St. Louis Refinancing Group » recession

St Louis Home Loan Mortgage and Customer Financing: Housing Key To Recovery

liberty — Fri, 03 Feb 2012 20:01:45 +0000

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St. Louis Mortgage Broker and In-House Financing News: Federal Reserve Says Housing Is Key To Recovery

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A fresh emphasis on healing the housing sector by officials at the Federal Reserve, in the Obama administration and in state capitals reflects the view that a healthier real estate market would go a long way in strengthening the economy. Fed Chairman Ben Bernanke said that the U.S. central bank was considering buying more mortgage debt to jolt the broader economy onto a more robust growth path.

“The housing sector is a very important sector,” he said at a news conference after a two-day policy meeting. “Problems in that sector are a big reason why our economy’s not recovering more quickly.”

Economists say the Fed could do well to target the housing sector. For one, it is at the center of the economy’s ills; for another, homebuying can be a catalyst for a wide range of consumer purchases from refrigerators to lawn furniture. While many other sectors of the economy have found their feet, housing continues to lag abysmally, held back by high rates of foreclosure and homes that have dropped dramatically in value.

Around 7.5 million U.S. households are either in foreclosure or delinquent on their mortgage, and 11 million homeowners owe more than their homes are worth. The Obama administration and a leading housing regulator announced plans last week to widen a program aimed at helping so-called underwater borrowers refinance their mortgages.

At the same time, state attorneys general are pressing for a settlement with top banks over alleged foreclosure abuses that could require the lenders to commit about $15 billion to reduce principal for struggling homeowners and modify loans.

“Clearly, the housing sector is an obvious candidate for policy intervention,” Goldman Sachs economist Andrew Tilton wrote in a recent note to clients. Fed Governor Daniel Tarullo caught some in financial markets off guard by recommending in a speech on October 20th that the central bank expand its purchases of mortgage-backed securities, reopening a debate many had thought closed. His ideas drew quick support from two of the most influential Fed officials Vice Chair Janet Yellen and New York Fed President William Dudley and has resonated with others.

But why housing, and why now? At just more than 2 percent of U.S. gross domestic product down from 6 percent during the housing boom residential investment isn’t that big a component of the $15 trillion U.S. economy. However, Tilton and others believe housing “punches above its weight” and generates enough momentum to be critical to strong growth.

“Housing might be special,” Tilton concluded. Housing has led the economy out of past recessions. It creates jobs and is a catalyst for spending on goods and services. The sector is usually a key avenue for the transmission of monetary policy but the drop in home values has locked many Americans out of refinancing, while leading others to fear taking the plunge by buying a home.

Coaxing mortgage rates a bit lower could lead potential borrowers into the market. MBS purchases could directly lower housing borrowing costs. “Their actions are more effective when they target markets that have wider spreads,” said Joseph Gagnon, a former Fed economist now at the Peterson Institute.

In September, the Fed resumed buying MBS to replace housing debt that was rolling off its balance sheet. Adding to this supply would be “a viable option” if circumstances were right, Bernanke said, although he declined to specify what might spur the Fed into action.

Another reason to spotlight housing may be timing. After blaming Japan’s natural disasters, Europe’s sovereign debt woes, and a spike in oil prices for the slow U.S. recovery, officials at the U.S. central bank have come round to the view that there is a more fundamental problem with the economy.

“I’d interpret the focus on housing as a result of the wake up call they got this summer,” JPMorgan economist Michael Feroli said. “Each time we’ve been disappointed so far in this expansion they have been saying ‘temporary factors.’ This summer they finally realized that wasn’t credible and took a fresh look at the recovery.”

Even so, any renewed expansion of Fed holdings with new MBS will face opposition within the central bank. Some top officials argued that the Fed’s previous $1.25 trillion in MBS purchases blurred the line between monetary and fiscal policy by targeting a specific sector. Those complaints resonated more broadly, as well, and the Fed eventually decided its ultimate goal would be to return to an all-Treasury portfolio.

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St Louis Mortgage Lending or In House Financing: Another Recession May Be Coming

liberty — Wed, 11 Jan 2012 19:58:08 +0000

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St. Louis Finance and Customer Financing News: Recession To Be or Not To Be?

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A summer of modest economic growth is helping dispel lingering fears that another recession might be near. Whether the strength can be sustained is less certain.

The economy grew at an annual rate of 2.5 percent in the July-September quarter, the Commerce Department recently said. But the growth was fueled by Americans who spent more while earning less and by businesses that invested in machines and computers, not workers.

The expansion, the best quarterly growth in a year, came as a relief after anemic growth in the first half of the year, weeks of wild stock market shifts and the weakest consumer confidence since the height of the Great Recession.

The economy would have to grow at nearly double the third-quarter pace to make a dent in the unemployment rate, which has stayed near 9 percent since the recession officially ended more than two years ago.

For the more than 14 million Americans who are out of work and want a job, that’s discouraging news. And for President Barack Obama and incumbent members of Congress, it means they’ll be facing voters with unemployment near 9 percent.

“It is still a very weak economy out there,” said David Wyss, former chief economist at Standard & Poor’s. For now, the report on U.S. gross domestic product, or GDP, sketched a more optimistic picture for an economy that only two months ago seemed at risk of another recession.

Some economists doubt the economy can maintain its modest third-quarter pace. U.S. lawmakers are debating deep cuts in federal spending next year that would drag on growth. And state and local governments have been slashing budgets for more than a year.

Obama’s $447 billion jobs plan was blocked by Republicans, meaning that a Social Security tax cut that put an extra $1,000 to $2,000 this year in most American’s pockets could expire in January. So could extended unemployment benefits. They have been a key source of income for many people out of work for more than six months.

Nor is the economy likely to get a lift from the depressed housing market. Typically, home construction drives growth during an economic recovery. But builders have been contributing much less to the economy this time. Wyss said that the collapse of housing had probably depressed annual growth by as much as 1.5 percentage points in the past two years.

Paul Ashworth, chief U.S. economist for Capital Economics, predicts that growth will cool in the fourth quarter and next year. “While our baseline forecast does not include an outright contraction, we expect GDP growth to average a very lackluster 1.5% next year,”Ashworth said in a note to clients.

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St Louis Home Loan Mortgage and In House Financing: Home Prices Dropping

liberty — Sat, 07 Jan 2012 16:11:54 +0000

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St. Louis Mortgage Refinancing and Customer Financing News: Home Prices Have Dropped

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The Standard & Poor’s/Case-Shiller index showed today that home prices increased in August from July in 10 of the 20 cities tracked. That marked the fifth straight month that at least half of the cities in the survey showed gains.

The biggest price increases were in Washington, Chicago and Detroit. The greatest declines were in Atlanta and Los Angeles. Over the past 12 months, prices have fallen in all but two cities including Detroit and Washington.

But here’s the bad news. Analysts warn that prices are certain to fall again once banks resume millions of foreclosures that have been delayed because of a yearlong government investigation into mortgage lending practices.

The index, which covers half of all U.S. homes, measures prices compared with those in January 2000 and creates a three-month moving average. The August data are the latest available.

Home prices have stabilized in coastal cities over the past six months, helped by a rush of spring buyers and investors. But this year, home prices in many cities, including Cleveland, Detroit, Las Vegas, Phoenix and Tampa, have reached their lowest points since the housing bust more than four years ago.

Sales of previously occupied home sales are on pace to match last year’s dismal figures which has been the worst in 13 years. Sales of new homes fell to a six-month low in August and this year could be the worst since the government began keeping records a half century ago.

The housing market is a key reason why the economy continues to struggle more than two and a half years after the recession was said to have ended. Many fear that another recession or what is called a double-dip may be approaching in 2012.

Foreclosures and short sales which is when a lender accepts less for a home than what is owed on a mortgage has made up about 30 percent of all home sales last month, up from about 10 percent in past years. The large number of unsold homes and foreclosures are sending prices lower and hurting sales.

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St Louis Home Loan and In House Financing: Default Notices Go Up

liberty — Sat, 10 Dec 2011 15:31:30 +0000

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St. Louis Mortgage Refinancing and Customer Financing News: Default Notices Spike
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A recent report by RealtyTrac says first-time default notices were filed on 78,880 homes last month, marking a nine-month high and up 33 percent from July. It was the biggest increase since August 2007. But as these numbers went up, notices were actually down 18 percent from the same month last year and were down 44 percent from the monthly peak reached in April 2009 during the tail end of the recession.

Many economists feel that this rise in default filings in no way suggests that a new foreclosure problem was on the horizon, but that some of the backlog related to documentation problems was being worked out of the system, said Rick Sharga, senior vice president at RealtyTrac. In addition, foreclosure activity was halted temporarily late last year due to claims that lenders relied on “robo-signing,” where documents were signed without reviewing the case files.

Total foreclosure filings which include default notices, scheduled auctions and repossessions were sent to 228,098 homes, a 7 percent increase from July but down 33 percent from August 2010. Bank repossessions fell 4 percent to a six-month low of 64,813 homes. Repossessions have come down 37 percent from the peak of 102,134 hit in September 2010.

Nevada once again had the highest state foreclosure rate with one in every 118 homes receiving a foreclosure filing in August. Nevada has held the top spot for over four years. Even so, Nevada saw a 3 percent decrease in filings as scheduled auctions and bank seizures eased.

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St Louis Mortgage Broker and Consumer Financing: Another Recession Coming

liberty — Fri, 09 Dec 2011 20:46:39 +0000

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St. Louis Home Loan Mortgage and In-House Financing News: Chief Economist Says 40 Percent Chance of Recession
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People throughout the nation are desperately wondering if this country will be back down into recession or finally up toward a recovery. Moody’s Analytics Chief Economist Mark Zandi says the inflection point for the economy will likely occur in the coming months and before the 2012 election. Zandi said there is a 40 percent chance the economy will slide back into recession within the next year.

Real GDP during the first half of 2011 increased at nearly 1 percent annualized rate and job growth slowed from close to 200,000 new positions per month to barely positive at the end of the summer. “This is not sustainable. Unless spirits improve soon, businesses will ramp up layoffs, consumers will pull back and the economy will fall into another recession,” Zandi said in a research note.

Zandi said the problems threatening the economy is a laundry list of outside and artificial forces created by the struggling economies in Europe and the “psychologically debilitating events in Washington,” such as the recent debt crisis debacle and subsequent Standard & Poor’s downgrade.

But at its core is housing. Before a Senate subcommittee, Zandi said the U.S. economy faces an overhang of 1.25 million vacant homes and roughly 3.5 million loans in the foreclosure process or more than 120-days delinquent.

Signs of restarting foreclosures in the recent report from RealtyTrac was a good sign of progress, Zandi said. “Housing generally is a major source of growth early in recovery. Two years into a recovery housing should be a tailwind to growth and of course it’s not. It’s a drag. Housing is not adding to growth,” Zandi said. “It’s subtracting.”

Some monumental litigation sagas could be resolved in the coming months to help both the banks and the government-sponsored enterprises to address housing going forward. These include the servicing settlement between banks and the 50 state attorneys general and the mortgage securities lawsuits between, again, the banks and the Federal Housing Finance Agency. With the banks able to put their mortgage woes behind them, the economy might be able to move forward.

“The inflection point will come sooner than later,” Zandi said. “The servicer has been slow and arduous, but I think it will be solved well before the next election, hopefully in the next few months. I’m hopeful the FHFA lawsuit will be resolved over the next few months. A few cases may be extended after the election and be ongoing for many, many years. But I’m hopeful that the fallout of the suit is well before then.”

The U.S. banking system as a whole is in reasonably good shape, he said. Many small banks will fail, and Bank of America continues to shift businesses and executives around, but credit has been slowly made available.

Commercial and industrial loans are up as much as 6 percent from last year. Auto loans and small business loans are also on the rise. “I don’t think the banking system is a real problem with the economy. There is an issue of writing first mortgages but I don’t think it’s capital. I think it’s more litigation risk and putback risk,” Zandi said. We shall see.

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St Louis Business and Customer Financing: Is Another Recession Looming

liberty — Mon, 28 Nov 2011 15:59:24 +0000

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St. Louis Mortgage Broker and In-House Financing News: Predictions Point To a 60 Percent Chance of Recession
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The St. Louis Refinancing Group news team has learned that the bond market indicator that has predicted every U.S. recession since 1970 shows that the economy has about a 60 perent chance of contracting within 12 months.

The so-called Treasury yield curve, adjusted for distortions caused by the Federal Reserve’s record low zero to 0.25 percent target interest rate for overnight loans between banks, shows that two-year notes yield 20 basis points, or 0.20 percentage point, less than five-year notes, according to Bank of America Corporation research. The unadjusted gap of 79 basis points at the end of last week indicates the chance of recession at about 15 percent.

Short-term rates have been higher than longer-term yields, or inverted, before each of the seven recessions since 1970. Unemployment has held at or above 9 percent every month except two since May 2009, including a reading of 9.1 percent in September.

“The adjusted curve is giving a powerful signal for an upcoming U.S. recession,” said Ruslan Bikbov, a fixed-income strategist in New York at Bank of America, one of the 22 primary dealers of U.S. government securities that trade with the Fed. “If that happens, the Fed’s target rate could remain near zero beyond 2014,” more than a year longer than the central bank has indicated, he said in an interview on October 3rd.

Bank of America’s research is sending the same message as the Economic Cycle Research Institute and Bill Gross, manager of the world’s biggest bond fund, which say the U.S. may be headed into a decline. Fed Chairman Ben S. Bernanke recently said in a testimony to Congress that the central bank can take further steps to sustain a recovery that’s “close to faltering” after almost three-years of near-zero interest rates and $2.35
trillion of bond purchases.

The Organization for Economic Cooperation and Development cut its forecasts for the U.S. last month, saying the $15 trillion economy likely grew 1.1 percent in the third quarter and will expand just 0.4 percent in the fourth.

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St Louis Lending and In House Financing: Recession Over According to Experts

liberty — Sat, 26 Nov 2011 18:05:10 +0000

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St. Louis Mortgage Refinancing and Customer Financing News: Recession Over, But Incomes Still Falling
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Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession which occurred from December 2007 to June 2009 we noticed that household incomes fell 3.2 percent.

The finding helps explain why Americans’ attitudes toward the economy, the country’s direction and its political leaders have continued to sour even as the economy has been growing. Unhappiness and anger have come to dominate the political scene, including the early stages of the 2012 presidential campaign.

The full 9.8 percent drop in income from the start of the recession to this June which was the most recent month in the study appeared to be the largest in several decades, according to other Census Bureau data. Gordon W. Green Jr., who wrote the report with John F. Coder, called the decline “a significant reduction in the American standard of living.”

That reduction occurred even though the unemployment rate fell slightly, to 9.2 percent in June compared with 9.5 percent two years earlier. Two main forces appear to have held down pay: the number of people outside the labor force neither working nor looking for work has risen; and the hourly pay of employed people has failed to keep pace with inflation, as the prices of oil products and many foods have jumped.

The new study by Mr. Green and Mr. Coder is based on monthly census surveys, rather than the annual data that appeared in last month’s census report on income. The monthly figures allow researchers to measure income changes more precisely during a recession or a recovery and provide more current information.

In their new study, Mr. Green and Mr. Coder found that income dropped more, in percentage terms, for some groups already making less, a factor that they say may have contributed to rising income inequality. From June 2007 to June of this year, they said, median annual household income declined by 7.8 perent for non-Hispanic whites, to $56,320, and by 6.8% for Hispanics, to $39,901. For blacks, household income declined 9.2 percent, to $31,784.

Income, after adjustment for inflation, declined fairly substantially for households headed by people under age 62, but it rose 4.7 percent for those headed by people 65 to 74, many of whom are not in the labor force. The change was negligible for those 62 to 64.

The type of employment also made a difference. Real median annual income declined to a similar degree for households headed by private-sector wage workers (4.3 percent) and government-sector workers (3.9 percent), but fell much more for the self-employed (12.3 percent). Family households generally had larger declines in real income than other households.

Men living alone showed a bigger decline than women living alone. Education levels were also a factor. Median annual income declined most for households headed by someone with an associate’s degree, dropping 14 percent, to $53,195, in the four-year period that ended in June 2011, the report said. For households headed by people who had not completed high school, median income declined by 7.9 percent, to $25,157. For those with a bachelor’s degree or more, income declined by 6.8 percent, to $82,846.

Republicans blame Mr. Obama for the slump, saying he has issued a blizzard of regulations and promised future tax increases that have hurt business and consumer confidence. Those arguments have been repeatedly heard as the Senate debated the jobs bill.

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St Louis Home Loan Mortgage: What Is The Best Investment

liberty — Mon, 13 Jun 2011 01:56:56 +0000

St Louis Mortgage and Real Estate News –

St Louis Loans and In-House Financing News: Consumers Still Believe Home Ownership Is The Best Investment
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According to a report by Pew Research released in April 2011, this figure is only down 3 percent from 1991.

Pew cites a CBS News/New York Times survey completed in 1991. Of those 81 pecent of the adult sample, 37 percent ”strongly agree” that a home is the ultimate long-term investment, while 44 percent only moderately agree.

Both figures indicate less adamant view than the 1991 survey.

Pew finds the overwhelmingly positive results notable in light of the fact that 47 percent of survey respondents said their home value depreciated since the beginning of the recession.

About one-third of those surveyed claimed their home value has stayed the same, while 17 percent said their homes are now worth more than before the recession.

Almost half (44 percent) of individuals whose homes lost value said they expect to recoup their equity losses in three to five years.

Another third are less optimistic and believe it will take between six and 10 years.

Homeowners aren’t the only people who consider a house the best long-term investment one can make.

Approximately 81 percent of current renters surveyed by Pew reported they would like to buy a house at some point. One-quarter said they would continue to rent.

Homeownership ranked first among long-term financial goals for those who took the survey.

That prospect was followed closely by living comfortably during retirement, being able to pay for their children’s college and being able to leave an inheritance.

Pew Research polled 2,142 adults between March 15 and March 29 for this survey. The survey sample was comprised 57 percent of current homeowners and 30 percent of renters.

The remaining percentage of people had special living arrangements, such as living with family members.

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St Louis Commercial Loans and Mortgage: Malls Still Vacant

liberty — Fri, 20 May 2011 16:29:20 +0000

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St Louis Refinancing Loans and In-House Financing News: Malls Vacancies Hit All Time High
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Even as the economy picks up steam, many of the nation’s malls and shopping centers are suffering a hangover due to changing consumer habits and the fallout from a massive building boom. Mall vacancies hit their highest level in at least 11 years in the first quarter, new figures from real-estate research company Reis Inc. showed.

In the top 80 U.S. markets, the average vacancy rate was 9.1 percent, up from 8.7 percent.

The outlook is especially bad for strip malls and other neighborhood shopping centers as seen by St Louis mortgage brokers.

Their vacancy rate is expected to top 11.1 percent later this year, up from 10.9 percent, Reis predicts. That would be the highest level since 1990.

In 2005, the mall-vacancy rate hit a low of 5.1 percent. For strip centers the boom-time low vacancy rate was 6.7 percent that same year.

Not all retail properties have suffered as much, especially on the high end.

Large, publicly traded mall owners like Simon Property Group Inc. and Taubman Centers Inc., which tend to own top-tier properties, have trimmed their vacancy rates to 7 percent or lower and lifted their lease rates in the past year, buoying their stock.

But a broader glut has struck some of the exurbs that saw heavy housing development during the boom, where malls and strip centers built for growth that never came.

More than one billion square feet of retail space was added in the 54 largest U.S. markets since the start of 2000, according to CoStar Group’s Property & Portfolio Research Inc. of Boston.

In part, the decline reflects a continued drag on spending from the recession.

But many retailers that had been stalwart mall- and strip-center tenants, like Borders Group Inc. and Blockbuster Inc., have floundered.

Even successful chains have closed and shrank hundreds of stores as they retrenched.

Additionally, the recession appears to have speeded a shift in habits that has more Americans shopping online.

Online retailing surged to 12 percent of the total during the holidays.

“We will hit a tipping point soon, if we have not already, where online will become so mainstream that retailers will wonder what they need some of these big boxes for, when you have a retail presence in everyone’s pocket via your smart phone,” said Leon Nicholas of retail consultancy Kantar Retail.

In some towns, city officials are looking for ways to revive, or even redeploy, mall space.

Vacancies and falling rents have especially hurt strip centers.

Some regional grocers have been clobbered by the downturn and new competition from big box stores like Wal-Mart, hurting strip centers anchored by their stores.

Some landlords have hedged against the impact of online shopping by adding more tenants like restaurants, entertainment venues, fashion stores and other wares not often bought online.

Longtime strip center tenants like dentists and tax preparers are even more coveted now.

But many small businesses typically housed in strip centers have been particularly hurt by the weak economy.

“The ongoing challenge is there is very little capital for those small businesses to expand and open new stores,” said Jim Sullivan, a retail-property analyst with Green Street Advisors.

He continues: Contributions By The“Until that capital arrives in a meaningful way, strip-center vacancies are likely to remain stubbornly high.”

Contributions By The Wall Street Journal

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St Louis Mortgage: Weak Recovery For Years

liberty — Sun, 06 Mar 2011 02:38:45 +0000

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St Louis Loan and Finance News: Federal Reserve Predicts Weak Recovery For Years
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According to minutes from the Federal Reserve’s November 2010 meeting, more than half of the central bank’s policymakers thought it would take about five or six years for unemployment, growth and inflation to return to more normal levels.

Other Fed members warned the full economic recovery could take even longer than that. The much weaker forecast is the major reason that policymakers decided to try and jump start growth by pumping an additional $600 billion into the economy through the purchase of long-term bonds.

That plan, known as quantitative easing (QE), has been criticized by several economists, politicians and foreign central bank officials.

The Fed now expects the economy to grow between 2.4 percent to 2.5 percent this year, compared to an earlier forecast of growth between 3.0 percent and 3.5 percent.

The Fed also trimmed its 2011 forecast to growth of between 3 percent and 3.6 percent. Its earlier estimate was for growth of 3.5 percent to 4.2 percent.

And the Fed now forecasts unemployment will only fall to between 8.9 percent to 9.1 percent in 2011, well above the 8.3 percent to 8.7 percent unemployment rate it previously predicted for 2011.

The Fed also indicated it expects unemployment to only drop to between 6.9 percent to 7.4 percent by 2013. To put that into context, the unemployment rate was 4.6 percent in 2007, the last year before the recession.

The central bank also maintained that inflation should not be a problem for the foreseeable future.

Prices for consumer goods are expected to rise a little faster than in the Fed’s previous estimate, but still well less than 2 percent through at least 2012.

The Fed stated that price increases are now judged to be too low to maintain its goal of price stability, but some policymakers at the Federal Reserve have expressed concern that the steps the central bank is taking to stimulate growth could lead to higher inflation down the road.

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