Down To The Wire

1367176_FULL-LNDWith the budget negotiations going on did anyone in America think that Congress would not go down to the wire before coming to an agreement? Whether we were optimistic that an agreement would be coming or not, the fact that it would not come early was of no surprise to anyone. We will not go into why deals have to be made at the last minute. We will just note that there will be consequences that come from waiting until the last second to come up with a deal. Some of these consequences are “psychological” with companies refusing to hire and consumers holding back on Holiday shopping in an uncertain environment.
Other consequences are technical in nature. How does the IRS prepare for the next year not knowing what the tax rates are going to be? Every company in American depends upon the IRS to give it instructions. The uncertainty extends beyond general tax rates. There are a host of government programs and tax write-offs that hang in the balance–from the Mortgage Debt Forgiveness Act to long-term rates on Capital Gains. Decisions on selling assets and even selling a home may be affected by whatever deal is struck. These uncertainties are extended if Congress and the President come up with a compromise that is a temporary solution — kicking the can down the road. As the Holidays approach, we hope that an agreement can end much of this uncertainty and clear the path for a stronger economic recovery next year.

The Markets. Rates were again stable at record lows last week. Freddie Mac announced that for the week ending December 13, 30-year fixed rates fell slightly from 3.34% to 3.32%– exactly where it was two weeks ago. The average for 15-year loans decreased slightly as well to 2.66%. Adjustable rates were mixed but steady with the average for one-year adjustables falling to 2.53% and five-year adjustables increasing to 2.70%. A year ago 30-year fixed rates were at 3.94%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, “Rates held relatively steady following the November employment report. Although 146,000 jobs were created, above the market consensus forecast of 85,000, revisions subtracted 49,000 workers over the September and October period. The unemployment rate fell from 7.9 to 7.7 percent. However, in its December 12 monetary policy statement, the Federal Reserve (Fed) noted that this rate remains elevated and modified the statement to tie any increases to its target rate to the unemployment rate falling below 6.5 percent. The latest Fed central-tendency forecast is for unemployment to be between 7.4 and 7.7 percent in the fourth quarter of 2013 and between 6.8 and 7.3 percent by late 2014.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated December 14, 2012
Daily Value Monthly Value
Dec 13 November
6-month Treasury Security 0.11% 0.14%
1-year Treasury Security 0.14% 0.18%
3-year Treasury Security 0.34% 0.36%
5-year Treasury Security 0.70% 0.67%
10-year Treasury Security 1.74% 1.65%
12-month LIBOR 0.864% (Nov)
12-month MTA 0.172% (Nov)
11th District Cost of Funds 1.011% (Oct)
Prime Rate 3.25%

Foreign buyers have flooded the U.S. housing market, taking advantage of favorable exchange rates, weaker prices and, in some cases, record-low rates. Foreign nationals accounted for $82.5 billion, or 8.9%, of the $928 billion spent on U.S. residential real estate from April 2011 through March 2012, according to a survey from the National Association of Realtors. That was up 24% from $66.4 billion the previous year. More than 50% of sales over the past year occurred in just five states: Florida, California, Texas, Arizona and New York. Chinese are also shopping in the U.S. in growing numbers. Buyers from mainland China and Hong Kong account for over $7 billion in sales annually, or 11% of international sales activity in the year to March, according to NAR, making them the second-largest foreign buyers of U.S. homes. If the Chinese are the second-largest foreign buyers of U.S. homes, who’s No. 1? Our neighbors to the north in Canada. Canadians accounted for 24% of sales to foreigners in the year to March, according to NAR. And it’s not likely to let up: says Canadians account for the most international search activity on the listing site every month in nearly all of major U.S. metro areas. Brazilians are getting attention for their buying sprees in markets like Miami and increasingly, New York City, but Argentineans have been just as active. “The foreign buyer story should be as much about Argentineans as Brazilians,” asserts Philip Spiegelman, a principal at International Sales Group, a marketing and sales organization for real estate developers. “The market in downtown Miami has been principally dominated by Argentineans, then Brazilians, then Venezuelans.” Increasing numbers of Venezuelans are pouring money into American real estate, seeking a safe haven for their wealth from political and financial uncertainty back home. Teplitzky says many of her South American clients, who also include Colombians and Argentineans, seek out rental units, especially in Miami. “The new landlords in Florida are South Americans and their tenants are Americans,” she adds. Source: Forbes
A measure of U.S. home prices rose 6.3 percent in October compared with a year ago, the largest yearly gain since July 2006. The jump adds to signs of a comeback in the once-battered housing market. Core Logic also said that prices declined 0.2 percent in October from September, the second drop after six straight monthly increases. The monthly figures are not seasonally adjusted. The real estate data provider says the decline reflects the end of the summer home-buying season. Steady price increases are helping fuel a housing recovery. They encourage more homeowners to sell their homes. And they entice would-be buyers to purchase homes before prices rise further. Home values are rising in more states and cities, according to the report. Prices increased in 45 states in October, up from 43 the previous month. Rates on home loans are near record lows, while rents in many cities are rising. That makes home buying more affordable, pushing up demand. And more people are looking to buy or rent a home after living with relatives or friends during and immediately after the Great Recession. At the same time, the number of available homes is at the lowest level in 10 years, according to the National Association of Realtors. The combination of low inventory and rising demand pushes up prices. An index measuring the number of Americans who signed contracts to buy homes in October jumped to the highest level in almost six years. That suggests sales of previously occupied homes will rise in the coming months. Source: Silicon Valley Mercury News
Rents are forecasted to rise nationally 4.6 percent next year, and that’s following a 4.1 percent increase this year, according to the National Association of Realtors®. What’s more, rents are expected to continue to climb for the foreseeable future, rising more than 4 percent a year for 2014 and 2015, forecasts Reis, a market research firm. “The pendulum has definitely swung back in favor of landlords, not renters,” Ryan Severino, senior economist for Reis, told USA Today. Rents are rising even more rapidly in some areas. For example, rents in San Jose, Calif., and San Francisco have been climbing at a 13 percent to 15 percent annual rate as of late last year, according to MPF Research. Other metro area seeing rent increases of more than 5 percent by the end of September include Oakland, Calif.; New York; Denver; Houston; Nashville; and Columbus, Ohio, MPF reports. The rise in rental costs are causing more renters to consider home ownerships, says Greg Willett, MPF vice president. Rates are at historical lows and home prices are up, but still way below their 2006 peak. Source: USA Today

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