The Unsustainable US Economy

The Unsustainable US Economy

The US economy is not sustainable. It is like a house built on an unstable foundation. I will make this a short bullet point post.

• Nearly the entire US economy was and still is based on consumer spending (think credit cards, car loans, etc.) and real estate, which was fueled largely by debt.
• The reason so much of the economy was based on consumer spending and real estate is that we do not make anything in the US any more. Real estate, in particular, is still something that has to be "made" in the US.
• Too much money (really debt) flowed into real estate and prices reached levels that could not be supported by personal incomes (the real historic driver of real estate prices - at least if you want a sustainable market).
• Now, our government want to artificially prop the price of real estate back up with more debt via the tax credit, expanded FHA (and other low/no down payment government loan programs), increased loan purchases by Fannie Mae, Freddie Mac and Ginnie Mae and bank bailouts (i.e. TARP). In addition to these taxpayer subsidies (more debt), the government instituted new FASB accounting rules which allow financial institutions (banks) to value their loans at debt value (i.e. the amount they are owed) despite the fact that many of their assets (think 2nd and 3rd mortgage loans, HELOC's etc) are worth 0-10% of that amount due to property value declines.
• The whole premise of this government plan is that if we give money to financial institutions (banks) and allow them to "cook their books", they will start lending to consumers and on real estate again.
• The government's desired result is that real estate will start increasing in value again which will in turn make the financial institutions (banks) healthy again (by virtue of eliminating the need to "pretend" their assets are worth something close to their actual debt values), bring back the construction industry and jump start other industries that feed off of real estate.

Below are my major issues with the plan above:

• Who will make these debt payments that are artificially high due to inflated real estate prices and increased consumer debt particularly in a time when unemployment is over 10%?
• The problems that started this entire mess in the first place were too much debt and inflated real estate prices (i.e. beyond what personal incomes could support).  These two causes operated hand in hand. Now, the government wants to start it all over again. This is insanity.
• The result of these government actions will be that the US economy will go up and crash again (due to another debt bubble, asset bubble and real estate bubble) and/or the US economy will be stuck in a low/no growth state for an extended period of time (think Japan).  Either result will cause more short sales, foreclosures and bankruptcies.
• The US economy will not enjoy sustainable growth until the real problems are addressed - jobs and debt (public and private).  In order to do this, we need to correct the economic and regulatory issues causing jobs to leave the US and we need to reduce public sector debt and encourage people to reduce their individual debt.

If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN).  If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Record Mortgage Delinquencies in 2009 Q3

Record Mortgage Delinquencies in 2009 Q3

According to this TransUnion press release, TransUnion.com: Mortgage Loan Delinquency Rates on Course to Hit Record in 2009 - Deceleration in Rate Climb Continues for Third Consecutive Quarter, in the 3rd quarter of 2009 the rate of mortgage loan delinquencies (the ratio of borrowers 60 or more days past due - a precursor to future foreclosures) increased 58% over the 3rd quarter of 2008 to reach an all time record of 6.25% (up from 3.96%). The rate of mortgage loan delinquencies has now increased for the 11th consecutive quarter. Below are the quarterly rates of increase in the rate of mortgage loan delinquencies in 2009:

• 2009 Q3: approximate 7.57% increase from 2009 Q2.
• 2009 Q2: approximate 11.3% increase from 2009 Q1.
• 2009 Q1: approximate 14% increase from 2008 Q4.

The release goes on to quote FJ Guarrera, vice president of TransUnion's financial services division, as saying "The third quarter provided a mixed bag of economic indicators. Many companies' third quarter results are coming in above analysts' expectations. The unemployment rate like the mortgage delinquency rate is still climbing, but has decelerated in the number of monthly job losses during the quarter. While housing starts improved during the first four months of the year, a drop was seen during this quarter and consumer spending still remains anemic or cautious at best. The economic peaks and valleys that we experienced during the quarter will most likely continue into the first half of 2010. While it continues to be a positive sign that the increase in mortgage borrower delinquency rates has slowed for three consecutive quarters, we have to keep things in perspective. Delinquency rates are rising and expected to peak at record levels. Until the housing market can consistently demonstrate several months of home value appreciation and the unemployment rate improves, mortgage delinquency will likely continue to rise. Many of these delinquencies in places like Nevada, California and Florida will result in foreclosures, potentially keeping home values depressed in these areas."

Personally, I think that Mr. Guarrera is being overly optimistic. I see no reason why mortgage loan delinquencies, foreclosures and short sales will be lower in the near future. Job losses, even at a slightly slower pace, are still job losses and people who do not have jobs tend to have a difficult time paying their mortgages. Beyond that, the housing market still has too much new construction and too many "shadow foreclosures" (homes that should be foreclosed due to mortgage non-payment, but are not) that will come onto the market within the next year.

If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN).  If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Nashville TN Banks Hurting

Nashville TN Banks Hurting

According to the information contained in these articles (Nashville Public Radio: Pinnacle Backtracks, Saves TARP Funds for Rainier Day and Associated Press: Synovus downgraded on capital, regulation worries.), two Nashville Tennessee area banks are in financial trouble: Pinnacle Financial and the Bank of Nashville (a Synovus company).  According to the ProPublica Financial Institution Bailout Recipient List, both banks/financial institutions received TARP (government bailout) monies with Pinnacle Financial receiving $95M and Synovus receiving almost $968M.  Ongoing credit deterioration was cited as the main reason for the financial trouble.  In short, these lenders made loans that are now going bad.  According to the Nashville Public Radio article, Pinnacle Financial intended on paying back their TARP money, but changed plans after economists told Pinnacle CEO Terry Turner that conditions will get worse before they get better. As a result Pinnacle now needs the TARP capital to prepare for the worsening economy. The article quotes Turner as saying "We’re not in a position where we’re going to see a steady climb out of the economy but instead may see further deterioration, maybe even worse than what we’ve seen thus far." According to the article, "Dragging down Pinnacle’s balance sheet is a growing number of bad loans. For the third quarter, Pinnacle had nearly four times the number of bad loans compared to the same period last year." The Associated Press article stated that shares of Synovus Financial Corp. (parent company of the Bank of Nashville) are now trading at near 17 year lows. While this news is definitely not good, it should be expected. Almost all banks are in poor financial condition with most being insolvent. Only government bailouts and FASB accounting rule changes are allowing many banks to survive (think "zombie banks"). There will definitely be more foreclosures and short sales at these banks (and at all banks) in the near future.

If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN).  If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Commercial Real Estate Problems

Commercial Real Estate Problems

According to this Philly.com article, Commercial real estate facing worse days, the worst for commercial real estate is yet to come. The article cites the contracting economy and worsening financing markets as the main causes of the commercial real estate decline. My opinion is that the real problem is that all real estate prices (residential and commercial) just reached a point where they made no sense whatsoever. According to the article, "It's just a hint of the harrowing state of affairs in commercial real estate, where vacancies are on the rise across virtually all sectors, rents and property values are dropping, building owners are low on funds, and financing options are drying up. And bad as things are, they're expected to get worse - the next slide in the snowballing economic crisis that began with the collapse of the housing market and continues to claim casualties." The article quotes Sid Smith, managing partner of the regional office of Newmark Knight Frank Smith Mack, a global real estate services firm, as saying "There's a tremendous amount of pain coming." I definitely agree. I predict that we will see more and more commercial real estate foreclosures, bankruptcies and short sales.

If you are a Middle TN real estate investor, home builder or real estate developer who cannot pay the property/project mortgage payments (due to the poor economy, adverse financing conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), have already defaulted on the mortgage, or are already in foreclosure, or owe more than the property/project is worth, please contact me to discuss your options including a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/project). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN).  If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Nashville Developer Faces Foreclosure

Nashville Developer Faces Foreclosure

According to this Nashville Business Journal article, Bank forecloses on property for Crosland's Griffin Plaza, Crosland, Inc.'s Griffin Plaza property (a 280,000 square-foot mixed-use development) in Downtown Nashville TN (in the Gulch area) is being foreclosed on by Carolina First Bank. The trustee auction sale is scheduled to take place on 11/30/2009 at 11:00 AM in front of the main entrance to the Sommet Center. This news comes only about a week after I posted my article, Terrazzo in Nashville Gulch to Auction Condo Units Due to Slow Sales, in which I predicted that the developer of the Terrazzo (also Crosland) would face foreclosure on that project. Now, I am almost certain that foreclosure will occur. It is clear that many other Nashville Tennessee and Middle Tennessee developers will go bankrupt and/or face foreclosure. The worst is yet to come.

If you are a Middle TN real estate investor, home builder or real estate developer who cannot pay the property/project mortgage payments (due to the poor economy, adverse financing conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), have already defaulted on the mortgage, or are already in foreclosure, or owe more than the property/project is worth, please contact me to discuss your options including a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/project). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN).  If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.