More Rough Times are Ahead for the U.S. Economy, Despite Recent Improvements in Durable...

More Rough Times are Ahead for the U.S. Economy, Despite Recent Improvements
in Durable Goods Orders, Exports, Auto and Real Estate Sales

YORBA LINDA, Calif., Sept. 24 /PRNewswire/ -- Despite signs of improvement,
more rough times are ahead for U.S. economy, according to several prominent
experts in real estate and the economy who attended a recent forum at the
Nixon Presidential Library.

"You look at the numbers and everything points to the fact that we not only
have bottomed, but things seem to be improving," said Christopher Thornberg of
Beacon Economics, citing increases in durable goods orders, exports and auto
sales.

He added, "When you think about the problems we've been through and what
government has done, in many ways, they have, in fact, stabilized the economy.
But you know what? They haven't actually solved the underlying problems in the
economy."

Thornberg cited real estate as a case in point. While home sales are up in
some areas of the country, 6 to 7 percent of home mortgages nationally are 60
to 90 days delinquent. In California alone, 250,000 mortgages are 60 to 90
days late. And there's more economic trouble on the horizon, he said, with
rising unemployment and additional waves of foreclosures.

"The second half of 2010 will be very weak," he said, adding, "2011 will be
very grim."

Thornberg was one of several nationally known experts in real estate and the
economy who shared their perspectives during a Sept. 11 forum and charity
event for the Orange County affiliate of Susan G. Komen for the Cure, the
world's largest grassroots organization dedicated to finding a cure for breast
cancer.

Real estate analyst and investor Bruce Norris of The Norris Group in Riverside
organized and moderated the event, which included experts from the California
Building Industry Association, the National Association of Realtors, the
Mortgage Bankers Association, RealtyTrac, The Appraisal Institute and the
National Auctioneers Association.

While all of the panelists agreed that the economy will rebound in another two
or three years, several pointed to tough economic conditions in the interim.

John Young, vice president of the California Building Industry Association,
said new housing starts are at their lowest levels since the early 1950s. He
added that new home sales are often stymied by appraisals coming in lower than
contracted home sale amounts.

Meanwhile, foreclosures continue to mount.

Rick Sharga, senior vice president of RealtyTrac, the leading online
marketplace for foreclosure properties, said the nation has had 43 consecutive
months of foreclosures. "We're dealing with foreclosure activity that is six
times what it would be in a normal market," he said.

Sharga added that legal and legislative efforts aimed at helping consumers
modify the terms of their loans "merely delay the inevitable." After all, he
said, modified loan terms are not going to help someone who loses their job.

Sharga also sees another big wave of foreclosures hitting the market next
year, which will reflect rising unemployment rates, which are expected to peak
during the first quarter, as well as the resetting of adjustable rate
mortgages to higher rates.

The real estate market is also negatively affected by a "shadow inventory" of
perhaps 400,000 to 500,000 homes, which have been taken back by banks, but
haven't been put back on the market for resale, Sharga said.

Home sales are also being frustrated by appraisals that underestimate true
market value of properties being sold, said Joseph Magdziarz, vice president
of The Appraisal Institute, the Chicago-based trade association that promotes
the highest standards of professionalism and ethics in the appraisal business.
Many problematic appraisals are coming from appraisal management companies
that use unqualified appraisers who lack geographic competency in the markets
where they are accepting assignments.

Banks, for their part, won't lend money on appraisals they can't trust, Sharga
said.

Despite these negative assessments, the panelists said there are many things
that Congress, consumers and the real estate industry can do to facilitate our
nation's economic recovery.

Magdziarz, for his part, said The Appraisal Institute has been trying to warn
Congress for years to take action to better regulate the appraisal business.
One pending bill, HR 1728, includes many of the Appraisal Institute's
recommendations, has passed the House and is currently in a Senate committee
with bipartisan support. The Appraisal Institute has also alerted its 26,000
members that it will take aggressive enforcement action against any members
who accept assignments they are not qualified for.

"We cannot sit back and allow bad appraisals to prevent deals from going
forward," Magdziarz said, adding that investors should work only with
appraisers that belong to professional appraisal associations. He also
encouraged consumers and investors to report incidents of substandard or
incomplete appraisal work to state authorities as well as to The Appraisal
Institute.

While Congress considers HR 1728 to improve appraisal industry, another
pending bill, Senate Bill 1230, would nearly double home purchase tax credit
to $15,000.

For his part, David Kittle, chairman of the Mortgage Bankers Association, said
it is up to consumers, investors and mortgage industry itself to weed out bad
apples and not to count on Congress to solve the problem.

"The people in Congress making laws don't understand our business," he said,
adding, "When somebody's doing something wrong, call them out and get them out
of our business."

Pat Vredevoogd Combs, 2007 president of the National Association of Realtors,
also recommended that Congress make tax credits available to all homebuyers
and not just first timers.

Tommy Williams, 2008 president of the National Auctioneers Association, said
professional auctioneers could also help market recovery by selling real
estate at real market values. He added that auction participants already have
their financing in place before they bid on properties.

Norris, for his part, recommended that Congress do several things to boost the
real estate market. These include:

-- Increase the number of loans made available to well capitalized
investors: Expand Fannie and Freddie loan programs from a maximum of
10
loans per investor to an unlimited number of loans for qualified
investors.
-- Make the 203K FHA loan program available to investors: A 203K loan
allows a property needing work to be purchased "as is," but
included in the loan amount is money for repairs. The loan funds both
the purchase and rehab of the property. Investors need this loan now,
but this loan is currently only available to owner occupants. FHA
previously made this loan available to investors, but stopped the
practice in 1996 when HUD ran out of lender owned, fix uppers. Banks
could solve the vacant house problem by giving investors back the 203K
loan program.
-- Eliminate the 90-day waiting period before a repaired property can be
sold to a buyer using an FHA loan: Investors who purchase fixer uppers
can often completely repair the property in a matter of weeks. But the
current law prohibits investors from reselling the property within 90
days. The assumption is that fraud must be taking place if a property
is
resold within 90 days. It's ridiculous to assume that every
investor who purchases a property, improves and resells it is
commiting
fraud. All this policy does is increase investors' costs of
purchasing and rehabbing vacant homes.

-- Allow loans to be taken over by credit-qualified new buyers with no
down
payment. Through this process, which was successfully used in the
1980s,
new buyers simply step in and take over the loan payments. The only
stipulation is that the loan has to be made current at the close of
escrow. The U.S. currently has about one million owners who will not
be
capable of keeping their homes without a huge discount on the
principle
balance. Many of these properties have fixed rates at very favorable
rates. Allowing willing and capable buyers to come in and take over
these loans would help contain the spread of foreclosures across the
country.

Thornberg, for his part, said it's not realistic to assume that our nation's
economic problems will be solved by increased regulation or by presidential
action. The economy simply needs some time to heal itself, he said. But
despite the near term trouble, Thornberg remains optimistic about the future.

"I have tremendous faith in the U.S. economy rebounding again in the future,"
he said. "And when we come out of this in two or three years, we're going to
have cheap housing and a weak dollar, which will be good for exports."

Norris said California housing affordability levels are already at their
highest levels in history.

To view the complete panel discussion on video, visit www.isurvived2009.com.
To schedule interviews with Norris and other experts quoted in this release,
please contact Aaron Norris at (646) 418-4437. Also, be sure to visit
www.thenorrisgroup.com for the latest press releases and recordings of Bruce
Norris's interviews with prominent economists, lenders and real estate experts
across the country. His weekly real estate radio talk show airs at 6 p.m.
Saturdays on KTIE 590 AM in the Inland Empire.

SOURCE The Norris Group

Aaron Norris, +1-646-418-4437, aaron@thenorrisgroup.com