Fixed mortgage rates end year just under 4 percent
Diane Alter – AHN News Reporter
Washington DC, United States (AHN) – Average fixed mortgage rates in the United States end 2011 near all-time record lows. The 30-year fixed home loan exits the year at 3.95 percent.
According to Freddie Mac, the rate for a 30-year fixed rate mortgage has stayed at or below 4 percent for nine consecutive weeks. It averaged above 5 percent just twice in 2011.
For the week ending Dec. 29, the 30-year fixed mortgage averaged 3.95 percent, up from 3.91 percent the prior week, and below 4.86 percent in the same period a year ago.
Rates on 15-year fixed mortgages averaged 3.24 percent, up from last week’s 3.21 percent, and below 4.20 percent a year ago.
Mortgage rates hit historic lows in 2011, but did little to help the ailing housing market, which is set to close out 2011 as the worst on record for new home sales.
Tight credit, stringent credit standards, and uncertainty about the economy kept many Americans from taking advantage of the never before seen, record low, mortgage rates.
Israel faces housing bubble – or bust, OECD warns
The Media Line Staff
Jerusalem, Israel David Rosenberg (The Medi – Home prices – an anxious subject for both Israeli consumers and policy makers as they first raced higher and then suddenly started to sink – remain a threat to the economy, the Organization for Economic Cooperation and Development (OECD) warned on Monday.
Although the price rises have eased as the government has clamped down on mortgage lending, Israel is by no means out of the hole yet, the Paris-based organization said in a report. Israel faces a twin risk of prices spiraling upward to bubble levels, if current measures don’t bring about long-term stability, or conversely dropping sharply.
“There is still a risk that a soft landing may not be achieved and house prices (and loan repayments) in relation to rents and incomes may reach ‘bubble’ proportions, heightening the risk of a sharp and damaging correction,” the OECD said. “On the other hand, the early stages of weakness may presage an imminent sharper-than-desired decline in prices.”
The warning has special meaning for Israel, which unlike the U.S. and much of Europe, succeeded in avoiding the catastrophic collapse of its housing market and the financial crisis that followed. But ironically the country’s record of almost uninterrupted economic growth, combined with low borrowing rates, caused home prices to start climbing in Israel just as much of the developed world was seeing prices fall at double-digit rates.
The increase caused the Bank of Israel to undertake a series of measures to reduce demand for mortgages at the same time it was raising interest rates through much of 2010 and 2011.
“There’s a lot of concern that there will be crash. Prices are heading down – the only question is how fast and how far,” Pinchas Landau, an independent financial consultant, told The Media Line.
“For first time in 15 years, there’s more supply than demand. There isn’t massive building. You have a multi-year backlog, but it’s not American situation,” he said. “There could be widespread pain, but if prices come down 20 percent I don’t think that’s a crash. You have to look at how much they went up before.”
Home prices in the 12 months through September climbed 10.5 percent and the central bank has reversed course and lowered its base lending rate in the past two months, a move that could encourage more home loans. Nevertheless, there are signs that they may have reached a plateau.
The rise over the past 12 months is far less steep than the 20 percent recorded in 2010 and August-September prices dropped for the first time since 2008, according to Israel’s Central Bureau of Statistics (CBS).
Meanwhile, residential construction is increasing while sales of new homes are falling. The number of building starts in the 12 months through August reached 43,672 units, compared with annual rates of less than 35,000 up through 2009. But only 1,057 new homes were sold in October 2011, down by more than 50 percent from a year ago, the CBS reported at the end of November.
A survey of senior real estate executives in Israel conducted by the accounting firm Deloitte Brightman Almagor Zohar in November found that 46 percent expected home prices to decline as much as 10 percent in the coming 12 months and another 9 percent saw drops of 10-20 percent. Fifteen percent, however, foresee rises of up to 10 percent.
The OECD said that warning indicators, such as the ratio of home prices to rents had not reached “critical levels” and lauded the measures taken by Israel to restrain the rises. But it did recommend that the government, which controls the lion’s share of land in the country through its Israel Lands Authority, speed up the sale of leaseholds, reduce delays in planning approvals and work to develop a market in mortgage-backed securities “with a good deal of caution.”
It said tax exemptions for homeowners and property investors should be pared back and housing policy geared more toward encouraging more rental housing and helping low-income families.
In spite of growing signs of recession in Europe, which is Israel’s biggest trade partner, Israeli gross domestic product will likely post another year of growth in 2012, the OECD said. Real GDP growth will shift down to 2.9 percent in 2012 from 4.7 percent this year, but accelerate to 3.9 percent in 2013.
“This is substantially better than in many OECD countries, but Israel benefits from relatively rapid population growth,” OECD economist Peter Jarrett said Sunday while visiting Israel for the Globes Business Conference in Tel Aviv. “Europe is leading the world into another period of very slow growth, if not outright recession.”
The report addressed two other issues that have dominated economic policy in the past year amid a gathering storm of social protests over the high cost of living and growing income inequality. The protests began quietly against hikes in gasoline prices, morphed into a nationwide boycott of cottage cheese and erupted over the summer into tent cities and mass rallies that drew hundreds of thousands demanding a wide range of economic reforms.
The government responded by appointing a committee to examine socio-economic policy and has since adopted some of the recommendations of the so-called Trajtenberg panel.
The OECD said that Israel’s “deep socio-economic cleavages,” expressed in high rates of poverty and income inequality, is weighing down on the economy by lowering growth rates for productivity and per capita income. Although the problem is concentrated in Israel’s ultra-Orthodox and Arab populations – which account for 60 percent of poor households, double their proportion of the population – they are not the only Israelis trapped in poverty.
The report noted some progress in overhauling education, where Israeli students have performed poorly in international comparisons of achievement in science, math and reading. But the OECD faulted efforts to encourage people to join the workforce, pointing to the abandonment of the Wisconsin program, which had put the responsibility job placement in the hands of private sector firms.
The OECD was also supportive of efforts to increase business competition and restrict the size and power of holding companies. It backed plans to separate financial institutions, such as banks and insurers, from other businesses, while faulting the government for the slow progress toward creating competition in electricity generation.
The OECD said the scope for increasing competition in other industries is limited due to the small size of the Israeli economy.
Fixed mortgage rates stay low
Diane Alter – AHN News Reporter
New York, NY, United States (AHN) – The average rate on the 30-year fixed mortgage stayed near its record low for the sixth consecutive week. But, the historically low rates have done little to goose the ailing housing market.
On Thursday, mortgage giant Freddie Mac said the rate on the 30-year home loan edged down to 3.99 percent from 4 percent the previous week. It dropped to a record low of 3.94 nine weeks ago, according to data from the National Bureau of Economic Research.
The average rate on the 15-year fixed mortgage ticked down to 3.27 percent from 3.30 percent. It also hit a record low nine weeks earlier when it fell to 3.26 percent.
For all of but two weeks in 2011, rates have been below 5 percent. Yet this year may turn out to be the worst for home sales in 14 years.
The record low rates have not helped homes sales. Sales of previously owned homes are just a hair ahead on last year’s figures, which were the worst in 13 years. In addition, new homes sales appear to be headed for their worst year on records dating back 50 years.
High unemployment and tight bank lending standards have made it much harder for potential home owners to qualify for loans. Also, many Americans are reluctant to pour money into homes that could lose value over the next several years.
Senate Subcommittee Grills CPSC on Drywall
ProPublica Staff
Washington, DC, United States (ProPublica) – by Joaquin Sapien
At a hearing in Washington yesterday, lawmakers pressed product safety and health regulators about their three-year investigation into contaminated drywall, expressing frustration with their progress on all fronts.
Defective drywall, most of it imported from China, releases sulfur gas that can corrode electric wiring and trigger respiratory irritation. An investigation published last year by ProPublica and the Sarasota Herald-Tribune showed there are nearly 7,000 homes built with bad drywall nationwide, but enough material was imported to build at least 100,000 homes.
Witnesses at yesterday’s Senate Commerce subcommittee hearing addressed several questions raised by our coverage, including the still-unknown health effects of sulfur gas exposure, the conflicting government guidelines on how to fix homes built with defective material, the challenges of holding Chinese companies accountable, and whether American-made drywall could also be problematic.
Sen. Mark Warner, D-Va., whose state has at least 400 homes affected by bad board, called the drywall problem one of the most frustrating he’s dealt with in more than 20 years in politics.
Brenda Brincku, a Florida homeowner who has sought relief for problems caused by drywall since 2004, said in written testimony that “the federal agencies working on this problem for over four years have failed us.”
The Consumer Product Safety Commission is leading the federal investigation into drywall. Neal Cohen, the commission’s small business ombudsman, defended the agency’s efforts, but acknowledged that progress has been stunted by a lack of cooperation from Chinese government-owned companies.
The subcommitee’s primary concern was the potential health effects of defective drywall. The Centers for Disease Control and the CPSC maintain that levels of sulfur compounds inside affected homes aren’t high enough to cause long-term health problems, but panel members said they found that hard to believe. Exposure to the sulfur gasses for even short periods can cause coughing, severe headaches and bloody noses. Warner said he had visited a home built with defective board staying just 45 minutes, and felt sick for the rest of the day.
The hearing’s most contentious moment came when Warner asked the Centers for Disease Control representative, Dr. Christopher Portier, “Would you allow your family to live in one of these homes?”
Portier paused before answering, “Probably not.”
Portier said the CDC is working to create a model of indoor air levels of sulfur gas emitted by defective drywall that would allow it to calculate health risks. Results from the study are expected in spring 2012.
Homeowners saddled with bad drywall have long complained that regulators keep changing the instructions for how to fix it. The CPSC first advised homeowners that all electrical wiring should be removed because of fire safety concerns then reversed its position, saying the wiring didn’t necessarily need to be taken out.
Cohen said that all of the CPSC’s decisions were supported by “a high caliber of science.” Still, the commission’s guidelines conflict with those issued last year by U.S. District Court Judge Eldon E. Fallon, who is presiding over drywall litigation in federal court in New Orleans, as well as those issued by Virginia’s housing department.
The Virginia guidelines say that wiring should be left in place, but corroded and exposed surfaces should be cleaned. Virginia housing department director William Shelton, who testified at the hearing, said that it would cost $35 to $50 per square foot to fix a home using this method.
The majority of homeowners interviewed by ProPublica and the Sarasota Herald-Tribune said they couldn’t afford to fix their homes. They’ve sought assistance from state and federal programs, but those options are limited because of the current fiscal environment. As a result, some homeowners with defective drywall have defaulted on their mortgages, gone into debt and endured blows to their credit.
Subcommittee members discussed pressing insurers to pay for drywall damage and asking credit-rating agencies not to penalize people affected by such problems. Freddie Mac is offering loan forbearance to affected homeowners.
Unlike most homeowners who have complained about corrosion and health problems from drywall, Brincku lives in a home built with board made in America, not China.
But as ProPublica and the Sarasota Herald-Tribune reported last year, Brincku has experienced the same problems as homeowners who had defective Chinese material.
National Gypsum, which produced the drywall in the Brincku home, contends that nothing is wrong with their material.
The CPSC studied 11 homes that homeowners said were built with American drywall, determining that five exhibited problems and levels of sulfur compounds similar to those built with Chinese drywall. But since the agency did not check for origin labels on the drywall samples, its findings were inconclusive. The CPSC has said that such labels often don’t exist anyway.
Pressed by Sen. Roger Wicker, R-Miss., Cohen said the CPSC had received more than 70 complaints about domestic drywall, but said it would be impossible to confirm the origins of the board “without ripping out every piece of drywall from a home.”
The subcommittee was eager to learn about the CPSC’s latest correspondence with the Chinese government, which owns many of the companies that produced the defective drywall.
Two years ago, a delegation of CPSC inspectors visited drywall factories and gypsum mines in China. The visit became so tense that an American inspector got into a physical tug-of-war with a Chinese official over a drywall sample.
Relations don’t seem to have improved much since then.
“To date there has been no response from the Chinese manufacturers,” Cohen said at yesterday’s hearing. “They are basically telling us, ‘return to sender’ and that they don’t believe there is a problem with their drywall.”
The CPSC is urging homeowners to seek relief in the courts. Plaintiff’s attorneys are currently trying to get the Chinese to cooperate in legal proceedings taking place in New Orleans federal court.
Several committee members cited the need to pass the Foreign Manufacturers Legal Accountability Act, which would require overseas manufacturers to register an agent in the U.S., to make it easier for U.S. attorneys to file civil and regulatory claims against foreign companies..
“This is a textbook case for why it’s critical that we should be able to reach these Chinese companies,” said Sen. Mark Pryor, D-Ark., who chaired the subcommittee hearing. “One of the basic starting points on this is that Chinese manufacturers should have to register, just like domestic corporations, and European corporations, for service and process.”
– Provided by ProPublica.org
Half of Americans suffering while rich prosper
Yonkers, NY, United States (AHN) – The saying “the rich get richer and the poor get poorer,” is seemingly true based on a two-year study of the groups. For American households earning less than $50,000 per year, it has been far more difficult on the economic road to recovery than their more affluent counterparts.
For more affluent households, those earning $100,000 or more, economic recovery began as far back as February 2010—when the Consumer Reports Sentiment Index score for this group moved into positive territory (above 50). In that time, sentiment among this affluent group, which represents 18 percent of Americans, has continued to rise and has reached a two-year high of 54.8.
However in the same period, sentiment levels of households earning less than $50,000 bottomed out in October of 2009. Since then, sentiment has barely risen among this group that represents 50 percent of the U.S. population.
“We are seeing a tale of two very different recoveries,” said Ed Farrell, a director of Survey Research at the Consumer Reports National Research Center. “While things have been improving for the wealthiest Americans for some time, lower-income families still have very little to be positive about.”
Analysts believe the disparity in sentiment levels could be attributed to the fact that lower-income households have suffered more pronounced and frequent financial troubles throughout the last two years.
Estimates place the financial suffering among lower-income Americans as being three to five times the level of those earning $100,000 or more over the course of the recession.
One of the biggest areas of disparity between the two groups is in their ability to afford medical coverage and prescription medication. The percentages of home ownership is a clear predictor of the two groups. Ninety percent of affluent households claim to own a home while only half of the lower income group can say the same.
Even now, missed mortgage payments among households earning less than $50,000 have soared, and are approaching 9 percent in June. Among the more affluent Americans, missed mortgage payment claims are below 2 percent and falling.
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Home loans soar as flood areas recover
AUSTRALIA’S stagnating property market is showing signs of improving, with an unexpected rise in home loan approvals.
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