NEW MEXICO’S ECONOMY BUCKS TRENDS

The Business Outlook this week reported that “New Mexico continues to buck national economic trends by posting stronger employment and personal income growth than the rest of the country.” Our employment in the last year grew by 1.1% and personal income rose 5.5% compared to under 5% nationally. The metro area lost jobs in construction and manufacturing but other sectors including healthcare, movie and TV industry, gambling and social assistance, showed growth. Information sector hiring was up 1,300 jobs from last year supported by hiring for call centers and film production. Film production was the largest contributor to the economy. Construction is still weak recovering from too ambitious a strategy starting in 2006. Residential construction has declined which will bring better balance to the home market here.

BUY! BUY! BUY!

So the mortgage rates are dropping still with the lowest rate we have seen in seven months following the government taking over Freddie Mac and Fannie Mae. The 30-year fixed declined to 5.78 percent this week. We are seeing more buyers out there although the gap between the deal the buyers think they can get and the amount the sellers are willing to take is still quite wide. There is a psychological balance that needs to be restored. I would expect that some people will take money out of their stocks right now and put it in real estate especially with all this good deals.

Bring it on! Call me if you want to buy or sell.

MODEST GROWTH PREDICTED IN NEW MEXICO

Fed Sees Modest Growth in New Mexico Sep 4, 2008 - New Mexico Business Weekly
Economic growth in the Federal Reserve’s Tenth District, which includes Albuquerque, Santa Fe and nothern New Mexico, remained modest in early April and May, according to the Fed’s latestBeige Book, a survey of economic activity published eight times a year.
The district, based in Kansas City, includes part or all of seven states: Oklahoma, Kansas, Nebraska, Missouri, Colorado, Wyoming and New Mexico.
Consumer spending in the district remained soft in May, despite solid travel and tourism activity. Retail managers expected sales to ease in coming months. Mall traffic remained slow, partly attributed to higher gasoline and food prices limiting purchases of non-essential goods.
After a rebound in March, auto sales slumped, especially for trucks and SUVs, and access to credit tightened. Auto dealers anticipated sales would remain sluggish, even with aggressive sales incentives and discounts.
Hotel occupancy and average room rental prices moved higher, and restaurants reported an uptick in sales despite a slight increase in menu prices.
Residential real estate activity strengthened seasonally from the last survey and commercial real estate activity held steady in late April and May. Demand for lower priced homes was stronger than demand for high-end homes requiring jumbo mortgages. Still, one realtor noted the market for first-time home buyers has slowed because higher living expenses constrained buyer efforts to save for a down payment. Apartment vacancy rates were down across the district, prompting further rent increases. Commercial real estate construction remained solid since the last survey though the number of sales declined. Commercial vacancy rates edged up and rents stabilized after steadily increasing over the past year, according to the Beige Book.
Bankers reported tighter credit standards and somewhat stronger loan demand than in the previous survey. Half of the respondents reported a tightening of credit standards for commercial real estate loans, about the same fraction as in the previous survey. Just under half of respondents reported tightened standards for commercial and industrial loans, up slightly from the previous survey.
Price pressures continued to build since the last survey period in all industries, but wage pressures held steady. District labor shortages persisted, especially for minimum-wage positions and technically skilled workers, but most firms did not plan to raise wages. District hiring announcements continued to outpace layoff announcements.
The complete report on the Tenth District is available at: www.federalreserve.gov/fomc/beigebook/2008/20080611/10.htm

NEW MORGAGE LENDING RULES

Paramount in new federal regulations approved to foster more responsible mortgage lending, are the implications for consumers shopping for a home loan. The Federal Reserve Board's new rule amends the "Truth In Lending Act," Regulation Z under the "Home Ownership and Equity Protection Act (HOEPA)". HOEPA was originally passed in 1994 to target abusive practices in home equity lending. The Fed's new move extends protections to home purchase loans. Critics complain the rule is long over due because unfair, abusive and deceptive home mortgage lending practices get much of the blame for the current housing crisis that has already put millions of properties in foreclosure and former owners on the street. Also, most lenders long ago curtailed many of the practices now forbidden by the new regulations, critics say. The horse is already out of the barn, so to speak, and the new regulations will do little to corral the market's downward stampede. However, the new rules should help prevent future runs on bad loans by helping remove them from the market. Perhaps more important, key provisions in the new rules will give consumers cause to pause before shopping for a mortgage. Effective October 1, 2009, the new rule's four key provisions (along with how each will impact consumers), for a newly defined, but yet to be detailed category of "higher-priced mortgage loans," include protections that will:
Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value.
This forces lenders to more closely scrutinize a borrower's debt-to-income ratio, looking for less debt, more income and savings, larger down payments and other liquid assets the borrower can fall back on. Consumers may have to take more time saving and paying off debt before buying a home.
Require creditors to verify the income and assets they rely upon to determine repayment ability. This provision will make it especially tough for home-based business owners, self-employed people, contract workers and others who don't get a regular pay stub. Lenders were already asking many of these borrowers for a CPA's or other tax professional's certified profit-
and-loss statement to reveal income viability.
Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. Without this lender risk-reducing tool they are more likely to offer a narrower variety of loans, forcing some consumers out of the market and more of them to spend more time shopping around. Shopping around, of course, is a smart practice.
Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans. This means borrowers will have to figure on paying more each month than just the home loan's principle and interest (or interest only, where available). This is actually a useful tool for borrowers, especially those who procrastinate and gamble they'll have the lump sum cash when the insurance premium or property tax comes due. Financial counselors have always advised spreading out the cost of insurance and taxes over 12 monthly payments is much easier to fit into a household budget than the lump sum risk. In addition to rules for higher priced home loans other rules include:
Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. Servicers are also required to credit consumers' loan payments as of the date of receipt.
Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans.
The rules also specifically outlaws seven deceptive and misleading advertising and requires more extensive information about rates, monthly payments and other loan features.

GOOD NEWS ON REAL ESTATE FRONT

The National Association of Realtors reports existing home sales on the rise by 11 percent according to NAR, the fall market is already in full swing. How does this affect ABQ? Many people want to move to our Enchanted City but are unable to do so until they sell their home. This is good news for us if their homes sell as they will be able to move here.