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Economic News Week: December 17, 2012
SWBC Mortgage
Wednesday, December 19, 2012 • Posted December 19, 2012

After a strong start this past week, stocks tumbled slightly after fiscal cliff negotiations seem to have stalled. The Dow ended at 13135.01 on Friday, all this despite the fact that the FED has promised to keep interest rates low. The FED announced a bold move by tying rates to the U.S. unemployment number. The benchmark used is 6.5% unemployment. Until then, the Fed will be buying bonds/MBSs (mortgage-backed securities) in order to keep rates at super lows to spur on the economy. Most economists believe Congress will offer their constituents a late Christmas present by solving the fiscal cliff issue. John Boehner did propose a tax hike for the rich to the tune of income earners making $1 million and more, instead of those making $250,000 plus, per the President’s proposal. 70% of Americans do agree that a tax hike is warranted per the President’s offer. The other sticking point(s) are cuts to certain entitlement programs and tax loopholes. I do agree that an agreement to the fiscal cliff will be completed just in time for both sides to brag that they held out “to the end” for the betterment of the American people. It’s all politics!

A steep drop in gas costs pushed down U.S. consumer prices last month, keeping inflation mild. Gas prices fell 7.4 percent in November, the biggest drop in nearly four years. The extra cash couldn’t have come at a better time for consumers during the Christmas shopping season. U.S. crude oil is heading for further declines, according to one report. The decline could force the nation’s production surge to slow and could drop the domestic crude oil price to $50 a barrel within the next two years. Another bit of positive news is that U.S. manufacturing was higher in November. U.S. factories rebounded after Superstorm Sandy, boosting production of cars, equipment, and appliances for an 1.1 percent boost in output. U.S. wholesale businesses increased their stockpiles by 0.06 percent in October. This is good news for the job front. U.S. employers advertised more jobs in October than September, rising by 128,000 to 3.68 million. U.S. weekly jobless claims fell too last week, the second lowest total this year. Retail sales inched up slightly last month as it rose 0.3 percent in November from October. Holiday travel reports state that this Christmas season could be the busiest in six years, according to AAA. No “Grinch” seen in the forecast before Christmas, except for Congress.

Real Estate, Mortgage Industry, and Other Economic News

I know I sound like a broken record but this needs repeating. In a report last week by the San Antonio Economic Development Foundation, the Eagle Ford Shale oil and gas field has become the biggest economic development boost for the San Antonio area in recent memory, already adding more than 4,000 jobs. San Antonio based NuStar Energy LP announced plans that it expects to spend as much as $120 million for expansions, as it continues to grow its operations. San Antonio’s technology sector continues to grow as well. These two sectors alone cause business interests to take notice in the Alamo City area, which in turn can cause an economic boost to surrounding cities and counties, including the Texas Hill Country.

National Mortgage Bankers Association: Freddie Mac has released its U.S. Economic and Housing Market Outlook for December showing what some of the market features are expected to look like in 2013. Freddie Mac says to look for long-term mortgage rates to remain near their record lows for the first half of 2013, then rising gradually during the second half of the year, but remaining below four percent. Property values are also expected to continue to strengthen with most U.S. house price indexes likely rising by two to three percent in 2013. While the refinance boom will continue into early 2013, it will be less compared to 2012, so look for single-family mortgage originations to decline by 15 percent; conversely, expect multifamily lending to rise approximately five percent. "The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive," said Frank Nothaft, Freddie Mac's vice president and chief economist. "This has been a big change from a year ago, when some analysts worried that the looming 'shadow inventory' would keep the housing sector mired in an economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery." Household formation should step up further to a net 1.20 to 1.25 million household increase in 2013 with housing starts up around the one million annualized pace by the fourth quarter.

As we wind down the year, home buyers are figuring out that “now” is a great time to invest in a home. Low rates prevail, home prices still remain low (but are on an increase), and lenders are loaning money to qualified buyers. Questions remain about what the CFPB (Consumer Finance Protection Bureau) intends to do regarding their definition of QMs (qualified mortgages). The problem now is that it may be too late to close on a home by end-of-year. In any case, it is not too late to contact your congressperson to let them know anything the CFPB does that hinders Real Estate, Construction, and Mortgage Industries, would be detrimental to our economy as a whole. We have all seen how much our economy depends on a good real estate/construction market. Again, being the ultimate optimist, I expect the CFPB to be under such pressure that they suspend any stifling regulations. which in turn would make for a very Merry Christmas and Happy New Year!

(This article is for informational purposes only. Do not use it as financial advice. Information gathered for the article include but, not limited to, The wall Street Journal Report, San Antonio Express News, Blanco County News, Boerne’s Hill Country Weekly, NAMB. For questions/comments call Tony Stevenson at 1.800.460.6990 or email: ).

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