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Archive for August 2010

Spending Up More Than Income

Consumer spending is critical because it accounts for 70% of economic activity. The Commerce Department says spending fell 0.1% in April, rose a tiny 0.1% in May, was flat in June, but rose 0.4% in July. Personal incomes were up 0.2% in July, less than expected but at least an improvement over June when incomes had not risen at all.

With spending rising, the personal savings rate slowed to 5.9% of after-tax income. That’s down from 6.2% in June, the highest in nearly a year. Even with the July decline, the savings rate is nearly three times higher than it was before the recession began in December 2007.

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Foreclosures Up (Again)!

RealtyTrac reports that in July there were more than 325,000 foreclosure filings — including notices of default, auctions notices and bank repossessions — up 3.6% from the month before but down 9.7% from 12 months earlier. That is the 17th month in a row total filings exceeded 300,000, said RealtyTrac’s CEO, James Saccacio. “Declines in new default notices, which were down on a year-over-year basis for the sixth straight month in July,” he said, “have been offset by near-record levels of bank repossessions, which increased on a year-over-year basis for the eighth straight month.” A near record number of people lost their homes to mortgage payment problems in July.

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Real Estate Investing Tips

Real estate investing makes people think of money.  You will see a lot of good reasons for this.  Real estate is something that is only available in limited quantities.  After all, manufacturing more land is impossible.  As a result, real estate is nearly universally thought to be a sound investment.

However, it must be acknowledged that conventional views on real estate are changing.  This certainly has something to do with the economy.  It is not uncommon to find people who are afraid of real estate investing.  They think there is no money there anymore.  They may also believe that they cannot succeed without investing large sums of their personal money.  Both of these beliefs are dead wrong.

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What Happens if the Bush Tax Cuts Expire

In a few short months, the Bush tax cuts are set to expire and if Congress doesn’t extend these tax cuts an estimated $135 billion could be taken out of the hands of the people by the government in new taxes. Adding around $1,541 in new taxes per household could break the backs of many people in an already struggling economy.

According to the nonpartisan Tax Foundation, not renewing the Bush tax cuts will represent a huge jump in taxes for the middle class. For example, a middle class family with a yearly income of $63,366 would pay around $4,964 in taxes. That is a big jump from the $3,423 that the same middle class family is paying presently. While President Obama and Treasury Secretary Geithner have insisted that they wish to keep the tax cuts for the middle class intact, they have also made it clear that they fully intend on targeting entrepreneurs and job creators with higher taxes by simply letting the Bush tax cuts sunset in 2011. With an already high unemployment rate, imagine the impact on an already struggling nation.

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Another $3 Billion Down the Drain

President Obama’s Emergency Homeowner Loan Program is about to shovel $3 billion more at foreclosures.  One part of the plan, announced Wednesday, includes a new $1 billion program that will offer loans to unemployed borrowers at risk of losing their homes. The loans, which will be dispersed through nonprofit and housing agencies, will carry 0% interest and be good for a maximum of $50,000 for up to two years.  The administration also added $2 billion in support for its program that helps struggling homeowners in the states with highest unemployment rates.

The government previously announced $2.1 billion for 10 of the hardest hit states. States were required to put together proposals on how they would use the money, and the Treasury finished approving those plans earlier this month.  The additional $2 billion announced Wednesday will expand the program to a total of 17 states, and the nation’s capital, all of which have suffered unemployment rates higher than the national average for a year.  Diana Olick’s take:  “…the trouble today is not that so many more people are losing their jobs, it’s that those who have already lost their jobs are having a hard time getting new jobs. Plus they’re already way behind on all kinds of debt. By giving many of these folks cash to pay their loans, the government is essentially putting them deeper into debt.”

New Record for 30 Year Mortgage Rates

Here we go again setting new records.  Freddie Mac’s weekly report said the 30-year fixed rate slipped to 4.44% for the week ended Thursday, the lowest since it began tracking the rate in 1971. Last week’s rates stood at 4.49%, and a year ago it was at 5.29%.  The 15-year fixed rate fell to 3.92% this week, the lowest since Freddie Mac began tracking it 1991, down from 3.95% last week and from 4.68% a year ago.  Adjustable-rate mortgages also declined, with the 5-year rate falling to 3.56% this week, the lowest since 2005 when the lender began tracking it.

Mortgage tracker Bankrate.com, which surveys large lenders across the country, said the average 30-year fixed loan sank to a record low for the fourth consecutive week, falling to 4.57% from 4.66% the previous week.  The 15-year fixed rate, which is a popular option for refinancing, also fell to the lowest level in the history of Bankrate’s 25-year old survey, dipping to 4.06%, from 4.11% the week before.  While the 1-year adjustable-rate mortgage held steady at 4.8% for a fourth week, the 5-year adjustable rate mortgage dropped to a record low of 3.92% from 3.95% the previous week.