Spend, spend spend

I had missed this email back in November but click HERE for an excellent read on why the government's SPENDING is killing our country. Well reasoned and supported...

Interest rates on the rise... move fast!

Are you considering a home purchase? A refinance? The time is NOW. Why? Read THIS ARTICLE noting that rates are rising but also take into account that it is widely accepted that the FED will raise short-term rates this summer. Sure, those rates actually have nothing to do with Long-term (e.g. mortgage) rates BUT it will still affect the marketplace. If they do raise the "Federal Funds Rate" expect to see car loan interest rates to go up as well as 2nd Mortgage (HELOC) rates, which are based on the Prime rate AND don't forget credit card rates will likewise rise. SO as noted, while the Prime rate may have 'no affect' on mortgage rates, the factors allowing people to AFFORD a mortgage will definitely be affected (okay, if they don't have ANY car loans or ANY credit card debt or ANY other interest rate affected items, then you are correct, I am wrong ; )

In sum-if you want to buy a house or refinance, do it NOW and definitely before August 1st when the world ends, thanks to dear old blubbering Barney Frank. Cheers!

Home sales info!

More info on the housing market (click HERE for the article).

While I understand the comment from an economics standpoint I totally disagree with the 'concept' that existing-home sales don't contribute to the GDP. There is a HUGE ripple effect from the purchase/sale of a home--Sellers (hopefully) got paid and now can purchase another home or more 'stuff' (or pay down debt so they can get more 'stuff') and Buyers need to make that home 'theirs' (Home Depot/Lowes, here they come! Ditto for furniture, electronics, etc.). Regardless, good info!

One way the shutdown could hurt the mortgage industry

Take a look at this document from the Mortgage Bankers Association; this explains how mortgages could be affected by a prolonged shutdown. One client's thoughts said that we're probably good for the next few weeks but if this lasts longer, month-end closings could be affected! Yikes!

Click HERE for the article.

Golf and taxes

I am not a golfer. In fact, my standard joke is that I am a failure as a lawyer because I don't play golf. I have played about 4 times; with about a 90 for 9 holes for each 'outing'. Again, I obviously don't play golf. I am also not an Econ major but I love to dabble, as evidenced by this blog. I have to share an amazing article with you about what 'real' taxes cost. Please click HERE to read an article about Phil Mickelson's complaints about taxes. Pretty interesting read and shows how horrible our taxes really are. (then again, if you want to 'share the love' and steal from the 'evil rich' then this article will make you giddy--not me!).
Cheers, Bo

An open letter to President Obama about the State of the Union Address

Here is the text of an email I just sent to the White House (from www.whitehouse.gov).

"In anticipation of the State of The Union Address this evening I want to put forth the following-I know your focus will be on the Economy and Jobs. With that in mind, I want to share something that doesn't make sense to me. I drive over 60 miles a day to get to and from work; I frequently have to drive to appointments as well. I have heard several predictions that gasoline prices will rise to over $4.50 this summer and with the saber rattling over the Straits of Hormuz I am not surprised by this. Couple that with the fact that my 1999 SUV with 165K miles takes premium my payments will be much higher. So why did you stop the Keystone pipeline project? This is something that will help OUR country and provide immediate jobs (I believe you have used the term Shovel Ready for several other projects that haven't yet started). I try to conserve and recycle and yes, we DO need to come up with other energy sources. But TODAY we need oil and that won't change. We also need JOBS. Please reconsider for the good of our COUNTRY (not political factions). Thanks for you time, good luck tonight!"

So why did he block the Keystone Pipeline project? For Jobs? NOPE. For the Economy? NOPE. For the safety of our fine Union? NOPE. He did it to appease environmentalists. They believe this pipleline to be a horror show for our country. Yes, there are risks involved and they need oversight to ensure they 'get it right'. We DO need alternative energy sources; I wish I could afford a solar array on my roof so I could thumb my nose at the Energy companies during our hot summer but I can't. We don't have enough wind and the more or less 'clean' nuclear industry (yes, I know it's not perfect) is also blocked by environmentalists. SO what does that leave us? OIL. We need oil NOW and it's time to approve this (Especially before CHINA inks a deal with Canada).

So in the interests of our country, why not approve this? OR are you interested in Elections and Polls? We will soon see. I am not so sure...

Chapter 11?

I just read an article about Hostess declaring bankruptcy. Why? To be able to truly bargain with their Unions and to ease some of their Pension pains. Look, I understand the problems of management versus workers but many of our unions have crippled their companies. It's pretty bad when such a well-known and well-loved company has to do something so draconian as to declare Bankruptcy in order to be able to negotiate! What's my thought on this? I am not a huge union fan obviously and I want to see more US companies be able to compete with foreign companies. Why did so many companies move offshore? Cheaper labor! I am sure the hourly wages are much different but if you add in all the governmental regulations PLUS the higher wages PLUS all the Union demands it makes for an easy business decision to relocate (not only that, compare rust belt Automakers vs. all the Southern US Plants--lower wages and benefits, yes, but people are WORKING). Look at all the new auto plants being built in the South--Kia, Hyundai, VW. Not only is it cheaper to produce here (due to exchange rates and shipping costs) we have a solid workforce. So I guess I'm just griping about unions today. Do I "applaud" Hostess' move? In some respects, I agree with it. However, no one wants to see someone 'fail' (at least that's how I see Bankruptcy). Will we see more of this? It all depends on the marketplace. In essence, both sides need to work together--pay a fair wage but work a fair amount. It's all in the balance! I wish Washington, DC worked like that... Cheers, Bo

The US Budget defined

I got this from an email (so of course it's true :) SO even if the facts aren't fully correct, this is a pretty good depiction of why we're in such a mess. Have fun! (Sorry about the layout; don't know why Blogger won't let me format how I want it). Why the U.S. was downgraded: * U.S. Tax revenue: $2,170,000,000,000 * Fed budget: $3,820,000,000,000 * New debt: $ 1,650,000,000,000 * National debt: $14,271,000,000,000 * Recent budget cuts: $ 38,500,000,000 Let's now remove 8 zeros and pretend it's a household budget: * Annual family income: $21,700 * Money the family spent: $38,200 * New debt on the credit card: $16,500 * Outstanding balance on the credit card: $142,710 * Total budget cuts: $385 Got It ?

Repeal Dodd-Frank NOW

Read THIS ARTICLE. This is very well written, no matter what you think of Newt. I like Newt; perhaps not as my President, but as a solid commentator. I have long complained of the Dodd-Frank Act (and it's 'friend' HVCC) and its repeal would do wonders for our country! That important? YES!

A mixed bag: Unemployment "Down" in GA

I suppose any drop is a good thing, but since we're still at 9.9% unemployment, it's tough to get super excited! March numbers reported 10% so a .1% drop is small, but I doubt the 30,100 people who found jobs would complain at all! Most of the jobs were added in hospitality, services, trade, educational and health services and (so it is reported) construction (construction? really?). It's also important to note that we were sitting at 10.1% unemployment a year ago (April) so again, this is a good thing, but the last time it was below 10 was in June of 2009 when unemployment was reportedly 9.8%--and all the while we've been running above the national average. BUT, it's the third consecutive month of gains to "Way to go, Georgia!"

Friday the 13--Feeling lucky today, punk?

In case you've been under a rock today, it's Friday the 13th! And yes, that's a "Dirty Harry" reference (for those of you who are too young to know the movie, Google it and see what Clint Eastwood looked like as a "youngster"). Yes, some people will be extra nervous today, expecting something horrible to happen (or some horror movie reject jumping out of a dark corner with a chainsaw or an axe). Me? I'm more worried about the economy and business to fear Friday the 13th (actually, I have always liked the number 13). So what's going on? Lots!

Are you more upbeat today? According to a recent poll, 2 of 5 people believe the US economy will get better. No, that's not a ringing endorsement but it's still better than last month's poll (each randomly sampled over 1,000 people). Believe it or not, the death of Osama was one factor for the positive outlook but other news items are also helping to fuel the positives--job creation and sales data among them. Current pricing for commodities are dropping (silver, sugar, natural gas, and even OIL) and the dollar is strengthening (which allows the US to spend less to buy more!). This may be a temporary dip as it seems everything costs more (have you been grocery shopping lately???) and many of those increases have been due to higher fuel costs. Still, I am amazed that gas prices are over a dollar more expensive than last year. So much unrest in oil producing countries as well as supply demands, factored in with the switch to expensive 'summer blends' of gas have pushed up prices BUT expect prices to drop a bit as people changed their habits (drove less, traded gas guzzlers) and now supplies are up/consumption down so we're hoping to see $3.50/gallon again soon.

Despite gasoline cutting into our wallets, April retail sales were up-the 10th straight month of increases! Why? Earnings are growing (more jobs, higher wages, more hours worked), and people stepped back and paid down debt during the crisis (so now there is more disposable wealth on the sidelines). Sales are expected to keep rising in the months to come!

Recent employment reports are a mixed bag. Claims for unemployment fell last week by 44K, dropping to a seasonally adjusted 434,000 average. While any drop is great, it must be mentioned that 375,000 is the level generally accepted as being consistent with sustainable job growth so we're not there yet. Again, employers added more than 200,000 jobs in April for the third straight month. Various sectors were represented--retailers, factories, financial companies, education and health care-even construction! One source noted that Fed/state/local governments actually cut jobs (which may not be a bad thing for taxpayers as there tends to be overlap and waste in that area). So if gas prices are so bad, looks like employers are ignoring that and hiring more people!

The Fed is not ignoring the fact that despite commodities taking a breather of late, their last official statement noted "inflation has picked up in recent months." For now, they will hold the Federal Funds rate near zero, as has been the case for the last year or so. However, if inflation continues to take hold, they will have no choice but to raise rates (which would in turn raise other short-term rates like the Prime Rate, which will hurt many equity line holders as well as anyone carrying a credit card balance). If you further dissect their comments, in March they said labor markets "appear" to be improving; in April they noted they "are" improving gradually. What a difference a few words can make, eh? With that being noted, they talked about a few positive gains (household spending, business purchases) but they noted "the housing sector continues to be depressed." Gee, ya think? So what's going on with housing?

My view from the frontlines notes that yes, we're seeing more activity. However, we are still seeing a LOT of foreclosures, short-sales and investor purchases. As I've said before, if you have some cash, it's a buyer's market, baby! In late March, it was reported that new home sales were up (great!) but there is SO much inventory out there of existing homes, many of which are 'almost new' and all seem to be selling at deep discounts due to foreclosures and short sales (bad!). ATL home prices dropped below 2000 levels and hit a 3rd monthly low per S&P/Case-Shiller index. We're not alone--the U.S. as a whole is back to 2003 price levels. BUT, the Atlanta Board of Realtors reported sales were up 5% in February and median sales prices were up over 7% in March and foreclosures dropped a bit. So pricing remains a problem as well as credit--but again, who knew that rates would remain under 5% so long? That's great, but if you can't get a loan due to stupid laws and incredible restrictions on credit, what good is that? Likewise, these underwriting conditions are hurting entry-level buyers quite a bit and 'move-up' buyers are underwater or cannot hit the down-payment requirements for a new mortgage so looks like we're going to see a lot more renters for the short-term (Boo!). I hope that some common sense underwriting will return to our industry soon (repeal Frank-Dodd act?); it's still a great time to purchase a home--if you can. Good luck to all of you; thanks for reading and keep in touch! Remember--if you need a closing attorney, choose us! I'll be in touch again soon!

Georgia Economic 'Snapshots'

When I first read the headline noting ATL is the #31 destination for movers according to U-Haul I was thinking 'cool, this is good for us!'. Unfortunately, when I read the article we were #1 in 2008 and #6 in 2009. People, Georgia is lagging! It's not just the data from 1.4M rentals by U-Haul--it's our water issues, our schools and our transportation problems. MARTA rail? Forget it... for a city our size we have the fewest miles of rail (compare us to Washington DC). We need to have a regional entity to make ATL competitive on that front. Many other topics but that's just one bugging me right now. The top 5 cities per U-Haul? 1-Houston (Houston?); 2-Orlando; 3-Vegas; 4-Chicago; 5-Portland. Oh what the heck-- 6-San Antonio; 7-Austin; 8-Brooklyn; 9-Sacramento and 10-Kansas City, MO (huh?).

We're also #8 for "financial distress". We scored 61.3 on CredAbility's Financial Distress Index--a score below 70 indicates a state of financial distress. A score of 60 or less is considered an emergency crisis. We are unfortunately in "good company". The top-10 in order are: Michigan, Mississippi, Nevada, Alabama, Florida, South Carolina, Indiana, Georgia, North Carolina and California. The 'punchline' in this story is that these 10 states produce over 33% of the country's GDP (no, it's not really a punchline, more like a punch in the gut). In essence, economic indicators are looking up; it's just that individual bottom lines have not fully recovered. Give it time; hang on fellow Georgians! Who knows--maybe we'll be able to vote on Sunday sales sometime soon; wouldn't that be a novel concept!

Steroids for the Economy?

This is great commentary--time to get off the drugs! The best comment is in the summary/end of the article: "Waiting for the recovery and removing the things that are holding it back (wasteful spending and regulation) is the healthiest way to create sustainable growth." AMEN While we're at it, what about all the foreclosures being "on hold"? That will only delay the inevitable (e.g. we need to work through the foreclosures that are out there so we can finally hit bottom with home prices). THEN we can see a true recovery. Whenever you tinker with market forces, 'bad things' can happen-in this case, it's just dragging out our issues. Final thought--we are 'on hold' until November. Win or lose, people are waiting to see how the chips fall. Once that happens, people will begin making their move (e.g. if Congress goes GOP, then businesses may see positive things on the horizon--if Democrats remain in power, they will either a) continue to sit on their hands or b) figure out a 'plan B'). Time will tell, eh?

In a word... Capitalism

THIS ARTICLE is simply amazing! Typically, economic commentary isn't very political but this one is pretty direct in saying what they think.

Be honest-how can you disagree with this? If you work and earn, you get it. If you sit on your butt and wait for someone else to bail you out, you will disagree with this. Amazing article...

Why am I so 'amazed'? It's right off the pages of Atlas Shrugged (the novel by Ayn Rand from the late 1930's). What's next for us? Is that our future? God help us...

Tell us how you really feel, Bernie Marcus!

The title of this interview says it all: Democrats are anti-business. Political pundit? Rant by some conservative talking head? Nope; Bernie Marcus! This article gave me a link to his interview--he doesn't hold back! Here's a link to the interview as well. It's a long one though... Cheers!

Newt Gingrich's message for Labor Day

Read this article! There was not a lot of press about Congressman Boehner's call to fire President Obama's Economic team, but this article makes it clear that it's time for some real CHANGE in D.C.!

(Full text of Boehner's speech here)

Big Ben says "Loosen the Guidelines"--Hear hear!

As an Atlanta closing attorney, we are on the front lines of the real estate and mortgage business and see 'what's really going on'. In lieu of continuing to generically (is that a word?) blame this all on "Wall Street" (which did contribute to this mess a few years back) let's take a look at one of the major reasons why we are STILL not seeing a solid real estate recovery--tight guidelines! (and appraisals--try googling HVCC if you want more info about well-intended legislation with unintended consequences) We see it all the time-people with good jobs, credit and income who cannot get a loan. With mortgage rates hitting an all-time low of 4.44% it's an awesome time to buy or refinance! Click on THIS LINK for a video from THINK BIG work small. Cheers, Bo

By the numbers: JOBS and Housing

What's important for our nation's economic recovery? Two things dominate--unemployment and the housing market (yes, government spending is a huge issue but many expenditures relate heavily to the two issues above). The tax credit originally did its job as people rushed to purchase homes last fall. There was a pretty solid push this Spring (prior to the April 30 cut-off date) but it was not as 'robust' as the fall of 2009. In fact, new home sales in May 2010 dropped to the lowest pace in the 47 years records have been kept! Right now, housing starts are down but home completions are actually up as it appears builders are focused more on finishing homes already started versus breaking ground, which is in-line with the tax credit and the June 30 close date deadline (which has been extended to September). If housing starts remain this slow, new home inventories will continue to decline which will in turn help clear the way for more recovery.
As a side note, the NAHB (National Association of Home Builders) says each new home built in the US creates the equivalent of 3 new jobs for a year and generates around $90,000 in taxes paid (local and federal) and impacts many industries (such as raw materials, goods like appliances and faucets, etc.). When I say that the housing recovery is key to our nation's recovery, you can see what I mean now! In ATL, we were overbuilt prior to the crash; that's why we were really hurt by the downturn. Even now there are over 89K homes for sale in ATL, which is a 14 month supply. 150K vacant lots = enough to supply builders for the next 4 years per a report by Wells Fargo Securities. More foreclosures = even more inventory!
Bright notes? Our unemployment rate has declined 3 months in a row (still around 10%) and our fundamental growth models remain intact. Factor in all the Fortune 500 companies here, the world's busiest airport, and our strong ports in Savannah, we are still a very attractive area for job creation. With that being said, we may not be back to 'normal' for another few years. The Fed agrees; they noted that the recovery is weakening in many parts of the country.
Final thoughts? Stocks are up this week due to upbeat earnings reports from many different companies/industries and there was a small drop in unemployment claims last week. Likewise, uncertainty in Europe is calming due to bank ratings remaining acceptable across the board after regulators crunched numbers on 91 banks (only 7 failed their tests per an AP report) and determined that most would survive further economic slowdown. The Euro rose and most European markets rose slightly on these reports as well. See? It's not all bad! Keep plugging away, and have I mentioned that rates are at their lowest levels EVER? Buy or refi NOW ; )

Today's little ray of sunshine...

Actually, this could be titled "The Economy turns to the darkside", or so it seems right now! Today's consumer confidence numbers dropped almost 10 points--the first drop since our last 10 point drop (February 2010-the index had risen monthly since that month's report). There are two components to the Consumer Confidence Index-one that measures how consumers feel about the economy (now) and the other assesses their outlook over the next six months. As noted previously, it's all about JOBS. Not the health care debate (debacle?). Stocks even dipped below 10,000 today (around 2pm the Dow is still around 9900 (will the Dow even close above that this week?). To put numbers into perspective, this index hit an all-time low of 25.3 in February 2009. Above 90 = solid economy, over 100 = strong growth. Todays' number? 52.9 (down from May's 62.7, with the expectation today's numbers would be 62.8).

What else is a mess? Housing. Sales of new homes fell 33% in May, to the lowest level ON RECORD after the government tax credits expired (and to be honest, April's closings/contracts were not as amazing as we had hoped). What other fun statistics do I have for you? Auto sales are expected to slow for June (have you seen more 0% finance deals advertised? Yep, I thought so too). Companies tracking auto sales expect a 9-12% drop for June sales, so you can expect to have more TV ads screaming at you between your reality programs (is there anything else on TV?). A quote from George Pipas (Ford's top sales analyst) notes that "The two big issues with consumers right now are employment growth and income growth, and they're not seeing much of either." Well stated...

So again, consumer confidence is in the toilet, sales of new and previously owned homes fell last month, auto sales are down, stocks are down (but hey, Bond sales are up!) and it is expected that the unemployment rate will creep up to 9.8% from 9.7% when numbers are reported this Friday. The only positive things to report relate to home prices rising in April (again, most likely due to the tax credit push) and consumer spending (remember, that's 70% of our Economy) rose 0.2% last month with personal income rising 0.4% (so more saving, less spending).

Finally--what other 'big picture' items could dump us into a DD? (no, not Pamela Anderson, that would be a "Double Dip" as in recession) Unfortunately, there are several disturbances in 'the Force' that are still unsettled. Globally, Asian markets fell after indexes related to China's economic activity fell and European indexes fell sharply after Greek workers walked off the job to protest budget cuts (how's that Socialist thing working out for you?). So roll that into our own government budget cuts, end of fiscal stimulus programs, problems in Europe and a slowdown in China--could that force a double dip recession? Time will tell. But for the United States, 2 comments attributed to a broker in NY (Doreen Mogavero) ring true: "People are starting to see that this recovery, as it is, is going to take considerably longer than anybody had anticipated." Relating to jobs and the job report, "That is the core of the recovery here. People have to feel they're going to work. If they don't they're not going to spend money." Again, well stated. So how confident are you? I'm not feeling it today... Ask me tomorrow or something...

Recovery?

So where are we now? Yes, the tax credit has expired and we're close to the end of the original closing date of June 30, though there are rumblings that the 'close by' date may be extended into September. That can help the mortgage guys 'catch up' and get the loans closed, but it doesn't do much to really 'create' business. One reminder-if you have a qualified military client, the tax credit still applies (thru April 2011).

We still have a mixed bag as it relates to real estate. Georgia is number 6 in terms of homes having 'negative equity' (commonly called 'underwater', where the loans on the home are higher than the current value of the home). The US rate was reportedly 23.7% in May (11.3M out of 47.7M mortgages) vs. GA's 28.7% (457,652 of 1.6M). The top 5 states were Nevada, Arizona, Florida, Michigan and California. Similar numbers are reported for foreclosure listings in the 1st quarter with Florida and California making up 29% of that total. If you add the next 5 states (TX, GA, AZ, IL, MI) that total rises to 52% of all foreclosures reported! The worst may be over, but there are still high numbers being reported for homeowners being over 30 days late. Why is this trend so strong? Most foreclosures should currently (emphasis on should) be due to typical 'life events' versus people being stuck with bad loans. Unemployment is reason #1, along with other 'common' factors such as divorce, illness and a new trend of people 'walking away' from underwater mortgages. One soapbox issue is the fact that many mortgage companies will not talk to a homeowner UNLESS they are delinquent. Yes, if you are paying on time and you're underwater, I am hearing that the banks (esp. the monster-mega-banks) will not consider a modification of any sort until the borrower is at least 3 months behind. That is a sad commentary for people who are trying to do the right thing as well as keep their home! But I digress...

The final issue that's dragging us down remains the job market. In May, employment increased. Good news? Not so much. Most of the improvement came from the government hiring 411,000 temporary census workers--the private sector only hired 41,000 for the month. Likewise, businesses are still relying on temp workers so there is still a good deal of uncertainty out there. One 'odd good sign is the amount of people quitting their jobs (told you it was odd!). The reasoning is this-if someone quits, they feel that they can find something better (i.e. they are not trapped in their current position b/c there is no alternative). SO you can make the argument that finally there are some 'greener pastures' for people to try.

I love listening to "Big Ben" (Fed Chief Ben Bernanke), especially when he's feeling positive about the economy as a whole. He noted that the European crisis will have only a "modest" impact on our recovery (don't we hope) and that we are "on track to continue to expand through this year and next." He did warn of a "slow reduction" in the unemployment figures and also seemed to hint that the Fed will not raise rates until next year. However, he warned about our record budget deficits, noting that if they are not reduced, it will hurt our economy in the long run, possibly leading to higher interest rates (homes, cars, etc.) and more expensive debt payments for Uncle Sam. His "happy" comment? At some point "things will come apart" if not. Oh goodie... SO, as we individually tighten our belts, our government has been warned to do the same--let's hope they listen! Cheers, Bo