Fed Raises Key Interest Rate Slightly

WASHINGTON (AP) — The Federal Reserve is raising interest rates from record lows set at the depths of the 2008 financial crisis, a shift that heralds modestly higher rates on some loans.

The Fed coupled its first rate hike in nine years with a signal that further increases will likely be made slowly as the economy strengthens further and inflation rises from undesirably low levels.

Wednesday’s action signaled the central bank’s belief that the economy has finally regained enough strength 6½ years after the Great Recession ended to withstand modestly higher borrowing rates.

“The Fed’s decision today reflects our confidence in the U.S. economy,” Chair Janet Yellen said at a news conference.

The Fed said in a statement after its latest meeting that it was lifting its key rate by a quarter-point to a range of 0.25 percent to 0.5 percent. Its move ends an extraordinary seven-year period of near-zero borrowing rates. But the Fed’s statement suggested that rates would remain historically low well into the future, saying it expects “only gradual increases.”… read more —>  Fed Raises Key Interest Rate

Leading Economic Indicators, July 2015

August 31, 2015 — The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County fell 0.4 percent in July. Five of the six components in the Index were down, led by big drops in initial claims for unemployment insurance and help wanted advertising. Down more moderately was consumer confidence and the outlook for the national economy. Building permits were also negative, but only slightly so. The only positive component was local stock prices, which were up strongly in July.

July’s decrease broke a string of thirteen consecutive monthly increases in the USD Index. Although the increase in the Index had slowed in recent months, the decline was unexpected as a couple of recently strong components (building permits and the outlook for the national economy) turned negative. Despite the drop and despite concern that five of the six components were negative, the outlook for positive growth in the local economy remains unchanged for now. Economists look for three consecutive changes in a leading index as a signal of a turning point in an economy, so the months ahead are critical. The numbers for the local economy remain good at this moment, with the unemployment rate at 5 percent and year-over-year job growth approaching 50,000. But there is concern about the deterioration of the labor market components in the Index (see below), and these need to be watched carefully in the months ahead, particularly in light of the recently announced layoffs at Qualcomm.

Index of Leading Economic Indicators The index for San Diego County that includes the components listed below (July) Source: USD Burnham-Moores Center for Real Estate	-0.4%
Building Permits Residential units authorized by building permits in San Diego County (July) Source: U.S. Census Bureau	-0.09%
Unemployment Insurance Initial claims for unemployment insurance in San Diego County, inverted (July) Source: Employment Development Department	-1.38%
Stock Prices San Diego Stock Exchange Index (July) Source: San Diego Daily Transcript	+1.23%
Consumer Confidence An index of consumer confidence in San Diego County , estimated (July) Source: The Conference Board	-0.51%
Help Wanted Advertising An index of online help wanted advertising in San Diego (July) Source: The Conference Board	-1.03%
National Economy Index of Leading Economic Indicators (July) Source: The Conference Board	-0.48%

Highlights:  Although the decline in residential units authorized by building permits was minor, it broke a string of six consecutive monthly increases in the component, with all six of those increases being significant. This drop was due to permits for only 207 multi-family units being authorized in July, which is the lowest number for any month this year. . . After turning negative for the first time in months in June, both labor market components accelerated their moves to the downside in July. Initial claims for unemployment insurance jumped above the 16,000 mark for the first time since last August, while help wanted advertising hit its lowest level since October. This has not been reflected yet in the local labor market, where seasonally adjusted local unemployment rate was 5.0 percent in July. This was up compared to the 4.8 percent rate in June but down a lot from the 6.5 percent rate in July 2014. . . Local stock prices did well in July, matching the performance of the broader market averages. Local stocks had run counter to the broader averages the last two months. With the recent turmoil in the markets, though, this component is likely to turn negative for August. . . Sentiment among consumers continues to fall, with local consumer confidence dropping for the third consecutive month, with the trend being more negative with each month. . . The national Index of Leading Economic Indicators dropped for the first time since February. As was the case with building permits, the drop came even though the component had been up strongly in recent months. Similar to the local Index, it remains to be seen whether this is a one month aberration or whether this signals a negative turning point for the national economy. GDP growth for the second quarter was strong, with the “second” estimate coming in at a higher than expected 3.7 percent annualized rate. This compares to the “advance” estimate of 2.3 percent and a growth rate of 0.6 percent in the first quarter.

July’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 139.6, down from June’s reading of 140.1. There were revisions in the previously reported values of the Index for March and April and in the changes in the Index for March and May.

          Index      % Change

2014   

JUL     128.0           +0.3

AUG    128.3           +0.3

SEP     129.0           +0.5

OCT    129.7           +0.5

NOV    131.4           +1.3

DEC    132.4           +0.7

2015  

JAN     134.2           +1.4

FEB     135.8           +1.2

MAR    137.7           +1.4

APR    138.9           +0.8

MAY    139.6           +0.5

JUN     140.1           +0.4

JUL     139.6         -0.4

For more information on the University of San Diego’s Index of Leading Economic Indicators, please contact:

Professor Alan Gin                             TEL: (858) 603-3873

School of Business Administration       FAX: (858) 260-4891

University of San Diego                 E-mail: agin@sandiego.edu

5998 Alcalá Park                             Website: http://www.sandiego.edu/~agin/usdlei

San Diego, CA 92110                        Twitter: @alanginusdsba

 

 

U.S. Home Sales Approach 8-1/2 Year High

U.S. home resales rose in June to their highest level in nearly 8-1/2 years, a sign of pent-up demand that should buoy the housing market recovery and likely keep the Federal Reserve on track to raise interest rates later this year.

The National Association of Realtors said on Wednesday existing home sales increased 3.2 percent to an annual rate of 5.49 million units, the highest level since February 2007.

“The economy really has the wind at its back now,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Home resales this year are on track to record their biggest gain in eight years, the NAR said.

Economists had forecast sales rising to an annual rate of 5.40 million units last month. Sales were up 9.6 percent from a year ago.

June’s solid home sales report came on the heels of last week’s strong housing starts and building permits data. A tightening labor market is starting to push up wages, helping to boost demand for housing, especially among young adults.

But a tight supply of properties for sale remains a constraint. The string of strong housing reports indicate the economy continues to be on firmer footing despite a drop in retail sales and a slowdown in job growth last month.

read more —>  http://www.reuters.com

San Diego Leading Economic Indicators, April 2015

Note:   The tentative release date of next month’s report is June 30.

The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County rose 0.9 percent in April.  Once again, all six components were positive.  Building permits led the move, followed by strong gains in help wanted advertising and the outlook for the national economy.  There were smaller increases in initial claims for unemployment insurance, consumer confidence, and local stock prices.

With April’s increase, the USD Index has now increased for 11 months in a row.  This would have been the fourth consecutive month where all six components of the Index were up, but a revision of the national Index of Leading economy indicators for February pushed that component into the negative column.  This was also the first month in 2015 where the gain was less than the significant one percent level, although it was very close.  The outlook continues to be for strong growth in the local economy for the rest of 2015 and at least through the early part of 2016.  Recent employment reports have put the year-over-year increase in wage and salary employment at over 40,000, which would be the best annual gain since 2000.  The strongest sectors of the economy at this point are professional, scientific, and technical services (+8,200 jobs year-over-year), leisure and hospitality (+6,500), and health care (+4,900).  The first is particularly important for San Diego because it includes research and development jobs in science and technology that are high paying and important to the local economy.

Index of Leading Economic Indicators   The index for San Diego County that includes the components listed below (April)Source:  USD Burnham-Moores Center for Real Estate	+0.9%
Building Permits   Residential units authorized by building permits in San Diego County (April)Source:  U.S. Census Bureau	+1.89%
Unemployment Insurance   Initial claims for unemployment insurance in San Diego County, inverted (April)Source:  Employment Development Department	+0.65%
Stock Prices   San Diego Stock Exchange Index (April)Source:  San Diego Daily Transcript	+0.14%
Consumer Confidence   An index of consumer confidence in San Diego County, estimated (April)Source: The Conference Board	+0.25%
Help Wanted Advertising   An index of online help wanted advertising in San Diego (April)Source: The Conference Board	+1.04%
National Economy   Index of Leading Economic Indicators (April)Source: The Conference Board	+1.29%

Highlights:  A huge surge in multi-family units pushed residential units authorized by building permits to its highest level since March of last year.  A total of 991 units were authorized in April, of which 719 were multi-family units. . . The labor market variables remain strong, although both initial claims for unemployment insurance and help wanted advertising were less positive than they have been in recent months.  The net result was that the seasonally adjusted local unemployment rate was 5.1 percent in April, which was unchanged from March but down from 6.4 percent in April 2014.  The non-seasonally adjusted rate was 4.9 percent, making April the first month since April 2008 where the local unemployment rate was less than 5 percent. . . Although the gains have not been spectacular, consumer confidence has now risen for 15 months in a row, which is the longest current streak any of the six components. . . Local stock prices were lower at the end of April than at the beginning, but the USD Index uses the average of prices for the entire month as the point of comparison.  Although local stocks faltered at the end of the month, they were strong enough in the middle April to lead this component to a modest gain . . . The downward revision in February broke a run of 13 straight increases in the national Index of Leading Economic Indicators. But there was a solid gain in March and a strong increase in April, so the outlook for the national economy remains positive.  There was a hiccup in the first quarter though, with the “advance” estimate of the GDP growth rate for that quarter coming in at a disappointing 0.2 annualized rate.  This compares to growth rates of 4.6 percent, 5.0 percent, and 2.2 percent for the second, third, and fourth quarters of 2014 respectively.  It is still an improvement over the first quarter of last year, when the economy shrank at a 2.1 percent annualized rate.

March’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 138.9, up from March’s reading of 137.7.  Revisions in the national Index of Leading Economic Indicators for November, December, February, and March affected the previously reported changes for those months.  For the previously reported values for the Index and for the individual components, please visit the Website address given below.

For more information on the University of San Diego’s Index of Leading Economic Indicators, please contact:

Professor Alan Gin                           TEL:  (858) 603-3873

School of Business Administration     FAX:  (858) 260-4891

University of San Diego                   E-mail: agin@sandiego.edu

5998 Alcalá Park                                     Website: http://www.sandiego.edu/~agin/usdlei

San Diego, CA 92110                               Twitter:  @alanginusdsba

San Diego Lead Economic Indicators Up Sharply AGAIN in Feb 2015

The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County rose 1.3 percent in February.  For the second month in a row, all six components of the Index were up.  In fact, February’s results were almost identical to those of January:  Initial claims for unemployment insurance, help wanted advertising, and building permits were strongly positive, while consumer confidence, local stock prices, and the outlook for the national economy had more modest gains.

February’s gain was the ninth consecutive increase for the USD Index and the monthly increase was second only to last month as the largest since February 2011.  The outlook remains for strong growth in the local economy at least through the end of the year.  Since last month’s report, the annual adjustment to the employment data was released.  Wage and salary employment increased by 30,200 in San Diego County in 2014.  Initial reports suggested a higher job growth number, so the revised data were a little disappointing.  Still, the local economy has added more than 30,000 jobs in each of the last three years, something that hasn’t happened since the period 1997 – 2000.  The strongest growing sectors were leisure and hospitality (+8,200 jobs), health care (+5,300), professional, scientific and technical services (+4,600), retail (+2,900), construction (+2,600), and government (+2,400).

Index of Leading Economic Indicators – The index for San Diego County that includes the components listed below (February) … Source:  USD Burnham-Moores Center for Real Estate	+1.3%
Building Permits – Residential units authorized by building permits in San Diego County (February) … Source:  U.S. Census Bureau	+1.58%
Unemployment Insurance – Initial claims for unemployment insurance in San Diego County, inverted (February) … Source:  Employment Development Department	+2.46%
Stock Prices – San Diego Stock Exchange Index (February) … Source:  San Diego Daily Transcript	+0.31%
Consumer Confidence – An index of consumer confidence in San Diego County , estimated (February) … Source: The Conference Board	+0.68%
Help Wanted Advertising – An index of online help wanted advertising in San Diego (February) … Source: The Conference Board	+2.38%
National Economy – Index of Leading Economic Indicators (February) … Source: The Conference Board	+0.49%

Highlights:

Residential units authorized by building permits built on the momentum of January with another big gain.  The strength in the opening months of the year is significant as January and February are among the slowest months of the year for building permit activity. . . Both labor market variables remain extremely strong initial claims for unemployment insurance and help wanted advertising up ten and seven straight months respectively.  That puts help wanted advertising at its highest level since January 2013.  The net result was that the seasonally adjusted local unemployment rate fell to 5.3 percent in February, which was down from 5.7 percent in January and from 7.1 percent in February 2014.  February’s rate was the lowest for San Diego County in almost seven years (since April 2008). . .  As has been mentioned in previous reports, the USD Index uses weighted moving averages of the data to smooth out erratic month-to-month changes and establish a trend in the direction of the components.  So while the trend in consumer confidence remains positive, the actual value of the component was down in February.  This could reflect the surge in gas prices that occurred during the month. . . Local stock prices continued to rise and have now advanced for six consecutive months, which indicates that the financial markets are positive about the prospects for San Diego companies. . . The outlook for the national economy continues to be positive, with the national Index of Leading Economic Indicators advancing for the 14^th straight month.  The “third” estimate of GDP growth for the fourth quarter was 2.2 percent, the same as earlier estimates.  For 2014 as a whole, GDP grew by 2.4 percent, which is about the same growth rate as the previous two years (2.3 percent in 2012 and 2.2 percent in 2013).

February’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 136.0, up from January’s reading of 134.2.  There were no revisions in the previously reported Index levels or the changes in either the overall Index or the individual components.  For the previously reported values for the Index and for the individual components, please visit the Website address given below.  The values for the USD Index for the last year are given below:

Index       % Change

2014

FEB     127.9           +0.2

MAR    128.6           +0.5

APR    127.9            -0.5

MAY    127.5            -0.3

JUN     127.7           +0.2

JUL     128.0           +0.3

AUG    128.3           +0.3

SEP     129.0           +0.5

OCT    129.7           +0.5

NOV    131.3           +1.2

DEC    132.3           +0.7

2015

JAN     134.2           +1.4

FEB     136.0        +1.3

 

For more information on the University of San Diego’s Index of Leading Economic Indicators, please contact:

Professor Alan Gin                           TEL:  (858) 603-3873

School of Business Administration     FAX:  (858) 260-4891

University of San Diego                    E-mail: agin@sandiego.edu

5998 Alcalá Park                                Website: http://www.sandiego.edu/~agin/usdlei

San Diego, CA 92110                          Twitter:  @alanginusdsba

San Diego Lead Economic Indicators Up Sharply in Jan, 2015

The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County rose 1.4 percent in January.  For the first time since February 2011, all six components of the USD Index were up during the month.  Leading the way to the upside were strong gains for initial claims for unemployment insurance, help wanted advertising, and building permits.  Bringing up the rear but also positive were consumer confidence, local stock prices, and the outlook for the national economy.

January’s gain was the eighth in a row for the USD Index and was the largest monthly increase since February 2011.  The strength of the move combined with the fact that all six components were positive signals a strong local economy at least through the end of 2015.  One potential area of concern was the surge in gas prices that occurred in February.  Gas prices rose more than 98 cents a gallon during the month, which has a number of negative effects.  First, money is taken directly out of the pockets of consumers.  By my estimate, every one cent increase in the price of gas takes a million dollars a month out of local economy, which means almost $100 million a month more will be spent on gas instead of on boosting the local economy.  Secondly, the price of shipping goods into San Diego increases, which boosts local prices.  Finally, rising gas prices could have a negative impact on consumer confidence.  Despite all these negatives, the rise in gas prices is not likely to significantly slow the local economy, let alone derail it.

Index of Leading Economic Indicators – The index for San Diego County that includes the components listed below (January).  Source:  USD Burnham-Moores Center for Real Estate	+1.4%
Building Permits – Residential units authorized by building permits in San Diego County (January).  Source:  U.S. Census Bureau	+1.34%
Unemployment Insurance – Initial claims for unemployment insurance in San Diego County, inverted (January).  Source:  Employment Development Department	+2.51%
Stock Prices – San Diego Stock Exchange Index (January).  Source:  San Diego Daily Transcript	+0.85%
Consumer Confidence – An index of consumer confidence in San Diego County , estimated (January).  Source: The Conference Board	+0.89%
Help Wanted Advertising – An index of online help wanted advertising in San Diego (January).  Source: The Conference Board	+2.44%
National Economy – Index of Leading Economic Indicators (January).  Source: The Conference Board	+0.49%

 Highlights: 

Residential units authorized by building permits broke a nine-month negative streak with a strong gain in January.  A strong raw number for the month was further boosted by seasonal adjustment, as January is usually the third worst month of the year for building permits . . . The labor market variables continue to show incredible strength.  The way the Index is calibrated, a change of one percent or more during a month is considered a significant change.  The increase for both initial claims for unemployment insurance and help wanted advertising topped two percent in January, which signals continued strength in the labor market.  As of the writing of this report, the data on the unemployment rate for January had not been released by the state’s Employment Development Department.  The previously reported seasonally adjusted unemployment rate for December was 5.6 percent. . . Consumer confidence has now been positive for an entire year.  One of the likely causes of that is good news on the labor front, with the unemployment rate dropping significantly compared to a year ago.  Also contributing to the positive outlook for consumers is the big drop in gasoline prices.  It remains to be seen whether the big jump in gas prices in February will push confidence to the downside. . . Local stock prices bucked the national trend by increasing in January.  All of the major market averages were down during the month. . . With January’s increase, the national Index of Leading Economic Indicators has now been positive for 13 straight months, which includes every month in 2014.  The outlook for the national economy remains positive, although the second estimate of GDP growth for the fourth quarter showed growth in the national economy slowing to 2.2 percent, compared to 4.6 percent in the second quarter and 5.0 in the third quarter.

September’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 134.2, up from December’s revised reading of 132.3.  Revisions in the national Index of Leading Economic Indicators for August, September, November, and December affected the previously reported Index levels and monthly change for those months.  For revisions to the previously reported values for the Index and for the individual components, please visit the Website address given below.  The values for the USD Index for the last year are given below:

          Index       % Change

2014

JAN     127.6           +0.1

FEB     127.9           +0.2

MAR    128.6           +0.5

APR    127.9            -0.5

MAY    127.5            -0.3

JUN     127.7           +0.2

JUL     128.0           +0.3

AUG    128.3           +0.3

SEP     129.0           +0.5

OCT    129.7           +0.5

NOV    131.3           +1.2

DEC    132.3           +0.7

2015

JAN     134.2           +1.4

For more information on the University of San Diego’s Index of Leading Economic Indicators, please contact:

Professor Alan Gin                             TEL:  (858) 603-3873

School of Business Administration        FAX:  (858) 260-4891

University of San Diego                            E-mail: agin@sandiego.edu

5998 Alcalá Park                                       Website: http://www.sandiego.edu/~agin/usdlei

San Diego, CA 92110                                Twitter:  @alanginusdsba

Freddie Mac 2015 Projections

A pickup in household formations and overall housing activity depends greatly on the pace of economic growth. The good news for 2015 is that the U.S. economy appears well poised to sustain about a 3.0 percent growth rate in 2015—only the second year in the past decade with growth at that pace or better. There are several reasons for the expected better macroeconomic performance. Governmental fiscal drag has turned into fiscal stimulus, lower energy costs support consumer spending and business investment, further easing of credit conditions for business and real estate lending support commerce and development, and more upbeat consumer and business confidence, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better paying jobs, providing the financial wherewithal to support household formations and housing activity ….

So, what will be some of the market features for 2015?

Interest rates

… We expect to see interest rates climb throughout 2015, averaging about 2.9 percent for 10 year Treasuries and 4.6 percent for 30-year mortgages …

Prices & Affordability

In addition to rising interest rates, we also expect house price gains to continue, albeit at a more moderate pace. Our current projection is for annual house price gains to slow from 9.3 percent in 2013, to 4.5 percent in 2014 and 3.0 percent in 2015 …

Home Sales/Starts

Look for housing activity to accelerate in 2015. We’re forecasting total housing starts to increase by 20 percent from 2014 to 2015. We’re also expecting to see total home sales increase by about 5 percent over that time period …

Single-family Originations

Increasing home sales are good news for mortgage Markets … We expect originations will fall an additional 8 percent from 2014 to 2015, before rising home values and increasing purchase originations finally offset the decline in refinance volume and drive originations higher.

Rentals in Demand

Rental markets are expected to remain tight in most urban markets across the U.S. … As household formations pickup in 2015, rental apartments will generally be their first home. Rental vacancy rates remain at or near their lowest level since 2000, and rent growth exceeds inflation in most markets. That has prompted new development and property value gains, which has led to property sales and new mezzanine debt …

read more –>  http://www.freddiemac.com/finance/pdf/November_2014_public_outlook.pdf

Government Says Gas to Average $2.60 Next Year

The Energy Department again slashed its prediction for next year’s average price of gasoline across the U.S., this time to $2.60 a gallon. That would be 23 percent below this year’s projected average and the lowest full-year average since 2009.

If that comes to pass, the price drop will save U.S. drivers $100 billion over the course of the year based on current consumption levels. That will boost the overall economy by reducing shipping and transportation costs, and leaving consumers more money to spend on other things.

read more —> http://www.utsandiego.com/news/2014/dec/09/government-gas-to-average-260-next-year/

San Diego Leading Economic Indicators, Oct 2014

Leading Economic Indicators Up in October

 Note:   Because of the holidays, the release date of next month’s report is uncertain.

December 3, 2014 — The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County rose 0.6 percent in October.  The pattern was the same as the previous month:  Strong gains in initial claims for unemployment insurance and the outlook for the national economy offset a sharp dropped in building permits.  Consumer confidence and help wanted advertising were up moderately while there was only a slight increase in local stock prices.

October’s gain was the fifth consecutive gain for the USD Index and signals continued solid growth in the local economy at least through the end of 2015.  Evidence of this should surface during the holiday spending season.  With the local unemployment rate 1.6 percent lower than last year and civilian employment up almost 55,000 since the same time last year, more money is available in the local economy.  The improving labor market should give consumers the confidence to spend that extra money.  Two other developments will also boost spending, although to a lesser extent:  The big drop in gas prices, almost 54 cents from last year, will mean more money to spend on things other than gasoline.  And the increase in the state minimum wage from $8 an hour to $9 will give workers at the low end a boost in income, almost all of which will be spent in the local economy.

	Index of Leading Economic Indicators – The index for San Diego County that includes the components listed below (October) – Source:  USD Burnham-Moores Center for Real Estate	+0.6%
	Building Permits – Residential units authorized by building permits in San Diego County (October) – Source:  California Homebuilding Foundation	-1.72%
	Unemployment Insurance – Initial claims for unemployment insurance in San Diego County, inverted (October) – Source:  Employment Development Department	+1.82%
	Stock Prices – San Diego Stock Exchange Index (October) – Source:  San Diego Daily Transcript	+0.08%
	Consumer Confidence – An index of consumer confidence in San Diego County , estimated (October) – Source: The Conference Board	+0.93%
	Help Wanted Advertising – An index of online help wanted advertising in San Diego (October) – Source: The Conference Board	+0.87%
	National Economy – Index of Leading Economic Indicators (October) – Source: The Conference Board	+1.69%

School of Business Administration, 5998 Alcalá Park, San Diego, California 92110-2492  619/260-2256

Highlights:  Residential units authorized by building permits continue to be the one drag on the local economy.  With strong job growth and increasing incomes, the demand for housing remains strong.  The problem appears to be on the supply side, with the lack of skilled labor and developable land being the main culprits. . . Both labor market variables were positive in October and are getting stronger.  Other than an aberration in September of last year, initial claims for unemployment insurance are now at their lowest level since the first quarter of 2008. On the other side of the labor market, help wanted advertising registered its biggest one month gain since February 2013.  The net result was that the seasonally adjusted local unemployment rate fell to 5.8 percent in October, down from 5.9 percent in September and from 7.4 percent in October 2013 . . . Consumer confidence advanced for the ninth month in a row, which is important since consumer spending is typically two-thirds or more of economic activity.  In particular, when confidence rises, consumers are more likely to take on debt for big ticket purchases such as automobiles and housing. . .  As was mentioned in last month’s report, the USD Index use the average close for all trading days in a month to measure local stock prices. Although the market was very strong at the end of the month, the average for October overall barely edged upward. . . The national Index of Leading Economic Indicators continues to be strong and has now advanced or been unchanged for 10 straight months.  This is reflected in the second estimate for GDP growth for the third quarter, which came in at a robust 3.9 percent, which was up from the advance estimate of 3.5 percent released last month.

September’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 129.9, up from September’s reading of 129.1.  Revisions in the national Index of Leading Economic Indicators reduced the previously reported change in August from +0.3 percent to +0.2 percent, but no other changes or Index levels were affected.  For revisions to the previously reported values for the Index and for the individual components, please visit the Website address given below.  The values for the USD Index for the last year are given below:

               Index      % Change

2013

OCT         127.0              -0.5

NOV        127.5              +0.4

DEC         127.5              +0.0

2014

JAN          127.6             +0.1

FEB          127.9             +0.2

MAR         128.6            +0.5

APR          127.9             -0.5

MAY         127.5             -0.3

JUN          127.7             +0.2

JUL          128.1             +0.3

AUG         128.4            +0.2

SEP          129.1             +0.6

OCT        129.9           +0.6

For more information on the University of San Diego’s Index of Leading Economic Indicators, please contact:

Professor Alan Gin                                TEL:  (858) 603-3873

School of Business Administration          FAX:  (858) 260-4891

University of San Diego                              E-mail: agin@sandiego.edu

5998 Alcalá Park                                          Website: http://www.sandiego.edu/~agin/usdlei

San Diego, CA 92110                                   Twitter:  @alanginusdsba

Mom-and-Dad Banks Step Up Aid to First-Time Home Buyers

The Bank of Mom and Dad is playing a growing role as lender of last resort for a housing recovery struggling to provide more traction for the U.S. economy.

Last year, 27 percent of those purchasing a home for the first time received a cash gift from relatives or friends to come up with a down payment, according to data from the National Association of Realtors. That’s up from 24 percent in 2012 and matches the highest share since the group began keeping records in 2009.

Those numbers will probably keep growing this year as younger Americans remain constrained by student debt, tough entry into the job market and stricter mortgage-lending rules that require more cash up front. At the same time, rising stock and property values give their baby boomer parents the ability to assist those wanting to lock in near record-low borrowing costs …. read more —> 

courtesy of:  http://www.bloomberg.com/news/

Homeownership Still Holds Promise For 90% of Americans

A new survey shows the vast majority of Americans still regard homeownership as a “highly desirable goal,” despite lingering effects of the housing crisis in the market. The results stem from the latest COUNTRY Financial Security Index® survey and overall it was found that Americans are feeling more optimistic, likely due to an improving economy and labor market.

Making sense of the story

• The survey found that 89 percent of Americans feel that buying a home is an important part of achieving the American Dream.

• Furthermore, 64 percent of respondents expressed belief that owning a home is an attainable goal for a typical middle-income family, a significant improvement over last year, when just 41 percent said the same.

• There was a generational split on opinions regarding whether or not the goal of homeownership is achievable. Respondents among the ages of 30–39 and ages 50–64 were most likely to be negative in that regard, with 26 percent and 20 percent, respectively, saying owning a home is not an attainable goal for a middle-income family.

• Among non-homeowners, a quarter of those under age 30 and a fifth of those ages 50–64 said they have no interest in owning a home.

• For those who currently don’t own a home, financial limitations represent some of the biggest barriers to homeownership. Fourteen percent say a low credit score is the primary obstacle.

• Americans also cite a lack of a down payment (13 percent) and the price of homes in the area (12 percent) as impediments to homeownership.

• More than half (56 percent) say their home is a long-term investment of 10 years or more to help fund retirement goals. Half of Americans also said they would avoid taking out a home equity loan unless absolutely necessary.

courtesy of:  California Association Of Realtors

What YOU SHOULD KNOW About Housing Affordability

Is it the right time to buy a house?  Is it the right time to sell?  How do you know when to jump into the real estate market?  The answer is….it depends.  There’s no single answer that applies to everyone.  A host of factors come into play, including the economy in general, whether home prices are rising or falling, the inventory of available homes, and the state of your own financial outlook.  If you’re thinking about buying or selling a home, here are some factors to consider.

For Buyers:

Improving Economy, Rising Prices, and Eager Buyers:

The rebound in the economy means more competition for homes because people who have been renting or staying put in their homes are now jumping into the housing market. This translates into quick turnover on home sales, multiple bids, and sometimes, buyers bidding over the asking price. The boost in housing prices is also fueling competition from buyers who want to get into the market before prices get too high. Even though prices are rising, many still consider some homes underpriced since prices had dipped so low. And buyers are looking to make a move while houses are still relatively a good deal.
FHA Fee Changes:

Loans through the Federal Housing Administration (FHA) were historically the best bet for people with low to moderate incomes and not much money to put toward a down payment. Generally, private lenders require a 5% down payment, while FHA only requires 3.5%. However, with several changes to loan terms, FHA may no longer be the smartest option.
FHA loans require mortgage insurance, a fee tacked onto the loan that provides the lender some protection in case the borrower defaults on the loan. In the past, the borrower only needed to carry the insurance until the loan reached 78% of the original loan amount. Under the new rules, the borrower is required to carry the insurance for the life of the loan.
The cost of mortgage insurance on FHA loans has also been on the rise, almost tripling since 2008. In 2013, the fee rose to 1.35% of the balance of the loan. Additionally, FHA loans require borrowers to pay an upfront fee of 1.75% when getting the loan. Between the upfront fee and the required mortgage insurance, saving up more for a down payment and getting a private mortgage may make more financial sense.
Beyond FHA:

Buyers with a low down payment have other options to consider. Fannie Mae HomePath loans, available only on Fannie Mae-owned properties, offer low down payments and no mortgage insurance requirement. Periodically, Fannie Mae also offers special deals in which they cover the buyer’s closing costs. There also loans available to people in various special circumstances. Veterans, for example, can get VA Mortgages, which offer good terms, low down payments, and easier qualification requirements. The USDA offers attractive mortgage terms to moderate-income families buying property in rural or semi-rural areas.
Check Other Affordability Programs:

The Good Neighbor Next Door program offers discounts of homes in “revitalization” areas of up to 50% for qualified fire fighters, law enforcement officers, EMTs, and teachers. Check with state and local housing agencies to see what programs are available in your area. Check http://www.usa.gov for links and other home buying help and information.
Mind Your Debt:

Having a large amount of debt in relation to your income will lower your chances of getting a loan with favorable terms, or even getting a loan at all. Private lenders generally have more stringent rules for debt-to-income ratio (DTI). There are two kinds of DTI–how much personal debt you can carry in relation to your income (e.g. car loans, student loans, child care expenses) and income versus the amount you will be spending on housing debt (e.g. mortgage payments, property taxes, insurance and so forth.) Lenders take both into consideration. Would-be borrowers who want private financing generally need to have less than 45% of their income going towards personal debts, while FHA will finance borrowers who have up to about 56% of their income allocated for debt payment. Borrowers can qualify for an FHA loan with up to 47% of their income slated for housing costs, while conventional lenders generally allow only up to 38-40%.

For Sellers:

Rising Home Prices:

House prices are rebounding from the downturn, and 2014 is shaping up to be a seller’s market. Rising home prices are a boon to sellers who can expect faster sales, multiple full-price offers and even offers above their asking price.
Starter Homes in Demand:

If you have a starter home and are looking to upsize, the market is especially in your favor. Starter homes are in short supply because during the economic downturn, people were buying and selling less frequently. Now that the economy is improving, there’s a lot of pent-up demand, especially for people looking for inexpensive housing or a starter home.
Fewer Underwater Mortgages, More Equity:

The nationwide trend of rising home prices means other good news for sellers. The boost in prices is finally lifting many homeowners from their underwater mortgages and giving others more equity in their homes. More equity means more owners will have the money for a down payment and closing costs if they’d like to move up to something pricier.
Time to Refinance?:

Rising prices will also raise the appraised value of many homes, meaning it may be a good time for homeowners to refinance. Higher appraisals may help you get more favorable terms on a first mortgage or refinance the rolling of a second mortgage into one stable, fixed-rate mortgage.

courtesy of:  http://www.clientdirect.net/

 

Mortgage Rates Drop – Mortgage Standards Expand To Include Lower Credit Scores

May 19, 2014

Mortgage lenders are lowering mortgage credit standards nationwide.

Effective immediately, home buyers and refinancing households can get approved for an FHA loan or a conventional loan with lower credit scores than during any time in the last five years.

Combined with mortgage rates today, which are at an 11-month low, it’s an excellent time to apply for mortgage.

Mortgage Credit Score Minimums Drop

It’s getting easier for borrowers to get approved for a mortgage. As the economy has improved, jobs growth has been ongoing; home values have climbed steadily; and the number of loans in default have dropped dramatically.

Lenders are taking fewer losses and realizing bigger returns. In response, they’re loosening loan guidelines in an effort to reach consumers who have been thus far locked out from the housing market rebound.

Earlier this year, U.S. lenders lowered minimum credit score requirements by 40 points for borrowers using FHA-backed financing, opening the low-downpayment program to a wide swath of underserved borrowers.

Lenders are making a similar move for conventional loans.

Lowering credit standards is a big deal in the U.S. housing market. Credit scores predict the probability of foreclosure with lower credit score correlating to high foreclosure probability.

During last decade’s housing market downturn, homes in foreclosure cost banks hundreds of millions of dollars. As more loans went bad, banks grew more risk-averse, tightening up what they would lend, and to whom.

This month’s loosening of loan standards suggests that fewer loans are defaulting nationwide, and that banks are willing to assume new risk given today’s strengthening economy.

For today’s buyers of homes and households wanting to refinance, this is good news.

You no longer need “perfect” credit to get access to Fannie Mae- and Freddie Mac-backed mortgages. A 620 FICO score now works just fine.

The Mortgage Approval “Triangle”

Because there are tens of available mortgage programs, there is no “one” formula for getting approved for a mortgage. However, mortgage approvals almost always focus on three key areas — your income, your equity, and your credit.

In this three-pronged approach, “income” is the amount of documented income you earn annually as compared to your monthly debts. In general, your debts must not exceed 45% of your documented income.

This ratio is known as your debt-to-income (DTI) ratio.

“Equity” is the amount of equity, in percentage terms, you hold in the home you’re mortgaging. For a home buyer, your equity is equal to your downpayment. For a refinancing mortgage applicant, your equity is your loan size divided by the home’s value, a ratio known as Loan-to-Value (LTV).

Loan-to-value requirements vary by program. For example, for borrowers with a FHA-backed loan, the maximum LTV on a home purchase transaction is 96.5%. On an FHA refinance, however, there are no LTV restrictions at all.

Or, for a military borrower using a VA loan for a purchase, the maximum LTV is 100%; there is no downpayment required whatsoever.

The third prong in mortgage underwriting is “credit”.

Your credit score is a based on a formula which determine the likelihood that you’ll go 90 days without making payment to your lender, which puts your loan into default. Credit scores are on a scale of 300-850 and are sometimes referred to as “FICO” scores, generically.

Credit scores of 740 or higher are considered excellent.

To get a mortgage approval, it’s not required for applicants be “excellent” in all three prongs of the mortgage approval triangle — you must only earn a “passing” grade.

With credit standards dropping, it’s easier for today’s borrowers to get approved.

Loan Programs For Borrowers With Average Credit Score

Mortgage lenders are loosening home loan standards. They’re lowering minimum credit score standards and granting more “exceptions” as compared to last decade.

If you were recently turned down for a mortgage because your credit score or income, it might make sense to re-apply — especially because of the number of home loans now available to borrowers with less-than-perfect credit scores.

One such program is the USDA Rural Housing Loan, which allows 100% financing for home buyers in rural and suburban neighborhoods. The USDA loan backed by the federal government, is available in all 50 states, and requires a minimum FICO score of 620.

Another available program is the VA loan, which also enforces a minimum FICO score of 620. VA loans are available to members of the military and require no downpayment whatsoever.

VA loans require no mortgage insurance and can be assumed by the future buyer of your home. This means that your 3.75% mortgage rate can be “sold” along with your home, so long as the buyer can be VA loan-approved.

Assumable loans add value to a home in a rising mortgage rate environment.

A third program for borrowers with less-than-perfect credit scores is the FHA home loan. Official FHA guidelines state that a 500 FICO score is required to get approved, but many lenders will underwrite to a minimum 580 FICO or better.

FHA loans are assumable, as well.

Low-credit-score borrowers can also use conventional mortgage financing. Conventional loans are loans which are backed by Fannie Mae or Freddie Mac.

Conventional loans are available with credit scores of 620 or higher, and can be the best choice for buyers with downpayments of 10% or more; or for refinancing homeowners with home equity of at least twenty percent.

Additionally, Fannie Mae or Freddie Mac can access the Home Affordable Refinance Program (HARP) program. Sometimes called the “Obama Refi”, HARP loans are for homeowners whose homes have lost equity since the date of purchase.

HARP is allowed with a 620 FICO score or better.

Get Today’s Live Mortgage Rates

As mortgage rates move to an 11-month low, mortgage lenders have opened their loan guidelines to a wider group of applicants. If you’ve been turned down for a mortgage in the recent past, consider applying again.

courtesy of:  http://themortgagereports.com/14951/mortgage-rates-fico-score-credit

10 Countries Racing to Buy American Homes

International homebuyers are attracted to the United States for a number of reasons. These include favorable housing prices, good weather, the country’s relative economic stability and an attraction to America in general. As the housing market improved and home prices rebounded, the interest of foreign buyers in U.S. properties has soared.

Interest in U.S. property increased dramatically in a number of countries between 2009 and 2013. In all, interest in home buying, according to housing market firm RealtyTrac, increased by 95% or more in 10 countries, and at least doubled in nine of these nations. Interest in U.S. property by residents of the United Arab Emirates rose 352%, the most out of any country. Based on subscription data provided by RealtyTrac, these are the 10 countries where interest in buying American homes is on the rise.  (read more —> http://www.usatoday.com/story/money/business/2014/04/12/countries-buying-american-homes/7586991/ )

courtesy of:  http://www.usatoday.com/

San Diego’s Economy Forecast To Be ‘Better Than Normal’

The next two years will be San Diego’s best since the end of the Great Recession, according to Mark Schniepp, director of the California Economic Forecast.

Schniepp, along with Svenja Maarit Gudell, director of economic research at Zillow; Jerry Nickelsburg, adjunct professor of economics at the UCLA Anderson School of Management and senior economist for the UCLA Anderson Forecast; William Yu, economist for the UCLA Anderson Forecast; Jim Costello, managing director of Americas research for CBRE; and David Osias, managing partner at Allen Matkins discussed the local, state and national economies at a regional breakfast series presented by the UCLA Anderson Forecast on Thursday at the UCSD Ida and Cecil Green Faculty Club.

Home prices in the San Diego metro area historically increase about 4.3 percent year over year, and but increased 15.1 percent from February 2013 to February 2014, Gudell said.

San Diego’s median home value is $445,100, according to the Zillow Home Value Index, and Gudell forecast a 4.1 percent home appreciation in San Diego in the next 12 months.

Home values are still down 17 percent from the peak, she said.

Increasing home prices have pushed many underwater homeowners into positive equity, bringing the remaining percentage of mortgaged homeowners who are underwater to 13.1 as of the fourth quarter of 2013 — less than the nation’s 19.4 percent, according to Gudell.

She doesn’t expect mortgage rates to significantly affect the housing market and anticipates an increase in demand as households that doubled up during the recession begin to break apart.  ( —> read more )

courtesy of:  http://www.sddt.com/RealEstate/article.cfm?SourceCode=20140417czh&_t=SDs+economy+forecast+to+be+better+than+normal#.U1LOu6ROW00

3 Major “Need to Know’s” About The 2014 Housing Market

The following list was put together by a veteran housing economist, asked by HousingWire for his opinion on the near-term future of the markets we cover daily.

(David Berson is the chief economist at Nationwide. He leads a team of economic analysts delivering economic forecasts and analyses that are used to inform and strengthen the organization’s business strategies and operating plans. Prior to joining Nationwide, David served as the chief economist at The PMI Group and for Fannie Mae.)

Here’s David Berson’s take on the 3 things you need to know about housing in 2014.

No. 1: 2014 should prove to be the strongest year for housing activity since before the Great Recession.

Housing activity (home sales and housing starts) has increased modestly over the past several years, but is still at levels well-below sustainable trends. For both economic and demographic reasons, 2014 should be the year when activity reaches the highest level since 2006/2007.

Propelling home sales are job growth and housing affordability. The latter reflects the interplay of household income, mortgage rates and house prices. In 2013, while housing activity picked up, it was a year when job growth remained low and virtually unchanged from the previous year.  Moreover, affordability, while still high, fell sharply in the second half.

Most economists expect an improved job market in 2014, with employment growth accelerating and the unemployment rate continuing to decline. That jobless rate drop will reflect more of a pickup in employment than further declines in the labor force participation rate. This will be the key factor improving housing demand this year, even if mortgage rates rise and affordability declines. While the housing market tends to do especially well when the job market improves and mortgage rates decline simultaneously, that combination of events occurs only rarely.

More often, either job gains accelerate while mortgage rates rise, or job gains decline while mortgage rates drop. Typically, housing activity expands in the former case and contracts in the latter. People buy homes when their job and income prospects improve – even if it’s more expensive to do so – rather than buy when it is inexpensive to do so but they’re worried about keeping their jobs.

No. 2: Demographics should start to favor housing activity.

The demographic factor most affecting the housing market is household formations. Newly formed households may buy or rent, but they reside somewhere as an independent unit. On average, roughly 1.2 million households form every year in the United States and they each demand a housing unit. Household formations are affected by the job market, as people “double-up” when worried about their job and income-earning prospects. The Great Recession and the modest job recovery in the years following induced many people who might have lived independently to move in together. That’s most noticeable in the rise in the share of young adults living with their parents, primarily because of the weak job recovery.

Reflecting the slow pace of household formations, there is an increasing pent-up demand for households. After all, most of these young adults would prefer the freedom of being on their own (and their parents really don’t want them as full-time residents, either). We estimate the economy is short by more than three million households.

If the economy expands at a faster pace this year, bringing a more rapid rate of job creation, that should translate into more households, raising housing demand. We won’t see all three million missing households return to the housing market at once. (That wouldn’t be a good thing for the housing market anyway, since that would be on top of the 1.2 million households that normally would develop this year; such a surge would swamp the existing housing supply). Beginning in 2014, the pace of household formations should accelerate to an above-trend pace for several years, pushing up housing demand.

No. 3: Mortgage availability shouldn’t worsen and may improve.

Mortgage credit isn’t nearly as easy to get as it was during the housing boom, and it shouldn’t be.  Still, compared with recent years, mortgage availability has increased slightly. And reasons exist for mortgage availability to be no worse in 2014 than in the past few years. Actually, it may be somewhat easier to get a mortgage loan.

With the dislocations in mortgage lending since the housing bubble popped, Fannie Mae and Freddie Mac have increased their share of the mortgage market significantly. When combined with lending from the Federal Housing Administration and the Veteran’s Administration, the government or government-sponsored share of mortgage lending has climbed to more than 90 percent in recent years. That is an untenable situation in the long run, but is unlikely to change much this year.

The good news is that new Qualified Mortgage lending rules from the Consumer Financial Protection Bureau exempt home mortgages that qualify for purchase or securitization from Fannie and Freddie. As a result, mortgage lenders won’t have to tighten their mortgage-underwriting requirements in response to QM as long as they sell their loans to the GSEs.

Additionally, the rise in mortgage rates already has reduced mortgage origination volumes as refinance activity declines. If mortgage rates rise further this year, as expected, then refinance activity will fall still more. In response, mortgage lenders probably will ease lending standards to the extent possible under the QM rules to boost lending activity by increasing purchase originations. As a result, the increase in new households expected to be created this year, spurred by a stronger job market, should find that qualifying for a mortgage loan will be somewhat easier in 2014 than in prior years.

courtesy of:  http://www.housingwire.com/

30-Yr Fixed Mortgage Rates Remain Unchanged According to Zillow

30-Year Fixed Mortgage Rates Remain Unchanged; Current Rate is 4.23%, According to Zillow Mortgage Rate Ticker

SEATTLE, Jan. 21, 2014 (GLOBE NEWSWIRE) — The 30-year fixed mortgage rate on Zillow(R) Mortgage Marketplace is currently 4.23 percent, which is unchanged from this time last week. The 30-year fixed mortgage rate increased slightly to 4.26 percent early last week before dropping down to 4.23 percent on Thursday where rates hovered for the remainder of the week.

“Last week, rates reached six-week lows after modestly positive economic data was not enough to offset the effects of the disappointing December jobs report,” said Erin Lantz, director of mortgages at Zillow. “Although the jobs report presents a temporary reprieve from the longer-term upward trend, looking ahead we expect rates will continue to gradually rise as the economy improves.”

Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgage Marketplace site, and reflect the most recent changes in the market. These are not marketing rates, nor a weekly survey.

The rate for a 15-year fixed home loan is currently 3.21 percent, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 2.82 percent.

Below are current rates for 30-year fixed mortgages by state. Additional states’ rates are available at: http://www.zillow.com/mortgage-rates.

 
                                 Current    Last Week's 
                                 30-Year      30-Year    Change in 
                                Fixed Rate   Fixed Rate    Basis 
            State               (01/21/14)   (01/14/14)    Points 
-----------------------------  -----------  -----------  --------- 
California Mortgage Rates            4.24%        4.26%         -2 
-----------------------------  -----------  -----------  --------- 
Colorado Mortgage Rates              4.25%        4.29%         -4 
-----------------------------  -----------  -----------  --------- 
Florida Mortgage Rates               4.21%        4.23%         -2 
-----------------------------  -----------  -----------  --------- 
Illinois Mortgage Rates              4.23%        4.28%         -5 
-----------------------------  -----------  -----------  --------- 
Massachusetts Mortgage Rates         4.22%        4.24%         -2 
-----------------------------  -----------  -----------  --------- 
New Jersey Mortgage Rates            4.21%        4.22%         -1 
-----------------------------  -----------  -----------  --------- 
New York Mortgage Rates              4.25%        4.22%         +3 
-----------------------------  -----------  -----------  --------- 
Pennsylvania Mortgage Rates          4.19%        4.14%         +5 
-----------------------------  -----------  -----------  --------- 
Texas Mortgage Rates                 4.24%        4.23%         +1 
-----------------------------  -----------  -----------  --------- 
Washington Mortgage Rates            4.25%        4.23%         +2 
-----------------------------  -----------  -----------  ---------

courtesy of:  http://online.wsj.com/

CA MORTGAGE DELINQUENCIES LOWEST IN 5 YEARS!

SAN DIEGO — The number of mortgage defaults in California has fallen so much that the housing market is once again being considered in balance.

The nation’s Mortgage Bankers Association said mortgage delinquencies have hit a five-year low.

The group’s latest survey finds only about 6 percent of loans on one- to four- unit homes were entering or in the foreclosure process.

That’s the lowest level since 2008.

San Diego State University real estate lecturer Dana Kuhn said that trend is also reflected in San Diego. The rebounding economy and rising prices get a lot of the credit.

“People who literally haven’t been able to make payments, they’ve held on this long and gotten jobs and now they can,” said Kuhn. “Along with that, increased confidence creates hope that if they can just get through the next few months, then they’ll be okay. And, of course, higher prices mean fewer homes are upside down.”

Mortgage Bankers said the foreclosure rate in California has come down so much that it is close to pre-recession levels.

courtesy of:  http://www.kpbs.org/news

San Diego Business Recovery Has Begun

SD Business Recovery Has Begun.pdf

Mary “Peg” Heying

REALTOR® – CA DRE License # 01726709

Prudential CA Realty

2830 Shelter Island Dr.

San Diego, CA 92106

Cell:  (619) 301-8589

Email:  realtorpeg@yahoo.com

Facebook:  https://www.facebook.com/realtorpegsd

Twitter:  http://twitter.com/realtorpegsd

Blog:  http://realtorpeg.posterous.com/