Archive for June, 2008
Unemployment Rate Up To 5.6%
From the Oregonian :
Oregon lost jobs in May for a third consecutive month — the first time that’s happened since early 2003 — as the state’s unemployment rate rose to 5.6 percent.
Payroll employment dropped by 3,700, on a seasonally adjusted basis, reaching 1,735,200, the lowest level since October. Job losses hit construction, manufacturing and professional and business services again in May, and spread to the trade, transportation and utilities sector.
But the three-month decline has not come close to the deepest monthly losses in downturns during each of the past three decades. In addition, some resilient sectors of Oregon’s economy, such as educational and health services, have protected the state from unemployment highs reached during 2003, for example.
“The employment trends are showing a modest downturn,” said David Cooke, an Oregon Employment Department economist. “There are substantial corrections in certain industries — construction and manufacturing, notably — and other industries continue to add jobs.”
Manufacturing lost 2,300 jobs in May, seasonally adjusted. Construction lost 1,600; trade, transportation and utilities also trimmed 1,600; and professional and business services dropped 1,000.
If not for educational and health services, a sector that added 1,400 jobs during a month when it usually loses 2,100, Oregon’s economy would look much worse. If not for strong government hiring, for instance, unemployment would be higher. And if not for recently cashed U.S. economic-stimulus checks, retail trade — down 3,200 jobs, seasonally adjusted, since February — would likely be in worse trouble.
Home Loan Refinance : A Primer
Homeowners choose to obtain a home loan refinance for many reasons. Before doing so, you should determine the answers to some questions in order to decide whether a refinance is right for you.
Why refinance?
Most homeowners choose a home loan refinance when they are in need of significant amounts of extra cash for a variety of reasons. For example, you may have a youngster who is nearing college age and you want to provide cash to reduce the amount of college loans that will be due upon graduation. You may need cash for pressing medical bills, or you may choose a home loan when you want to do major renovation to your home. Another common reason for refinancing and pulling equity from your home is to consolidate credit card debt and thus lower interest rates.
When is the best time to refinance?
Choosing a home loan refinance can make good sense at several times in your financial life. For example, you may have acquired your existing mortgage at a time when interest rates were high, due to the nation’s economy, or you may have had a higher interest rate because of personal credit issues. Refinancing should not be done frivolously, but when you are in genuine need of the cash, or when the savings in interest fees will more than offset the cost of the refinance. Because the refinance option taken too frequently can be a sign of a homeowner in financial trouble, you should avoid the refinance option except for times when it makes good financial sense to do so.
What is the bottom line?
The bottom line will result in a savings over all to you, or an increase to you. At times, the homeowner will do a home loan refinance and save thousands of dollars in interest fees since the interest rate has dropped. Another time when the interest fees will be lower over the term of the loan is if you are repaying a larger payment in order to reduce the term of the loan. If you are spreading the mortgage out over a longer period of time in order to reduce the payment amounts, you may end up with significantly more interest costs, plus the costs of the loan itself.
What can you use the money for?
A home loan refinance with cash out can be used for almost any purpose you wish. Depending on the way you structure your loan, you may have lump sum cash available; you may decide to have a line of credit tied to your home equity value, or you may use the funds to pay off existing debts and bills in order to free up disposable income each pay period in the future. The choice will depend upon the individual needs in your situation and how your tax picture is structured.
Things to watch out for
Be cautious in structuring a home loan refinance. You will want to verify that you are obtaining your loan through a legitimate broker or direct lender. Make sure that you don’t end up with a different type of loan than you thought you were getting. For example, if you want a fixed rate loan, take care that you aren’t sold a variable rate loan or one where you have a negative equity building.
Determine the characteristics and terms of a home refinancing choice is important. Choose a resource site that will help you to understand and compare various loan options. The best site on the internet can be located here at Home Loan Refinance or Home Loan .
The fuss over froth revisited
Exactly one week ago, I had the pleasure of sitting on a panel to talk about financial blogs along with Jon Lansner of the Orange County Register and Mark Lacter of LA Biz Observed at the Reuters AdvicePoint Investment Conference in Long Beach.
It was a fun time - one of the quickest hours I can recall with lots of questions from the audience and some interesting give-and-take between the three of us and moderator Ray Fazzi.
The first question was the funniest - a white-haired gentleman in the back of the room asked, “How do you make money on blogs?”
None of us could really answer that question.
Since my badge looked something like what you see below, the subject of the retired Fed chairman and his legacy came up with almost everyone I spoke to at the conference as well as a number of times during the panel discussion.
So, it was not much of a surprise later in the day when Jon forwarded a link to his mid-2005 column on the subject of Alan Greenspan’s “froth” characterization of the then-booming housing market.
It’s worth having another look at three years later. It begins…
What in the world is Federal Reserve boss Alan Greenspan thinking when he says there’s “froth” in some of the nation’s hottest housing markets?Understanding the word’s meaning is critical in this town, where many folks wonder if the wealth created by soaring home prices is a permanent addition to their checkbooks.
Well, the wondering is over. We all know the answer to that question now - housing wealth is about as permanent as stock market wealth.
After going on to talk about beer heads and baristas, a pricey gourmet coffee analogy concludes the piece:
Greenspan says he’s cool with a national economy dotted with dicey regional housing markets that have been heavily financed with exotic, untested loan products.That logic works for me only if housing is undergoing a froth-like metamorphosis, where changing tastes make folks comfortable spending far more money than previous generations on old favorites.
The Starbucks analogy is a good one.
It’s more than just a coincidence that the Starbucks (Nasdaq: SBUX ) share price peaked at about the same time that home prices peaked back in 2006.
I can’t tell you how many $4 Starbucks cups I used to see when I slogged away as a software engineer in Southern California a few years ago. Stopping on the way to work for a latte when you could brew a cup at home for about 10 cents never made any sense to me.
(Note: Starbucks stock would make a fine addition to the S&P Case-Shiller Home Price Index chart series - see government inflation , job creation , revolving credit , and Countrywide stock .)
In a ” froth update ” earlier this week, Jon looked back at when the mid-2005 “tiny bubbles” characterization was formalized in a Federal Reserve speech and suggested readers weigh in on the matter.
Not surprisingly, the retired Fed chairman fared rather poorly.
Fisher: Silly interest rate talk
Does anyone really think that the Federal Reserve is going to be raising short-term interest rates anytime soon? And if so, by anything more than some token amount that will likely have all sorts of disastrous, unexpected effects on markets?
Remember what happened with the housing market back in 2004 when former Fed chief Alan Greenspan began his “baby-steps” campaign? Well, just think how emboldened commodity traders will become when that first quarter-point rate hike comes and the price of oil doesn’t drop as expected.
Does anyone really think that interest rates are going to be moving up during an election year with job losses already totaling 324,000 through just five months with what will likely be a massive downward revision to that total before November?
Dallas Fed head Richard ” eighth inning ” Fisher was talking yesterday like he was a cowboy about to go “round up” inflation with a big lasso.
According to this report from Bloomberg, it’s not so much if or when, but how much and how fast rates will be raised.
Any move to increase interest rates to counter rising inflation pressures should be “very deliberate” and gradual, Federal Reserve Bank of Dallas President Richard Fisher said.“We need to proceed in a very deliberate manner and I expect us to do so,” Fisher said in a speech today in New York. Fisher said he disagreed with the idea that “we could move less than gradually if the forces of inflation were threatening.”
The Dallas Fed chief is the only member of the Federal Open Market Committee to dissent three times this year from decisions to lower the overnight bank-lending rate, favoring either no change or less aggressive reduction. Chairman Ben S. Bernanke yesterday said policy makers will “strongly resist” any surge in inflation expectations, delivering his clearest message yet that the central bank is done lowering interest rates.
“You don’t want central banks with trigger fingers,” Fisher said to the Council on Foreign Relations. “One would expect gradualism.”
And you don’t want Fed Bank Presidents who imply something that the central bank can’t deliver - after a while of talking and not delivering, people start to catch on.
It looks like we’re in for months and months of “silly interest rate talk”, a phrase that, if memory serves, Chuck Butler at Everbank coined a few years back.
If they really wanted to do something about rising prices and the plunging dollar, they’d take rates back up to at least four percent - the “official” rate of inflation. And if they were really serious about it, they’d take rates up to five percent, six percent, or more - closer to the “actual” rate of inflation.
But there’s that little problems of jobs to deal with.
Now, admittedly, no one really thinks that the Bernanke Fed will wait as long as the Greenspan Fed waited to start raising interest rates back in the summer of 2004 - there was a whole year of job growth back then before short-term rates began rising and they were talking about “deflation” when home prices were rising by more than 20 percent a year in parts of the country.
Ahhh… memories…
That’s actually very ironic - today we’re talking about in-flation while home prices are dropping by more than 20 percent a year in parts of the country.
Is there some imminent reversal in the employment picture that Richard Fisher knows about that will make the current downturn the briefest of all economic slowdowns following the bursting of the biggest financial bubble in the history of the planet?
Yeah, that sounds >like< a plan.
Should I install a solar energy system using a home equity loan, even when rates are at 8.25%?
Q. What is your take on upgrading your house to include solar energy and taking the money out of the equity of your home even when rates are at 8.25%. They may not rise before summer, but do you see them rising after that?
A. It’s often hard to determine whether solar heating or electrical systems will save much if any money in the long run. You not only have to consider the cost of buying, installing, maintaining and financing the equipment, but the price of natural gas and electricity over the next decade as well. That is very difficult to forecast. But most homeowners who install solar systems seem to be happy with their decision. Even if they don’t save a lot of money, they have the satisfaction of knowing they did something good for the environment. How do you put a dollar figure on that?
But if you’re going to do it, you should do it now because you should qualify for some generous tax credits that are only available this year. Whether you’re installing photovoltaic panels that turn sunlight into electricity or a water heating system, you’ll receive a tax credit for 30% the cost of the system, up to a maximum of $2,000. Each project must meet specific criteria and the work must be completed by 2007. Your contractor should know the details. (You can also get tax credits for other improvements, such as new windows, air conditioning units and water heaters.)
As far as where the prime rate will go this year, the best guess is that it should stay at 8.25% at least until August. What the Federal Reserve decides to do after that will depend on the economic data we see over the next six months. If you decide to go with a home equity loan to finance your project, be sure and shop around. Some banks, particularly smaller ones, are offering rates that are 0.5% or even 1.0% below prime. You can find the best deals on our comparison charts of home equity rates.
Another option would be a cash-out refinancing. This is where you refinance your primary mortgage for more than your current balance and use the extra cash to pay for your solar project. With home equity rates so high, that has become a very popular way to get money for home improvements and to pay off credit card debt, because average mortgage rates are still below 6.5%. If you’re paying more than 7% on your current mortgage, or you have an adjustable rate loan that’s poised to go that high, this could be a less expensive way to go.
By: http://home-equity.interest.com
Protect Yourself From Home Equity Loan Scams
It’s become almost instinctive these days for some people to rush to tap into the equity in their homes when they find themselves in need of cash. That’s because of the growing awareness that home is where the money is. However, it pays to stay alert as you pursue funding, since your budget will be affected for years to come.
There are a wide variety of home equity loan scams out there. Whether you’re planning to tap your equity through a home improvement loan, a home equity loan, or a home equity line of credit (HELOC), here are some tips to keep you out of trouble.
No rose-colored glasses: Don’t be dazzled by dollar signs. Make sure that you’ve considered all the costs and conditions of any loan before signing on the dotted line. Since your intention is to solve a short-term problem with a long-term solution, consider whether the loan you choose makes sense over the long haul.
Don’t succumb to pressure: Avoid being bullied into accepting home mortgage products that you don’t want, such as credit insurance. Shop around for the extras that you do want before allowing them to be rolled into your loan. They may be cheaper somewhere else. If you can’t reasonably handle the monthly payments or the loan costs, reject the offer. Follow your gut instinct-it’s probably right!
Watch what you sign: Read everything carefully before you sign anything, and make sure that you understand it. Don’t put your John Hancock on anything that has blank spaces that could be filled in later.
Don’t deed your property: If you think that you should deed your property over to another party for any reason whatsoever, consult with an attorney first.
Even if you’re desperate, act like you’re not. Take your time, stay on your toes, and make a good decision. You’ll need to live with it for a very long time. And you’d like to live with it inside your own home, not on the street because you inadvertently lost it.