"Southeast Economy Improved in March & April"

So the Fed's "Beige Book" report noted that the Southeast's economy saw some improvement in March and April. Specifically, retailers saw higher sales, increased traffic and that's a big plus as we all know that retail sales contribute around 70% of our economy. Car sales even rose a bit, despite Toyota's recall woes (offset by a big sales push) and Chrysler's continued slump. Homebuilders should be a bit more positive as housing starts have increased over the first quarter (yes, there was a small dip in March, but that was due to a large upward revision for February). Existing home sales have picked up a bit, but mainly in the lower priced markets (sub-$300K) due to the 1st-time homebuyer credit. As noted several times in the past, the $6,500 credit was a non-event as a) people aren't truly aware of it and b) the 5-year residency provision was too restrictive. Prices are still a bit lower due to all the foreclosures out there (expect more in 2010 and 2011 as ARM's continue to re-set). While there are still hurdles to obtaining home financing (tight underwriting and low appraisals) I keep hearing that common sense MAY actually be returning and lenders are having less trouble making loans (I even heard that there is a local company actually doing SECOND mortgages again, the horror!). We'll see how that sorts out; hopefully interest in homes won't fall off a cliff after 4/30/10 when the tax credits expire (for good). Georgia reported higher unemployment (a record 10.6%) which has outpaced the National average for 30 months. Labor Secretary Michael Thurmond notes that there are signs of growth, however, and while we may lose additional jobs in the short-term, a recovery may finally gain traction in Georgia. Finally, the FDIC extended protection for large deposits (Transaction Account Guarantee (TAG) Program, which guarantees non-interest-bearing deposits greater than $250,000, not that it affects me individually!) which will help smaller banks keep high dollar deposits in-house. Hopefully we won't see any new bank closures, but don't bet on it... Have a great weekend! Bo

Clark Howard on Health Care reform...

I respect Clark Howard's opinion on several things and disagree on a few as well. In this article, he spells out some details of health-care reform. I see that the 'average taxpayer' will be hit with $450 in fees to cover this plan. I don't think that this figure covers all the costs, but so be it... I guess we'll see what happens down the road, eh? I for one am scared of any governmental control. I expect them to start dictating (rationing?) tests. Remember the mammogram issue last year? Just wait... that's the tip of the iceberg!

Uh-oh... The Economy stumbles a bit...

Unemployment claims rose last week and inflation jumped more than forecast in January. Yes, there are still positive news items (manufacturing is up, cars are selling, new home permits up slightly and pricing stabilizing) but the core issue currently is the job situation (a reminder to those 'in charge'--it has ALWAYS been about jobs--NOT our health care). Why is this important? If inflation keeps rising, how does the Fed combat that? They raise interest rates! What will KILL home sales? Rising interest rates! (right Mr. Carter?) What else? Well, the Fed has been more or less buying loans (in simplistic terms). At the end of March, this will end, so we can see rates hike up based on the fact that it will be more difficult to obtain funds. This can also hurt home sales and refinances. I will expand on this soon, but suffice it to say that we are nearing a 'perfect storm' environment for home sales: the tax credit will expire soon (must be under contract by the end of March); the Fed will need to raise interest rates to combat inflation (prediction-by Summer); the Fed will stop shoring up the mortgage market at the end of March. bottom line-if you are on the fence, BUY OR REFI NOW!

As for health care, READ THIS from the AJC--I wish our politicians would....

What's really going on? Key word is 'underwater'.

This article from USA Today is spot-on. People would love to 'move up' but they can't get out of their old home! My old house in Smyrna is still rented (thank goodness!) but it may be worth less than my mortgages so it will be difficult to sell. Our current home is definitely underwater as the mortgages are easily $20,000-50,000 higher than the value (not that we're trying to sell/move). This is one of the main stories that every American should understand--and I wish Congress could understand it as well and try to stop regulating with silly new programs (HVCC anyone?) that have unintended consequences. Instead of the waste of time, money and resources on the health care debate, the focus should be on 2 things: jobs and housing. If you get those 2 areas sorted out, EVERYTHING will come together. I do feel that healthcare (like anything government regulates) needs to be reviewed and 'tweaked'. I am NOT in favor of governmental control and we need to see how both sides (Dems/Reps) can figure this out together--AFTER they sort out the economy! My 2 cents...

Current Outlook

The Recession Is Over!

Oh, really? Ask one of the thousands of unemployed people and I'd bet you'll hear a different answer. Yes, home sales (and prices) have risen a bit and yes, retail sales have risen a bit, BUT we need jobs. (I could digress about wasting time with health care reform vs. our real problems (It's the Economy, Stupid!) but this is not to be a politicized rant today).

This week's unemployment figures didn't truly rise (on a nationalized level, but in GA it actually went UP) but the numbers are higher than a level that indicates the economy is adding jobs. New unemployment claims have fallen around 22% since the Spring, but who is hiring? With people losing jobs and with those people not FINDING jobs, foreclosures could be the next flood to hit. We have been hit with all the adjustable-rate and/or subprime loan foreclosures in prior years but we are seeing many more fixed rate 'plain vanilla' loans going to the courthouse steps of late. To turn the tide, we need to see weekly claims to fall to higher than 400,000 for several weeks! Unemployment benefits were extended, but this lifeline will run out in January unless we see another extension from Congress. Some members of "The Fed" have noted that our recovery will resemble an "L" with a gradual upward tilt from the base (which is better than the L pointing down!). Small businesses typically contribute about a third of net job growth in the last 2 economic recoveries--not this time! Small businesses have accounted for about 45% of net job losses through the end of 2008, so it looks like we are in for a long fight...

On a positive note, the federal tax credit for 1st-time home buyers was extended and 'move up' buyers were given their own credit of $6,500 as well. HOWEVER, I am very disappointed in that credit as it is restricted to people who have lived in their home for 5 of the last 8 years. Let's cut to the chase-I am 44 and I am finally 'stable' (well, at least as it relates to moving!) and I don't plan to move any time soon. I have never lived in a home for over 5 years so if I was looking to move (I'm not) I couldn't get the tax credit. I think a more reasonable figure would have been a 3-year restriction but no one called for my opinion...

If we could loosen credit to credit-worthy borrowers AND get back to common sense underwriting we could get out of this mess faster. As I keep saying, this all started with Housing and Housing will get us out of this mess. We need to repeal the Home Valuation Code of Conduct as well so we can go back to using quality appraisals vs. whomever happens to be cheapest, but again, that's a topic for another day.

Finally, I read that Atlanta's housing inventory began to deplete in the 3rd quarter and housing starts actually ROSE. The quote (from Metrostudy) that really rang true for me was this: "We do not have an oversupply problem, we have a demand problem". This is what I am referencing above-if people could sell their homes they could move into a new home. It's like a 'reverse' domino effect-nothing is falling into place so that the next domino can fall. No credit = no home sale. No home sale = no seller becoming buyer. Hopefully we'll see some positive movement sooner rather than later!

Senator Byrd-time to go?

This is a perfect case for Term Limits. While I respect the fact that Senator Byrd has set a record for his service I want to 'cut and paste' a few things from the AP article written by Laurie Kellerman.

*It was unclear whether Byrd would be able to attend Wednesday's session.

* He has cast more than 18,000 votes and, despite fragile health that has kept him from the Senate floor during much of this year, has a nearly 98 percent attendance record over the course of his career.

*Friday is his 92nd birthday.

Now I must admit that I have bias against him as he is known for his pork (another quote from Laurie's article: "He's a champion of "earmarks" - pet project spending that critics also call "pork." He's helped bring home to West Virginia $326 million for 2008 alone, according to Citizens Against Government Waste.") but truly I feel that ALL of our Senators and House members should have a much shorter shelf life. If he is not attending Congress, why is he there? And it's not blaming him for anything in particular, but I feel that many in Congress are too focused on special interest groups and companies and are biased against making tough decisions for our country versus voting using polls so that they can remain in Congress! As I type that comment, I must note that I think my Representative, Dr. Tom Price, has done great things and his voting has been in-line with many of my thoughts. So what to do? Guess it will be a 'toss the baby out with the bathwater' (e.g. getting rid of a 'good guy' along with some of the corrupted (yes, I said it) members).

Why are term limits so important to me? ALL of Congress have forgotten why they are in office: to serve US. Not special interests and not to vote laws that more or less purchase votes. As it relates to health care, why do they get a VIP health plan (at our expense)? Why can't they use the new health plan (in whatever form it passes)? As far as unemployment is concerned, wouldn't you like to vote on your own pay? Even as monster corporations get bashed by Congress, you don't see CEO's paying themselves MORE money when the company is losing money? I digress by complaining about Congress complaining about "corporate excess" by flying around in corporate jets--how does Madame Queen Pelosi get around? Do you think you'll ever sit next to her in Coach (heck, even on 1st class!) on Delta??? NOT!

Bottom line: Congress is broken. Let's end the fiefdoms of ALL of our "leaders" (lowercase and in quotes on purpose) and see how they fare in the real world like US. See how their tax and spend policies help them out (there are over 237 Congressional MILLIONAIRES currently serving us! Wonder how they'll like the tax code if they were private citizens again?) Let's work on getting Term Limits passed! My 2 cents and your rant for the day :)