area. The homes there range in price from $2,000 to $500,000. 

“Next we go to Florida, where on April 7 through April 13, we’re selling 650 bank-owned foreclosures in Fort Lauderdale, Port St. Lucie, Melbourne, Daytona Beach, Jacksonville and Destin, Fla.

“We also have auctions scheduled in Colorado on April 19, where 150 homes are for sale; Las Vegas on April 20, where 300 foreclosures are on the block; and the Washington, D.C.-Maryland metro area, where 45 properties are on the block. Arizona is scheduled for April, and we’re back in California in June.”

Is your business growing?
“Last year we sold 9,000 units. This year, our business will double. We’ll sell 18,000 units.”

Learn more about Hudson & Marshall and the fast-growing bank-owned foreclosure auction market by ordering your first issue of the Foreclosure News Report for free.

With a speech given today in Philadelphia, Sen. Hillary Clinton reinforced her standing as the presidential candidate with the most far-reaching and concrete proposals calling for government intervention to save homeowners from the sins of greed and bearing false witness that were rampant in mortgage lending over the past few years.

The payment for those sins is often foreclosure, but Clinton wants the government to become a Messianic figure for homeowners facing foreclosure — and by default also for many lenders who approved problem loans for those homeowners — by forgiving these sins and bearing the transgressions of malevolent mortgages that no other lender or buyer is willing to touch.

"That’s why I believe the Federal Housing Administration should also stand ready to be a temporary buyer — to purchase, restructure, and resell underwater mortgages," Clinton said in the speech at what was billed as the "Solutions for the American Economy" event.

Giving the FHA the ability to buy trouble mortgages would act as a safety net to legislation proposed by fellow Democratic Sens. Barney Frank of Massachusetts and Chris Dodd of Connecticut.

"The Frank-Dodd legislation would ... (set) up an auction system for mortgage companies that hold hundreds of thousands of these mortgages. Through this system, these companies could sell mortgages in bulk to banks and other buyers. The buyers would be willing to purchase these mortgages — and restructure them to make them affordable for families — because they know the government will guarantee them once they are refinanced," Clinton said, not long after setting up the problem by citing RealtyTrac's statistic of 2.2 million foreclosure notices filed in 2007, up 75 percent from 2006.

But because she doubts the sufficiency of this plan to help all homeowners, Clinton called on President Bush to form an "emergency working group on foreclosures" to step in and evaluate the plan along with her proposal to have the "government step in as a purchaser."

Clinton believes that her proposal to allow the FHA to purchase loans "would cost taxpayers nothing in the long run" because it would not create a new federal bureaucracy and would be designed to be "self-financing over time." Whether that is a realistic belief is questionable based on the tendency of government programs to overreach and overspend. 

The bottom-line question is this: Should government act as a savior willing to take on the foreclosures of the world, or should it take a more tough-love approach and let the market work through the consequences of its actions? Let us know what you think.

For the longest time now Ben and his band of governors were mostly on defense. At first they weren’t fighting back at all, preferring to stay on the ropes while the economy turned from bull to bear. Over the past few months the Fed started to fight back, taking a few jabs here and there without much oomph to them — lowering the federal funds rate, but without a real noticeable positive impact.

Now in the late rounds of the title fight and on the ropes again, Bernanke took a leap of faith this week, swinging wildly at anything that looked like it could put his opponent down for the count. And he finally connected with a good left hook and a right uppercut to the economy’s jaw. It may not be the knockout punch the American public is looking for, but it sure had a tremendous impact on the financial markets this week and goes a long way towards restoring confidence in the Fed’s ability to control fiscal policy.

The setup blow came without warning last weekend when the Fed took the following steps:

• Lowered its discount rate by 25 basis points to 3.25 percent
• Approved an increase in the maximum maturity of primary credit loans from 30 days to 90 days
• Created a lending facility to provide financing to participants in securitized markets (such as the mortgage-backed securities market)
• Approved the bailout financing of Bear Stearns Companies Inc. by JP Morgan Chase & Co.

These moves alone set up a wild ride on Wall Street early this week. Then came the uppercut with the expected lowering of the federal funds rate during Tuesday’s meeting of the Federal Open Market Committee. Seeing that inflation expectations have risen, the Fed took action and lowered the rate by 75 basis points.

“Growth in consumer spending has slowed and labor markets have softened,” the FOMC said in their official statement. “Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.”

Even with such reasoning, lowering of the rate by three-quarters of a percent was more than some people expected. In fact two of the Fed governors voted against the action, preferring “a less aggressive action” according to the Fed statement.

All told, it looks good that the Fed is finally awake and seeking to take appropriate action to fix our broken economy. Even if they’re not ready to admit we’re already in a recession.

Still, way to go Ben! The American public, especially distressed homeowners facing foreclosure, is counting on you to defend our way of life more in the future.

In the end, fixing the economy can only serve to help everyone — homeowners looking for ways to stay in their homes or get out gracefully and with dignity; legitimate real estate investors looking to finance home purchases to help out those distressed homeowners and to make a reasonable profit on their investments; and real estate professionals who are looking for the real estate market to come back so they can start making a living again.

February foreclosure activity was down 4 percent from the previous month but still up 57 percent from February 2007, according to the latest RealtyTrac U.S. Foreclosure Market Report. So does the monthly decrease mean we've hit a ceiling of sorts for this cycle in terms of foreclosures?

Probably not.

The February monthly decrease is more likely a seasonal decrease helped along by a shorter-than-average month and the fact that January's numbers are often padded with some pent-up foreclosure activity from the holiday season. That premise is supported by looking at the numbers in February 2007, when U.S. foreclosure activity was down 6 percent from January. Foreclosure activity continued to climb for the remainder of that year.

The more important indicator is the year-over-year increase, which has been between 50 percent and 60 percent for both January and February. If you look back at the RealtyTrac monthly reports, activity has increased on a year-over-year basis every month since January 2006, the first month that YOY stats were available.

So the overall trend -- at least on a national basis -- is steadily upward. Eventually the bleeding will stop, and the fundamentals of a healthy real estate market will be restored. The million dollar question (or millions and millons of dollars if you're a really smart investor) is, when will that be? Will we see another series of three more lines that are all higher than the lines in the graph above, or will there be just one more year of rising foreclosures, or two? Let us know what you think.

View full February report.

Time to dust off those Ouija boards and take out the tea leaves. The way things are going nowadays you too have about as much a chance of correctly predicting whether the nation and the state of California are either headed towards, or are already in, a recession as any of the professionals who do it for a living. It’s a 50-50 crapshoot no matter which way you lean on the issue.

Late last week Nobel prize winning economist Robert Engle told attendees of a business seminar at the University of Albany that the U.S. economy is headed for a recession. “But I don’t think it’s going to be a really serious recession,” he said, according to published reports in The Business Review (Albany).

This week, by contrast, the San Diego Union-Tribune is reporting that prognosticators working at UCLA’s Anderson Forecast don’t see the nation — or the state — falling into a recession. “Don’t worry, be happy,” said Edward Leamer, director of the forecast, according to the publication.

Although he believes the $152 million economic stimulus package President Bush and Congress approved last month will help somewhat, Engle, a professor at New York University,  is disappointed in the performance of the housing sector enough to blame it as the chief reason that a recession is likely.

“What I’m hoping is that this sector of the economy doesn’t get legislated away. I think subprime loans have made it possible for a lot of low-income households to buy a home for the first time. I think it’s unfortunate it has turned into a crisis for the financial sector,” Engle said.

To Leamer and his group at UCLA, what we have is a sluggish economy, and a recession is not in the cards because the current state of the economy does not match those of previous recessions when factories were laying off large numbers of employees. In defending the UCLA forecast, Leamer justified his positive outlook by reasoning that consumer spending should keep the economy afloat.

He may be correct — at least as to California — based on the latest California Consumer Confidence survey conducted by economists at the A. Gary Anderson Center for Economic Research at Chapman University in Orange, Calif.

According to the Chapman Composite Index of Consumer Sentiment, while responses to the survey were negative when it came to the current and future economic conditions (to the lowest level seen since the survey began in Q3 2002), consumers did answer positively to their future spending plans for big ticket items (although the uptick was only 5 points for Q1 2008 after a 16-point decline for Q4 2007).

Still, whether or not any particular state — or the nation as a whole — is actually in recession may be beside the point. The real question may be, how do consumers feel about it? And how are their pocketbooks feeling these days with higher fuel prices and higher food prices, on top of concerns about whether they can continue to afford to stay in their home and whether they will have a job to go to tomorrow.

How are your tea leaves looking now? Is the Ouija board giving you the answers you’re looking for yet?

No matter the immediate decision on economic issues, one factor is certain — the nation’s housing market (in most areas) is stagnant at best with no clear turnaround point in sight. So until this mess flushes through the system, foreclosures are going to continue to offer opportunities for investors and homebuyers with the patience to wait for the right deal to present itself.

Well, in case you either weren’t in the business at that time, or were hoping to erase the nightmare permanently, welcome to the early 1990s redeaux…almost! We’re getting there. FAST!!!

Back then we had a major recession, much more extreme than the one earlier this decade. It was a recession highlighted by high foreclosure levels, rampant job losses, inflation and high interest rates.

After last week’s disappointing employment report was released by the U.S. Labor Department, and Wall Street continued its downward spiral, a lot of factors seem to be pointing the nation’s economy further into the abyss. All very reminiscent of the early 90s — except for the high interest rate part.

Although, it is very curious that despite Mr. Bernanke’s  best intentions, the recent slashing of interest rates seem to be having no real effect on turning the economy around. Maybe it’s more of a feel good for the moment way of going about the whole economy mess. Who knows? One thing’s for certain. It seems obvious that Bernanke and his colleagues at the FOMC waited a little too long to decide to do something constructive about the foreclosure crisis and the recession he said probably wasn’t going to happen.

This blog has been talking about the housing sector leading the nation into recession for some time now. And we continue to believe that it will take a true recovery of the housing sector before the nation pulls out of the black hole it’s falling into thanks to seven years of poor financial planning in Washington and the too little too late kneejerk response of the Federal Reserve.

We have the high foreclosure levels being reported by RealtyTrac on a regular basis. It doesn’t matter whether you are talking about total foreclosure filings (defaults, auctions and REOs together) or the total number of unique properties being foreclosed on every month. Anyway you slice and dice it, the result is the same. 

Mr. Bernanke admitted to the nation’s community bankers last week that foreclosures are here to stay for the foreseeable future. Mr. Bush spoke out last week, trying to give hope to people that his economic stimulus package will ease the pain.

Governments at the national, state and local levels, plus numerous non-profit groups are busy scampering around looking for solutions to the foreclosure crisis, holding workshops, counseling sessions, opening hotlines, and getting the word out that something has to be done to stem the tide of foreclosures.

Even the AFL-CIO Executive Council came out with a prepared statement about affordable housing and foreclosures during its meeting last week.

“It is a crime that in the richest nation in the world, a full-time job no longer guarantees access to decent, affordable housing,” the statement said. “The Bush administration’s proposed month-long “Band-Aid” moratorium on mortgage foreclosures will not provide any real help and is an insult to Americans in distress.”

Later this week, 600 community leaders from around the nation are set to descend on Washington as the National Community Reinvestment Coalition (NCRC) holds its national conference titled, “Creating the Vision for a Fair Economy: Investing in People and Communities.”

Fed Chairman Bernanke and Sheila Bair, chairwoman of the Federal Deposit Insurance Committee (FDIC) are scheduled to deliver the keynote addresses.

ForeclosurePulse will report next week on the outcome of this meeting. In the meantime, foreclosures are a part of the national economic mix for the time being which is not necessarily a good thing for American consumers, retailers, and business overall. But it will allow time for the once overheated real estate industry to make the correction it needs desperately, and as a result people who want to get into owning a piece of the American Dream may have a chance to get into the market…legitimately…as either an investor or a homebuyer.

Foreclosures are rising. Home prices are falling. Sales are down. What does all this mean? Here are some “megatrends” that may develop in the months ahead. For investors and homebuyers, these and other rapidly developing “megatrends” could signal opportunities.

Vultures Circling
Wall Street wizards profited handsomely from the subprime market they helped create; Wall Street gurus will profit from cleaning up the mess they spawned. Nationwide, wealthy investors are pooling their cash and circling in orbits once unheard of.

“When Jorge M. Perez, chairman and CEO of the Related Group, the nation’s leading high-rise luxury condo developer, becomes the biggest ‘vulture’ fund buyer in the downturn, what does that tell you?” questioned Jack McCabe, a real estate consultant in Deerfield Beach, Fla.

Searching for Stimulus II?
In a presidential year, Uncle Sam and politicians nationwide are rushing to unveil new and bolder schemes to unravel the foreclosure crisis. As federal, state and local government weighs in of the rising foreclosure mess, look for new plans to halt the foreclosure train wreck. Bankruptcy reform. Rate-freezes. Loan modification. Stimulus plans. Fraud legislation. So far, these efforts have yielded little results. But will the political considerations transcend economic considerations? The market will correct the problems, not the government. The solution lies in the hands of real estate investors and homebuyers.

Return of the “Jingle Mail”
Already, companies are positioning themselves to profit from the wreckage of the subprime folly. Lawyers in California — for a fee, of course — will show you how to damage your credit history for a decade or more and “walk away” from your debt. For a grand, youwalkaway.com will explain what to do. Increasingly, homeowners who put little or no money down are walking away from their homes, mailing their keys — jingle mail — to lenders who gave them toxic loans, according to the New York Times. The walkers could trigger the next domino. What ever happened to the savings account?

Banks and Builders Buckle
If 2007 was the year of the mortgage meltdown, where hundred of subprime lenders became extinct, then 2008 could shape up to be the year where banks and homebuilders buckle under the crushing strain of debt. Look for smaller regional homebuilders and lenders to fail or merge with larger national outfits. A wave of foreclosure walkers could spawn $1 trillion or more in financial losses, creating a systemic banking and builder crisis unseen in American history, warns the Economist.

Rise of the Eight-Figure Foreclosure
Only poor people lose their homes to foreclosure, right? From coast to coast, the rich — and now the ultra rich — are drowning in debt too. This week alone, two trophy properties were swept away in the foreclosure tsunami. In Palm Beach, Veronica Hearst  lost her $27 million dollar mansion at the courthouse steps, according to the Palm Beach Post.  And in Santa Barbara, Michael Jackson’s Neverland Ranch is slated to be auctioned on March 19, with an opening bid of about $20 million.

As we look ahead, the foreclosure crisis seems to have more headwind rather than tailwind. Look to ForeclosurePulse to keep you informed of developing foreclosure “megatrends.”

For the second time in less than a month, the real estate bubble has burst on a rich and famous homeowner’s palatial estate. Following closely on the heels of another trophy property recently sold on the auction block, Michael Jackson's Neverland Ranch is set to possibly suffer a similar fate.

On March 19, at 1:00 p.m., Michael Jackson's Neverland Ranch in Los Olivos, Calif., is scheduled for a public auction at the Santa Barbara County Courthouse at 1100 Anacapa Street. The opening bid is estimated to be at least $20,000,000. The sprawling Jackson estate — located at 5225 Figueroa Mountain Road — sits on 2,800 acres of rolling hills in California’s wine county north of Santa Barbara. Financial Title Co. filed the notice of trustee’s sale with the Santa Barbara County Superior Court on February 26th. 

View auction notice on RealtyTrac.

“We are starting to see evidence of a rise in high-end foreclosures across the nation,” said James J. Saccacio, chief executive officer at RealtyTrac. “With the auction of the Hearst mansion in Palm Beach, Fla., and the scheduled auction of Michael Jackson’s Neverland Ranch, it appears that even the rich and famous are not immune to foreclosure.”

Last month, the oceanfront south Florida mega mansion owned by the widow of publishing heir Randolph Hearst went on the auction block at the Palm Beach County Courthouse. Veronica Hearst’s Manalapan estate — known locally as Villa Venezio — was auctioned for $22 million. Sitting on 3.5 acres of beachfront property, the 32,000 square foot trophy mansion — complete with 9-bedrooms and 12 full bathrooms — was originally built in 1929 for the grandson of Cornelius Vanderbilt.

Big Ben Bernanke, that guy at the top of the nation’s financial food chain, finally admitted Tuesday in an address to a group of the nation’s community bankers that foreclosures are not going to go away anytime soon.

The Fed Chief gave two reasons for the bleak forecast (both of which have been espoused in previous posts in this blog): 1) further declines in housing prices are expected; and 2) significant resets of adjustable interest rates to unaffordable levels for many borrowers who were convinced to take out the more risky loan products of the past few years.

Speaking at the Independent Community Bankers of America Convention in Orlando, Bernanke noted that 1.5 million subprime loans (or approximately 40 percent of the outstanding stock of subprimes) were going to reset in 2008 from just above 8 percent to about 9.25 percent — about a $1,500 increase on the average subprime loan. That’s a significant hit to many household budgets.

“Declines in short-term interest rates and initiatives involving rate freezes will reduce the impact somewhat, but interest rate resets will nevertheless impose stress on many households,” Bernanke noted.

Bernanke went on to mention many of the same issues we’ve been talking about in this blog for months now. The fact that refinancing is out of the question for many distressed homeowners now that lending standards have been tightened all over the country. And the fact that the number of vacant homes had risen to more than 2 million units at year-end 2007.

What does he suggest? Bernanke said he wants to institute measures that will reduce “preventable” foreclosures to stave off the erosion of property values and municipal tax bases in communities across the country. Measures like promoting greater loss mitigation efforts between lenders and distressed borrowers. Or to utilize principal writedowns or short payoffs to help out homeowners with little or no equity left.

At the national level he believes real relief that will stabilize the nation’s  housing sector and help it recover will come with the support of such programs as the FHA Secure program and the HOPE NOW alliance coalition, as well as hastening the modernization of the Federal Housing Administration (FHA). Bringing the lending limits of FHA originated loans to higher amounts — a measure enacted recently as part of the economic stimulus package passed by Congress and signed by President Bush — and allowing Fannie Mae and Freddie Mac to purchase those loans and sell them on the secondary market would be highly beneficial to the economy, he noted.

Talk is cheap. Will any of this actually pass muster on Capitol Hill and in local government chambers around the country? Only time will tell.

In the meantime, it sounds like the Fed, and Mr. Bernanke, are coming back down to earth, realizing the nation’s economy (through the housing sector) is in much worse condition than they first admitted to. Will it recover? Sure! How soon? Who knows for sure. There’s no guarantee.

For now the inventory of foreclosed properties will grow for the foreseeable future, giving legitimate real estate investors, first-time homebuyers, and real estate professionals a golden opportunity to help fellow citizens out of desperate financial situations while also finding bargain properties. It’s still very much a win-win for everybody.