Richard Brody

30 Yr Mortgage Rates hit all-time low & other housing info

Freddie Mac stated today that the 30-year fixed-rate mortgage average hit a new low. The 30-year average declined to 4.71% (with an average 0.7 point) for the week ending Dec. 3 from 4.78% last week. This new 30-year average is the lowest since Freddie Mac began its weekly survey in 1971. Last year, the average was 5.53%. Remember that this is the average 30- year rate, which means that many lending institutions are offering even low rates. Frank Nothaft, Freddie Mac's chief economist stated, "Low mortgage rates and the cumulative decline in house prices have contributed to an extremely affordable housing market and helped spur home sales this year . . . For instance, total new and existing home sales in October were 36% higher than their January low on a seasonally adjusted, annualized rate, according to the U.S. Census Bureau and the National Association of Realtors."
So, there is improving news in the housing/ real estate markets. The combination of the Federal housing tax credit, low mortgage rates, lower home prices, and some improvement in consumer belief that the worst of the recession is over, has created this improvement. As we enter the Holiday season, real estate "shopping" historically cools off until after the holiday season. However, this kind of news is hopefully a fore-teller of a better 2010 housing market.
Another promising indication is that the President is finally convening a Jobs-related summit for tomorrow, and hopefully, that will addressed the major weakness in both the housing market as well as the overall economy. Let's hope that our political leaders have finally understood that joblessness is what's keeping our economy from really growing, and they will address some real solutions to that situation. Amongst my suggestions: (1) Incentives for hiring in "progressive" industries, such as alternative energy, technology, etc-- that will NOT ONLY put people back to work, but also support industries will be necessary for the US to reach the next level. As an Ecobroker, I believe that incentives in "green-related" building and renovations will boost the economy, help the joblessness situation, and make houses more sustainable for now and the future; (2) Make the joblessness challenge the #1 Economic Priority; (3) Create incentives so that progressive industries benefit by hiring people, than by the cost-savings side-effects of layoffs. Let's put America back to work again!

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The preliminary figures have been released regarding Black Friday, and depending on how you wish to view it, the numbers are either bad news, so-so news, or good news. Apparently more Americans purchased on Black Friday, but their average spending was down about 5-10% for the day, and the total retail sales were either flat, or slightly lower. Since today is so-called Cyber-Monday, we do not know yet what these numbers will show, but more retailers are offering Cyber-Monday sales than ever before!
So, what does that mean? Well, the good news is, that despite the ongoing recession, despite the high joblessness rate, despite the credit tightening (many of the larger banks have tightened, eliminated, reduced credit lines, and increased credit card interest rates charged, while changing their installment payment features, thus requiring higher minimum payments), despite the fact that merchants are being quite conservative about inventory-on-hand, more Americans are still buying gifts, and the total spent has not been reduced significantly. Also, many retailers began their promotions early or are stretching them out over a longer period of time, which makes the Black Friday numbers even more positive! Granted last year's holiday season was not a robust one for retailers, but considering the cost-saving measures many companies have implemented, I feel the overall indicators are positive ones.
I am guessing that the Cyber-Monday results will either parallel the stores, or be slightly better than the store results. These numbers might be slightly skewed also because of many sites stretching this sale period out over a longer period of time. I am of the belief that there will be a higher than usual number of last-minute shoppers this holiday season, but that retailers will have to be creative as well as use discounting to attract more shoppers. I also feel that consumers will still purchase for the holidays, but that the average spending per shopper will be somewhat lower than in the past.
Since many manufacturers are suffering like retailers and consumers, many manufacturers are offering discounts and/ or incentives to retailers at a much greater rate this season than in the past. That is also a factor in the lower consumer purchasing averages.
Having gone to a few stores, malls, and warehouse clubs both on Black Friday as well as on Saturday, it is obvious that this season is being kinder to some stores than others, and to some malls than others. On Black Friday, WalMart was packed for the Early Bird sales, butr much quieter the rest of the day. The store Friday afternoon looked like it must have been "packed and ransacked" in the morning, but was simply messy and not fully re-stocked on Friday afternoon. The warehouse clubs seemed to be doing business as usual on Friday! On Saturday, I went to two different malls, and while one mall seemed very quiet, the other was very busy. Some stores were obviously much busier than others. Yet, for example, the Apple Store at one mall seemed relatively quiet, while at the other mall was busy.
We need to start adopting the "half-full" instead of "half-empty" philosophy, or this recession will stretch out and linger longer than it would on its own. All too often, too many of the so-called "experts" analyze each piece of data independently, without trying to understand some of the many causes. Daily discussions of the prices of gold, oil, and the stock indexes. are as misguided as people looking for "quick kills" in purchasing stocks rather than long-term outlooks. Historically, investors who use "dollar-cost averaging" have out-performed most others, because they do not fall victim to normal and abnormal market swings. We all need to "sit back and chill out" and look at things through a broader window, and figure out the best long-term strategies.
Let's remember that when George Bush became President he inherited a budget surplus. By the time he left office eight years later, instead of a surplus there was a $400 Billion plus deficit. A little more than ten months after President Obama took office, the US deficit now exceeds $1.4 Trillion. We need to understand that deficit financing has long-term impacts and ramifications, and the US cannot simply keep spending without a plan for repaying it. That is why our dollar is so weak, even though the recession is a world-wide challenge, not just an American one.
Weak housimg markets, high foreclosure rates, high joblessness rates, etc., cannot and are not balanced out solely by spending and low interest rates. America must reconfigure our economy to make it stronger and more productive! We need to get people back to work, and keep them working. That should be the major thrust of our government's activities now-- on the Federal, State and Local Levels. Demand that from your government leaders!

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The most recent housing report showed that sales for October 2009 were up 10.1% over October 2008. While that is certainly promising news, it must be considered in light of a few factors. The first factor was, of course, that October 2008 numbers were so dismal that even with an increase, there is plenty of room for improvement. Then, we must remember that some closings last month occurred as a result of the First Time Housing Credit, and the uncertainty at that time over whether it would be extended (remember it was originally set to expire at end of November). The continuation of historically low mortgage rates has certainly also helped. In addition, while sales were up, the average price of a house sold last month versus a year before is down, so, in other words, houses are still selling for less than in the past.
The good news are indications are that the worst of the recession is probably past us, consumer confidence seems to have improved slightly, mortgage rates should remain low for the foreseeable future (and hopefully the government will apply pressures on lenders to lend!), home prices are more affordable, the Home buying credit has been BOTH extend and enhanced, and most economists are calling for the U.S. economy to improve somewhat throughout 2010. The less-happy news is the high joblessness rate, the uncertainty in the economy, less than stellar public consumer confidence, and a seemingly prevailing attitude that "there is no rush" to do anything, and the overall wait-and-see attitude.
We have gone from a decade of a "seller's market" in the housing market, to a mixed market, to a buyer's market (where unfortunately NOT enough buyers are taking advantage - - - either being unwilling, afraid, or unable to). The real estate market has always been cyclical, and this market is the same in that way. We are probably at or near the bottom of the market now, and 2010 should probably see the beginning of the recovery. Those in a position to take advantage should do so now, because the combination of tax advantages, low prices and low mortgage rates have brought the true cost of home purchasing down significantly.
The industry and those interested in having a sound and robust housing market should implore their elected officials to address the most pressing economic issues now --- joblessness (and job creation), consumer confidence, responsible economic policies, and continued incentives that benefits consumers instead of just large corporations!

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The most recent housing report showed that sales for October 2009 were up 10.1% over October 2008. While that is certainly promising news, it must be considered in light of a few factors. The first factor was, of course, that October 2008 numbers were so dismal that even with an increase, there is plenty of room for improvement. Then, we must remember that some closings last month occurred as a result of the First Time Housing Credit, and the uncertainty at that time over whether it would be extended (remember it was originally set to expire at end of November). The continuation of historically low mortgage rates has certainly also helped. In addition, while sales were up, the average price of a house sold last month versus a year before is down, so, in other words, houses are still selling for less than in the past.
The good news are indications are that the worst of the recession is probably past us, consumer confidence seems to have improved slightly, mortgage rates should remain low for the foreseeable future (and hopefully the government will apply pressures on lenders to lend!), home prices are more affordable, the Home buying credit has been BOTH extend and enhanced, and most economists are calling for the U.S. economy to improve somewhat throughout 2010. The less-happy news is the high joblessness rate, the uncertainty in the economy, less than stellar public consumer confidence, and a seemingly prevailing attitude that "there is no rush" to do anything, and the overall wait-and-see attitude.
We have gone from a decade of a "seller's market" in the housing market, to a mixed market, to a buyer's market (where unfortunately NOT enough buyers are taking advantage - - - either being unwilling, afraid, or unable to). The real estate market has always been cyclical, and this market is the same in that way. We are probably at or near the bottom of the market now, and 2010 should probably see the beginning of the recovery. Those in a position to take advantage should do so now, because the combination of tax advantages, low prices and low mortgage rates have brought the true cost of home purchasing down significantly.
The industry and those interested in having a sound and robust housing market should implore their elected officials to address the most pressing economic issues now --- joblessness (and job creation), consumer confidence, responsible economic policies, and continued incentives that benefits consumers instead of just large corporations!

FOLLOW ME ON TWITTER: @rgbrody (www.twitter.com/rgbrody
CHECK OUT MY REAL ESTATE SITE: http://tinyurl.com/pwlire
LEARN WHAT A CONSULTING PRO CAN DO FOR YOU: http://tinyurl.com/rgbcons
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http://tinyurl.com/rgbstake

No wonder most people don't understand the economy. Often what might seem good on one hand, has bad side effects on the other. For example, the stock market rises- one would think that was good! But that was mostly due to the rising price of oil- bad news. But the price of oil is rising because the "experts" believe the economy is improving and thus more oil will be needed in production- good news! But that rise in oil prices causes the cost of living to increase- bad news. But that helps the Gross Domestic Product (GDP)- good news! But that then causes inflation- bad news. But that inflation means the economy is improving- good news! But then the Fed becomes concerned about inflation and raises interest rates- bad news! Which causes the value of the dollar to improve- good news! But that hurts exports because now American products cost more overseas- bad news! But that means foreign products cost less in the US- good news! But that hurts American companies competetiveness- bad news!
And so on, etc. So you see why economic news often seems co confusing. Because it is- what is good for one consumer, might be bad for another- what is good for one company, bad for another- what might be good for one sector of economy- bad for others.
The stock market is often the most confusing. On days when there is "bad news," the market often goes up, while on some "good news" days, the market sometimes goes down! While the Dow, or the S&P, etc., might go up, it does NOT mean that the stock(s) you own, will follow suit.
Too often, for the sake of a sound-byte, the media tries to over-simplify economic news. Yet the economy is by definition quite complex.
The one issue there should be some agreement on is that high unemployment is not good. Yet even in that case, the "experts" can't agree upon, nor act upon a viable solution.
The best way to think about the economy is this-- the difference between a recession and a depression is that it's a recession when it happens to someone else-- it's a depression when it happens to you!
It is my belief that a healthy economy requires certain factors to be in place - - low joblessness; high consumer confidence; a strong manufacturing sector; and reduced government deficits. That is what we must demand!

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It seems that every day there is another economic report out that different individuals interpret differently. Today, the joblessness report showed that "only" 502,000 new unemployment claims were made, which was 10,000 less than the previous month and 8,000 less than anticipated. The "gurus" jumped all over this report, letting us know that this was economic news. Although it probably was good news because things were getting significantly worse, it certainly wasn't good news for the 502,000 individuals putting in new unemployment claims. And this was on top of the over 10% already receiving regular and extended unemployment benefits, not to mention those who have taken lesser work or given up looking (estimates are a total of approximately 17.5%).
Also, in today's news, WalMart announced its 3Q economkic figures, and the net revenue was better than anticipated. That could be interpreted as good news, or not so good if one factors in that the increased net was based on lower than anticipated revenues, which means that obviously WalMart had made some "efficiencies" to improve its numbers.
Over 80% of the companies reporting 3Q figures have reported better than anticipated numbers. Does that mean that we are gradually coming out of the recession (hopefully), or that companies are cutting jobs making themselves more profitable, or that the "experts" are under-estimating, or some combination of the three? It all depends on PERCEPTION.
Most experts believe that the worst of the recession has passed, and that there will be gradual, but slow improvement during 2010. Historically, companies begin recovery periods by hiring part-time workers before they add full-time employees. However, since the average number of hours the American worker has dropped to only 33 hours per week, will companies then simply have existing workers put in a little more time. I believe that this figure of number of average hours per week will be a significant one to look at when we want to see how much progress is being made in getting out of the recession.
The housing market is an important one to follow as an indicator of the economy. Government incentives have slightly shored up the housing market, but it will not bounce back until there is some restoration of consumer confidence. For anyone who is in a position to buy a house, there has rarely been this great a buying situation, when you consider the combination of relatively low prices, low mortgage rates (average 30 year mortgage rates dropped today to 4.91%), tax incentives, and selection on market. Yet, many potential buyers are still adopting a "wait-and-see" approach, and just taking their time. Most experts believe that home prices, and mortgage interest rates will nudge up toward the second half of 2010. Again, consumer confidence and perception is a primary factor in this evaluation.
So, what is really going on? Huge US deficits, a weak US dollar, a recession, high joblessness and under-employment, are all unfortunate realities. Corporations have reacted by making themselves more cost-efficient, but unfortunately that exacerbates the unemployment challenge. The economy does not appear to be getting any worse! The next important step is to see how consumer confidence reacts. Halloween shopping was nearly 30% down this year, and if Christmas shopping bounces back somewhat, that will be an important indicator that consumer confidence is increasing. Many major retailers have already announced that they will beging "Black Friday" sales early, and be more aggressive in their marketing this season. Hopefully, some of the seasonal employment will be extended and we see a restoration in the job area as early as the second quarter of 2010. Vacation travel during the holidays, and overall travel in January and February of next year, will also be important indicators of consumer confidence.
Since most experts believe that one of the driving forces in creating this recession is the high cost of energy, job creation should be created by having the government create alternative energy incentives, and for hiring and re-training into that industry. T.Boone Pickens has promoted heavily his Pickens Plan, with the goal of US energy independence, by using alternative energy (he prefers windmills), and natural gas (because of its abundance in the US). Creating jobs in this area would be a short-term and a long-term solution, because it addresses not only employment, but a stronger US energy policy.
The American electorate must demand from it's politicians that they become leaders. Leadership and statesmanship means that "polls" should not dictate policy, but that they need to be effective problem solvers. It can be done, and must be done, for the U.S. to again become the strongest economy in the world. I truly believe that if the American public clearly demands "real change," instead of empty promises, we can "jump-start" our economy, and consumer confidence. I urge you all to join with me.

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