Rates went down a touch this week. The long-awaited end of the Great American Job Destruction of 2008 and 2009 did not arrive in December, as some forecasters hoped it might, as the Bureau of Labor Statistics reported another 85,000-job decline in nonfarm payroll employment this morning. The BLS did revise November's payroll number, initially estimated at -11,000, up to +4,000—marking the first month of job gains since December 2007. But +4,000 is statistically equivalent to no change at all and they can always revise it back down again. In fact, there's going to be a big "benchmark revision" of the payroll data next month that will change all the numbers going back to April 2008.

In light of this news, rates are holding down for now which is great for our borrowers. PLEASE NOTE, our 5/1 conforming ARM is at 3.875% today for a loan up to $417,000!!! What a great rate for someone who will buy a home for a five year investment or plans to pay off the loan within that time. This is a really great rate .

Apartment prices fall 3%, vacancies up 8%

The national apartment vacancy rate rose to 8% in the last three months of 2009, according to Reis Inc., a commercial real estate information provider. That is the highest level Reis has ever reported. The vacancy rate barely inched up from the third quarter -- just 7.9% to 8% -- but it rose significantly from a year ago, when it stood at 6.7%. Even more dramatic, vacancies spiked 45% from the third quarter of 2006, when they had bottomed out at 5.5%. According to Reis economist Ryan Severino the main culprit is the recession. Not only do people lose their jobs during downturns, many others are afraid of being laid off. And they all feel pressure to reduce their housing costs. "Household formation rates slow down during recessions," said Severino. "They may move in with their families or rent larger apartments and partner up with friends. They partner with others much more then they do during more prosperous times." Occupancy rates did climb during the quarter, with near ly 10,000 more apartments being rented than had been three months earlier, according to the report. But vacancy rates still managed to climb because 28,000 newly constructed units hit the market. A total of 120,000 new apartments came online during 2009, the most since 2003.

Americans borrowing less

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amounts on records going back nearly seven decades. The Federal Reserve said Friday that total borrowing dropped by $17.5 billion in November, a much bigger decline than the $5 billion decrease economists had expected. November's $17.5 billion drop in total credit was the biggest amount in dollars terms since records began in 1943. That represents an 8.5 percent fall from the October borrowing level. That was the biggest percentage drop since total credit declined 9 percent in May 1980. The borrowing category that includes credit cards fell by $13.7 billion, an all-time record decline in dollar terms. The drop was 18.5 percent from November, the biggest decline in percentage terms since a 29.6 percent plunge in December 1974. The Fed's credit report excludes home loans and home equity mortgages, only covering borrowing that is not secured
by real estate. The drop in overall credit for 10 straight months was a record in terms of consecutive declines, surpassing the old mark of seven straight declines set in 1943 and again in 1991. Americans are borrowing less for a number of reasons. They remain fearful about their job prospects and they are also trying to replenish depleted investments.

DSNews.com - Future of Mortgage Purchase Program?

According to minutes released this week of the Federal Reserve Board’s closed-door December meeting, Fed policymakers have already begun debating whether the program should be extended, to ensure the already-fragile housing recovery maintains its course, but the decision has left a dividing line down the central bank boardroom. The Federal Reserve has said it will end its purchases of mortgage-backed securities (MBS) from Fannie Mae, Freddie Mac, and Ginnie Mae on March 31, but the decision wasn’t unanimous. Over the past year, the U.S. central bank has purchased nearly 75 percent of the mortgages that Fannie, Freddie, and Ginnie have securitized. It currently holds just over $900 billion of these MBS bonds, and says by the time the program ends it will have bought a total of $1.25 trillion.

On Wednesday, federal banking regulators, including the Federal Reserve, issued an advisory to the nation’s financial institutions, warning them to ensure procedures and practices are in place to minimize their risks from loans and an increase in financing costs when interest rates do rise. The government has already moved to reassure the market that the Fed’s withdrawal of its support won’t have as big a sting as some fear. In late December, the Treasury pledged “unlimited support” to Fannie Mae and Freddie Mac, and lifted the mandate that the two companies begin selling off large chunks of the securities they hold. But some investors aren’t convinced. Ronald Temple, portfolio manager at Lazard Asset Management, told the Wall Street Journal that if the Fed stops buying mortgage bonds, we should expect mortgage rates to rise by at least a full percentage point. He says that combined with high unemployment and still large numbers of foreclosures could push home p rices down as much as 20 percent.

Redefault Rates ‘Tragic’, Says Amherst

According to Amherst Securities Group, default and prepayment rates on non-agency, private-label mortgage-backed securities (MBS) were constant in November. However, re-performance rates, where payments return to less than two months delinquent, were down and re-default rates “tragic” in November, according to market commentary provided by the firm. The Amherst report, based on November payment data covering 98% of loans backing private-label MBS, said cash flow velocity continued to decline. Based on performance data, Amherst projects that always-performing loans fell to $905bn in November from $930bn in October, as first-time defaults came in at $16bn, from $16.8bn in October.

Prepayments of $8.3bn were unchanged from the previous month. Re-performing loans totaled $117.3bn in November, down from $118.1bn in October. Loans totaling $12.8bn became re-performing in November by getting back within two payments delinquent, down from $13.4bn in October. Total non-performing loans were $484.8bn in November, from $486.1bn in October. Re-defaults after modification were $12.8bn, or 10.9%, up from 10.5% last month. Laurie Goodman of Amherst has said the fundamentals of certain modification programs put them at a disposition for unsuccessful modification. The Treasury Department’s Home Affordable Modification Program (HAMP), for example, is “destined to fail” as it does not address negative equity.

Bailout for speculation

Thanks to a handout from this spend crazy congress, dozens of serial money-losers will stake claims in a cash scramble that could cost us more than $50 billion. Thanks to months of lobbying by the homebuilders, the measure also gave companies the right to apply losses incurred in 2008 and 2009 to income earned in any five years through 2007. Previously, losses could be counted against profits over just two previous years. The change was good news for companies like Lennar, a Miami-based homebuilder that has been gushing red ink since its misguided bets on house prices went bad three years ago. All told, Lennar has lost $3.4 billion over the past three years, wiping out profits running back to 2003. But the company now is free to use $1.5 billion of losses over the past two years to offset previous income. It expects to get a $320 million tax refund check this year. Those funds will allow Lennar "to continue to capitalize on distressed land-buying opportunities, which will
improve our operating results in 2010 and beyond," Miller said. As CNN says, it is curious at a time of bulging national budget deficits that taxpayers should be funding Lennar's land speculation efforts -- particularly given the company's poor record in that area. After gorging on land during the boom, the company lost $1.8 billion on land sales in 2007 and 2008. Regardless of what purpose the refunds might serve, Lennar won't be the last homebuilder to claim one. Toll Brothers (TOL) said last month it expects to get a $162 million income tax refund when it files its 2009 taxes, thanks to losses the past two years it can now offset against 2007 income. A Wall Street analyst last month upgraded KB Home (KBH) shares, citing a large expected refund there. As has so often been the case during the last two bailout-soaked years, those funds will come out of taxpayers' pockets.

So much for "job creation"

Labor Department data showed that US employers unexpectedly cut 85,000 jobs in December, even though analysts polled by Reuters had expected nonfarm payrolls to be unchanged last month and the unemployment rate to edge up to 10.1 percent. For the whole of 2009, the economy shed 4.2 million jobs, the department said. Still the job market continued to show broad improvements last month, with a number of sectors showing gains. Professional and business services added 50,000 positions, while education and health services increased payrolls by 35,000. Temporary help employment rose by 47,000. Manufacturing payrolls fell 27,000 after dropping 35,000 in November. The construction sector lost 53,000 jobs, while the service-providing sector shed only 4,000 workers. The average workweek was unchanged at 33.2 hours, while average hourly earnings increased by $18.80 from $18.77 in November. Unemployment remains the Achilles heel of the economic recovery that started in the third qu arter of 2009 following the worst recession in 70 years. Creating jobs is critical to sustaining the economic recovery when government stimulus fades. It's also critical to Democratic ambitions. Obama's popularity has steadily fallen, knocking his approval ratings down to around 50 percent, and this could dim the election prospects for his Democratic Party in the November congressional elections. Obama is scheduled to make a statement on the economy at 2:40 p.m. EST.

DSNews.com - Unemployment Plagues 25% of Distressed Homeowners

An analysis by MortgageKeeper Referral Services of 400,000 homeowners in 2009 shows that nearly one in four needed access to employment services to help them keep their homes. The New York-based MortgageKeeper has found that of the 19 service categories its database offers, struggling homeowners most requested employment assistance. Based on this information, the company sees strong ties between job loss and foreclosure. “The results are not surprising, but they point to foreclosure as a symptom of much larger problems in our economy,” said Rochelle Nawrocki Gorey, president of MortgageKeeper Referral Services. “In almost all cases, something is forcing a family to miss their mortgage payments. If these underlying issues go unaddressed, loan modifications and other aids are only temporary fixes.” MortgageKeeper says its database is accessed more than 1,000 times every day, helping more than 30,000 families every month. Its resources include more than 4,000 nonprofi t and government agencies in 75 metro areas in all 50 states-covering 90 percent of high foreclosure markets, the company said. “Our web-based applications-including our newest, MKDirect-dive to the root cause of missed mortgage payments,” said Gorey. “Offering a struggling homeowner help to find a job, feed their family, and pay their utility bills-this helps them steady their financial ship. And with their finances in order, homeowners will be much more likely to stay current on their mortgage.”

Holiday sales up

Total holiday-season sales grew 1.8% with a late surge before Christmas, according to an index of 33 retailers by the International Council of Shopping Centers. According to a Thomson Reuters index of 30 retailers, sales grew even more, with sales for the five weeks ended in early January rising 2.9% compared with the prior year, the best monthly showing since April 2008. Retail economists now predict solid growth for 2010. The International Council of Shopping Centers projects annual sales will increase 3% to 3.5%, the biggest jump since 2006. "It's a story of the turning of the corner for the retail industry," said Michael Niemira, the group's chief economist. The improvement was seen broadly. From department stores to teen retailers to discount mass merchants, three-fourths of major store chains reporting December sales exceeded low analysts' expectations. The 2009 Christmas totals remained far below those of just two years ago and only presented a partial portrait bec ause they didn't include retail behemoth Wal-Mart Stores Inc., which stopped disclosing monthly figures last year. The relatively strong performance signaled that most store chains protected profit margins by restricting inventories to match demand, avoiding the desperation clearance sales that ate into fourth-quarter earnings in 2008. Nordstrom Inc. posted a 7.4% rise in same-store sales and said annual earnings should exceed its prior estimate of $1.83 to $1.88 a share. The less-is-more strategy is expected to continue well into this year as merchants cautiously move forward in light of continuing high unemployment and a recent spike in energy prices that is reducing consumers' disposable income.

Recovery Worries over Fed Plan to Stop Buying Mortgages

The Federal Reserve's pledge to stop buying mortgages by the end of March is sparking fears among home builders, mortgage investors and even some Fed officials that mortgage rates could rise and knock the fragile housing recovery off course. Rates on 30-year fixed-rate mortgage have risen by a quarter of a percentage point in the past month to around 5.2%, according to HSH Associates, near their highest levels since September as the bond market has pushed up long-term interest rates amid signs of an improving economy. The recent rise in mortgage rates could be a prelude to even bigger increases in coming months as the Fed steps away from support for the market. That prospect has some in the markets counting on the Fed to change course and keep buying past March, which many officials are reluctant to do. When such a big investor stops buying, "that could lead to material increases in [interest] rates across the board," said Ronald Temple, portfolio manager at Lazard Asset Ma nagement. He sees mortgage rates rising by a percentage point when the Fed stops buying. A withdrawal of government support, combined with high unemployment and rising mortgage foreclosures, could push home prices down 20%, he said. The Fed now holds $909 billion of mortgage-backed securities. In the past year it has purchased 73% of the mortgages that government-backed Fannie Mae, Freddie Mac and Ginnie Mae have turned into securities. Purchases by the Treasury pushed total government purchases above $1 trillion. The Fed says it plans to top off its purchases at $1.25 trillion by the end of March, but must decide in the months ahead whether the economy is strong enough to stick with that plan.

Home energy efficiency program coming?

The government is expected to unveil a new program in the next couple of months that if approved may reimburse homeowners for up to half the cost of making their homes more efficient. Homeowners will get the most return for the money in simple upgrades like caulking the windows, putting insulation in the attic, and changing the light bulbs - not new windows, refrigerators or dishwashers. A complete energy retrofit - which could include caulking and insulation as well as new windows, appliances and boiler, could slice a home's energy consumption in half, according to Lane Burt, manager of building energy policy at Natural Resources Defense Council. But getting all that work done might run into the tens of thousands of dollars. And any new federal program - which is still being drafted and is not guaranteed to become law - would cap the government reimbursements at $12,000, said Burt. The original proposal, which called for $23 billion to be spent on energy retrofits, was es timated to create over half a million jobs, according to CleanEdison, an association of green building professionals. Those familiar with the proposal say the final bill may set aside $10 billion for energy retrofits. Still, it's a lot more than is currently being done - while some states have reimbursement programs, there is no federal plan. The original stimulus bill contained $5 billion for low income homeowners and money to retrofit federal buildings, but nothing for middle income Americans. The new proposal has no income restriction. But in addition to creating jobs and saving consumers money, it also lays the framework for an energy efficient economy and achieving the 80% reduction in greenhouse gases most scientists say is necessary to avoid the worst impacts of global warming.

Jobless claims up

As expected, the Labor Department announced that the number of Americans filing first-time claims for unemployment insurance rose modestly last week. There were 434,000 initial jobless claims filed in the week ended Jan. 2, up 1,000 from the previous week's upwardly revised 433,000. A consensus estimate of economists surveyed by Briefing.com expected claims to jump to 440,000. The government said 4,802,000 people filed continuing claims in the week ended Dec. 26, the most recent data available. That's 179,000 down from the preceding week's unrevised 4,981,000 claims. So-called continuing claims are below their peak of 6.9 million in June and have declined for three straight weeks. The four-week moving average for new claims dropped 10,250 to 450,250 last week, the lowest since mid-September 2008 and the 18th straight weekly decline. The four-week moving average is viewed as a better measure of underlying trends as it levels out week-to-week volatility. The insured unempl oyment rate, which measures the percentage of the insured labor force that is jobless, fell to 3.6 percent in the week ended Dec. 26, the lowest since January last year, from 3.8 percent.

Diana Olick on principal writedowns

Olick points out that the decline in home sales was expected - "home sales were spiked by several shots of government stimulus in the second half of 2009, and as that stimulus starts to wear off, sales activity has nowhere to go but down." With the homebuyer's credit expiring just as the 2010 season gets rolling in April, and Bernanke making noise about raising interest rates, she suggests that home buyers are likely to think twice before leaping into the market. But Olick is most concerned about the potential for principle writedown: "Most agree that the government's mortgage bailout program (Home Affordable Modification Program or HAMP) is at best unsuccessful and at worst detrimental. So now I'm beginning to hear more chatter about principal writedown, and more specifically, government-funded principal writedown. The idea is to give folks equity back in their homes so they don't walk away from their mortgage commitments. It would also help borrowers who don't qualify
for modifications because they are so far "underwater" on their mortgages. The arguments are plain and simple: Bite the bullet to save the greater housing market or don't because the moral hazard is far too untenable. Anyone who's ever read this blog before knows where I stand. I would honestly rather see my home's value go down than see the guy next door (figurative: my neighbors are lovely and fiscally responsible) who made a poor/negligent financial decision get a mulligan at my expense."

More taxes coming

In his continuing quest to ram through healthcare "reform," President Barack Obama signaled to House Democratic leaders Wednesday that they'll have to drop their opposition to taxing high-end health insurance plans to pay for health coverage for millions of uninsured Americans. In a meeting at the White House, Obama expressed his preference for the insurance tax contained in the Senate's health overhaul bill, Democratic aides said. House Democrats want to raise income taxes on high-income individuals instead and are reluctant to abandon that approach, while recognizing that they will likely have to bend on that and other issues so that Senate Majority Leader Harry Reid, D-Nev., can maintain his fragile 60-vote majority support for the bill. The House wants to raise income taxes on individuals making more than $500,000 and couples over $1 million. The Senate wants to tax insurance companies on plans valued at over $8,500 for individuals and $23,000 for couples. Most analyst s say the insurance tax would be passed on to consumers, and organized labor is strongly opposed, as are House Democrats, some of whom contend that the tax would violate Obama's campaign pledge not to tax the middle class. Whichever way you look at it, here come taxes on the middle class. Didn't someone promise not to raise taxes on the middle class?

Renter's market

The apartment vacancy rate ended the year at 8%, the highest level since Reis Inc., a New York research firm that tracks vacancies and rents in the top 79 U.S. markets, began its tally in 1980. Rents fell 3% last year, according to Reis, led by declines in San Jose, Calif., Seattle, San Francisco and other cities that had brisk growth until the recession. Effective rents -- which include concessions such as one month of free rent -- fell 5.6% in New York last year, the worst since Reis began tracking the data in 1990. Few markets have been spared. During the fourth quarter, vacancies increased in 52 markets, while they improved in 17 and stayed flat in 10. Vacancies increased most sharply for the year in Tucson, Ariz.; Charlotte, N.C.; and Lexington, Ky. Apartments have been squeezed because younger workers, who are more likely to rent, have experienced the brunt of job losses during the downturn. Such oversupplied markets as Florida, Phoenix and Las Vegas are hurting, e ven though housing sales have picked up. Marcus & Millichap is to release a separate report on Friday that forecasts a further 2% to 3% drop in apartment rents over the next year, most of which will be concentrated over the next six months. The report forecasts Washington, D.C., will be the healthiest rental market in 2010 for the second straight year.

One potential silver lining for apartment owners is the fact that many of those developments had secured financing before credit markets seized up, and since the credit crunch has frozen most new development, new apartment completions should fall by half in 2011. However, government efforts to prop up the housing market also threaten the apartment sector by making it easier for some renters to buy homes. Some landlords have reported a slight uptick in renters moving out to buy homes. Around 13% of Camden Property's move-outs last summer left to buy homes, up from 11% at the beginning of the year. But that is still roughly half of the rate seen during the housing boom, when mortgage standards were much looser. Thanks to falling home prices and record low mortgage rates, it now costs less to own than it has in the past decade on a mortgage-payment-to-rent basis. But falling rents are expected to offset some of the recent improvement in affordability, making renting more attra ctive than owning in some markets.