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U.S. Investing
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Less Than Enthusiastic Housing Rebound Causes Mortgage Rates To Fall Again |
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Thursday, March 29, 2012 16:15
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Tags: economy | investing | mortgage debt | value investing
Despite indications that the housing market is improving, the housing market faces challenging times ahead. The recent Urban Land Institute forecast didn’t indicate the significant bounce back depressed homeowners were hoping to see.
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The new demand which would normally ignite an up cycle at the end of a market downturn simply isn’t there. Neither is easy access to credit. So the housing market’s recent signs of price improvement as reported by the Standard and Poor’s/Case-Shiller index may be thwarted.
This is good for buyers with cash because the disappointment in the rate of price improvement is causing mortgage rates to decline once again. For conventional loans, the latest weekly mortgage rates came in at 3.99%. That’s below the 4.08% rate from the previous week and down from the 4.86% rate a year ago. Adjustable rate mortgage rates were 2.9% versus the previous week’s 2.96% rate and the year-ago rate of 3.26%. |
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Traditional Home Buying Season May Come Back Into Full Swing |
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Wednesday, March 28, 2012 15:20
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Tags: economic indicators | Economic Outlook | economy | mortgage debt
2012 looks like it may be the housing market bottom. Economists and industry insiders are saying the traditional spring home buying season is benefiting from increased sales of homes as well as pending sales. The two indices offering this hope are the Pending Home Sales Index whose February numbers came in 9.2% higher than last year and the Existing Home Sales which improved by 8.8%. This Website Is For Financial Professionals Only
Increased demand is softening competition for sellers and indicates the long-anticipated housing recovery may be at hand. Mild winter weather helped builders in new home construction.
The National Association of Realtors (NAR) is looking for sales increases of 7% to 10% for this year. These are the highest expected increases in five years. Since consumers have retired a good bit of their debt and have decreased savings rates, owning a home has once again become a viable option. Interest rates are still at historic lows although big banks are still reluctant to make loans so many home sales have been in cash.
Buyers with ready cash have squeezed out many first-time home owners, although smaller banks have loosened their restrictions somewhat, making financing a home easier. The high foreclosure rate particularly makes paying cash attractive since buyers can sometimes get a better deal for cash on properties whose values are under water. As these homes get snapped up, they strengthen the market and make it more attractive for other buyers to come in. |
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Bernanke Says Weakness In Jobs Market Will Continue To Guide Fed Policy |
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Tuesday, March 27, 2012 15:57
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Tags: economic indicators | Economic Outlook | Federal Reserve
Like gains in the equities markets, recovery in the economy doesn’t go straight up. In spite of recent good news about job growth, the Fed chairman made it clear on Monday, March 26 that FED policy would remain in accommodative stance. The markets liked this news, rising in triple-digit fashion in response. This Website Is For Financial Professionals Only
The months of December through February each saw employment gains of 245,000 jobs, causing a jobless rate decline to 8.3% from 2009’s high of 10.2%. Improvements have not been felt for a long enough time to reflect real growth. They may simply indicate a resurgence of hiring after the long recession. The employment number has improved enough for the Fed chairman to concede the improvement may be real. Employment levels, however, are still far above normal—as much as 3 percentage points than the 20-year average before the crisis began. |
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Bank Lending Has Had Little Influence On US Economic Recovery |
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Friday, March 23, 2012 16:24
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Tags: banks | Economic Outlook | economy | European debt
The original purpose of the Troubled Asset Recovery Program (TARP) funds included enabling banks to make loans to boost economic activity. But lending by banks is at a low point—even lower than it was during the Great Depression. This Website Is For Financial Professionals Only
The Federal Deposit Insurance Corp. (FDIC) reported that the ratio of increased lending to the nominal GDP reached a peak of 1.75 between 2001 and 2008. The previous historic low for that ratio came during the Great Depression and was a multiple of .64. Today, the ratio is at a multiple of .31.
US banks are struggling to reinvent their business models as a result of increased regulation which evens competition between regulated and non-regulated financial institutions. Smaller institutions are getting swallowed up, increasing consolidation in the industry.
The economy is on a recovery track despite the historic low lending levels. Investors’ appetite for risk seems to have returned and the retirement of personal debt coupled with improvement on the employment front seems to be fueling equity markets. S&P 500 returns for the last quarter of 2012 are projected to reflect a 15.5% rate of growth.
This is triple the rate predicted for third quarter returns. The deterioration of European sovereign debt is still a concern, however, and continues to inject an element of uncertainty about the health of the recovery going forward.
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Clients And Advisors Have Separate Views On Performance |
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Friday, March 16, 2012 13:09
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Tags: client education | asset management | client communications
A recent survey noted the differing views held by advisors and clients regarding performance. While advisors take a longer term view of performance and tend to benchmark performance against achieving client goals, clients measure performance on much shorter term criteria. One year returns, volatility, and absolute returns were the focus of 41% to 54% of clients. Fifty-three percent of advisors focused on long term goal achievement.
Advisors also have a brighter view of markets going forward. The 2008 crisis did so much damage to portfolios that investors are still reeling almost four years later. Clients are also concerned about short term volatility, government policies, and global events. Such discrepancies between client and advisor views adequately reflect the experiences of each side in the client-advisor relationship.
Advisors who study behavioral finance will find many common biases in these views. People remember painful experiences much more readily than positive ones. They base decisions on those painful experiences. They also become selective in the information they use to make decisions. Advisors may have an opportunity here to educate clients on these biases and to view investment performance more objectively.
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