Wells Fargo economists see recession's end in late 2009

Wells Fargo economists see recession's end in late 2009

Charlotte Business Journal

The deepest and longest recession since the 1930s will end in the second half of 2009, Wells Fargo & Co. economists say in their annual forecast.

The third quarter of next year will be “better than expected” by many, says Jim Paulsen, chief investment strategist. “It’s like you’re at a cookout and you’re trying and trying to get your charcoal going and you keep squirting on lighter fluid, and all of a sudden it goes ‘poof!’ ”

Paulsen says “fear mongering” by government officials who were trying to sell the $700 billion Troubled Asset Relief Program in the fall made the situation much worse, freezing everyone in their tracks and bringing on “economic paralysis.”

Senior economist Scott Anderson predicts that housing will lead the way back. “One bright note is that the sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out.”

The job market is now one of the worst in decades, with 3.7 million more jobs expected to be lost next year, Anderson says. That means 5.5 million jobs will be lost in this recession, twice as many as were lost in the 1981-82 recession, the second-worst since World War II.

Eugenio Aleman, senior economist at San Francisco-based Wells Fargo (NYSE:WFC), says he is concerned that injecting of hundreds of billions of dollars into the economy through the financial sector is not helping those who need it most.

“Current monetary policy will help only those households that do not need help — those that have plenty of money and have a stable job,” he says. “They will refinance, buy homes and consume. It will not help those who are struggling to make ends meet, or have lost their jobs or may soon lose them, because no financial institution is going to lend them money to buy a home, no matter what the interest rate is.”

He says the new administration will need to help those households through fiscal policy, with government spending that will create jobs.

Article provided courtesy of Charlotte Business Journal

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Mortgage Rates Hit 4 1/2 Low

Freddie says 30-year mortgage rates dropped to 5.47% this week, continuing to fall since the Nov. 25 Fed decision to buy $500B in mortgage-backed securities.

By Larissa Padden CNNMoney.com contributor
Last Updated: December 11, 2008: 6:14 PM ET

New York (CNNMoney.com) -- Mortgage rates fell again this week, following the government's efforts to assist the troubled housing market.

Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.47% for the week ending Dec. 11. That's down from 5.53% last week and well below 6.11%, which is where the rate stood at this time last year.

Mortgage rates began to fall after November 25th, when the administration announced that it would pump another $800 billion into the credit markets to unfreeze consumer and mortgage lending.

Specifically, mortgage rates responded to the Federal Reserve's announcement that it would purchase up to $500 billion in mortgage backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. It will also buy another $100 billion in direct debt issued by those firms.
Rates dipped to 5.77% on a 30-year, fixed rate loan the day after the government's announcement, down from the previous Monday's 6.06% average, according to Keith Gumbinger, vice president of HSH Associates. And the downward trend has persisted.
"What we're seeing is a slight continued decline influenced by the Federal Reserve's announcement to buy half a trillion in mortgage backed securities," Gumbinger said. "And this continued minor downdraft is also due to the poor economic climate."

The 30-year rate has not been this low since March 25th, 2004 when it averaged 5.40%.
"Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage rates room to ease back a little further," said Frank Nothaft, Freddie Mac vice president and chief economist, in a release on Thursday.

The 15-year fixed rate mortgage this week averaged 5.20%, which is down from 5.33% last week. A year ago at this time, a 15-year fixed rate loan averaged 5.78%.

The 15-year rate has not been this low since February 7, 2008, when it averaged 5.15%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.82% this week, up from last week when it averaged 5.77%. At this time a year ago, the 5-year ARM averaged 5.89%.

And the one-year Treasury-indexed ARM averaged 5.09% this week, up from last week when it averaged 5.02%. Last year, the 1-year ARM averaged 5.50 percent.

"The housing market still hangs in the balance," Nothaft said in a release. "On a year-over-year basis, after rising in both August and September, pending existing home sales fell 1.0% in October, based on figures from the National Association of Realtors. Meanwhile, conventional mortgage applications for home purchases over the week ending December 5th were up 2.0% from four weeks prior, but were still 51% below the same period last year, according to the Mortgage Bankers Association."

First Published: December 11, 2008: 11:33 AM ET

Are you missing out on your opportunity to own a home and build your own equity?

Are Home Buyers Missing An Opportunity?
Foreclosures: Are Home Buyers Missing An Opportunity?
Posted By: Diana Olick CNBC Real Estate Reporter
cnbc.com
16 Dec 2008 01:38 PM ET

You'd think now would be a great time to buy a foreclosed property, but a majority of Americans don't think so. A new survey from real estate search site Trulia.com and foreclosure sale site RealtyTrac.com finds that only 47 percent of those surveyed would consider buying a foreclosed property, that's down from 54 percent last spring.

It seems that negative sentiment surrounding foreclosures is turning buyers off of what should be some of the best real estate investment opportunities in decades. The survey says 80 percent of adults are concerned with negative aspects, such as hidden costs, a potentially risky purchase process, home price depreciation and personal connection with foreclosure (not sure exactly what that last one means, just maybe that there is a social stigma attached to a foreclosed home I guess).

Now I have to take this report with a grain of salt because I'm a stat gal, and I happen to know that foreclosure sales are not only abundant, but they're on the rise. In Las Vegas, which boasts 30,000 foreclosures in 2008, two out of three home sales are foreclosed properties. In California, foreclosure sales are pushing up total existing home sales like never before. I've also been to several foreclosure auctions and there are plenty of bidders on hand.

You then have to pose the question: Who's buying foreclosed properties? Is it the average American that would have been included in this survey or is it largely investors and investment companies?

The survey also says that 75 percent of respondents expect a discount "of at least 25 percent on a foreclosure purchase," while 30 percent expect "a major discount of at least 50 percent" compared to a comparable home not in foreclosure. Housing Starts, Permits Plummet to Record Low

I'm a bit surprised that so many folks only expect a 25 percent discount. The bulk of foreclosed properties are in states with the largest price declines. If I were buying a foreclosed property, I'd be in at least the 50 percent discount window.
Questions? Comments? RealtyCheck@cnbc.com
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Article courtesy of cnbc.com

Are you missing out on your opportuinity to own a home and build your own equity?