Economic Update

November 22, 2011 by · Leave a Comment 


The economic data released last week was positive for the economy, with stronger than expected economic growth and lower than expected inflation.  Retail Sales, Industrial Production, and Housing Starts all exceeded their consensus forecasts. Weekly Jobless Claims fell to the lowest level since April and the NAHB Home Builder Confidence Index rose to the highest level since May 2010. Meanwhile, Core CPI inflation was a modest 2.1% higher than one year ago. For mortgage rates, the tame inflation data was positive, while the relatively strong growth data was negative.


Investors continue to closely monitor the debt troubles in Europe. While Italy’s bond yields remained below the highs reached last week, bond yields in France and Spain climbed to new highs. Investors are concerned that nearly every euro zone country except Germany is at risk of seeing a sharp rise in yields, which will make it even more difficult to meet their debt obligations. Weaker euro zone countries are increasingly looking to Germany for additional aid, but the Germans are reluctant to bear the cost. The level of aid provided by Germany, most likely through the European Central Bank (ECB), will heavily influence the ability of the other countries to resolve their debt problems.

Ahead of Thanksgiving, Existing Home Sales will be released on Monday, revisions to third quarter Gross Domestic Product (GDP) Tuesday, and Durable Orders, Personal Income, Core PCE inflation, and Consumer Sentiment Wednesday. The FOMC Minutes from the November 3 Fed meeting will also be released on Wednesday. There will be Treasury auctions on Monday, Tuesday, and Wednesday. MBS markets will be closed on Thursday for Thanksgiving, but they will be open on Friday.


FHA Loan Limits

November 22, 2011 by · Leave a Comment 

Congress reinstated higher loan limits for FHA loans last week, however, this news is not the good news it seems to be for the Atlanta market. Several months ago, FHA loan limits were reduced by about $25,000 in metro-Atlanta. Congress has not returned these loan limits to the previous level, rather they approved legislation that allows for higher loan limits in certain “high-cost” areas of the country. In cities like San Francisco and New York, the loan limits are allowed to go as high as $729,750 for another two years. This is great news for these high-cost areas but is of no benefit to the metro-Atlanta area where the single-family FHA loan limit remains $320,850.



Economic Overview: European Saga Continues / Unemployment Drops

November 10, 2011 by · Leave a Comment 

The saga inEurope seems to change by the day.  Two week ago, there was great optimism from the announced European bailout plan.  That optimism faded last week as the Greek Prime Minister surprised investors by announcing that the proposed bailout package would be put to a public referendum within a matter of only a few days.  Although Greek voters passed his plan, the saga eventually cost the Prime Minister his job as he resigned over the weekend.  Fortunately, an agreement was quickly reached to form a coalition government, which is expected to accept the terms of the bailout.

In the meantime, the focus has shifted toItaly, a country with a much larger economy and much more at stake.  While the budget vote passed, Italian Prime Minister Berlusconi failed to gain the support of a majority in Parliament.  As a result, he too agreed to resign. Italywill either hold special elections or be ruled by a national unity government (a temporary coalition).  A national unity government might be better able to implement politically unpopular austerity measures.  After this news yesterday, investors reversed “flight to safety” trading and stocks rallied putting a little upward pressure on mortgage rates.

Shifting to the home front, not that long ago investors were concerned that the USeconomy was close to a “double dip” recession.  Recent economic data and comments from Fed officials, however, have eased those fears.  Last week’s Fed statement expressed a little more optimism about the economy than in the previous statement.  Friday’s stronger than expected Employment data also suggested that the economy is gradually improving.  Against a consensus forecast of 90K jobs, the economy added 80K jobs in October.  In addition, the figures from prior months were revised higher by 102K jobs.  The Unemployment Rate unexpectedly declined to 9.0% from 9.1% in September.

The Economic Calendar is very light this week.  Import Prices and the Trade Balance will be released on Thursday and Consumer Sentiment is scheduled for Friday.  There will also be Treasury auctions on Tuesday, Wednesday, and Thursday of this week.  The Bond Market will be closed on Friday in observance of Veterans Day.

Stealing Ideas from the World’s Most Innovative Companies

November 1, 2011 by · Leave a Comment 

Below is a list of three of the biggest corporate brand names in the world.  These companies have consistently excelled in the market place for different reasons.  Let’s dive in deeper today and look at what each of these companies does well and how you can use it as a lesson to improve your business.

Apple Computers:  fill a need your clients don’t realize they have.  The late Steve Jobs didn’t just develop cool products – he created needs that consumers didn’t even know they had!  Tiny music players?  Cell phones that doubled as mini computers?  No one was asking for these innovations, and yet, millions wouldn’t live without them now.  What can you offer your clients that would make their life easier even if they don’t realize it?  Is there something you can offer that simplifies the real estate process for the buyer or seller?

McDonalds:  be reliable and accessible.  A key to McDonald’s success is every location delivers good quality the same way every time.  You can be confident you’ll find a McDonalds nearby and that the food will be hot and tasty.  Are you easy to reach by phone, email, and text?  Do clients know when they ask for something, you will deliver on time, as promised?  Are you pleasant to deal with no matter how busy or frazzled you are?

Google:  tap customers for feedback.  When a new product is rolled out, technology companies, like Google, listen to the feedback they get from users.  Often, they introduce the new item to a pilot group first, solicit brutally honest opinions about what works and what doesn’t, and then apply those observations to the final product.  Are you asking clients what they need?  Are you bouncing ideas off of them?  Real estate professionals have an advantage over many other types of business people – your job is all about asking questions and learning what clients want.  Why not ask how you can serve them better?

Although these iconic companies have bigger budgets than you do, it’s not their financial resources that make them so successful.  Instead, it’s their attention to discovering customer needs and then delivering products that meet those needs better than their competition.  That is something that each of us can take to heart today and resolve to do the same!

European Agreement Reached

November 1, 2011 by · Leave a Comment 

The big economic news over the last week came from Europe.  Last Thursday, European leaders announced a comprehensive aid package that was broad enough to reduce the concerns of most investors.  The plan included three primary elements.  First, private banks holding Greek bonds agreed to a “voluntary” haircut of about 50%.  Second, the EFSF bailout fund will be increased to 1 trillion Euros (about $1.4 trillion).  Finally, 106 billion Euros will be used to recapitalize European banks.  After the news, stock markets around the world posted large rallies, which was not good for mortgage rates and pushed them higher.

With the European plan now announced and out of the way, the focus will again be domestic economic data.  The economic data released over the last week was moderate at best.  Consumer confidence fell to the lowest level since March 2009.  Third quarter GDP increased at a 2.5% annual rate.  Although this is at a faster pace than the first half of the year, it is still well below average.  In addition, the September Core PCE price index, an inflation indicator closely watched by the Fed, was only a moderate 1.6% higher than one year ago.  The best news of the week was October New Home Sales rising 6% from September (see graph below).

The current investor sentiment is that today’s economic environment, with slow economic growth and tame inflation, will continue to support low mortgage rates.  With this said, any signs of faster economic growth or rising inflation could push mortgage rates higher at a moment’s notice. 

 Looking ahead, another big week lies ahead with Wednesday’s Fed meeting the headliner.  Investors are looking for an update on economic growth and signs of additional easing.  The biggest economic report this week will be the important Employment data on Friday.  As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month.  Also out this week will be the ISM Manufacturing and Construction Spending report on Tuesday as well as ISM Services, Factory Orders, and Productivity on Thursday.