Only in America would we desecrate the English language to find a word to describe what our government is up to. Yes, March 1 is the official sequestration date. But don’t expect the government to declare the next Federal Holiday to be “Sequestration Day.” Here are a couple of points about this word. First of all, the word sequestration means confiscation or seizure of assets. No one is proposing a seizure of assets here. What we are talking about is automatic and severe budget cuts. In this case we will defer to the Congressional Research Service which has rewritten the dictionary to expand the definition to mean… the permanent cancellation of budgetary resources by a uniform percentage. Moreover, this uniform percentage reduction is applied to all programs, projects, and activities within a budget account.
Okay, now that we know what it means, the questions that follow are… will it happen and if it does happen, what affect may it have upon our lives and especially the economy? There have been many articles written regarding what could happen if the budget is cut by approximately 10% overnight. These cuts include all discretionary spending from jobless benefits to food inspections to defense. Not all cuts would happen immediately. For example, if there are furloughs of Federal workers, we have read that the furloughs may take 30 days or more to implement. That gives Congress and the Administration more time to come up with a solution. And you know what they do when they have extra time? Usually nothing. There is no doubt that dropping hundreds of millions of dollars out of the budget will take some steam out of the economy this year. This could lead to lower rates and oil prices. We just don’t think that the cuts will be allowed to take hold all year. With a compromise of some kind, there will be some cuts, but how much remains to be seen.
The Markets. Rates were up slightly in the past week. Freddie Mac announced that for the week ending February 21, 30-year fixed rates rose from 3.53% to 3.56%. The average for 15-year loans remained at 2.77%. Adjustable rates were mixed, with the average for one-year adjustables rising to 2.65% and five-year adjustables stable at 2.64%. A year ago 30-year fixed rates were at 3.95%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, “Rates have been relatively stable, hovering near record lows for the past four weeks which is helping to spur new home construction. For instance, new construction on single-family houses rose to an annualized rate of 613,000 in January, the most since July 2008. In addition, single-family building permits were up to the highest issuance level since June 2008.” 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 February 22, 2013
|Daily Value||Monthly Value|
|6-month Treasury Security||0.13%||0.11%|
|1-year Treasury Security||0.16%||0.15%|
|3-year Treasury Security||0.40%||0.39%|
|5-year Treasury Security||0.86%||0.81%|
|10-year Treasury Security||1.99%||1.91%|
|12-month LIBOR||0.818% (Jan)|
|12-month MTA||0.178% (Jan)|
|11th District Cost of Funds||1.071% (Dec)|
The economic downturn that ended a few years ago may have soured many consumers on making significant financial decisions. But as the effects of the recession fade, many may be more interested in homeownership. That seems particularly true of younger consumers who may not have been in a position to buy years ago. Today, the vast majority of consumers between the ages of 25 and 44, comprising both millennials and those in Generation X, say that homeownership is at least somewhat important to them, according to a new survey from Prudential Real Estate. In all, 96 percent of all consumers feel this way. But 77 percent of those aged 25 to 34, and 78 percent of people between 35 and 44, say it’s “very important.” Further, 74 percent say that the current levels of affordability lent by historically low interest rates mean that now is a great time for them to buy a home. “Millennials and Generation X — about 85 million people strong — face a unique opportunity in U.S. housing,” said Earl Lee, chief executive officer at HSF Affiliates LLC and president of Prudential Real Estate. “They are generally optimistic about homeownership and, by nature, share a strong sense of community. As important, many were not impacted by the real estate downturn and are looking at today’s buying opportunities with keen interest.” In addition, 63 percent of those polled say they currently have a favorable view of the real estate market in general, and those in the younger generations were typically more enthusiastic about it than their older counterparts, the report said. Source: AOL Real Estate
A large majority of people in that field plan to buy as many or more properties in the next 12 months to rent out or sell for profit. That’s one of the findings of a study released recently that attempted to measure the impact people involved in income or speculative real estate are having on the housing market. The survey, sponsored by BiggerPockets.com, the nation’s leading social Web site for real estate investors, and Memphis Invest, one of the largest providers of single-family rentals — shows that 65 percent of investors plan to buy a lot more homes during the next 12 months. The report points out that investors played a fairly substantial role in the housing recovery. The housing crisis pushed nearly 4 million foreclosures onto the open market, devastating home values. This and the coinciding financial crisis squashed homebuyers’ confidence and their ability to buy. At that time, real estate investors began buying up the foreclosures when few other people could enter the market. They bought up so many properties that they established single-family rentals as a $100 billion business. In fact, the report says that single-family rentals now outnumber apartment units. They are also renovating the homes they buy and spending an average of $7,500 per home. That totals more than $9.2 billion every year in construction-related spending, according to the report. This is critical business for an industry that was hit hard by the recession. In 2008, Congress approved the Neighborhood Stabilization Program to provide funds to municipalities and not-for-profit organizations to repair damage to foreclosed homes. Up to this point, they have spent a total of $7 billion of tax payer money. Real estate investors are doing more than this every year with their own money or money that they borrow. Surprisingly, the report finds that only one in four real estate investors are cash buyers. In fact, slightly more than half make down payments and finance the rest of the purchase amount. Source: The Washington Post
Consumers need to be extra vigilant about checking for any errors on their credit reports, according to the Federal Trade Commission. One in four Americans report they’ve found an error on their credit report, according to a study conducted by the FTC, which analyzed 1,001 consumers’ credit reports from the three major agencies, Equifax, Experian, and TransUnion. Researchers helped the consumers spot potential errors on their reports. Five percent of the consumers found such large errors on their report that they could have gotten stuck paying more for home loans or other financial products, if they hadn’t taken steps to correct it before applying, according to the study. Twenty percent of the credit reports studied that were found to have errors in it were ultimately corrected after the consumer took steps to dispute it, which resulted in about 10 percent of consumers receiving a higher credit score, according to the study. Consumers are entitled to receive a free copy of their credit report each year from the three reporting agencies. Source: The Associated Press