71% of all U.S. homes are affordable

According a quarterly report from the National Association of Home Builders and Wells Fargo, the typical American family, who makes the nation's median income of $64,000 a year, could afford to buy 70.8% of all homes sold in the United States during the last three months of 2009. That's off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable. "Favorable mortgage rates and sliding house prices that have now started to stabilize nationally have both contributed to a record year for housing affordability in 2009," said NAHB chairman Bob Jones, a home builder from Bloomfield Hills, Mich. The NAHB judges a home to be affordable if a family making the metro area's median income could devote no more than 28% of their take-home pay toward housing costs.

There was a huge variation in affordability around the nation. All five of the most affordable major housing markets were in the Rust Belt, led by Indianapolis, which has been the nation's most affordable major metro area for more than four years. More than 95% of all home sold there were classed as within the budget. Detroit was the second most affordable major market with 93.4%, followed by three Ohio cities, Dayton (93.2%), Youngstown (93%) and Akron (92.2%). New York was the least affordable market; less than 20% of homes met the criteria. San Francisco (22.3%), Honolulu (33.8%), Santa Ana, Calif.,. (34.5%) and Los Angeles (36.8%) filled out the bottom five. The most unaffordable small market was San Luis Obispo in California, where only 32% of homes sold were attainable for median-income families.

Jobless claims up again

The Labor Department says there were 473,000 initial jobless claims filed in the week ended Feb. 13, up 31,000 from the previous week's upwardly revised 442,000. A consensus estimate of economists surveyed by Briefing.com expected claims to slide to 438,000. Analysts polled by Reuters had expected claims to drop to 430,000. The prior week was initially reported as 440,000. The number of people filing continuing claims in the week ended Feb. 6 was unchanged from the previous week's revised 4,563,000 claims. The four-week moving average of new claims, which irons out week-to-week volatility, fell 1,500 to 467,500, the Labor Department said. The number of people still receiving for benefits after an initial week of aid was unchanged at 4.56 million in the week ended Feb. 6. This measure has held below the 5 million mark for eight straight weeks and analysts believe it is starting to reflect an improvement in the labor market rather than people merely dropping off rolls beca use they have exhausted their benefits. The economy has lost 8.4 million jobs since the start of the downturn in December 2007. However, the pace of layoffs has dropped sharply from early last year.

HAMP helping some

The U.S. Treasury said its foreclosure-prevention program (Home Affordable Modification Program, known as HAMP) has cut mortgage payments for about 947,000 households, at least temporarily. The total was up about 11% from a month earlier. The administration estimates that 1.7 million households—about 3% of those with mortgages—are eligible for the program. The Treasury said 60,000 trial modifications have been canceled. Many more are likely to fall out of the program this month because extensions of the time available to verify incomes have run out. For those who fail to qualify, lenders may proceed with foreclosure or seek other solutions, including short sales, in which homes are sold for less than the loan balance due. The program's dropout rate is likely to be high, partly because lenders allowed many people into trials without first making sure they qualified. Wells Fargo & Co. said 92,000 of the borrowers it services had made three trial payments by Jan. 31. It expects about half of them to get permanent modifications. Others failed to provide all or some of the required documents or were found to be ineligible after the paperwork was reviewed. Among loans with permanent modifications, the median monthly savings is about $522, the Treasury said. It said borrowers in trial and permanent modifications have saved more than $2.2 billion so far.

Manufacturing up

According to the Institute of Supply Management's survey of manufacturing executives, the global economic recovery and a lower value of the dollar have lifted US exports of goods 24% since April. January was the first month in three years that there was a gain in manufacturing jobs nationwide. "Manufacturing is clearly leading the way out of the recession," said Mark Zandi, chief economist for Moody's Economy.com. Zandi said there even should be some new manufacturing jobs created in the next few years, and that "modest gains are a big swing from massive job losses." Further signs of strength came Wednesday when the Federal Reserve's report on industrial production showed growth for the seventh straight month. While the index is still 10% below where it was at the start of the Great Recession in December 2007, it has jumped 4% in the nine months since the low point it hit in April. An expected pickup in consumer and business spending in the U.S. later this year could be p articularly good news for manufacturers.

Experts point to the pent-up demand for new cars and new homes as a good sign. "The levels of vehicle sales and housing construction are much below where general demographic trends suggest they should be," said Zandi. Automakers are among the leading purchasers of goods as varied as semiconductors, carpeting, glass, metals and paint, in addition to traditional auto parts. New home sales lead to the purchases of furniture and appliances far more than sales of existing homes. Dave Huether, chief economist for the National Association of Manufacturers, agrees with Zandi that U.S. manufacturers have a relatively bright outlook. He said the sector is far better positioned today than it was at the end of the previous recession in late 2001, due partly to the lower value of the dollar, which remains relatively weak against other currencies despite a rally this year. Huether believes that manufacturers could start to hire significant numbers of workers later this year, and that job growth will continue all the way through 2012. He is predicting a million new manufacturing jobs in the next few years. There hasn't been an annual net gain in jobs since 1997.

DSNews.com - "perfect storm" in foreclosures

Foreclosure experts at Heavy Hammer Inc. and its foreclosure listing site USHUD.com see a confluence of factors exacerbating an already devastated housing market in 2010, driven primarily by financial industry practices and changing government policies. They predict that the consequence will be a doubling of foreclosure rates this year. USHUD.com CEO Michael Urbanski says the first and most obvious factor is the unemployment rate, which continues to languish in the 10 percent range nationally, and often much higher regionally. He explained that similar unemployment rates have historically affected 20 to 30 percent of homeowners’ ability to make their scheduled mortgage payments. The second factor, according to Urbanski, is the significant constriction of lending due to tightening mortgage requirements. Citing a National Association of Realtors (NAR) study that finds the average U.S. home depreciated 12 percent from 2008 to 2009, Urbanski says selling will become an impos sible proposition for a growing number of underwater homeowners. “Watch the horizon,” said Urbanski. “Left unchecked, the perfect storm may be only one more bad policy away.”

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