Myrtle Beach Real Estate Talk

Is Employment Still a Lagging Indicator?

2009-07-28T19:25:00.000-07:00

A basic economic premise is that employment is always a lagging indicator in economic cycles. During previous downturns, companies were slow to lay off workers because of the time and other resources they had invested in these employees. At the end of these downturns, more 'permanent' resources such as employees were the last segment of expansion. Of course, these premises were built many years ago when most employees had retirement plans and spent a career with one or two companies. The companies themselves were in business 'forever.' In today's market of more frequent turnover of employees and more frequent turnover of companies themselves, we would expect that an old premise such as lagging employment would not be as strong.
Yet, as we look at an impending recovery it seems employment is the last indicator to get the message. We have now had three straight months of expansion of the leading economic indicators. Even real estate is starting to stir with increases in housing starts and existing home sales. Yet, we are nowhere near expansion of the workforce. The employment numbers are not as bad as they were but they are nowhere near positive. In the next week we have some very important numbers coming up. The first is a snapshot of second quarter economy and then the employment numbers for July will follow. It will be interesting to see if we continue to witness employment lagging behind other aspects of the economy. Make no mistake about it, employment must rise before we are fully out of this recession.
Housing experts predict that multi-family rental properties and apartments will recover fastest from the current downturn, followed by housing in cities that didn't overbuild. The market is likely to hit bottom in the next few months, says Bernard Markstein, senior economist and director of forecasting for the National Association of Home Builders. 'Next year will see slow but steady improvement, as home builders are controlling their inventory,' Markstein says. Apartments and other multi-family residences will snap back quickly once businesses start hiring again, predicts Victor Calanog, director of research at Reis. Baby boomers looking for retirement homes and first-time home buyers also will lead the way out of the decline, predicts Bill Singer, a securities attorney and trader who is a member of Forbes.com's panel of financial gurus. Source: Forbes.com
Low prices and high affordability both urge consumers back to the housing market, according to Realtor.com's national homeownership survey Nearly two-thirds (62.5%) of potential homebuyers surveyed named increased affordability as a motivator for them to purchase a home. Foreclosure bargains in their communities are the motivating factor for 19.6% of potential buyers surveyed. "Value is clearly motivating potential home buyers, and today's new level of affordability is still an under-appreciated reality that needs to be explored," said Realtor.com president Errol Samuelson in a release. "The variety and quality of homes currently within reach of the average American family is much greater than most people realize. Making credit available to responsible borrowers and building consumer confidence in the economy are now key factors in restoring vitality to the nation's housing market." The survey also showed that low prices aren't making sellers wary of the market. Only 10% of potential sellers said they were holding off putting their home on the market because of lower prices. In addition, 15.5% of potential buyers said they were motivated to buy soon because they believe prices are as low as they'll go. A concern over rates increasing was the factor an additional 15.5% of Realtors.com's respondents said is motivating them to buy, while the federal government's $8,000 tax credit for homebuyers is the motivation 14.6% of respondents said they need to get into the housing market. Source: Housing Wire

Courtesy of Joanie Deas with Franklin American Mortgage
jdeas@franklinamerican.com

We Are Not Trying To Predict The Future

2009-06-02T21:11:00.000-07:00

In the past few weeks, we have pointed out how tough the government's job is with regard to keeping rates down. You just can't be spending trillions of dollars and then expect that the bond market will not have trouble absorbing the supply. A few months ago the Feds were talking about even lower rates. We said that would be difficult and to expect periods of volatility this year. Well, last week was a perfect example of this. Rates on long-term bonds skyrocketed and then fell back. What does this mean for the markets? If the economy is indeed poised to start rebounding, then rising rates on long-term bonds should not hurt the economy. Rising rates on home loans are another matter.
The Fed has kept rates on real estate loans down by purchasing mortgage backed securities. The spread between mortgages and Treasuries have narrowed to the point that any future increases in bond yields will also affect home loan rates. The real estate market is much too fragile right now to absorb higher rates. We have already seen how a poorly performing real estate market can affect the general economy. So the Fed must try, try, try to halt rising rates at least for now. Of course as we have pointed out, the Fed can't control long-term rates any better than we can predict the future.

This post published by Joanie Deas with Franklin American Mortgage.

Current State of The Market

2009-05-29T22:27:00.000-07:00

Has the market gotten ahead of itself?
The stock market has rallied for over two months, oil prices have risen and long-term rates have gone up as well. It is not surprising that the markets have paused to take a breather. Yes, the reports were fairly negative this past week with higher jobless claims and slower than expected retail sales. Even the good news, slow consumer inflation, is indicative of a slower economy. But the markets have been reacting positively through a lot of negative economic news. Why pause now?
It would not be out of the question to view this period as a breather or period of consolidation. The markets are not likely to turn back down unless there are some really surprising negative statistics. We don't rule that out. For now, the breather and lower rates are a great opportunity for homeowners and consumers to take advantage of what might be the last chance to obtain the lowest rates of our generation. At this point rates on home loans have stayed steady despite higher rates on Treasuries and that can't last forever.

In a positive move, the U.S. Department of Housing and Urban Development is set to roll out guidelines permitting HUD-approved lenders, public housing finance agencies, and some nonprofit organizations to make bridge loans to home buyers. The loans would be collateralized by the $8,000 tax credit, giving buyers the upfront funds for a down payment. The inability to use the credit for the down payment has been a major stumbling block for the tax credit. NAR has been calling for HUD to use its authority to allow the bridge loans. During the summit, HUD Secretary Shaun Donovan announced that HUD has decided to allow bridge loans, sparking a loud cheer of appreciation from more than 1,000 Realtors attending the session. "We want FHA consumers to access the credit to use as a down payment," Donovan said. "I want to thank NAR for its p artnership with FHA." More details on the guidelines will be released in a few days, he said. Donovan said the credit is expected to stimulate 100,000 first-time homebuyer purchases and 60,000 move-up purchases this year before it expires Dec. 1. Note: we hope to have more details on this next week when the documentation is released in writing from FHA. Source: Realtor Magazine
According to a study by Freddie Mac of its own portfolio, refis during the first quarter are on track to reduce consumer home loan payments by $2.5 billion in the coming year. 'The payment savings refis done during the quarter is about $160 a month on a $200,000 loan and in aggregate this adds up to about $2.5 billion,' said Freddie Mac chief economist and vice president Frank Nothaft. Half of all borrowers who redid their loans during the period lowered their rate by at least 20%, according to Freddie Mac. The government-sponsored enterprise added that this corresponds to a new rate that is about 1.25 percentage points below the old rate. The volume of home equity loans and lines of credit rolled into the first lien during refis increased during the first quarter to $7 billion in seconds from $4.7 billion the previous three-month period, according to Freddie deputy chief economist Amy Crews Cutts. 'Beca use second liens generally carry higher rates, the combining of $11.7 billion into a lower-cost first lien provides about $200 million in interest savings over the next year to these households,' she said. Source: National Mortgage News
For buyers who can afford it, right now is a great time to pick up a second home in a vacation paradise at a bargain price. Since there are fewer people with money to spend on this kind of a luxury item, sales as well as prices are down in many prime areas. Buyers with the desire and the wherewithal can get a really good deal. BusinessWeek and Zillow.com took a look at the second-home markets where prices dropped between the fourth quarter of 2007 and fourth quarter of 2008. A sampling of places where vacation homes are on sale showed the following locations experiencing significant price declines: Scottsdale (27 percent), Napa (21 percent), Marco Island (27 percent), Las Vegas (26.8 percent) and Point Pleasant Beach, NJ (15.6 percent). Source: BusinessWeek.com

Published by Joannie Deas with Franklin American Mortgage

FIRST TIME HOME BUYER $8000.00 TAX CREDIT

2009-03-04T21:38:00.000-08:00

A new tax credit is available for first time homebuyers under the American Recovery and Reinvestment Act of 2009. If you close on a home between January 1st 2009 and November 30, 2009, you may be eligible to receive a tax credit for 10% of the purchase price of your home up to $8000.00.

Here are the highlights of the program:

1. Homebuyer must not have owned a primary residence for the past three years. This does not mean you can not have owned investment properties.

2. To get full credit homebuyer if single can not make more than $75,000/year, and if married $150,000/year. This will be determined from your tax return.

3. To get a partial credit homebuyer if single can not make more than $95,000/year or $170,000/year if married.

4. This applies to the purchase of single family homes, including condos, co-ops, townhomes, ect. that will be used as a primary residence.

5. Homebuyer can reduce (or even eliminate) their income tax liability for the year of purchase by claiming the credit on their tax return. You can even receive a refund if you do not have a tax liabliity.

6. If the homebuyer sells the property before 3 years the first time homebuyer who is now the seller will be responsible for paying back the tax liability.

This is a great incentive for anyone considering buying their first home. If you are interested in finding out if you qualify, please email Kemp Nash @ kemp.nash@century21.com and I will put you in touch with a mortgage broker that can assist you.

To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document. Consult your tax advisor for further details.