"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

I told you so...

Read this article to see what I'm talking about. Suffice it to say if you want to buy a house and/or refinance, make it happen SOON......!

More fun with Jobs and Rates (new and improved!)

Well, it seems ADP is reporting employers cut 23,000 jobs in March, when Economists had expected a GAIN of 40,000. What gives? Wondering aloud (no one is listening) if that had anything to do with the weather but I doubt that seriously. Friday's actual employment report (from the Labor Department) may tell a slightly different story as the ADP tracks real jobs (translation: private sector) while the Labor Department's numbers include governmental jobs, such as all those 2010 Census hires. Either way, Economists expect the Labor report to show an added 190,000 jobs in March, which would be great (and only the 2nd monthly increase since the recession began back in late 2007). UCLA economists noted that they expect the economy to continue to grow despite our high unemployment figures. They even rule out a double-dip recession and I agree. I doubt we'll have a V-shaped recovery (i.e. a sharp rise to contrast our sharp drop in the past) but I am hoping that those who say 'hockey stick' are incorrect (translation, if you look at economic numbers on a table/graph, you would see a large drop (check!) and a loooonnnnnggggg slow recovery, hence the name hockey stick). Either way, the UCLA people expect unemployment to average around 9.7% this year and it won't drop below 9% until 2012.

To totally contradict today's posting (referencing Fannie and Freddie predictions) a March 15 forecast from MBA (Mortgage Bankers Association) said they expect rates to rise to 5.8% in the final quarter of the year and even hit 6.2% in 2011 and 6.4% in 2012. Yikes!

Time is up! (and time to move to ATL!)

All too often you hear the phrase "For A Limited Time" tossed out in marketing. As noted in last month's email, time may be running out for these incredibly low rates due to TODAY's end of the Fed's $1.25T (yes, Trillion) program to purchase mortgage-backed securities (MBS). The program provided liquidity for Freddie and Fannie, keeping rates low and reducing financing costs. Low point? 4.71% for a 30-year fixed in December! But "what now" since the Fed is ending this program? I predicted a larger jump in rates but I have to retract based on what I've recently read (either way I hope rates remain low!). Estimates from Freddie/Fannie expect a rise of less than a quarter point in the next 3 months (a rise of about $30/month payment on a $250K loan). Why so 'low'? Right now the investment 'spread' for US Treasuries is low but higher for MBS so they are attractive to money managers, banks and pension funds (I also read that China is not buying as many Treasuries so be aware that the USA could face higher interest rates to finance our ever-increasing budget deficits, but I digress). In essence, the private industry players are stepping in to fill the void left by the Fed so rates should remain lower, though the (estimated) average will be just over 5% and under 5.25% (for reference, the average for the past decade was 6.2%). Note-the Fed is poised to 'jump back in the market' if there is a significant 'run-up' in rates.
So rates should be 'okay' but are we out of the woods yet? Well, we don't know what will happen after April 30th when the tax credits expire (actually, July 1 will be the true barometer as you MUST be under contract by 4/30 and you MUST close by 6/30 to get the final tax credit). Robert Shiller (of the S&P/Case-Shiller index) said "You don't make addicts go cold turkey. The credit interferes with the market in an arbitrary way, but ending it now would be psychologically powerful. People will be in a bad mood about buying a house." All I can say, try being a seller! Talk about a bad mood... or why not try to buy a short-sale? THAT'S truly 'bad mood' material!
Let's talk about ATL now. No less than the New York Times (albeit in blog form) noted "Don't count Atlanta out." Harvard Economics Professor Edward L. Glaeser notes that ATL has had its ups (#2 in population growth of 1.13M people from 2000-2008) and downs (annual building permits dropped like a rock from 2005-2009, highest of any other metropolitan area) but we have many things going for us. Click on the link to read the article but John Adams has a companion article that sums up his 3 maj or factors for our future success: ATL is dominant in the region, with no real rivals; we have a 'business-friendly' political environment; we have a highly skilled population (nearly 43% of adults have college degrees vs. 27% nationwide). Not only that, a recent KPMG study ranked ATL the second most cost-competitive 'large city'. They used a matrix of 26 cost components such as labor, taxes, real estate and utilities as it relates to 17 industries based on a 10-year time period. Tampa was #1, with a cost index of 96.0 (100.0 being the national baseline) and ATL was 96.3. Our ranking was based on our competitive business costs (office leasing, transportation, labor, employee benefits and corporate tax rate). Miami, Baltimore, and Dallas round out the top 5. LA, NYC and SF were the three most expensive.
SO tell your friends it's time to relocate to ATL! Buy now, save now, and pop some bubbly along the way!

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!

Rates at 7.5% by the end of 2010?

Read this article to see what I'm referencing. Nothing new that I haven't said before but just further thoughts that you need to make that loan decision NOW before rates go up! I hope that I'm wrong, but it's highly possible that this will happen. Happy Monday, eh?

Headline today: Not much impact from repeat buyer credit"

In a word-DUH! Check out this post on my other blog about this silly tax credit. What a waste of time...