Marc's Mortgage Matter's

In terms of powerful world figures, how does the FDIC's Sheila Bair stack up against Lady Gaga or Katie Couric? ForbesList

Dear Real Estate Dictionary - what is the main difference between buying a condominium versus a single-family home? It is the type of ownership you receive. With a condo, the owner owns the exclusive right to the interior space of her dwelling unit, but the land, walls, grounds, fences and facilities are owned in common with the other owners in the complex. With a SFR(single family residence) the borrower is the sole owner of the building and the land it sits on. This is "fee simple" ownership. Lines blur slightly when condos are detached, or homes are attached. (Attached houses where the land is individually owned are termed PUD's.) Townhouses are most often an architectural style of building which include no neighbors above or below, often has a small fenced yard, low maintenance lifestyle (since the HOA may cover roof repair and replacement, exterior maintenance, common area maintenance, and other expenses), and often include amenities such as a community pool.

Townhouses can be either "condo" or "fee Simple." If one owns the land under one's unit, it is fee simple, if you do not it is a condominium. Lenders and borrowers usually rely on the preliminary title report to know for sure. In the last year or two condominiums, townhouses, etc. have suffered dramatic price declines, especially in states like Florida and Nevada. 

McDonald’s named Tuesday “national hiring day.” As with everything McDonald’s, it’s all about scale. In one day, the chain hoped to add as many as 50,000 people to its payrolls; worldwide, it employs 1.7 million, runs 32,000 restaurants and serves tens of millions of burgers every day. On one hand, this is great news: 50,000 jobs! On the other hand, 50,000 McJobs?

Indeed, the McHiringSpree raises the question: What kind of jobs has the recovery ginned up? The Bureau of Labor Statistics offers a host of month-by-month information on who is working where, for how much and for how long. The data show that a few industries are at or above their level of employment before the recession. The federal workforce is slightly bigger, once you factor out job losses at the Postal Service and ignore Census hiring. Employment is up in some niches, like computer systems design. And health care remains the nation’s strongest growth industry, with tons of new jobs for workers like home health aides and physicians’ office workers.

But the industries where employment remains below peak are too long to list — jobs remain scarce in the majority of subcategories, from logging to personal and laundry services. Alas, that is to be expected. The Great Recession sacked the entire economy. Demand remains low.

So it may be better to measure from the trough than the peak, looking for the industries that have had a jobs uptick since bottoming out. According to the BLS, a lot of sectors have seen a mild, tentative rebound. Businesses from railways to clothing retailers have taken back some of the workers they shed.

Despite the gains, though, it all adds up to a fairly bleak picture: The jobs we’re adding, for the most part, aren’t great ones. The National Employment Law Project took a closer look at employment and jobs-growth data in February. It says that just 14 percent of recent job growth comes from high-wage industries. About half comes from low-wage industries. Restaurants and food services businesses, “especially” fast-food outlets, made up 7 percent. The picture contributes to a larger story: The country has produced far too few stable, middle-income jobs over the past 20 years, not just the past three.

Harry Holzer, a Georgetown University professor, says the recession has distorted the jobs picture. “Early on in a recovery, a lot of the hiring is temporary and low-end,” he says. “In an uncertain labor market, it’s easier to hire those workers.” As the recovery strengthens, he expects the economy to add more and better positions.

For now, the economy will take any jobs it can get. Besides, those McJobs might be nothing to mock. Several McDonald’s executives started behind the counter. A low-paying job need not stay a low-paying job forever. And a low-paying job is decidedly better than none at all.

Is it my imagination, or does the public's memory last only a few weeks? Or is it just because the financial press is on to the next shiny object? I mention this because I noticed the news Thursday that the Japanese stock market index (Nikkei) hits highest level since the earth quake. Remember the earth quake in Japan, right? Heck, remember hurricane-ravaged New Orleans, or the havoc wreaked by the tsunami in Indonesia?

When you're hunkered down over that tall cool one this weekend at the bocce ball tourney, ask the person standing next to you, "In the first quarter of 2011, how many housing units are there in the US?" The answer is 131 million. Of those, about 86% are occupied, 57% by owners, 29% by renters, and 14% (nearly 19 million units) are vacant. In this country the home ownership rate is about 66%, down slightly from the previous quarter and year. The Census Bureau reports that the homeownership rates were highest for those householders ages 65 years and over (81%) and lowest for those under 35 years of age (38%) - no surprise there. Lastly, the homeownership rate for non-Hispanic Whites was highest at 74%, while "Black Alone householders" was lowest at 45%.(Discretion advised; no offense intended - I thought it was clever.)

The Federal Reserve ended its regularly-scheduled FOMC policy-setting meeting on Wednesday. In a new twist, Federal Reserve Chairman Ben Bernanke took to the airwaves for a 50-minute question and answer session. Little new was revealed about the Fed's concerns and future intentions; anyone who expected the Fed to lay its cards on the table for all to see was surely misguided.
The statement which signaled the close of the meeting was released a little earlier (12:30pm instead of 2:15) but for all the new revelations it brought it could have been released before the meeting even began. "[T]he economic recovery is proceeding at a moderate pace," noted the Fed, and while "Inflation has picked up in recent months [...] longer-term inflation expectations have remained stable."
Mortgage rates, seemingly as unconcerned about inflation as the Fed appears to be, found new reasons to drift downward, and there may be reason to believe that we could see more of this as Summer approaches.

The Fed also decided to let its program of purchasing $600 billion of Treasuries to run its course. QE2, as the program was dubbed, will come to a close sometime by the end of June. To the extent that economic activity was boosted by the program, we could very well see a falloff in growth of a like amount. Discounting future growth may be at the heart of the recent decline in interest rates. Certainly, a decline inflation wouldn't be.

The economy isn't really firing on all cylinders and seems unlikely to do so anytime soon. If nascent price pressures do prove to be transient, the economy will probably have a little more traction as we move deeper into 2011. However, price increases are usually quick to come and slow to go (mortgage rates tell much the same tale) and since they are still seem to be on an upward swing it's way too soon to expect that they will diminish in a fashion which doesn't upset the economy any further.
While the popular belief is that the Federal Reserve started their program to spur economic growth, we have been of the mind that the QE2 program was more intended to act as a sponge, keeping interest rates from rising rather than trying to influence the downward to any great degree. This would act as a tempering tool to keep rates from flying upwards as the inflation the Fed hoped to foster (to ward off potential deflation) began to take hold. Rates did rise, but have since settled back somewhat as the markets have become more accustomed to an environment of firming (rather than falling) inflation.

For a time, perhaps too long a time, investors were eschewing almost all investments but ultra-safe Treasuries, and the Fed's goal was to de-concentrate those assets from safe-haven holdings to that they could and would be put to more productive use elsewhere. To some extent, this has worked; stock markets are producing solid gains as money flows into them, businesses are starting to re-invest and so forth. But a world still awash in dollars has seen plenty of them moved out of those safe havens, and into precious metals, basic commodities, oil and other staples, frothing up those markets... at least until the Fed (and other central banks to a lesser degree) begin to mop up those funds.

To the extent that the Fed's move propped up or added to GDP growth is the amount of pullback to be expected when the program comes to a close in June. If we are still feeling the effects of higher prices (and it is very likely that we will) it is very possible that mortgage interest rates could find more reasons to decline than to increase as growth slows, must as they have found reasons to decline in recent weeks as the economic news has turned more gray than rosy. That's still a bit off in the future, and of course, growth may turn higher between now and then.
Next week's a busy week in terms of data. ISM surveys, car sales, productivity and the all-important employment report. Mortgage rates have leveled off over the last couple of days, holding pretty steady. With the economic news becoming increasingly muddy, we would expect that mortgage rates hold at about these levels next week. They are pretty close to the low points of the year, for what it's worth.

Several years ago a US Navy cruiser anchored in Mississippi for a week's shore leave.
The first evening, the ship's Captain received the following note from the wife of a wealthy plantation owner:
"Dear Captain, Thursday will be my daughter Melinda's Debutante Ball. I would like you to send four well-mannered, handsome, unmarried officers in their formal dress uniforms to attend the dance. They should arrive promptly at 8:00 PM prepared for an evening of polite Southern conversation. They should be excellent dancers, as they will be the escorts of lovely refined young ladies. One last point: No Jews Please."
At precisely 8:00 PM on Thursday, Melinda's mother heard a polite rap at the door which she opened to find, in full dress uniform, four handsome, smiling Black officers. Her mouth fell open, but pulling herself together, she stammered, "There must be some mistake."
"No, Madam," said the first officer. "Captain Goldberg never makes mistakes."