Wednesday, July 23, 2008
Economist's Commentary Based On Recent Survey -A Very Insightful Article
We survey our members periodically to get at information that is not readily available from MLSs or via other hard data sources. A recent market assessment survey of data from over 2,000 Realtors® was completed in June and here are the findings.
40 percent indicated having assisted in selling foreclosed property in 2008.
Most indicated little problem with their clients getting a mortgage. Specifically, 68 percent said either none or less than one-fifth of clients were not able to get a mortgage. Only 8 percent indicated that half or more of their clients were not able to get a mortgage.
The most interesting results, from my point of view, were about clients postponing their purchase of a home. The question posed was 'In thinking of your most recent potential buyer in 2008, did the client postpone their home buying decision?'
*50 percent said no, and said the buyer bought in the end
*23 percent said the potential buyer did not buy, preferring to wait for prices to fall further
*6 percent said the potential buyer did not buy because of mortgage difficulties
*4 percent said the potential buyer could not locate that 'perfect' home
*7 percent said the potential buyer needed to first sell the current home
*9 percent said the potential buyer changed their mind due to various personal reasons.
What is striking is the second bullet point. There are a measurable number of potential buyers who have the financial capacity and mortgage qualifications, yet are refusing to jump into the market because of price decline fears. These hesitant buyers far outnumber the people who are unable to secure a mortgage.The implication is that once there are signs of market stabilization then we may see a rush of buyers returning to the market. The recovery could be robust rather than tame. It also implies that the homebuyer tax-credit being discussed in Congress right now as part of the housing stimulus bill could make a big impact in drawing buyers to the closing tables.
Separately, I have received a lot of feedback from Realtors® across the country about some unique factors that are not yet being captured in hard, quantifiable statistical data.
The common themes are:
(1) Short sales are excruciatingly frustrating because lenders take forever to reply
(2) REO (bank-owned) properties are getting multiple bids and selling above list price
(3) Homes sell without a problem if priced correctly
(4) Many eager buyers cannot buy because they cannot sell their existing home
(5) Buyers of fixer-uppers are not buying because of the high cost of construction
(6) Builders are selling for less than the cost of construction and hurting the existing home market
(7) Low appraisals are leading to fallouts
(8) High gas prices are impacting neighborhoods far out from the city
(9) The media is painting inaccurate picture not related to my local market conditions and scaring away the buyers
(10) Buyers are waiting for the prices to drop further before committing.
Most of these factors, as I see it, point to sizable pent-up demand waiting to be released into the marketplace. Particularly intriguing is the prevalence of multiple bids - after prices drop. Once it begins to take place, many buyers will be buying on the way up rather than on the way down. As is always the case, the market bottom will have been realized only after the fact.
Here are some notable excerpts (some changed for clarity and brevity):
*Reno, NV - closed to half of sales are foreclosed/bank owned properties, but low prices have led condo sales to nearly triple from a year ago.
*Loudoun County, VA - Home sellers need to be realistic on prices. A home is listed at $975,000 and is also offered for rent at $3,000. Do the math and they do not match.
*Honolulu, HI - High energy costs are a major concern since all imported goods to the island require long transports. The high associated cost of living could impact housing demand.
*Stockton, CA - High fuel prices have effectively raised the cost of home in the area for people commuting to the Bay Area. The majority of buyers of REO homes are investors. Listing agents report that their short sale owners have not received a Notice of Default, even after a year of no house payments.
*FL - A neighbor has not made a payment since summer of last year yet has not received a notice of foreclosure.
*Undisclosed - High energy usage is impacting older homes
*Outer Banks, NC - Few are visiting to browse vacation homes because of the high gas prices
*An outer suburb of Boston, MA - The high cost of long commutes has deterred buyers looking for affordable homes this far out in the suburbs.
*Austin, TX - Prices here are going strong, but the outer edges (requiring long commutes) are seeing price declines
*Ft. Worth, TX - Had the best year in over 25 years in 2007 and my husband also had a terrific year as a builder. Oil is helping the local economy.
*Charleston, SC - Agents are still taking overpriced listings (thereby inflating inventory that sits on the market for long time). My team, however, has being selling homes at a good pace in less than 30 days for 98% of the list price on average, because the owners allowed me to price the property.
*Spokane, WA - Well-priced homes are selling and the best incentive to buyers is always price.
*Culver City, CA - Few homes come on the market and when one does appear, there are buyers. When the home is priced sensibly, it sells quickly.
*San Diego, CA - Bank owned properties are going quickly with multiple offers. There is good traffic at open houses.
*Undisclosed - Some foreclosed homes are so messed up that it is a health hazard to view them
*Undisclosed - A lot of immigrants are leaving the area and selling homes at any price
*Undisclosed - A lot of well qualified first-time buyers who had been priced out before are now coming back
*Undisclosed - Many buyers are cash purchasers in this resort area so mortgage situations have less of an impact
*Undisclosed - A loan officer called back this month (June) on my contract submission in January. Of course, the buyer has long gone away.
*Undisclosed - Many Realtors® and clients are now avoiding short sales outright because of unpredictable process time, but there is client interest in, and multiple bids on, REO properties
*Undisclosed - Agents list prices way below the market for a short-sale and, of course, the lender rejects it. In the meantime, the low listing price ruins comps for other normal properties.
This article was written by Lawrence Yun, Chief Economist of NAR - Economist's Commentary: July 3, 2008. This is one in a series of commentaries by the Research staff at NAR.
Preparing for the Harvest Means Planting Now!
When market conditions dry up, lay the groundwork for healthy harvests in the future.
By Mariwyn Evans
To everything, there is a season . . . a time to plant, a time to reap .
If you’ve had days when the sales figures in the MLS brought up visions of a fallow field in winter, it’s time to look at your market from a different perspective.
John Foltz (pictured above right), CRB, president of Realty Executives in Phoenix saw his market fall 35 percent in 2007, yet he’s not picturing market desolation. Rather, he remains an optimist.
“The attitude real estate practitioners convey to customers is directly related to the picture of the market they have in their minds,” he says.
Instead of dwelling on what others may see as drought conditions, Foltz is teaching his 1,500 sales associates to look at the current market as a fertile farm that just needs cultivation and patience.
Planting the seeds of future relationships now, when sales are slow, is what will ensure prosperity when markets improve, he says.
That doesn’t mean being a Pollyanna. Instead it means adopting an authentically positive attitude, which recognizes real estate is a cyclical business. Your market may be in the down leg of the cycle now, but it won’t be there forever.
“It’s pretty easy to fall into ‘Woe is me’ and wallow in the weak sales numbers,” he says. “And sometimes it’s not any fun out there in the mud doing the heavy work of planting, but if you don’t plant and cultivate your farm now, you’ll have nothing to harvest when the market improves.”
To help business grow, Realty Executives has instituted a continuous customer contact system, dubbed Executive Edge, and a system of accountability partners and personal coaches who prod associates to plant the seeds of relationships now so that they will have greater market share and profits when that cyclical curve starts upward.
Foltz isn’t the only real estate professional today who looks at big inventories and sees opportunities. Read on for our Top 100 Companies lists, and learn what other large brokerage leaders are doing to help ensure a better harvest in the years to come.
This article is from Realtor Magazine and was written by Mariwyn Evans, Senior Editor - July 2008
Government Assures Financial Markets on Viability of Fannie Mae and Freddie Mac
In response to market turmoil and unsubstantiated rumors about the continued viability of Fannie Mae and Freddie Mac, the U.S. Government took action to make clear that the two government sponsored enterprises (GSEs) will not be allowed to fail.
On Sunday, July 13, 2008, the Federal Reserve Board announced authority for the Federal Reserve Bank of New York to make secured loans to the GSEs, if necessary. The Fed took a similar step for investment banks at the time of the Bear Stearns failure. The same day, Treasury Secretary Paulson announced three legislative proposals:
1. Temporary authority for the Treasury Department to make direct loans to the GSEs.
2. Temporary authority for the Treasury Department to purchase stock of the GSEs. The stock is expected to have priority status over existing classes of GSE stock.
3. A permanent requirement that the new GSE regulator (the successor to the Office of Federal Housing Enterprise Oversight (OFHEO)) must consult with the Fed on GSE capital requirements and all other safety and soundness standards for the operation of the GSEs. This authority strengthens the hand of the new regulator by putting the prestige and power of the Fed behinds its policies, but it weakens the regulator by giving the Fed an important policy role. GSE and government officials are both on the record saying that they see no current need for the GSEs to borrow from the Fed or the Treasury or for Treasury to buy stock in the GSEs.
This article appeared in the National Association of Realtors Weekly Washington Report dated 7-21-08
Tips for Lowering the Cost of Driving
Given that real estate practitioners tend to drive at least 20,000 miles per year, rising gas prices are hitting them hard in the wallet. Bernice Ross, real estate columnist for Inman.com, offers these ideas for mitigating your driving costs:
*Consider working from home a couple days per week, which could save upwards of 40 percent on fuel expenses.
*Use video tours or Power Point presentations to show listings to co-workers, rather than making an in-person trip to the property.
*Reducing your vehicle's weight by keeping unnecessary items at home.
Run numerous errands in a single trip.
*Screen buyers to ensure they visit only those homes that best meet their needs.
*Change your driving style; Edmunds.com reports that drivers can use 31 percent to 37 percent less gas by gently accelerating; and they can lower gas consumption by 12 percent to 14 percent by driving the speed limit.
*Take advantage of cruise control reduces gas consumption by 7 percent to 14 percent, while turning the car off while waiting uses 19 percent less gas.
*Fuel up in the morning, and reduce wear on your tires by ensuring they are inflated at the recommended levels.
*Stay cool; Experts note that turning the air conditioner off does not save gas.
Source: Inman News, Bernice Ross (07/18/08)
This article is from Realtor Magazine Online Edition - Daily News for July 21, 2008
Congress Ready to Nix Seller-Financed Loans
Congress is expected to pass a housing package this week that eliminates seller-financed mortgage programs.
Under these programs, nonprofit organizations finance the down payment for buyers, then home sellers repay the organizations. Millions of people have bought homes this way, but the Federal Housing Administration says the foreclosure rate on these transactions is four times higher than it is on its other transactions.
The Senate version of the housing bill banned seller financing; the House version did not. Negotiators crafting a compromise bill have agreed to follow the Senate’s position, which is also supported by the Bush administration."
No insurance company can sustain that amount of additional costs year after year and still survive," Brian D. Montgomery, the FHA commissioner, said in a recent speech.But supporters of this kind of assistance say the system may have its problems, but because it is vital to low- and middle-income buyers, it should be fixed, not abandoned.
Source: Washington Post, Dina ElBoghdady (07/22/2008)
This article is from Realtor Magazine Online Edition - Daily Real Estate News 7/22/08
Treasury Secretary Urges Congress To Support Fannie Mae & Freddie Mac
Treasury Secretary Henry Paulson Tuesday urged Congress to quickly approve support for Fannie Mae and Freddie Mac, calling it "central to the speed with which we emerge from this housing correction."
Meanwhile, Treasury officials confirmed that bank examiners from both the Federal Reserve and the Office of the Comptroller are currently inspecting the books at both Fannie and Freddie.
Paulson said in an interview published Tuesday in the New York Times that he believed the results of those examinations will give Congress confidence.
Paulson said that Fannie and Freddie have issued $5 trillion in debt and mortgage backed securities. Of that amount, more than $3 trillion is held by U.S. financial institutions and over $1.5 trillion is held by foreign institutions, making the stabilization of the two companies essential to the global economy.
Source: The Associated Press, Martin Curtsinger (07/22/2008)
This article is from Realtor Magazine Online Edition Daily News for July 22, 2008
Poll Results Show Most People Believe Housing Market Will Improve With Next President
A recent survey conducted by Harris Interactive on behalf of Move Inc. shows that 44 percent of home buyers expect improvements in the housing market when the new president is installed next year.
At the same time, 81 percent of home buyers are still nervous about the current housing market and say there are barriers between them and home ownership. What kinds of barriers? Respondents cited the cost of a down payment (28 percent), their annual income level (20 percent), lack of confidence in the economy (26 percent) and high home prices (31 percent).
Despite these reservations, the survey indicates underlying demand for homeownership is healthy. While nearly half (41 percent) of current homeowners do plan to purchase a home again, 80 percent of all renters plan to purchase a home someday with 47 percent planning to purchase a home within the next five years.
Most home buyers (78 percent) are also willing to make sacrifices to save and earn extra income for down payments, and will compromise on neighborhood features and residential amenities in order to buy a home in the current market.
Many of their choices may reflect changing values, including a growing concern over the environment, the importance of community features and the rising cost of fuel.
"These findings show that despite the difficulties home buyers face in the wake of the subprime crisis and their concerns about economic uncertainty, underlying demand appears relatively strong. Consumers see better times coming," said Lorna Borenstein, president of Move, Inc.
This article is from Realtor Magazine Online Edition Daily News for July 22, 2008
At the same time, 81 percent of home buyers are still nervous about the current housing market and say there are barriers between them and home ownership. What kinds of barriers? Respondents cited the cost of a down payment (28 percent), their annual income level (20 percent), lack of confidence in the economy (26 percent) and high home prices (31 percent).
Despite these reservations, the survey indicates underlying demand for homeownership is healthy. While nearly half (41 percent) of current homeowners do plan to purchase a home again, 80 percent of all renters plan to purchase a home someday with 47 percent planning to purchase a home within the next five years.
Most home buyers (78 percent) are also willing to make sacrifices to save and earn extra income for down payments, and will compromise on neighborhood features and residential amenities in order to buy a home in the current market.
Many of their choices may reflect changing values, including a growing concern over the environment, the importance of community features and the rising cost of fuel.
"These findings show that despite the difficulties home buyers face in the wake of the subprime crisis and their concerns about economic uncertainty, underlying demand appears relatively strong. Consumers see better times coming," said Lorna Borenstein, president of Move, Inc.
This article is from Realtor Magazine Online Edition Daily News for July 22, 2008
Still A Buyer's Market
Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year. The Pending Home Sales Index, NAR’s forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5.
Some pullback after a sharp increase in the previous month was expected. The overall decline in contract signings suggests we are not out of the woods by any means. The housing stimulus bill that is still being considered in the Congress is critical to assure a healthy recovery in the housing market, jobs and the economy.
But location has never mattered more than in the current market. Look at the pending home sales index for the West. While it’s true the index slipped 1.3 percent to 97.5 in May in that region, it was 2.0 percent higher than it was in May of 2007. Indeed, some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. For instance, double-digit pending sales gains in May from a year ago were noted in Colorado Springs CO, Sacramento CA and Spartanburg SC. In addition, price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.
Current real estate market conditions are positive for most buyers: still-attractive interest rates, a large inventory of homes available for sale, and many sellers willing to negotiate their prices – sometimes significantly. And in spite of the headlines surrounding issues with Fannie Mae and Freddie Mac – as well as the recent federal “takeover” of IndyMac – there is still mortgage capital out there. Credit may be tightened, but lenders are still happy to originate a mortgage loan to households who qualify. And remember: owning a home still provides long-term value – and most buyers today plan to remain in their homes for five or more years. Home buyers can get a great deal right now.
Concerns Remain
Yes, there are some concerns on the horizon. Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009. Based on current indicators, the 30-year fixed-rate mortgage is forecast to rise gradually to 6.5 percent by the end of this year, and then hold at that level for most of 2009. But note – that is still well below the “threshold” level of 7 percent. In spite of a month to month decrease from April to May, housing affordability – as measured by NAR’s housing affordability index -- is improving this year and is likely to rise 15 percentage points to 127.0 for all of 2008.
Existing-home sales are expected to grow from an annual pace of 5.01 million in the second quarter to 5.75 million in the fourth quarter. For all of 2008, existing-home sales should total 5.31 million, and then increase 5.0 percent next year to 5.58 million. That is less than 100,000 unit sales off the annual pace last year.
The speed at which home prices have declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market. Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets. The aggregate median existing-home price (on a national basis) is projected to fall 6.2 percent this year to $205,300, and then rise by 4.3 percent in 2009 to $214,100.
New-home sales are a different story. They are likely to fall 32.3 percent to 525,000 in 2008 and decline another 3.4 percent next year to 507,000. In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into next year. Housing starts, including multifamily units, will probably fall 28.7 percent to 966,000 this year, and then drop another 9.0 percent in 2009 to 879,000. The precipitous drop in starts is due in part to some overbuilding during the “boom” years, as well as the rising costs of construction. The median new-home price is expected to decline 3.2 percent to $239,300 this year, and then rise 5.3 percent in 2009 to $251,900.
Officially, the U.S. economy has still not drifted into recession. In fact, GDP growth in the first quarter of this year was revised upward from preliminary estimates – albeit at a slow 1.0 percent rate. Growth in GDP is forecast at 1.6 percent for all of 2008 and 1.4 percent next year – not spectacular, but still positive. Inflation, as measured by the Consumer Price Index, is forecast at 3.7 percent this year and 2.4 percent in 2009. Unfortunately, personal income gains are unlikely to keep pace with rising prices. Inflation-adjusted disposable personal income is projected to grow 1.5 percent in both 2008 and 2009.
Conclusion
So, what does all this mean for housing consumers? It will continue to be a buyer’s market for a while. Obviously, we will need to watch developments with credit markets and the GSEs, but if a potential buyer can qualify for a mortgage, there is plenty of choice out there.
This article was written by Lawrence Yun, Chief Economist NAR
Employment Trends: Layoffs, But Not Everywhere
Written by by Ken Fears, Manager, Regional Economics - NAR
Job creation is crucial to economic health. Lately, the news on jobs has not been all that good. The U.S employment level has been falling since January of 2008. Roughly 283,000 jobs were lost between January and May, and from May 2007 to May 2008 employment has grown just 0.2 percent. The initial layoffs were substantial, but this surge has slowed.
What’s driving this slowdown? New layoffs are being caused by the downward movement in the housing market and the general U.S. economy. But not all industries and locations are experiencing the slowdown in the same fashion.
As the housing market slowed in 2006, many people lost work in the residential construction sector. Some of this labor was able to shift to the commercial sector where skilled labor was in short supply. But then the commercial real estate market began to slow in the second half of 2007; consequently, so did commercial construction. Layoffs for the entire sector were on the rise by the late fall of 2007. Over the 12 months ending in May of this year, the construction sector lost 386,000 jobs, a decline of 5.1 percent.
Like construction, the financial service sector also felt the impact of the decline of the U.S. housing market. Following the credit crisis last summer, most banks scaled back mortgage lending operations and cut sub-prime outfits altogether. But the ripple effect was even more pronounced. Many appraisers, inspectors, and real estate services professionals were also left without work because of the steep decline in sales volume. A total of 91,000 jobs were lost in the financial services sector over the 12-month period ending in May of 2008.
Economic Changes
More recent economic changes are also impacting employment. Steadily increasing fuel prices have weighed on the trade and transport sector for some time. Business owners in this sector have been forced to strip payrolls in order to cut costs as oil prices sky-rocketed. As a result, job losses in this sector have accelerated since December, with 228,000 jobs shed over this 6-month period.
However, the hardest hit sector by far has been manufacturing which lost 341,000 jobs -- or 2.3 percent over the May 2007 to May 2008 period. This sector started its decline earlier than the rest of the economy, though, and has shed roughly 621,000 jobs over the last 2 years.
There are some bright spots. The weak value of the dollar has attracted a steady stream of tourists to the United States for sight seeing and shopping. Employment in leisure and hospitality industries is up by 2 percent, or 272,000 jobs in the 12 months May 2007 to May 2008. The big winner during this time period has been the education industry, where employment has grown by 3.2 percent or 577,000 jobs!
Uneven Slowing
Regionally, the impact of the slowing housing market has been uneven. California has experienced sharp declines in both the construction (88,400 jobs lost) and financial service sectors (34,900 jobs lost). The large concentration of mortgage brokering businesses in the Los Angeles area made it ripe for a sharp increase in layoffs following the sub-prime crisis. Nevada has also experienced a sharp decline in construction and the industry has been laying off jobs in most regions. Despite these developments, it’s not all bad news. The West boasted one of the strongest net job growth rates over the 12 months - May 2007 to May 2008. Employment in the region is actually up by 83,000 during the period, making it the second strongest region in terms of job creation over those 12 months. New employment in the trade, information, education and leisure areas have led the way.
This cycle’s employment pattern are similar across the country with moderate number of jobs construction- related job losses. However, those states that experienced the sharpest home sales and home price growth from 2000 to 2005 have felt the sharpest decline in construction employment. From May of 2007 to May of 2008, California, Florida, and Arizona experienced declines in construction employment of 88,400, 77,200, and 27,700, respectively. Of the 50 states and the District of Columbia, 43 experienced a decline in construction employment over those 12 months.
In all, the construction related job losses account for nearly a third of all job losses with the majority of these losses concentrated in a few states.
Uneven Gains
Outside of the West, employment gains have been strong enough to more than offset the construction related losses. The South has done particularly well tacking on nearly 325,800 jobs since May of 2007. Texas has experienced its own job boom, adding 238,000 of these jobs. Florida’s loss of 74,700 jobs was more than made up for in by gains in other states like North Carolina (35,000), Louisiana (32,000), Georgia (20,200), and South Carolina (13,500). The service and education sectors have done well in nearly all Southern states except for Florida where the booming education sector could only ameliorate service sector losses.
The education, service, and information sectors have all done a good job at generating jobs in the Midwest, while the results for the financial and trade sectors have been mixed. The manufacturing sector suffered in nearly all states. Losses in the manufacturing sector accounted for nearly another third of job losses. However, many of the markets losing jobs in this sector are in those states located in the rust-belt of the Midwest or in localized areas that create goods for the slowed housing sector.
In the Northeast, the finance, trade, and information sectors suffered in nearly every state. Small-scale manufacturing was also hurt across the board. But the economy of Rhode Island suffered in almost every sector, whereas most Northeastern states posted steady improvements in employment in theservice, education and leisure sectors.
Employment is Critical
While the economic slowdown has raised many alarm bells, the most dire situation has not yet emerged. To date, this downturn has been relatively mild with pockets of significant slowdown, but it could take a turn for the worse. Job losses have been concentrated in the manufacturing and real estate-related sectors, the bulk of the large losses to date have been in the construction and mortgage banking industries and concentrated in a handful of states. Most states and regions have experienced relatively mild upward or downward swings in employment.
Employment is critical to generating new home sales as well as keeping people out of foreclosure. While the national statistics on jobs – as well as those for a few states – look dire, employment in some sectors of the economy and in the states which have a heavy concentration of industries and services in those sectors has been relatively steady. The long-term impact is tough to foretell, but these steady employment statistics to date bode well for transitioning through these tough times for housing.
Job creation is crucial to economic health. Lately, the news on jobs has not been all that good. The U.S employment level has been falling since January of 2008. Roughly 283,000 jobs were lost between January and May, and from May 2007 to May 2008 employment has grown just 0.2 percent. The initial layoffs were substantial, but this surge has slowed.
What’s driving this slowdown? New layoffs are being caused by the downward movement in the housing market and the general U.S. economy. But not all industries and locations are experiencing the slowdown in the same fashion.
As the housing market slowed in 2006, many people lost work in the residential construction sector. Some of this labor was able to shift to the commercial sector where skilled labor was in short supply. But then the commercial real estate market began to slow in the second half of 2007; consequently, so did commercial construction. Layoffs for the entire sector were on the rise by the late fall of 2007. Over the 12 months ending in May of this year, the construction sector lost 386,000 jobs, a decline of 5.1 percent.
Like construction, the financial service sector also felt the impact of the decline of the U.S. housing market. Following the credit crisis last summer, most banks scaled back mortgage lending operations and cut sub-prime outfits altogether. But the ripple effect was even more pronounced. Many appraisers, inspectors, and real estate services professionals were also left without work because of the steep decline in sales volume. A total of 91,000 jobs were lost in the financial services sector over the 12-month period ending in May of 2008.
Economic Changes
More recent economic changes are also impacting employment. Steadily increasing fuel prices have weighed on the trade and transport sector for some time. Business owners in this sector have been forced to strip payrolls in order to cut costs as oil prices sky-rocketed. As a result, job losses in this sector have accelerated since December, with 228,000 jobs shed over this 6-month period.
However, the hardest hit sector by far has been manufacturing which lost 341,000 jobs -- or 2.3 percent over the May 2007 to May 2008 period. This sector started its decline earlier than the rest of the economy, though, and has shed roughly 621,000 jobs over the last 2 years.
There are some bright spots. The weak value of the dollar has attracted a steady stream of tourists to the United States for sight seeing and shopping. Employment in leisure and hospitality industries is up by 2 percent, or 272,000 jobs in the 12 months May 2007 to May 2008. The big winner during this time period has been the education industry, where employment has grown by 3.2 percent or 577,000 jobs!
Uneven Slowing
Regionally, the impact of the slowing housing market has been uneven. California has experienced sharp declines in both the construction (88,400 jobs lost) and financial service sectors (34,900 jobs lost). The large concentration of mortgage brokering businesses in the Los Angeles area made it ripe for a sharp increase in layoffs following the sub-prime crisis. Nevada has also experienced a sharp decline in construction and the industry has been laying off jobs in most regions. Despite these developments, it’s not all bad news. The West boasted one of the strongest net job growth rates over the 12 months - May 2007 to May 2008. Employment in the region is actually up by 83,000 during the period, making it the second strongest region in terms of job creation over those 12 months. New employment in the trade, information, education and leisure areas have led the way.
This cycle’s employment pattern are similar across the country with moderate number of jobs construction- related job losses. However, those states that experienced the sharpest home sales and home price growth from 2000 to 2005 have felt the sharpest decline in construction employment. From May of 2007 to May of 2008, California, Florida, and Arizona experienced declines in construction employment of 88,400, 77,200, and 27,700, respectively. Of the 50 states and the District of Columbia, 43 experienced a decline in construction employment over those 12 months.
In all, the construction related job losses account for nearly a third of all job losses with the majority of these losses concentrated in a few states.
Uneven Gains
Outside of the West, employment gains have been strong enough to more than offset the construction related losses. The South has done particularly well tacking on nearly 325,800 jobs since May of 2007. Texas has experienced its own job boom, adding 238,000 of these jobs. Florida’s loss of 74,700 jobs was more than made up for in by gains in other states like North Carolina (35,000), Louisiana (32,000), Georgia (20,200), and South Carolina (13,500). The service and education sectors have done well in nearly all Southern states except for Florida where the booming education sector could only ameliorate service sector losses.
The education, service, and information sectors have all done a good job at generating jobs in the Midwest, while the results for the financial and trade sectors have been mixed. The manufacturing sector suffered in nearly all states. Losses in the manufacturing sector accounted for nearly another third of job losses. However, many of the markets losing jobs in this sector are in those states located in the rust-belt of the Midwest or in localized areas that create goods for the slowed housing sector.
In the Northeast, the finance, trade, and information sectors suffered in nearly every state. Small-scale manufacturing was also hurt across the board. But the economy of Rhode Island suffered in almost every sector, whereas most Northeastern states posted steady improvements in employment in theservice, education and leisure sectors.
Employment is Critical
While the economic slowdown has raised many alarm bells, the most dire situation has not yet emerged. To date, this downturn has been relatively mild with pockets of significant slowdown, but it could take a turn for the worse. Job losses have been concentrated in the manufacturing and real estate-related sectors, the bulk of the large losses to date have been in the construction and mortgage banking industries and concentrated in a handful of states. Most states and regions have experienced relatively mild upward or downward swings in employment.
Employment is critical to generating new home sales as well as keeping people out of foreclosure. While the national statistics on jobs – as well as those for a few states – look dire, employment in some sectors of the economy and in the states which have a heavy concentration of industries and services in those sectors has been relatively steady. The long-term impact is tough to foretell, but these steady employment statistics to date bode well for transitioning through these tough times for housing.
Real Estate - A Nice "Commodity" Play
I found this to be a very interesting and "out-of-the-box" view concerning the current economy and real estate. You won't be sorry you've read this! -Ross
The following article was written by Lawrence Yun, NAR Chief Economist
We are all well aware of high commodity prices in today’s market. Most tangible raw materials are commanding sky high prices. Oil, diesel, copper, steel, cement, and other construction-related costs (except lumber) are all up substantially. Some have even brought back the Malthusian theory of too many people on earth outstripping available resources.
We can see the effect in inflation figures. In the past five years the consumer price index has risen 18 percent; the producer price index for construction has increased 39 percent during the same period.
In light of the resource price boom, one interesting angle that has not been delved into deeply is that real estate could be a nice commodity play. Real estate -- with all its tangible and concrete solid qualities (unlike paper financial assets) -- has historically been a good hedge against inflation. High commodity prices -- and high inflation rates in the late 1970s and early 1980s -- led to double-digit gains in home prices. So why hasn’t that happened this time?
One reason goes back to supply and demand. Right now there are too many home sellers (some of whom are trying to sell one of several properties they own) in relation to home buyers. The short-term dynamics of high home inventory (of both new and existing homes) will require some time to work off. However, once inventory reaches a manageable level, does it then mean that real estate prices will “catch-up” to reflect high commodity costs and the high costs of construction?
Think about two different households (one owner, one buyer) interested in homes situated where land is cheap and plentiful. How much are those homes worth? If a household desires to build a (new) home there, then the real price of that home will be the cost of construction.
But let’s assume that the home owner wanted to charge a much higher price (i.e., more than the cost of construction) to sell that home to a buyer. The buyer would do well by simply building a new home at the cost of construction rather than paying the higher asking price. So the long-term home price equilibrium can be viewed simply as the cost of production. If the cost rises, then so will the home price. In areas of the country where developable land is relatively widely available, the rising cost of construction will surely then lead to proportionately higher home prices.
Of course, where land is not cheap and/or plentiful, then real estate prices will not only reflect the cost of construction, but also the shortage (in supply) and the premium value of the land. New York, San Francisco, and the Washington D.C. areas, for example, will always command high home prices because of the very limited land supply that is close to downtown job centers.
Inflation has been – and always will be -- a big headache for the country, our economy and consumers. One way for consumers to assuage the pain of inflation, however, is to own commodities. A simple, good way is to own real estate. If commodity prices further accelerate for some reason, you will automatically be in the game.
Thursday, July 17, 2008
Good Report About Fannie Mae/Freddie Mac, Economy, With Christopher Dodd Interview
This is a segment that appeared on CBS Morning News on Monday 7/14/08. It is worth watching.
Monday, July 14, 2008
A Safety Net Is Put in Place to Protect Fannie Mae and Freddie Mac
The government, over the weekend, has come up with a plan to assist both Fannie Mae and Freddie Mac in the wake of both corporations losing billions of dollars due to the rising number of American homeowners defaulting on their mortgages.
First, the Federal Reserve agreed to allow Fannie Mae and Freddie Mac, both of which are government sponsored entereprises (GSEs), to borrow directly from the fed. This was the same policy the fed extended to securities firms after the Bear Stearns crisis in March of this year. This would give both corporations the necessary liquidity to function uninterrupted as well as continue purchasing and insuring mortgages and expand their operations.
Second, the Administration will ask Congress to authorize the Treasury to lend both GSEs more money beyond their current limits and to buy stock in both companies. Third, the plan calls for the Federal Reserve to play a greater role in overseeing and regulating Fannie Mae and Freddie Mac.
There is no fear of a collapse of either corporation; however, some in the media have been capitalizing on the situation and have been working overtime to spread fear and uncertainty. Last Friday there was talk about the possibility of the two GSEs being nationalized. There was also a lot of buzz about a government bailout. However, the announcement yesterday about the government’s plan is nothing close to either nationalizing or a bailout.
Yet, the actions taken by the government were needed to reduce fears and increase confidence on Wall Street concerning the financial stability of both Fannie Mae and Freddie Mac. Late last week, investors, worried about the losses suffered by both companies, dumped the stocks and thereby caused stock prices of both to plunge to 17-year lows.
Treasury Secretary Henry Paulsen said: “Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.”
Assistant Tr
easury Secretary Michelle Davis said: “This is basically a safety net. We do not expect to need to execute on either [the increased Treasury lending or the government stock purchase] immediately.”
While there are critics of the government’s plan, as can be viewed in today’s news, it was important that the Administration, Federal Reserve and Treasury restore calm and confidence to the financial markets and not allow this situation to have a broader impact upon the entire economy. Also, it can't be over-emphasized that such measures greatly assist going forward in helping our housing market and economy to recover and to restore consumer confidence in the real estate market.
First, the Federal Reserve agreed to allow Fannie Mae and Freddie Mac, both of which are government sponsored entereprises (GSEs), to borrow directly from the fed. This was the same policy the fed extended to securities firms after the Bear Stearns crisis in March of this year. This would give both corporations the necessary liquidity to function uninterrupted as well as continue purchasing and insuring mortgages and expand their operations.
Second, the Administration will ask Congress to authorize the Treasury to lend both GSEs more money beyond their current limits and to buy stock in both companies. Third, the plan calls for the Federal Reserve to play a greater role in overseeing and regulating Fannie Mae and Freddie Mac.
There is no fear of a collapse of either corporation; however, some in the media have been capitalizing on the situation and have been working overtime to spread fear and uncertainty. Last Friday there was talk about the possibility of the two GSEs being nationalized. There was also a lot of buzz about a government bailout. However, the announcement yesterday about the government’s plan is nothing close to either nationalizing or a bailout.
Yet, the actions taken by the government were needed to reduce fears and increase confidence on Wall Street concerning the financial stability of both Fannie Mae and Freddie Mac. Late last week, investors, worried about the losses suffered by both companies, dumped the stocks and thereby caused stock prices of both to plunge to 17-year lows.
Treasury Secretary Henry Paulsen said: “Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.”
Assistant Tr
easury Secretary Michelle Davis said: “This is basically a safety net. We do not expect to need to execute on either [the increased Treasury lending or the government stock purchase] immediately.”While there are critics of the government’s plan, as can be viewed in today’s news, it was important that the Administration, Federal Reserve and Treasury restore calm and confidence to the financial markets and not allow this situation to have a broader impact upon the entire economy. Also, it can't be over-emphasized that such measures greatly assist going forward in helping our housing market and economy to recover and to restore consumer confidence in the real estate market.
Meanwhile on Capitol Hill, there isn’t much calm over this situation. Senator Christopher Dodd (D-Conn.), Chairman of the Senate Banking Committee, sharply criticized the White House by stating: “The administration’s failure to prevent bad lending practices has caused unprecedented hardship in the form of record foreclosures and market turmoil. Now, homeowners across the country and our entire financial system are suffering the consequences.”
I guess we will be debating for a very long time as to where to lay blame for our current situation. Frankly, I don't think any one person, agency, administration can be rightfully blamed. Rather, the problem or cause is systemic in nature. For right now the important thing is to lend strength where needed to ensure stability and to learn from our mistakes by putting measures in place to prevent this from ever happening again.
Saturday, July 12, 2008
IndyMac Taken Over By Feds
On Friday 7/11/08, federal regulators took over IndyMac, once one of the nation's leading home lenders.
It was a Pasadena California based thrift with $32 billion in assets. It is the first bank failure in California since 2003. At 3pm yesterday, the Office of Thrift Supervision shut down the bank and transferred it to the FDIC. The bank will reopen on Monday of next week as IndyMac Federal Bank.
IndyMac specialized in Alt-A loans which allowed buyers to borrow with little documentation required.
According to the FDIC, 10,000 IndyMac customers could lose up to $500 million in uninsured deposits. The FDIC said it could cost the Deposit Insurance Fund between $4-8 billion. IndyMac is the fifth bank to fail this year. In the past 15 years the FDIC has taken over 127 banks. It is the largest bank collapse since 1984, when Continental Illinois failed, according to the FDIC. The two most expensive failures were both in 1988 when American Savings and Loan Association in California failed (costing $5.4 billion) and First Republic Bank in Texas (costing $4 billion).
The FDIC will try to sell IndyMac as a complete entity within the next 90 days.
Depositors are insured up to $100,000 on traditional bank accounts. Annuities and mutual funds are not insured at all. Individual Retirement Accounts are insured up to $250,000. Customers with uninsured deposits will get at least half their money back, according to the FDIC.
Are Fannie Mae and Freddie Mac in Trouble??
The big buzz in the news about the housing market on Friday (7/11) concerned the solvency of Fannie Mae and Freddie Mac. Specifically, on Friday the stocks of both companies plummeted to their lowest levels in 17 years and both have sustained huge losses in their loans portfolios - about $11 billion over the past few months. There is great concern that both may be on the financial brink due to the housing market crisis. 
Some of the talk in the news was about a government bailout to rescue both companies; however, such talk appears to be premature. Fannie Mae and Freddie Mac, both of which are GSEs (government sponsored enterprises) issued separate statements yesterday saying that their financial position is solid. However, Senator Christopher Dodd indicated that times are tough for both corporations and said that the government was considering an emergency lending program as a possible option to prop up the firms, if necessary. Senator Dodd also said he has discussed this with Treasury Secretary Paulsen and Fed Chairman Ben Bernanke.
So, how severe is the financial picture for both of these companies? Well, Senator Dodd stated on Friday “these institutions are fundamentally sound and strong.” He also said “there is no reason for the kind of [stock market] reaction we’re getting [concerning both companies]. Treasury Secretary Paulsen stated that a bailout of both companies is unlikely despite the concerns and reaction that the stock market is currently having. Paulsen also said that the primary goal remains to support both GSEs in their current form (as opposed to becoming nationalized companies). There are, in fact, several options of assisting both these institutions, when it comes right down to it, prior to any potential scheme for a bailout.
The New York Times on Friday stated that the administration was considering a plan to put both Fannie Mae and Freddie Mac into a conservatorship if their problems worsened. The purpose of such a plan would be to appoint someone to run these institutions and get them out of financial trouble. The accuracy and/or context of the information in this report is not certain.
Yet, Freddie Mac issued a statement that it has options to weather the financial storm. They stated that they could cut the dividend on its stock allowing it retain capital. Fannie Mae also stated that it has access to “ample sources of liquidity”.
The spokeswoman for the Federal Reserve, Michelle Smith, said the central bank is keeping a close watch on the situation. The fed has also said that, as of yesterday, they have not discussed the current situation or different financial backing options with either corporation.
There is a very good possibility that some sort of financial game plan/safety net could be put in place for both Fannie Mae and Freddie Mac sometime within the next few days. If this happens it could indicate that the situation for both GSEs is dire or it could simply mean that a prudent contingency plan is put in place just in case it is needed.
It is extremely unlikely that Fannie Mae and Freddie Mac are on the ropes. However, they are under duress due to the foreclosure of so many loans, the steep decline in their stock price, and the constraining pressure of available capital. Rest assured, the government would never let them go belly-up because they underwrite or outright hold about 50% of all the mortgages in the U.S. Stay tuned for continuing developments on this story in the days ahead.
Some of the talk in the news was about a government bailout to rescue both companies; however, such talk appears to be premature. Fannie Mae and Freddie Mac, both of which are GSEs (government sponsored enterprises) issued separate statements yesterday saying that their financial position is solid. However, Senator Christopher Dodd indicated that times are tough for both corporations and said that the government was considering an emergency lending program as a possible option to prop up the firms, if necessary. Senator Dodd also said he has discussed this with Treasury Secretary Paulsen and Fed Chairman Ben Bernanke.
So, how severe is the financial picture for both of these companies? Well, Senator Dodd stated on Friday “these institutions are fundamentally sound and strong.” He also said “there is no reason for the kind of [stock market] reaction we’re getting [concerning both companies]. Treasury Secretary Paulsen stated that a bailout of both companies is unlikely despite the concerns and reaction that the stock market is currently having. Paulsen also said that the primary goal remains to support both GSEs in their current form (as opposed to becoming nationalized companies). There are, in fact, several options of assisting both these institutions, when it comes right down to it, prior to any potential scheme for a bailout.
The New York Times on Friday stated that the administration was considering a plan to put both Fannie Mae and Freddie Mac into a conservatorship if their problems worsened. The purpose of such a plan would be to appoint someone to run these institutions and get them out of financial trouble. The accuracy and/or context of the information in this report is not certain.
Yet, Freddie Mac issued a statement that it has options to weather the financial storm. They stated that they could cut the dividend on its stock allowing it retain capital. Fannie Mae also stated that it has access to “ample sources of liquidity”.
The spokeswoman for the Federal Reserve, Michelle Smith, said the central bank is keeping a close watch on the situation. The fed has also said that, as of yesterday, they have not discussed the current situation or different financial backing options with either corporation.
There is a very good possibility that some sort of financial game plan/safety net could be put in place for both Fannie Mae and Freddie Mac sometime within the next few days. If this happens it could indicate that the situation for both GSEs is dire or it could simply mean that a prudent contingency plan is put in place just in case it is needed.
It is extremely unlikely that Fannie Mae and Freddie Mac are on the ropes. However, they are under duress due to the foreclosure of so many loans, the steep decline in their stock price, and the constraining pressure of available capital. Rest assured, the government would never let them go belly-up because they underwrite or outright hold about 50% of all the mortgages in the U.S. Stay tuned for continuing developments on this story in the days ahead.
Factoid: Congress created Fannie Mae (the Federal National Mortgage Association) in 1938 as well as Freddie Mac (the Federal Home Loan Mortgage Corporation) in 1970 to buy mortgages and bundle them into securities for sale to investors in order to create and maintain a stable and affordable housing market in United States.
Senate Passes Mortgage Rescue Plan
The Senate overwhelmingly passed legislation that would rescue hundreds of thousands of homeowners avoid foreclosure and help them obtain more affordable, safer mortgage loans.
The plan allows homeowners get loans backed by the Federal Housing Administration (FHA). Banks that agreed to take substantial losses on distressed loans could avoid costly foreclosures and be assured of recovering some of their money under this new law.
The new program would let the FHA insure up to $300 billion in new mortgages and assist about 400,000 homeowners by doing so.
The legislation faces some real hurdles with the House of Representatives planning to rewrite some of the details and the White House threatening to veto the bill without some major changes.
Senator Christopher Dodd, D-Conn., chairman of the Banking Committee stated: "It's not the final stop, but it is a major stop in getting this bill done". Dodd said he is expecting minor revisions to be made to the bill.
The bill allows for a long-sought-after modernization of the FHA and would create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage corporations which insure or own about 50% of all mortgages in the United States.
Democrats are divided over important elements of the plan, including limits on loans the FHA may insure and Fannie Mae and Freddie Mac may buy. The Senate measure sets them at $625,000, while a number of House leaders want the cap as high as $730,000.
House leaders also oppose the immediate effective date of the Senate plan, preferring to phase in new regulations for both Fannie Mae and Freddie Mac over a period of six months.
Another area of dispute in the bill is the funding in the Senate measure for buying and fixing foreclosed properties. Many conservative Democrats oppose this measure due to the cost and concern that it would cause the budget deficit to increase unless combined with cuts or tax increases built-in to cover the cost of this measure.
Both Congress and the White House agree in principle on the rescue plan since the goal is to allow the government to backstop new mortgages for struggling homeowners.
The plan allows homeowners get loans backed by the Federal Housing Administration (FHA). Banks that agreed to take substantial losses on distressed loans could avoid costly foreclosures and be assured of recovering some of their money under this new law.
The new program would let the FHA insure up to $300 billion in new mortgages and assist about 400,000 homeowners by doing so.
The legislation faces some real hurdles with the House of Representatives planning to rewrite some of the details and the White House threatening to veto the bill without some major changes.
Senator Christopher Dodd, D-Conn., chairman of the Banking Committee stated: "It's not the final stop, but it is a major stop in getting this bill done". Dodd said he is expecting minor revisions to be made to the bill.
The bill allows for a long-sought-after modernization of the FHA and would create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage corporations which insure or own about 50% of all mortgages in the United States.
Democrats are divided over important elements of the plan, including limits on loans the FHA may insure and Fannie Mae and Freddie Mac may buy. The Senate measure sets them at $625,000, while a number of House leaders want the cap as high as $730,000.
House leaders also oppose the immediate effective date of the Senate plan, preferring to phase in new regulations for both Fannie Mae and Freddie Mac over a period of six months.
Another area of dispute in the bill is the funding in the Senate measure for buying and fixing foreclosed properties. Many conservative Democrats oppose this measure due to the cost and concern that it would cause the budget deficit to increase unless combined with cuts or tax increases built-in to cover the cost of this measure.
Both Congress and the White House agree in principle on the rescue plan since the goal is to allow the government to backstop new mortgages for struggling homeowners.
A Primer on Credit Scores
While the nation's credit-scoring program is a critical factor in determining what individual borrowers pay in interest on credit cards and mortgages — and even how much they pay for insurance — new research suggests that most Americans still do not understand how the system works.
Respondents to a recent Consumer Federation of America/Washington Mutual Inc. survey largely did not know that credit scores are derived from payment histories, with many participants mistakenly believing that the number is influenced by such factors as income, age, education, and marital standing.
According to Anthony Vuoto of Washington Mutual Card Services, if all consumers took steps to boost their credit scores by at least 30 points, they together would realize as much as $28 billion annually in savings.
Source: Boston Globe (07/11/08)
5 Factors That Decide Your Credit Score
Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage.
The following factors affect your score:
1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.
3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, visit http://www.myfico.com/.
What You Can Do to Improve Your Credit
Credit scores, along with your overall income and debt, are big factors in determining whether you’ll qualify for a loan and what your loan terms will be.
So, keep your credit score high by doing the following:
1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.
2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.
3. Don’t charge your credit cards to the maximum limit.
4. Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year.
5. Don’t order items for your new home on credit — such as appliances and furniture — until after the loan is approved. The amounts will add to your debt.
6. Don’t open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.
7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.
8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.
This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, Knowing and Understanding Your Credit, visit http://www.homebuyingguide.org/.
Respondents to a recent Consumer Federation of America/Washington Mutual Inc. survey largely did not know that credit scores are derived from payment histories, with many participants mistakenly believing that the number is influenced by such factors as income, age, education, and marital standing.
According to Anthony Vuoto of Washington Mutual Card Services, if all consumers took steps to boost their credit scores by at least 30 points, they together would realize as much as $28 billion annually in savings.
Source: Boston Globe (07/11/08)
5 Factors That Decide Your Credit Score
Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage.
The following factors affect your score:
1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.
3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, visit http://www.myfico.com/.
What You Can Do to Improve Your Credit
Credit scores, along with your overall income and debt, are big factors in determining whether you’ll qualify for a loan and what your loan terms will be.
So, keep your credit score high by doing the following:
1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.
2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.
3. Don’t charge your credit cards to the maximum limit.
4. Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year.
5. Don’t order items for your new home on credit — such as appliances and furniture — until after the loan is approved. The amounts will add to your debt.
6. Don’t open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.
7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.
8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.
This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, Knowing and Understanding Your Credit, visit http://www.homebuyingguide.org/.
Bank of America CEO: Lenders Must Step In
REALTOR® Magazine Online Edition - July 11, 2008
The CEO of Bank of America Kenneth D. Lewis called on the
lending industry to avoid foreclosure and “help borrowers manage through the current crisis.”
lending industry to avoid foreclosure and “help borrowers manage through the current crisis.”He told 175 California business and lending professionals at a conference this week that now is the time
for the lending industry to "return to a more disciplined view of risk standards that will protect everyone from a repetition of what we are going through today."
for the lending industry to "return to a more disciplined view of risk standards that will protect everyone from a repetition of what we are going through today."Bank of America sidestepped the mortgage market meltdown by avoiding subprime loans, but it recently acquired Countrywide Financial Corp., the nation’s largest mortgage lender and a company that was whip-lashed by its subprime lending practices.
So far this year, Lewis says Countrywide has worked to help nearly 100,000 customers remain in their homes. "If borrowers can afford to pay market rates and want to stay in their homes, we can and do work with them to make that happen, even when it means modifying the terms of a loan they can no longer afford,” he says.
Source: The San Diego Union-Tribune (07/08/08)
Foreclosures Eased Compared to May
REALTOR® Magazine Online Edition Daily Real Estate News July 10, 2008
Foreclosures declined 3 percent from May to June but were still up 50 percent compared with June of 2007, according to RealtyTrac Inc., which monitors the foreclosure process.
One in every 501 U.S. households received a foreclosure filing last month.
Foreclosure filings increased from a year earlier in all but 11 states. Nevada, California, Arizona, Florida and Michigan continued to have the highest foreclosure rates.
In today's market, about 50 to 60 percent of borrowers nationally who receive foreclosure filings are now likely to lose their homes, said Rick Sharga, RealtyTrac's vice president of marketing, compared with a typical rate of about 40 percent.
Source: The Associated Press, Alan Zibel (07/10/2007)
Fannie and Freddie May Face New Rules
REALTOR® Magazine Daily Real Estate News July 9, 2008
Shares of Fannie Mae and Freddie Mac rose Tuesday after falling precipitously on Monday over worries that new accounting standards would require them to raise new capital.
The Financial Accounting Standards Board is reviewing a rule that might force financial firms to take mortgage-backed securities that are currently off their balance sheets and place them on balance sheets.
If Fannie and Freddie were to have to add portions of their securitizations business back on to their balance sheets, Fannie Mae would need to raise $46 billion in cash to meet capital requirements. On the other hand, Freddie Mac would need to raise $29 billion, Lehman Brothers analyst Bruce Harting wrote in a research note Monday.
The accounting board has made no decision on changing its rules, and any proposal would include a "rigorous" review process that would likely take several months, Neal McGarity, a spokesman for the group said.
Source: The Associated Press, Stephen Bernard (07/08/08)
Sales to Vary in Narrow Band, Then Rise
Daily Real Estate News July 8, 2008
Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year, according to the latest forecast by the National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5. Lawrence Yun, NAR chief economist, says some pullback after a sharp increase in the previous month was expected. “The overall decline in contract signings suggests we are not out of the woods by any means," he says. "The housing stimulus bill that is still being considered in the Senate is critical to assure a healthy recovery in the housing market, jobs and the economy."
Location Matters
Here's how the PHSI fared across the region:
Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year, according to the latest forecast by the National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5. Lawrence Yun, NAR chief economist, says some pullback after a sharp increase in the previous month was expected. “The overall decline in contract signings suggests we are not out of the woods by any means," he says. "The housing stimulus bill that is still being considered in the Senate is critical to assure a healthy recovery in the housing market, jobs and the economy."
Location Matters
Here's how the PHSI fared across the region:
- West: slipped 1.3 percent to 97.5 in May but is 2 percent higher than May 2007.
- Northeast: declined 2.9 percent to 77 in May and is 16.4 percent below a year ago.
- Midwest: fell 6 percent to 78.6 and is 13.8 percent below May 2007.
- South: dropped 7.1 percent in May to 84.5 and is 22.1 percent below a year ago.
Yun says location has never mattered more than in the current market. “Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half," he says. "Price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.”
Double-digit pending sales gains in May from a year ago were noted in Colorado Springs, Colo.; Sacramento, Calif.; and Spartanburg, S.C.
Housing Bargains
NAR President Richard F. Gaylord says the current market offers immediate benefits and long-term value for many buyers. “Home buyers are getting a great deal right now,” he says. “Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009.”
Existing-home sales are expected to grow from an annual pace of 5.01 million in the second quarter to 5.75 million in the fourth quarter. For all of 2008, existing-home sales should total 5.31 million, and then increase 5 percent next year to 5.58 million.
“The speed at which home prices has declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market,” Yun says. “Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets.”
The Market Forecast
Other NAR projections:
- The aggregate median existing-home price is projected to fall 6.2 percent this year to $205,300, and then rise by 4.3 percent in 2009 to $214,100.
- New-home sales are likely to fall 32.3 percent to 525,000 in 2008 and decline another 3.4 percent next year to 507,000.
- Based on current indicators, the 30-year fixed-rate mortgage is forecast to rise gradually to 6.5 percent by the end of this year, and then hold at that level for most of 2009. NAR’s housing affordability index is improving this year and is likely to rise 15 percentage points to 127 for all of 2008.
- Housing starts, including multifamily units, will probably fall 28.7 percent to 966,000 this year, and then drop another 9 percent in 2009 to 879,000. “In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into 2009,” Yun says.
- The median new-home price is expected to decline 3.2 percent to $239,300 this year, and then rise 5.3 percent in 2009 to $251,900.
- Growth in the U.S. gross domestic product (GDP) is seen at 1.6 percent in 2008 and 1.4 percent next year. The unemployment rate should average 5.4 percent this year and 5.8 percent in 2009.
- Inflation, as measured by the Consumer Price Index, is forecast at 3.7 percent this year and 2.4 percent in 2009. Inflation-adjusted disposable personal income is projected to grow 1.5 percent in both 2008 and 2009.
Obama, McCain Seek to Fix Housing Problems
REALTOR® Magazine Online Edition Daily Real Estate News July 7, 2008
Which candidate would do a better job of handling housing prices?
According to a recent AP-Yahoo News poll, 25 percent of those surveyed said Barack Obama and 17 percent thought John McCain. But nearly 30 percent said neither.
Both Obama and McCain envision the Federal Housing Administration providing new, cheaper mortgages to distressed home owners.
Obama wants to create a $10 billion fund to counsel distressed home owners before they slide into foreclosure; help people sell homes they bought but could not afford; and team with state governments, community groups, and lenders to ensure loans can be modified in a timely manner to avoid foreclosure or bankruptcy.
McCain sees a more limited government role. "In some cases, lenders and borrowers alike were caught up in the speculative frenzy that has harmed the housing market," the Arizona senator said. "It is not the responsibility of the American public to spare them from the consequences of their own bad judgment."
Although most voters think the next president will have a "great deal" or "some" influence over housing prices, there is unlikely to be a quick fix.
"The odds of that are slim to none," says Cal Jillson, political science professor at Southern Methodist University. If the next president can make people more optimistic about the future, "the slow rebuilding of confidence will help to increase home values," he contends.
Source: The Associated Press, Jeannine Aversa (07/06/08)
Friday, July 4, 2008
Today is the 4th of July. When I think about this day I think of many things. One of those things is the time when our nation was involved in the Civil War, the greatest struggle our people faced since its founding. Abraham Lincoln wrote perhaps the most famous speech in American history, which until the last several years was regularly recited in our public schools; however, unfortunately is seldom known by our citizens today. I post this speech because we should know our past and because our freedom and independence is that precious.
Here is that speech - which is known as the Gettysburg Address:
"Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.
Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.
But, in a larger sense, we can not dedicate -- we can not consecrate -- we can not hallow -- this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth."
Wednesday, July 2, 2008
Jack LaLanne-An Inspiration You Need to Know About
Jack LaLanne was born September 26, 1914, so he is approaching his 94th birthday.
He is best known as the physical fitness and nutrition pioneer, former operator of over 200 health clubs which became Bally Total Fitness in the 1980s, and perhaps the king of juicing.
He has been known to say that it is better to wear out than rust out. He claims that the human body was designed and built to last one hundred and forty years, if properly taken care of and says that history provides some examples of such people.
At age forty-two he set the world's record of 1,033 push-ups in twenty-three minutes.
He says "I eat sensibly, exercise vigorously, take no drugs or alcohol, think positively, and look and feel as young as ever." "The food you eat, the exercise you do, and the thoughts you think all manifest themselves in the way you walk, talk, look and feel" (based on an interview he had with Shelby Loosch; 1988 Globe International, Inc.).
Jack LaLanne says he hasn't been sick since 1936 and says that it is because he gets up at 4 am every morning to lift weights and swim for two hours.
Regarding his eating habits, he says that if man makes it, don't eat it. He says he eats no processed foods, no sugar, consumes no white flour, and no red meats. He says he eats three meals a day but never eats between meals.
Jack LaLanne says he strongly believes in a positive outlook on life. He believes that anything in life is possible if you want it badly enough, and has said so many times. He keeps making new challenges and goals for himself and claims that is what keeps him going. He has said that with proper diet, exercise, and attitude, you can live life to the fullest. He has also said that he can't afford to die because that would ruin his image.
LaLanne tells people that if they want to live longer, look better and feel better they must earn the right to do so, not look back to the good-old-days and to do something now. He tells people not sit on their backsides but instead do 15-20 minutes of exercise 3-4 days each week, as well as to eat right.
On his 70th birthday, he celebrated by swimming a mile in Long Beach harbor with both hands and feet tied, towing seventy boats behind him filled with guests.
In a June 2007 interview, he claimed that for his 95th birthday, he'd like to swim to Santa Catalina Island from the coast of California, a distance of approximately 20 miles. ("A Fitness Icon Keeps His Juices Flowing" by Sally Squires as published in The Washington Post.com on Tuesday, June 12, 2007).
He has been married for 54 years to his wife Elaine (age 81). He has been honored with the lifetime achievement award from the President's Council for Physical Fitness and Sports. On May 28th of 2008, he was inducted into the California Hall of Fame.
May you live as long as Jack!
He is best known as the physical fitness and nutrition pioneer, former operator of over 200 health clubs which became Bally Total Fitness in the 1980s, and perhaps the king of juicing.
He has been known to say that it is better to wear out than rust out. He claims that the human body was designed and built to last one hundred and forty years, if properly taken care of and says that history provides some examples of such people.
At age forty-two he set the world's record of 1,033 push-ups in twenty-three minutes.
He says "I eat sensibly, exercise vigorously, take no drugs or alcohol, think positively, and look and feel as young as ever." "The food you eat, the exercise you do, and the thoughts you think all manifest themselves in the way you walk, talk, look and feel" (based on an interview he had with Shelby Loosch; 1988 Globe International, Inc.).
Jack LaLanne says he hasn't been sick since 1936 and says that it is because he gets up at 4 am every morning to lift weights and swim for two hours.
Regarding his eating habits, he says that if man makes it, don't eat it. He says he eats no processed foods, no sugar, consumes no white flour, and no red meats. He says he eats three meals a day but never eats between meals.
Jack LaLanne says he strongly believes in a positive outlook on life. He believes that anything in life is possible if you want it badly enough, and has said so many times. He keeps making new challenges and goals for himself and claims that is what keeps him going. He has said that with proper diet, exercise, and attitude, you can live life to the fullest. He has also said that he can't afford to die because that would ruin his image.
LaLanne tells people that if they want to live longer, look better and feel better they must earn the right to do so, not look back to the good-old-days and to do something now. He tells people not sit on their backsides but instead do 15-20 minutes of exercise 3-4 days each week, as well as to eat right.
On his 70th birthday, he celebrated by swimming a mile in Long Beach harbor with both hands and feet tied, towing seventy boats behind him filled with guests.
In a June 2007 interview, he claimed that for his 95th birthday, he'd like to swim to Santa Catalina Island from the coast of California, a distance of approximately 20 miles. ("A Fitness Icon Keeps His Juices Flowing" by Sally Squires as published in The Washington Post.com on Tuesday, June 12, 2007).
He has been married for 54 years to his wife Elaine (age 81). He has been honored with the lifetime achievement award from the President's Council for Physical Fitness and Sports. On May 28th of 2008, he was inducted into the California Hall of Fame.
May you live as long as Jack!
Factiod & Quote
Mark Twain once said: "The man who does not read good books has no advantage over the man who cannot read them."
Fact: If you turn off the T.V. and instead study or read for just one hour per day, after 5 years you will have studied for 1,825 hours, the equivalent of about one normal working year involving forty-five 40-hour weeks. Wow! Think of what you could accomplish if you did that!
Fact: If you turn off the T.V. and instead study or read for just one hour per day, after 5 years you will have studied for 1,825 hours, the equivalent of about one normal working year involving forty-five 40-hour weeks. Wow! Think of what you could accomplish if you did that!
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