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September 30, 2009

AmEx halts gift card monthly fees as holidays near

Filed under: business — Tags: , — Snowman @ 5:25 pm

American Express Co said on Wednesday it is getting rid of monthly fees on all its gift cards, attempting to appease holiday shoppers who may worry that their cards will lose value if not used quickly.

American Express said the elimination of monthly fees is effective immediately and includes cards in stores, those yet to be purchased and ones that have already been bought.

The move could be a welcome boost for gift card sales, after a weak showing for the once-popular gift cards in the 2008 holiday shopping season.

Sales of gift cards were forecast to fall nearly 6 percent in last year’s holiday period by the National Retail Federation as shoppers were expected to pick discounted merchandise as holiday presents over gift cards.

NRF said it only issues forecasts for gift card spending.

The 2008 holiday season was one of the worst in nearly 40 years by some measures — turning the spotlight on how things will transpire this year.

Early forecasts for the 2009 holiday season call for sales to be anywhere from up 2 percent to down 1 percent. Consumers are still expected to seek out discounts, putting pressure on retailers to take fresh steps to bolster their revenue.

American Express also said that it will be the primary provider of gift cards for Simon Property Group’s malls and outlet centers.

American Express gift cards are available at more than 70,000 stores, the card issuer said in a statement.

(Reporting by Aarthi Sivaraman in Seattle)

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Unemployment claims slide continues

Filed under: news — Tags: , , — Snowman @ 2:37 am

New filings for unemployment insurance fell for a third straight week, the government said Thursday, surprising economists.

There were 530,000 initial claims filed in the week ended Sept. 19, down 21,000 from a revised 551,000 the previous week, the Labor Department said in a weekly report.

A consensus estimate of economists surveyed by Briefing.com expected 550,000 new claims.

The 4-week moving average of initial claims was 553,500, down 11,000 from the previous week’s revised average of 564,500.

"After two weeks of declines which seemed to be linked in part to seasonal problems connected to the late Labor Day, we expected a rebound this week, so these data come as a pleasant surprise," wrote economist Ian Shepherdson of High Frequency Economics in a research note.

"The downward trend in claims leveled off in the early summer but it now seems to be back with a vengeance, as it should if the economy really is growing at a (Cash for) Clunker-assisted 3%-plus rate in the quarter," he said.

Continuing claims. The government said 6,138,000 people filed continuing claims in the week ended Sept. 12, the most recent data available. That was down 123,000 from the preceding week’s revised 6,261,000 claims.

The 4-week moving average for ongoing claims fell by 1,250 to 6,187,250, down from the prior week’s revised average of 6,188,500.

The initial claims number identifies those filing for their first week of unemployment benefits. Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks.

The figures do not include those who have moved to state or federal extensions, nor people whose benefits have expired.

State-by-state data: A total of 21 states reported a decline in initial claims of more than 1,000 for the week ended Sept. 12, the most recent data available.

Claims in Texas declined the most, by 4,623, which a state-supplied comment said was due to fewer layoffs in the trade, service and manufacturing industries.

Claims increased by 1,573 in Wisconsin, which a state-supplied comment said was due to layoffs in the construction, service and manufacturing industries.

Outlook: Though job losses are tapering off, Shepherdson said claims still need to drop by 100,000 to about 432,000 to be consistent with payrolls.

"Claims still have a long way to go," he said. "But payrolls won’t keep falling forever — just until next spring, we think."  

Source

September 28, 2009

What we’ve learned (and failed to) from the Great Recession - so far

Filed under: online — Tags: , — Snowman @ 7:25 pm

As the world economy lurches toward recovery, we’ve learned four lessons. We’ve also failed to learn at least two.

Here they are:

KEYNES WAS RIGHT (i)

Free markets don’t always work. That was the key insight that British economist John Maynard Keynes drew from the depression of the ’30s. He argued that the automatic, self-adjusting model of the capitalist economy was false. Yet, as an optimistic liberal, he believed that government action could rectify the market’s faults.

This recession has been a test case of classic Keynesianism. Faced with the spectre of falling consumer demand, governments around the world pumped money into their national economies.

The amounts have been staggering. The United States federal government is expected to run a $1.6 trillion (U.S.) deficit this year.

But the strategy appears to have worked. China is going gangbusters. Japan is out of recession as are, probably, both Canada and the U.S.

Even more striking is the ideological turnaround. A year ago, no one was a Keynesian. Even Jack Layton’s New Democrats vowed to produce balanced budgets.

Now Conservative Prime Minister Stephen Harper has embraced deficit financing. Who could have predicted that?

KEYNES WAS RIGHT (II)

Keynes’ other great insight was the need for global economic coordination.

That’s why he spent so much effort lobbying for international institutions that could stabilize finance and trade.

In the end, the institutions that emerged were less robust than he suggested. Even so, they have performed credibly in this crisis.

The International Monetary Fund in particular has emerged as a star. For years, it was seen to be the villain of the world economy, as it bullied small, indebted nations into slashing social spending in order to appease international financiers.

But in this recession, the IMF has been in the forefront, setting the targets for global fiscal stimulus and then coaxing member states to meet those targets.

At the same time, the World Trade Organization – itself a popular villain just a few years ago – has managed to persuade most countries not to engage in self-defeating trade wars.

This hasn’t stopped protectionism. The U.S. uses loopholes in its free trade treaties to discriminate against Canadian firms. America and China are engaged in a tit-for-tat trade row over tires.

Still, no country has engaged in the kind of the wide-scale protectionism that characterized and deepened the Great Depression.

KEYNES WAS RIGHT (III)

While he’s remembered most for his views about the virtue of government spending, Keynes did spend much of his professional life fretting about deficits, inflation, currency fluctuations and international imbalances.

Just as the Depression of the ’30s revealed the fundamental weakness of imperial Britain, so this recession has highlighted the fragility of the U.S.

Its overall economy is in imbalance (Americans spend too much and save too little) as is its war-drained federal treasury.

This doesn’t mean the U.S. is a spent force. Even after Britain lost economic clout, it managed to keep its empire for another 30 years.

But the writing is on the wall. China and others are already questioning the role of the American dollar as the world’s premier currency.

And America’s massive and growing government debt – while necessary to fight the recession now – does promise future inflationary trouble down the road.

In that sense, the growing debate over whether recession or inflation poses the real danger to the American economy is moot.

As Keynes might have pointed out, the answer is both.

YES, CHINA IS IMPORTANT

Even before the recession, it was commonplace to talk of the 21st century as Asia’s. The slump has proven the clich?-mongers correct.

China, with its peculiar brand of faux communism and authoritarian capitalism weathered the recession better than most. Canada owes its bounce-back to China’s prodigious appetite for raw materials. America has financed itself for years on the savings generated by Chinese workers and farmers.

In both Africa and South America, China has become the major economic player.

This doesn’t mean Beijing is now the centre of the world. If history is any guide, the Chinese "miracle" will be as fraught with setbacks as the Japanese, German, Irish and Icelandic versions that preceded it.

But large upheavals usually produce qualitative change. The lasting effect from this recession is the rise of China.

Unlearned lesson I: Just because the economy’s better off it doesn’t mean you are

Blame the media for this one. We like simplicity. When the economy, as measured by gross domestic product, goes down, we produce panic headlines. When GDP goes back up – as it appears to be doing now in Canada – we drop the story and get back to covering celebrities.

In fact, many recoveries are uneven. The economy, as measured in terms of goods and services produced, can be growing even as unemployment continues to rise.

Economists, with their love of paradoxical euphemisms call this jobless recovery.

So far, it looks like that’s where Canada and the U.S. are heading. The stock market is working its way upward. In Canada, the housing market remains strong. In fact, it never crashed.

But the job market – otherwise known as what most people do to earn a living – is expected to stay weak.

Even the federal government predicts that the official unemployment rate won’t fall below 9 per cent next year.

Remember: After the far more benign recession of the ’80s, it took seven years for employment to return to pre-slump levels.

Unlearned lesson II: Don’t just fiddle with financial markets. Fix them

Paul Krugman, the Princeton economist who writes in the New York Times argues that the economies of the West today are too biased toward the financial sector. He’s right. He’s also following an intellectual tradition that includes early 20th-century thinkers like Thorstein Veblen (who differentiated between businessmen engaged in the shadow play of money and those, like engineers, who did "real" things), as well as Marxists such as Rosa Luxemburg, who saw global finance as a source of fundamental instability.

Finance in itself is not illegitimate. Any society requires some kind of mechanism to transform savings into productive activities.

But finance in our day is impossibly opaque – to the extent that, in a Veblenesque way, it does siphon off resources and, in a Marxist way, does threaten the real economy.

The true Ponzi scam artists are not people like convicted New York fraudster Bernie Madoff. Rather they are those who thought up and sold the perfectly legal but ultimately dodgy financial instruments known as collateralized debt obligations that then blew apart the international banking system.

Yet, as Krugman points out, we encourage this kind of behaviour by paying financiers far more handsomely than those who do more useful things.

None of this is being addressed in a fundamental way. International organizations like the so-called G20 play around the edges. London and New York continue to vie with one another to be the world centre of finance Ponziism. Toronto boosters would have this city join that league.

At best, the world of international finance is complex. In its current form, it’s dangerous. We should have learned that lesson, too. We haven’t.

Thomas Walkom’s column appears Wednesday and Saturday.

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September 26, 2009

Swedish car maker could pull out of Saab deal: report

Filed under: legal — Tags: , — Snowman @ 10:40 pm

Swedish luxury car maker Koenigsegg Group could pull out of its planned purchase of Saab Automobile from General Motors unless steps to secure loans are in place by Wednesday, a part owner told a newspaper on Saturday.

Norwegian businessman Bard Eker, who owns part of Koenigsegg through his holding company, told Dagens Industri that progress was needed on the billions of crowns of loans from the European Investment Bank (EIB) that Koenigsegg needs to finalize the Saab deal.

“If everything is not in place before Wednesday we are out. We give up,” Eker was quoted as saying by the Swedish business daily.

“The milestones that need to be achieved on Wednesday pertain to the EIB, the Swedish Debt Office and we at Koenigsegg Group moving at the same pace.”

A Koenigsegg spokeswoman said she had no immediate comment on the report cash advance no faxing.

The Swedish government has not yet said if it will pledge the state guarantees needed in order for the EIB to approve loans to Saab Automobile. The debt office is handling the negotiations on the guarantees on behalf of the government.

Koenigsegg, backed by U.S. and Norwegian investors, struck a deal this year to buy GM’s loss-making Saab Automobile business, but its ability to finance the purchase had remained in question.

This month, Koenigsegg said state-run Beijing Automotive Industry Holdings would take a minority stake in the luxury carmaker as part of its planned purchase of Saab, potentially solving some of the financing issues.

(Reporting by Niklas Pollard; editing by Sue Thomas)

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Ford unveils the Figo, new small car for India

Filed under: management — Tags: , , — Snowman @ 5:00 am

Ford Motor Company unveiled a new small car at a press conference in Delhi, India on Wednesday. The subcompact, which is called the Figo, will be produced in India for the Indian market, as well as for export to other Asian countries and Africa.

The Figo’s launch "signals Ford’s intention to compete in India’s largest and most important small-car market segment," the Dearborn, Mich.-based automaker said in an announcement.

A little over 1 million passenger cars are sold in India each year, according to Ford spokesman Mark Schirmer. The automaker expects India to become the third largest market for small cars, behind the U.S. and China, by 2030.

India-based Tata Motors and Japan’s Suzuki Motors are currently among the country’s biggest-selling carmakers.

Ford (F, Fortune 500) has invested $500 million in its factory near Chennai, India, to prepare it for high-volume production of the Figo, the automaker said, doubling the plant’s capacity to 200,000 units per year.

The Figo was designed and engineered in India, Ford said, but it’s based on the existing small-car engineering platform that’s already used for the Ford Fiesta.

Ford currently sells a version of the Fiesta in India, as well as three of its other car models. While all of these Ford models would be considered small cars in the U.S., they’re each bigger than the Figo, which is about the size of a Honda Fit.

According to Ford, small cars like these makes up about 70% of the Indian car market. "[That’s] where the meat of the Indian market is," Ford spokesman Mark Schirmer said of the Figo.

No additional details about the car — such as what size engine it will use, its fuel economy or its price — were revealed.

"We’re confident that the new Ford Figo will be extremely attractive to Indian car buyers," said Michael Boneham, president and managing director, Ford India. "It’s going to be very competitive with the current market leaders and offer a tremendous value story for our consumers. We believe Ford Figo is a big game-changer for Ford that will help transform our brand into a volume player in India."

The car represents a major shift in Ford’s India strategy, the automaker said in its announcement. India will now become Ford’s "regional center of excellence" for small car engineering and production.

For the past several years, Ford Motor Co. has been moving toward a global structure in which different facilities around the world become "centers of excellence" for different types of vehicles, responsible for engineering that is shared throughout the company. Australia, for instance, is a "center of excellence" for rear-wheel-drive cars, while U.S. engineers concentrate on trucks.

The Figo will go on sale in early 2010. Ford has not announced any plans to sell the car outside markets in Asia and Africa. 

Source

September 24, 2009

Obama urges investment in high-tech education

Filed under: online — Tags: , , — Snowman @ 8:21 pm

President Obama on Monday pushed his plans to make the nation’s economy more stable in the future by investing in education for high-tech industries.

The president unveiled a new "innovation strategy" that builds on $100 billion of economic stimulus funds to support entrepreneurship, education, infrastructure and other investments.

The plan aims to make the U.S. economy more competitive and help prevent volatile "boom and bust" cycles in the future, Obama said.

"As we emerge from this economic crisis, our great challenge will be to ensure that we do not simply drift into the future, accepting less for our children and less for America," Obama told students at Hudson Valley Community College in Troy, N.Y. "Instead, we must choose to do what past generations have done: shape a brighter future through hard work and innovation."

Obama said improving the nation’s education system is a key component of the strategy. "We know that the nation that out-educates us today will out-compete us tomorrow," he said.

To that end, Obama touted his administration’s efforts to make college more affordable by increasing government grants, simplifying student aid applications and updating the GI Bill.

He praised a bill making its way through Congress that would boost federal student aid further and effectively end the government’s practice of subsidizing private lenders of student loans.

Obama also reiterated his call for increased investment in green energy technology, electronic health records, manufacturing advanced vehicles and expanding the nation’s broadband Internet network.

The president also pointed to proposed tax cuts and trade policies his administration has persued as ways to make U.S. companies more competitive and prosperous.

"Our strategy begins where innovation so often does: in the classroom and in the laboratory — and in the networks that connect them to the broader economy," Obama said. "These are the building blocks of innovation: education, infrastructure, and research."  

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September 23, 2009

U.S. health insurers say they face gov’t gag

Filed under: legal — Tags: , , — Snowman @ 12:27 am

Health insurers accused the U.S. Medicare agency on Tuesday of political interference in a battle over whether the industry can lobby its customers directly over healthcare legislation.

The Centers for Medicare & Medicaid Services (CMS), which oversees the Medicare program for the elderly and disabled as well as privately run Medicare alternatives, said on Monday it was investigating a letter Humana Inc sent enrollees about efforts to overhaul the nation’s healthcare system.

Humana’s letter, sent in an envelope citing important plan information, told customers the Democrats’ bills could hurt “millions of seniors and disabled individuals could lose many of the important benefits and services that make Medicare Advantage health plans so valuable,” according to CMS.

The agency also warned other insurers against sending potentially misleading health reform mailings to customers.

America’s Health Insurance Plans, the industry lobby group, called the CMS action a “gag order.”

The group argued that any cuts, including those in various Democratic proposals, would raise costs and reduce benefits for those who want private plans.

“Seniors have a right to know how the current reform proposals will affect the coverage they currently like and rely on,” said AHIP spokesman Robert Zirkelbach.

Republicans seized on the spat. “It looks likes CMS is engaged in government intimidation, pure and simple,” said Representative Dave Camp, the ranking Republican on the U.S. House of Representatives Ways and Means Committee.

Senate Republican Leader Mitch McConnell of Kentucky, where Humana is based, also blasted the CMS “effort to squelch free speech.”

A spokesman for Senate Majority Leader Harry Reid said it was “indefensible for insurance companies to send out propaganda” to scare the elderly.

“It’s clear that we are closer than ever to meaningful reform because defenders of the status quo are ginning up scare tactics to stand in the way of fixing our broken system,” Jim Manley said.

CMS dismissed the criticism, saying it wanted to ensure companies do not violate marketing rules or improperly use protected Medicare mailing lists.

“Our goal is to safeguard beneficiaries’ personal information,” agency spokesman Peter Ashkenaz told Reuters.

BILL AUTHOR WELCOMES CMS ACTION

Democratic Senator Max Baucus had urged CMS to get involved and later welcomed the investigation of what he called “scare tactics” by Humana. 

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September 22, 2009

Debt costs to rise as bank collateral re-use falls

Filed under: money — Tags: , , — Snowman @ 8:51 am

Corporate, mortgage and other debt issuers may be facing permanently higher costs as large banks face new restrictions on their use of client assets.

Banks have relied on their ability to reuse hundreds of billions of dollars in client assets that are posted against repurchase agreements, securities lending agreements and derivatives to back new trades and loans, boosting liquidity in many markets.

After losing assets when Lehman Brothers collapsed last September, however, many investors are forbidding banks to reuse the assets, a process known as rehypothecation.

Banks and investors have also restricted the collateral they accept to only the most liquid, highest quality debt, after many markets, including corporate bonds, froze in the aftermath of Lehman’s failure.

As riskier debt is less acceptable for reuse, it will become more costly for banks to hold, which will hurt issuers.

“When securities are less available to freely circulate in the market, the liquidity of those securities goes down,” said Darrell Duffie, professor of finance at Stanford University.

“Its going to raise the cost of trading in corporate bonds and will lower the attractiveness of buying corporate bonds when they’re issued, and that means the corporation will have to pay a higher interest rate,” he said.

A recent report by the International Monetary Fund estimates that the pullback in high grade collateral due to a reduction in the use of pledged client collateral and a pullback in securities lending and hoarding by banks, has adversely impacted global liquidity by around $5 trillion allstate insurance company.

Large banks have reported significant declines in the number of securities they are able to reuse.

The amount of securities posted with Goldman Sachs against repos, securities lending agreements and derivatives that the bank was allowed to reuse fell to $596 billion in June 2009, from $891 billion in November 2007, according to the bank’s quarterly reports.

Morgan Stanley saw an even larger drop, receiving $331 billion in June 2009 that could be repledged, compared with $948 billion in November 2007.

Securities lending by the major custodians including BNY Mellon, State Street and JPMorgan has fallen by half relative to its peak of about $1.6 trillion before the crisis, the IMF found.

Cash hoarding by major banks is also sizable with many large banks having around $200 billion each in cash or cash-equivalents, it said.

PRIMARY MARKET RALLY

Corporate bond issuance has surged in the past few weeks as issuers take advantage of a market rally, and banks also continue to be propped up by cheap government funds. 

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September 20, 2009

Squeezing the last bit of oil from Mother Earth

Filed under: business — Tags: , — Snowman @ 11:30 am

It follows as night the day that the unquestionably finite nature of fossil fuels inevitably will cause significant changes in the global economy and our way of life.

But the continued lack of absolute certainty – which will continue for many years – about the timing and severity of the crisis offers room for diehard "denialists" to continue with their arguments that a world without oil that can be extracted viably is a myth.

With the final week of August marking the 150th anniversary of commercial oil development, peak-oil deniers have become even more forceful in their arguments.

They have launched spirited attacks on the "alarmists" in recent weeks, stoutly maintaining that there remains a frontier of undiscovered mammoth oil discoveries, and that extraction technology is advancing at such a rapid pace of increased sophistication that even the most challenging deep-sea deposits and complex geological formations can be tapped.

Michael Lynch is at the forefront of the peak-oil deniers. He is former director for Asian energy and security at the Center for International Studies at the Massachusetts Institute of Technology. In a late August op-ed in The New York Times, Lynch wrote that "Oil remains abundant, and the price will likely come down closer to the historical level of $30 (U.S.) a barrel as new supplies come forward. But that may not keep the Chicken Littles from convincing policy-makers in Washington and elsewhere that oil, being finite, must increase in price."

Lynch’s core message is that scarce social resources are being misallocated in too-determined a quest for alternatives to fossil fuels.

"This is not to say," Lynch continued, "that we shouldn’t keep looking for other cost-effective, low-pollution energy sources – why not broaden our options? But we can’t let the false threat of disappearing oil lead the government to throw money away on hare-brained renewable energy schemes or impose unnecessary and expensive conservation measures on a public already struggling through tough economic times."

By coincidence for such denialists, major oil discoveries subsequently were announced off the Brazilian coast, in the Gulf of Mexico and, earlier this week, offshore Sierra Leone. But a closer look at each dims the initial euphoria.

Petrobras, the Brazilian state oil producer, is notoriously laggard at making the necessary heavy investments in bringing oil supplies to market promptly. The Gulf of Mexico petroleum "structure" is so geologically complex that the extraction costs will be exorbitant. Sierra Leone, like Nigeria, Sudan and other African production regions, is conflict-ridden.

Just the same, the surge of "denialist" noise, which has undeniable influence on certain lawmakers in the United States and Canada, seemed to merit a corrective from the peak-oil theorists. Their premise, roughly speaking, is that we have depleted half or more of the world’s oil supply and run out of easily accessible reserves.

Matthew Simmons, long the most prominent peak-oil theorist, offered a reminder in Foreign Policy this month that data from agencies as varied as the IEA and the U.S. Department of Energy continue to show alarming oil-depletion rates worldwide.

"The world will never `run out of oil’," Simmons writes, "but its flow is in decline. There may still be ample oil reserves for half of today’s use. But these remaining reserves are all very low-quality heavy oil, which is difficult to produce and hard to refine into usable petroleum products."

That’s a shot across the bow of the Athabasca tarsands, of course, the world’s only major heavy-oil production centre payday loans online. (Venezuela is a potential rival in size for heavy oil production, but its quixotic political regime has yet to allow oilsands development.)

Which gets us to where the so-called "alarmists" tip the balance in their favour. The world’s remaining oil reserves overwhelmingly are in politically hostile regimes or in remote locations where extraction is either enormously costly or technologically impossible.

Touted "rapid advances in oilfield technology," writes Simmons, are "the greatest myth of all."

Technology allowing us to tap oil several kilometres below sea level or in previously inaccessible pools on land by means of horizontal drilling are "now quite mature," says Simmons, who earlier in his career helped raise funds to develop those technologies. "Sadly, there are few new ideas in the oilfield pipeline."

An unhappy coincidence for "denialists" is a report this week by the top oil analyst for Australia’s Macquarie Bank, a long-respected merchant bank with investments worldwide. Iain Reid, head of that firm’s European oil and gas research unit, endorsed the peak-oil view, asserting that oil supply will peak this year.

The recent economic crisis that deniers point to as a helpful development in easing demand has in fact been a disaster, Reid says.

It caused major oil firms to postpone needed investment in new supply sources.

We saw that in our own oilpatch, where a planned $100-billion plus in heavy oil investments came to an abrupt halt.

Those developments will, of course, resume post-recession. Some Alberta megaprojects already are gradually coming back to life. The problem is that the delay will cause a severe "supply gap."

New oil sources will fail to come on-stream soon enough to satisfy skyrocketing demand in China, India and elsewhere in the developing world, to say nothing of a return to normal demand levels in industrial nations.

That, finally, might bring an end to our addiction to oil. Reid believes we soon will turn this debate on its head. We will stop talking about peak oil or peak supply, instead concerning ourselves with "peak demand."

Reid, who spent 16 years with Royal Dutch Shell and Amerada Hess sees demand eclipsing supply very soon, with a huge gap opening by 2015. That’s a good thing, he argues. It will drive up pump prices to unsustainable levels.

Oil currently trades at about $72 a barrel.

"Oil near $150 a barrel would very soon create another set of global economic drivers which would spell much lower demand in the future," says Reid. "In the very long term, we can see demand for oil falling quite substantially."

Reid’s presumption, of course, is that much more determined energy conservation will kick in as we approach that price level.

We did see it on a small scale during the recession, as motorists switched to public transit and smaller cars – and, Reid presumes, the acceleration of alternative-energy development.

For prominent peak-oil believers like Chris Nelder, the deniers would set us up for long lines at filling stations and cold houses in winter.

"If we let outlier critics like Lynch lull us into a false sense of security about future oil supply," Nelder wrote in The Business Insider this month, "we won’t begin soon enough on the decades-long effort to leave oil before it leaves us. And we will pay for it dearly."

dolive@thestar.ca

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September 19, 2009

Builder confidence up, but tax fears loom

Filed under: finance — Tags: , , — Snowman @ 8:30 pm

An index of home builders’ confidence rose in September for the third month in a row, but an industry group said Wednesday the fragile residential real estate market recovery could be cut short if a popular government tax credit isn’t extended.

The National Association of Home Builders said that its Housing Market Index, which it compiles for Wells Fargo, rose one point last month to 19 — the highest level since May 2008.

The index, which fell to an all-time low of 8 in January, has increased steadily in 2009 as the housing market picked up in many parts of the country.

According to NAHB, the rebound in builder confidence is largely due to a temporary tax credit that the government created last year for first-time home buyers. Low mortgage rates and rock-bottom home prices also helped boost confidence, the group says.

The credit, which can be as high as $8,000, was established as part of the government’s economic recovery act to help stimulate demand and revive the battered housing market.

As the market begins to show some sings of life, however, builders are becoming worried that the credit, which is set to expire Nov. 30, will not be renewed.

"The window is now basically closed for being able to start a new home that can be completed in time for buyers to take advantage of the tax credit," said Joe Robson, NAHB’s chairman and a home builder from Tulsa, Okla, in a statement. "Builders are concerned about what will keep the market moving once the credit is gone."

To that end, the index component that measures builders’ expectations for sales in the near future fell one point in September to 29, after rising for five months in a row.

More than 1.5 million taxpayers are expected to claim the credit, according to an NAHB spokeswoman.

Meanwhile, the National Association of Realtors said earlier this month that the credit has already brought 1.2 million new buyers into the market, including 350,000 buyers who would not have purchased a home without the credit.

White House press secretary Robert Gibbs said Wednesday that the Obama administration is evaluating how the tax credit has impacted home sales and could recommend that the President extend it.

While the tax credit has helped stabilize the housing market, falling home prices are the real reason why sales have begun to rebound, according to Mike Larson, real estate and interest rate analyst at Weiss Research.

"I believe the tax credit is the icing on the cake of this housing market recovery, not the cake itself," Larson said in a research report.

Indeed, a government report released earlier this month showed that roughly 315,000 people have claimed the tax credit so far. However, industry analysts point out that those figures reflect a small portion of homebuyers who could ultimately claim it.

For buyers interested in taking advantage of the credit, time is of the essence.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Sept. 16, 78 days remain before the credit ends.

In addition to uncertainty about the tax credit, builders are also wary about a "critical lack of credit" for new home construction projects and ongoing problems related to appraisals that NAHB says are sinking one quarter of all new-home sales.

"These concerns need to be addressed if we are to embark on a sustained housing recovery that will help bolster economic growth," said NAHB chief economist David Crowe, in a statement.  

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