Home sales are actually up? Does that home sales are actually up, make you feel the “depression” isn’t real?
According to the national Realtor association home sales are up 17.4% in the last two months.
November home sales leap –
NEW YORK (CNNMoney.com) — After surging 10% in October, sales of existing homes jumped again in November, growing 7.4% compared with October to an annualized rate of 6.54 million units, according to the National Association of Realtors.
“This clearly is a rush of first-time buyers not wanting to miss out on the tax credit,” said NAR’s chief economist, Lawrence Yun.
November was originally going to be the last month in which sales to first-time homebuyers would qualify for a federal tax credit of up to $8,000. However, that deadline was extended through June.
In addition, the tax credit was expanded to cover people who already own a home. They can qualify for a $6,500 tax credit if purchase a new house before the end of June. That should encourage “trade-up” buyers.
The strength of sales in November surprised the industry. A panel of experts compiled by Briefing.com had forecast month-over-month sales growth of just 2.5% to 6.25 million from 6.1 million a month earlier.
The sales total was also a huge improvement over a year ago. Sales rose 45.7% over the paltry annualized rate of 4.49 million units during November 2008.
The contribution made by first-time buyers is evident in a separate survey NAR conducted of its members. They estimate that 51% of sales in November were by newcomers to the market, up a point from 50% in October. Normally, first timers account for about 40% of sales.
Also propelling sales higher were rock-bottom interest rates. The average for a 30-year, fixed-rate loan during the month was just 4.88%, down from 4.95% in October and 6.09% a year ago.
With rates that much lower, homebuyers can save more than $150 a month on a $200,000 mortgage.
The industry expects home sales to slacken December, partially because of the tax credit’s originally scheduled demise. That caused some buyers to push up their closing, stealing sales from December.
However, sales will not fall off a cliff, though, according to Walter Molony, a NAR spokesman. “The psychology seems to be turning around,” he said. “Potential buyers, who had been staying on the fence, now believe we’re at or near the market bottom.”
One X-factor, however, is the vast numbers of homes that may come to market over the next few months. There is a large “shadow inventory” — homes owned by banks and mortgage companies — that have not yet been put up for sale. It could be as many as 1.7 million units, according to First American CoreLogic.
In addition, another spate of foreclosures could be hitting the market as a number of option-ARM mortgages are set to default.
All that may drive prices down, according to Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream.” And the impact of these renewed price declines could again alter the market psychology.
“People think that prices have bottomed,” she said. “I don’t think they have. People will see price declines and that will discourage them from buying.”
Mike Larson, a real estate analyst with Weiss Research has preached all through the bust that price declines are what will “fix” the housing crisis.
“We needed to see prices fall to make ownership competitive with renting again, and to restore the normal relationship of house prices to income,” he said. “That has now happened and you’re seeing buyers come out of the woodwork as a result.”
Still, they will have to come out in large numbers to offset the inventory overhang in some of the worst markets, according to Olefson. In the Florida condo market, for example, there is a 35-to-40 month supply of units at the current rates of sale, she said.
Prices still almost certainly have further to fall
Home sales were down again in November – and there are millions more homes that will probably be foreclosed in the next yr or two, which will keep house prices down – the real estate market has years to go before most homeowners (including me) have positive equity again
Can you give a simplified version of “Reasons Why Dollar Could Collapse?”?
Taken from http://www.economicshelp.org/2008/09/us-dollar-collapse.html, “Reasons Why Dollar Could Collapse?” is very complex and difficult for me to understand.Can you explain this in much more simpler way?
1. Switching Reserves away from the Dollar.
The US is currently the world’s reserve currency. Central banks currently hold upto 90% of their foreign reserves in the dollar. However, as the US economy and finance sector looks very weak, it makes sense for countries to diversify out of the dollar. If countries were to switch from holding reserves in dollars to holding reserves in Yen, Euros or others, it could spark a free fall in the dollar.
* Chinese banks told not to lend to American Banks.
* China threatens to sell Dollars
If China did sell its $1trillion dollar assets. It would cause a devaluation in the dollar and also higher bond yield rates. Higher interest rates are the last thing the US economy need at the moment.
There is also the danger of OPEC oil exporting countries shifting out of the dollar or at least not using their oil surpluses to buy US securities. (By the way, markets think this is more likely if Obama wins election)
2. US Debt increasing.
US debt currently stand at $9 tn or 65% of GDP. However, it is forecast to increase substantially Some argue National debt could soon pass 100%. This is because
* Financial bailout for subprime debt. If house prices continue to fall, if mortgage defaults continue to rise; the legacy of toxic debt could leave the US treasury facing unprecedented losses as it tries to bale out the system.
* Long term spending commitments on health care and pension will increase spending. Although, this has gained less publicity, in the long term, it could be more expensive than the current financial bailout. The Ageing population will increase the debt burden.
The problem with the increasing levels of debt is that the growing concern that the US government may start to default on its debt. If this ever happened it would cause shockwaves throughout the global financial situation and people would sell dollars. At the moment, countries like Japan and China have shown a willingness to lend the US money (buy US Bonds) at relatively low interest rates. But, if this confidence falls, nobody would want to buy any more US debt. This would cause a fall in demand for dollars and the value would fall. (Default by US Government is no longer unthinkable at Telegraph.)
To finance the growing national debt, the government may also just increase the money supply because they can’t sell any more bonds. This would increase the money supply and inflation and also cause a depreciation in the value of the dollar.
3. Credit Crisis – Worst still To Come
The credit crisis and banking losses put downward pressure on the dollar because:
* They are forcing the US government to borrow more.
* Lack of Confidence in US financial markets which affects confidence in the dollar.
4. Current Account Deficit.
For several years, the US has been running a large current account deficit. This peaked at around 6.5% of GDP in 2006 (It has since fallen to 5% on the back of a weaker dollar.) Upto now the current account deficit has been financed by capital flows from abroad (mainly Asia and OPEC countries). If these capital flows were to dry up, as Asian countries no longer wanted to hold dollar securities, the dollar would fall.
5. Economic Recession and Low Interest Rates.
US interest rates are already low – 2%. However, if the economy was pushed into a very deep recession (e.g. growth of -2%) then there may be pressure for further cuts in interest rates. This would make the US even less attractive as a place to save money. Therefore demand for dollar would fall.
Easy: Printing too many dollars.
Milton Friedman discusses what causes inflation and how it cured. He leads the viewer through the monetary process so that, in the end, the situation is crystal clear.
global growth vulnerable to market tension ?
what effect does this have long term and short ?
Despite a flourishing US economy, global momentum remains vulnerable to financial market tension that could dampen critical consumer spending and bedevil the corporate and housing sectors, analysts warn.
While the US government on Wednesday reported a surprisingly robust 3.9 percent gain in third quarter US growth, Veronique Riches-Flores, chief economist with the bank Societe Generale, put that in perspective.
“The third quarter will be good everywhere, including in the eurozone,” she cautioned.
She predicted however that “we are in for two to three quarters of negative effects” showing up in the financial results of major banks. Several of them have already disclosed big losses stemming from a collapse in the US high-risk housing market and its impact on mortgage-backed securities.
The US Federal Reserve has put the cost of the crisis in the “subprime” mortgage sector at between 100 and 150 billion dollars (69.2 billion-103 billion euros) to banks and credit institutions worldwide.
But beyond simple bottom-line losses, “the crisis in the credit market persists, with tighter lending conditions, a weakening in other segments of the economy and a rise in US unemployment,” said one banking analyst who asked not to be named.
Borrowiong costs among banks are still abnormally high, a sign that jitters continue to sap confidence at financial institutions.
As a result, according to Riches-Flores, companies are having trouble securing financing, both in the United States and Europe.
A downturn in US housing prices has also signalled an end to the “wealth effect”, which in the past few years has enabled homeowners to re-finance their properties in order to obtain ready cash.
With that option now disappearing, US consumer spending, which drives US growth, could contract.
The US labour market has so far generally resisted the slide in the housing sector, although there have lately been increases in the number of first-time applicants for unemployment compensation.
In Europe, “the effects of the subprime crisis are expected to materialise gradually,” said Eric Vergnaud, an economist at the BNP Paribas bank.
At research group Exane, analyst Jean-Pierre Petit, also noted that “the cost (to Europe) will be progressive” and said there would be no serious damage done if “the equities market rebounds and if the credit market returns to normal.”
He forecast that the global credit squeeze would shave 0.3 to 0.6 points from the world economy between mid-2007 and mid-2008. The International Monetary Fund last month reduced its growth projection for 2008 to 4.8 percent from 5.2 percent.
Petit also cited certain positive effects from the current situation, notably lower US interest rates, a delay in rate hikes in the eurozone and oil prices “that would be even higher without the crisis.”
In addition, tighter credit conditions had “put an end to the pursuit of speculative bubbles” and could thereby ensure a soft landing for the global growth pace after a five-year spurt.
The short run effects are clear. Savers are putting less money into banks and real estate, and banks have been unwilling to lend to subprime customers. This will create a slowdown in the real estate market, and perhaps the stock market will also decline temporarily.
The longer-term implications are harder to understand. If you believe that the sub-prime market was not sustainable, and those individuals should not have been buying houses, then this will create a permanently lower demand for housing. If you believe otherwise, then the market might figure out a better way of handling the risks.
Should I sell or should I sit?
My partner and I recently split. We entered into a mortgage for a unit in Brisbane (inner city suburb – Albion) in September last year. I have since moved out and he wants to buy me out (he can afford to do this, I cannot).
He is keen to do this ASAP (as soon as the FHOG year period expires). My feelings are at this point are if I do this, I will probably walk away with nothing, so at first I was not very keen to be “bought” out. However, all the doom and gloom reports I have read don’t expect the market to improve for at least 1 year to 18 months, would it really be worth my time sticking it out paying rent, mortagage, body corp, rates, water etc for another year to two years? Or should I just cut my losses and sign it over. He has assured me that I wont end up owing anything (we have gone 50/50 in everything including the initial $40K deposit) so at worst I would just sign it over and walk away empty handed.
My questions are:
1. What would your advice be for me in this situation, considering the market situation at present and forecast market standing?
2. I am sure others have been in this situation, does being bought out of a property negatively effect your credit rating or standing with the banks?
3. What sort of professional can I talk to about this? Financial planner? Estate agent? Valuer? (obvious choice if he buys me out)
NB- all mortgage payments have always been on time and over the minimum standard so no issues there. We purchased the prop for $339K.
Any help would be greatly appreciated as I dont know where to turn. The banks are not helpful and our broker was even more useless than the banks when we bought so I am stuck!!!
When you bought this property together you put in 20K. At the every least you need to get the full 20K back plus there should be some equity (tho not much) built up in the past year (maybe a couple hundred dollars) so you should get half the equity as well. Your BF will need to do a title transfer where he takes your name off the title. Make sure he does this-so you don’t get screwed if he defaults on the loan. He needs to give you your share FIRST-before he starts the transfer process. You will need to fill out documents too saying you have received your share, etc. I’m sad to say but usually you will need to hire a lawyer to help you thru this. Costs can vary buy a title transfer is simple and just requires some paper work. I recently bought my partner out and the lawyers fees were $2,000.
As you already know banks are useless as far as getting any help. If you were to keep your share do not expect property prices to go up for AT LEAST another 5-10 years.
I hope this helps in some small way. It appears you are in Australia (lucky you ) and I am in California so I’m sure the legal systems are different. You need to get your full share back. If you stay in the real estate partnership you will still have to pay half of everything even tho you are not living there. Good luck with this.
Do the Republican, candidiates John McCain and Sarah Palin support the $700 Billion Dollar Corporate bailout?
Do the Republicans, and candidiates John McCain and Sarah Palin support the $700 Billion Dollar Corporate bailout of the housing finance industry (of domestic and foreign investors) proposed by the GW Bush administration, in violation of Republican rhetoric against government involvement in the economy, that the government is best that governs least; and, if not isn’t that Republican deceit lying and hypocrisy, in light that they don’t bailout the average American citizen and accuse Barrack Obama of support bloated budgets, wasteful spending, and pork barrel politics?
Bush asks Congress for $700 billion for bailout By JULIE HIRSCHFELD DAVIS, Associated Press Writer
Sat Sep 20, 9:30 AM ET
Economists see financial bailout as necessary
By MARTIN CRUTSINGER AP Economics Writer
The economy could suffer a massive hangover from the government’s efforts to rescue the financial system in the form of a soaring debt burden. But the alternatives look infinitely worse.
The $700 billion the administration is seeking from Congress as the upper bounds of what it will need to take a mountain of bad loans off the books of financial firms is certainly an eye-popping figure.
To get the funds to buy up the bad mortgage loans that have threatened to bring the financial system to its knees, the government will have to borrow. And that borrowing will come at a time when the federal budget deficit is already soaring.
The deficit for this budget year, which ends on Sept. 30, is expected to rise to $407 billion, a figure that is more than double the $161.5 billion imbalance for 2007, reflecting what the economic slowdown and this year’s $168 billion economic stimulus program are already doing to the government’s books.
The Bush administration is estimating that the deficit for the budget year that begins Oct. 1, which will cover the new president’s first year in office, will hit $482 billion, a record in dollar terms.
And that forecast doesn’t include the $200 billion the administration committed to spending two weeks ago when it took over the nation’s two biggest mortgage companies, Fannie Mae and Freddie Mac.
And it doesn’t have any of the $700 billion the administration is seeking to soak up the bad mortgage-backed securities that have been at the heart of the severe credit crisis the country has been struggling with since August 2007.
The legislation Congress passed this summer that gave the authority to rescue Fannie and Freddie boosted the limit on the national debt by $800 billion to $10.6 trillion.
The legislation the administration is now seeking to authorize the financial system bailout, according to a draft obtained by The Associated Press, would boost that debt limit to $11.3 trillion, up another $700 billion.
It is the rapidly rising debt that is cause for concern. The government is already spending more than $400 billion a year just to pay interest on the national debt. The higher that debt goes, the higher the government’s borrowing costs and the less it has to spend on other programs.
Republican John McCain and Democrat Barack Obama are both running for president, making campaign promises about what new programs they will implement once in office, promises that could be severely constrained by the costs of a financial bailout.
The escalating borrowing also means that the government is competing with the private sector for loans, driving up interest rates. And then there is the matter of the country’s large trade imbalances which mean the United States has to borrow $2 billion a day from foreigners.
Will foreigners still want to lend as much to the United States if there are concerns that all the borrowing could weaken the dollar’s value against other currencies.
But even with all these threats, economists said the government has to take decisive action because the alternative of letting the financial system slide into even deeper problems which could jeopardize the routine loans that businesses and consumers need was simply not an option.
“It was critical to arrest the downward slide in financial markets,” said Sung Won Sohn, an economist at California State University, Channel Islands.
The dire situation was dramatically demonstrated this past week when the Federal Reserve, working with the central banks of other nations, poured billions of dollars into the financial system without any significant impact because of the fear keeping banks from lending.
The financial system has already been staggered with $500 billion in losses from the mortgage mess and the International Monetary Fund has estimated the ultimate price could be $1 trillion.
What the administration’s plan would do is at least establish a price for the mortgage-backed securities, which at the moment no one wants to own.
Officials who have briefed Congress on Treasury Secretary Henry Paulson’s plan have suggested that one approach would be for the government to buy the toxic debt through a
It’s not quite as dismal and socialistic as it seems. In exchange for the money loaned, we get real estate and other assets. Last time this sort of thing happened in the ’80s, the government made a profit from it.
The alternative is bread lines around the world. 🙁
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