Second Recession Fears Ease

Second Recession Fears Ease

Many home buyers have been reluctant in recent weeks to move forward on home purchases due to fears that the country could be heading to a double-dip recession, but new data suggests they have nothing to fear.

The job picture seems to be improving, according to new economic data. For example, a report from ADP, a payroll processing company, showed that private employers had added 91,000 new jobs in August--after expanding by 114,000 in July. Also, unemployment rates were lower in July than a year earlier in 257 of the 372 metro areas, according to the U.S. Bureau of Labor Statistics. The government’s labor market report, coming on Friday, also is expected to show a modest increase in employment.

What’s more, the number of planned layoffs at companies, which has been rising for the last three months, curtailed in August.

“The labor market is soft but not falling apart,” says Joel L. Naroff, chief economist at Naroff Economic Advisors in Holland, Pa. “The economy is not on the verge of a recession.”

Also, economic data pointed to a strong rebound in demand for manufactured goods in July, particularly for cars. Orders for motor vehicles posted their largest gain since 2003.

Source: “Range of Data Calms Fear of a Return to a Recession,” Reuters, August, 2011

Give me a call or email me if you are wondering about real estate activity in Orange County. I keep a close watch on the trends.

Gil Thibault at 949-275-5900 or GGThibault@aol.com

Pending Home Sales Turn Around in May

June 29, 2011

Pending Home Sales Turn Around in May

Pending home sales rose strongly in May with all regions experiencing gains from a year ago, pointing to higher housing activity in the second half of the year, according to the National Association of REALTORS®.

The Pending Home Sales Index rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.

This is the first time since April 2010 that contract activity was above year-ago levels, and the monthly gain was the strongest increase since last November when the index rose 10.6 percent.

Lawrence Yun, NAR chief economist, said the improvement bodes well for home prices. “Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” he said.

“Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn., Indianapolis, Minneapolis, Houston, and Seattle,” Yun added.

Pending home sales have trended up unevenly since bottoming last June, rising in seven of the past 11 months. “Home sales still could be 15 to 20 percent higher,” Yun said. “If banks would simply return to normal, sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”

“In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price,” Yun added.

Regional Performance

▪ The PHSI in the Northeast rose 7.3 percent to 69.2 in May and is 4.4 percent above a year ago.

▪ In the Midwest, the index jumped 10.5 percent to 82.8 and is 17.2 percent higher than May 2010.

▪ Pending home sales in the South increased 4.1 percent to an index of 95.0 in May and are 14.6 percent higher than a year ago.

▪ In the West, the index surged 12.9 percent to 100.6 and is 13.5 percent above May 2010.

Yun cautioned that healthy job creation is necessary to ensure a solid recovery in both housing and the overall economy. “The job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country,” he said.

Source: NAR, June 29, 2011

2 Executives Sentenced in 3 Billion Fraud Ring

The news below is good news because we can appreciate our own Rick Cirelli, RTC Mortgage. I have had many transactions with Rick over the years and he can be trusted. He is honest, competent, experienced, thinks of the client's best interest, and very hard working.

2 Executives Sentenced in $3 Billion Fraud Ring

Two executives were sentenced to several years in prison for their involvement in a massive fraud ring — estimated at $3 billion — that led to the collapse of one of the country’s largest privately held mortgage lending companies, as well as a bank.

Taylor, Bean & Whitaker Mortgage Corp.’s former president Raymond Bowman and its former treasurer Desiree Brown were convicted for their part in trying to cover up major losses by the company in moving money between accounts at Colonial Bank and selling mortgage loans that never existed or that had previously been sold. TBW’s former chairman Lee Farkas, who prosecutors have called the ring leader of the fraud, is set to be sentenced June 27.

Bowman was sentence to 30 months in prison while Brown was sentenced to six years in prison. "It was never my intent to commit a crime," Brown told the court. "It was always my intent to fix the problem."

Prosecutors say the mortgage fraud at TBW lasted more than seven years up until August 2009, which ultimately led to the collapse of TBW and Colonial BancGroup Inc.’s Colonial Bank. Prior to its collapse, TBW was one of the nation’s largest privately held mortgage lenders with some $20 billion in mortgage sales a year. Meanwhile, Colonial Bank — before regulators took it over — was once one of the top 50 U.S. banks.

Prosecutors say the case marks one of the few since the aftermath of the global financial crisis where charges have been brought up against executives at major firms. Usually prosecutions, up to this point, have involved lower-level employees or smaller firms.
Source: “Former Executives Get Prison Time for Mortgage Fraud,” Reuters (June 10, 2011)

Good Trends in Real Estate Activity

"CEOs Optimistic about economy."
         Source: LAT, March, 31, 2011, pg. B2

"U.S. Layoffs are lowest since 1995"
       Source: OCRegister, March 31, 2011, pg. B3

"Housing Shortage on the Horizon"
     Source: CNN, " It's Time to Buy," March 28, 2011