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  • Wed, Apr 7 2010
  • 2:18 PM » Goldman Sachs denies betting against mortgage clients
    Published Wed, Apr 07 2010 2:18 PM by Washington Post
    NEW YORK -- Goldman Sachs, the investment bank that has emerged as a Wall Street leader and the target of public ire in the aftermath of the financial crisis, said Wednesday it did not unfairly bet against clients in the mortgage securities market and defended its relationship with American...
    Click Here to Read the Full Article

    Source: Washington Post
  • 2:17 PM » Did You Know: Residential Building Permits, 1990-2008
    Published Wed, Apr 07 2010 2:17 PM by Google News
    Did you know that in fifteen metropolitan regions, the central city more than doubled its share of permits between 1990 and 2008?
  • 2:16 PM » HUD Terminology Changes Seek to Resurrect Blighted Areas
    Published Wed, Apr 07 2010 2:16 PM by
    The Department of Housing and Urban Development has changed the definitions of the terms "foreclosed" and "abandoned" to increase the reach of its Neighborhood Stabilization ...
    Click Here to Read the Full Article

  • 2:16 PM » February Report Shows FHA Volume Down 25%
    Published Wed, Apr 07 2010 2:16 PM by
    FHA single-family originations have tailed off during the first two months of 2010 as loan production fell to $22.3 billion in February-off 25% since December.
    Click Here to Read the Full Article

  • 2:16 PM » Rising Mortgage Rates Not Fed's Fault
    Published Wed, Apr 07 2010 2:16 PM by CNBC
    The 30-year fixed hit 5.31 percent last week, the highest level since the first week of last August, according to the Mortgage Bankers Association. In response, mortgage applications fell 11 percent, driven entirely by a nearly 17 percent drop in refis.
  • 8:27 AM » Bernanke Speaks: Expect Deficit Warnings
    Published Wed, Apr 07 2010 8:27 AM by WSJ
    Ben Bernanke ’s speech at the Dallas Chamber of Commerce Wednesday afternoon is a coming-out for the Federal Reserve chairman after a grueling winter. Mr. Bernanke had been keeping a low profile as he waited for the Senate to confirm him for a second four-year term at the helm of the Fed. He’s also been busy working the halls of Congress to convince lawmakers not to strip the Fed of its powers as a bank regulator. With the confirmation complete and the Fed’s powers largely preserved as the overhaul bill comes into shape, Mr. Bernanke plans to look outward more often in the months ahead with speeches in Dallas, South Carolina and elsewhere. It is an extension of a PR campaign he initiated last year but put on hold while he was hunkered down in Washington. The idea is to spend more time explaining to the public how the Fed behaved during the crisis and how Mr. Bernanke sees a recovery unfolding. As he restarts this campaign, he is likely to go beyond the dry mechanics of monetary policy and the Fed’s exit from market rescue programs. One issue on his agenda for the days ahead: Immense government budget deficits. Mr. Bernanke has warned lawmakers in recent hearings at the House and Senate that U.S. deficits aren’t sustainable. Formulating a credible plan to gradually shrink them over time, he has noted, could help the economy now by bringing down long-term interest rates. Yields on 10-year Treasury notes have risen to nearly 4% from under 3.25% in late November, in part because investors worry about the enormity of debt the government is selling to the public. That rise in rates doesn’t help the Fed, which is trying to keep interest rates low to spur a recovery. Having made his pitch to Congress, Mr. Bernanke is now likely to make it to the public more broadly. Starting this afternoon.
  • 8:26 AM » Goldman Sachs Denies It Bet Against Mortgage Clients (Update1)
    Published Wed, Apr 07 2010 8:26 AM by Business Week
    Goldman Sachs Group Inc., the most profitable firm in Wall Street history, denied it bet against clients in the mortgage-derivatives market and said it was “grateful” for government assistance in the credit crisis.
    Click Here to Read the Full Article

    Source: Business Week
  • 8:25 AM » Did You Know: Home Buyer "Must-Have" Features
    Published Wed, Apr 07 2010 8:25 AM by Google News
    Do you know what features home buyers really look for in a home?
  • 8:24 AM » Economist's Commentary: Commercial Real Estate Challenges, Financing
    Published Wed, Apr 07 2010 8:24 AM by Google News
    For most commercial Realtors®, the biggest challenge remains the availability of financing to close deals.
  • 8:23 AM » Did You Know: U.S. Employment by Foreign Companies
    Published Wed, Apr 07 2010 8:23 AM by Google News
    Did you know that affiliates of foreign companies operating in the U.S. employed a lot of U.S. residents?
  • 8:21 AM » Infographic: Jumbo vs. Conforming
    Published Wed, Apr 07 2010 8:21 AM by
    Infographic: Jumbo vs. Conforming
    Click Here to Read the Full Article

  • 8:20 AM » More Foreclosure Delays; This Time, Is It Political?
    Published Wed, Apr 07 2010 8:20 AM by
    The three latest government programs to cure the foreclosure crisis have at least one thing in common: none will likely be fully operational until this fall, which will push ...
    Click Here to Read the Full Article

  • 8:19 AM » Ginnie: More 'Big Slugs' of Buybacks Are Unlikely
    Published Wed, Apr 07 2010 8:19 AM by
    The Government National Mortgage Association's president said he does not expect lenders to repurchase delinquent loans from its pools in such large chunks as they did in ...
    Click Here to Read the Full Article

  • 8:19 AM » NCSHA Asks OMB to Simplify HUD’s Housing Credit Tenant Data Requirements
    Published Wed, Apr 07 2010 8:19 AM by National Council of State Housing Agencies
    On March 26, NCSHA sent the Office of Management and Budget (OMB) a read more
    Click Here to Read the Full Article

    Source: National Council of State Housing Agencies
  • 8:19 AM » Real-Estate Player Poised to Pounce
    Published Wed, Apr 07 2010 8:19 AM by WSJ
    Scott Rechler is positioning RXR Realty to start buying again, the latest sign that some investors believe prices are at or near a bottom.
  • 8:04 AM » FOMC Minutes on Housing
    Published Wed, Apr 07 2010 8:04 AM by Calculated Risk Blog
    I want to highlight the housing comments in the for the March 16, 2010 meeting: Participants were also concerned that activity in the housing sector appeared to be leveling off in most regions despite various forms of government support , and they noted that commercial and industrial real estate markets continued to weaken. Indeed, housing sales and starts had flattened out at depressed levels, suggesting that previous improvements in those indicators may have largely reflected transitory effects from the first-time homebuyer tax credit rather than a fundamental strengthening of housing activity . Participants indicated that the pace of foreclosures was likely to remain quite high ; indeed, recent data on the incidence of seriously delinquent mortgages pointed to the possibility that the foreclosure rate could move higher over coming quarters . Moreover, the prospect of further additions to the already very large inventory of vacant homes posed downside risks to home prices . And from the staff: The staff did make modest downward adjustments to its projections for real GDP growth in response to unfavorable news on housing activity , unexpectedly weak spending by state and local governments, and a substantial reduction in the estimated level of household income in the second half of 2009. The staff's forecast for the unemployment rate at the end of 2011 was about the same as in its previous projection. This fits with in response to Minneapolis Fed President Narayana Kocherlakota's speech today: It isn't the size of the sector, but the contribution during the recovery that matters - and housing is usually the largest contributor to economic growth early in a recovery. And as the FOMC notes, there isn't much contribution from residential investment right now (in fact the contribution from RI will probably be negative in Q1 2010). And on employment, residential investment probably contibuted significantly to employment growth following previous recessions...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • Tue, Apr 6 2010
  • 4:59 PM » Let’s Get Real About Equity Required For A Reverse Mortgage
    Published Tue, Apr 06 2010 4:59 PM by
    It is a common belief that one has to have a lot of equity in their home in order to do a reverse mortgage. In reality a reverse mortgage can be done if there are enough proceeds from the reverse mortgage to pay off any current liens. If there aren’t enough reverse mortgage proceeds if the borrower can come up with the difference a reverse mortgage can still be done and benefit them. The Reverse Mortgage improves cash flow because one doesn’t have to make mortgage payments. Even if the reverse mortgage proceeds are used to pay off current liens the senior’s cash flow will be improved because they will have eliminated their mortgage payment. For example, Wayne was struggling to make his mortgage payments of $1,200 a month. The reverse mortgage proceeds were just enough to pay off his current liens. While he didn’t have funds available from the reverse mortgage beyond paying off the mortgage, his cash flow improved by $1,200 a month because he no longer had to make the mortgage payments. When we ran the calculations for Minnesota home owners, Jerry and Dorothy the reverse mortgage proceeds were short $3,000 to pay off their current mortgage. They chose to pull some funds from their savings so they could do the reverse mortgage and eliminate their mortgage payments – a benefit and savings in the long run. (Note that HUD, who insures the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM) does not allow the difference to be from another loan or credit cards. If the funds are coming from an outside source, not from your own resources, then it must be a gift, not a loan to be repaid.) If one is having a hard time making the payments and facing foreclosure the revere mortgage may be the solution in saving their home. Because income and credit scores are not considered to qualify for a reverse mortgage, the reverse mortgage may be a solution. If reverse mortgage funds are not enough to pay off the current loan, we work with foreclosure and housing counselors...
    Click Here to Read the Full Article

  • 4:59 PM » Which Cities Save Commuters the Most With Public Transport?
    Published Tue, Apr 06 2010 4:59 PM by WSJ
    With gas prices going up again it might be worth it to consider public transportation instead. In some cities, it’s a better exchange than others, according to the American Public Transportation Association ’s monthly transit savings report. Getty Images The joy of saving money, New York-style. The average price for regular fuel in the U.S. has risen to $2.83 a gallon — nine cents higher than a month ago and about 80 cents higher than a year ago. Factor in the cost of parking and New York City residents save the most by opting for mass transit: $1,149 a month and $13,784 a year. Both Boston and San Francisco residents also, on average, save more than $1,000 a month by using public transportation, according to the report. Nationally, public transit riders save about $9,293 a year and about $774 each month. There were some surprises in the list of top 20 cities for saving. Some relatively smaller cities, such as Cleveland, Minneapolis and Honolulu all ranked in the top 15, allowing citizens to save between $800 and $900 a month. The more populated Washington, D.C., meanwhile, fell relatively low on the list in 15th place, with residents saving $757 a month. And in last place, Pittsburg, where locals could save $681 a month or $8,174 a year if they opt for mass transit instead. To be sure, public transportation has its downsides, for example, crowded trains and buses, the and no cell phone service underground. And the crowds are likely to be even worse — and the prices higher — this year as to adjust for battered state and local budgets. To calculate how much you would save, if any, from the public-transportation association. Below are the top 20 cities for savings and how much a consumer can expect to save per month: 1. New York $1,149 2. Boston $1,032 3. San Francisco $1,015 4. Chicago $955 5. Seattle $938 6. Philadelphia $928 7. Honolulu $894 8. Los Angeles $839 9. San Diego $827 10. Minneapolis $826 11. Denver $804 12. Portland $803 13. Cleveland $803 14. Baltimore...
  • 3:40 PM » Fed’s Kocherlakota: Fed Will Need To Sell Mortgages At Some Point
    Published Tue, Apr 06 2010 3:40 PM by WSJ
    The Federal Reserve could conceivably divest itself of mortgage securities in a matter of about half a decade with little financial or economic impact if it chooses to follow that path, a central bank official said Tuesday. Kocherlakota “It is likely that the Federal Reserve will have to sell a nontrivial amount of its [mortgage] holdings if it is to be able to normalize its balance sheet in the next two decades,” Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said. “I am optimistic that we will be able to normalize our balance sheet by the end of the teens” by way of a combination of active selling of assets, coupled with the passive process of allowing securities to mature. Kocherlakota, who isn’t currently a voting member of the interest rate setting Federal Open Market Committee, was speaking before the Minnesota Chamber of Commerce , in Bloomington, Minn. His comments came from , and in his address he said he expects to see a modest recovery, low inflation and continued difficult circumstances for the labor market. But the meat of his remarks centered on how the Fed can return its balance sheet, which has more than doubled to just north of $2 trillion, back to levels seen before the start of the financial crisis. A major driver of the balance sheet’s expansion has been a program, ended in March, that had the Fed buy some $1.25 trillion in mortgage securities, along with considerable amounts of agency securities and long term Treasurys. The large size of the balance sheet has the potential to become an inflationary problem for the economy if not managed properly. Kocherlakota and other central bankers have been thinking about ways the Fed can start reducing the balance sheet in a way that doesn’t thwart the recovery and drive a big surge in rates. While Kocherlakota didn’t say much about the timing for starting the active sale of mortgage securities, he did say it would be an important piece of the puzzle. Allowing a passive process suggests...
  • 3:09 PM » Home Builders Drooping as Tax Credit Nears Expiration
    Published Tue, Apr 06 2010 3:09 PM by Google News
    While analysts debate whether or not the housing market has bottomed, building stocks seem to be signaling that another drop in activity is on the way. (We’re not saying double-dip, but we kinda just did.) The decline follows builder Meritage Homes Corp., which said Tuesday that the home-buyer tax credit didn’t jump-start sales as much as hoped, while Credit Suisse downgraded a trio of companies. Credit Suisse lowered its ratings on KB Home and NVR to neutral from outperform, and cut PulteGroup, the nation’s largest builder, to underperform from neutral. “We think that much of the ’spring trade’ has played out and we expect a slowing in housing demand after the April 30th expiration of the home buyer tax credit,” analyst Daniel Oppenheim wrote in a note to clients. Industry watchers have long warned that the tax credit, offering first-time purchasers up to $8,000 and move-up buyers $6,500, has pulled demand forward and the market will soften once it ends. However, it’s unclear how many buyers even acted. Steven Hilton, Meritage’s chief executive, said the spring selling season started off better than last year, but it “didn’t appear to positively impact our sales in the first quarter as much as we’d hoped.” Abnormally wet and cold winter weather, he said, took a toll on sales and closings. Even so, Scottsdale, Ariz.-based Meritage still expects to be profitable for the year. It expects to report $201 million in closing revenue on 808 homes at an average price of $248,000 for the first quarter. The cancellation rate was 18%, as fewer buyers abandon signed contracts. That compares with $231 million, 932 homes and the same average price a year earlier. The cancellation rate then was 26%. Meritage builds homes in six states, including Nevada, California and Florida, which were battered by the housing downturn. It also has a big presence in Texas, which hasn’t been as hard hit. As of Tuesday afternoon, KB Home leads the sector with a 2.83% decline, while Meritage and Pulte...
  • 3:09 PM » Writing the Checks to Appraisal Associations: I've Made My Choices
    Published Tue, Apr 06 2010 3:09 PM by Google News
    Guest Author: Mark R. Linné, is Executive Vice President of AppraisalWorld, an innovative provider of advanced valuation technology for appraisers. He is a veteran appraiser who has focused on technology, data and valuation modeling and their roles in appraisal practice....
  • 2:36 PM » NAHB Petitions EPA to Delay Lead-Paint Work Regulations Until Agency Can Show Capacity
    Published Tue, Apr 06 2010 2:36 PM by NAHB
    Press Release
  • 12:31 PM » Dallas Fed’s Fisher: Inflation Low on List of Worries
    Published Tue, Apr 06 2010 12:31 PM by WSJ
    Richard Fisher , president of the Federal Reserve Bank of Dallas , built a reputation as an outspoken inflation fighter in the summer of 2008, when he lobbied the Fed to push interest rates higher to combat rising consumer prices even though the financial crisis was still raging. Bloomberg News Dallas Fed President Richard Fisher Today, inflation is low on his list of worries. In fact, he says there is small risk that deflation, or falling consumer prices, could become a bigger problem for the Fed in the months ahead than higher inflation. That puts him on the side of those who want to keep interest rates near zero for at least several more months — if not much longer — to help the recovery get on stronger footing. In a wide-ranging interview, Mr. Fisher said the global economy is burdened by such large amounts of unused industrial capacity and idle labor that consumer prices face little risk of shooting higher. “Because of the enormous slack in the system, and as you know I tend to be very vigilant about inflation, we’re just not seeing price pressures right now,” Mr. Fisher said. “If anything, the tail risks are on the deflationary side.” (“Tail risk” is market-speak for nightmare scenarios, low probability events that can be very damaging to markets and the economy.) Fed officials have been engaged in recent weeks in a deepening debate about whether inflation is slowing even as the economy recovers. Many measures of inflation are slowing, but some Fed officials dismiss these measures because they might be getting skewed by a sharp slowdown in housing costs. It is an important debate: If Fed officials come to the view that inflation is slowing a lot; it could push interest-rate increases further down the road, possibly into 2011. Though he says he’s still worried about longer-term inflation risks tied to immense U.S. budget deficits, Mr. Fisher’s current view on inflation puts him close to others, like San Francisco Fed President Janet Yellen , who say inflation is...
  • 12:31 PM » Fed Research Looks at Difficulties Gauging Inflation Expectations
    Published Tue, Apr 06 2010 12:31 PM by WSJ
    Federal Reserve officials have long argued that keeping inflation expectations under control allows them to control the actual level of inflation. But Monday from the Federal Reserve Bank of Dallas argues that there isn’t any good way yet to derive from financial markets where long-run inflation expectations actually lie. This suggests that, when central-bank officials describe long-run inflation expectations as well contained, as they do these days, those conclusions are based more on art than on science. The paper was written by Carlos E.J.M. Zarazaga . To reach his conclusion, the economist looked at the message offered by the “forward rates” method, which relies on government bond yields. Treasurys of all maturities are sensitive to inflation worries, but they are also sensitive to other types of risk. The problem is that the interplay of those factors is hard to disentangle. “The disturbing property of risk premia that move around over time is that they can severely distort popular inflation-expectations indicators,” Zarazaga wrote. This means that market-based models “could give the wrong impression that long-run inflation expectations have switched dangerously to a deflationary mood when, in reality, that is a mirage produced by declining risk premia,” he wrote. The economic profession hasn’t yet figured out how to deal with the problem. “Some time will pass before many of the remaining theoretical and empirical issues relevant to the construction of reliable long-run inflation-expectations indicators are sorted out,” Zarazaga noted. “Policymakers are well advised not to attribute the relatively ample fluctuations observed in popular long-run inflation expectations indicators to actual changes in those expectations,” he wrote. The paper’s findings put the Fed in a bit of a pickle, especially now. Actual levels of inflation are low and have been trending lower for some time due to weak demand and high unemployment. Key Fed officials think that the gap between actual...
  • 12:31 PM » Geography of a Recession
    Published Tue, Apr 06 2010 12:31 PM by The Big Picture
    According to the U.S. Department of Labor’s Bureau of Labor Statistics, there are nearly 30 million people currently unemployed — that’s including those involuntarily working parttime and those who want a job, but have given up on trying to find one. In the face of the worst economic upheaval since the Great Depression, millions of Americans are hurting. “The Decline: The Geography of a Recession,” as created by labor writer LaToya Egwuekwe, serves as a vivid representation of just how much. Watch the deteriorating transformation of the U.S. economy from January 2007 — approximately one year before the start of the recession — to the most recent unemployment data available today. Hat tip Michael P
    Click Here to Read the Full Article

    Source: The Big Picture
  • 10:58 AM » Morning Greece
    Published Tue, Apr 06 2010 10:58 AM by Calculated Risk Blog
    Just an update ... Market News International that Greece may want to cut the International Monetary Fund out of the rescue package. However an unnamed Greece official denied the report, from the WSJ "Don't expect at this point any major push by Athens to get the IMF out of the picture," the official said. "There is unhappiness with the support package because it's vague. And, yes, the involvement of the IMF is something that we could do without," the official said. "But it was us who first raised the IMF card and I don't think the Greek government will or can renegotiate the package. It will show inconsistency." This official said Greece would like more clarity on any aid package involving the IMF, but the government doesn't plan to demand the agreement be renegotiated to exclude the IMF. Update: Jason sent me an update from the Street on Greek bonds: "Wider by 50 on the day in the 10 years and 120 in 2 year, it is clear panic has now set in ..."
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:11 AM » Did Consumer Protection Laws Prevent Texas Housing Bubble?
    Published Tue, Apr 06 2010 10:11 AM by Google News
    We why didn’t the housing boom mess with Texas. Last week, Alyssa Katz offered an insightful and much-discussed for Slate’s The Big Money (which was also reprinted in Sunday’s Washington Post). She argues that restrictions on so-called “cash-out” refinancing transactions, which allow homeowners to tap into rising home equity to refinance into larger loans, helped Texas avoid the kind of severe home price bubble that caused so much damage in other sunbelt states: During the boom, cash-out refinancings were the unofficial currency of bubble states from Florida to California, beloved by mortgage brokers as a way to persuade existing homeowners to take out new loans repeatedly. As home values surged, the sales pitch was a slam-dunk: Borrowers could refinance their homes at extremely low interest rates, and based on newly reappraised property values get more cash in their hands than they might earn in a year…. But not in Texas. A borrower there can secure a home-equity line of credit from a bank. And she can refinance her mortgage or take out a home-equity loan. But the total amount of debt on a home cannot exceed 80 percent of its appraised value, and any proceeds cannot be used to pay off other debts. This is an example of the kind of consumer protection rule that advocates of a consumer finance protection agency if such an agency is ever established. have pointed to rules banning prepayment penalties, balloon loans or negative amortizing loans where the loan payment is less than the interest on the loan. While the inability to tap rising home equity or to invent exotic loan products likely prevented Texas from inflating a bubble, it doesn’t get to the root of the issue, per se: why was there no bubble to begin with? The Economist : [T]here is less incentive to take a cash-out home equity loan in non-bubble market, because you have a lot less equity on which to draw…. In Texas markets, where home values peaked at perhaps 130% of their 2000 level, the room to take out potentially...
  • 8:40 AM » Office Vacancy Rate Hits New High
    Published Tue, Apr 06 2010 8:40 AM by Realtor.Org
    Research firm Reis Inc. reports that office vacancies are the highest since 1994 at 17.2 percent nationwide in the first quarter of 2010.
  • 8:39 AM » Access Eases for Property Rehab Funds
    Published Tue, Apr 06 2010 8:39 AM by Realtor.Org
    The federal government has relaxed rules for cities seeking funds to buy and fix-up abandoned and foreclosed properties.
  • 8:38 AM » U.S. government a big commercial real estate player
    Published Tue, Apr 06 2010 8:38 AM by Washington Post
    Evidence of the federal government's growing influence on Washington area commercial real estate is illustrated in big deals it is working on both sides of the table: auctioning a 127,000-square-foot Bethesda building previously occupied by the National Institutes of Health and moving to snatch up...
    Click Here to Read the Full Article

    Source: Washington Post
  • 8:38 AM » Some Jobless Benefits Run Out
    Published Tue, Apr 06 2010 8:38 AM by WSJ
    Tens of thousands of jobless Americans could lose unemployment benefits after Congress failed to enact a short-term extension, with Democratic and Republican lawmakers exchanging blame.
  • 8:38 AM » Fannie, Freddie Touch Off Swaps Scrap
    Published Tue, Apr 06 2010 8:38 AM by WSJ
    The regulator of Fannie Mae and Freddie Mac plans to have the mortgage-finance giants use a clearinghouse for interest-rate swaps trade by year's end. Wall Street banks and exchanges are scrambling.
  • 8:22 AM » CNBC'S Olick: Foreclosure Wave about to hit with "Thunderous roar"
    Published Tue, Apr 06 2010 8:22 AM by Calculated Risk Blog
    From Diana Olick at CNBC: I'm ... starting to hear rumblings among the number crunchers that the wave of foreclosures we keep hearing about is about to hit with a thunderous roar. Servicers are ramping up the mod process and pushing those who don't qualify out the door more quickly than ever. I don't know about a "thunderous roar", but I do think we will see more distressed sales soon. Most trustee sales seem to be "postponed" each month, and perhaps the lenders were just waiting for the HAFA short sales program to begin. That program started today and anyone considering a short sale should ask their lender if they qualify.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:22 AM » FRBSF Economic Letter: The Housing Drag on Core Inflation
    Published Tue, Apr 06 2010 8:22 AM by Calculated Risk Blog
    Some people have argued that measured is inflation is declining mostly because of the Owners' Equivalent Rent component that is being pushed down by the record high rental vacancy rate. Economists at the San Francisco and New York Fed argue that there is "a broad pattern of subdued price increases across most consumption goods and services and [housing] is not distorting the broad downward trend in core inflation measures." From Bart Hobijn, Stefano Eusepi, and Andrea Tambalotti: Click on graph for larger image in new window. One way to consider the effect of the price of housing on core inflation is to calculate a core PCEPI that excludes housing. This is done in Figure 1, which contains three time series. The first is 12-month growth in the core PCEPI. The second is a comparable measure of inflation for the housing component of the core PCEPI. The final time series is a core PCEPI that excludes housing expenditures. Three things stand out in this figure. First, the standard core inflation measure shows substantial disinflationary pressures at work. ... Second, part of the drop in measured core inflation is undoubtedly due to the deceleration in the price of housing. ... Third, it turns out that this drag is rather small . The decrease in housing inflation only accounts for a small part of the overall disinflationary pressure on core PCEPI. ... Consequently, the evidence in Figure 1 offers little cause for concern that the recent behavior of core inflation might be a misleading signal of the underlying inflation trend. emphasis added Note: The measures of housing inflation try to separate the cost of living in a home from changes in the asset price. The Fed has a dual mandate of price stability and maximum sustainable employment. This disinflationary trend (ex-housing) is important because some people at the Fed are more concerned about possible future inflation, whereas others are more concerned with the high level of unemployment.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:22 AM » Among Middle Class, Financially Literate Families Feel Most Secure
    Published Tue, Apr 06 2010 8:22 AM by WSJ
    The more American middle class families understand personal finances, the less financially strapped they feel, a new survey shows. First Command Financial Services Inc. , an investment adviser firm, administered a financial literacy test in March to people with household incomes of $50,000 or more to gauge the financial knowledge of the middle class. Of those who answered all of the questions correct, 63% said they didn’t feel financially strapped versus 48% who said the same but had answered one or more questions incorrectly. Some 42% of people who got a perfect score on the test also said they were comfortable with their debt levels. Meanwhile, of those who answered questions wrong, 32% said they were comfortable with their debt. Overall, the survey respondents scored pretty well on the tests: They answered 7.5 out of nine questions correctly, on average. And three out of 10 respondents earned a perfect score. Despite higher levels of confidence among the most financially literate, even they didn’t feel comfortable with their savings or their ability to retire. Less than a quarter of those who answered all the questions correctly said they felt comfortable with their savings. A slightly higher 36% said they were very confident in their ability to retire comfortably. Among those who answered at least one question incorrectly, just 15% felt good about their savings and 29% said they were sure they would be able to retire comfortably. The test surveyed 659 people and has a margin of error of plus or minus 3.8 percentage points.
  • 8:22 AM » How Many Will the New Mortgage Modification Programs Reach?
    Published Tue, Apr 06 2010 8:22 AM by Google News
    The Obama administration’s announcement late last month that it will revamp its foreclosure prevention efforts by adding loan write-downs to banks’ tool-kits has generated considerable optimism that more loan modifications will stick. But a handful of analysts are tempering that optimism by pointing out that many of these programs face some of the same obstacles that have hampered others: The programs are voluntary and they require borrowers to document their incomes and qualify for a modification or refinance. The administration will introduce two ways for borrowers to have their loan balances written down: Under the first, borrowers who are current on their loans but owe more than their homes are worth might be eligible to refinance into a smaller loan backed by the Federal Housing Administration. That program, the FHA “short refinance,” is voluntary and investors must agree to to take at least a 10% haircut to get the first mortgage down to 97.75% of the property value. Short refinancing will face the same hurdles that have snagged others before it, including the presence of second-lien mortgages or mortgage insurance and the fact that a refinance that results in any forgiven principal could ding a borrower’s credit score. “After accounting for all these potential hurdles, the number of strong candidates for this program drops sharply,” says a report from analysts at Barclays Capital. Barclays estimates that around 2-4% of most borrowers with loans that were bundled and sold into securities could ultimately be eligible for the FHA initiative. The effort appears to be targeted towards those loans that have been sold to private investors as opposed to those backed by Fannie Mae or Freddie Mac, which already have their own programs to refinance underwater borrowers. The second program represents an expansion of the existing Home Affordable Modification Program, or HAMP. Currently, banks modify loans under HAMP by lowering interest rates and extending loan terms in order...
  • 8:22 AM » Apartment Vacancy Rate stays at Record Level, Rents increase Slightly
    Published Tue, Apr 06 2010 8:22 AM by Calculated Risk Blog
    From Nick Timiraos at the WSJ: Nationally, the apartment vacancy rate stayed flat at 8%, the highest level since Reis Inc., a New York research firm, began its tally in 1980.... Nationally, effective rents, which include concessions such as one month of free rent, rose 0.3% during the quarter compared with a 0.7% decline in the fourth quarter of last year and a 1.1% drop in the first quarter of 2009. ... "Rent reductions are not over yet," said Hessam Nadji, managing director at real-estate firm Marcus & Millichap. Note: the Reis numbers are for cities. The from the Census Bureau was at a near record 10.7% in Q4 2009. Rents plunged in 2009 by the most in the 30 years Reis has been tracking rents - and with vacancies at record levels, the slight increase in Q1 2010 rents doesn't mean the rent declines are over.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:22 AM » The Credit Squeeze Is Intensifying on Main Street
    Published Tue, Apr 06 2010 8:22 AM by Seeking Alpha
    submits: Banks do not want to lend to Main Street homeowners and consumers. Mortgage delinquencies rise at Fannie Mae (FNM). Higher US Treasury yields will put a drag on equity valuations. ISM shows only slow job creation and mounting inflationary pressures. Construction spending continues to decline tightening the noose on Main Street jobs. Initial Jobless Claims are at a cycle low extending gains in stocks, but still above the Recessionary 350,000 threshold. Economy is creating some jobs, while personal bankruptcies rise 35%. The Wall of Resistance for the Dow Even if you are current on your mortgage and credit card payments banks do not want to lend. This even applies if your credit score is in the upper 20 percentile. My son and I visited our mortgage servicer last Wednesday to test their lending standards for Home Equity Loans and Credit Cards. We bought a new home last June and this bank services our mortgage, for which we put 20% down on a 30-Year fixed rate mortgage with a 4.5% rate. The bank branch had three other clients ahead of us with only two of five offices open with bankers on duty. When it was our turn we found out that we could not get a Home Equity Line being told that house values have declined since last June, and that you need to have more than 30% equity before getting a home equity line of credit. How many homeowners do you know that have 50% or more equity in their homes at this time? With regard to credit card applications even though our credit scores are in the upper 20 percentile, the best interest rate offered was 18.99% for purchases and 20.24% for cash advances. We said thanks, but no thanks. Main Street bailed them out, but they obviously do not want to extend credit either backed by home equity or on a credit card given to citizens with great credit scores. They explained that many customers are starting to default even with great credit scores. I have always opined that Credit Scores are worthless. They helped cause “The Great Credit...
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • Mon, Apr 5 2010
  • 4:45 PM » Let the Short Sales Begin
    Published Mon, Apr 05 2010 4:45 PM by CNBC
    Today the Administration's Home Affordable Foreclosure Alternative Plan takes effect, offering incentives to borrowers, servicers, investors and second lien holders to push short sales through the system.
  • 3:59 PM » Fed Ends Meeting Without Discount-Rate Move
    Published Mon, Apr 05 2010 3:59 PM by WSJ
    The U.S. Federal Reserve on Monday said its Board of Governors met to discuss the interest rate it charges banks on emergency loans, but the Fed made no announcement of a discount-rate increase. The Fed said on its Web site that Chairman Ben Bernanke and governors Kevin Warsh , Elizabeth Duke and Daniel Tarullo had met at 11:15am EDT to review the discount rate. When the Fed at the end of last week said its board would discuss the discount rate at the regular meeting, some analysts speculated that an increase would be announced Monday. But the meeting likely wasn’t indicative of that, as the Fed holds many routine meetings to formally review the discount rate. When the Fed last raised the discount rate, by a quarter-point to 0.75% on Feb. 18, it had prepared financial markets for what was coming. That hasn’t happened this time. In a prepared speech, Fed Chairman Ben Bernanke said on Feb. 10 the central bank could soon charge more for backstop loans made directly to banks. Then on Feb. 17, a day before the rate increase was announced, the Fed released the minutes of the Jan. 26-27 meeting of its policy-setting body, which revealed that officials had mulled raising the discount rate. To be sure, the Fed may yet raise the discount rate to bring the spread with the more broadly important federal-funds rate–or the rate banks charge each other for overnight loans–to a pre-crisis level. But it will have plenty of opportunities to signal any discount-rate moves to markets beforehand, including several this week. Tuesday, the minutes of the March 16 Federal Open Market Committee meeting will be released, after the usual three-week lag. Also, Bernanke is scheduled to speak in Dallas on Wednesday and in Washington a day later. But even if the Fed does increase the discount rate in the near future, markets should be cautious about reading too much into it. When the Fed raised the discount rate Feb. 18, it stressed the move was just an unwinding of its emergency lending facilities...
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