Cash for Clunkers Program on Track to Stimulate Economy

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RISMEDIA, July 30, 2009-The governments Cash for Clunkers program (C.A.R.S.) began stimulating the economy a month before the first rebate check was cut to a consumer for a new vehicle. “Manufacturers and dealers have spent millions to reach consumers who qualify for the $4,500 government funded rebates,” said Sharon O’Connell from www.CashForClunkersInformation.org.

Big budgets have been activated to implement campaigns targeting clunker consumers who are eligible for the program and the early results suggest the returns will be worth the investment. “We predict that the annualized selling rate for July will exceed 10 million vehicles for the first time this year due to the government program bringing dormant consumers back into the market,” adds O’Connell. “We think August could do even better with a million or more sales due to increased demand from the CARS program.”

“The stimulus helps local markets more than national car companies because car dealers stimulate the local economy through their big advertising expenditures, job creation and enormous state tax revenue,” said O’Connell. “A small dealership who sells 100 vehicles a month spends an average of $500 per car in advertising, which is a total of $50,000 that is spent in local advertising.”

Courtesy Chevrolet, one of GM’s largest dealerships in the country, “bought new inventory, hired additional salespeople and increased our ad budget by 88%,” said Scott Gruwell. “We spent $200,000 on a targeted direct mail and Web campaign to every customer in our market and we launched a regional information portal called www.CashForClunkersDC.com,” said Vince Sheehy, owner of www.Sheehy.com in Washington, DC, Virginia, Maryland and Baltimore. “So far we have sold over 100 vehicles while most dealers in our area are just getting started.”

Since over 80% of consumers initiate their vehicle searches online, Automotive Manufacturers and retailers have spent a lot of money online. Ford Motor Company is promoting its program on their home page where consumers can link to a website that promotes Ford models that qualify. The New York Honda Dealers Association initiated an integrated campaign weeks before the final ruling to send a targeted mailer to every qualified clunker owner on the Clunker List in New York while most other brands were focused solely on expensive television advertising. The Association also created a regional website, www.NYCarsProgram.com, to educate New Yorkers about the program. “Honda is the most popular brand in the New York market and nearly all Hondas qualify for the Cash for Clunkers program, so we launched an interactive website to educate the public,” said Rob Sabbagh Jr., representing www.NYLIhonda.com. www.NYCarsProgram.com provides program information, a clunker calculator and a multi-media consumer tutorial that highlights the fact that nearly every new Honda qualifies. “You don’t really need a complicated chart to find a qualifying vehicle at a Honda dealer,” said John Mendel, executive vice president of American Honda Motor Co., Inc.

Early Spenders are the Early Winners
Most of the economic activity generated up to this point has come from early spenders who also appear to be early winners in the race to reach clunker consumers. The winning retailers have been marketing to consumers for weeks while others are just getting started. Hyundai and a small group of dealer groups got a head start when they announced they would help consumers participate in the program starting on July 1st, while others were turning them away until the final rule was published on the 24th. The NHTSA and the National Automobile Dealers Assn. warned dealers against doing transactions before the final rules were announced on July 24th. Despite these warnings, Hyundai and a few dealers took the risk to help consumers get rebates when the law said they could. “Hyundai has attributed 10 percent of July’s sales to the program and some dealers have generated hundreds of incremental sales,” said O’Connell.

“We quickly created a program that helped consumers take advantage of the program and it has helped our sales a lot,” said Rick Case, who has 6 Hyundai stores as a part of one of the most successful automotive groups in the country. “So far all our sales are conquest sales. More than 70% of the clunkers were Ford or Chevy trade ins, 71% of the clunkers were SUVs, 93% had over 100k miles and 71% qualified for the $4,500 because SUV’s only need a 5 mpg improvement to get the full $4,500 rebate. The average clunker trade in gets 17 mpg and the average new vehicle gets 25 mpg, which is an average of an 8 mpg improvement,” explained Case.

“We had over 100 orders by the time the final rule was announced and our customers appreciated the fact that we could help them when they were turned away by other dealers that weren’t ready,” said Sheehy. It turns out their strategy was not very risky because the Consumer Assistance to Recycle and Save Act clearly states that consumers were eligible for rebates starting July 1st.

For more information, visit www.CashForClunkersInformation.org

How Long Will a Foreclosure or Bankruptcy Affect Credit?

By Susan Tompor Print Article

RISMEDIA, June 30, 2009-(MCT)-Question: How long will a foreclosure or bankruptcy show up on your credit report?

Answer: A foreclosure can be reported on your credit report for seven years from the date the foreclosure was filed in the court, according to Gerri Detweiler, author of “Reduce Debt, Reduce Stress.” The book is $14.95, and an ebook is available at www.ReduceDebtReduceStress.com.

Bankruptcy, she said, legally can remain for 10 years from the date you filed - not the date of discharge or when the bankruptcy is completed. However, credit reporting agencies have agreed to voluntarily remove completed Chapter 13 filings - where someone pays off part or all of their debt under a court-supervised plan - seven years from the date of filing.

The idea is to give consumers some credit for having paid back as much of their debt as they could afford to pay back.

What happens with a short sale? Or an arrangement in which the lender allows the homeowner to sell the home for less than the mortgage due? Detweiler noted that a short sale may either be listed as a charge-off or a debt settled for less than the full balance. Both remain on your credit report for seven years from the date that action occurred

 Steve Wisemiller,CRS

www.soldbysteve.net

Have We Reached Bottom? 10 Factors to Consider

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RISMEDIA, June 24, 2009-Historically, the value of real estate goes through cycles. Many factors affect the value of homes including the laws of “supply and demand.” From the Appraisal Institute, here’s a quick reference guide to some of the factors involved and advice on how to spot a turning point in the market:

1. A spike in local sales activity. A spike refers to a significant rise in the number of home sales (or values) in a local market area, which generally is measured month to month. A spike does not necessarily mean continued growth, i.e. it could be a one month phenomenon.

2. Higher asking and selling prices vs. appraisal value opinions for residential properties. Appraisers study the markets; they do not make the markets. When the data shows higher sale prices in comparable properties market value opinions will increase proportionally. Appraisers seek evidence of value but do not create the value. In time periods with low activity, evidence of any kind is difficult to find.

3. More activity at open houses. Open houses with five to eight attendees is considered average, so a dozen or more people attending an open house means buyer interest is picking up. Also, the mood of the attendees is important. Are they optimist and upbeat? Buyers interest alone does not always translate to effective purchasing power. If the number of buyers in the market increases but they do not have requisite down payments, the sales may still not occur.

4. Shorter marketing times. In some markets, houses have been up for sale for more than a year. In most balanced residential markets, properties that are priced competitively will typically sell in less than six months. If the Days On Market (DOM) is shortening, many practitioners will read an improvement in the market.

5. Reduced number of foreclosures and short sales. A reduction in these transactions commonly signals a more balanced market. If lenders are reluctant to foreclose because of an oversupply of inventory, they may choose to wait to repossess the properties, which could allow a spike in the number of foreclosures later despite a better market condition.

6. Stabilized employment. Stable or increasing employment rates provide the necessary confidence for potential buyers to invest in a home. Since most buyers rely on borrowed funds to make real estate purchases and borrowing money usually requires a source of repayment and that usually means jobs, an increase in this basic need, will enable more real estate sales.

7. Fewer buyer incentives and seller concessions. Seller-paid incentives or concessions are a sign of seller motivation. If there are fewer builders offering “free” upgrades and fewer sellers sweetening the deal with big screen TVs, it may be a sign of lessening supply and therefore a better market.

8. New construction starts. Most builders are quite attune to their markets and will not build new homes without a corresponding contract for sale or a perceived increase in demand. An increase in the number of building permits usually indicates higher demand and higher prices. If residential properties are selling for 25% less than they cost to build, only a few new homes will be built. It would be prudent to buy an existing home rather than build a new one for a much higher price.

9. “Move-up” buyers entering the market. More buyers willing to move to a larger or superior quality home indicates a healthy market. The lack of buyers at the lower end of the price range will have a chain reaction throughout the market. If a buyer for a high priced home has a lower priced home to sell first, the sale of the higher priced home may have to occur before the higher priced one can sell.

10. Apartments advertising renter specials - fewer renters in the market may indicate more people are moving into owner occupied homes or it could indicate a reduction in population. Lower population will cause an oversupply of housing which will oftentimes permeate throughout several markets.