News Mortgage/Real Estate BoBroker.com
October 5, 2010
 When Will They Hire?
Everyone can talk all they want about influences on the economy from foreclosures to the price of oil, but as we have said several times, it is all about jobs. Lowering the jobless rate would take the creation of a few hundred thousand jobs per month. That is what will give consumers confidence to spend on big-ticket items such as homes. Unfortunately, though the economy is not bleeding jobs anymore, it is still not creating jobs at the pace that would cause confidence to rise. We find that interesting because corporate profits are strong and so are the cash coffers of companies. It seems every Monday, more corporate buyouts are announced.
We should ask, why can companies afford to purchase other companies for billions of dollars, but they cant afford to hire? From the Washington Post: Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, theyve yet to amp up hiring or make major investments the missing ingredients for a strong economic recovery. Corporations need to be confident to hire more employees. Well, they appear to be confident enough to purchase other companies. Seems like corporate America is holding back and the consumer is the one suffering for it. A real test comes with the Holiday Season approaching. If consumers are now purchasing again, will there be enough sales and customer service personnel to take their money? If the stock market is any indication, the answer is yes with the strongest September gains in seven decades. This weeks employment numbers will be importantbut as we said, the real test will come with the Holidays. We are interested in seeing if companies will not only hire help, but will they be temporary workers or permanent employees.
 The Markets. Rates moved lower in the past week. Freddie Mac announced that for the week ending September 30, 30-year fixed rates averaged 4.32%, down from 4.37% the previous week. The average for 15-year fixed fell to 3.75%. Adjustables were stable with the average for one-year adjustables rising slightly to 3.48% and five-year adjustables falling slightly to 3.52%. A year ago 30-year fixed rates were at 4.94%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac, "Confidence in the state of the economy fell among consumers and businesses, which led to a decline in long-term bond yields and brought rates to record lows this week. The September Consumer Confidence Index by the Conference Board fell to the lowest level since February of this year. Consequently, rates for the 15-year fixed loans and the 5-year hybrid ARM reached new all-time lows and rates for 30-year fixed loans tied its record set just four weeks ago. Homeowners have regained $1.0 trillion in home equity as of the second quarter of 2010 after losing more than $7.5 trillion over the three-year period ending in the first quarter of 2009, the Federal Reserve Board reported. This, in part, strengthened household balance sheets and reduced serious delinquencies on home loans." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated October 1, 2010
|
Daily Value |
Monthly Value |
|
Sept 30 |
August |
6-month Treasury Security |
0.19% |
0.19% |
1-year Treasury Security |
0.27% |
0.26% |
3-year Treasury Security |
0.64% |
0.78% |
5-year Treasury Security |
1.27% |
1.47% |
10-year Treasury Security |
2.55% |
2.70% |
12-month LIBOR |
|
0.949% (Aug) |
12-month MTA |
|
0.353% (Aug) |
11th District Cost of Funds |
|
1.713% (Aug) |
Prime Rate |
|
3.25% |
 At least some analysts are bullish on housing. William C. Wheaton, professor of economics at Massachusetts Institute of Technology, argues that the housing market is due for improvement, calling home construction, "a sleeping giant that is about to wake up." Wheaton believes that because there has been so little construction that demand exceeds the level of building and it will soon absorb excess inventory. "Housing construction will not only rise, but it will stay high for a while, which didnt happen in previous recoveries," Wheaton predicts. Source: Fortune
Americans overwhelmingly oppose any action by Congress to tamper with the home loan interest deduction, according to a nationwide survey which supports the National Association of Realtors position that homeownership incentives must be preserved. Nearly 80 percent of respondents said they support retaining federal tax incentives to promote homeownership in a survey commissioned by the National Association of Home Builders. "These results show strong national voter support for keeping the home loan interest deduction, said Neil Newhouse, partner at Public Opinion Strategies, a research firm based in Alexandria, Va., which conducted the survey. "Clearly, voters have a very strong connection to the home loan interest deduction and are not likely to respond well to efforts to reduce or eliminate it. In fact, voters overwhelmingly say they would be less likely to vote for a candidate for Congress who supported either eliminating or reducing the home loan interest deduction," Even when told that getting rid of the deduction would help ease the federal budget deficit, 72 percent of respondents in the NAHB survey opposed any proposal to abolish the home loan interest deduction. This cut across partisan lines and home owner status; 76 percent of Republicans, 75 percent of Independents, and 64 percent of Democrats oppose eliminating the deduction. Meanwhile, 75 percent of home owners and 55 percent of renters also oppose doing away with the home loans interest deduction. Source: NAHB
Congress voted on Sept. 29 to extend higher loan limits for government-insured home loans, hopefully keeping borrowing costs down and adding some stability to the shaky housing sector. When the legislation is signed into law by President Obama, the cap would hold at $729,750 for single-family loans in more expensive areas until October of next year. Currently, it is set to drop back down to $625,500 at the beginning of 2011 and could cause the housing market to hit another slump if not extended. Source: Reuters
The percentage home owners who spent 30 percent or more of their household income on housing, including loan payments, taxes, insurance, and utilities, was 37.6 percent in 2009, almost unchanged from 2008. At the same time, the median home price dropped about 6 percent, according to data from the U.S. Census Bureau. Renters werent so lucky. The number of renters spending 30 percent or more of their household income on housing-related costs rose to 51.5 percent of all renters in 2009, rising from 50 percent in 2008, according to the Census. Two factors affected housing affordability: First, median household income, adjusted for inflation, fell 2.9 percent in 2009 as unemployment rose. Second, median monthly housing costs, including rent and utilities, rose 3 percent in 2009 from $818 to $842. Source: USA Today
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