Builder Confidence Up, But Tax Fears Loom
September 18, 2009
NEW YORK — An index of home builders’ confidence rose in September for the third month in a row, but an industry group said Wednesday the fragile residential real estate market recovery could be cut short if a popular government tax credit isn’t extended.
The National Association of Home Builders said that its Housing Market Index, which it compiles for Wells Fargo, rose one point last month to 19 — the highest level since May 2008.
The index, which fell to an all-time low of 8 in January, has increased steadily in 2009 as the housing market picked up in many parts of the country.
According to NAHB, the rebound in builder confidence is largely due to a temporary tax credit that the government created last year for first-time home buyers. Low mortgage rates and rock-bottom home prices also helped boost confidence, the group says.
The credit, which can be as high as $8,000, was established as part of the government’s economic recovery act to help stimulate demand and revive the battered housing market.
As the market begins to show some sings of life, however, builders are becoming worried that the credit, which is set to expire Nov. 30, will not be renewed.
“The window is now basically closed for being able to start a new home that can be completed in time for buyers to take advantage of the tax credit,” said Joe Robson, NAHB’s chairman and a home builder from Tulsa, Okla, in a statement. “Builders are concerned about what will keep the market moving once the credit is gone.”
To that end, the index component that measures builders’ expectations for sales in the near future fell one point in September to 29, after rising for five months in a row.
More than 1.5 million taxpayers are expected to claim the credit, according to an NAHB spokeswoman.
Meanwhile, the National Association of Realtors said earlier this month that the credit has already brought 1.2 million new buyers into the market, including 350,000 buyers who would not have purchased a home without the credit.
White House press secretary Robert Gibbs said Wednesday that the Obama administration is evaluating how the tax credit has impacted home sales and could recommend that the President extend it.
While the tax credit has helped stabilize the housing market, falling home prices are the real reason why sales have begun to rebound, according to Mike Larson, real estate and interest rate analyst at Weiss Research.
“I believe the tax credit is the icing on the cake of this housing market recovery, not the cake itself,” Larson said in a research report.
Indeed, a government report released earlier this month showed that roughly 315,000 people have claimed the tax credit so far. However, industry analysts point out that those figures reflect a small portion of homebuyers who could ultimately claim it.
For buyers interested in taking advantage of the credit, time is of the essence.
Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Sept. 16, 78 days remain before the credit ends.
In addition to uncertainty about the tax credit, builders are also wary about a “critical lack of credit” for new home construction projects and ongoing problems related to appraisals that NAHB says are sinking one quarter of all new-home sales.
“These concerns need to be addressed if we are to embark on a sustained housing recovery that will help bolster economic growth,” said NAHB chief economist David Crowe, in a statement.
Source: CNNMoney.com
Popularity: 2% [?]
Refinancing Your Mortgage – Is It The Right Choice For You?
September 17, 2009
Mortgage refinancing is an option for many homebuyers who are paying interest rates 2-3% or higher than what they can find today, or who need additional cash. Were you a first time homebuyer or you had poor credit the last time you obtained a loan? Now you are on your feet and make a salary that could help you receive the best interest rates. Possibly you are looking to refinance your mortgage so you can free some funds for a new car or for educational purposes. There are many options available when you refinance.
Before you decide if refinancing is right for you, look at your current financial situation. Do you have an adjustable rate loan or a fixed rate loan? How long do you plan to be in your home after you obtain your new mortgage? What is your ultimate goal? Most people want to refinance so they can access more money now. Refinancing is a great solution, but is a refinance of your loan the right solution for you?
The first step is making contact with you lender, and be aware how much your monthly payment is now. It is also helpful to find out how much you have paid of your mortgage towards principal. Since you will refinance the amount left on the mortgage principal, and not refinance the original mortgage amount, it is really important to know how much principal is left. If you plan to stay in your home for a length of time and still have a sizeable principal left on your loan, then a mortgage refinance may be a good option for you if interest rates are lower than when you obtained your last loan.
Just as with most conventional loans, refinancing offers similar options of adjustable and fixed rate mortgages and anywhere from 10-40 year loans. Be sure to review with your mortgage lender the reasons you are interested in refinancing; do you need to refinance to obtain cash for home improvements or for a new car purchase? These are important factors to make your lender aware of as you are deciding how to refinance your mortgage.
Another factor that determines whether borrowers refinance is interest rates. Current mortgage interest rates can rise and this often scares refinance borrowers who have ARMs because they are afraid the adjustable rates will rise after they refinance. It is difficult to assess what will happen to the adjustable refinance mortgage interest rates over the next few years. If you refinance into a fixed rate mortgage during a high interest rate period, then when interest rates go back down, you are stuck with a high fixed rate mortgage and another decision about whether or not to refinance again. Of course the only sure-fire way of knowing if you should apply for a refinancing is to assess your reasons for the refinance and how it will affect you in the future.
Source: Real Estate Global Network
Popularity: 1% [?]
One Year Later, Lehman Bank Still in Business
September 17, 2009
A visit to the last major operating business of the once swaggering Wall Street firm Lehman Brothers feels a bit like entering a pawn shop.
Customers dropping by the “main branch” of the former Lehman Brothers Bank must knock to catch the attention of staff, who then press a buzzer to unlock the glass doors to the office.
The bank lacks the cushy chairs offered by nearby TD Bank or the lounge area with TVs at PNC Bank across the street in downtown Wilmington, a subdued city south of Philadelphia that is perhaps best known for being a place where many major companies are registered because of business-friendly laws.
A year after Lehman Brothers Holdings Inc declared bankruptcy, exacerbating a crisis that led to a trillion dollar rescue of the global financial system, one of its biggest remaining operations scarcely attracts the attention of anyone passing by.
The arrival of a reporter at the branch on the anniversary becomes a big event for the half dozen staff. They all vacate their desks and teller stations to gather and watch as their manager politely declines to answer any questions.
There is a small desk where customers can fill out deposit slips, but there is little sign it has been recently used. Accounts have to be opened online for what is largely an Internet bank.
A paper sign on the door says “no change given” and requests visitors report to building security.
It is all an indication of how far the once mighty Lehman Brothers has fallen.
Gone are Lehman Brothers’ investment banking operations, the private bank, the brokerage businesses and trading desks, as almost every Lehman unit has been unloaded to a new owner or shut down.
The former Lehman Brothers Bank has remained and is not part of the bankruptcy. In the first few months of the parent company’s bankruptcy, the bank website even continued to advertise an application for a Lehman Brothers credit card.
The bank was optimistically renamed Aurora Bank FSB in April — Aurora being the goddess of the dawn in Roman mythology.
It employs more than 1,700 — the bulk of Lehman Brothers remaining staff — with most in loan servicing operations in Colorado and Nebraska. Other than that, the bank only has two branches: this one in Wilmington and another in Jersey City, New Jersey.
Source: Reuters
Popularity: 1% [?]
IRS Issues Rules to Ease Mortgage Refinancing
September 16, 2009
WASHINGTON – The IRS issued new rules Tuesday designed to make it easier to refinance some commercial real estate loans in an effort to curb the number of defaults.
The rules would allow commercial loans that are part of investment pools known as Real Estate Mortgage Investment Conduits, orREMICs, to be refinanced without triggering tax penalties for investors.
The investment pools were designed to encourage mortgage-backed securities by offering tax benefits not typically available through other investment vehicles. However, under the old rules, investors could have lost those benefits if loans in the portfolio were restructured.
The new regulations come as Wall Street braces for a wave of defaults on commercial real estate loans. More than 90 U.S. banks have already failed this year. Hundreds more banks are expected to fail in the next few years largely because of souring loans for commercial real estate.
“These changes will affect lenders, borrowers, servicers, and sponsors of securitizations of mortgages in REMICs,” the new regulation says.
The changes will not affect commercial mortgage loans held by investment trusts. However, the Internal Revenue Service said Tuesday it is soliciting comments on possibly expanding the changes to other investment vehicles.
Concept Capital, a New York-based institutional broker, welcomed the changes but cautioned that they will not solve the commercial real estate crisis alone.
“We have all heard stories about commercial real estate loans that are performing now but cannot be refinanced because of the tax rules,” Concept Capital’s Washington Research Group said in a report issued after the regulations were released. “The IRS attempted to ease the tax code problem for these modifications.”
But, the report said, “We still question if there is enough financing available to deal with the wave of commercial real estate loans that must be refinanced by 2012.”
Source: Yahoo! News
Popularity: 1% [?]
AP Poll: A Year Later, Worries Linger on Economy
September 16, 2009
WASHINGTON – One year after Wall Street teetered on the brink of collapse, seven out of 10 Americans lack confidence the federal government has taken safeguards to prevent another financial industry meltdown, according to a new Associated Press-GfK poll.
Even more — 80 percent — rate the condition of the economy as poor and a majority worry about their own ability to make ends meet. The pessimistic outlook sets the stage for President Barack Obama as he attempts to portray the financial sector as increasingly confident and stable and presses Congress to act on new banking regulations.
The public sentiment also poses a challenge to central elements of Obama’s governing agenda. Half of those surveyed said deficit reduction should be a national priority over increased spending on health care, education or alternative energy.
“I know a lot of people who don’t have health care and really can’t afford it,” said Judy Purkey, a 57-year-old grandmother from Morristown, Tenn., who has raised four grandchildren and is living on disability payments. But she added: “The economy is so bad. You’ve heard the expression getting blood out of a turnip? — Well, that’s what’s going on.”
The president, in a CBS interview that aired Sunday on “60 Minutes,” acknowledged the public’s quandary.
“This is a very difficult economic environment. People are feeling anxious,” he said. “And I think it is absolutely fair to say that people started feeling some sticker shock.”
Still, Obama generally avoided public blame for the recession or the condition of the banking sector.
Only one out of five surveyed said Obama bore responsibility for the recession; 54 percent blamed former President George W. Bush and 19 percent blamed former President Bill Clinton.
Financial institutions, however, bore the brunt of the criticism — 79 percent of those surveyed said banks and lenders that made risky loans deserve quite a bit of the blame. Sixty-eight percent held the federal government responsible for not adequately regulating banks and 65 percent blamed borrowers who could not afford to repay loans.
In a glimmer of good news for the administration, 17 percent of those surveyed said the government’s massiveeconomic stimulus has improved the economy, a 10 percentage point increase over July. Nearly six out of 10, however, said they are not confident that $787 billion that Congress approved to lower taxes and inject spending into the economy will do any good.
The White House has been promoting the stimulus package as a job creator and job saver that has helped keep unemployment from rising above its current 9.7 percent level — the highest since 1983.
Michael Painter, a 38-year-old unemployed plumber from Orlando, Fla., said that while he believed that spending package would ultimately stimulate the economy, it had yet to help him or his laid-off wife and teenage daughter.
He said he approved of Obama’s job performance so far, but not Congress’. “The people in Congress need to quit bickering about party issues and start worrying about people issues.”
The Obama administration also has begun to portray the financial sector in more upbeat terms, eager to make the case that government interventions begun under then-President Bush and continued, altered or expanded under Obama have brought stability to the markets.
Obama plans to deliver a speech Monday — the anniversary of Lehman Brothers’ bankruptcy — to outline the administration’s achievements and press Congress to enact changes in bank regulations.
But the AP-GfK poll illustrates the difficulty he faces.
More Americans worry about facing big, unexpected medical expenses now than they did in July — up 7 percentage points to 68 percent among those polled. Likewise, more worry that the value of their stocks and retirement investments will drop — up 4 percentage points from July to 68 percent.
In October, then-President Bush pushed a $700 billion financial rescue package through Congress on the condition that only half could be spent without further congressional authority. Obama, upon becoming president in January, succeeded in getting the second amount released, despite growing apprehension among lawmakers about the wisdom of such a bailout.
Obama has repeatedly said that the rescue of the financial sector would be incomplete without a new regulatory regime that would prevent a recurrence of the crisis. Obama has sent the outlines of possible regulation to Congress. Key banking lawmakers in the House and Senate have promised Obama legislation by the end of the year, but there is vigorous debate over key elements of Obama’s plan, including a new consumer finance protection agency and the designation of the Federal Reserve as the main overseer of large institutions that could pose risks to the system.
The survey of 1,001 adults with cell and landline telephones was conducted from Sept. 3-8. It had a margin of sampling error of plus or minus 3.1 percentage points.
Source: Yahoo! News
Popularity: 1% [?]
Bernanke: Recession Very Likely Over
September 16, 2009
WASHINGTON – Federal Reserve Chairman Ben Bernanke said on Tuesday that the worst U.S. recession since the Great Depression was probably over, but the recovery would be slow and it would take time to create new jobs.
“Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time,” Bernanke said at the Brookings Institution, a Washington think tank.
In declaring the recession over, Bernanke sounded a slightly more upbeat tone than in late August when he had said simply that prospects for a return to growth were good.
However, he cautioned that growth next year would probably be sluggish and that unemployment would only fall slowly.
“The general view of most forecasters is that that pace of growth in 2010 will be moderate, less than you might expect given the depth of the recession because of ongoing headwinds,” Bernanke said, citing tight credit conditions and other economic restraints.
He spoke on the one-year anniversary of the collapse of Lehman Brothers investment bank, an event that sparked a global financial panic, and a week before Fed officials meet to review their policy options.
The Fed — the U.S. central bank — slashed benchmark interest rates to near zero in December and has been buying mortgage-related securities and longer-term U.S. Treasury debt to give the economy a lift.
Bernanke, in a nod to recent relatively upbeat economic signals, said it was possible the recovery could be stronger than expected, but cautioned that it could also be weaker.
“There are risks on both sides of that forecast,” he said. “But if we do in fact see moderate growth, but not growth much more than the underlying potential growth rate, then unfortunately, unemployment will be slow to come down.”
Source: Reuters
Popularity: 1% [?]
Toxic Assets May Get a Value Soon
September 15, 2009
The toxic assets dilemma may be solved in the next few weeks, when results from an auction in securities backed by residential mortgages are made public by the Federal Deposit Insurance Corporation (FDIC), commercial real estate investor Richard Lefrak told CNBC Tuesday.
“We did bid on a package of FDIC assets about two weeks ago and we expect to see what the results of that auction were. This was one of the first ones,” Lefrak, president of LeFrak Organization, said in a live interview.
“When we get an indication of value that would be an indication of how much these assets are worth,” he added, but refused to disclose how much he, together with asset manager Wilbur Ross, had bid.
The auction took place within the government’s Public-Private Investment Program, and the package of mortgages was $1.3 billion, he said.
“I don’t have the facts completely but I believe they had a significant amount of bidders,” he said. “If the auction goes well it’s an indication of positive news for the economy… or at least an indication of positive news for the banks that have these assets on their books.”
“At the end of the day, it’s a great opportunity and the actual interest, vigorous interest in this package, shows you that people are chasing yield right now,” Lefrak said.
The commercial real estate sector was heavily dependent on healthy employment, so its recovery is going to take a while, according to Lefrak.
“When they’re cutting jobs, they don’t need office space. When the retail business is sagging, they don’t need shopping space,” he said.
And because commercial property investors are sophisticated investors who “ought to have known what they were doing,” they don’t get the same degree of sympathy from the government, he said.
“They made an effort now with the TALF… but in the end it’s going to be about jobs. If we have a vigorous recovery in jobs, the real estate sector will follow,” said Lefrak.
“But if the robustness of the stock market is directly related to robustness of profits which is directly related to… corporations getting lean and mean by getting rid of people, real estate will still suffer.”
Source: CNBC
Popularity: 1% [?]
U.S. Retail Sales Surge
September 15, 2009
Sales at U.S. retailers rose at their fastest pace in three-and-half years in August and a gauge of manufacturing in New York State hit a near two-year high, bolstering views the economy was emerging from recession.
The Commerce Department said on Tuesday total retail sales climbed 2.7 percent, the biggest monthly advance since January 2006, after declining by a revised 0.2 percent in July. Sales in July were previously reported to have eased 0.1 percent.
Analysts polled by Reuters had forecast retail sales rising 2.0 percent in August. Sales in August were a bolstered by the government’s “cash for clunkers” program, which gave consumers cash to swap aging gas-guzzlers for new, more fuel efficient models. High gasoline prices also added to the rise in sales.
“The V-shaped recovery just got a badly needed shot in the arm today as the consumer is back in the game in a big way,” said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.
U.S. stock index futures added to gains, while Treasury debt prices fell on the data.
Motor vehicle and parts sales surged 10.6 percent in August, notching their biggest rise since October 2001. The auto scheme ended in August.
The retail sales report also showed signs of strength across almost all sectors, with the exception of furniture and building materials, evidence that household spending was probably mending.
Consumer spending accounts for about 70 percent of U.S. economic activity.
Excluding motor vehicles and parts, sales jumped 1.1 percent in August after falling 0.5 percent in July. Economists had expected a 0.4 percent increase.
Indications are that the economy is in the early phase of recovery from the worst recession in seven decades, but lackluster household demand means the process will lack vigor. Rising unemployment is decimating household incomes.
The retail sales data fanned optimism consumer spending would rise in the current quarter after falling in the April-June period.
Source: Reuters
Popularity: 1% [?]
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