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Archive for the 'Money Matters' Category

Economic Highlights for the Week Ending June 18, 2010

Economic Highlights for the Week Ending June 18, 2010

MONDAY, June 14th Fed funds futures traders believe monetary policy will remain unchanged for the rest of this year while lowering expectations for a rate adjustment in early 2011. Traders are pricing in a roughly a 48% chance the Fed will bump the fed funds rate to 0.5% at their January 2011 meeting down from 58% one week ago. The fed funds rate has been targeted in a range of 0% to 0.25% since December 2008.

TUESDAY, June 15th The NAHB housing market index fell sharply in June, dropping to a level of 17 from a reading of 22 in May. The swoon in homebuilder confidence may be related to the downshift in the market following the expiration of the homebuyer tax credit. Weak economic data recently, especially the employment report for May also weighed. Builders lowered scores of current single family sales and sales six months from now while foot traffic through model homes decreased. The homebuyer tax credit provided temporary support for the housing market; now, recovery in the housing market is once again dependent upon growth in the economy, namely jobs and incomes.

WEDNESDAY, June 16th The MBA mortgage applications index jumped 17.7% to 659.9% for the week ending June 11. The purchase index rose 7.3% last week, rebounding from its lowest level since the end of 1996 in the previous week. Until last week, the purchase index had fallen nearly 40% in the five weeks since the expiration of the tax credit indicating a slower pace of home sales this quarter and into the third. The refinance index increased 21.1%on the week, its fifth increase in the past six weeks. Refinancings account from almost 75% of total application activity. The producer price index fell 0.3% in May as food prices fell 0.6% and energy prices dropped 1.5%. Excluding food and energy prices from the index, the core PPI rose 0.2% on the month and is up 1.3% on the year. These data indicate subdued inflation at the wholesale level. Industrial production increased 1.2% after a 0.7% gain in April. The May gain was led by a 4.8% surge in utilities usage though manufacturing output also increased 0.9% on the month. Total output has risen in 10 of the last 11 months and is now 7.6% above its year ago level. Although industrial activity has been in recovery mode for almost a year, it remains 7.9% below its December 2007 peak. Housing starts fell 10.0% in May to a 593k annual rate from a rate of 659k in April. The tumble in new construction starts last month correlates to the end of the homebuyer tax credit and the consequential pullback in demand for homes. Housing starts are now at their lowest level of 2010 but are still 7.8% above their year ago level. After the initial retraction associated with the homebuyer tax credit the outlook for home construction improves but does remain dependent upon a pick-up in job creation and the broader economy.

THURSDAY, June 17th The consumer price index fell 0.2% in May as energy prices tumbled 2.9%. Headline consumer inflation is now up a modest 2.0% on the year. The core CPI, which excludes food and energy costs rose 0.1% last month and was up by just 0.9% on the year. Soft final demand and slack in the economy are subduing inflationary pressures which will allow the Fed hold rates down in order to revive the economy. Jobless claims rose 12k to 472k for the week ending June 12. The level of claims remains stubbornly high which unfortunately is consistent with weak job creation in the private sector last month. The May employment report combined with the elevated trend in initial claims suggests ongoing duress in labor market conditions.

FRIDAY, June 18th

Stock Market Close for the Week

Index Latest A Week Ago Change DJIA 10450.64 10211.07 +239.57 or +2.35% NASDAQ 2309.80 2243.60 +66.20 or +2.95%

WEEK IN ADVANCE

New and existing home sales for May, due out in the coming week will inform on the depth of the post-tax credit pullback. Also, the FOMC will meet and release their policy statement Wednesday. We may see recent weakness reflected in their outlook. Another $108 billion in new supply is scheduled to hit the bond market this week as well.

Key Interest Rates Latest 6 Mos Ago 1 Yr Ago Prime Rate 3.25 3.25 3.25 Fed Discount 0.75 0.50 0.50 Fed Funds 0.21 0.12 0.19 11th District COF 1.825 1.259 1.380 10-Year Note 3.22 3.56 3.75 30-Year Treasury Bond 4.14 4.48 4.55 30-Yr Fixed (FHLMC) 4.75 4.94 5.38 15-Yr Fixed (FHLMC) 4.20 4.38 4.89 1-Yr Adj (FHLMC) 3.82 3.34 4.95 6-Mo Libor (FNMA) 0.75188 0.48813 1.2400 Sources: IBC’s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

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State’s Home Default Cases Plunge

A 40.2% drop in the first quarter suggests that the foreclosure crisis is easing.

April 21, 2010  Alejandro Lazo   Copyright 2010 Los Angeles Times

The California foreclosure crisis appears to be abating, new data show, as the federal government and big lenders step up efforts to keep troubled borrowers in their homes.

Mortgage default notices — the first step toward foreclosure — plunged 40.2% statewide in the first three months of the year compared with the same period in 2009, according to San Diego research firm MDA DataQuick.

Foreclosure sales dropped 1.7% from a year earlier and 16.1% from the last three months of 2009, DataQuick said Tuesday.

The numbers suggest that the housing market won’t be flooded by a fresh wave of bank repossessions, which had been seen as a major threat to the market’s recovery.

“It is surprisingly good news,” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “There is still a lot of supply lurking out there, but at this point, it looks like it is pretty much under control.”

Stuart A. Gabriel, director of UCLA’s Ziman Center for Real Estate, said the declining foreclosure numbers are “consistent with a broad range of indicators that are suggestive of not only a healing economy but the beginning of healing in the housing market.”

Southern California home prices jumped 14% in March from the same month a year ago, to a median $285,000.

Even so, economists note that further gains statewide are jeopardized by continued high unemployment, particularly in the Inland Empire and the Central Valley.

Foreclosure activity remains concentrated in these inland areas, which suffer from above-average unemployment. DataQuick said mortgages were most likely to go into default in Merced, Stanislaus and San Joaquin counties. Defaults were least likely in the Bay Area counties of Marin, San Francisco and San Mateo.

“In coastal California, things are looking pretty decent,” said Richard Green, director of the USC Lusk Center for Real Estate. “I still think if you get into the Inland Empire, Fresno, Bakersfield, Modesto, people are really struggling because the unemployment rate is so high — so that people just need help to get out from under.”

California loan default notices peaked at 135,431 in the first quarter of 2009. Since then, the federal government has put increasing pressure on banks to work with homeowners behind on their payments. At the same time, experts say, banks have recognized that flooding the market with foreclosures weakens the value of the properties they have taken back and must resell.

8 Work-From-Home Rules

From Inc. Magazine

By Leigh Buchanan |  Feb 10, 2010

Inc. Magazine lives in New York City. I live in the Boston suburbs. So for three years I’ve been working out of my home office with nothing to look at but the Ozark-esque compound across the road and nothing to listen to but squirrels striking the back porch when they miss the bird feeders. It gets lonely at times. My house lacks both a water cooler and peers to engage in conversation around one. I miss the random hallway conversations that unexpectedly ignite ideas or forge alliances. When I know my colleagues are staying late to close an issue, I work late too, out of solidarity. The managing editor offers to order in dinner and sends out a link to the menu. I mentally place my order.

On the whole though, working at home has been a satisfying experience. I’ve managed to remain productive, and the stress reduction from not commuting has probably added a year to my life. So, as my New York colleagues embark on their telecommuting experiment, I offer them—and others new to working from home—eight lessons for thriving away from the mother ship.

1. Language is important. Tell people you “work out of my home office” or that you “work from home.” Never say, “I work at home.” That suggests you create window treatments freelance in your spare time. “Home office” sounds more professional when you’re giving someone your phone number for work. Also, if friends and relatives believe you are less than seriously employed they will start adding you to their lists of People Who Can Easily Host a Last-Minute Book-Club Meeting or Pick Up My Child After School.

2. Some people like to dress for work, even though they never set foot outside their houses. Others like to lounge around in sweats or pajamas. It’s a matter of personal choice. But if you prefer the latter, change clothes at least once at night and once in the morning. Casual is fine. Crusty isn’t.

3. Talk to someone from the office at least once a day. Long silences are nervous-making. After three days I start to feel like a kid at camp: worried that in my absence the rest of the family has moved away without telling me. Managers are best because they know when there’s reason to panic. Their calm becomes your calm. (I find Dan Ferrara, Inc.’s deputy editor, the most soothing person to talk to. A conversation with him is like half an hour sitting in the Lotus Position.)

4. Gossiping, Web surfing, popping out to do a little shopping at lunch—those are healthy ways to decompress when you’ve spent an hour commuting and another three hours sitting in an uncomfortable chair drinking pallid coffee from the kitchenette and trying not to overhear the conversation in the next cubicle. At home, where all is relative peace and luxury, such activities seem to me Caligula-scale decadent. Still no one can work eight hours without pause. So establish some useful, non-fun things to do during work breaks that don’t induce guilt. Do your laundry or clean your gutters or catch up on your work reading. Stock your bathroom with the collected oeuvre of Peter Drucker. If you have exercise equipment, work out. Unless you enjoy working out, in which case avoid that at all costs.

5. If you have children, explain that when your door is closed they should not disturb you. If they fail to comply, explain that if they continue to interrupt then you will miss your deadlines and lose your job, which will force the family to live on the streets and sell all their toys for food.

6. Larks will love working from 4 AM to 1 PM; owls from 3 PM to midnight. But remember some commitments (interviews, teleconferences etc.) will likely fall outside your preferred work hours. For the first few months I worked at home, I got up before dawn every day and put in a solid five hours before most people had arrived at the office. But often I still had people to talk to in the afternoon, and by that time I was seriously dragging. So while it’s tempting to create a routine customized for how you like to work, instead schedule yourself fresh every day based on how the world requires you to work. 

7. At our house we have three phone numbers: one for the family, one for the kids, and one for my work calls. When someone calls the family number the phone rings once. When someone calls one of the kids it rings twice in quick succession. When someone calls for me at Inc., it rings three times in quick succession. That way no one else ever accidentally picks up my work calls (“Hey Mom, it’s for you. Some guy named Steve Jobs. Can I have Julia over?”) Also, I always know whether to answer in professional mode (“This is Leigh Buchanan”) or personal mode (“Yeah, what?”)

8. Stay caffeinated. The Saeco Incanto Sirius is a totally awesome espresso maker, even if it does sound like something out of Harry Potter.

What’s all This Loan Modification Stuff?

By: Malcolm H. Scott

The Reality

With the current economic crisis forever worsening, no one seems to be immune to the onslaught of financial hardship. Whether wealthy or living on the fringe, people have been affected. Some are seeing what they have worked for over the last decade or more disappear right before their eyes. Some seniors have watched their annuities fade away, others have watched their retirement accounts dwindle to nearly zero. Every day hard-working folks, just like you and I, are losing jobs. Some families have seen one of their income earners laid off. Others are hardly able to make house payments, while some are slipping into foreclosure. There is no denying America and the rest of the world are deeply embedded in a catastrophic economic crisis, even those veiled in denial have changed their opinion by now. Read the rest of this entry »

The Real Estate Mortgage Lending Environment in 2009

By: Malcolm H. Scott

There are communities around the United States that are practically abandoned due to the recent wrath of foreclosures.

Real Estate Development deals have been stopped for lack of construction financing when nearly 90% complete. Businesses that need loans for equipment and expansion are being turned down that once had no problems getting financed. Mezzanine financing on large commercial real estate deals has almost completely dried up. And, the lenders that are still lending more resemble hard money shysters, yielding the kind of fees and interest rates that most would call usurious. Not to mention, the deals are now contingent upon the lender becoming an equity partner too. Thanks for the due diligence, we love being your partner. Surprise!

http://realestate.msn.com/article.aspx?cp-documentid=16831437&GT1=35000

The last couple of years probably can’t end quick enough for most of us in the mortgage industry. The same could be said for those of us in real estate. I’m sure there are some securities brokers that wished the windows opened in some of those big office buildings. Most of them didn’t leap, although, there are a few that I would have liked to push out! I mean that in a nurturing and loving way. I’m sorry, after I’m finished standing in the bread line I’ll go see my therapist to suppress this festering resentment I have! Speed-bump?

The times have certainly changed

and with that the lending guidelines have adjusted to our new, not so, “Brave New World.” That isn’t necessarily a bad thing, seeing some folks were giving out loans to pretty much anyone that could fog a mirror. We knew the house of cards was destine to fall sooner or later. When a mortgage back security is leveraged out 38 times or so, a lot was depending on those questionable folks making payments. Of course times got tough, jobs were lost, rates adjusted, home values finally plummeted and here we all are in a heap sorting through the ashes of what we once knew. I could use a hug. Read the rest of this entry »