Tuesday, October 30, 2007

10 Reasons the Housing Market Will Begin to Recover 2nd Quarter 2008

  1. The Federal Open Market Committee (FOMC) Will Continue to Lower Interest Rates - This will continue stimulating the economy, keeping unemployment low in addition to helping ARMs reset to lower interest rate.

  2. The Economy is Creating Jobs and Unemployment is Low - The last two housing downturns were due to recessions in the U.S. economy (80-81, 90-94)

  3. Lenders are Helping Homeowners with Loan Modifications on ARM Resets - This will decrease the number of homeowners needing to sell or going into foreclosure

  4. Subprime ARM Resets Peak in 1st Quarter 2008 with Minimum Resets by Year End - The credit markets froze in fear of these resets. Once past, more credit markets will make money available

  5. Home Builders are Dumping Standing Inventory to Remove Inventory off the Books by Year End - The competition to the resale market will be greatly reduced

  6. Sellers of Existing Homes Will Take Their Homes Off the Market at Year-End that Don’t Need to be Sold - Combining this with those that need to sell and lowering their sales prices during the holiday slow period, will cause the months to sell inventory to come down

  7. Credit Markets for Jumbo Financing are Opening Up - The spread of interest rates between conforming and jumbo has been greatly reduced. Many programs are still available making it easy for buyers to qualify

  8. Fires in So. California Will Create Construction Jobs and Help Supporting Industries - California has been losing jobs in this area. This in itself will keep a cap on the unemployment rate. Furniture, appliances, landscaping and architects will benefit

  9. Real Estate Investors are Stepping Up and Making Offers - Mostly absent in 2007, Real Estate investors are stepping up to take advantage of the foreclosures and lowered prices

  10. Buyer Sentiment of Those Waiting Will Change as Foreclosure Reporting Lessens - There are so many buyers just waiting for a sign as they fear prices will continue down. The sign will be decreasing foreclosures and inventory time to sell reduced and reported by the media
Information provided by: Kevin Budde, Branch Manager Countrywide Home Loans. Kevin Budde has been in the mortgage industry since 1975 in Orange County.

Monday, October 8, 2007

Economic Week in Review - Oct. 8, 2007

Employment rebounds
The week's key report was released on Friday, with new Labor Department data on the September employment situation indicating an improved payroll picture, as was expected. Coupled with Thursday's unemployment report, the two releases painted a benign employment situation. In other news, activity in the manufacturing and services sectors slowed, and factory orders declined; consumer credit remained healthy. For the week, the S&P 500 Index rose 2.0% to 1,557 (and has earned a year-to-date total return of 11.4%). The yield of the 10-year U.S. Treasury note rose 7 basis points to 4.64%.

Manufacturing slowed
In September, manufacturing continued to expand—though at a slower rate—as the Institute for Supply Management (ISM) Index of manufacturing activity dropped to 52.0 from 52.9 the previous month. This marked the third consecutive month of declines for the index, which now stands at its lowest level since March. Weak numbers on core capital goods orders and shipments indicated weaker output, as new orders and production grew more slowly. While the report suggested a slowing in manufacturing, the sector is holding up despite ills elsewhere in the economy, especially in housing.

Nonmanufacturing activity eased
The ISM Non-Manufacturing Index also showed a slight decrease for September, dropping to 54.8 from the prior month's 55.8. The report showed that employment activity in the nonmanufacturing sectors increased during the month, as did prices, which saw a big rise. The report came in above consensus expectations and suggested that, overall, the outlook for the services sector remains sunny, though activity may be muted for the rest of the year.

Factory orders fell
In August, factory orders dropped a larger-than-expected 3.3%, wiping out most of July's 3.4% increase. Durable-goods orders sank 4.9%, while nondurable-goods orders posted a 1.6% decline, the largest since January. A decline in oil and coal shipments, driven by August's sharp drop in oil production, accounted for most of the weakness in durable goods.

Payroll picture improved
Two reports from the Labor Department painted an improved employment picture, relieving fears of an economic downturn within the financial markets. Thursday's release showed initial jobless claims for the week ended September 29 increasing to 317,000 from an upwardly revised 301,000 the previous week, bringing claims back in line with expectations. Aside from the occasional spike, during the year jobless claims have remained essentially flat.

Friday's employment situation report showed that employment growth rebounded in September, with a net job gain of 110,000. In addition, August's report of 4,000 jobs lost underwent a major revision, showing an ultimate gain of 89,000. Public-sector employment, which had dragged the preliminary numbers down, actually rose in both August and September. Gains also continued in September for service industries, suggesting that spillover from the housing downturn remains largely contained, and private-sector employment as a whole increased. Overall, the unemployment rate rose very modestly in September to 4.7%, from 4.6% in August.

Consumer credit increased
In August, consumer credit increased $12.2 billion, or an annualized 5.9%, to $2.5 trillion. A report released by the Federal Reserve showed that the latest hike was driven by an upswing in revolving credit, which rose 8.4% in August on the heels of July's 7.7% gain. Rebounding auto sales during August also helped to increase demand for nonrevolving credit, which was up 4.8%.

The economic week ahead
On Tuesday of next week, the Federal Open Market Committee will release the minutes from its September 18 meeting, when it slashed both the federal funds rate and the discount rate. A report on international trade will appear on Thursday, and Friday's releases will cover the Producer Price Index, retail sales, and business inventories.

by: Cheryl Anderson