Seneate Plans to Extend and Expand Homebuyer Tax Credit. Contact me for more information.
Ramona DeMille
Prudential Rubloff
773-572-7574
www.MyChicagoRealEstateAgent.com
Thursday, October 29, 2009
Monday, October 26, 2009
Chicago Real Estate and Mortgage News
Interest rates rose slightly last week, as last week's economic news, that would typically have been good for mortgage rates, was offset by the announcement of a record setting treasury bond auction and positive earnings news in the stock market. But was that news really positive? Additionally, this week there was some positive movements on extending the first time homebuyer tax credit and on the HVCC (Home Valuation Code of Conduct). The week ahead will be chock full of economic news covering the full gamut* from consumer confidence to housing to 3rd Quarter economic growth to inflation. Could be an interesting week for mortgage rates!
*(what's a gamut, anyway? - see the answer at the bottom of the update!)
Last Week's Economic News - Tuesday brought good news on inflation, as the Producer Price Index showed a decrease of 0.6% in September, well below the 0.0% increase that was expected and much lower than the +1.7% increase from August. Also, the "core" Producer Price Index, excluding food and energy costs, came in at -0.1%, lower than in August and lower than expected. Housing Starts also were a negative surprise for the markets. There were 590,000 new homes started in September. This was up slightly from August's number of 587,000, but the markets were expecting 610,000. At the same time, building permits for new homes came in at 573,000, lower than the anticipated 590,000 and the 587,000 from the week before. Thursday brought a surprise in the employment picture, as it was reported that 531,000 people filed first time claims for unemployment last week. That was higher than the week before, and much higher than what the markets were anticipating. One tidbit of good news on Thursday was that the Index of Leading Economic Indicators showed an increase for the sixth month in a row. The LEI is an indicator of future economic growth. Finally, Friday's news on existing home sales was very exciting for us in the real estate industry, as there were 5.57 Million home sales reported, higher than the 5.35 Million that were expected and the 5.10 Million that were sold the previous month. However, included in the report was the fact that last month's sales were made up of 45% First Time Homebuyers, as they rushed to take advantage of the $8,000 tax credit. More on that later!
Treasury Bond Auction Announcement - Weighing heavily on the treasury and mortgage bond markets last week was the announcement that $123 Billion in U.S. Treasury Securities will be auctioned off this week. That's a record amount, and comes at a time that the government is winding down its purchase of treasury and mortgage bonds. What does this mean? With the government decreasing the amount that they are purchasing, interest rates may have to rise to attract investors into those bonds. Possibly worse than the amount of bonds being sold is the fact that this will only tide us over for two weeks, before there will be another large auction. We will be watching the results of this week's auctions to see what kind of demand there is in the marketplace. Strong demand would lead to lower rates, while weak demand would certainly push rates higher.
First Time Homebuyer Tax Credit - There is more and more talk out of Washington that the first time homebuyer tax credit is going to be extended in some form, prior to its expiration on November 30. Three of the most talked about option are - 1) a 9 - 12 month extension of the current program, 2) an increase of the credit, for first time homebuyers only, or 3) increasing the credit, the income limits or making it for ALL home buyers, not just first timers. This past week, the Senate Banking Committee Chairman - Chris Dodd endorsed the idea of extending and expanding the tax credit this week. This came even in the wake of news released by the IRS of some fairly widespread abuse of the tax credit from taxpayers that claimed the credit when they really didn't have it coming. More than 19,000 people have claimed the credit despite not purchasing anything. 70,000 claimed it, although they didn't meet the definition of first time buyer. And 582 individuals under 18 claimed it, including some 4 year olds! All told, there have been 1.4 million taxpayers claiming nearly $10 Billion in credits.
Stock market news - We are in the middle of earnings season in the stock market. This is the quarterly period where companies report their earnings or losses for the quarter that just ended. In this current round, there have been a lot of companies reporting earnings that are better than expected. These positive reports have helped the stock market to continue its upward climb. When money flows into the stock market, it often is at the expense of the bond market, which pushes rates up. The problem with this scenario is that some of those stocks that are improving on better than expected earnings numbers are earning more by laying off employees, so these so called positive improvements are being gained at the expense of jobs, and not real improvement in the economy. Realistically - you can only cut so many jobs and so many costs so far. While Wall Street and stocks appear to be doing well, and the media starts to get on the band wagon, we have to proceed with caution. You can't simultaneously grow the ranks of unemployment and then grow your business hoping for increased sales to those same people who are without jobs. Sorry for the editorial!
Is the end of the HVCC near? The Home Valuation Code of Conduct that has been blamed for some of the decrease in home prices since its inception in March could be meeting an untimely death, as there is an amendment to H.R. 3126 - "The Consumer Financial Protection Act of 2009" that will allow originators to once again order their own appraisals on mortgage transactions. This amendment has been voted on and passed in committee and is now a part of a bill that is widely expected to pass into law.
Now, what's a gamut? A gamut is easily defined as "the complete range of something". The term gamut originally referred to the lowest note in the musical scale used in medieval times, and then to the entirety of the medieval musical scale. From this notion of a complete range, the term came to be applied to other fields, including as a completely general term. Now you know!
*(what's a gamut, anyway? - see the answer at the bottom of the update!)
Last Week's Economic News - Tuesday brought good news on inflation, as the Producer Price Index showed a decrease of 0.6% in September, well below the 0.0% increase that was expected and much lower than the +1.7% increase from August. Also, the "core" Producer Price Index, excluding food and energy costs, came in at -0.1%, lower than in August and lower than expected. Housing Starts also were a negative surprise for the markets. There were 590,000 new homes started in September. This was up slightly from August's number of 587,000, but the markets were expecting 610,000. At the same time, building permits for new homes came in at 573,000, lower than the anticipated 590,000 and the 587,000 from the week before. Thursday brought a surprise in the employment picture, as it was reported that 531,000 people filed first time claims for unemployment last week. That was higher than the week before, and much higher than what the markets were anticipating. One tidbit of good news on Thursday was that the Index of Leading Economic Indicators showed an increase for the sixth month in a row. The LEI is an indicator of future economic growth. Finally, Friday's news on existing home sales was very exciting for us in the real estate industry, as there were 5.57 Million home sales reported, higher than the 5.35 Million that were expected and the 5.10 Million that were sold the previous month. However, included in the report was the fact that last month's sales were made up of 45% First Time Homebuyers, as they rushed to take advantage of the $8,000 tax credit. More on that later!
Treasury Bond Auction Announcement - Weighing heavily on the treasury and mortgage bond markets last week was the announcement that $123 Billion in U.S. Treasury Securities will be auctioned off this week. That's a record amount, and comes at a time that the government is winding down its purchase of treasury and mortgage bonds. What does this mean? With the government decreasing the amount that they are purchasing, interest rates may have to rise to attract investors into those bonds. Possibly worse than the amount of bonds being sold is the fact that this will only tide us over for two weeks, before there will be another large auction. We will be watching the results of this week's auctions to see what kind of demand there is in the marketplace. Strong demand would lead to lower rates, while weak demand would certainly push rates higher.
First Time Homebuyer Tax Credit - There is more and more talk out of Washington that the first time homebuyer tax credit is going to be extended in some form, prior to its expiration on November 30. Three of the most talked about option are - 1) a 9 - 12 month extension of the current program, 2) an increase of the credit, for first time homebuyers only, or 3) increasing the credit, the income limits or making it for ALL home buyers, not just first timers. This past week, the Senate Banking Committee Chairman - Chris Dodd endorsed the idea of extending and expanding the tax credit this week. This came even in the wake of news released by the IRS of some fairly widespread abuse of the tax credit from taxpayers that claimed the credit when they really didn't have it coming. More than 19,000 people have claimed the credit despite not purchasing anything. 70,000 claimed it, although they didn't meet the definition of first time buyer. And 582 individuals under 18 claimed it, including some 4 year olds! All told, there have been 1.4 million taxpayers claiming nearly $10 Billion in credits.
Stock market news - We are in the middle of earnings season in the stock market. This is the quarterly period where companies report their earnings or losses for the quarter that just ended. In this current round, there have been a lot of companies reporting earnings that are better than expected. These positive reports have helped the stock market to continue its upward climb. When money flows into the stock market, it often is at the expense of the bond market, which pushes rates up. The problem with this scenario is that some of those stocks that are improving on better than expected earnings numbers are earning more by laying off employees, so these so called positive improvements are being gained at the expense of jobs, and not real improvement in the economy. Realistically - you can only cut so many jobs and so many costs so far. While Wall Street and stocks appear to be doing well, and the media starts to get on the band wagon, we have to proceed with caution. You can't simultaneously grow the ranks of unemployment and then grow your business hoping for increased sales to those same people who are without jobs. Sorry for the editorial!
Is the end of the HVCC near? The Home Valuation Code of Conduct that has been blamed for some of the decrease in home prices since its inception in March could be meeting an untimely death, as there is an amendment to H.R. 3126 - "The Consumer Financial Protection Act of 2009" that will allow originators to once again order their own appraisals on mortgage transactions. This amendment has been voted on and passed in committee and is now a part of a bill that is widely expected to pass into law.
Now, what's a gamut? A gamut is easily defined as "the complete range of something". The term gamut originally referred to the lowest note in the musical scale used in medieval times, and then to the entirety of the medieval musical scale. From this notion of a complete range, the term came to be applied to other fields, including as a completely general term. Now you know!
Monday, October 12, 2009
Chicago Real Estate and Mortgage News for week of October 12, 2009
After reaching the lowest level that we have seen since May, mortgage rates finished the week higher than where they started as the result of some positive news on the economy and some inflation fears caused by Federal Reserve Chairman Bernanke in a speech on Capitol Hill last Thursday night. The better than expected news came in the service industry, first time unemployment claims and the U.S. Trade Balance. The Fed Chairman said that the low interest rate environment will likely be needed for awhile. However, he went on to say that as the economy improves, the Fed will hike rates quickly to ward off inflation. While inflation is not a problem now, it certainly could be down the road, and the ending may not be pretty for rates. There is little doubt that rates will eventually head higher, and the rates that we have seen over the last week or so could be the best we see, dare I say it, ever again in our lifetimes. The week ahead brings a semi-full calendar of economic news, starting on Wednesday.
In news regarding the first time homebuyer credit, there are several bills floating through Congress right now to extend and/or change the first time homebuyer credit. Remember, the last day to close and take advantage of the credit is currently November 30, 2009. Locally, the Illinois Housing Development Authority (IHDA) announced at the end of last week that the last day to register a buyer for the Tax Credit Advance loan is October 15. The Tax Credit Advance loan is the second mortgage that allows a first time homebuyer to borrow up to $6,000 of their tax credit and use it towards their downpayment. They are stopping registrations for the program, because they think that it will be difficult to get transactions that come together after that date through the approval process and close them by the November 30th deadline. They did say in their announcement that the program would most likely be extended if the first time homebuyer tax credit gets extended.
Let's take a look at last weeks economic news:
On Monday, the Industrial Supply Manager's Services (ISM) Index showed an increase to 50.6. The markets had been expecting a reading of 50. This reading is significant because a number above 50 shows an economy that is growing, while a number below 50 shows an economy that is shrinking. The latest report says we're headed in the right direction. On Thursday we learned that First Time Unemployment Claims dropped to their lowest level since January, while a much smaller decrease was anticipated. Although this looks like good news on the surface, 521,000 people would beg to differ with that opinion, even if it wasn't the 540,000 that was expected. Finally, on Friday, the U.S. Trade Deficit with the rest of the world was reported to have shrunk to $30.7 Billion. This number was great, considering the market was looking for an increase to $32.9 Billion from the month befores $32 Billion. In addition to these reports, and Chairman Bernanke's not-so-kind words, the markets also had to digest a three day treasury bond auction that did not go so well. It will now worry about future bond auctions to come. When treasury bond auctions do not go well, the rates on those bonds have to increase in order to attract interest (pardon the pun) and sell the bonds. As treasury bond rates go up, so do mortgage bonds rates and mortgage rates in general.
In the week ahead, the bond market is closed on Monday for the Columbus Day holiday, and economic news will only be released on Wednesday, Thursday and Friday. However, the reports due that week include some market movers, like Retail Sales, the Federal Reserve Open Market Committee minutes, the Philadelphia Fed Index and the Consumer Price Index (CPI), which is a measure of inflation at the consumer level. After what the Fed Chairman said last week, the markets will watch all inflation numbers carefully to see if any will be the catalyst for future Fed rate increases.
I'll keep you posted on any updates!
In news regarding the first time homebuyer credit, there are several bills floating through Congress right now to extend and/or change the first time homebuyer credit. Remember, the last day to close and take advantage of the credit is currently November 30, 2009. Locally, the Illinois Housing Development Authority (IHDA) announced at the end of last week that the last day to register a buyer for the Tax Credit Advance loan is October 15. The Tax Credit Advance loan is the second mortgage that allows a first time homebuyer to borrow up to $6,000 of their tax credit and use it towards their downpayment. They are stopping registrations for the program, because they think that it will be difficult to get transactions that come together after that date through the approval process and close them by the November 30th deadline. They did say in their announcement that the program would most likely be extended if the first time homebuyer tax credit gets extended.
Let's take a look at last weeks economic news:
On Monday, the Industrial Supply Manager's Services (ISM) Index showed an increase to 50.6. The markets had been expecting a reading of 50. This reading is significant because a number above 50 shows an economy that is growing, while a number below 50 shows an economy that is shrinking. The latest report says we're headed in the right direction. On Thursday we learned that First Time Unemployment Claims dropped to their lowest level since January, while a much smaller decrease was anticipated. Although this looks like good news on the surface, 521,000 people would beg to differ with that opinion, even if it wasn't the 540,000 that was expected. Finally, on Friday, the U.S. Trade Deficit with the rest of the world was reported to have shrunk to $30.7 Billion. This number was great, considering the market was looking for an increase to $32.9 Billion from the month befores $32 Billion. In addition to these reports, and Chairman Bernanke's not-so-kind words, the markets also had to digest a three day treasury bond auction that did not go so well. It will now worry about future bond auctions to come. When treasury bond auctions do not go well, the rates on those bonds have to increase in order to attract interest (pardon the pun) and sell the bonds. As treasury bond rates go up, so do mortgage bonds rates and mortgage rates in general.
In the week ahead, the bond market is closed on Monday for the Columbus Day holiday, and economic news will only be released on Wednesday, Thursday and Friday. However, the reports due that week include some market movers, like Retail Sales, the Federal Reserve Open Market Committee minutes, the Philadelphia Fed Index and the Consumer Price Index (CPI), which is a measure of inflation at the consumer level. After what the Fed Chairman said last week, the markets will watch all inflation numbers carefully to see if any will be the catalyst for future Fed rate increases.
I'll keep you posted on any updates!
Thursday, October 08, 2009
Chicago Job and Real Estate News
Jobless claims fall to 9-month low
Number of initial filers drops by 33,000 to 521,000 last week, the lowest level since January.
By Julianne Pepitone, CNNMoney.com staff reporter
Last Updated: October 8, 2009: 10:07 AM ET
NEW YORK (CNNMoney.com) -- The number of first-time filers for unemployment insurance fell last week to the lowest level since January, according to a government report issued Thursday.
There were 521,000 initial jobless claims filed in the week ended Oct. 3, down 33,000 from an upwardly-revised 554,000 the previous week, the Labor Department said in a weekly report.
A consensus estimate of economists surveyed by Briefing.com expected 540,000 new claims.
"Looks like a healthy trend to us," said Ian Shepherdson, analyst at High Frequency Economics, in a research note. "The level of claims is still far too high, for sure ... but it is heading in the right direction."
The 4-week moving average of initial claims was 539,750, down 9,000 from the previous week's revised average of 548,750.
"We have been looking very keenly for the kind of thing we saw today," said David Resler, chief economist at Nomura Global Economics.
"It's part of what looks to be a somewhat better trend in recent weeks, and it's an encouraging sign that deterioration has slowed considerably from earlier this year," Resler added.
Continuing claims: The government said 6,040,000 people filed continuing claims in the week ended Sept. 26, the most recent data available. That was down 72,000 from the preceding week's ongoing claims.
The 4-week moving average for ongoing claims fell by 15,750 to 6,144,250, from the prior week's revised average of 6,160,000.
But the slide in continuing claims may not be a positive sign, Resler said, as it may signal that more filers are falling off that count and into extended benefits.
Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, nor people who have exhausted their benefits.
"When we add in the number of people on the extensions, we see that figure is rising and has been doing so consistently," Resler said, adding that comparison is difficult because extension data lag continuing claims by a further week.
State-by-state data: Three states reported a decline in initial claims of more than 1,000 for the week ended Sept. 26, the most recent data available. Claims in New York fell by 2,253; North Carolina's slipped by 1,609; and South Carolina's declined by 1,159.
Five states said that claims increased by more than 1,000. California reported the most new claims at 4,467, which a state-supplied comment attributed to layoffs in the construction, trade and service sectors.
Outlook: High Frequency Economics' Shepherdson said he does not expect claims "to keep falling this fast," and that the decline will slow through the year-end and into 2010 although the downward trend will continue.
But Nomura's Resler said he thinks initial claims could fall below the 500,000 mark by the end of October.
"We keep seeing more evidence that fewer workers are being laid off, and enough of the economic data is more positive," Resler said. "That, plus today's decline, tells me that hope isn't just a pipe dream."
While no "absolute threshold" of claims exists, Resler said, he thinks payrolls will increase when initial filings hit 475,000 or 450,000.
"I don't think we're there at this point, and the durability of today's bounce remains in doubt," Resler said. "We're not dancing in the streets, but we're not abandoning hope yet."
First Published: October 8, 2009: 8:37 AM ET
Number of initial filers drops by 33,000 to 521,000 last week, the lowest level since January.
By Julianne Pepitone, CNNMoney.com staff reporter
Last Updated: October 8, 2009: 10:07 AM ET
NEW YORK (CNNMoney.com) -- The number of first-time filers for unemployment insurance fell last week to the lowest level since January, according to a government report issued Thursday.
There were 521,000 initial jobless claims filed in the week ended Oct. 3, down 33,000 from an upwardly-revised 554,000 the previous week, the Labor Department said in a weekly report.
A consensus estimate of economists surveyed by Briefing.com expected 540,000 new claims.
"Looks like a healthy trend to us," said Ian Shepherdson, analyst at High Frequency Economics, in a research note. "The level of claims is still far too high, for sure ... but it is heading in the right direction."
The 4-week moving average of initial claims was 539,750, down 9,000 from the previous week's revised average of 548,750.
"We have been looking very keenly for the kind of thing we saw today," said David Resler, chief economist at Nomura Global Economics.
"It's part of what looks to be a somewhat better trend in recent weeks, and it's an encouraging sign that deterioration has slowed considerably from earlier this year," Resler added.
Continuing claims: The government said 6,040,000 people filed continuing claims in the week ended Sept. 26, the most recent data available. That was down 72,000 from the preceding week's ongoing claims.
The 4-week moving average for ongoing claims fell by 15,750 to 6,144,250, from the prior week's revised average of 6,160,000.
But the slide in continuing claims may not be a positive sign, Resler said, as it may signal that more filers are falling off that count and into extended benefits.
Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, nor people who have exhausted their benefits.
"When we add in the number of people on the extensions, we see that figure is rising and has been doing so consistently," Resler said, adding that comparison is difficult because extension data lag continuing claims by a further week.
State-by-state data: Three states reported a decline in initial claims of more than 1,000 for the week ended Sept. 26, the most recent data available. Claims in New York fell by 2,253; North Carolina's slipped by 1,609; and South Carolina's declined by 1,159.
Five states said that claims increased by more than 1,000. California reported the most new claims at 4,467, which a state-supplied comment attributed to layoffs in the construction, trade and service sectors.
Outlook: High Frequency Economics' Shepherdson said he does not expect claims "to keep falling this fast," and that the decline will slow through the year-end and into 2010 although the downward trend will continue.
But Nomura's Resler said he thinks initial claims could fall below the 500,000 mark by the end of October.
"We keep seeing more evidence that fewer workers are being laid off, and enough of the economic data is more positive," Resler said. "That, plus today's decline, tells me that hope isn't just a pipe dream."
While no "absolute threshold" of claims exists, Resler said, he thinks payrolls will increase when initial filings hit 475,000 or 450,000.
"I don't think we're there at this point, and the durability of today's bounce remains in doubt," Resler said. "We're not dancing in the streets, but we're not abandoning hope yet."
First Published: October 8, 2009: 8:37 AM ET
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