NEW YORK—Americans' confidence in the economy improved slightly in August from July, but they're still roughly as gloomy as a year ago.
The downbeat sentiment underscores the challenges ahead for the increasingly shaky recovery and for retailers, which are grappling with a weak start to back-to-school shopping. Worries are even growing about the critical holiday shopping season.
The Conference Board, a private research group, said Tuesday that its Consumer Confidence Index rose to 53.5 from a revised 51.0 in July. Economists surveyed by Thomson Reuters had expected 50.5. The increase comes after two straight months of declines.
"The consumer is still struggling, and the prospects look like more of the same," said Ken Perkins, president of research firm RetailMetrics.
An index of 90 or more indicates a healthy economy. That level hasn't been approached since the recession began in December 2007. The index—which measures how Americans feel about business conditions, the job market and the next six months—had been recovering fitfully since hitting an all-time low of 25.3 in February 2009.
In August 2009, the index stood at 54.5, only a point higher than now. Since then, it has mostly hovered in a tight range between the mid-40s and the high 50s. May 2010 proved to be the only exception, at 62.7—still weak.
Moreover, there doesn't seem to be any catalyst in sight to get them to feel better any time soon. Home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent, all contributing to weak confidence.
Shoppers are increasingly waiting for the best deals and buying only fashions that they can wear right away. Perkins estimates that August retail sales were at best slightly better than last year, which was weak. Major retailers report August revenue figures Thursday.
Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. But worries are rising the economy is growing too slowly to support sustained job growth. Some are concerned it could fall back into a recession.
"The comfort ... is that confidence did not fall further," Paul Dales, U.S. Economist at Capital Economics, said in a statement. "But there are few signs that households will ramp up their spending. High unemployment, widespread negative housing equity and low share prices are keeping households on the sidelines."
Investors seized on the bigger than-expected increase. The Dow Jones industrial average got a boost early in the day on the figure, though the Dow Jones Industrial average finished just 4.99 points higher by the end of the day. Stocks have been pummeled all month by uncertainty over signs of slowing growth.
Tuesday's regional manufacturing report was another one of those signs. The drop in the Chicago Purchasing Managers Index was similar to declines seen in other regional manufacturing reports earlier this month.
The slight uptick in August's confidence figures was a result of Americans' improved outlook over the next six months, which is one component of the index.
Still, "employment concerns continue to heavily weigh on consumers' attitudes," Lynn Franco, director of The Conference Board Consumer Research Center, whose random survey was mailed to 5,000 households Aug. 1 to Aug. 24.
Meanwhile, a home price index showed prices rose in June for a third straight month as now-expired tax credits inspired a burst of home buying. But prices are expected to fall the rest of the year now that demand has faded.
The Standard & Poor's/Case-Shiller 20-city home price index, released Tuesday, posted a 1 percent increase in June from May and was up 4.2 percent from a year ago. Home prices nationally rose 4.4 percent in the second quarter compared with the first quarter. That was largely because buyers could take advantage of government tax credits of up to $8,000.
Home sales have dropped sharply since those incentives expired. Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years.
The minutes from the Federal Reserve board of governors' Aug. 10 meeting showed that the bank recognized the economy might need further stimulus beyond purchases of government debt. Some members of the Fed's policy-setting committee acknowledged the economy had softened more than they had anticipated.
Economists will closely watch Friday's August employment report. They're expect another month of tepid hiring by the private sector.
————
AP Real Estate Writer Alan Zibel in Washington contributed to this report.
Read more: Americans' economic confidence ticks up slightly - The Denver Post http://www.denverpost.com/breakingnews/ci_15950814?source=rss#ixzz0yE2Huu5k
Tuesday, August 31, 2010
Friday, August 27, 2010
Mortgage Rates Hit Lowest Point Since 1971
Mortgage rates
fell to the lowest level in decades
for the ninth time in 10
weeks, as concerns grow that
the economy is weakening.
Mortgage buyer Freddie
Mac said Thursday that the average
rate for a 30-year
fixed-rate loan was 4.36 percent
this week, down from
4.42 percent last week. That’s
the lowest since Freddie Mac
began tracking rates in 1971.
Rates have fallen as investors
shifted money into the
safety of Treasury bonds, lowering
their yield. Mortgage
rates tend to track those yields.
fell to the lowest level in decades
for the ninth time in 10
weeks, as concerns grow that
the economy is weakening.
Mortgage buyer Freddie
Mac said Thursday that the average
rate for a 30-year
fixed-rate loan was 4.36 percent
this week, down from
4.42 percent last week. That’s
the lowest since Freddie Mac
began tracking rates in 1971.
Rates have fallen as investors
shifted money into the
safety of Treasury bonds, lowering
their yield. Mortgage
rates tend to track those yields.
Ground Breaking Yesterday On Light Rail to Denver from Airport
Ground was broken Thursday for RTD’s East Corridor commuter-rail line between Denver International Airport and Union Station downtown. The rail station, being built immediately south of the Jeppesen Terminal,will be 70 feet below ground. Attendees were given a “VIP ticket to ride,” allowing them a seat on one of the first trains to use the line after its scheduled completion in 2016.
Wednesday, August 25, 2010
The Best Investors Buy During The Most Pessimistic Time
Remember, the best investors buy during the most pessimistic time. To highlight this, and to give a better perspective and some hope towards the future, something that was pointed out by Dennis Gartman, a well respected market analyst. Back in 1992, an article in Time Magazine included this passage:
"The US economy remains almost comatose. The slump already ranks as the longest period of sustained weakness since the Depression. The economy is staggering under many “structural” burdens, as opposed to familiar “cyclical” problems. The structural faults represent once-in-a-lifetime dislocations that will take years to work out. Among them: the job drought; the debt hangover; the banking collapse; the real estate depression; the health care cost explosion and the runaway federal deficit."
It's amazing how eerily similar the picture from 1992 compares to today. We all know that the period following 1992 included terrific growth and opportunities in the economy, stock market and housing. If history repeats itself, which it often does, this could point to much better days in the future with opportunities in the present.
"The US economy remains almost comatose. The slump already ranks as the longest period of sustained weakness since the Depression. The economy is staggering under many “structural” burdens, as opposed to familiar “cyclical” problems. The structural faults represent once-in-a-lifetime dislocations that will take years to work out. Among them: the job drought; the debt hangover; the banking collapse; the real estate depression; the health care cost explosion and the runaway federal deficit."
It's amazing how eerily similar the picture from 1992 compares to today. We all know that the period following 1992 included terrific growth and opportunities in the economy, stock market and housing. If history repeats itself, which it often does, this could point to much better days in the future with opportunities in the present.
Tuesday, August 17, 2010
Capital Gains Tax Set to Rise at Year End; Transaction Activity May Edge Higher as Long-Term Owners Lock in Profits
Marcus & Millichap Real Estate Investments
August 15, 2010
■With the Bush tax cuts set to expire on December 31, 2010, capital gains taxes will revert to 20 percent from their 70-plus-year low of 15 percent. In addition, barring legislative intervention, the tax rate on dividends will jump from 15.0 percent to 39.6 percent for top earners. When substantial tax code changes took effect in 1986, including a capital gains rate increase from 20 percent to 28 percent, investor liquidations nearly doubled the total realized capital gains from the previous year. Despite the decline in investment values over the last two years, many investors will likely follow this liquidation strategy, locking in their profits rather than waiting for investments to appreciate sufficiently to offset the 5 percent tax hike.
■Recent commentary by Treasury Secretary Geithner suggests the Obama administration will allow the Bush tax cuts to expire. The reluctance to endorse even greater rate hikes likely stems from concern more significant increases could further impede the economic recovery. Considering long-term capital gains taxes have averaged 26 percent over the last fifty years, even hitting 40 percent in 1976 during the Nixon/Ford administrations, risk of further increases once the economy stabilizes remain high. As a result, though investors often choose to hold assets in the year following a rate hike, perceived tax-related risks may encourage them to continue selling assets in 2011.
■Apartments have taken the lead in the national recovery and will likely post notable occupancy and rent gains in major markets over the next year. Demand for retail and office space remains tepid, however, particularly in secondary and tertiary markets, placing downward pressure on rents and preventing owners from regaining substantive pricing power. For investors holding these assets, future capital gains tax increases could overshadow appreciation substantially, extending the hold period to break even against current net profits for several years. Investors who purchased these assets more than six years ago likely have profits to protect and may consider liquidating late this year.
■In response to the increase in capital gains taxes, commercial real estate investors’ ability to defer capital gains indefinitely through 1031 exchanges will become even more attractive. Since 2002, the year before the capital gains tax rate was reduced to a 70-plus-year low, the number of 1031 exchanges has fallen by nearly half. As capital gains taxes rise, the share of deals involving 1031 exchanges will increase substantially, as sellers will be further discouraged from taking profits from the investment real estate sector.
August 15, 2010
■With the Bush tax cuts set to expire on December 31, 2010, capital gains taxes will revert to 20 percent from their 70-plus-year low of 15 percent. In addition, barring legislative intervention, the tax rate on dividends will jump from 15.0 percent to 39.6 percent for top earners. When substantial tax code changes took effect in 1986, including a capital gains rate increase from 20 percent to 28 percent, investor liquidations nearly doubled the total realized capital gains from the previous year. Despite the decline in investment values over the last two years, many investors will likely follow this liquidation strategy, locking in their profits rather than waiting for investments to appreciate sufficiently to offset the 5 percent tax hike.
■Recent commentary by Treasury Secretary Geithner suggests the Obama administration will allow the Bush tax cuts to expire. The reluctance to endorse even greater rate hikes likely stems from concern more significant increases could further impede the economic recovery. Considering long-term capital gains taxes have averaged 26 percent over the last fifty years, even hitting 40 percent in 1976 during the Nixon/Ford administrations, risk of further increases once the economy stabilizes remain high. As a result, though investors often choose to hold assets in the year following a rate hike, perceived tax-related risks may encourage them to continue selling assets in 2011.
■Apartments have taken the lead in the national recovery and will likely post notable occupancy and rent gains in major markets over the next year. Demand for retail and office space remains tepid, however, particularly in secondary and tertiary markets, placing downward pressure on rents and preventing owners from regaining substantive pricing power. For investors holding these assets, future capital gains tax increases could overshadow appreciation substantially, extending the hold period to break even against current net profits for several years. Investors who purchased these assets more than six years ago likely have profits to protect and may consider liquidating late this year.
■In response to the increase in capital gains taxes, commercial real estate investors’ ability to defer capital gains indefinitely through 1031 exchanges will become even more attractive. Since 2002, the year before the capital gains tax rate was reduced to a 70-plus-year low, the number of 1031 exchanges has fallen by nearly half. As capital gains taxes rise, the share of deals involving 1031 exchanges will increase substantially, as sellers will be further discouraged from taking profits from the investment real estate sector.
Nationally Less Than Half of all Home Sales Successful in 2009
Wall Street Journal
By Nick Timiraos
A survey of seven major housing markets found that less than half of all attempts to sell a home in 2009 had, as of last Wednesday, resulted in a sale.
The analysis, conducted by Redfin Corp., a Seattle-based brokerage that operates in nine states, shows just how tough the housing market has become–and just how many sellers are unwilling to lower their prices.
The survey looked at how the 500,000 homes that were listed for sale last year in seven of the nation’s biggest counties had fared. Around 47% of those listings had sold by last week, while just 4% of those listings were still active. The success rate looks at the number of listings that sold through the original listing agent; if someone hired an agent, and then changed agents, the home is added again to the count of new listings.
“There’s just such a standoff in the market between sellers and buyers, both with unrealistic expectations, and a lot of heartbreak and wasted effort,” said Glenn Kelman, Redfin’s chief executive. He said that buyers’ complaints of overpriced or stale listings had prompted the number crunching, which looked at properties in the counties that include Chicago, Atlanta, Seattle, Los Angeles, San Francisco, Phoenix and Boston.
Of those counties, Phoenix’s Maricopa County and San Francisco County had the highest share of listings that sold, at 59% and 57%, respectively. Chicago’s Cook County had just one-third of all homes listed during 2009 sell by mid-August.
Seller Stand-Off: A Look at Redfin’s Data
County Name Listings Activated in 2009 # 2009 Listings Sold % 2009 Listings Sold # Still Active % Still Active
Cook County, IL 134,710 44,789 33.3% 7,893 5.9%
Fulton County, GA 27,089 9,941 35.8% 1,329 4.8%
King County, WA 51,252 21,500 42.0% 1,729 3.4%
Los Angeles County, CA 130,326 68,564 52.6% 3,079 2.4%
San Francisco County, CA 9,289 5,259 56.6% 112 1.2%
Maricopa County, AZ 137,647 81,204 59.0% 5,008 3.6%
Suffolk County, MA 15,763 5,682 36.1% 393 2.5%
7-County Average 506,796 236,939 46.8% 19,545 3.9%
Many sellers aren’t willing to reduce their prices because they don’t want to sell their homes for less than the amount they owe. Those “short sales” typically take much longer to complete because a bank must sign off on the deal, and they can be just as damaging to a borrower’s credit score as a foreclosure. Banks are less likely to approve short sales for borrowers who can’t demonstrate hardship or imminent default.
Others simply think that they shouldn’t have to reduce their prices, often because they’ve plunked down lots of money for renovations that they had hoped would boost the value of their home. The buyers may be happy to pull their homes off and wait for the market to come back.
Already, there are some signs that this year could be worse than 2009. Many markets have seen inventory levels shoot up since a tax credit for home buyers expired in April.
Follow Nick for more housing and mortgages news on Twitter:
By Nick Timiraos
A survey of seven major housing markets found that less than half of all attempts to sell a home in 2009 had, as of last Wednesday, resulted in a sale.
The analysis, conducted by Redfin Corp., a Seattle-based brokerage that operates in nine states, shows just how tough the housing market has become–and just how many sellers are unwilling to lower their prices.
The survey looked at how the 500,000 homes that were listed for sale last year in seven of the nation’s biggest counties had fared. Around 47% of those listings had sold by last week, while just 4% of those listings were still active. The success rate looks at the number of listings that sold through the original listing agent; if someone hired an agent, and then changed agents, the home is added again to the count of new listings.
“There’s just such a standoff in the market between sellers and buyers, both with unrealistic expectations, and a lot of heartbreak and wasted effort,” said Glenn Kelman, Redfin’s chief executive. He said that buyers’ complaints of overpriced or stale listings had prompted the number crunching, which looked at properties in the counties that include Chicago, Atlanta, Seattle, Los Angeles, San Francisco, Phoenix and Boston.
Of those counties, Phoenix’s Maricopa County and San Francisco County had the highest share of listings that sold, at 59% and 57%, respectively. Chicago’s Cook County had just one-third of all homes listed during 2009 sell by mid-August.
Seller Stand-Off: A Look at Redfin’s Data
County Name Listings Activated in 2009 # 2009 Listings Sold % 2009 Listings Sold # Still Active % Still Active
Cook County, IL 134,710 44,789 33.3% 7,893 5.9%
Fulton County, GA 27,089 9,941 35.8% 1,329 4.8%
King County, WA 51,252 21,500 42.0% 1,729 3.4%
Los Angeles County, CA 130,326 68,564 52.6% 3,079 2.4%
San Francisco County, CA 9,289 5,259 56.6% 112 1.2%
Maricopa County, AZ 137,647 81,204 59.0% 5,008 3.6%
Suffolk County, MA 15,763 5,682 36.1% 393 2.5%
7-County Average 506,796 236,939 46.8% 19,545 3.9%
Many sellers aren’t willing to reduce their prices because they don’t want to sell their homes for less than the amount they owe. Those “short sales” typically take much longer to complete because a bank must sign off on the deal, and they can be just as damaging to a borrower’s credit score as a foreclosure. Banks are less likely to approve short sales for borrowers who can’t demonstrate hardship or imminent default.
Others simply think that they shouldn’t have to reduce their prices, often because they’ve plunked down lots of money for renovations that they had hoped would boost the value of their home. The buyers may be happy to pull their homes off and wait for the market to come back.
Already, there are some signs that this year could be worse than 2009. Many markets have seen inventory levels shoot up since a tax credit for home buyers expired in April.
Follow Nick for more housing and mortgages news on Twitter:
Shorter Term Mortgages Gain Favor for Refinancing
By Stephanie Armour, USA TODAY
More homeowners are refinancing into shorter-term loans, saving a bundle by taking advantage of the lowest mortgage rates in decades.
Nearly a third of borrowers refinancing fixed 30-year loans in April through June picked loans with 15- or 20-year terms, according to mortgage finance giant Freddie Mac. It was the highest share since 2004.
The trend has been driven by near-weekly drops in rates all summer.
Average rates on fixed 15-year loans fell below 4% for the first time last week, dropping to 3.92%, according to Freddie Mac. A year ago, the average 15-year rate was 4.68%.
CALCULATE: Your mortgage payments at various terms
Meanwhile, the rates on fixed 30-year loans now average 4.44%, Freddie Mac found.
At today's rates, a borrower with a 30-year loan at a 6.5% interest rate and a $200,000 principal balance could save some $70,000 in interest over the life of a shorter 20-year loan.
"It's borrowers looking to build equity more quickly, and borrowers have generally been paying down their loans more quickly," says Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage and consumer loan information.
Peter Iche, president of Carthage Federal Savings and Loan Association in Carthage, N.Y., says he's seen an increase in people who are approaching retirement refinancing to shorter-term loans.
"They realize that they can afford a heavier payment," he says. "They're getting closer to retirement where they are willing to suck it up for a few years."
Most of the customers trying to refinance to shorter-term loans usually qualify, he says. And with rates as low as they are now, "For the group of people that can afford to do it, it's a good time to wrap things up."
Many can't, however.
With rates at record lows, a higher volume of refinancings would be expected, says Mark Zandi of Moody's Analytics.com. But high unemployment and lost home equity is preventing many borrowers from doing so, he says.
Application volume for both home-purchase mortgages and refinancings has been tepid because many potential borrowers lack high enough credit scores, sufficient income or enough equity in their homes to qualify for new loans.
Borrowers' monthly payments rise when they refinance into a shorter-term loan, so lenders generally require borrowers to have higher monthly incomes to get a 15-year mortgage than a 30-year.
In addition, because property values in many areas have fallen sharply the past three years, about a quarter of residential properties with mortgages are worth less than the loan balances.
More homeowners are refinancing into shorter-term loans, saving a bundle by taking advantage of the lowest mortgage rates in decades.
Nearly a third of borrowers refinancing fixed 30-year loans in April through June picked loans with 15- or 20-year terms, according to mortgage finance giant Freddie Mac. It was the highest share since 2004.
The trend has been driven by near-weekly drops in rates all summer.
Average rates on fixed 15-year loans fell below 4% for the first time last week, dropping to 3.92%, according to Freddie Mac. A year ago, the average 15-year rate was 4.68%.
CALCULATE: Your mortgage payments at various terms
Meanwhile, the rates on fixed 30-year loans now average 4.44%, Freddie Mac found.
At today's rates, a borrower with a 30-year loan at a 6.5% interest rate and a $200,000 principal balance could save some $70,000 in interest over the life of a shorter 20-year loan.
"It's borrowers looking to build equity more quickly, and borrowers have generally been paying down their loans more quickly," says Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage and consumer loan information.
Peter Iche, president of Carthage Federal Savings and Loan Association in Carthage, N.Y., says he's seen an increase in people who are approaching retirement refinancing to shorter-term loans.
"They realize that they can afford a heavier payment," he says. "They're getting closer to retirement where they are willing to suck it up for a few years."
Most of the customers trying to refinance to shorter-term loans usually qualify, he says. And with rates as low as they are now, "For the group of people that can afford to do it, it's a good time to wrap things up."
Many can't, however.
With rates at record lows, a higher volume of refinancings would be expected, says Mark Zandi of Moody's Analytics.com. But high unemployment and lost home equity is preventing many borrowers from doing so, he says.
Application volume for both home-purchase mortgages and refinancings has been tepid because many potential borrowers lack high enough credit scores, sufficient income or enough equity in their homes to qualify for new loans.
Borrowers' monthly payments rise when they refinance into a shorter-term loan, so lenders generally require borrowers to have higher monthly incomes to get a 15-year mortgage than a 30-year.
In addition, because property values in many areas have fallen sharply the past three years, about a quarter of residential properties with mortgages are worth less than the loan balances.
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