National Flood Insurance program needs support!!!

The National Flood Insurance Program is set to expire soon and must be reauthorized by Congress.  Call, write, email your Congressman and insist that this essential program not fall prey to the political wrangling.  The recent threat to FEMA funding makes me more than a little nervous that we'll be without NFIP.

If you aren't already doing so, have a contigency plan to deal with at least a pause.  Recall that we had a bump earlier this year regarding Missouri River coverage.  It was fixed retroacitvely.

Home Values still sluggish gains

For the fourth straight month, home values nationally inched up, this time by 0.8%.  The twelve month downward trend appears to have been reversed, based on new home purchases and refinances in Spring and Summer.  That's good news as we are still 18% below the April 2007 peak, and right now values are at about where they were in March 2004.

A survey of 111 economists and real estate sources predicts a 1.1% average home value gain in each of the next 3 years - not only an average but a general consensus for slow recovery.  Since historically, regional downturns have taken 3-4 years to ascend to prior levels, we are indeed making history in this market.

FHFA published its second quarter report of 308 real estate markets.  Of the top 20 performers in Q2, most were smaller metropolitan areas.  However, Pittsburgh, Buffalo, Honolulu and San Antonio made the top 20 list.  Among the bottom 20 were (still) 13 in AZ, NV and Florida. 

Our financial policy makers must find this report very sobering as refinances won't work if value isn't there to support a new loan.  Unless, of course, the banks are allowed to split the asset into a secured portion (supported by current home value) and an unsecured asset represented by the amount owed that is in excess of the home value. 

Stay tuned....

A Survey of Risk Types

We deal with risk issues all of the time, even if we don't think of them with that label. Here are some worth noting:
- Insurable Risks: property, liability, flood, title
- Property Management: taking care of a vacant home in a northern climate,
- Computers: data security, etc
- Political Risk: relocating to a country with some political instability
- Economic/market/interest rate: outside forces affect your customers, capital and cash
- Loss on Sale: for both the homeowner and the employer post-buyout
- Maritime Risk: the inherent risk of sailing the Seven Seas and briny Oceans
- Credit Risk: Can your invoices be paid in timely fashion?
- Regulatory: especially in the home lending arena, but also taxation issues abound
- Betty Grable Risk: legs, throwing arms, etc (OK, probably not a relocation issue per se)
- Legal: are your contracts, SLAs, addenda documented, tracked and enforcable?

Each requires attention, at the outset and ongoing. Quantify them where you can and apply at least an ounce of prevention and planning to minimize or avoid.
Which have I missed?

Civil War - How Did the Foes Match Up?

So, by August 1861 people sensed the war would not be short, and in would be bloody. There was still hope for a quick solution, but a string of victories for the South emboldened the Confederacy, and firmed up Lincoln's resolve. So how did the sides compare?

From all appearances, the North held a tremendous advantage: more than 3 times the number of available fighting men, 70% of railroads, over 90% of iron & coal production, and three quarters of the nations wealth. The South produced by far the greatest export - cotton - but that was cut off by the Union naval blockade.

Yet, the South had important strengths. They needed only to win a defensive war fighting for their homes. Cotton was crucial to British and French industry; thus, the diplomatic pressure could favor the Confederacy. But most important, in a war of unprecedented scale and complexity, the South had superior military leadership. Stonewall Jackson routinely outfought larger Union forces. And, Robert E Lee would go down in history as one of the great field commanders.

This would be a new kind of war with extensive use of railroads, the telegraph, the machine gun and ironclad warships. And, no one was prepared for the casualties. By war's end there were over 600,000 dead and 2 million wounded. Fully one third of adult southern men died or were wounded from 1861 to 1865. But in that August 150 years ago, no one could foresee such a tragic outcome.

Home Sale Data - A different view

One of the money center banks recently presented an interesting view on home values. They looked at every state and compared home value trends with and without the influence of distressed sales. The result shows that 14 states have experienced appreciation - in one case as high as 8% - with distressed home sales factored out. And the large overhang of 90+ past due and in-process-foreclosures continues to exert gravitational pull on certain key markets.

Our view is that even statewide data is of limited use to folks - realtors, counselors, appraisers - dealing with home value challenges. The various sources of data must be applied to both the property and market complexity issues. We conclude this shows that deeper analysis - perhaps even down to the 10 block zone - can give much better insight to those handling home sales.

Peer Group Data

The banking industry has for decades collected data on various operations and financial ratios. It is relatively easy for a banker to compare his/her performance against peer banking companies. What is your operating ratio, expense load versus peers? Average loss on sale of a foreclosed home? Cost to deliver a specific service. That sort of thing.

Our ERC folks do a fine job of surveying the industry. But I cannot locate a resource to which all companies have contributed refined data used to develop objective comparative measures. Numbers are surely available but when I inquire within the industry, not much is available. One industry veteran referenced an excellent report from (I think) 2009 from ERC that was a one shot deal.

If such a report (a la the banker's Sheshunoff reports) exists, please direct me to it via a Comment. If not, let's work together to develop one. After all, our clients operate in highly competitive markets where this sort of resource, and the discipline that comes with it, is essential.

Overhang

There are now 4.1 million homes either 90+ days past due or in foreclosure. Add to that homes already owned by lenders, and we have a serious overhang issue.

The good news is that the rate of new problem loans has declined in the past year by half.

What steps are relocation managment companies, clients and vendors taking to deal with the impact of this issue? Process, use of data, home marketing, policy development all require attention in light of unprecendented, and lingering, affects of our housing challenges.

Use "Comments" if you want more information, and the source of the data.