Building edged up in March
The Commerce Department said yesterday that construction spending
ticked up 0.1 per cent. The small March gain left construction
spending at a seasonally adjusted annual rate of $808.1 billion.
That's 6 per cent above a 12-year low of $762.6 billion hit last
March. Still, the level of spending is roughly half of what
economists consider to be healthy. "The weakness in construction
spending in March was entirely in public spending," said John
Ryding, an analyst at RDQ Economics, in a note to clients.
Still, even with the increase in private construction spending,
the trend over the last three months is weak, Ryding noted. "We
look for some gradual improvement in private construction
spending in 2012, but structures investment is not a material
factor in our growth forecast for this year," he said.
Government construction activity fell 1.1 per cent to the slowest
pace since February 2007, the report said. Spending by state and
local governments dropped to the weakest level since November
2006, while spending by the federal government rose 3.8 per cent
to a rate of $28.9 billion. Spending on private nonresidential
projects rose 0.7 per cent. Work on office buildings, hotels and
transportation projects rose. Spending in the category that
includes shopping centres fell. Private residential activity
rose 0.7 per cent. The increase was driven by more construction
of single-family homes. Even with the gains, home construction
continues to slump five years after the housing bubble burst.
Sales of new homes fell 7.1 per cent in March, the largest
decline in more than a year. Though new-home sales represent
less than 10 per cent of the housing market, they have an outsize
impact on the economy. Each home built creates an average of
three jobs for a year and generates about $90,000 in tax revenue,
according to the National Association of Home Builders. Business
spending on construction projects, such as office buildings and
shopping centres, is also sluggish. The government reported last
week that it fell in the January-March quarter, the second
consecutive quarterly decline. The economy grew at an annual
rate of 2.2 per cent in first quarter. Stronger consumer spending
offset slower business investment and less growth in government
spending. Economists expect construction spending to remain
sluggish this year. Tighter credit could keep businesses from
receiving loans for building projects. And lawmakers are likely
to keep pressure on government spending, which could hamper
public works projects.
Private sector employment sluggish
Private-sector employment increased by just 119,000 in April,
according a report from ADP that puts a dent into the notion that
the jobs market is on the path to a solid recovery. The report
was well below forecasts of 170,000 and comes after a string of
stronger numbers. ADP said service-sector jobs rose by 123,000,
but construction fell by 5,000, falling for the first time since
September 2011. Manufacturing also lost 5,000, while
goods-producing dropped 4,000. Financial services added 13,000
jobs. Employment additions again were strongest in small
businesses, which added 58,000 positions, and weakest in big
business, which saw a net of just 4,000 new jobs. The March
number was revised downward from 209,000 to 201,000, according to
the report, which is done in conjunction with Macroeconomic
Advisors.
MBA - mortgage applications up
Mortgage applications increased 0.1% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending April 27,
2012. The Market Composite Index, a measure of mortgage loan
application volume, increased 0.1% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index
increased 0.4% compared with the previous week. The Refinance
Index decreased 0.7% from the previous week. The seasonally
adjusted Purchase Index increased 2.9% from one week earlier. The
unadjusted Purchase Index increased 3.7% compared with the
previous week and was 3.0% higher than the same week one year
ago. The four week moving average for the seasonally adjusted
Market Index is up 0.09%. The four week moving average is down
1.77% for the seasonally adjusted Purchase Index, while this
average is up 0.75% for the Refinance Index. The refinance share
of mortgage activity decreased to 72.6% of total applications
from 73.4% the previous week. The government share of purchase
applications remained steady at 37.0%, a slight increase from a
couple of weeks ago when the share was 36.4%. The government
share of purchase applications over the last three weeks has been
at the lowest level since 2009. During the month of March, the
investor share of applications for home purchase was at 5.7%, a
slight decrease from 6.1% in February. This change was led by a
decline in the West South Central region. In addition, the share
of purchase mortgages for second homes remained constant at
5.8%.
US has to deleverage
The US government will have to follow its citizens and corporates
in deleveraging its balance sheet, Bob Baur, chief global
economist, Principal Global Investors, said today. “It’s no
question that we’re going to see more deleveraging. Households
are in much better shape and companies have improved their
balance sheets dramatically. It’s the government that needs to
deleverage,” he said. He added that some deleveraging had
begun at the state level, but had yet to reach central
government. The US government, which pumped trillions of dollars
into bailouts of the banking and automobile sector and buying
mortgage-backed securities to help lenders Fannie Mae and Freddie
Mac, has more than $15 trillion in debt – the ceiling for
borrowing is set at $16.4 trillion. It is also facing
demographic problems such as an aging population and subsequent
rising Medicare bill, which might handicap the speed at which it
can reduce its debt.
Olick - where are the foreclosures?
"The number of homes entering the foreclosure process rose in
March, up 8.1%, according to a new report from lender Processing
Services, but the volume is down more than 30% from a year ago.
Analysts had expected this number to skyrocket immediately
following the $25 billion settlement between banks and state
governments over fraudulent mortgage servicing. Foreclosures
sales, which are the final stage of the foreclosure process, not
sales of bank-owned homes, dropped precipitously in March to
their lowest point in over two years. They dropped most sharply
— 14% month-to-month — in states where a judge is not
required in the foreclosure process (so-called non-judicial
states). Again, that is contrary to expectations, but could be
yet another stall in the system, as banks try to modify more
loans to meet some of the terms of the servicing settlement. The
foreclosure sales decline also appears to be exclusively in
private and portfolio loans, which again points to the
settlement. That low pace of foreclosure sales is keeping
foreclosure inventory, or loans in the foreclosure process, at
near historic highs, according to LPS. That number may be heading
lower, however, as banks ramp up the short sale process.
Short sales, when the bank allows the home to be sold for less
than the value of the mortgage, are in fact now outpacing sales
of bank-owned homes in many markets, according to a new report
from RealtyTrac. Short sales rose by 15% in the fourth quarter
of 2011 from the previous year, while sales of REO’s
(bank-owned homes) dropped 12%. Short sales outpaced REO sales in
several markets, including Los Angeles, Miami, and Phoenix,
according to RealtyTrac. Georgia, where foreclosure inventories
are surging, saw a 113% jump in short sales. The process, once
avoided widely due to its lengthy lag time, is already speeding
up, and Fannie Mae and Freddie Mac both recently announced new
guidelines to reduce short sale timelines. 'Lenders are
increasingly recognizing that short sales may be a better
alternative for them than foreclosure,' notes RealtyTrac’s
Daren Blomquist. 'This trend began in markets with stronger
demand and where the distressed inventory tends to be newer homes
(Phoenix, Los Angeles, Las Vegas), but the trend appears to be
spreading to other markets like Atlanta and Detroit.' Look for a
special report on the Atlanta housing market on CNBC and CNBC.com
Thursday."
People renouncing US citizenship to escape taxes
About 1,780 expatriates gave up their nationality at US embassies
last year, up from 235 in 2008, according to Andy Sundberg,
secretary of Geneva's Overseas American Academy, citing figures
from the government's Federal Register. The embassy in Bern, the
Swiss capital, redeployed staff to clear a backlog as Americans
queued to relinquish their passports. The US, the only nation in
the Organization for Economic Cooperation and Development that
taxes citizens wherever they reside, is searching for tax cheats
in offshore centers, including Switzerland, as the government
tries to curb the budget deficit. Shunned by Swiss and German
banks and facing tougher asset-disclosure rules under the Foreign
Account Tax Compliance Act, more of the estimated 6 million
Americans living overseas are weighing the cost of holding a US
passport. Renunciations are higher in Switzerland because
American expatriates expect extra scrutiny of their affairs after
the UBS case and as the US probes 11 other Swiss financial firms
for aiding offshore tax evasion, said Martin Naville, head of the
Swiss-American Chamber of Commerce in Zurich.
"Every dollar you save, you lose to the US tax man," said tax
lawyer Ledvina. "That's one reason why people give up
citizenship." The 2010 Fatca law requires banks to withhold 30%
from "certain US-connected payments" to some accounts of American
clients who don't disclose enough information to the IRS. "There
is incredible frustration at the audacity and imperial overreach
of this law," said David Kuenzi, a tax adviser at Thun Financial
Advisors in Madison, Wisconsin, referring to Fatca. Failure to
file the 8938 form can result in a fine of as much as $50,000.
Clients can also be penalized half the amount in an undeclared
foreign bank account under the Banks Secrecy Act of 1970. "It's
a big brother concept," said Brent Lipschultz, a partner at New
York-based accounting firm EisnerAmper. The implementation of
Fatca from next year comes after UBS, Switzerland's largest bank,
paid a $780 million penalty in 2009 and handed over data on about
4,700 accounts to settle a tax- evasion dispute with the US
Whistle-blower Birkenfeld was sentenced to 40 months in a US
prison in 2009 after informing the government and Senate about
his American clients at the Geneva branch of Zurich-based UBS.
Pushback against ideology in principal reduction debate
Federal Housing Finance Agency (FHFA) Acting Director Edward
DeMarco pushed back against Democratic lawmakers yesterday,
claiming the agency decision on principal reduction will be based
on analytics not ideology. Reps. Elijah Cummings, D-Md., and
John Tierney, D-Mass., sent a letter earlier in the morning to
DeMarco. They pointed to internal documents at Fannie Mae showing
the government-sponsored enterprise and its regulator approved
but then quickly closed a pilot principal forgiveness program in
2010 that could have saved the firm $410 million. DeMarco
expressed disappointment in the letter and said since 2009, the
FHFA approved multiple pilot programs for principal forgiveness,
but the approvals did not indicate a "pre-determined view."
"The fact that FHFA continues to consider principal-forgiveness
alternatives, including recent HAMP program changes initiated by
the Treasury Department, belies any ideological tilt on our part,
but rather a strict analytical-based approach to gathering and
evaluating data to determine what options best fit within the
legal constraints that fall upon this agency as conservator for
the enterprises," DeMarco said in the letter. DeMarco said while
many pilot programs were developed, "there was not full agreement
to proceed at the enterprises or their counterparties," which in
this instance was Citigroup. The pilot program in question
involves 1,200 mortgages originated by Citi for shared
appreciation and 1,000 Fannie-guaranteed loans for principal
forgiveness, according to the internal documents reviewed by
HousingWire. The program would have been partly rolled out in the
second quarter of 2011, according to several of the internal
emails.
In an early April speech, DeMarco showed preliminary FHFA
analysis on new principal-reduction incentives. The expanded HAMP
effort could save Fannie and Freddie Mac $1.7 billion but would
cost taxpayers a net $2.8 billion. He also outlined how principal
forbearance was a substitute for a shared-appreciation program.
The FHFA delayed its decision on approving the GSEs to do
principal reductions, but DeMarco said in the letter that this is
a decision meant for Congress. "Such a policy question,
especially as it has to do with public funds being taken from one
group of citizens to provide a benefit to another group of
citizens, should be determined by Congress," DeMarco wrote. "In
the absence of clear legislative direction, however, FHFA will
continue to make determinations in how best to accomplish both of
these goals after careful analysis of the facts and other
information available to us and the multiple legal
responsibilities placed upon us."
The Commerce Department said yesterday that construction spending
ticked up 0.1 per cent. The small March gain left construction
spending at a seasonally adjusted annual rate of $808.1 billion.
That's 6 per cent above a 12-year low of $762.6 billion hit last
March. Still, the level of spending is roughly half of what
economists consider to be healthy. "The weakness in construction
spending in March was entirely in public spending," said John
Ryding, an analyst at RDQ Economics, in a note to clients.
Still, even with the increase in private construction spending,
the trend over the last three months is weak, Ryding noted. "We
look for some gradual improvement in private construction
spending in 2012, but structures investment is not a material
factor in our growth forecast for this year," he said.
Government construction activity fell 1.1 per cent to the slowest
pace since February 2007, the report said. Spending by state and
local governments dropped to the weakest level since November
2006, while spending by the federal government rose 3.8 per cent
to a rate of $28.9 billion. Spending on private nonresidential
projects rose 0.7 per cent. Work on office buildings, hotels and
transportation projects rose. Spending in the category that
includes shopping centres fell. Private residential activity
rose 0.7 per cent. The increase was driven by more construction
of single-family homes. Even with the gains, home construction
continues to slump five years after the housing bubble burst.
Sales of new homes fell 7.1 per cent in March, the largest
decline in more than a year. Though new-home sales represent
less than 10 per cent of the housing market, they have an outsize
impact on the economy. Each home built creates an average of
three jobs for a year and generates about $90,000 in tax revenue,
according to the National Association of Home Builders. Business
spending on construction projects, such as office buildings and
shopping centres, is also sluggish. The government reported last
week that it fell in the January-March quarter, the second
consecutive quarterly decline. The economy grew at an annual
rate of 2.2 per cent in first quarter. Stronger consumer spending
offset slower business investment and less growth in government
spending. Economists expect construction spending to remain
sluggish this year. Tighter credit could keep businesses from
receiving loans for building projects. And lawmakers are likely
to keep pressure on government spending, which could hamper
public works projects.
Private sector employment sluggish
Private-sector employment increased by just 119,000 in April,
according a report from ADP that puts a dent into the notion that
the jobs market is on the path to a solid recovery. The report
was well below forecasts of 170,000 and comes after a string of
stronger numbers. ADP said service-sector jobs rose by 123,000,
but construction fell by 5,000, falling for the first time since
September 2011. Manufacturing also lost 5,000, while
goods-producing dropped 4,000. Financial services added 13,000
jobs. Employment additions again were strongest in small
businesses, which added 58,000 positions, and weakest in big
business, which saw a net of just 4,000 new jobs. The March
number was revised downward from 209,000 to 201,000, according to
the report, which is done in conjunction with Macroeconomic
Advisors.
MBA - mortgage applications up
Mortgage applications increased 0.1% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending April 27,
2012. The Market Composite Index, a measure of mortgage loan
application volume, increased 0.1% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index
increased 0.4% compared with the previous week. The Refinance
Index decreased 0.7% from the previous week. The seasonally
adjusted Purchase Index increased 2.9% from one week earlier. The
unadjusted Purchase Index increased 3.7% compared with the
previous week and was 3.0% higher than the same week one year
ago. The four week moving average for the seasonally adjusted
Market Index is up 0.09%. The four week moving average is down
1.77% for the seasonally adjusted Purchase Index, while this
average is up 0.75% for the Refinance Index. The refinance share
of mortgage activity decreased to 72.6% of total applications
from 73.4% the previous week. The government share of purchase
applications remained steady at 37.0%, a slight increase from a
couple of weeks ago when the share was 36.4%. The government
share of purchase applications over the last three weeks has been
at the lowest level since 2009. During the month of March, the
investor share of applications for home purchase was at 5.7%, a
slight decrease from 6.1% in February. This change was led by a
decline in the West South Central region. In addition, the share
of purchase mortgages for second homes remained constant at
5.8%.
US has to deleverage
The US government will have to follow its citizens and corporates
in deleveraging its balance sheet, Bob Baur, chief global
economist, Principal Global Investors, said today. “It’s no
question that we’re going to see more deleveraging. Households
are in much better shape and companies have improved their
balance sheets dramatically. It’s the government that needs to
deleverage,” he said. He added that some deleveraging had
begun at the state level, but had yet to reach central
government. The US government, which pumped trillions of dollars
into bailouts of the banking and automobile sector and buying
mortgage-backed securities to help lenders Fannie Mae and Freddie
Mac, has more than $15 trillion in debt – the ceiling for
borrowing is set at $16.4 trillion. It is also facing
demographic problems such as an aging population and subsequent
rising Medicare bill, which might handicap the speed at which it
can reduce its debt.
Olick - where are the foreclosures?
"The number of homes entering the foreclosure process rose in
March, up 8.1%, according to a new report from lender Processing
Services, but the volume is down more than 30% from a year ago.
Analysts had expected this number to skyrocket immediately
following the $25 billion settlement between banks and state
governments over fraudulent mortgage servicing. Foreclosures
sales, which are the final stage of the foreclosure process, not
sales of bank-owned homes, dropped precipitously in March to
their lowest point in over two years. They dropped most sharply
— 14% month-to-month — in states where a judge is not
required in the foreclosure process (so-called non-judicial
states). Again, that is contrary to expectations, but could be
yet another stall in the system, as banks try to modify more
loans to meet some of the terms of the servicing settlement. The
foreclosure sales decline also appears to be exclusively in
private and portfolio loans, which again points to the
settlement. That low pace of foreclosure sales is keeping
foreclosure inventory, or loans in the foreclosure process, at
near historic highs, according to LPS. That number may be heading
lower, however, as banks ramp up the short sale process.
Short sales, when the bank allows the home to be sold for less
than the value of the mortgage, are in fact now outpacing sales
of bank-owned homes in many markets, according to a new report
from RealtyTrac. Short sales rose by 15% in the fourth quarter
of 2011 from the previous year, while sales of REO’s
(bank-owned homes) dropped 12%. Short sales outpaced REO sales in
several markets, including Los Angeles, Miami, and Phoenix,
according to RealtyTrac. Georgia, where foreclosure inventories
are surging, saw a 113% jump in short sales. The process, once
avoided widely due to its lengthy lag time, is already speeding
up, and Fannie Mae and Freddie Mac both recently announced new
guidelines to reduce short sale timelines. 'Lenders are
increasingly recognizing that short sales may be a better
alternative for them than foreclosure,' notes RealtyTrac’s
Daren Blomquist. 'This trend began in markets with stronger
demand and where the distressed inventory tends to be newer homes
(Phoenix, Los Angeles, Las Vegas), but the trend appears to be
spreading to other markets like Atlanta and Detroit.' Look for a
special report on the Atlanta housing market on CNBC and CNBC.com
Thursday."
People renouncing US citizenship to escape taxes
About 1,780 expatriates gave up their nationality at US embassies
last year, up from 235 in 2008, according to Andy Sundberg,
secretary of Geneva's Overseas American Academy, citing figures
from the government's Federal Register. The embassy in Bern, the
Swiss capital, redeployed staff to clear a backlog as Americans
queued to relinquish their passports. The US, the only nation in
the Organization for Economic Cooperation and Development that
taxes citizens wherever they reside, is searching for tax cheats
in offshore centers, including Switzerland, as the government
tries to curb the budget deficit. Shunned by Swiss and German
banks and facing tougher asset-disclosure rules under the Foreign
Account Tax Compliance Act, more of the estimated 6 million
Americans living overseas are weighing the cost of holding a US
passport. Renunciations are higher in Switzerland because
American expatriates expect extra scrutiny of their affairs after
the UBS case and as the US probes 11 other Swiss financial firms
for aiding offshore tax evasion, said Martin Naville, head of the
Swiss-American Chamber of Commerce in Zurich.
"Every dollar you save, you lose to the US tax man," said tax
lawyer Ledvina. "That's one reason why people give up
citizenship." The 2010 Fatca law requires banks to withhold 30%
from "certain US-connected payments" to some accounts of American
clients who don't disclose enough information to the IRS. "There
is incredible frustration at the audacity and imperial overreach
of this law," said David Kuenzi, a tax adviser at Thun Financial
Advisors in Madison, Wisconsin, referring to Fatca. Failure to
file the 8938 form can result in a fine of as much as $50,000.
Clients can also be penalized half the amount in an undeclared
foreign bank account under the Banks Secrecy Act of 1970. "It's
a big brother concept," said Brent Lipschultz, a partner at New
York-based accounting firm EisnerAmper. The implementation of
Fatca from next year comes after UBS, Switzerland's largest bank,
paid a $780 million penalty in 2009 and handed over data on about
4,700 accounts to settle a tax- evasion dispute with the US
Whistle-blower Birkenfeld was sentenced to 40 months in a US
prison in 2009 after informing the government and Senate about
his American clients at the Geneva branch of Zurich-based UBS.
Pushback against ideology in principal reduction debate
Federal Housing Finance Agency (FHFA) Acting Director Edward
DeMarco pushed back against Democratic lawmakers yesterday,
claiming the agency decision on principal reduction will be based
on analytics not ideology. Reps. Elijah Cummings, D-Md., and
John Tierney, D-Mass., sent a letter earlier in the morning to
DeMarco. They pointed to internal documents at Fannie Mae showing
the government-sponsored enterprise and its regulator approved
but then quickly closed a pilot principal forgiveness program in
2010 that could have saved the firm $410 million. DeMarco
expressed disappointment in the letter and said since 2009, the
FHFA approved multiple pilot programs for principal forgiveness,
but the approvals did not indicate a "pre-determined view."
"The fact that FHFA continues to consider principal-forgiveness
alternatives, including recent HAMP program changes initiated by
the Treasury Department, belies any ideological tilt on our part,
but rather a strict analytical-based approach to gathering and
evaluating data to determine what options best fit within the
legal constraints that fall upon this agency as conservator for
the enterprises," DeMarco said in the letter. DeMarco said while
many pilot programs were developed, "there was not full agreement
to proceed at the enterprises or their counterparties," which in
this instance was Citigroup. The pilot program in question
involves 1,200 mortgages originated by Citi for shared
appreciation and 1,000 Fannie-guaranteed loans for principal
forgiveness, according to the internal documents reviewed by
HousingWire. The program would have been partly rolled out in the
second quarter of 2011, according to several of the internal
emails.
In an early April speech, DeMarco showed preliminary FHFA
analysis on new principal-reduction incentives. The expanded HAMP
effort could save Fannie and Freddie Mac $1.7 billion but would
cost taxpayers a net $2.8 billion. He also outlined how principal
forbearance was a substitute for a shared-appreciation program.
The FHFA delayed its decision on approving the GSEs to do
principal reductions, but DeMarco said in the letter that this is
a decision meant for Congress. "Such a policy question,
especially as it has to do with public funds being taken from one
group of citizens to provide a benefit to another group of
citizens, should be determined by Congress," DeMarco wrote. "In
the absence of clear legislative direction, however, FHFA will
continue to make determinations in how best to accomplish both of
these goals after careful analysis of the facts and other
information available to us and the multiple legal
responsibilities placed upon us."
No comments:
Post a Comment