Economic Impact of Forclosures and Declining Home Values

Study Warns of Decline
In Value of Homes

By DAMIAN PALETTA
November 27, 2007 5:57 a.m.

WASHINGTON -- The property value of U.S. homes will fall by $1.2 trillion, and "at least" 1.4 million homeowners will lose their properties to foreclosure in 2008, according to a study released Tuesday by the U.S. Conference of Mayors and the Council for the New American City.

The study, prepared by forecasting firm Global Insight Inc., predicts a widespread and deep economic impact from ongoing housing market problems, which many expect to stretch through next year.

Global Insight predicted that the economy would grow at a 1.9% rate in 2008, "a full percentage point lower than would have been the case without the mortgage crisis." It also said U.S. gross domestic product growth would be $166 billion lower next year because of mortgage market problems, and that consumer spending would fall to 2% growth. The study also found that home price declines would average 7% in 2008, though it would be much higher -- 16% -- in California.

Local tax revenue is expected to be hit hard by falling home values. In California, property tax revenues are expected to have fallen by $2.96 billion last year, the study said. In Florida, property taxes revenues could fall by $589 million.

There have already been a record number of homeowners entering the foreclosure process this year, and many have warned the problems will continue through 2008. One major reason for this is subprime adjustable-rate mortgages, many of which began with low teaser rates but grow into much higher monthly requirements after several years. A high concentration of these loans are expected to become more expensive next year, and both the banking industry and government leaders are trying to find ways to address it.

The states where housing prices are expected to fall the most - such as California - are also the same places where housing prices jumped the most during the recent housing boom. Global Insight said the mortgage market's economic impact could be "significantly contained" if investors and loan servicers agree to new payment terms with borrowers struggling to afford monthly payments.

In its study, Global insight predicted the real estate crisis of 2007 and 2008 would "go down on the record books," but said it wouldn't ultimately "bring the economy grinding to a halt."

"Indeed, we expect job growth in 2008 to be 0.85% and GDP growth to be 1.9%," the study said. "In 2009, those figures will be 1.2% and 2.9%, respectively. In the end, the economy will not come off the rails, and we may actually have learned something."

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Asset Management & Business Networking Event (12/01 @10AM)

FYI

Next Saturday 12/01/07 @ 10AM, my broker-dealer firm will host a seminar and business networking event. See the attached flyer for more information.  The seminar will cover two topics:

• How to use Asset Management accounts to improve investment returns and increase retirement income.
• New career opportunities in Asset Management (esp. Account Managers, Branch Office Managers)

Get a quick preview. Take a minute to watch this video [click here] and visit our partner web site [click here].

To RSVP, use the contact information below.

• Call:    718-875-8058
• Email:  thompsonWFG@yahoo.com

See you on Saturday 12/01/07 @ 10AM.

Asset Management Seminar & Business Networking Event
Saturday 12/01/2007 at 10 AM (sharp)
316 FULTON AVENUE, 2nd Fl.
Hempstead, NY 11550
Phone: 516-292-1025 x913 

Victor

917-653-4406

victor7@BizAnalyst.net   |  vsmith@mlgcap.com

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Food Prices Increase Rapidly (Inflation is here!)

More Money for Less Turkey: Price of Meal Increases

The average cost of a Thanksgiving dinner is a little more than $4 per person, according to the American Farm Bureau. (photodisc) The rising costs for auto and airplane travel already has some holiday travelers fretting.

full article

 

The Average Price of a Thanksgiving Dinner Has Increased Since Last Year

Nov. 20, 2007 —

The rising costs for auto and airplane travel already has some holiday travelers fretting. But once people arrive to their Thanksgiving Day destinations and begin to prepare for their dinners, they will find the cost of their turkey day feast has increased, too.

The American Farm Bureau said the average Thanksgiving dinner for 10 will cost $42.26, which is up 11 percent from last year.

Per person, the price of a Thanksgiving meal will cost a little more than $4, according to the bureau.

"That's less than a value meal at almost any fast food restaurant. It remains a tremendous bargain," said Jim Sartwelle, of the American Farm Bureau.

Higher energy costs involved in refrigerating and transporting the large birds and dairy items are the biggest reason for the rising costs.

Judy Inman already has begun to feel the pinch as she plans for a dinner for eight.

"It isn't going to be macaroni and cheese, but we're real close on some things," said the grandmother. "I was really fortunate to be one of the people involved in the price war on turkeys and was able to get one at a very, very reasonable price."

Not everyone has been as lucky as Inman. But there are ways for consumers to save funds on their banquet.

Ways to Save

For example, buyers should consider the size of the turkey they plan to purchase. A smaller bird may be the best bet unless they plan to make good use of their leftovers, according to Maryland Cooperative Extension Service nutrition educator Jodi Balis.

Purchasers also may want to consider buying only a turkey breast instead of the whole bird.

This saves people money because they are avoiding waste, Balis said.

Another way to spend less this year is to use less expensive ingredients. For example, many serve green beans as part of their Thanksgiving meal, but "Good Morning America" found asparagus on sale at a lower price.

Potato prices also are down about 5 percent compared to last year.

"All you really need is just to be flexible with what's on your grocery list," Balis said.

Also, cooking from scratch isn't just a way to spend time and bond with the family; it also can save you money.

Balis said people could make a pumpkin pie a lot cheaper than the $10 dessert "Good Morning America" found at one store.

Utilizing some of these tips may help lower your Thanksgiving Day costs this year.

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New Jobs: Global Asset Management Company

Hi,

I recently met the Executive Vice Chairman for a global asset management company that's hiring new associates.  They will work in the Strategic Sales Group. It would be a good fit for those interested in advanced sales, investment banking or portfolio management. If you know someone that would like to interview for this role, they can send me a copy of their resume. I'll forward it to the right people in the firm.

Take Care

Victor

917-653-4406

victor7@BizAnalyst.net

 

 

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Your New Mortgage Survival Kit

Mortgage Survival Kit
By ALEKSANDRA TODOROVA
November 4, 2007

It's a nightmare for any homeowner: An interest-rate hike pushes your mortgage payments into such costly territory that you fall behind, and soon the foreclosure notice arrives in the mailbox.

So when Countrywide Financial, the nation's largest mortgage lender, recently announced a program aimed at helping cash-strapped homeowners by canceling rate resets or modifying their loans, you could almost hear a collective sigh of relief.

Countrywide estimates it will offer help to 80,000 of its customers. It's likely that others will follow Countrywide's example, but if your mortgage is with another lender, you still may have to negotiate a solution yourself. Here's what you need to do.

Know your mortgage. If you have an adjustable rate mortgage -- any type of ARM -- be sure to call your lender immediately and ask when your interest rate will reset and how often it will change afterward, says Dania Perez, a housing counselor at the Tampa Bay Community Development Corp. in Clearwater, Fla. You should be particularly cautious with the so-called 3/27 or 2/28 ARMs, which carry a fixed rate for the first three or two years, respectively. These are subprime loans that carry high rates to begin with, but also tend to reset every three or six months once the fixed-rate period ends.

Prepare a budget. Once you know when your rate adjusts, figure out how much your payment will increase, says Maria Enomoto, a credit and housing counselor with the Consumer Credit Counseling Service of Ventura County, Calif. Ask your lender for an estimate of your new payment or, at the very least, what your new interest rate will be. You can plug that rate into the SmartMoney.com Mortgage Calculator to get a rough estimate of your payment. If the new payment is beyond your means, look for ways to cut back your spending or increase income.

Talk to your lender. Don't wait to fall behind on your mortgage. Call as soon as things start getting rough, says Ms. Perez. Although the lender might not be able to do anything like Countrywide, it will put a note in your file and may be more willing to help if you do become delinquent. Meanwhile, if you're already in trouble, don't dodge the lender's calls. "It's like telling them you don't care," Ms. Perez says.

Seek help, avoid rip-offs. Many credit-counseling agencies now have housing counselors to help you, free of charge, so don't fall for companies that charge fees. Use an agency that has been approved by the Department of Housing and Urban Development (HUD). You can also call the Homeownership Preservation Foundation (888-995-HOPE), a network ofHUD-approved credit-counseling agencies that offers help nationwide.

Other alternatives. Some homeowners simply won't be able to keep their homes. Your only choice might be to let the house go, says Kate Williams, a vice president at Money Management International, a credit-counseling service. If that's the case, there are options. For example, if you haven't been able to sell your house but think you'll find a buyer at a much lower price, you can ask your lender if it will agree to a short sale. That means it will accept a lump-sum payment lower than the loan outstanding, and consider it paid off.

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Berkshire Profits on Sale of PetroChina Stake

Berkshire Profit Surges 64 Percent on Sale of PetroChina Stake

By Josh P. Hamilton

Nov. 3 (Bloomberg) -- Billionaire investor Warren Buffett's Berkshire Hathaway Inc. said third-quarter profit surged 64 percent as it reaped an eightfold gain on a stake in PetroChina Co.

Net income rose to $4.55 billion as investment gains increased more than tenfold to $1.99 billion after taxes, the Omaha, Nebraska-based company said yesterday in a regulatory filing. Berkshire began selling its 2.34 billion PetroChina shares as oil prices rose to records in the quarter.

Buffett, 77, is investing outside the U.S. to spur growth at his $200 billion investment and holding company as profit from insurance businesses wanes and the dollar weakens. Israel- based subsidiary Iscar Metalworking Cos., acquired for $4 billion last year in Buffett's first purchase of a non-U.S. company, also boosted results. PetroChina rose more than eightfold since Berkshire's $488 million investment in 2003.

``I don't think anybody's ever made much money betting against Warren Buffett and Berkshire Hathaway,'' said Frank Betz, who helps manage $800 million, including Berkshire shares, at Carret Zane Capital Management in Warren, New Jersey. ``His investment in China was the big brass ring that he grabbed in this period.''

Excluding investment gains, Berkshire's profit fell 1.4 percent to $2.56 billion, or $1,655 a share. Gary Ransom, an analyst at Fox-Pitt Kelton Cochran Caronia Waller had forecast $1,477 a share because of the expected drop in insurance earnings, Berkshire's biggest business. Ransom rates the stock ``in-line.''

$60 Billion For Purchases

Buffett, ranked the world's third-richest man by Forbes magazine, transformed Berkshire from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate jet leasing. He has another $60 billion for purchases, and said as recently as last week that he's ``still negative'' on the dollar and likes to get ``foreign- exchange exposure through stocks.''

``I'm looking all over the world,'' Buffett said at an Oct. 24 press conference at an Iscar factory in Dalian, China. Berkshire rose $1,250, or 1 percent Friday, to end the week at $132,500 in New York Stock Exchange composite trading, up 20 percent this year. Earnings were released after the close of U.S. exchanges yesterday.

Dividends and interest from stocks and bonds and other investments by Berkshire's insurance companies rose 21 percent to $922 million after taxes. The company typically gets about half its profit from insurance.

Reinsurance, Geico

Underwriting profit from units including National Indemnity Co. and Geico Corp. tumbled 47 percent to $486 million. Buffett has told investors not to expect a repeat of the $3.8 billion in insurance earnings in 2006 when the company charged record rates a year after Hurricane Katrina. Falling prices after a calm 2006 hurricane season led Berkshire to scale back catastrophe coverage this year.

Berkshire Hathaway Reinsurance Group, which includes the catastrophe reinsurance business of National Indemnity, earned $183 million before taxes, down 75 percent. Reinsurers share in the premiums and claims of insurance companies.

Willis Group Holdings Ltd., the world's fourth-largest reinsurance broker, estimates that the cost of property reinsurance as of July 1 declined 15 percent to 20 percent on average from a year earlier.

Profit from selling policies at car insurer Geico Corp. fell 18 percent to $335 million before taxes as claims costs rose and the company increased its advertising budget. Geico spent 88.8 cents of every premium dollar on claims and expenses, compared with 85.6 cents a year earlier.

Geico added 536,000 new policyholders since the end of 2006, cutting prices to compete with companies including Progressive Corp., which also reduced rates to customers that it reaches over the phone and Internet.

Accident Rates

Until this year, U.S. auto insurers have been able to cut prices and still increase profit because of a steady decline in accident claims. Now, the trend is reversing, with Geico joining Allstate Corp. and Travelers Cos. in saying an increase in accidents is causing claims costs to rise.

Earnings from Berkshire's energy and utilities unit climbed 36 percent to $354 million, led by Portland, Oregon-based PacifiCorp, where revenue advanced on rate increases approved by regulators and higher customer usage.

A slowdown in U.S. homebuilding caused profit to fall 9.4 percent to $125 million at Shaw Industries, the world's largest carpet manufacturer, and lowered the earnings of Berkshire's other building products businesses.

``Residential housing construction is expected to remain low for the remainder of 2007 and into 2008,'' Berkshire said in its filing.

Sales of new homes were 23 percent lower in September than a year earlier, according to the U.S. Commerce Department.

The contribution from Iscar helped increase overall profit at Berkshire's manufacturing, service and retailing businesses by 21 percent to $647 million.

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