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Friday, March 30, 2012

March 2012 Real Estate Report

The Dow Jones Industrial Average crossed over 13,000 in Mid-March while the S&P crossed the 1,400 level. These are more than just psychological barriers -- they represent highs not seen since the start of the fiscal crisis almost five years ago. There are two ways you could look at these numbers. In one respect, we have seen a remarkable 100% increase in the Dow since the low below 6,600 three years ago. That is quite a run. On the other hand, one could say that the Dow is still below its high of over 14,000 almost five years ago. The stance we take on these numbers is not important. What is important is how the stock market affects consumer confidence. All along we have been talking about the slow recovery being a result of a lack of consumer confidence. If consumers gain confidence in the markets, they will be more confident about the economy in general.

Besides, if we wanted to put these numbers in perspective, we could point out that the Dow was near 1,700 in 1987. We will let you do the math. While we watch the stock market's effect upon confidence and the recovery, one place to seek a clue would be in the housing sector. This past week we had important numbers released within this sector. These numbers were mixed, but did not dispel the notion that housing is on the rebound. Good news on housing is vitally important because we know we have a larger amount of distressed properties moving through the system this year. If the market absorbs these quickly in the form of short sales, modifications and REO sales, then we will have a real estate recovery much sooner than analysts are predicting. No long-term economic recovery can take place with stocks stagnant and the real estate market languishing. We are hoping the Dow at this level represents another building block to a solid recovery.

[WEEKLY INTEREST RATE OVERVIEW]
[http://www.newsletterproonline.com/newsletters/wp-content/themes/default/images/hsection2.jpg]The Markets. Rates rose for the second straight week. Freddie Mac announced that for the week ending March 22, 30-year fixed rates rose from 3.92% to 4.08%. The average for 15 year loans rose from to 3.30%. Adjustable rates also rose, with the average for one-year adjustables rising to 2.84% and five-year adjustables increasing to 2.96%. A year ago 30-year fixed rates were at 4.81%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, "Rates on home loans are catching up with increases in U.S. Treasury bond yields placing the average 30-year rate above 4 percent for the first time since the end of October 2011. Bond yields rose over the past two weeks in part due to an improving assessment of the state of the economy by the Federal Reserve, better than expected results of commercial bank stress tests and the likelihood of a second bailout for Greece. Meanwhile, consumers continued to reduce their debt burdens in the fourth quarter of 2011. For instance, homeowners reduced their financial obligations ratio (debt payments as a share of disposable income) to the lowest point since the second quarter of 1994." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

[REAL ESTATE NEWS]
[http://www.newsletterproonline.com/newsletters/wp-content/themes/default/images/hsection3.jpg] Some builders are putting up brand-new houses as rentals. At a time when buyers are scarce but tenants are plentiful, builders say it's an idea whose time has come again. “It's a very dynamic business opportunity,” says architect-developer Robert Koch, who is building an 80-unit rental subdivision in the Knoxville, Tenn., area. Houses as rentals are nothing new. Depending on whom you ask, anywhere from one-third to one-half of the country's rental units are houses. Purpose-built single-family, detached rentals are not new, either. Backed by tax credits and other subsidies, dozens of subdivisions are built every year to house low-income families, the elderly and even college kids. But now, bowing to the realities of today's for-sale housing market, a growing cadre of market-rate builders are warming to the concept of houses as an alternative rental product. Several factors are driving developers to consider building houses for rent instead of sale. For one, the market is currently flush with renters. Source: Source Media

Americans’ concerns over housing and the economy are subsiding, according to Fannie Mae’s National Housing Survey from February. An improving job market is a big part of what’s behind Americans feeling more confident about the housing market and the direction of the economy, according to the survey. “The pickup in the pace of hiring over the past few months has helped soothe consumer concerns, lifting their moods regarding their personal finances, the direction of the economy, and their views on the housing market,” says Doug Duncan, chief economist of Fannie Mae. “As a result, we’ve seen more potential for economic upside, creating a more balanced near-term outlook.” The survey found that 28 percent of Americans expect home prices to increase over the next 12 months while 53 percent say prices will likely stay the same. Fifteen percent say they expect home prices to decline. Meanwhile, the majority of those surveyed see rental prices continuing to increase over the next year. Sixty-five percent of those surveyed say that if they were going to move they’d buy their next home; 29 percent say they would rent. With low rates and falling home prices, 70 percent of those surveyed say now is a good time to purchase a home. Source: Fannie Mae

Fifty-one percent of Americans in a recent poll say that if their financial situation were to improve, they’d buy a home. Coming in second on the list of wishes, they’d make repairs or improvements to the home they already have, according to the poll of more than 1,400 Americans conducted by the National Foundation for Credit Counseling Web site, www.DebtAdvice.org<http://www.debtadvice.org/>;. Meanwhile, 17 percent of Americans polled said they’d upgrade their car and 9 percent said they’d take a vacation. "Home ownership has traditionally been a part of sound financial planning," says Gail Cunningham, spokesperson for the NFCC, a nonprofit credit counseling organization. "With a combined total of 74 percent of respondents selecting a home-oriented option, the poll results strongly suggests that people continue to place value in owning a home, and are anxious to buy a house or improve their existing one." Source: Realtor Magazine Daily News

Wednesday, March 28, 2012

Housing Starts

February housing starts slip 1.1%
By Ken Clark
Created 03/20/2012 - 10:23
Commerce Department data released Tuesday morning show February housing starts were at a seasonally adjusted annual rate of 698,000.
There's good news and bad news in Tuesday's data.
February starts declined 1.1% compared with the upwardly revised January figure. And single-family starts declined 9.9% to a rate of 457,000. The total-starts figure fell below expectations, as analysts expected about 710,000.
The revised figure for January 2012 -- 706,000 -- gives that month the distinction of being the highest since October 2008.
More good news for the home-building industry lies in the year-over-year data. Compared with February 2011, total housing starts increased 34.7%. And single-family starts grew 17.8% year over year.
This good news, however, is tempered by the fact that February 2011 was one of the two worst months on record for residential construction.
Also released today, building permits in February increased 5.1% to an annual rate of 717,000.

Saturday, March 17, 2012

Wells Fargo's Monthly Economic & Financial Commentary- March 2012

- Nonfarm payrolls have risen by an average of 244,000 per month over the past three months and the unemployment rate has fallen to 8.3%, while weekly first-time unemployment claims confirm the labor market has firmed a bit, particularly in the private sector.

. Even with the recent improvement in hiring, private sector average hourly earnings have risen just 1.6% over the past year, and inflation-adjusted disposable personal income is more or less flat over the same period on a per capita basis.

- Higher food and energy prices will make it tougher for the Fed to meet its 2% inflation objective.

. The extension of the temporary social security tax cut and the prospect of additional quantitative easing means that fiscal and monetary policy are offsetting some of the contractionary effects of higher food and energy costs, allowing them to rise even further.

- We suspect the Fed will toughen its rhetoric and adjust its timetable to begin to move away from its ultra-low interest rate policy over the course of this year as private demand proves more resilient.

Wells Fargo's Weekly Economic & Financial Commentary- March 16, 2012

- Retail sales have bounced back following a weak end to 2011, rising 0.6% month-over-month in January and 1.1% in February.

. While over a third of the February increase was driven by gasoline station sales, retail sales excluding gasoline were up 0.8%, the biggest increase since October.

- Industrial production was flat in February after rising an upwardly revised 0.4% in January.

. Manufacturing slowed to the weakest pace in three months due to declines in auto and utilities production.

- Although import prices rose 0.4% in February after two months of no change, the annual rate of change fell from 6.9% to 5.5%.

. Rising petroleum and industrial supply prices were countered by the biggest drop in food prices in three years, and excluding petroleum import prices actually declined 0.2%.

- Producer prices rose 0.4% in February, the most in five months, although prices rose just 3.3% year-over-year, the smallest increase since August 2010.

Sunday, March 11, 2012

Wells Fargo's Weekly Economic & Financial Commentary- March 9, 2012

- The labor market added a total of 227,000 jobs in February and the unemployment rate remained unchanged at 8.3%, while last month’s job gains were revised higher to 284,000.

. The private sector added 233,000 jobs in February due to strong gains in manufacturing, education and health, and leisure and hospitality.

. Average hourly earnings rose just 0.1% in January and are up just 1.9% year-over-year, indicating a large portion of recent job gains have been in low paying industries.

- Initial jobless claims rose to 362,000 for the week ending March 3, the third consecutive weekly increase, while the four-week moving average rose to 355,000.

- The ISM non-manufacturing index rose 0.5 points to 57.3 in January, as the business activity component increased 3.1 points to 62.6 and the new orders component rose 1.8 points to 61.2.

- The real trade deficit widened in December to -$49.1 billion from -$48.3 billion, with much of the change due to rising petroleum prices.

Sunday, March 4, 2012

Wells Fargo's Weekly Economic & Financial Commentary- March 2nd, 2012

- Economic growth was revised modestly higher for the fourth quarter to a 3.0% annual rate, as personal consumption grew at a 2.1% pace and final sales rose 1.1%, up from the initial estimate of just 0.8%.

- Personal income came in slightly below expectations, but upward revisions to previously published data put the savings rate at 4.6% in January, well above the earlier reported 4.0%.

- Consumer confidence jumped 9.3 points to 70.8, the highest it has been since February of last year, although the survey was taken prior to the most recent spike in gasoline prices.

- Durable goods orders posted a sharper-than-expected 4.0% drop in January following a 3.2% rise in December, indicating business fixed investment will likely be relatively soft in the first quarter.

- Weaker factory orders and shipments data, combined with a 0.1% drop in real personal consumption outlays, caused us to slightly reduce our forecast for first quarter GDP growth to a 1.5% annual pace and our outlook for 2012 to 1.9%.