~~~
You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away people’s initiative and independence.
You cannot help people permanently by doing for them, what they could and should do for themselves.
…..Abraham Lincoln
Market Conditions
New home sales were up for the month of August, welcome news for builders across the country.
The National Association of Home Builders is reporting that "following four months of solid gains, sales of newly built, single-family homes edged up by less than one percent in August as the window for an important buyer incentive began to close." (U.S. Commerce Department)
"With the $8,000 home buyer tax credit set to expire at the end of November, prospects for being able to purchase a newly built home and have that transaction completed in time to take advantage of the credit dimmed considerably as of August," said National Association of Home Builders (NAHB) Chairman Joe Robson, a home builder from Tulsa, Okla. "Congress must take immediate action to extend the tax credit if the positive momentum in home sales is to continue so that a sustained housing and economic recovery can take hold."
The National Association of Home Builders is reporting that "following four months of solid gains, sales of newly built, single-family homes edged up by less than one percent in August as the window for an important buyer incentive began to close." (U.S. Commerce Department)
"With the $8,000 home buyer tax credit set to expire at the end of November, prospects for being able to purchase a newly built home and have that transaction completed in time to take advantage of the credit dimmed considerably as of August," said National Association of Home Builders (NAHB) Chairman Joe Robson, a home builder from Tulsa, Okla. "Congress must take immediate action to extend the tax credit if the positive momentum in home sales is to continue so that a sustained housing and economic recovery can take hold."
Thinking about paying for a loan Modification?
LOAN MODIFICATION ATTORNEYS UNDER INVESTIGATION
The State Bar of California has recently launched numerous investigations against attorneys for misconduct related to loan modifications. In a rare move, the State Bar has released the names of 16 attorneys under investigation, by opting to waive investigation confidentiality in favor of public protection. These attorneys have allegedly taken fees for promised services, but failed to perform those services or even communicate with their clients who face the possible loss of their homes. Their non-attorney staff may also be under investigation for unlawfully practicing law.
Not all attorneys engaged in loan modifications are unscrupulous. However, this announcement from the State Bar serves as a good reminder for REALTORS® and their clients to be careful when dealing with attorneys and others for loan modifications. Scam artists may intentionally associate or affiliate themselves with attorneys in an attempt to lend credence to their fraudulent schemes. The list of attorneys currently under investigation is available at http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10144&n=96395.
The State Bar of California has recently launched numerous investigations against attorneys for misconduct related to loan modifications. In a rare move, the State Bar has released the names of 16 attorneys under investigation, by opting to waive investigation confidentiality in favor of public protection. These attorneys have allegedly taken fees for promised services, but failed to perform those services or even communicate with their clients who face the possible loss of their homes. Their non-attorney staff may also be under investigation for unlawfully practicing law.
Not all attorneys engaged in loan modifications are unscrupulous. However, this announcement from the State Bar serves as a good reminder for REALTORS® and their clients to be careful when dealing with attorneys and others for loan modifications. Scam artists may intentionally associate or affiliate themselves with attorneys in an attempt to lend credence to their fraudulent schemes. The list of attorneys currently under investigation is available at http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10144&n=96395.
Inventory Very Low... becoming seller's market
Sometimes, you have to look deeper than the headline to get the full story.
As reported by the National Association of REALTORS®, the number of Existing Home Sales fell last month, ending the report's 5-month winning streak.
Some newspapers are calling it a "setback" for housing. Others are questioning the comeback.
Rest easy, folks. August happened to be a terrific month for housing -- despite what the press says.
The Existing Home Sales report has 3 parts to it:
Total sales volume
Median sales price
Overall housing supply
Of the three, housing supply is paramount to the long-term strength of the market. The other two are periphery. It really doesn't matter how many homes are selling, or at what price they're selling. What's more important is the ratio of home buyers to home sellers.
Not enough buyers and home prices fall. Too many buyers and home prices rise. The former led us into the housing doldrums, and now the latter is leading us out.
Between July and August 2009, existing home supply fell by nearly an entire month and, since peaking 9 months ago, supply is down 23%.
Furthermore, the supply of new homes is down, too, off 34 percent on the year.
Housing supply helps us statistically define "Buyers' Market" and "Sellers' Market" and, right now, the Buyers' Market looks like its ending. If you've encountered a multiple-offer situation, you know exactly what I'm talking about, too.
The combination of low mortgage rates, relatively cheap homes and timely tax credits turned the housing market around this year and there's more gains ahead -- no matter what the papers say.
With home supply keeps falling, a full housing recovery is just around the bend.
As reported by the National Association of REALTORS®, the number of Existing Home Sales fell last month, ending the report's 5-month winning streak.
Some newspapers are calling it a "setback" for housing. Others are questioning the comeback.
Rest easy, folks. August happened to be a terrific month for housing -- despite what the press says.
The Existing Home Sales report has 3 parts to it:
Total sales volume
Median sales price
Overall housing supply
Of the three, housing supply is paramount to the long-term strength of the market. The other two are periphery. It really doesn't matter how many homes are selling, or at what price they're selling. What's more important is the ratio of home buyers to home sellers.
Not enough buyers and home prices fall. Too many buyers and home prices rise. The former led us into the housing doldrums, and now the latter is leading us out.
Between July and August 2009, existing home supply fell by nearly an entire month and, since peaking 9 months ago, supply is down 23%.
Furthermore, the supply of new homes is down, too, off 34 percent on the year.
Housing supply helps us statistically define "Buyers' Market" and "Sellers' Market" and, right now, the Buyers' Market looks like its ending. If you've encountered a multiple-offer situation, you know exactly what I'm talking about, too.
The combination of low mortgage rates, relatively cheap homes and timely tax credits turned the housing market around this year and there's more gains ahead -- no matter what the papers say.
With home supply keeps falling, a full housing recovery is just around the bend.
Mortgage Rates Remain Low, Increasing Affordability
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.04 percent with an average 0.6 point for the week ending September 24, 2009, unchanged from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.09 percent.
The 15-year FRM this week averaged 4.46 percent with an average 0.6 point, down from last week when it averaged 4.47 percent. A year ago at this time, the 15-year FRM averaged 5.77 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.51 percent this week, with an average 0.5 point, unchanged from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.02 percent.
The one-year Treasury-indexed ARM averaged 4.52 percent this week with an average 0.6 point, down from last week when it averaged 4.58 percent. At this time last year, the 1-year ARM averaged 5.03 percent.
"Mortgage rates held relatively steady at three-month lows this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. Correspondingly, the Mortgage Bankers Association reported that mortgage applications jumped 12.8 percent over the week of September 18th to the strongest pace since late May, boosted by refinancing activity."
"In its September 23rd policy statement, the Federal Reserve (Fed) indicated that it plans to keep its benchmark interest rate exceptionally low for an extended period. This will likely benefit consumers who opt for ARMs, because they are typically tied to shorter-term interest rates. The Fed also noted that activity in the economy and housing market has picked up and financial markets have improved.”
Published: September 25, 2009
The 15-year FRM this week averaged 4.46 percent with an average 0.6 point, down from last week when it averaged 4.47 percent. A year ago at this time, the 15-year FRM averaged 5.77 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.51 percent this week, with an average 0.5 point, unchanged from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.02 percent.
The one-year Treasury-indexed ARM averaged 4.52 percent this week with an average 0.6 point, down from last week when it averaged 4.58 percent. At this time last year, the 1-year ARM averaged 5.03 percent.
"Mortgage rates held relatively steady at three-month lows this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. Correspondingly, the Mortgage Bankers Association reported that mortgage applications jumped 12.8 percent over the week of September 18th to the strongest pace since late May, boosted by refinancing activity."
"In its September 23rd policy statement, the Federal Reserve (Fed) indicated that it plans to keep its benchmark interest rate exceptionally low for an extended period. This will likely benefit consumers who opt for ARMs, because they are typically tied to shorter-term interest rates. The Fed also noted that activity in the economy and housing market has picked up and financial markets have improved.”
Published: September 25, 2009
Prices Rising...If your waiting for the bottom, you may have waited too long
Federal Index Shows Home Prices Rising U.S. home prices rose 0.3 percent in July compared to June, the Federal Housing Finance Agency said Tuesday.
The index is 4.2 percent below what it was in 2008 and 10.5 percent off its peak in April 2007.
The index excludes most expensive homes from its calculations, so prices appear to have declined less than they have by other measures.
The report "supports other evidence that the three-year long decline in prices has come to halt," Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients.
Other economists were less positive. "We think house price indexes are likely to edge somewhat lower in the fall when foreclosures become a larger share of home sales," Barclays Capital economist Nicholas Tenev wrote in a note to his clients.
Source: The Associated Press, Alan Zibel (09/22/2009)
The index is 4.2 percent below what it was in 2008 and 10.5 percent off its peak in April 2007.
The index excludes most expensive homes from its calculations, so prices appear to have declined less than they have by other measures.
The report "supports other evidence that the three-year long decline in prices has come to halt," Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients.
Other economists were less positive. "We think house price indexes are likely to edge somewhat lower in the fall when foreclosures become a larger share of home sales," Barclays Capital economist Nicholas Tenev wrote in a note to his clients.
Source: The Associated Press, Alan Zibel (09/22/2009)
Tax Credit is Helping Motivate Buyers!
Analysis: Tax Credit Adds 357,000 Buyers A study estimates that 357,000 buyers have been motivated so far by the $8,000 First-Time Homebuyer Tax Credit.
The study by Campbell Surveys, a division of Campbell Communications, calculated the figure by comparing the number of first-time homebuyers before and after the tax credit was instituted. The percentage of first-time buyers rose from 32 percent in January and February to 43 percent for the rest of the year – except July when the rate fell to 42 percent.
Campbell’s Research Director Thomas Popik pointed out that this survey mirrors the numbers calculated by the National Association of REALTORS® and those from Moody’s Economy.com.
The data supports legislative efforts in both the U.S. House and Senate to extend the tax credit.
Source: HousingWire.com, Austin Kilgore (09/22/2009)
The study by Campbell Surveys, a division of Campbell Communications, calculated the figure by comparing the number of first-time homebuyers before and after the tax credit was instituted. The percentage of first-time buyers rose from 32 percent in January and February to 43 percent for the rest of the year – except July when the rate fell to 42 percent.
Campbell’s Research Director Thomas Popik pointed out that this survey mirrors the numbers calculated by the National Association of REALTORS® and those from Moody’s Economy.com.
The data supports legislative efforts in both the U.S. House and Senate to extend the tax credit.
Source: HousingWire.com, Austin Kilgore (09/22/2009)
Investment property Help!
Investor Report: IRS Changes Policy
by Kenneth R. Harney
Commercial and investment property owners who are facing problems refinancing mortgages because of credit market conditions and declining lease revenues may have just gotten some important help from the IRS.
In a policy change outlined last week, the IRS said it is aware that the global capital squeeze is hurting investors who own income real estate and are finding it difficult to stay current on loan payments.
To help ease the burden, the IRS said it would relax current tax guidelines on commercial mortgage bond securitizations to allow more modifications of loan terms.
Commercial real estate, including multifamily apartment projects, has been struggling for the past year.
According to the Mortgage Bankers Association, more building owners are falling behind on payments and seeing property valuations decline as the result of the recession. Between the second and third quarters of this year, the delinquency rate on loans held in commercial mortgage backed securities more than doubled, from 1.9 percent to 3.9 percent.
In its policy change, the IRS noted its tax rules governing commercial property bonds allow for certain levels of loan modifications within loan pools in cases of financial distress and imminent default by borrowers. These modifications include interest rate reductions, extensions of loan terms, and forgiveness of principal debt.
But because IRS's technical rules clamp certain limits on the extent of modifications in a given loan pool, one or more "significant" modifications can terminate the special tax benefits that are crucial ingredients in commercial securitizations.
For certain types of bonds, there is even a 100 percent tax on all net income that is derived from "prohibited transactions."
To permit greater numbers of modifications to occur without triggering prohibited transactions penalties, the IRS said it will lighten up on its rules and not challenge commercial mortgage bonds' tax status in some cases where there is a significant risk of default by borrowers.
Though the IRS's approach is intended to open the door to more modifications for investment property owners in need of relief, mortgage servicing experts were cautious in their initial reactions last week. Jan Sternin, senior vice president of the Mortgage Bankers Association for commercial financing, said that because of the complexity of commercial bond structures, "it will take some time for servicers to determine how much latitude they have to implement the new IRS rules."
Bottom line for income property owners facing loan problems: Get in touch with your mortgage servicer sooner rather than later. Do not assume that a loan modification or refi is out of the question.
In fact, there may be more room for negotiations than ever before.
Published: September 18, 2009
by Kenneth R. Harney
Commercial and investment property owners who are facing problems refinancing mortgages because of credit market conditions and declining lease revenues may have just gotten some important help from the IRS.
In a policy change outlined last week, the IRS said it is aware that the global capital squeeze is hurting investors who own income real estate and are finding it difficult to stay current on loan payments.
To help ease the burden, the IRS said it would relax current tax guidelines on commercial mortgage bond securitizations to allow more modifications of loan terms.
Commercial real estate, including multifamily apartment projects, has been struggling for the past year.
According to the Mortgage Bankers Association, more building owners are falling behind on payments and seeing property valuations decline as the result of the recession. Between the second and third quarters of this year, the delinquency rate on loans held in commercial mortgage backed securities more than doubled, from 1.9 percent to 3.9 percent.
In its policy change, the IRS noted its tax rules governing commercial property bonds allow for certain levels of loan modifications within loan pools in cases of financial distress and imminent default by borrowers. These modifications include interest rate reductions, extensions of loan terms, and forgiveness of principal debt.
But because IRS's technical rules clamp certain limits on the extent of modifications in a given loan pool, one or more "significant" modifications can terminate the special tax benefits that are crucial ingredients in commercial securitizations.
For certain types of bonds, there is even a 100 percent tax on all net income that is derived from "prohibited transactions."
To permit greater numbers of modifications to occur without triggering prohibited transactions penalties, the IRS said it will lighten up on its rules and not challenge commercial mortgage bonds' tax status in some cases where there is a significant risk of default by borrowers.
Though the IRS's approach is intended to open the door to more modifications for investment property owners in need of relief, mortgage servicing experts were cautious in their initial reactions last week. Jan Sternin, senior vice president of the Mortgage Bankers Association for commercial financing, said that because of the complexity of commercial bond structures, "it will take some time for servicers to determine how much latitude they have to implement the new IRS rules."
Bottom line for income property owners facing loan problems: Get in touch with your mortgage servicer sooner rather than later. Do not assume that a loan modification or refi is out of the question.
In fact, there may be more room for negotiations than ever before.
Published: September 18, 2009
It's over When It's over...?
Real Estate Outlook: Recession is Over
by Kenneth R. Harney
Now it's official. The chairman of the Federal Reserve Board himself has said it publicly that it looks like the recession is over.
Here comes the recovery.
But there was a big footnote in Bernanke's speech on the economy last week in Washington: Don't look for a dramatic recovery.
It'll be more like a slow moving, plodding sort of improvement where the economy inches toward expansion. But there'll be no sudden, splashy return to economic boomtime anytime soon.
Bernanke's point about the end of the recession was underscored by a 2.7 percent jump in retail sales for the month of August, according to the Commerce Department.
That's an important indicator because the key to pumping up the economy again is to get consumers spending, and that appears to be happening. Not just for auto sales, which got a big boost in August from the government's "cash for clunkers" program, but also for other key categories, like food and clothing purchases, department store retail, entertainment and restaurant spending, sporting goods.
They were all up for the month, after having been mainly down for well over a year.
One reason for the pick-up in consumer spending: People feel more confident about the direction of the economy in the months ahead. They see the stock market up, so their retirement funds and 401 K plans are bouncing back.
They see home values stabilizing or growing in most areas, so their equity is beginning to increase again.
The one big negative -- and it's definitely a drag for housing -- is the unemployment rate, which Mr. Bernanke said won't be coming down fast, even with the end of the recession.
Nonetheless, the vast majority of Americans who do have jobs have seen their real wages rise this year, up five percent. That's the largest annual gain in fifty years.
All of this is feeding into the housing sector in key markets, such as southern California, where August sales were up 11 percent compared with the year before, according to MDA DataQuick. Even prices are rising slightly.
In the combined markets of Los Angeles, San Diego, Orange County, San Bernadino-Riverside and Ventura, the median price of homes sold gained 2.6 percent in August, which is very encouraging for one of the hardest-hit boom-to-bust areas of the country.
Meanwhile, the mortgage market continues to be exceptionally positive for housing sales and values: 30 year fixed rates averaged just above 5 percent last week, according to the Mortgage Bankers Association, and 15 year loans averaged 4.4 percent.
Published: September 22, 2009
by Kenneth R. Harney
Now it's official. The chairman of the Federal Reserve Board himself has said it publicly that it looks like the recession is over.
Here comes the recovery.
But there was a big footnote in Bernanke's speech on the economy last week in Washington: Don't look for a dramatic recovery.
It'll be more like a slow moving, plodding sort of improvement where the economy inches toward expansion. But there'll be no sudden, splashy return to economic boomtime anytime soon.
Bernanke's point about the end of the recession was underscored by a 2.7 percent jump in retail sales for the month of August, according to the Commerce Department.
That's an important indicator because the key to pumping up the economy again is to get consumers spending, and that appears to be happening. Not just for auto sales, which got a big boost in August from the government's "cash for clunkers" program, but also for other key categories, like food and clothing purchases, department store retail, entertainment and restaurant spending, sporting goods.
They were all up for the month, after having been mainly down for well over a year.
One reason for the pick-up in consumer spending: People feel more confident about the direction of the economy in the months ahead. They see the stock market up, so their retirement funds and 401 K plans are bouncing back.
They see home values stabilizing or growing in most areas, so their equity is beginning to increase again.
The one big negative -- and it's definitely a drag for housing -- is the unemployment rate, which Mr. Bernanke said won't be coming down fast, even with the end of the recession.
Nonetheless, the vast majority of Americans who do have jobs have seen their real wages rise this year, up five percent. That's the largest annual gain in fifty years.
All of this is feeding into the housing sector in key markets, such as southern California, where August sales were up 11 percent compared with the year before, according to MDA DataQuick. Even prices are rising slightly.
In the combined markets of Los Angeles, San Diego, Orange County, San Bernadino-Riverside and Ventura, the median price of homes sold gained 2.6 percent in August, which is very encouraging for one of the hardest-hit boom-to-bust areas of the country.
Meanwhile, the mortgage market continues to be exceptionally positive for housing sales and values: 30 year fixed rates averaged just above 5 percent last week, according to the Mortgage Bankers Association, and 15 year loans averaged 4.4 percent.
Published: September 22, 2009
FED Unlikely to Raise Interest rates!
Fed Unlikely to Raise Rates The Federal Reserve is likely to keep interest rates near zero when it ends its two-day meeting on Wednesday, say economic researchers. It is also predicted that the Fed will not slowdown its lending and bailout programs.
Peter Morici, professor of economics at the University of Maryland, says, "The Fed normally anticipates the recovery by raising rates, taking away the punch bowl just as the party gets interesting. But this is not a normal recovery. It's tepid and weak."
Source: CNNMoney.com, David Goldman (09/21/2009)
Peter Morici, professor of economics at the University of Maryland, says, "The Fed normally anticipates the recovery by raising rates, taking away the punch bowl just as the party gets interesting. But this is not a normal recovery. It's tepid and weak."
Source: CNNMoney.com, David Goldman (09/21/2009)
New Tax Credit Information!
Washington, DC – U.S. Senator Benjamin L. Cardin (D-MD), last night, along with Senators John Ensign (R-NV), Harry Reid (D-NV), Johnny Isakson (R-GA) and Debbie Stabenow (D-MI) introduced a six-month extension of the popular $8,000 federal tax credit for first-time homebuyers. The current provision, passed as part of the American Recovery and Reinvestment Act, expires December 1, 2009. According to the most recent Treasury data, nearly 530,000 Americans have applied for the tax cut to help them purchase their first home. About 40 percent of all home buyers this year will be eligible for the tax credit. “As we are fighting to get our economy back on track, we cannot afford to let lapse an important tool that has had had a positive effect on the housing market. Thanks to this tax credit, hundreds of thousands of Americans have confidently jumped into the housing market for the first time, with $8,000 from the federal government in their family checkbook. The ripple effect has been profound, injecting tens of billions of dollars into our national, state and local economies to help stabilize communities and create jobs. But there is more to be done,” said Senator Cardin. “While we look for additional ways to help the housing industry, a six-month extension is a fiscally responsible way to provide adequate time to nudge even more prospective home buyers off the sidelines and closer to owning their part of the American Dream.” “Nevada’s housing market has been one of the hardest hit over the run of this recession and is still struggling,” said Senator Ensign. “It is not only hurting families and homeowners but also risks dragging down our economy further. This bipartisan plan is a proven model that incentivizes potential buyers while targeting the serious problem of excess inventory in the housing sector, and I urge the Senate to extend this tax cut.” “Yesterday we learned that new home sales have increased in Las Vegas, and that’s good news. I hope this credit will build on that so more Nevadans can realize the American dream of homeownership,” Senator Reid said. “I’m pleased to join Senator Ensign in supporting a bill that offers relief to Nevadans as we continue the work of rebuilding Nevada’s economy. While extending the credit is an important tool to help stabilize the housing market, I will also continue efforts to help Nevada homeowners avoid foreclosure and keep them in their homes." “As we approach the winter months when the real estate market traditionally slows down, extending the current homebuyer tax credit is essential to continuing our nation’s economic recovery,” Senator Isakson said. “I also will continue to push Congress to increase the amount of the tax credit and to expand it to all buyers – a move that I believe would result in significant improvement in the housing market and in turn our economy.”“The first-time homebuyer tax credit has been an extraordinary success, helping to boost pre-owned home sales to a two-year high in July. But we can and must do more to help families during these difficult economic times,” said Senator Stabenow. “By extending the tax credit an additional six months, we will help more hard-working Americans turn the dream of homeownership into a reality.”The bill introduced today, S. 1678, does not make any changes to the current tax credit except extend the sunset date six months to June 1, 2010.
FEDS SAY "It's Over!" We've hit Bottom!
Warren Buffett says economy has bottomed out
The U.S. economy got another vote of confidence of sorts Wednesday after Warren Buffett, among the nation's most admired investors, told CNBC that while the economy hasn't improved much, it also "hasn't gotten any worse." Further, he told the cable news network he doesn't expect a double-dip recession and see signs of an improving residential real-estate market.
Barring some horrible event such as the attacks of Sept. 11, 2001, "or worse," he said, the economy has bottomed out. "We're past the critical point," said Buffett, CEO of Berkshire Hathaway (BRK.B) and its largest shareholder.
Buffett's comments follow those of Federal Reserve Chairman Ben Bernanke, who said Tuesday that the U.S. economy had probably exited recession sometime earlier in the current quarter. Speaking after a meeting at the Brookings Institution in Washington, Bernanke said the recession "was very likely over," but he also warned that growth may be too tepid to cut the unemployment rate significantly anytime soon. "It's still going to feel like a very weak economy for some time," he said.
In his CNBC interview, Buffett warned, however, that there are still shoes to drop in the U.S. economy. They include commercial real estate, a market that has seen property values plummet and access to credit diminish.
Commenting on a bid by Kraft Foods (KFT) for Cadbury (CBY), the British-owned chocolatier, Buffett said Kraft's offer is a "pretty full one." Berkshire Hathaway is the largest shareholder in Kraft, the nation's second-largest food maker. The Illinois-based company has offered to pay $16.7 billion in a stock-and-cash deal for Cadbury even as Kraft's own stock is undervalued, in Buffett's estimation. Buffet expressed confidence in Kraft management led by CEO Irene Rosenfeld, but he added, "they have to do a lot of things right to justify this price." Cadbury has rejected the offer.
Buffett also heaped praise on federal officials who last year engineered the $700 billion bailout of the nation's banking system. Calling them heroes, Buffett specifically referred to Bernanke, former Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner, who at the time was president of the New York Federal Reserve Bank.
There are those who will quibble over whether certain things couldn't have been done differently, Buffett said. "But at the time I called it an economic Pearl Harbor and in the end we got through Pearl Harbor. And it could have turned out a lot differently."
On health-care reform legislation that Congress is debating Buffett expressed skepticism that an overhaul of the insurance system is the way to go to keep costs in line. "I'm talking as much about reforming health care as we're talking about reforming the insurance," he told CNBC.
When pressed again about the chance of the U.S. falling into a second recession, Buffett told the CNBC interviewer the economy has stabilized. "We are moving through a recession," he said. "And I see nothing that makes me worry about the fact that it's going to be worse than I would have thought three months ago."
The U.S. economy got another vote of confidence of sorts Wednesday after Warren Buffett, among the nation's most admired investors, told CNBC that while the economy hasn't improved much, it also "hasn't gotten any worse." Further, he told the cable news network he doesn't expect a double-dip recession and see signs of an improving residential real-estate market.
Barring some horrible event such as the attacks of Sept. 11, 2001, "or worse," he said, the economy has bottomed out. "We're past the critical point," said Buffett, CEO of Berkshire Hathaway (BRK.B) and its largest shareholder.
Buffett's comments follow those of Federal Reserve Chairman Ben Bernanke, who said Tuesday that the U.S. economy had probably exited recession sometime earlier in the current quarter. Speaking after a meeting at the Brookings Institution in Washington, Bernanke said the recession "was very likely over," but he also warned that growth may be too tepid to cut the unemployment rate significantly anytime soon. "It's still going to feel like a very weak economy for some time," he said.
In his CNBC interview, Buffett warned, however, that there are still shoes to drop in the U.S. economy. They include commercial real estate, a market that has seen property values plummet and access to credit diminish.
Commenting on a bid by Kraft Foods (KFT) for Cadbury (CBY), the British-owned chocolatier, Buffett said Kraft's offer is a "pretty full one." Berkshire Hathaway is the largest shareholder in Kraft, the nation's second-largest food maker. The Illinois-based company has offered to pay $16.7 billion in a stock-and-cash deal for Cadbury even as Kraft's own stock is undervalued, in Buffett's estimation. Buffet expressed confidence in Kraft management led by CEO Irene Rosenfeld, but he added, "they have to do a lot of things right to justify this price." Cadbury has rejected the offer.
Buffett also heaped praise on federal officials who last year engineered the $700 billion bailout of the nation's banking system. Calling them heroes, Buffett specifically referred to Bernanke, former Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner, who at the time was president of the New York Federal Reserve Bank.
There are those who will quibble over whether certain things couldn't have been done differently, Buffett said. "But at the time I called it an economic Pearl Harbor and in the end we got through Pearl Harbor. And it could have turned out a lot differently."
On health-care reform legislation that Congress is debating Buffett expressed skepticism that an overhaul of the insurance system is the way to go to keep costs in line. "I'm talking as much about reforming health care as we're talking about reforming the insurance," he told CNBC.
When pressed again about the chance of the U.S. falling into a second recession, Buffett told the CNBC interviewer the economy has stabilized. "We are moving through a recession," he said. "And I see nothing that makes me worry about the fact that it's going to be worse than I would have thought three months ago."
FED Says U.S. REcession May be Over
Fed Says U.S. Recession May Be Over
WASHINGTON (Sept. 9) - Economic activity is stabilizing or improving in most of the U.S., according to a new government survey, adding to evidence that the worst recession since the 1930s is over.
The Federal Reserve's snapshot of economic conditions backs predictions by Fed Chairman Ben Bernanke and most other analysts that the economy has started to grow again in the current quarter.
In the survey released Wednesday, all but one of the Fed's 12 regions indicated that economic activity was "stable," showed "signs of stabilization" or had "firmed." The one exception was the St. Louis region, which continued to report that the pace of decline in economic activity appeared to be "moderating."
Looking ahead, businesses in most Fed regions said they were "cautiously positive" about the economic outlook.
The assessments of businesses on the front lines of the economy was brighter than those they provided for the Fed report in late July. At that time, most regions said the recession was easing its grip and some of them reported signs that activity was leveling off.
In Wednesday's survey, the Dallas region indicated that economic activity had "firmed." The Fed regions of Boston, Cleveland, Philadelphia, Richmond and San Francisco mentioned "signs of improvement." The Atlanta, Chicago, Kansas City, Minneapolis and New York regions described activity as "stable or showing signs of stabilization."
Analysts predict the economy is growing in the current July-September quarter at anywhere between 3 and 4 percent.
Most of that growth should come from more spending from businesses, which had slashed investments — often by double-digits — during the recession.
Consumer spending, however, is expected to turn up only because of the binge-buying of automobiles generated by the short-lived Cash for Clunkers program. Buyers were given cash rebates to trade in less efficient gas guzzlers.
The Fed's survey found that the majority of regions did report that the government's clunkers program "boosted traffic and sales." But aside from brisk businesses at auto dealerships, other merchants struggled. Consumer spending remained "soft" in most Fed regions.
Manufacturers in most regions, meanwhile, reported "modest" improvements. The San Francisco region said orders rose for semiconductors and other information technology products. Richmond, Atlanta, Chicago and Minneapolis reported increases or planned increases in automobile production. Several regions noted more production for pharmaceutical products.
Although the ailing residential real-estate market is still weak, it also flashed signs of improvements. The Fed regions of Chicago, Richmond, Boston and San Francisco observed an "uptick in sales." Most regions said buyer demand remained stronger at the low end of the housing market, although Philadelphia did note an "upturn in sales at the high end of the market."
The Boston, Cleveland, Dallas, Kansas City, Richmond and New York regions credited the first-time home buyer tax incentive with spurring sales. Most regions reported downward pressure on home prices, although Dallas and New York said that prices were "firming."The commercial real-estate market, however, continued to drag. Demand for space remained weak and construction fell again in all regions.
On the jobs front, employment conditions "remained weak" in all the Fed regions.The nation's unemployment rate climbed to a 26-year high of 9.7 percent in August. It is expected to top 10 percent this year.
Many economists predict that rising unemployment will keep consumers cautious. For the budding recovery to be durable, businesses will have to step up spending and investment, analysts say.
The Fed's survey found that staffing firms in Atlanta, Dallas, Richmond, Cleveland, Philadelphia, Boston, New York and Chicago did report a "slight pickup" in demand for temporary workers. That's an encouraging sign because employers will usually boost use of temp workers before they hire new employees.
Still, several regions noted businesses and local governments were imposing wage freezes or cutting compensation in some cases. With the labor market weak, employers aren't expected to be generous with wages, a force that will keep inflation low, the Fed report said. Expectations for a lethargic recovery also likely will prevent companies from jacking up prices, keeping inflation subdued, the report suggested. Copyright 2009 The Associated Press
WASHINGTON (Sept. 9) - Economic activity is stabilizing or improving in most of the U.S., according to a new government survey, adding to evidence that the worst recession since the 1930s is over.
The Federal Reserve's snapshot of economic conditions backs predictions by Fed Chairman Ben Bernanke and most other analysts that the economy has started to grow again in the current quarter.
In the survey released Wednesday, all but one of the Fed's 12 regions indicated that economic activity was "stable," showed "signs of stabilization" or had "firmed." The one exception was the St. Louis region, which continued to report that the pace of decline in economic activity appeared to be "moderating."
Looking ahead, businesses in most Fed regions said they were "cautiously positive" about the economic outlook.
The assessments of businesses on the front lines of the economy was brighter than those they provided for the Fed report in late July. At that time, most regions said the recession was easing its grip and some of them reported signs that activity was leveling off.
In Wednesday's survey, the Dallas region indicated that economic activity had "firmed." The Fed regions of Boston, Cleveland, Philadelphia, Richmond and San Francisco mentioned "signs of improvement." The Atlanta, Chicago, Kansas City, Minneapolis and New York regions described activity as "stable or showing signs of stabilization."
Analysts predict the economy is growing in the current July-September quarter at anywhere between 3 and 4 percent.
Most of that growth should come from more spending from businesses, which had slashed investments — often by double-digits — during the recession.
Consumer spending, however, is expected to turn up only because of the binge-buying of automobiles generated by the short-lived Cash for Clunkers program. Buyers were given cash rebates to trade in less efficient gas guzzlers.
The Fed's survey found that the majority of regions did report that the government's clunkers program "boosted traffic and sales." But aside from brisk businesses at auto dealerships, other merchants struggled. Consumer spending remained "soft" in most Fed regions.
Manufacturers in most regions, meanwhile, reported "modest" improvements. The San Francisco region said orders rose for semiconductors and other information technology products. Richmond, Atlanta, Chicago and Minneapolis reported increases or planned increases in automobile production. Several regions noted more production for pharmaceutical products.
Although the ailing residential real-estate market is still weak, it also flashed signs of improvements. The Fed regions of Chicago, Richmond, Boston and San Francisco observed an "uptick in sales." Most regions said buyer demand remained stronger at the low end of the housing market, although Philadelphia did note an "upturn in sales at the high end of the market."
The Boston, Cleveland, Dallas, Kansas City, Richmond and New York regions credited the first-time home buyer tax incentive with spurring sales. Most regions reported downward pressure on home prices, although Dallas and New York said that prices were "firming."The commercial real-estate market, however, continued to drag. Demand for space remained weak and construction fell again in all regions.
On the jobs front, employment conditions "remained weak" in all the Fed regions.The nation's unemployment rate climbed to a 26-year high of 9.7 percent in August. It is expected to top 10 percent this year.
Many economists predict that rising unemployment will keep consumers cautious. For the budding recovery to be durable, businesses will have to step up spending and investment, analysts say.
The Fed's survey found that staffing firms in Atlanta, Dallas, Richmond, Cleveland, Philadelphia, Boston, New York and Chicago did report a "slight pickup" in demand for temporary workers. That's an encouraging sign because employers will usually boost use of temp workers before they hire new employees.
Still, several regions noted businesses and local governments were imposing wage freezes or cutting compensation in some cases. With the labor market weak, employers aren't expected to be generous with wages, a force that will keep inflation low, the Fed report said. Expectations for a lethargic recovery also likely will prevent companies from jacking up prices, keeping inflation subdued, the report suggested. Copyright 2009 The Associated Press
Last week, Standard & Poor’s reported that its S&P/Case-Shiller U.S. National Home Price index rose from the first quarter to the second, the first quarter-to-quarter increase in three years. Its index of 20 major cities also rose, with only two areas reporting declines. This data suggest that home prices may have reached bottom during the second quarter, and have now begun to rise. In California, July marked the fifth consecutive month of month-to-month increases in the state’s median price.
Real estate prices nationally have declined approximately 30 percent from their 2006 peak and are beginning to show signs of increases—an indicator that prices aren’t likely to go much lower, according to some housing analysts.
The inventory of unsold homes rose 7.3 percent nationwide in July, according to the NATIONAL ASSOCIATION OF REALTORS®. In California, inventory levels declined to 3.9 months, from 6.9 months a year ago, and are well below the long-run average. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Buyers sitting on the fence should note that the federal tax credit of up to $8,000 expires at midnight on Nov. 30, 2009. With mortgage loans taking longer to close than in years past, buyers should start working with a REALTOR® now to ensure they find the right house for their needs, and close escrow by the deadline.
Homeownership provides many benefits, including security, pride of ownership, a sense of community, and decent investment returns as a bonus. Those thinking of purchasing a home should consider these benefits when making their decision of whether or not now is the right time to buy a home.
Real estate prices nationally have declined approximately 30 percent from their 2006 peak and are beginning to show signs of increases—an indicator that prices aren’t likely to go much lower, according to some housing analysts.
The inventory of unsold homes rose 7.3 percent nationwide in July, according to the NATIONAL ASSOCIATION OF REALTORS®. In California, inventory levels declined to 3.9 months, from 6.9 months a year ago, and are well below the long-run average. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Buyers sitting on the fence should note that the federal tax credit of up to $8,000 expires at midnight on Nov. 30, 2009. With mortgage loans taking longer to close than in years past, buyers should start working with a REALTOR® now to ensure they find the right house for their needs, and close escrow by the deadline.
Homeownership provides many benefits, including security, pride of ownership, a sense of community, and decent investment returns as a bonus. Those thinking of purchasing a home should consider these benefits when making their decision of whether or not now is the right time to buy a home.
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