From RealtorMag - Daily Real Estate News October 22, 2010
Mortgage Rates Edge Up
Interest on the 30-year fixed mortgage averaged 4.21 percent this week, up from a record low of 4.19 percent a week ago, reports Freddie Mac.
Rates for 15-year fixed loans also rose, climbing to 3.64 percent from 3.62 percent. However, the five-year adjustable-rate mortgage fell to a record low of 3.45 percent, after averaging 3.47 percent the previous week.
Source: Columbus (Ohio) Dispatch (10/22/10)
Saturday, October 23, 2010
Friday, October 22, 2010
Fed Beige Book Shows Modest Growth but Weak Real Estate Conditions
Fed Beige Book Shows Modest Growth but Weak Real Estate Conditions
10/21/2010 By: Carrie Bay DSNEWS
The Federal Reserve’s popular Beige Book report released this week suggests economic activity across most of the nation is showing signs of “modest” growth, but it’s not enough to improve the country’s anemic jobs picture with the unemployment rate holding at or above 9.5 percent for more than a year.
Beige Book findings are based on anecdotal information collected across the country from businesses and contacts outside the Federal Reserve. Data included in the latest report covers the September to early October time period.
Seven of the Fed’s 12 districts reported “moderate improvements” in economic activity. Three regions — Philadelphia, Richmond, and Cleveland – characterized economic development as “mixed” or “steady,” while only two regions — Dallas and Atlanta – described activity as “subdued.”
The most recent results show progress, albeit uneven, compared to the Fed’s description of “widespread deceleration” in the September Beige Book.
Housing markets remained weak with most districts reporting sales below year-ago levels. The central bank says input it received on home prices, however, suggests stability. Conditions in the commercial real estate sector were soft, while overall lending activity was described as stable in most districts.
Overall home sales were characterized as “sluggish” or “declining” throughout most regional districts. There were scattered reports of some improvement in sales in a few districts, however.
Philadelphia noted an increase in sales of existing homes, and Richmond, Kansas City, and Dallas reported upticks in sales of higher-priced homes. Sales reports were mixed in the St. Louis and Minneapolis districts, with increases in some metro areas and declines in others. Home inventories were elevated or rising according to most district reports.
The central bank says home prices were generally stable since last month’s Beige Book release, although Kansas City noted a decrease in prices, and New York and Minneapolis reported declines in some metros. Homebuilders in the Atlanta district reported downward price pressure and expressed concern about rising foreclosures and bank-owned properties coming to market.
Conditions in the commercial real estate sector “remained subdued,” according to Fed officials. Reports suggested rental rates continued to decline for most commercial property types. The one exception was the apartment sector, where higher leasing activity led to fewer concessions, most notably in Manhattan. Office, industrial and retail rental markets remained weak, although there were a few reports of slight increases in leasing activity in the Richmond, Chicago, and Dallas districts.
Commercial property sales were low overall, but contacts in Chicago and Dallas said investment demand for distressed commercial properties remained strong. Contacts within the real estate industry appear to believe the commercial real estate and construction sectors will remain weak for some time, according to Beige Book commentary.
Overall lending activity was at low levels across most districts, but that’s consistent with conditions over the past many months and characterized as “stable” by the central bank.
On the consumer side, lending was sluggish, but there were scattered reports of improvement. Residential mortgage lending and refinancing activity increased in several districts, and San Francisco reported an increase in demand for nonconforming mortgage loans.
Credit quality changed little on balance. New York reported a decrease in delinquency rates on consumer loans, however, and overall quality improved in Philadelphia and Richmond.
10/21/2010 By: Carrie Bay DSNEWS
The Federal Reserve’s popular Beige Book report released this week suggests economic activity across most of the nation is showing signs of “modest” growth, but it’s not enough to improve the country’s anemic jobs picture with the unemployment rate holding at or above 9.5 percent for more than a year.
Beige Book findings are based on anecdotal information collected across the country from businesses and contacts outside the Federal Reserve. Data included in the latest report covers the September to early October time period.
Seven of the Fed’s 12 districts reported “moderate improvements” in economic activity. Three regions — Philadelphia, Richmond, and Cleveland – characterized economic development as “mixed” or “steady,” while only two regions — Dallas and Atlanta – described activity as “subdued.”
The most recent results show progress, albeit uneven, compared to the Fed’s description of “widespread deceleration” in the September Beige Book.
Housing markets remained weak with most districts reporting sales below year-ago levels. The central bank says input it received on home prices, however, suggests stability. Conditions in the commercial real estate sector were soft, while overall lending activity was described as stable in most districts.
Overall home sales were characterized as “sluggish” or “declining” throughout most regional districts. There were scattered reports of some improvement in sales in a few districts, however.
Philadelphia noted an increase in sales of existing homes, and Richmond, Kansas City, and Dallas reported upticks in sales of higher-priced homes. Sales reports were mixed in the St. Louis and Minneapolis districts, with increases in some metro areas and declines in others. Home inventories were elevated or rising according to most district reports.
The central bank says home prices were generally stable since last month’s Beige Book release, although Kansas City noted a decrease in prices, and New York and Minneapolis reported declines in some metros. Homebuilders in the Atlanta district reported downward price pressure and expressed concern about rising foreclosures and bank-owned properties coming to market.
Conditions in the commercial real estate sector “remained subdued,” according to Fed officials. Reports suggested rental rates continued to decline for most commercial property types. The one exception was the apartment sector, where higher leasing activity led to fewer concessions, most notably in Manhattan. Office, industrial and retail rental markets remained weak, although there were a few reports of slight increases in leasing activity in the Richmond, Chicago, and Dallas districts.
Commercial property sales were low overall, but contacts in Chicago and Dallas said investment demand for distressed commercial properties remained strong. Contacts within the real estate industry appear to believe the commercial real estate and construction sectors will remain weak for some time, according to Beige Book commentary.
Overall lending activity was at low levels across most districts, but that’s consistent with conditions over the past many months and characterized as “stable” by the central bank.
On the consumer side, lending was sluggish, but there were scattered reports of improvement. Residential mortgage lending and refinancing activity increased in several districts, and San Francisco reported an increase in demand for nonconforming mortgage loans.
Credit quality changed little on balance. New York reported a decrease in delinquency rates on consumer loans, however, and overall quality improved in Philadelphia and Richmond.
Wednesday, October 20, 2010
China's Surprise Rate Hike: What It Means
China's Surprise Rate Hike: What It Means
by Daniel Gross, Yahoo! Finance Tuesday, October 19, 2010
Mike Santoli, columnist at Barron's, talks to Daniel Gross and Aaron Task about China's rate hike.
On Tuesday global stock markets got up on the wrong side of the bed thanks to news from an unexpected source: the People's Bank of China. The nation's central bank, analogous to the Federal Reserve in the U.S., announced it would raise rates on one-year loans and deposits by .25 percent, or 25 basis points.
Why is the People's Bank of China raising interest rates?
Central banks raise interest rates when they are concerned about inflation, or if they are worried that credit or the economy at large is expanding at an unsustainable pace. Higher interest rates make money more expensive, and thus should cut down on borrowing activity. China's economy is growing very rapidly, at a 10.3 percent annual rate in the most recent quarter, and inflation is running above the official target of three percent. For a country that has to make up as much ground as China does, no rate can be too fast. But housing markets, especially in coastal cities, have been raging. With observers fretting about bubbles, China's central bank has taken efforts to discourage real estate lending and choke off inflation. Raising interest rates is one way to do that.
Why would global stock markets react negatively to this news?
Two reasons. First, think about the changing shape of the world's economic geography. The U.S. (the world's largest economy), Japan (until recently the world's second-largest economy), and the European bloc (which rivals the U.S. in size) are all growing very slowly. China, now the second-largest economy in the world, accounts for a huge amount of growth and demand. While it exports a great deal, it also imports massive quantities of everything from nuts grown in California to copper mined in Chile. The Chinese domestic market has also finally emerged as an important source of sales; General Motors sells more cars in China than it does in the U.S. So any hint that the Chinese juggernaut might be showing signs of slowing is bound to be seen in a negative light by investors who are concerned about growth.
Second, it was a surprise. Markets hate surprises. As a general rule, monetary policy in the U.S. and Europe is conducted with a certain amount of transparency. Officials use speeches and statements to telegraph their intentions, so as not to surprise investors and markets. In China, government bodies keep information very close to their vest and don't face the same type of pressures that western central banks do to give notice about their actions. Since the markets for Chinese currency are very tightly controlled, the People's Bank of China doesn't feel the need to communicate openly about its intentions.
What are the effects of such an increase on China's economy?
The impact of this rate increase lies as much in its symbolism as in its practical effect. Boosting the rates by 25 basis points is like tapping the brakes gently on a freight train running at 90 miles per hour -- it can only slow it down a bit. But it does signal that China's central bank is sufficiently concerned about some issues in its economy to take action.
The exchange rate of China's currency, the yuan (the Renminbi is the official name of the currency, while the yuan is the main unit of currency), against the dollar, has been a contentious issue between the U.S. and China. How does this move affect the exchange rate?
In theory, raising interest rates in China should make the yuan stronger against the dollar. All things being equal, money flows toward countries with higher interest rates (like China) and away from countries with very low interest rates (like the U.S.). But despite intense pressure from the U.S. government, China has remained committed to keeping the yuan trading in a stable range against the greenback. China prefers a weak currency because it makes Chinese goods cheap for American consumers and makes American-made goods expensive for Chinese consumers -- which encourages exports and the consumption of domestically produced goods.
Daniel Gross is economics editor and columnist at Yahoo! Finance.
by Daniel Gross, Yahoo! Finance Tuesday, October 19, 2010
Mike Santoli, columnist at Barron's, talks to Daniel Gross and Aaron Task about China's rate hike.
On Tuesday global stock markets got up on the wrong side of the bed thanks to news from an unexpected source: the People's Bank of China. The nation's central bank, analogous to the Federal Reserve in the U.S., announced it would raise rates on one-year loans and deposits by .25 percent, or 25 basis points.
Why is the People's Bank of China raising interest rates?
Central banks raise interest rates when they are concerned about inflation, or if they are worried that credit or the economy at large is expanding at an unsustainable pace. Higher interest rates make money more expensive, and thus should cut down on borrowing activity. China's economy is growing very rapidly, at a 10.3 percent annual rate in the most recent quarter, and inflation is running above the official target of three percent. For a country that has to make up as much ground as China does, no rate can be too fast. But housing markets, especially in coastal cities, have been raging. With observers fretting about bubbles, China's central bank has taken efforts to discourage real estate lending and choke off inflation. Raising interest rates is one way to do that.
Why would global stock markets react negatively to this news?
Two reasons. First, think about the changing shape of the world's economic geography. The U.S. (the world's largest economy), Japan (until recently the world's second-largest economy), and the European bloc (which rivals the U.S. in size) are all growing very slowly. China, now the second-largest economy in the world, accounts for a huge amount of growth and demand. While it exports a great deal, it also imports massive quantities of everything from nuts grown in California to copper mined in Chile. The Chinese domestic market has also finally emerged as an important source of sales; General Motors sells more cars in China than it does in the U.S. So any hint that the Chinese juggernaut might be showing signs of slowing is bound to be seen in a negative light by investors who are concerned about growth.
Second, it was a surprise. Markets hate surprises. As a general rule, monetary policy in the U.S. and Europe is conducted with a certain amount of transparency. Officials use speeches and statements to telegraph their intentions, so as not to surprise investors and markets. In China, government bodies keep information very close to their vest and don't face the same type of pressures that western central banks do to give notice about their actions. Since the markets for Chinese currency are very tightly controlled, the People's Bank of China doesn't feel the need to communicate openly about its intentions.
What are the effects of such an increase on China's economy?
The impact of this rate increase lies as much in its symbolism as in its practical effect. Boosting the rates by 25 basis points is like tapping the brakes gently on a freight train running at 90 miles per hour -- it can only slow it down a bit. But it does signal that China's central bank is sufficiently concerned about some issues in its economy to take action.
The exchange rate of China's currency, the yuan (the Renminbi is the official name of the currency, while the yuan is the main unit of currency), against the dollar, has been a contentious issue between the U.S. and China. How does this move affect the exchange rate?
In theory, raising interest rates in China should make the yuan stronger against the dollar. All things being equal, money flows toward countries with higher interest rates (like China) and away from countries with very low interest rates (like the U.S.). But despite intense pressure from the U.S. government, China has remained committed to keeping the yuan trading in a stable range against the greenback. China prefers a weak currency because it makes Chinese goods cheap for American consumers and makes American-made goods expensive for Chinese consumers -- which encourages exports and the consumption of domestically produced goods.
Daniel Gross is economics editor and columnist at Yahoo! Finance.
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