Economy Archives - Page 6 of 40

Fannie and Freddie Could Be Done

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Ever since the financial crisis, Fannie Mae and Freddie Mac have been wards of the federal government, under direct control. This happened when the companies appeared to be on the verge of collapse, and ready to take down a large portion of the mortgage market. With the two GSEs accounting for about 70% of loan originations due to FHA loans, a collapse would have been devastating. Fannie and Freddie are the biggest mortgage lenders in the country, between originations and servicing.

But Barney Frank doesn’t want Fannie Me and Freddie Mac to go back to the way they were before. National Mortgage News Online reports on his opposition:

Chairman Frank said he plans to hold hearings on restructuring the U.S. housing finance system and he has no desire to see Fannie and Freddie return to the former “hybrid” status as a private companies with a public mission.

It is unclear about what might happen going forward, but if Fannie and Freddie are no longer GSEs, they would end up either being completely private, or they would be turned into government home financing programs.

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Goldman Sachs Pulls in a Profit

by Miranda Marquit Leave a Comment

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Goldman Sachs has managed pull in profits as revenues jump. So far, the earnings season for financial companies has been somewhat mixed, with some companies reporting profits (like JP Morgan Chase and Morgan Stanley), while others, like Citi, post losses.

But with Goldman in the profit category, it seems as though things are probably looking better overall for the big banks that seemed on the verge of collapse toward the end of 2008. MarketWatch reports on the Goldman Sachs response to their profits:

“Despite significant economic headwinds, we are seeing signs of growth and remain focused on supporting that growth by helping companies raise capital and manage their risks, by providing liquidity to markets and investing for our clients,” Chief Executive Lloyd Blankfein said in a press release.

Some of the biggest helps to Goldman include underwriting fees it earned, as well as the fact that there were pay cuts. Compensation and benefits were cut in response to public outrage, and Goldman appears to have reaped some benefits.

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Housing Starts Down in December

by Miranda Marquit 2 Comments

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The last of the housing market data is being tallied from 2009, and it looks like things have ended on something of a weak note. Housing starts dropped 4% in December. Multi-family housing starts gained, but that small victory was completely overwhelmed by the fact that single-family housing starts were down so much.

In my mind, it appears that the news illustrates continued stress on families. Demand for multi-family units indicates that there are plenty of families in financial trouble, and even suffering through foreclosure, looking for less expensive housing. Single-family housing starts are above the bottom seen in 2009, but they are far from showing strength. Improvement in this area is likely to be slow, depending on a change in the employment situation.

Until families can afford single housing units gain, housing starts are likely to continue to struggle.

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A Look at Foreclosure Distribution in the U.S.

by Miranda Marquit 2 Comments

Even as we hear about a recovering economy, the fact of the matter is that there are some places that have higher rates of foreclosure than others. Here is a chart on foreclosure distribution from 2005 to 2009 found at The Mortgage Reports.

You can see the large spike after the financial crisis toward the end of 2008. And it does appear that foreclosures are declining right now. As long as we see something of an improvement in terms of employment and the overall economy, there should be continued declines in the rate of foreclosure.

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Check the Credit History of Builder

by Kathy T. 2 Comments

When we are ready to buy a car, open a credit card, or jump into the big world of making a home purchase, one of the first things that happens is a lender checks our credit score. Have you paid your bills on time? Do you have any major dings on your credit like a judgement or unpaid child support? Is there a foreclosure in your 10-year history or a short-sale in the last five or seven years?

Like regular consumers, builders also have a credit history. Their credit history is just as important as ours as people again start thinking about buying new construction homes. Why? Consider what it would be like to have a contract on a house and then you wait for construction to be completed so you can close prior to the June 30th deadline to get the $8000 first-time home buyer or the $6500 existing homeowner tax credit. Suddenly, everything stops because the builder’s assets have been frozen because of a credit problem.

There are ways to ensure that you won’t be caught in someone else’s misfortune, according to Ken Kruse, president of Payne Family Homes. He offers tips on how to be sure your builder is financially sound as you consider a new construction home,

Check third-party resources, such as the Better Business Bureau, which may have a rating on the builder, and Dun & Bradstreet, which may have information on a builder’s credit history. And there’s no harm in asking if the builder has a forward-looking view by investing in more land and more floor plans.

Ask lots of questions of your real estate agent, the workers at the houses (but don’t interfere with their work), and even the other people who live in the neighborhood. As the economy improves, the sound of hammering, saws, and drilling should return … make sure they don’t suddenly stop on YOUR house by being sure your builder is financially stable in advance.

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Continued Labor Market Issues Could Mean More Foreclosures

by Miranda Marquit Leave a Comment

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Labor market issues continue to plague the economy, slowing recovery and prompting a host of issues. One of the concerns is that the continued high unemployment rate could lead to an increase in foreclosures down the road. This is because as people continue to lose their jobs (or fail to find jobs), they are less able to make their housing payments. And this could result in foreclosure.

Real Estate Pro Articles makes a very interesting point about the rather vicious cycle we’re seeing with regard to unemployment and the economy:

A greater amount of consumer and business confidence is an essential factor in any economic recovery; financial recovery hinges on it. We need more than just incentive programs to prop up businesses and consumer spending; we need an increase in confidence in the economy across the board. Only when the public’s confidence is raised will consumers feel comfortable in investing their money in real estate as well as the rest of the economy; unfortunately, the economy will need to look like it is faring better before more consumers show a higher level of confidence in it.

Until the economy improves, employers will be reluctant to hire. However, the economy can’t improve until employers hire more people, boosting their ability to spend and make mortgage payments. It’s rather circular. But it’s the way things are right now. So it will be interesting to see how things proceed from here.

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Mortgage Applications on the Rise

by Miranda Marquit 2 Comments

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After taking a bit of a break for the holidays, it appears that mortgage applications are on the rise again. As one might expect, refinancing is in the lead again. But home purchase applications have risen as well, reports MarketWatch:

Refinancing applications jumped 21.8% in the week ended Jan. 8 compared with the week before, which was shortened for the New Year’s holiday. Applications for mortgages to purchase homes rose a seasonally adjusted 0.8% on a week-to-week basis.

With the home buyer tax credit extended and expanded, it is no surprise that people are starting to consider buying homes again. Of course, some of these mortgage applications will be rejected, without good credit scores, but the increase in applications is heartening for the housing market.

And, of course, it makes sense that refinancing applications are on the rise. With mortgage rates still hovering near historical lows, it is natural that home owners want to take advantage. When you refinance to a lower interest rate, it is possible to save thousands of dollars on your home loan.

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Are You Ready for Inflation?

by Miranda Marquit Leave a Comment

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With signs of economic recovery showing, there are concerns that inflation could come with economic growth. This is a common thought, since economic growth often means that prices rise as well, eroding the purchasing power of the dollar. And, indeed, an economist at RBS Securities Inc. believes that inflation is on the way, reports BusinessWeek:

“Inflation will start to tick up again as we get stronger growth,” Stanley said today in an interview on Bloomberg Radio. “I don’t think the Fed is ready to own up to that.”

As a result, there are some expectations that the Fed will have no choice but to raise interest rates in order to combat inflation. It is possible that the Fed will raise rates to 3% by the end of 2010, from their current rate at between 0% and 0.25%.

For savers, this is good news, since it means that they will see a higher yield on their cash investments. For borrowers, though, it means that they will have to pay more in interest charges. If you have a variable mortgage rate, it might be time to refinance. If you have credit card debt, it is best to pay down as much as you can before rates move even higher than they already are.

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Consumers Ready to Abandon Frugality?

by Miranda Marquit 1 Comment

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In the time frame of our short attention spans, this recent recession has been a bit long. Many people who have changed their spending behaviors in accordance with economic conditions appear ready to slide back into pre-recession habits. At least that’s the hope offered by retailers reporting their December sales results.

Last month saw the best monthly retail sales in more than 20 months, with consumers ready to spread a little Christmas cheer after abstaining during the recession. Additionally, rock-bottom discounts in the post-holiday sale fervor further tempted consumers. But, of course, the real point is that consumers appear to be developing comfort with spending money again.

While this is likely to provide a boost to the economy, it is not likely to do much in terms of actually helping individual finances. This is because, in spite of the frugality seen in recent months, many Americans are still in debt. While the savings rate has risen, and debt has decreased, it hasn’t been by enough to overcome the credit spending spree that characterized the 15 or so years leading up to the most recent recession.

If consumers are already tired of frugality and ready to dive back into the instant gratification of credit spending, all it will do is once again raise their debt, reduce their savings — and put them in a worse position for the next economic downcycle.

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Considerations when Buying Foreclosures

by Miranda Marquit 1 Comment

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While the housing market is slowly improving, the fact of the matter is that foreclosures are still very much on the market, and provide a number of interesting opportunities to buy. However, as you move forward with buying foreclosures, it is a good idea to keep some of these considerations, from Real Estate Pro Articles, in mind:

1. Look for a foreclosure in a good location.

2. Research your foreclosure choice, and learn about its back story. Watch out for liens against the home.

3. Keep within your budget, understanding that sometimes even foreclosures can end up out of your price range.

4. If you decide to buy a foreclosure at an auction, make sure that you understand the rules.

5. Know that an auction is not your only choice. You can look for foreclosure listings elsewhere and buy homes from a number of sources.

It is also possible to look into other distressed homes, such as those in pre-foreclosure, or homes that are being sold short, for less than the owner owes.

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