Wall Street's wait is up: The Federal Reserve meets this week to decide what to do about interest rates. Investors may want to keep in mind that Tuesday's decision may end up raising as many questions as it answers.

The stock market plunged from record highs this summer on fears about souring home loans and excessive leveraged debt strangling corporate and economic growth. Since then, the big question on Wall Street has been: Will the Fed finally lower interest rates? Tuesday afternoon, investors will find out.

No matter the outcome, the stock market could be in for a wild ride.

Like many investment strategists, Bob Doll of BlackRock Inc. believes Fed policymakers will lower rates by a quarter-point rate Tuesday and alter their assessment of the economy - particularly given a decline of 4,000 jobs in August and weakening retail sales. But, he added, even if market gets its rate cut, the next day the market will probably ask: Now what?

"I'm not even sure good news from the Fed means we're out of the woods in terms of volatility," Doll said.

With all the recent weak economic data, many investors have been crossing their fingers for a half-point rate cut, a move Swiss Re chief U.S. economist Kurt Karl said policymakers are loathe to make. "I don't think they want to give the market everything it wants. It's a very difficult situation."

Moreover, some experts argue that the Fed may not go through with a cut at all, because the central bank, which hasn't reduced the benchmark fed funds rate since 2003, wants to avoid being viewed as bailing out investors.

From the Desk of Scott McGrane

I just wanted to bring everyone up to speed on some of the financial world around us.  Unless you have been living on the moon for the past month, you are probably aware that interest rates are expected to drop next Tuesday the 18^th.  Experts are predicting that the FED will lower interest rates by .25 basis points and maybe as much as .50 bps.  Does this mean that we are out of the housing woes?  No, not at all.  Experts are predicting that in most areas the housing is not going to bounce back until late 2008 and into early ’09.  What is the purpose of this Fed Move you ask?  Believe it or not we are teetering or the brink of a recession for the first time since just after 9/11.  Wikipedia defines a recession as the drop in Gross Domestic Product for two or more successive quarters in a calendar year.   In simple terms it’s when our nation’s economy begins to slow and we start heading towards certain trends.  These trends include:  People spending less, Growing unemployment, Decrease in factory production, lowering incomes, and a slumping stock market.  Keep in mind I said “teetering” on a recession.  We actually have not hit one yet.  Some of the data that has been released in the last month or so just simply suggests we may be heading in that direction, that’s all.   I say don’t push the panic button.  The housing and mortgage woes are hopefully not going to affect the economy once the FED steps in next week…….only time will tell   

What does this all mean for you?????

Simple!  You all get one last shot to lock in your super low interest rate one last time.  Rates are expected to drop, however, not quite the lowest in history, which we saw  earlier this decade.  They are, however, going to be just above that level and competing with where rates were in 2003 and 2004. 

I write these articles to just help make people aware.  I simply raise questions.  For those of you who have equity in your home this coming year may be one of the last times you can access that cash and lock in that  low interest rate.  So for those of you out there who want to start college planning or retirement planning; now is the time for qualified borrowers to get there ducks in a row, clean up some credit issues and lock in that thirty year fixed somewhere in the ballpark of 5.75%!!!!!! Its not the lowest it’s ever been, but that is a damn good rate my friends.  

I’m always here to help or answer any questions you may have.   

Have a great Day!

More Arizona homeowners fell behind on their mortgage payments this summer, indicating foreclosures will keep climbing.

The number of delinquent mortgages rose half a percentage point during the second quarter of the year. Now, 3.55 percent of all home loans in Arizona are delinquent and could fall into foreclosure, according to the Mortgage Bankers Association.

The delinquency rate on the state's subprime mortgages rose almost 2 percentage points, to 10.21 percent.

Arizona's overall delinquency rate is lower than the national rate of 5.12 percent, but the state's increase in foreclosures helped boost the national foreclosure figure. In July, 806 homes were foreclosed on in the Valley, a five-year high.

"What continues to drive the national numbers is what is happening in California, Florida, Nevada and Arizona," said mortgage banker economist Doug Duncan. "Were it not for increases in foreclosure starts in those four states, we would have seen a nationwide drop."

courtesy of azcentral.com

The mortgage bankers association announced that delinquencies have risen to an all time high.  What a great opportunity to find under valued properties with motivated sellers.  Banks are not in the real estate business and would like to avoid being in the real estate business if possible.  The expenses they incur buy taking a property over through the foreclosure process are just added expenses to the already financially stricken banks.  The experienced investors are licking their chops while some beginner investors are seizing the opportunity to get into real estate investing at a great time.  There are homes with built in equity which can be found very easily and there is little competition for these homes as well.  The trick is to leverage yourself, hire your work out, find a good real estate agent to find the properties, a good mortgage broker to put competitive financing together in a profitable way, and then make sure you have a network of vendors to service and care for the property such as property management companies.  The real estate and mortgage brokers are going to be the most important choices when finding an acquiring property.  The real estate agents job is going to be to find you home with your goals in mind, such as cash flow, spread and all of the other important factors in buying an income property.  The mortgage broker job is going to be just as important they will need to find a loan program which your goals in mind and take advantage of the market which creative solutions such as rate buy downs, interest only programs, as well as fixed rated again depending on your loan program.  If you create a well orchestrated network of people working for you with your goals in mind you will become a profitable real estate investor.  Put these things in place and the sky is the limit.

Click here to view lender owned property

The delinquency rate for mortgage borrowers spiked higher in the second quarter and the number of homes entering the foreclosure process hit a record high, according to a report released Thursday.

Deliquencies hit 5.12 percent of all outstanding mortgages, up from 4.39 percent a year ago, the Mortgage Bankers Association (MBA) said in a quarterly survey.

Serious delinquencies, those 90 days or more late, jumped to 1.11 percent of all loans, from 0.98 percent in the first quarter.

The loans actually entering foreclosure proceedings stood at 0.65 percent, a rise from 0.58 percent in the first three months - and the highest rate in the MBA's 55-year history. (Latest home prices - 149 markets)

More Americans are falling behind in their mortgage payments as stagnant home prices, auto-industry weakness and climbing interest rates have taken a toll on housing affordability.

The survey revealed steady increases in all categories of delinquencies among mortgage borrowers, but problems in subprime adjustable rate loans drove much of the increase.

"There is a clear divergence in performance between fixed rate and adjustable rate mortgages due to the impact of rate resets," said Doug Duncan, the MBA's chief economist.

Duncan called the delinquency trends "a story of seven states." There are the three midwestern states - Michigan, Ohio and Indiana - where defaults and foreclosures are linked to serious underlying economic and job issues. Michigan alone has lost 300,000 jobs since 2000.

Then there are the once red-hot housing markets of the Sunbelt. According to Duncan, homes entering the foreclosure process in Arizona, California, Florida and Nevada drove the national increase - the national foreclosure rate would have otherwise declined.

"The data shows dramatic effects of speculative investing in those four states," said Duncan. High levels of non-occupied houses there coupled with a high percentage of ARMs made markets particularly susceptible to delinquencies.

Many investors simply do not have the same level of interest in retaining their properties than do owner-occupiers who have, historically, always strived to keep their properties

Delinquencies are expected to continue a steady climb for the next year or so. The number of adjustable rate mortgages (ARMs) that reset to higher rates will peak this fall and many of those borrowers will likely fall behind on payments.

Many borrowers in default work out their problems without undergoing foreclosure. Some rework their loans in cooperation with their lenders, often cleaning up arrears by making extra payments later. Others get free of unaffordable ARMs by refinancing into fixed rates.

Many sell their homes before they lose them, especially if they still retain some equity in the properties. Even if there is no home equity, they may get their bank to agree to a short sale in which the bank will forgive the debt not covered by the sale of their houses.

A minority of homeowners will actually go through the entire foreclosure process and their numbers are not forecast to peak until 2008, as homeowners scrambling to find a solution to their unaffordable loans abandon the fight.

The ultimate foreclosure total may be influenced by several of the initiatives being discussed in Washington. President Bush floated some proposals last week that sought to help responsible borrowers stay in their homes.

Bush's proposals, if followed through on, could make it easier for some families to refinance from ARMs into fixed rates.

In addition, regulators recently informed mortgage servicers, which act as liaisons between investors and borrowers, that rewriting the terms of mortgages does not violate accepted accounting practices if it's done for the benefit of the investors. That should remove one of the legal stumbling blocks faced by servicing firms that want to help borrowers by modifying or refinancing their mortgages.

Other proposals - such as increasing cap limits on HUD loans - that offer some relief to troubled homeowners may also reduce the total of loans that actually go into foreclosure.

If, however, the housing-market slump deepens, delinquencies and foreclosures could worsen. And turmoil in the credit markets could tighten the liquidity squeeze that has made it much tougher for many potential home buyers - as well as owners looking to refinance - to obtain loans.

That has caused demand for homes to plunge in many areas and the national inventory of homes on the market has doubled over the past three years. There is now about a nine-month supply of listings at the current rate of sales. 

Record drop in pending home sales

Index that measures contracts being signed for existing home sales drops to lowest level since 9/11 attack.

A day after I posted the article about the number of pending homes in Arizona's drastic decline.  CNNmoney.com author Chris Isidor posted the below article about the record decline in pendings as well on a nation wide platform.

The meltdown in the mortgage market caused the biggest drop on record in July for pending home sales, taking the index down to the lowest level since the month that included the Sept. 11, 2001 terrorist attack.

The National Association of Realtors' pending home sales index, which measures contracts to buy existing homes, fell 12.2 percent to a reading of 89.9.

It is the second lowest reading on record for the seven-year-old index, trailing only the 89.8 reading in September 2001. Economists had been looking for only about a 2 percent decline in the latest reading.

"There's bad reports and then there's truly awful ones. This is clearly the latter," said Mike Larson, real estate analyst for independent research firm Weiss Research. "Even I'm shocked by a 12 percent decline."

But Realtors' spokesman Walter Molony said the large drop isn't a surprise, given that the problems in the mortgage markets seen in July and August were the biggest disruption to the home buying market since 9/11.

"It's difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren't closing because mortgage commitments have been falling through at the last moment," said Lawrence Yun, the Realtors' senior economist, in the index report.

The June reading in the index had shown an hopeful 5 percent jump to 102.4, but that was only up from a very weak May report that had been tied for the third weakest reading on record before this latest report.

And Jeoff Hall, the chief U.S. economist for Thomson Financial, said that the size of the drop in the July report may be partly due to the unexpected rise in the June reading, which he said now appears to be someone of a fluke and perhaps an statistical anomaly.

"We were in a discernable downturn before the June rise. If you look at the decline since May, it comes to about an average of a 3.9 percent monthly decline," Hall said. "I'm not going to say we've hit a bottom, but the magnitude of the decline is an outlier."

The months of July and August saw rising delinquencies and defaults cause problems in the sale of mortgage backed securities. In August Countrywide Financial (Charts, Fortune 500), the nation's leading mortgage lender, had to tighten its underwriting standards and drastically cut back many types of loans used by borrowers with less than top credit or those needing loans of greater than $417,000. Other lenders pulled out of the mortgage market altogether.

The Realtors' economist said the group was hopeful the shock to the real estate market seen in this latest report is short-term in nature.

"These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans," Yun said. "Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat."

Still the pending home sales report could actually be overstating the strength of sales, since it includes the potential buyer who signs a contract but then has to cancel it due to an inability to arrange financing.

additional content provided by Chris Isidor from CNNmoney.com

Good morning!  I hope all of you enjoyed your long weekend and the kickoff of college football I anticipate that most are ready to get back into the swing of things. 

The August numbers are in from the Arizona Multiple Listing Service.  I have some good news and some bad news.  The good news is the number of listings has remained steady at 55,908 marks which are where the total number of listings was at around a month ago.  The bad news is that the number of pending homes and homes sold in the last 30 days has gone down. The number of homes closing escrow in the month of August 3952 compared to the July number of 4100. The most dramatic number was that of pending homes on August 1^st that number was 5255 that same number was just 4080 on September 1^st down 1,175.  This is in a direct correlation with the turn in the mortgage industry.  The sub prime and high loan to value loans are now close to extinct.  These loans were heavily utilized by first time home buyers and entry level buyers to get them into their first home with a reasonable payment.   The extinction of these programs has created somewhat of a log jam.  The number of entry level buyers has been reduced so people sitting in a entry level home cannot sell to move into a larger or more expensive homes.  The government is currently developing very interesting FHA programs which will take the place of some of the sub prime loans and create a wide open market for entry level home buyer to obtain a mortgage.

In summary, some analysts say we have hit the bottom or the bottom will be here within the next 30 to 60 days.  With the creation and changing of the mortgage market this could be just what we need to get the ball rolling in the other direction.

-John Kepple-

The Kepple Group

480-313-0788

jkepple@thekepplegroup.com

Sales slip but supply of homes on the market jumps to 9.6 months, pushing prices down for 12th straight month.

The National Association of Realtors said sales by homeowners slipped to an annual rate of 5.75 million last month, down 0.2 percent from the revised 5.76 million pace in June. Economists surveyed by Briefing.com had forecast the sales rate would fall to 5.7 million in the latest reading.

Not only did sales slip but the number of homes for sale jumped 5.1 percent, the group said, meaning there is now a 9.6-month supply of homes for sale, up from 9.1-months in the June reading. It was the biggest supply of homes by that measure since October 1991.

"Forget 'location, location, location.' The most important factor in today's real estate market is 'supply, supply, supply,'" said Mike Larson, a real estate analyst at with independent research firm Weiss Research.

Second quarter numbers are in from the National Association of Realtors.  The national median price for a single-family home sold during the three months ended June 30 fell to $223,800, 1.5 percent below the price a year ago.  The Phoenix-Mesa-Scottsdale, AZ metro area average median price fell to $264,800, 2.7% below the price a year ago.  

Some of the results of the survey, from the National Association of Realtors were more positive. More metro area markets - 97 of 149 - gained ground than lost.

One of the four U.S. regions, the Northeast recorded a slight price gain of 0.7 percent. The West lost 0.4 percent, the South 1.6 percent and the Midwest 2.2 percent.

NAR predicts home prices will turn slightly positive again by spring of 2008 and rise about 2 percent that year.

Among individual metro areas, prices in the second quarter plunged furthest in Elmira, N.Y., down 17.9 percent to $71,700. Other big losers included Palm Bay, Fla. (down 15 percent to $183,300), Davenport, Iowa (down 11.3 percent to $103,300) and Sarasota, Fla. (down 11.3 percent to $311,400).