New Tax Hikes Bad for Real Estate Market
New Tax Hikes Bad for Real Estate Market and stock markets!
Massive Tax Hikes Across the Board – Could be just days away!
We may be facing massive tax increases in the coming days! What should you do to shield yourself against massive tax increases such as capital gains tax, income tax and other taxes that will be needed as congress raises capital for the new 3.5 Trillion Dollar Infrastructure Bill? Read more 
San Diego Real Estate Market – Unemployment – Stock Market
San Diego real estate market
San Diego real estate market stats show a firming trend. But, I personally believe that before a real bottom is in place, we must see an improving local job market. With yesterday’s announcement of a 0.1 % micro improvement in the unemployment rate to 9.4% , this certainly is not the beginning a major trend. I don’t think we are close to a turnaround in the worst jobs turndown since the thirties.
The unemployment numbers look like they are getting worse at a slower rate. If I’m correct, how can one believe that the San Diego real estate market is improving by any significant amount? There are plenty of great arguments that the published Unemployment Rate of 9.4% is understated.
There is one item that confirms the arguments: the unprecedented and historical record decline of 18% in Federal Tax Revenues is a the confirming number. The 18% reduction in tax revenue correlates more with a 15% unemployment rather than a 9.4% unemployment rate.
At least the government is hiring.
The private sector economy is hunkered down, shell shocked, waiting for the next blow to fall. Large numbers of workers, investors, homeowners, and businesspeople have simply given up. They are no longer counted in the unemployment numbers.
I would say there just isn’t enough of a trend in the BLS monthly data to suggest an end date for the recession. I’d say you’d need at least two more BLS reports of improving net payrolls and two upward revisions in the work week.
If there is no bottom in sight for real estate, how can the stock market be putting in such a stellar proformance? Well, to answer my own question, it could very well be that (as it’s often said) the stock market is looking six months down the line. But, than again, the current stock market rally is being driven by momentum buying and liquidity from the government and hedge funds. This too may end badly. It may take some time, but by then the retail investor will be invested, and then look for the institutions to exit, leaving the little guy holding the bag. Will they ever learn?
San Diego Little Italy condos
Home Sales Up – Stocks Up – Bonds Down
First-time homebuyers who purchase a home before December 1, 2009, will receive up to $8,000 in tax credit. Here’s a great article from the IRS for more information: www.irs.gov/article
Last week saw more unexpected good data on the housing market. February existing homes sales increased 5.1%, to a 4.72 million annual rate. Sales were up in all regions for both single-family homes and condos/co-ops. Plus, the Federal Housing Finance Agency reported home prices UP 1.7% for January. That puts them off just 10% from their April 2007 peak. The supply of existing homes stayed at 9.7 months, with the number of homes in inventory showing its first increase since July. Some observers feel sales have finally bottomed. Wednesday saw February new home sales UP 4.7% to a 337,000 annual rate. The supply fell to 12.2 months as inventories dropped to 325,000, their lowest level since 2002 and 43.0% below their mid-2006 peak.
Finally, mortgage applications were up for the week ending March 20. Although most of the activity was for refinances, applications for purchase mortgages were up a good 4.2%, according to the Mortgage Bankers Association. Freddie Mac's survey for the week ending March 26 reported 30-year fixed-rate mortgages averaged 4.85% with an average of 0.7 points. This was for conventional conforming mortgages with a 20% down payment and was the lowest rate since the survey began in 1971. Compared to last year's high rate of 6.63%, the current rate saves about $225 a month on a $200,000 mortgage, according to Freddie Mac.
>> Review of Last Week
UP AGAIN… The market boom continued, as the rally that started March 6 went for one more week, this time at a very nice 6% clip. The rise was fueled by the unexpectedly good housing data, plus Treasury Secretary Geithner's plan to set up a series of public-private investment funds to buy $500 billion to $1 trillion worth of troubled bank assets. The government is enticing the private sector to join in by taking on the bulk of the risk and offering subsidies. The world's largest bond fund said they'll go along with the program. Not ba d for starters.
There's clearly been a change for the better in the economic data we've been getting. Indicators have come in above expectations the last few weeks. In addition to the housing numbers, the list includes retail sales, the Philly Fed Index (a manufacturing gauge) and durable goods. This bolsters the position of those economists who believe the recession is quickly losing steam and will probably be over by mid-year, way earlier than some expect. The President, in his prime time news conference Tuesday, commented on the economic situation: "We're beginning to see signs of progress."
For the week, the Dow shot UP 6.8%, to 7776.18; the S&P 500 was UP 6.2%, to 815.94; and the NASDAQ ended UP 6.0%, to 1545.20.
With stocks up, bond prices went down. But stocks ended the week on a down day Friday, so bond prices recovered a bit. The yield on the benchmark 10-year Treasury settled at 2.755%. This indicates mortgage rates should stay at their current attractive levels, which is just what the Fed wants to see.
>> This Week’s Forecast
ACCOUNTING, THEN JOBS… This Thursday, April 2, the Financial Accounting Standards Board (FASB) will tell us whether they'll modify mark-to-market accounting. The hope is an analysis of cash flow can be used to value assets, so income-generating securities won't be marked down because of an accounting rule. The week ends with the March employment report. No one is expecting a change for the better just yet.
Economic indicators include the ISM Index, which measures national manufacturing. It went up a bit in February, so let's see if the rate of manufacturing contraction continues to slow. Tuesday is Chrysler and GM's deadline to show Congress how they figure to survive long term. Also April 2, world leaders meet in London for the G-20 Summit. Look for more resolve to fix the financial system, along with tougher regulation and oversight.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Mar 30 – Apr 03
|
Date |
Time (ET) |
Release |
For |
Consensus |
Prior |
Impact |
|
Tu |
09:00 |
Consumer Confidence |
Mar |
28.0 |
25.0 |
Moderate |
|
Tu |
09:45 |
Chicago PMI |
Mar |
34.0 |
34.2 |
HIGH |
|
W |
10:00 |
ISM Index |
Mar |
35.5 |
35.8 |
HIGH |
|
W |
10:00 |
Pending Home Sales |
Feb |
–1.6% |
–7.7% |
Moderate |
|
W |
10:30 |
Crude Inventories |
3/27 |
NA |
3300K |
Moderate |
|
Th |
08:30 |
Initial Jobless Claims |
3/28 |
NA |
652K |
Moderate |
|
F |
08:30 |
Average Workweek |
Mar |
33.3 |
33.3 |
HIGH |
|
F |
08:30 |
Hourly Earnings |
Mar |
0.2% |
0.2% |
HIGH |
|
F |
08:30 |
Nonfarm Payrolls |
Mar |
–657K |
–651K |
HIGH |
|
F |
08:30 |
Unemployment Rate |
Mar |
8.5% |
8.1% |
HIGH |
|
F |
10:00 |
ISM Services |
Mar |
41.9 |
41.6 |
Moderate |
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months. The Fed made it pretty clear the week before last that they were going to keep the fed funds rate down for an extended period. The economists are believing them.
Current Fed Funds Rate: 0%–0.25%
|
After FOMC meeting on: |
Consensus |
|
Apr 29 |
0%–0.25% |
|
Jun 24 |
0%–0.25% |
|
Sept 23 |
0%–0.25% |
Odds of change from current policy:
|
After FOMC meeting on: |
Consensus |
|
Apr 29 |
1% |
|
Jun 24 |
3% |
|
Sept 23 |
5% |
This post information was provided by: Greg Brooks southwest area manager San Diego Mortgage Network (800) 287-8292 x 225 San Diego homes for sale
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Housing & Stock Market Worries
The Obama new policy blitzkrieg has many worried. Just look at decline in stocks since Jan. 20 for the opinion of the investing public.
What are they so worried about? The short list includes:
- Proposals for higher income taxes on the highest earners.
- Higher taxes on capital gains and dividends.
- A new tax on all securities trades.
- "Cram-down" legislation forcing banks to accept lower profits on mortgages.
- The Employee Free Choice Act, which would give unions an advantage over management.
- The carbon tax & the resulting very possible double digit increase in utility rates.
- Limits on oil drillers' tax breaks.
- Limits on agricultural subsidies.
- Smaller deductions on mortgage payments.
- Cuts in subsidies to independent student loan providers.
- Limits on drug pricing and Medicare rates.
Stock Market Rally … A Real Bottom?
At last!! It only took a few dew drops of good news for the Dow to recover from its near death experience and rocket 350 points. The “I love America trades” of long bonds and Treasuries came back with a vengeance. The “short America trades” were last seen running down the street with their tails between their legs, and gold breaking key support at $900. News that Citigroup was profitable in 2008, rumors of the suspension of the uptick rule and mark-to-market accounting were enough to do the trick. It also helped that every technical analyst on the planet was screaming “Buy!” Although this may not last, even a single day of fresh air is welcome.
Is this stock market rally just a one day 5% dead-cat bounce? The basic fundamentals of Citi has not changed. Of course the banks will all be profitable if Uncle Sam removes any and all losses. A one-way street upward as long as the taxpayers pay the losses… a market rally based on these fundamentals does not prove to be a true bottom. San Diego Realtors
Recent Related Posts:
Eternal Optimism Meets Reality or Know When to Fold Them
The Greater Depression – Jim Rogers Interview
Real Estate Market Problems Solved
San Diego Real Estate & Mortgage Views
INFO THAT HITS US WHERE WE LIVE Last Wednesday, January existing home sales came in down 5.3%, to an annual rate of 4.49 million. The supply went to 9.6 months, but that was all because of the slower pace of sales. In fact, the raw inventory of both single family homes and condos/co-ops DECLINED. The inventory of existing homes has now been reduced by one million homes since its peak last July.
Thursday, new single-family home sales came in at a 309,000 annual rate, a bit slower than expected. Because of this slow pace, inventory increased to 13.3 months. But the total inventory of unsold new homes has dropped dramatically – to 341,000 homes, down 40.2% from its record peak in 2006. The new homes inventory is now below the 355,000 average of the last 25 years.
We also saw the Case-Shiller home price index down 2% for December and down 18.5% versus a year ago. The media jumps all over this index, but it focuses on homes in major metro areas, so it isn't a true average for the country. For a truer look at the overall situation, we might want to consider the Federal Housing Finance Agency (FHFA) numbers, which concentrate on homes with conforming mortgages. Sales of these homes showed a PRICE GAIN of 0.1% in December and only an 8.7% drop from a year ago. Some experts feel many areas of the country are close to or already have hit bottom.
>> Review of Last Week
STAYING ABOVE 7000…It wasn't a great week in the markets, with the major indexes slipping just over 4%. The Dow happily stayed above 7000, a psychological victory of sorts, since both the Dow and the S&P 500 finished at 11-year lows. The week began with a low Consumer Confidence reading and ended with Friday's revised Q4 GDP of –6.2%. This was bigger than predicted and the media jumped all over "the worst GDP reading in a quarter century." They were referring to Q1 1982 GDP, which was actually –6.4%, meaning we're still not as bad off as we were in the Reagan recession.
Real disposable personal income was up 3.4% in Q4, indicating people have money, they're just hesitant to spend it. Other positive news included the Chicago PMI (Purchasing Managers Index) coming in UP over last month. This forward-looking indicator is a good si gn, as is University of Michigan Consumer Sentiment, which also came in better than expected. The most encouraging signs came from our leaders. Fed Chairman Ben Bernanke told Congress Tuesday there is a "reasonable prospect" the current recession will end this year and that 2010 will be a year of recovery. That evening, the President told a joint session of Congress, the nation and the world: "We will rebuild, we will recover and we will emerge stronger than before."
Efforts to fix the financial system included the announcement Wednesday of the administration's Capital Assessment Program. CAP will provide banks with capital in exchange for stock, if they go through a "stress test" to determine the need for those funds. Friday, the Treasury agreed to hike its stake in Citigroup to 36%.
The week saw the Dow fall 4.1%, to 7062.93; the S&P 500 went down 4.5%, to 735.09; and the NASDAQ slid 4.4%, to 1377.84.
The bad week in stocks was matched, uncharacteristically, by a bad week in bonds. Uncertainty about the cost of all the bailouts is weighing on prices. The price of the benchmark 10-year Treasury went down, so its yield, which runs counter to price, went up to 3.030%. Mortgage rates, however, remain at very attractive levels.
>> This Week’s Forecast
GOT JOBS?… We'll find out the latest employment story in Friday's Jobs Report. Pending Home Sales will be the topic on Tuesday. AIG is supposed to announce quarterly earnings (no date yet confirmed), but no one's expecting to throw a party over that one. Other indicators will continue to scope out the economic situation.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months. Economists believe the Fed is unlikely to move rates from their rock bottom level during the first half of the year. Things could change in the second half if the economy and inflation start perking up.
Current Fed Funds Rate: 0%–0.25%
This post information was provided by: Greg Brooks southwest area manager San Diego Mortgage Network (800) 287-8292 x 225 San Diego homes for sale
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Government Bailouts – Why a Modern-Day New Deal Won’t Work
The days of buy & hold in the stock mark are over! The vast majority of stock brokers and media financial types have always said not to panic, hold for the long term and stocks always bounce back. The problem is when –a real bust, you can end up with a huge percentage of your savings wiped-out. About the only think for certain in the long term, is that the person who gave you the buy and hold advice has retired and you have to keep working because you can't retire on your reduced savings.
You have to know when to hold them and know when to fold them! San Diego real estate agents
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So Much For The Bailout
Wall street voices its opinion of the Government bailout. First it was the Government cash taxpayer rebate. Then we had a Government housing bailout effective October 1, 2008. Then, in a third step, the Government bailout program known as the "rescue bill," signed into law on October 5, 2008.
During the three business days after the latest bailout bill was voted on, Wall Street & all other world marketssaw huge declines. Note the Dow Jones Index chart shown below:
Now, Obama is already proposing another bailout plan. I would suggest that just like the Rocky movies, we name these new bills, bailout #1, bailout #2, bailout #3 … It would be much easier to reference these different bills if each was numbered.
I venture to say that somewhere around bailout #4 or #5 (the P.C. name of the next bill will most likely be "The neighborhood village revitalization Act") we will finally see the Government's real end-game: Behind on your home payments? Not to worry, we will rewrite your loan to the new depreciated value of your home and reduce your interest rate to today's rate. Plus, we will extend the 30 year term to 60 years to lower your monthly payments. If you cannot make your new drastically reduced payments, just pay what you can and we'll make up the difference by again extending your payback period beyond the sixty year term. Did I hear anyone say 100-year home mortgages?
Naturally, you can keep the new speedboat and SUV you purchased with your original home equity loan.
Cramer Says SELL Stocks This Week!
This morning on The Today Show, Jim Cramer said if you own stocks and will need cash from those investments within the next five years, you should sell those investments this week! Why say this on national TV? Obviously, he expects stocks to fall an additional 20% from today's level.
Keep in mind that as of Friday's close, 80% of stocks in the Russell 3,000 are down year-to-date, and a whopping 17% are down more than 50%. Jim Cramer is the host of CNBC's "Mad Money" and co-founder of TheStreet.com.
A few prior posts on stocks & the economy:
Govt. Take Over Of Fannie Mae and Freddie Mac Could Cost Billions
Stocks of Housing Giants Suffer Huge Losses
Former Fed Chief … Would Not Be Surprised If The Housind Drop Was “in double digits.”
Stock Market tumbles 146 points . . . The Perfect Bull Trap on Sub-Prime Woes
Bicoastal Housing Recession Forecast By UCSD Economist
Real Estate vs. Stocks – Which is the Better Investment?