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Job losses hit 2.6 million as layoff pain deepens

Job losses hit 2.6 million; unemployment surges to 7.2 percent, heads for 10 percent or higher

Jeannine Aversa, AP Economics Writer
Friday January 9, 2009, 6:43 pm EST

WASHINGTON (AP) — A staggering 2.6 million jobs disappeared in 2008, the most since World War II, and the pain is only getting worse with 11 million Americans out of work and searching. Unemployment hit a 16-year high of 7.2 percent in December and could be headed for 10 percent or even higher by year’s end.

Friday’s government figures were “a stark reminder,” said President-elect Barack Obama, that bold and immediate government action is needed to revive a national economy that’s deep in recession and still sinking.

More than a half million jobs melted away as winter took hold in December — 524,000 in all, the government estimated — and the true carnage will almost certainly turn out to be even worse when the figures are nailed down more clearly a month from now.

“Behind the statistics that we see flashing on the screens are real lives, real suffering, real fears,” said Obama, already moving full-speed with Congress to put together an emergency revival plan a week and a half before taking office.

It’s real, indeed, for 38-year-old Rachel Davis of St. Louis.

“If you get laid off right now, God help your soul,” she said. “You better hope you’ve got savings or someone backing you.” In fact, she was laid off three months ago after working as a dental technician for 20 years. While Congress and the new president struggle to find answers, she says, “I have no faith in this system” and plans to move out of the country in hopes of finding better luck.

The severe recession, which just entered its second year, is already the longest in a quarter-century and is likely to stretch well into this year. The fact that the country is battling a housing collapse, a lockup in lending and the worst financial crisis since the 1930s makes the downturn especially dangerous.

All the problems have forced consumers and companies alike to retrench, feeding into a vicious cycle that Washington policymakers are finding difficult to break.

Investors, too. The Dow Jones industrial average fell 143 points Friday to end the week down nearly 5 percent, the worst week since November.

The Labor Department’s unemployment report showed widespread damage across U.S. industries and workers — hitting blue-collar and white-collar workers, people without high school diplomas and those with college degrees.

“One word comes to mind — dreadful,” said Stuart Hoffman, chief economist at PNC Financial Services Group.

And, there’s no relief in sight. The new year got off to a rough start with a flurry of big corporate layoffs, and there were more on Friday. Airplane maker Boeing Co. said it plans to cut about 4,500 jobs this year, and uniform maker G&K Services Inc. is eliminating 460 jobs.

Employers also are cutting workers’ hours and forcing some to go part-time. The average work week in December fell to 33.3 hours, the lowest in records dating to 1964 — and a sign of more job reductions in the months ahead since businesses tend to cut hours before eliminating positions entirely.

“There is no indication that the job situation would stabilize anytime soon,” said Sung Won Sohn, economist at the Martin Smith School of Business at California State University. “This could turn out to be one of the worst economic setbacks since the Great Depression.”

Economists predict a net total of 1.5 million to 2 million or more jobs will vanish in 2009, and the unemployment rate could hit 9 or 10 percent, underscoring the challenges Obama will face and the tough road ahead for job seekers.

All told, 11.1 million people were unemployed in December. An additional 8 million people were working part time — a category that includes those who would like to work full time but whose hours were cut back or those who were unable to find full-time work. That was up sharply from 7.3 million in November.

If those part-time employees, discouraged workers and others are factored in, the unemployment rate would have been much higher — 13.5 percent in December. That was the highest for that broader category in records going back to 1994.

Worried about the sinking economy and their own financial fortunes, companies are trimming payrolls as a way to cut costs. Government revisions showed losses in both October and November to be much deeper than previously reported.

“Clearly, the situation is dire, it is deteriorating, and it demands urgent action,” Obama said Friday. “For the sake of our economy and our people, this is the moment to act, and to act without delay.”

Obama, who takes over Jan. 20, is promoting a huge package of tax cuts and government spending that could total nearly $800 trillion over two years. With add-ons by lawmakers, the package could swell to $850 billion or higher.

The unemployment rate zoomed from 6.8 percent in November, to 7.2 percent last month, the highest since January 1993.

The rate for blacks climbed to 11.9 percent, the highest since the spring of 1994. The rate for Hispanics rose to 9.2 percent, the highest since May 1996. The rate for teenagers rose to 20.8 percent, the highest since September 1992.

Last year was the first that payrolls had fallen for a full year since 2002, and the loss was the most since 1945, when nearly 2.8 million jobs disappeared. Though the number of payroll jobs in the U.S. has more than tripled since then, losses of this magnitude are still brutal.

The nation’s jobless rate averaged 5.8 percent for the year — up sharply from 4.6 percent in 2007 and the highest since 2003.

During President George W. Bush’s nearly eight years in office, a net total of 3 million jobs were created. In President Clinton’s two terms, roughly 21 million jobs were generated.

Employment last month shrank in virtually every part of the economy — construction companies, factories, mortgage brokers, banks, real-estate firms, accountants and bookkeepers, computer designers, architects and engineers, retailers, food services, temporary help firms, transportation, publishing and waste management. The few fields spared included education, health care and government.

The lost-job total for December probably understated the reality since some companies probably held off on layoffs around the holidays, economists said. Moreover, the government collects the payroll information around mid-month. So the full extent of the layoffs probably wasn’t captured, making it even more likely there will be big reductions in January and that December’s cuts will be revised upward.

Workers with jobs saw modest wage gains. Average hourly earnings rose to $18.36 in December, a 3.7 percent increase over the year. But high prices for energy and food through much of 2008 made people feel that their paychecks weren’t stretching that far.

Corporate layoffs continue to pile up. Earlier this week, drugstore operator Walgreen Co., managed care provider Cigna Corp., aluminum producer Alcoa Inc., data-storage company EMC Corp., Intermec Inc., which makes electronic devices for tracking inventory, and computer products maker Logitech International announced major layoffs to cope with the recession.

AP Business Writer Christopher Leonard in St. Louis contributed to this report.

Copyright © 2008 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press.

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ELYAC Realty- Mortgage rates tumble to record low

Mortgage rates tumble to record low

Average rates on 30-year fixed mortgages drops to 5.1 percent

The Associated Press

updated 10:10 a.m. PT, Wed., Dec. 31, 2008

Rates on 30-year mortgages fell to a record low for the third straight week and borrowers took advantage of the drop, sending new applications soaring.

With the Federal Reserve on the verge of pouring hundreds of billions of dollars into the devastated U.S. housing market, mortgage rates have plunged to the lowest level since Freddie Mac started tracking the data in April 1971.

Low rates are a great opportunity for borrowers with solid credit and plenty of equity in their homes. But those in danger of foreclosure are still sidelined, and defaults are expected to keep rising in the coming months.

Freddie Mac reported Wednesday that average rates on 30-year fixed mortgages dropped to 5.1 percent this week, down from the previous record of 5.14 percent set last week. It was the ninth straight weekly drop. The survey was released a day early due to the New Year’s holiday.

Mortgage rates have plunged by about 1.3 percentage points since late October, Freddie Mac said. For a borrower taking out a $200,000 loan, that means a savings of more than $170 in monthly payments, according to Frank Nothaft, the mortgage finance company’s chief economist.

Meanwhile, mortgage applications last week remained at the highest level in more than five years, the Mortgage Bankers Association said.

The trade group’s weekly application index was essentially unchanged for the week ending Dec. 26. Applications surged earlier this month to the highest level since July 2003, when refinancing activity boomed at the peak of the housing market.

More than 80 percent of applications came from borrowers looking to refinance at more affordable rates, the trade group said.

Interest rates have plunged since the Federal Reserve pledged last month to buy up mortgage-backed securities in an effort to bolster the long-suffering housing market. The Fed, starting early next month, will buy up to $500 billion in securities guaranteed by the government-controlled home loan giants Fannie Mae, Freddie Mac and Ginnie Mae, a federal agency.

“It’s a huge number,” said Derek Chen, an analyst at Barclays Capital, who noted that mortgage rates are still high when compared with yields on long-term Treasury debt.

With the Fed and Treasury Department buying up a significant portion of the new mortgage securities issued by Fannie and Freddie next year, that gap, or spread, could narrow.

If that happens, mortgage rates could fall further, possibly as low as 4.5 percent, Chen said.

The average rate on a 15-year fixed-rate mortgage dropped to 4.83 percent, the lowest point since March 2004. That rate was 4.91 percent last week, Freddie Mac said.

Rates on five-year, adjustable-rate mortgages rose to 5.57 percent, compared with 5.49 percent last week. Rates on one-year, adjustable-rate mortgages fell to 4.85 percent, from 4.95 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year, 15-year mortgages and five-year adjustable rate mortgages averaged 0.7 point last week, compared with 0.5 point for one-year adjustable-rate mortgages.

Meanwhile, home prices dropped by the sharpest annual rate on record in October and there are no signs the housing pain is over.

The Standard & Poor’s/Case-Shiller 20-city housing index, released Tuesday, fell by a record 18 percent from October last year, the largest drop since its inception in 2000. The 10-city index tumbled 19.1 percent, its biggest decline in its 21-year history. Prices are at levels not seen since March 2004.

URL: http://www.msnbc.msn.com/id/7148582/

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ELYAC Realty- Automakers Fear a New Normal of Low Sales

By BILL VLASIC and NICK BUNKLEY

DETROIT — The historic collapse of the new-car market dragged on in December, raising questions of whether the auto industry will ever again have sales levels that it took for granted just a few years ago.

The across-the-board decline of 35 percent, reported by auto companies on Monday, is certain to put more pressure on the fragile finances of several manufacturers, particularly General Motors and Chrysler.

G.M. and Chrysler received emergency federal loans last week to stave off bankruptcy while they accelerated their reorganization efforts.

But unless consumers change course and return to vehicle showrooms, the entire industry will be forced to make sweeping adjustments to cope with declining demand.

After several years of sales topping 16 million vehicles, the United States market plummeted to 13.2 million cars and trucks sold in 2008. Analysts expect another sizable decrease this year and do not predict a year with 15 million in sales until 2012 or later.

“After an era of excess indulgence, we’re now entering a prolonged period of conservation,” said John A. Casesa of the consulting firm Casesa Shapiro Group. “Trading in a car every three years is a luxury that the average American can no longer afford.”

The dismal sales reports for December punctuated the worst year for vehicles sales since 1992. Sales dropped 31 percent at G.M., 32 percent at the Ford Motor Company and a stunning 53 percent at Chrysler, a unit of the private equity firm Cerberus Capital Management.

Foreign automakers hardly fared better, with sales plunging 37 percent at Toyota, 36 percent at BMW and 35 percent at Honda.

For the year, industrywide sales declined by 18 percent — the worst year-to-year drop-off since the early 1970s.

The impact of the shrinking market could be felt for years to come, as automakers will continue to cut production and employment, and reduce the number of new vehicles they bring to the market.

“With these declines in revenues, you will see research and development budgets cut,” said Jesse Toprak, chief auto analyst for Edmunds.com, a Web site that offers car-buying advice. “We are going to have fewer new vehicles and less variety for at least the next couple of years.”

Mr. Toprak is forecasting sales of 12.4 million vehicles this year and 13.5 million in 2010. He said the chances of the industry reaching annual sales of 16 million were slim for the foreseeable future.

“The question is, What will be the natural level of demand in the U.S. market when the economy recovers?” he said. “Based on our best guess, it is probably in the range of 14.5 million to 15 million.”

Auto executives said on Monday that the industry had little chance of improving in the first half of 2009 because of a continued lack of available credit for prospective car buyers and a profound lack of confidence in an overall economic recovery.

“The first quarter is going to be bad no matter how you look at it,” said Emily Kolinski Morris, a senior Ford economist. “Once we get into the second quarter, we’ll have a better idea.”

G.M.’s chief market analyst, Michael C. DiGiovanni, said the automaker was predicting industry sales of 10.5 million to 12 million vehicles for the year.

While the Bush administration approved up to $17.4 billion in loans to G.M. and Chrysler, analysts say they expect the Detroit auto companies to need longer-term assistance from the incoming president, Barack Obama.

“The internal problems of the Big Three are so great, there is no way they can survive without government help for several years,” Mr. Casesa said.

Both G.M. and Chrysler have to submit reorganization plans to the Treasury Department by mid-February as a condition of their loans.

“We have prepared our restructuring plan at a worst-case scenario,” said James E. Press, a Chrysler vice chairman. “We’re hoping for the best, but we’re prepared for the worst case.”

Mr. Press said Chrysler was operating as if the severe fall in demand in recent months was the “new reality” for an industry that had grown accustomed to nearly unfettered growth since the mid-1990s.

The industry thrived on cheap credit that allowed automakers to offer low-interest loans and rock-bottom lease payments to encourage consumers to regularly trade in and upgrade their vehicles.

As a result, American consumers went on a sustained buying spree for new cars, trucks and S.U.V.’s.

In 1970, less than 6 percent of American households owned three or more vehicles, according to the Department of Transportation. By 2000, that percentage had jumped to 18.

More than 244 million vehicles were in operation in 2006, far outnumbering the 202 million licensed drivers in the country, according to the most recent federal statistics.

Auto companies fed the growing appetite for vehicles by broadening their lineups with new products, like car-based crossover vehicles, inexpensive sports cars and a wide array of luxury models.

Companies were forced to redesign their cars more frequently to keep up in the race to put ever-fresher products in dealerships.

“In 1988, the average age of a car in a U.S. showroom was 4.1 years,” said Mr. Casesa, referring to the time that lapsed in model redesigns. “Today it is 2.9 years, which is a tremendous difference.”

With annual sales of 16 million as the norm, the industry expanded its infrastructure to meet demand.

Even though the Detroit automakers have been shutting excess factory capacity and shedding jobs to cut costs, their foreign rivals have been adding new plants in the United States to make up the difference.

Now, with sales plunging to levels not seen since the early 1990s, the industry will be forced to cut back significantly on product development.

Analysts also predict that the era of expansion of foreign companies in the United States is probably over, as well.

“So many foreign transplants came so quickly because they had visions of grandeur in their eyes,” David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said. “Now they’re saying, ‘Oh my, what have we done?’ ”

Besides the drop in demand caused by the tight credit and a weak economy, the quality of vehicles themselves has improved to the point where consumers do not need to replace them as often.

Twenty years ago, the median age of cars and trucks in use in the United States was about six years. Now the typical vehicle on the road is nine years old, according to federal statistics.

“You may not want to drive your car for 10 years, but you can if you need to,” Mr. Cole said.

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ELYAC Realty- Obama Pushes for Stimulus on Capitol Hill

By JEFF ZELENY and DAVID M. HERSZENHORN

WASHINGTON — Two weeks before assuming power, President-elect Barack Obama took his economic recovery package to Capitol Hill on Monday and worked to build a bipartisan coalition to endorse his plan of tax cuts and new spending with an urgent appeal “to break the momentum of this recession.”

Mr. Obama, on his first full day in Washington since the election, held a series of face-to-face meetings with Democrats and Republicans as he began spending his political capital. He spoke of the nation’s economic condition in dark terms and urged Congress to pass the legislation within a month.

“Right now, the most important task for us is to stabilize the patient,” Mr. Obama said. “The economy is badly damaged — it is very sick. So we have to take whatever steps are required to make sure that it is stabilized.”

The meetings were a mix of symbolism and substance between the man who will be sworn in as the 44th president and the Congressional leaders who hold the fate of his agenda in their hands. The sessions, aides said, were particularly aimed at encouraging Republicans to buy into the plan and help ease resistance over a $775 billion price tag.

Mr. Obama pledged to help advance the legislation in any way he could, participants said, including inviting skeptical members of Congress to meet with him at his transition headquarters or at his temporary residence, the Hay-Adams Hotel.

“This is not a Republican problem or a Democratic problem at this stage,” Mr. Obama said Monday afternoon. “It is an American problem, and we’re going to all have to chip in and do what the American people expect.”

After meeting for about an hour in the Lyndon B. Johnson Room near the Senate chamber, Congressional leaders said they expected a bipartisan effort to approve the economic stimulus package by early February. Lawmakers said they were waiting for Mr. Obama to present a written proposal — perhaps even draft legislation — within days. Various House and Senate committees would fill out the details.

For Mr. Obama, it was his first return to the Capitol since he was elected on Nov. 4, and another reminder of how rapid his ascent has been. Four years after he took his first steps into the building, arriving as a freshman senator from Illinois, he swept in Monday under the cover of considerable security, with some roads barricaded outside the building and corridors inside closed off to accommodate his movements. At one point, large groups of tourists were forced to linger in the Rotunda to wait for Mr. Obama to leave his morning meeting with Speaker Nancy Pelosi.

The president-elect returned to the Capitol in the afternoon for a meeting with Vice President-elect Joseph R. Biden Jr. and Senator Harry Reid, the majority leader. He then proceeded past a huge crowd of photographers to the meeting with House and Senate leaders from both parties.

Mr. Obama listened as Republicans raised concerns about waste and transparency in the economic stimulus plan. He agreed with a suggestion raised by Representative Eric Cantor, Republican of Virginia, about putting the entire contents of the legislation online in a user-friendly way to see how the money is being spent.

But participants in the private meetings said there did not seem to be agreement on the scale of the package. Mr. Reid said many economists have urged a bill of $800 billion to $1.2 trillion, while Mr. Obama’s advisers estimated legislation at no more than $775 billion.

The House Republican leader, Representative John A. Boehner of Ohio, said he was concerned about the overall size of the stimulus package. He said the American public was rightly agitated by the lack of accountability in the bailout bills that were abruptly approved last fall.

“While we want to get the economy moving again,” Mr. Boehner said, “the overall size and how we craft this is going to be very important.”

Still, Republicans praised Mr. Obama’s willingness to hear their ideas, which is something they have often felt did not take place under President Bush. They urged Mr. Obama to use the stimulus bill to provide a substantial tax cut to middle-class families and small businesses, but also pressed him to ensure that the legislative process would be fair to the diminished Republican minorities in both chambers.

The Senate Republican leader, Mitch McConnell of Kentucky, also said he encouraged Mr. Obama to consider providing aid to states in the form of loans that would have to be repaid, as a means of preventing wasteful spending.

“I thought the atmosphere for bipartisan cooperation was sincere on all sides,” Mr. McConnell said after the meeting. He added, “The best way to stimulate the economy obviously is to put money directly in the pockets of taxpayers.”

The legislation, which Mr. Obama and his economic advisers discussed Monday, includes about $300 billion in tax cuts for workers and businesses. A part of the plan that was a centerpiece of the presidential campaign would provide credits of up to $500 for most workers at an overall price of $150 billion. The plan also includes more than $100 billion in tax incentives for business to create jobs and invest in factories and equipment.

The series of meetings with lawmakers on Capitol Hill highlighted the fact that the new president is coming from their own ranks, for the first time since John F. Kennedy.

Mr. Reid, speaking to reporters after the meeting, said lawmakers were committed to adopting the economic plan as quickly as possible. But Congressional Democrats and the Obama transition team have pushed back their timetable, which originally called for the legislation to be ready for Mr. Obama to sign on the day of his inauguration. Instead, they said their goal was to have the bill completed no later than the Presidents’ Day holiday in mid-February.

Ms. Pelosi, who met with Mr. Obama twice on Monday, said that the stimulus bill would be taken up first in the House and that there was agreement to move swiftly.

“I won’t make any announcement about how soon, but we all know what our tasks are,” Ms. Pelosi said. “We know what the time constraints are. They are dictated by the sense of urgency that the American people have about their economic well-being.”

As the stimulus plan began to take shape, the search intensified for a new commerce secretary, one day after Gov. Bill Richardson of New Mexico withdrew from consideration for the position.

Democratic officials familiar with the search said prospective candidates include William Daley, who served as commerce secretary in the Clinton administration, and Laura Tyson, who has advised Mr. Obama on the economy and served as chairwoman of the Council of Economic Advisers under Mr. Clinton.

Mr. Obama, aides said, would like to make an announcement before week’s end.

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ELYAC Realty- Fed appears ready to cut key interest rate again

Fed appears ready to cut key interest rate again

Central bank’s leaders will begin a two-day meeting on Monday

The Associated Press

updated 6:43 a.m. PT, Mon., Dec. 15, 2008

WASHINGTON – With the country spiraling deeper into recession, the Federal Reserve is ready to slash its key interest rate — perhaps to an all-time low — in hopes of cushioning some of the economic fallout felt by many struggling Americans.

To battle the worst financial crisis since the 1930s, Fed Chairman Ben Bernanke and his colleagues already have ratcheted down their main lever for influencing the economy — the federal funds rate — to 1 percent, a level seen only once before in the last half-century.

The Fed opens a two-day meeting Monday to assess to economy and decide its next move on rates. Another reduction to the funds rate, the interest banks charge each other on overnight loans, is all but certain to be announced Tuesday.

Many economists predict the Fed will cut its rate in half — to just 0.50 percent. A few think the Fed could opt for an even more forceful action — lowering rates by a whopping three-quarters percentage point or more. If that larger cut occurs, it would be the lowest on records that track the monthly average of the targeted funds rate going back to 1954.

Even an aggressive rate reduction won’t turn the economy around, analysts said.

“It is not so much going to give the economy a big push forward. It’s more a case of trying to help the economy from being pushed further backward by all these negative events,” said Stuart Hoffman, chief economist at PNC Financial Services Group.

However deeply the Fed decides to cut rates, the prime rate — now at 4 percent — for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate is used to peg rates on home equity loans, certain credit cards and other consumer loans. Cheaper rates could give pinched borrowers a dose of relief.

The goal of lower borrowing costs is to entice people and businesses to spend more, which would revive the flat-lined economy. So far, though, the Fed’s aggressive rate reductions have failed to lift the country out of a recession that started last December.

Clobbered by the financial crisis, worried banks have hoarded their cash and been extremely reluctant to lend money to customers. Fearful consumers, watching jobs vanish and their investments tank, have sharply cut back their spending, including big-ticket purchases like homes and cars that typically involve financing.

The negative forces have fed off each other, creating a vicious cycle that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to break.

To unlock lending and get financial markets to operate more normally, the U.S. has resorted to a string of radical actions, including a $700 billion financial bailout where the government is making cash injections in banks in return for partial ownership stakes.

In terms of rate cuts, the Fed is getting ever closer to running out of ammunition.

It can lower the funds rate only so far — to zero. Even if that were to happen — a point of debate among economists — the prime rate would fall to 3 percent but no lower.

Against that backdrop, Bernanke says the central bank is exploring other ways to stimulate the economy.

The Fed could buy longer-term Treasury or agency securities on the open market in substantial quantities, Bernanke says. This might lower rates on these securities and help spur buying appetites.

Another option the Fed has mulled: issuing its own debt, which would give the central bank cash and more flexibility to battle the financial crisis. To do that, however, the Fed would need new powers from Congress.

“The Fed wants to show that it has tools and options and is not out of tricks because interest rates are very low,” said Michael Feroli, economist at JPMorgan Economics. “The problems holding back the economy are fairly long lived in nature.”

To combat the financial crisis, the Fed already has created first-of-its-kind programs, such as getting cash directly to companies by buying up mounds of “commercial paper,” the short-term debt firms use to pay everyday expenses such as payroll and supplies.

It also recently launched massive programs to boost the availability of consumer credit, including that for cars, student loans, homes and credit cards. The Fed also is making loans to banks, is providing a financial backstop to the mutual fund industry, and has injected billions of dollars in financial markets here and abroad.

The Fed could opt to expand programs by enlarging loans it’s now making, providing loans to other types of companies, or buying more and different types of debt. The Fed’s balance sheet has ballooned to $2.2 trillion, from close to $900 billion in September, reflecting some of those other activities to get credit flowing again.

Even with all the bold moves, the economy continues to sink deeper into despair.

Skittish employers axed 533,000 jobs in November alone. That drove the unemployment rate up to 6.7 percent, a 15-year high.

Since the start of the recession, the economy has shed nearly 2 million jobs. Analysts predict another 3 million more will be lost between now and the spring of 2010.

Last week alone, Bank of America Corp., tool maker Stanley Works and Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, announced job cuts.

General Motors Corp., Chrysler LLC and Ford Motor Co., meanwhile, are fighting for their survival. GM and Chrysler have said they’re in danger of running out of money within weeks. The White House is exploring new ways to help Detroit after rescue efforts collapsed in Congress.

With the employment market eroding and consumers retrenching, the economy could stagger backward at a shocking 6 percent rate in the current October-December quarter, analysts predict. It shrank at a 0.5 percent pace in the third quarter.

President-elect Barack Obama is advocating an economic recovery plan that includes spending on big public works projects to bolster jobs. His plan also includes tax cuts to spur consumers to spend more and businesses to step up investment and hiring.

Americans are sorely feeling the toll of the housing, credit and financial crises.

Households’ net worth fell 4.7 percent in the third quarter to $56.5 trillion as people watched the value of their homes and investments tank. It marked the fourth straight quarterly decline, the Fed said.

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Fed looks likely to cut key interest rate again

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ELYAC Realty- Mortgage Troubles Are Moving Downtown

Like others who got caught up in the recent commercial real estate frenzy, Joseph Moinian, the owner of 20 million square feet of office towers, apartment buildings and hotels throughout the country, sought to take advantage of the huge run-up in values as banks feverishly competed to make loans with exceedingly generous terms.

But now that office rents in Manhattan and elsewhere are declining and empty space is beginning to flood the market, Mr. Moinian, who is developing a 58-story W hotel and residential tower just south of the World Trade Center, finds himself with a problem.

He recently missed part of a $319,000 monthly payment on a $66.5 million mortgage for 60 Madison Avenue, a second-tier Midtown Manhattan office building that he refinanced in April 2007, Commercial Mortgage Alert, a trade publication, reported in October. The cash flow from the property does not come close to what was projected in the loan documents, according to Realpoint, a credit ratings agency which has put the loan on its watch list.

Mr. Moinian quickly made good on the delinquent payment and has pledged to keep current on future payments, but his difficulties demonstrate that the troubles that have already begun to afflict the commercial real estate industry will be widespread and not limited to high-profile deals.

So far, the delinquency rate for loans that were packaged and sold to investors as commercial mortgage-backed securities and are at least 30 days behind is only 0.63 percent, Realpoint said. But the unpaid balance of delinquent loans — $5.3 billion as of October — has increased by 70 percent since January.

And analysts say the low default rate is deceptive. For one thing, as banks competed for business during the heady period from 2005 to 2007, most of the loans they wrote were interest-only, at least initially, so monthly payments were artificially low for the first few years, said Mike Kirby, a principal in Green Street Advisors, a research company.

Delinquencies are expected to accelerate next year. And many more delinquencies and defaults are expected in 2010, when five-year interest-only loans issued in 2005 begin to mature and borrowers are unable to refinance them because credit is scarce and property values have declined instead of risen.

“Defaults on mortgages are a trickle right now, but the pace will pick up over the next year, more than I would have thought in October,” Mr. Kirby said. “It’s coming, and it can’t be avoided. There’s going to be a lot of it, and it’s going to be bad.”

As the market heated up in the middle of the decade, the volume of securitized loans exploded — to $200 billion a year in the period from 2005 to 2007, from $70 billion a year in the 2000-to-2004 period, according to Green Street. And as volume picked up, projections of rent growth became increasingly optimistic and the reserve funds intended to make up for the amount not covered by the property’s cash flow were often inadequate, analysts said. The $1.5 million debt-service reserve fund for 60 Madison Avenue has dwindled to $7.80, Realpoint said.

“The underwriters were very aggressive,” said Victor Franco M. Calanog, the senior economist at Reis, a research company. “They were under a lot of pressure for deals to be made. They allowed investors to take a lot of risks.”

When Mr. Moinian refinanced 60 Madison Avenue, a 1910 building at 27th Street, it was 86.5 percent occupied. But the 10-year loan was underwritten for occupancy of 95.1 percent, according to documents filed with the Securities and Exchange Commission. In the interim, the building has lost tenants instead of gaining them. CoStar Group, a research company, said that occupancy was now 66 percent.

The mortgage was written as if the annual net cash flow from the building amounted to $4.9 million, when in fact the building was generating only $3.2 million then and is bringing in only $1.9 million now, Realpoint said.

Mr. Moinian, a co-owner of the Sears Tower in Chicago, declined to be interviewed. But he told Commercial Mortgage Alert that he made up the shortfall in the debt service payment as soon as he learned about it. “We will continue to make all payments promptly,” he said in a statement.

Some borrowers are already rushing to try to renegotiate their loans because the current terms are untenable. This can only be done by transferring the mortgage to a special servicer, a financial services unit that is charged with resolving problems with distressed assets in the interests of investors.

Last month, the industry was shocked to discover that two loans JPMorgan Chase had packaged with other mortgages and sold to investors in May as a commercial-mortgage-backed security were delinquent. Both loans — one for an open-air shopping center in the Southern California community of Corona, and another for Westin hotels in Tucson and Hilton Head, S.C. — were transferred to a so-called special servicer.

The transfer startled investors because the loans were originated and sold to investors long after the credit squeeze became apparent in the summer of 2007, said Steve Kuritz, a Realpoint senior vice president. “You would figure a 2008 deal would be a little cleaner,” he said.

The 350,000-square-foot shopping center, the Promenade Shops at Dos Lagos, was developed by Poag & McEwen, a Memphis company that is often credited with originating the concept of “lifestyle center” — a retail property without a roof or a traditional department store anchor that is aimed at relatively affluent shoppers. The loan anticipated that the shopping center would bring in $10.5 million a year, but the net operating income for 2007 was only $6.3 million, Realpoint said.

Josh Poag, the chief operating officer of Poag & McEwen, said the shopping center had been on track to achieve revenue goals until the retail industry began to struggle. He said the shopping center also faced competition from other projects that sprang up anticipating further growth in the counties east of Los Angeles, where Corona is located. Instead, the area is among those hit especially hard by the housing crisis.

“We’ve had three retailers close their doors,” Mr. Poag said. “Other retailers are struggling to meet their payments and some are getting dangerously late — are on the verge of not paying the rent.” He said the company believed in the shopping center’s prospects and hoped to work out a solution with the special servicer.

As the recession progresses, many borrowers with leveraged loans will seek to modify terms, said Alan L. Todd, an analyst at JPMorgan Chase. “If the borrower knows that going forward, the cash flow, or net operating income, is expected to drop, the first time they hit a 30-day delinquency, they’re going to say, ‘I need help,’ “ he said. “They can see how it is going to play out.”

But there is likely to be a tug of war between property owners and investors who bought the bonds backed by the mortgages. The owners will want their mortgages extended, said Orest Mandzy, the managing editor of Commercial Real Estate Direct, a news service. But holders of AAA-rated bonds, the least risky, are likely to press the special servicer to sell the loan so that they can get their money back. “That’s going to be the sort of battle that goes on,” Mr. Mandzy said.

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ELYAC Realty- It May Be Time to Think About Buying a House

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.

Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.

That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.

Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.

If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.

But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.

As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.

This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.

Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.

When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”

The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.

Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.

You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.

John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.

While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”

For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.

Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”

One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.

Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.

Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.

Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.

“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”

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ELYAC Realty- White House Struggles to Find G.O.P. Support for Auto Bailout

WASHINGTON — Even as House Democrats pressed for a vote Wednesday afternoon on a government rescue of the automobile industry, the Bush administration failed to generate enough support for the measure among Senate Republicans who have the power to kill the bill, dimming the prospects for the $15 billion plan.

The White House chief of staff, Joshua B. Bolten, attended a weekly lunch of Republican senators in an effort to persuade them to support the auto rescue plan. But he encountered stiff resistance. Some senators said the automakers should be allowed to go into bankruptcy while others said the White House plan for a car czar was weak.

Senator George V. Voinovich, Republican of Ohio, and one of the few outspoken Republican supporters of a government rescue for the auto industry, emerged from the lunch and suggested there was little hope that the bill could be approved. He said that even substantial changes to the bill may not change the minds of many colleagues.

Efforts by the Bush administration and Congressional Democrats to fashion a government rescue of the foundering American auto industry hit other snags on Wednesday, with a dispute over the precise wording of the bill. That led the House and Senate to put forward competing versions of the legislation.

The last-minute disagreement centered on a single word — with the Senate bill requiring the automakers “to comply with all applicable federal fuel efficiency and emissions requirements” and the House bill referring to “all applicable fuel efficiency requirements,” which would include state emissions rules that the automakers oppose.

Aides to House Speaker Nancy Pelosi said that she was prepared to push ahead with plans for a vote on the legislation Wednesday afternoon, while Democratic Senate aides warned that the House version of the bill was doomed in the Senate because it would be rejected by Republicans and would never be signed by President Bush.

Even as negotiators sought to iron out that final disagreement, a group of Republican senators held a news conference to say that they would oppose an auto bailout in any form and that they stood ready to filibuster the bill. It was not immediately clear if the opposition would be sufficient to block the measure.

Senator Richard C. Shelby, Republican of Alabama, said he remained opposed to a bailout. “I intend to talk to the American people about it from the Senate floor,” he said.

In the broadest sense, the competing bills provide an identical government rescue of the two most imperiled automakers, General Motors and Chrysler, in the form of $15 billion in emergency loans. In exchange for the loans, the auto manufacturers would have to submit to strict government oversight and carry out sweeping reorganization plans.

The auto bailout plan would be supervised by a so-called car czar to be appointed by President Bush within the executive branch.

The bill also provides for extensive taxpayer protections that would give the government warrants to take an equity stake in the automakers. It would limit executive pay, bar “golden parachute” severance packages and prohibit the paying of shareholder dividends while the emergency government loans are outstanding.

The bill would require the companies and their stakeholders, including creditors, labor unions, and dealers to agree on sweeping reorganization plans that would lead to long-term financial viability. If they fail to agree, the auto czar would be able to impose a plan, and could also force the companies into bankruptcy if they fail to meet requirements.

Even if the final dispute over the legislation could be resolved on Wednesday, it seemed likely that the Senate would not be able to approve the bill until sometime next week.

Senator Shelby was joined by three other Republican senators, John Ensign of Nevada, Tom Coburn of Oklahoma and David Vitter of Louisiana, in speaking against a bailout.

“How does anybody expect some ‘car czar’ to make the decisions that are right?” Mr. Ensign asked rhetorically as he and his colleagues alluded to the decades-long, systemic problems of the domestic auto industry.

Before the unexpected snag, Congressional aides said a deal between House Democrats and the White House was close, and White House aides said good progress had been made. But House Republicans, who are at a 236-to-198 disadvantage, were circulating an alternate plan that they said would allow the car companies to be competitive again without putting public money at risk.

Some Republicans, notably Mr. Shelby, have said the carmakers’ problems were of their own making and they should be forced into bankruptcy, if necessary. Others, like Mitch McConnell of Kentucky, the minority leader, have said they would like to find a way to save the companies without putting taxpayers’ money at risk.

Republican support for a rescue is vital in the Senate, since 60 votes are needed to advance the measure because of procedural rules. With the resignation of President-elect Barack Obama, Democrats have only a 5o-to-49 advantage in the Senate, and it is not clear if the White House can muster broad support among Republicans.

The rescue plan would extend $15 billion in emergency loans to General Motors and Chrysler, the two most imperiled automakers, and would subject them to far-reaching government oversight at the direction of a so-called car czar to be named by Mr. Bush.

Ford is not seeking short-term loans because it is not as bad off as the other two big automakers.

By Tuesday evening, White House and Democratic Congressional negotiators, meeting at the Capitol, had narrowed their differences to one major issue: a proposal to bar the automakers from fighting state laws that seek to cap greenhouse gas emissions.

A senior administration official said that bill would set a firm deadline of March 31 for the car czar to certify that the automakers and their stakeholders, including creditors, labor unions and dealers, had agreed to carry out a long-term viability plan and that the bill would set out “a hard economic definition of what it means to be a viable firm.”

The official said that if there were no such agreement, the auto czar would be required to demand repayment of the administration rather than giving the czar discretion to call in the loan, which Democrats had initially proposed. The bill would also allow the auto czar to impose a viability plan, which could force a company into bankruptcy.

To address concerns raised by the White House on Monday, the bill will require the car czar to call in the emergency loans for repayment should the auto companies fail to carry out aggressive reorganization plans or meet other obligations in the law.

Congressional Democrats also agreed to a White House request to raise to $100 million, from $25 million, the size of business transactions requiring the approval of the auto overseer. The administration said it did not want to micromanage the automakers.

Aides suggested that Speaker Pelosi, whose district is in California, where an emissions lawsuit is under way, might be willing to compromise on that point in exchange for White House assurances that Republican lawmakers would support the bill.

Meanwhile, House Republicans were putting forth a proposal calling for the government to provide insurance to cover up to half the losses of new investment in the auto industry in the case of default. That way, they said, taxpayers’ money would be protected and private investment would be encouraged.

The Senate majority leader, Harry Reid of Nevada, said that lawmakers might need to work through the weekend to get the rescue plan approved. But he expressed resolve.

“There will be no stalling us from doing this,” Mr. Reid said on the Senate floor on Tuesday afternoon. “We are going to complete this legislation.”

The Democrats may face difficulties generating votes in their own caucus as well. There were 10 Democrats who voted against the $700 billion financial system bailout in October, some of whom could similarly oppose a taxpayer rescue of the auto companies.

In addition, Senators John Kerry of Massachusetts and Amy Klobuchar of Minnesota, both Democrats, are scheduled to leave Washington on Wednesday for a trip overseas.

Mr. Reid said he would urge lawmakers in both parties to be available to vote on the auto-rescue package. “I would suggest it’s not a very good vote to miss,” he said. “Maybe multiple votes.”

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ELYAC Realty- Job market is awful, but may get worse

Job market is awful, but may get worse

Sharp jump in unemployment shows the economy is rapidly weakening

ANALYSIS

By John W. Schoen

Senior producer

msnbc.com

updated 12:22 p.m. PT, Fri., Dec. 5, 2008

Friday’s report showing the biggest monthly job loss in 34 years confirmed forecasters’ worst fears that the decline in the U.S. economy accelerated in November, after the financial system seized up and consumers hunkered down. As the government scrambles to break the downward spiral, some economists are predicting the unemployment rate is headed substantially higher through next year.

Since the start of the recession in December 2007, the economy has lost 1.9 million jobs, lifting the number of Americans out of work to 2.7 million. At 6.7 percent, the jobless rate has now risen 2.3 percentage points since it bottomed in March 2007.

Most sectors of the economy are now losing jobs, including manufacturing, construction, financial firms, retailers, and the leisure and hospitality industries. Only government, education and health services managed to post job gains.

Friday’s report also slashed another 200,000 jobs from the numbers already reported for September and October — a sign that the economy was hit harder than first reported when the credit crunch deepened.

Economists, who had been expecting a loss of some 350,000 jobs last month, were stunned by the news, describing the report as “horrendous,” “horrific” and “eye-poppingly bad.”

“We’re scrambling around here for historical parallels,” said Robert Barbera, chief economist at ITG, an investment advisory firm.

More big job cuts are on the way, as companies slash costs to try to offset the expected drop in revenues. In just the past few weeks, major employers like AT&T Inc., DuPont, Citibank, JPMorgan Chase and Pratt & Whitney have announced steep job cuts.

“These numbers are shocking,” said economist Joel Naroff, president of Naroff Economic Advisors. “Companies are sharply reacting to the economy’s problems and slashing costs. They are not trying to ride it out.”

Chrysler, General Motors and Ford continued to fight for survival Friday with another round of testimony on Capitol Hill, where the companies’ CEOs are asking lawmakers for as much as $34 billion in emergency aid. But the auto industry has already sustained major damage. Car sales cratered to a 26-year low last month after the financial storm erupted in September.

“This is unprecedented in the history of the industry — and it happened from one day to the next,” said Mike Jackson, chairman and CEO of AutoNation, the largest U.S. chain of car dealers. “The strong will survive and the weak will be swept away by this toxic combination of Depression sales level and the lack of credit for business. It’s going to be painful and unfortunate, but it does need to happen.”

What makes the latest data so worrisome is that they point to an economic decline that is picking up speed.

“The economy is now locked in a vicious downward spiral in which employment, incomes and spending are collapsing together,” said Nigel Gault, chief U.S. economist at IHS Global insight.

Consumers also are taking a hit to their finances as the collapse in housing prices and the rise in foreclosures that tipped the economy into recession show no signs of abating.

A record one in 10 American homeowners with a mortgage were either in foreclosure or at least a month behind on their payments at the end of September, according the latest survey released Friday by the Mortgage Bankers Association. The percentage of auto loans that was behind by 60 days or more rose 15.9 percent in the third quarter compared to last year, according to credit reporting agency TransUnion.

As consumers struggle to keep up with existing debts, lenders have cut credit card limits and tightened up on extending new loans, which has further crimped spending. The collapse of the stock market has wiped out trillions of dollars of personal wealth, forcing consumers to try to increase savings to make up for those losses.

All of which is accelerating the pullback in consumer spending – the main engine of the U.S. economy that accounts for roughly two-thirds of gross domestic product. Consumption dropped 3.7 percent in the third quarter; the spending pullback is expected to worsen during the holiday season that retailers rely on for the bulk of their profits. Gault expects consumer spending to shrink by 4.7 percent in the fourth quarter.

Economists already have begun comparing the current downturn to the back-to-back recessions of 1980-1982. The unemployment rate peaked at 10.8 percent then after the government pushed interest rates to high double-digits to try to break a decadelong inflationary spiral.

“You had interest rates that soared, the credit system shut down, and everything stopped,” said Barbera. “That’s what this (jobs) number says, and that’s what it suggests for the GDP numbers.”

Before Friday’s jobs data, economists had expected GDP to contract at a sharp 4 to 5 percent rate in the current fourth quarter. Barbera said the latest data indicated the drop could be more like 8 percent.

“We’re in a deep contraction with very little offset now,” said former Treasury Secretary John Snow. “The consumer is parked. China is slowing. India’s slowing — Brazil, Mexico. Virtually every sector of the American economy is being affected.”

To some observers, the current economy is in even worse shape than the early 1980s recession that was brought on by the government-induced credit squeeze. Once the government cut rates, the economy recovered quickly.

Now the government has so far been unable to halt the steep decline, despite the commitment of trillions of dollars in spending, investment and loan guarantees.

The current credit drought follows the excesses of a prolonged period of low interest rates and easy-money lending that began to reverse course in 2007 and all but shut down lending in mid-September. To spur borrowing, the Federal Reserve has cut the target overnight lending rate to 1 percent and is expected to cut by as much as a half-percentage point on Dec. 16. But short term market rates have been well below the Fed’s official target for weeks.

With short-term rates approaching zero, the Treasury and the Fed are considering other measures to try to drive down the cost of long-term borrowing, including mortgage rates.

President-elect Barack Obama already has called for a half-trillion-dollar government spending package to generate 2.5 million jobs over his first two years in office, which Congress is hoping to have ready by Inauguration Day in January. The latest data may prompt enactment of an even bigger spending package.

“We had assumed a $550 billion package over three years — we will need more than that,” said Gault. “The trick will be making the stimulus effective quickly, which is difficult since infrastructure projects take time to gear up.”

Regardless of the size of the package, Friday’s jobs report heightens the urgency of an aggressive government response, said Mark Zandi, an economist at Moodys’ Economy.com.

“The only way out is for government to be extremely aggressive on every front — the Federal Reserve, economic stimulus, help for the automakers, extending out TARP money (to buy bad assets from banks) — everything,” he said. “Because we’re now in this self-reinforcing, negative cycle, and the only way out is for the government to fill the void.”

Even if the government acts quickly and stems the slide in the financial markets and the economy, some economists believe the jobless rate will top 10 percent before beginning to subside. If this recession drags on past mid-2009, it would be the longest since the Great Depression. (The recessions of 1973-75 and 1981-82 both lasted 16 months according to the National Bureau of Economic Research.)

In any case, the eventual recovery will likely be more gradual and weaker than after past recessions, according to Stuart Hoffman, chief economist at PNC Financial.

“I think the mind-set will be different on the other side of this recession over the next couple of years,” he said. “That will prevent borrowers and would-be borrowers and lenders from saying, “Alright, game’s back on. Let’s start running house prices up and credit cards and credit limits up. It’s not going to happen.”

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ELYAC Realty- Treasury weighs action on mortgage rates

Treasury weighs action on mortgage rates

Plan would aim to buoy housing market by forcing down the cost of loans

By David Cho, Zachary A. Goldfarb and Dina ElBoghdady

The Washington Post

updated 12:30 a.m. PT, Thurs., Dec. 4, 2008

The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to dramatically force down rates and stimulate the moribund housing market, according to sources familiar with the proposal.

Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home purchases, according to the sources. But to participate in the government’s program, mortgage lenders would have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year fixed-rate loans.

These securities would be purchased primarily from Fannie Mae and Freddie Mac, the financing giants that buy most mortgages from U.S. lenders, according to sources who spoke on condition of anonymity because the plan has not been finalized.

The cost of the plan and source of funding remain unclear. One possibility is for the Treasury to raise money by issuing bonds to the public at 3 percent interest. This could allow the government to turn a profit because it would be buying securities that pay 4.5 percent.

At a meeting attended by the Treasury’s Interim Assistant Secretary for Financial Stability Neel Kashkari and the National Association of Realtors in mid-November, senior Treasury officials said they were optimistic that subsidizing lower mortgage rates with taxpayer dollars would help revive the housing market, sources said.

Treasury officials told the Realtors that the plan could be a more effective way to help homeowners than focusing efforts solely on borrowers who are struggling to meet their monthly payments, the sources said. Democratic lawmakers have been advocating a proposal to modify the mortgages of distressed homeowners.

A source said Treasury officials suggested at the meeting that the Realtors start a grass-roots campaign to press the mortgage rate plan with lawmakers.

Treasury officials described the situation as fluid and said the plan was still being finalized, according to people in contact with the department. The officials expressed concerns yesterday that premature disclosure of the plan could prompt Americans to put off buying homes and hold out for a better rate, sources added.

Treasury spokeswoman Brookly McLaughlin said she would not comment on the matter.

Key to solving financial crisis
Treasury Secretary Henry M. Paulson Jr. has said that a recovery in the housing market is key to solving the financial crisis. Such a rebound would restore confidence in the banking system and support the value of troubled assets backed by mortgages.

Though he has said a mortgage modification plan proposed by Federal Deposit Insurance Corp. Chairman Sheila C. Bair could help the housing market, Paulson has expressed concerns about whether it would reward borrowers who bought houses they couldn’t afford. Bair’s plan would use tens of billions in federal funds to modify adjustable-rate mortgages for several million financially troubled homeowners.

The initiative under review at the Treasury would be an alternative. Borrowers would have to meet standards set by Fannie Mae, Freddie Mac or the Federal Housing Administrations that include documenting their income, sources said. Fannie and Freddie were put under government control in September. The Treasury plan would not apply to refinances.

Any efforts by the Treasury to lower rates on new mortgages would work in concert with a Federal Reserve plan announced last week to buy $500 billion worth of existing mortgage-backed securities issued by Fannie Mae and Freddie Mac, and $100 billion worth of those companies’ debt.

The Fed was pleasantly surprised that 30-year fixed mortgage rates fell by as much as three-quarters of a percentage point in anticipation of their program. Homeowners rushed to refinance. Cheaper monthly payments may bolster consumer spending, the most important component of U.S. economic activity.

‘Short-term windfall’
News of the Treasury plan spread quickly through the markets. Shares of home builders rose. At Long & Foster, the Washington area’s largest real estate brokerage, top brass informed agents that they should gear up for increased demand from potential buyers.

“This is going to be a short-term windfall that everybody needs to jump on,” said Dave Stevens, the firm’s president and chief operating officer and a former Freddie Mac official. The move by the Treasury certainly would mean “interest rates will drop,” he added.

But it is unclear whether lower mortgage rates will spark home buying, which is a weightier decision for ordinary people than refinancing a loan.

There are also questions about how much the Treasury would spend to buy down the mortgage rate. One industry source said another idea being pushed by trade groups calls for the Treasury to spend $50 billion of its $700 billion financial rescue package to reduce the fees, or points, that home buyers pay when they want a lower rate for a mortgage.

Yesterday, the average rate on a 30-year fixed-rate mortgage increased slightly to 5.75 percent yesterday, up from 5.54 the previous day, said Keith Gumbinger, a vice president at research firm HSH Associates.

“What’s not known is the timing of the purchasing of the mortgage-backed securities and how quickly money will be pumped into the marketplace and that matters as to how low the mortgage rates will go,” Gumbinger said.

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ELYAC Realty- Record 1-in-10 Americans in mortgage trouble

In California Real Estate, Dubai, ELYAC Realty Los Angeles Mortgage Broker- 310.562.0572, ELYAC Realty: Real Estate Agents Salary, Economy, FSBO MLS services, For Sale, Foreclosure, Homes, Houses, How to fina a foreclosure in Southern California, How to find a Forclosure in Southern California, Islam, Kuwait, Los Angeles Home Loans, Marketing, Mortgage Broker Newport Beach, Mortgage Brokers Laguna Beach, Muslim, Politics Life News Music Family Travel Personal Sports, Ramadan, Real Estate Agents Laguna Beach, Real Estate Agents Los Angeles, Real Estate Agents Newport Beach, Real Estate News, Realtor, SEO for Real Estate, Saudi Arabia, Shari'a compliant financing, investment, mortgage, mortgage broker Los Angeles, seo on December 5, 2008 at 8:24 pm

Record 1-in-10 Americans in mortgage trouble

Many at least a month behind on their payments or in foreclosure

The Associated Press

updated 12:07 p.m. PT, Fri., Dec. 5, 2008

WASHINGTON – A record one in 10 American homeowners with a mortgage were either at least a month behind on their payments or in foreclosure at the end of September as the source of housing market pressure shifted from risky loans to the crumbling U.S. economy.

The percentage of loans at least a month overdue or in foreclosure was up from 9.2 percent in the April-June quarter, and up from 7.3 percent a year earlier, the Mortgage Bankers Association said Friday.

The foreclosure crisis continued to be concentrated in states like Florida, where a stunning 7.3 percent of all loans were in foreclosure at the end of September, by far the highest in the country.

In Nevada, the number was 5.6 percent. It was 3.9 percent in California — compared with about 3 percent nationally.

Distress in the home loan market started about two years ago as increasing numbers of adjustable-rate loans reset to higher interest rates. But the latest wave of delinquencies is coming from the surge in unemployment.

Employers slashed 533,000 jobs in November, the most in 34 years, catapulting the unemployment rate to 6.7 percent, the Labor Department said Friday. “Now it’s a case of job losses hitting more across the board,” Jay Brinkmann, the trade group’s chief economist.

With the economy worsening, the much-anticipated bottom of the housing market likely will be pushed further into the future.

“Things are going to get worse before they get better,” said Northern Virginia housing economist Thomas Lawler.

Most troubling, he said, is that the mortgage bankers’ report reflects conditions before October’s stock market plunge and the resulting economic fallout.

“The number of homes that are in the foreclosure process is so high — right before the economy has fallen off a cliff,” Lawler said.

The U.S. tipped into recession last December, a panel of experts declared earlier this week, and economists fear it could be the longest and most severe in decades. Since the start of the recession, the economy has lost 1.9 million jobs.

Job losses are already having an impact in rising delinquency rates for traditional 30-year fixed rate loans made to borrowers with strong credit. Total delinquencies on those loans rose to 3.35 percent in September from 3.07 percent at the end of June, the Mortgage Bankers Association said.

Lenders appear to be on track to initiate 2.25 million foreclosures this year, up from an average annual pace of less than 1 million during the pre-crisis period, Federal Reserve Chairman Ben Bernanke said this week. In the third quarter, there were about 575,000 new foreclosures, with about 183,000 in California and Florida combined, according to the MBA’s data.

There were some modest signs of stabilization. The number of loans that entered the foreclosure process totaled 1.07 percent of all loans in the third quarter, flat from the second quarter.

That number, however, likely reflects changes in state laws that delay or extend the foreclosure process and efforts to work out or modify loans that could still fall back into foreclosure.

Also, the total delinquency rate on subprime adjustable-rate loans remained just over 21 percent, down from a peak of 22 percent in the first quarter.

With delinquencies still accelerating on many types of loans, efforts to stabilize the U.S. housing market are accelerating. The Treasury Department is now considering a plan to make loans at 4.5 percent as a way to revive the U.S. housing market. The plan being considered would apply to new home purchases, not refinanced loans.

But some analysts worry that the government’s plan will delay a necessary deflation of the housing bubble. With the government effectively lowering mortgage rates, housing prices could be prevented from falling to a more affordable level.

Any government assistance plan should exclude homes that are out of line with rents or other measurements of affordability, said Dean Baker, an economist and co-director of the Center for Economic Policy Research in Washington.

“It’s absolutely counterproductive,” he said, “to try and prop up prices.”

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Barack Obama, Bush administration, Federal government of the United States, George W. Bush, Paulson, United States, United States Secretary of the Treasury, US

ELYAC Realty- Paulson: crisis happens once or twice in 100 years

WASHINGTON – Treasury Secretary Henry Paulson called the financial crisis now plaguing the world economy a “once or twice” in a 100 years event, even as he warned Thursday against imposing too-strict regulations to prevent a repeat calamity.

Paulson’s remarks follow pledges by world leaders attending last week’s emergency economic summit to begin an overhaul of the world’s financial regulatory system.

With the next summit slated for the spring, the work on fleshing out details for the Herculean task will fall to the incoming administration of President-elect Barack Obama and his new Treasury secretary.

Paulson, whose boss President George W. Bush leaves office on Jan. 20, acknowledged that the financial crisis was caused by many factors including “government inaction and mistaken actions, outdated U.S. and global financial regulatory systems, and by the excessive risk-taking of financial institutions.”

Still, he cautioned against the U.S. and other countries developing a too-onerous regulatory response.

“If we do not correctly diagnose the causes, and instead act in haste to implement more rather than better regulations, we can do long-term harm,” Paulson said in a speech in Simi Valley, Calif.

Earlier this week, lawmakers blasted Paulson for his handling of a $700 billion financial bailout package to help ease the crisis and restore stability and confidence to unhinged markets.

Paulson on Thursday again defended his management, including his decision last week to officially abandon the original rescue strategy: buying rotten mortgages and other bad debts from banks to free up their balance sheets and get them to lend more freely.

“By proactively addressing the problems we saw coming and being pragmatic enough to change strategy in the face of changed facts and despite the inevitable criticism — we prevented a far worse financial crisis,” Paulson insisted.

Focusing the bailout program on infusing billions into banks — and possibly other types of companies — to pump up their capital and bolster lending to customers was deemed a faster and more effective approach to stabilizing the financial system than the original centerpiece of the plan, he said.

“There was no playbook for responding to a once or twice in a hundred year event,” Paulson argued, saying he needed to shift strategy to respond to worsening financial and economic conditions.

Paulson again said he believed the Bush administration has taken the necessary steps to prevent a financial market collapse, but he cautioned that it will take time for markets and lending conditions to return to normal.

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Chrysler, ChryslerLlc, Ford Motor Company, General Motors, Ron Gettelfinger, United Auto Workers, United States, US

ELYAC Realty- Officials: Autos bailout vote put off until Dec.

Officials: Autos bailout vote put off until Dec.

Dems will insist Big Three come up with a plan to transform industry

BREAKING NEWS

msnbc.com news services

updated 11:07 a.m. PT, Thurs., Nov. 20, 2008

WASHINGTON – Congressional officials say Democratic leaders have decided to put off a bailout vote for the auto industry until December and will insist that the Big Three first come up with a plan showing how the money would help transform their industry.

An announcement is expected later in the day in the Capitol, where top Democrats in the House and Senate have been meeting. The officials who described the developments did so on condition of anonymity, saying they were not authorized to disclose them.

The big auto companies — General Motors Corp., Ford Motor Co. and Chrysler LLC — have been seeking government loans totaling $25 billion to stay in business until spring. Critics want to make sure the companies will use the money to transform their industry into one that is more competitive.

Earlier, news reports said four senators had reached a bipartisan agreement on a bill to assist the struggling automotive industry.

U.S. automakers GM, Ford and Chrysler have been pleading for $25 billion in emergency government aid to weather a steep business downturn. The CEOs of all three companies testified before two congressional committees this week, but came away empty-handed.

The White House favors using $25 billion already authorized and appropriated through the Energy Department to provide loans for ailing automakers.

Democratic leaders in Congress have argued for carving out $25 billion from the $700 billion financial rescue fund.

Earlier, at a news conference in Detroit, United Auto Workers President Ron Gettelfinger said the Bush administration and Congress need to come to an agreement on aid for the domestic auto industry because “inaction is simply not an option.”

Gettelfinger acknowledged there is disagreement about how aid should be given, but “both the Bush administration and congressional leaders agree that immediate assistance is needed, and the cost of not acting would be devastating.”

Gettelfinger says without help, one or more of the Detroit Three automakers could collapse by the end of this year, and “the costs that would come from this are just too great.”

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Federal Reserve System, Labor Department, Labour economics, Unemployment, Unemployment benefits, United States, United States Department of Labor, US

ELYAC Realty- U.S. jobless claims jump to 16-year high

U.S. jobless claims jump to 16-year high

Data are more evidence of a rapidly weakening labor market

The Associated Press

updated 8:03 a.m. PT, Thurs., Nov. 20, 2008

WASHINGTON – New claims for unemployment benefits jumped last week to a 16-year high, the Labor Department said Thursday, providing more evidence of a rapidly weakening job market expected to get even worse next year.

The government said new applications for jobless benefits rose to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week. That’s much higher than Wall Street economists’ expectations of 505,000, according to a survey by Thomson Reuters.

That is also the highest level of claims since July 1992, the department said, when the U.S. economy was coming out of a recession.

The four-week average of claims, which smooths out fluctuations, was even worse: it rose to 506,500, the highest in more than 25 years.

In addition, the number of people continuing to claim unemployment insurance rose sharply for the third straight week to more than 4 million, the highest since December 1982, when the economy was in a painful recession.

Those figures partly reflect growth in the labor force, which has increased by about half since the early 1980s.

The figures likely will cause some economists to increase their projections for the unemployment rate this year. Many already expect unemployment to reach 7 percent by early next year and 8 percent by the end of 2009.

The rate in October was 6.5 percent, and last year the rate averaged 4.6 percent.

The Federal Reserve on Wednesday released projections that the jobless rate will climb to between 7.1 percent and 7.6 percent next year, according to documents from the Fed’s Oct. 29 closed-door deliberations on interest rate policy.

Initial claims have been driven higher in the past several months by a slowing economy hit by the financial crisis, and cutbacks in consumer and business spending.

Economists consider jobless claims a timely, if volatile, indication of how rapidly companies are laying off workers. Employees who quit or are fired for cause are not eligible for benefits.

Several companies announced mass layoffs in the past week, including Citigroup Inc., Union Pacific Corp. and Sun Microsystems Inc.

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U.S. inflation hits 17-year high

Ann Taylor, Business, Charming Shoppes, Circuit City, Fashion Bug, Home Depot, J. C. Penney, Lane Bryant, Retail Stores and Trade, Retail Trade, Shopping, United States

ELYAC Realty- A list of all Big Name Stores that are Closing down!

Circuit City stores …

Ann Taylor- 117 stores nationwide are to be shuttered

Lane Bryant,, Fashion Bug ,and Catherine’s to close 150 store
nationwide

Eddie Bauer to close stores 27 stores and more after January

Cache will close all stores

Talbots closing down all stores

J. Jill closing all stores

GAP closing 85 stores

Footlocker closing 140 stores more to close after January
Wickes Furniture closing down

Levitz closing down remaining stores

Bombay closing remaining stores

Zales closing down 82 stores and 105 after January.

Whitehall closing all stores

Piercing Pagoda closing all stores

Disney closing 98 stores and will close more after January.

Home Depot closing 15 stores 1 in NJ (New Brunswick )

Macys to close 9 stores after January

Linens and Things closing all stores

Movie Galley Closing all stores

Pacific Sunware closing stores

Pep Boys Closing 33 stores

Sprint/ Nextel closing 133 stores

JC Penney closing a number of stores after January

Ethan Allen closing down 12 stores.

Wilson Leather closing down all stores

Sharper Image closing down all stores

K B Toys closing 356 stores

Loews (not Lowe’s) to close down some stores

Dillard’s to close some stores.

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Congress, General Motors, George W. Bush, House Financial Services Committee, los angeles foreclosure homes for sale, Los Angeles Homes For Sale, los angeles mortgage brokers, United States, United States House Committee on Financial Services, Washington DC, White House

ELYAC Realty- Dems seek to lower auto bailout expectations

Dems seek to lower auto bailout expectations

Heads of Detroit ‘Big Three’ make little headway in building support

The Associated Press

updated 11:54 a.m. PT, Wed., Nov. 19, 2008

WASHINGTON – Top Senate Democrats suggested Wednesday that a bill to rescue Detroit’s Big Three automakers was stalled and challenged the Bush administration to take steps to save the industry if congressional efforts falter. The White House quickly rebuffed the suggestion.

Senate Majority Leader Harry Reid of Nevada sought to lower expectations of reaching a deal on the $25 billion proposal before Congress quits for the year.

While he told the Senate he still hoped lawmakers could agree to an auto deal in the “next day or two” of the current lame-duck session, he added: “If we can’t do it here legislatively, I would hope that the secretary of Treasury would listen loud and clear because they could take this into their own hands and do what I think is appropriate from their perspective.”

Responded White House press secretary Dana Perino: “There’s no appetite for that.” She said it was up to Congress to act.

Banking Committee Chairman Chris Dodd, D-Conn., was even more downbeat, calling the possibility of reaching agreement “remote.”

“I don’t see how in the next few days this is going to move forward,” Dodd told reporters. Still, he added, “That does not mean that there are not opportunities.” He suggested that the Federal Reserve could possibly step up to the job.

The difficulties of striking a deal on the package before a new president and a new Congress with expanded Democratic majorities take office appeared to be too great to overcome. The deadlock persisted even as the heads of General Motors, Ford and Chrysler returned for a second day to plead for relief and as their congressional backers urged colleagues not to punish them for past mistakes.

General Motors Corp. CEO Rick Wagoner told the House Financial Services Committee that collapse of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the nation.

In sometimes contentious testimony, Wagoner was pressed on when GM would run out of money if the loans weren’t extended.

He said he couldn’t say precisely, but that the company now was burning through “$5 billion each month.”

Still, with the $25 billion emergency package, “We think we have a good shot to make it through this,” Wagoner said. He said he anticipated that, if the package is approved, GM would qualify for about $10 billion to $12 billion of the money.

President George W. Bush and Republicans in Congress have been reluctant to use the Treasury Department’s $700 billion financial bailout program to finance the loans.

The White House wants Congress to draw the $25 billion from an Energy Department program established to encourage production of fuel-efficient cars.

Perino said Wednesday the administration supports legislation to authorize just that, but will not go along with the proposal by Democratic leaders that an additional $25 billion be taken from the government’s existing $700 billion Wall Street bailout fund.

“The purpose of the $700 billion was clearly intended for financial institutions, and we wanted to keep that whole,” Perino said.

If Congress quits without taking any action, “then the Congress will bear responsibility for anything that happens in the next couple of months during their long vacation,” Perino said.

During a hearing Wednesday before the House Financial Services Committee, Rep. Brad Sherman, D-Calif., asked the three auto chiefs seated at the witness table before him to raise their hands if they had come to Washington on commercial airliners. No hands went up. Then he asked if any planned to sell their corporate jets. Again, no hands went up.

Sherman and Rep. Gary Ackerman, D-N.Y., told the auto executives they were having a hard time justifying to their constituents bailing out companies whose chiefs fly around in expensive private jets.

Ackerman said there was “a delicious irony in seeing private jets flying into Washington D.C. and people coming off them with tin cups in their hands.”

A Senate vote on an automotive bailout plan, which would also extend jobless benefits, could come as early as Thursday, but it clearly lacks the necessary support to advance.

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Apple, Cisco Systems, google, Los Angeles Home Loans, los angeles mortgage brokers, los angeles real estate agents, Nokia, Sun Microsystems, Tesla Motors, United States, Wall Street

ELYAC Realty- Tech Companies, Long Insulated, Now Feel Slump

The technology industry, which resisted the economy’s growing weakness over the last year as customers kept buying laptops and iPhones, has finally succumbed to the slowdown.

In the span of just a few weeks, orders for both business and consumer tech products have collapsed, and technology companies have begun laying off workers. The plunge is so severe that some executives are comparing it with the dot-com bust in 2000, when hundreds of companies disappeared and Silicon Valley lost nearly a fifth of its jobs.

October “was like turning a switch,” said Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm. “Everything pretty much shut down.”

After industry leaders like Intel and Nokia warned of slowing sales this week, investors aggressively sold technology stocks. On Friday, the Nasdaq composite index, which is full of technology names, fell 5 percent. Advanced Micro Devices and eBay both dropped more than 10 percent.

Tech companies directly account for about 4 percent of the nation’s employment. And globally, companies and governments spend about $1.75 trillion on technology a year, according to Forrester Research. But the industry’s importance to the world economy is larger than its size might suggest. Technology has fueled many of the productivity gains of the last two decades. And about half of the capital spending by corporations goes toward technology products, according to Moody’s Economy.com.

As struggling businesses cut back on spending of all kinds, a slowdown in tech proved inevitable.

During the dot-com crash, technology companies were victims of Internet hype that they helped create. Once the enthusiasm faded, so did the boom-era sales on software and infrastructure equipment.

However, consumer enthusiasm for products like video games, wireless phones and high-definition televisions helped the industry recover.

This time around, the tech sector finds itself at the mercy of a double-barreled slump in both corporate and consumer spending caused by the housing decline and the economic crisis on Wall Street. Technology companies are also feeling the effect of frozen credit markets as business and government customers struggle to finance computer and software purchases that can run to millions of dollars.

“We have never seen anything like this in history,” said William T. Coleman III, a Silicon Valley veteran who founded the software maker BEA Systems and is now chief executive at a start-up called Cassatt.

Best Buy, the leading electronics retailer, declared this week that “rapid, seismic changes in consumer behavior” had fostered the worst conditions in its 42-year history, and its main rival, Circuit City Stores, filed for bankruptcy protection. Nokia, the world’s largest maker of cellphones, predicted Friday that global sales of handsets would fall in 2009, which would be only the second decline ever.

Technology giants like Intel, which makes chips for personal computers and servers, and Cisco Systems, which makes network equipment, warned that revenue was plummeting at rates last seen in 2001.

Dozens of start-ups, like the messaging service Twitter and the electric carmaker Tesla Motors, have been cutting staff members as they prepare for a slow economy.

And on Friday, Sun Microsystems, a leading maker of computers used by financial services companies, announced that it would lay off as many as 6,000 employees, or 18 percent of its work force.

The turnaround has been as sudden as it is severe. Until late September, a number of large technology companies maintained an optimistic stance, despite the obvious distress in the global economy.

Cisco was the first large technology company to reveal its sales data from October, noting a 9 percent fall in sales compared with the same month last year. On Nov. 5, Cisco, which is based in San Jose, cautioned that because of a “completely different environment,” revenue in its current quarter could plummet as much as 10 percent – a major reversal from the 7 percent growth that Wall Street had been expecting.

Intel, the world’s largest chip maker, followed this week, warning that sales in the fourth quarter could fall as much as 19 percent compared with the same period last year.

Even Google, an advertising juggernaut that many analysts said they believed would weather a downturn better than other companies, is now feeling the impact.

About eight weeks ago, the company’s chief executive, Eric E. Schmidt, told reporters, “My guess is that the drama is in New York and not here.” A month later, Google surprised Wall Street when it reported strong financial results for the quarter that ended Sept. 30, sending its shares up 10 percent.

But Google’s stock has dropped 16 percent since, as the same analysts who were upbeat about its results have since cut their revenue and profit forecasts. This week, its shares dipped below $300 for the first time in three years, well below their $742 peak. And the company, known for its torrid hiring and free-spending on employee perks, has begun the most serious belt-tightening in its 10-year history.

“We don’t know as managers how long the crisis goes,” Mr. Schmidt said last week.

For all the gloom, the tech industry is still far healthier than Wall Street. Unlike the banks, many technology companies are flush with cash. Cisco has close to $27 billion; Google, $14 billion; and Apple, $24 billion. It is likely that some of these funds will go toward acquiring struggling competitors. “The guys that aren’t as strong will be good pickings,” Mr. Coleman said.

Powered by technology, Silicon Valley has stood out as a bright spot for jobs in the United States, with employment growing at about 2 percent a year while national employment slowed. Through 2007, the region continued to add 20,000 jobs, although that positive trend has started to change.

“With this now having become a worldwide event, it’s clear that the job losses will come,” said Stephen Levy, director of the Center for Continuing Study of the California Economy.

Given the unpredictability of the current economy, the industry’s past experience will only go so far, said Chris Cornell, an economist with Economy.com. “It would be a tragic mistake for C.E.O.’s who did a great job fighting the last recession to think the same tactics will work this time,” he said.

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American International Group, Barack Obama, Credit card, Federal Reserve System, General Motors, Office of the Comptroller of the Currency, United States, US

ELYAC Realty- Paulson: Troubled assets won’t be purchased

Paulson: Troubled assets won’t be purchased

U.S. to use proceeds of $700 billion plan to bolster banking system directly

msnbc.com news services

updated 10:51 a.m. PT, Wed., Nov. 12, 2008

WASHINGTON – In a stunning turnabout, the Bush administration Wednesday abandoned the original centerpiece of its $700 billion effort to rescue the financial system and said it will not use the money to purchase troubled bank assets.

“Our assessment at this time is that this (the purchase of toxic assets) is not the most effective way to use funds,” Treasury Secretary Henry Paulson told a news conference.

Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

But he was noncommittal about direct support for the auto industry, saying it was a “critical industry” but that the bailout plan was not designed for them.

Asked about a Democratic congressional leadership plan to rush financial aid to the industry, Paulson cautioned that “any solution has got to be leading to long-term viability” for the automakers.

Stocks slid broadly, partly because Paulson’s comments at a news briefing underscored the extent of the problems in the financial system. Investors also were concerned that the Treasury will be investing more taxpayer dollars into the banking sector, which will dilute the value of existing shareholders, said Rudy Narvas, senior analyst at 4Cast Ltd. in New York.

Aides to President-elect Barack Obama have been playing down reports of tension with the Bush administration over help for the stricken auto industry.

Struggling General Motors, Ford and Chrysler are seeking $25 billion in additional assistance on top of $25 billion in federal loans approved in September to help them develop more fuel-efficient cars. GM reported last week that it lost $2.5 billion in the latest quarter and does not have enough cash to make it through 2009, raising the prospect of a potential bankruptcy filing. Company executives say they are determined to avoid bankruptcy.

Democratic congressional leaders plan to push for emergency legislation to bail out the automakers, possibly by amending the $700 billion rescue program,

Paulson on Wednesday said that non-financial firms as well as banks may need additional cash infusions but that he saw “implementation difficulties” aiding companies that were not federally regulated.

Paulson said the administration was looking at a major expansion of the program into the markets that provide support for credit card debt, auto loans and student loans. He said 40 percent of U.S. consumer credit is provided through selling securities that are backed by pools of these loans.

“This market, which is vital for lending and growth, has for all practical purposes ground to a halt,” Paulson said.

Paulson said the massive bailout effort, the largest in U.S. history, was showing results but that more efforts were needed given the most severe downturn being faced in housing.

“Our financial system remains fragile in the face of an economic downturn here and abroad,” Paulson said. “Market turmoil will not abate until the biggest part of the housing correction is behind us. Our primary focus must be recovery and repair.”

Paulson said some of the bailout money also should be used to support efforts to keep mortgage borrowers from losing their homes because of soaring default levels.

He said a proposal to use some of the funds to guarantee mortgages that have been reworked to reduce monthly payments for borrowers is an approach the administration continues to discuss. But he indicated it would not be a part of the rescue program because it went beyond the intent of the legislation Congress passed on Oct. 3.

Asked about what he had in mind to expand the rescue effort to support credit card and other types of consumer debt that is backed by selling securities, Paulson said it would probably take weeks to design the new program and more time to get it implemented, a possible sign that any such proposal would have to be put into place by the incoming administration of President-elect Barack Obama.

Paulson said this weekend’s first-ever summit of leaders of the Group of 20 major industrial and developing countries needs to focus first on how to repair the financial system as a way to bolster the global economy.

Paulson also praised a new set of guidelines issued by the Federal Reserve and other bank regulators, saying that they addressed a crucial issue of making sure that banks continue to lend at adequate levels.

The guidelines urge institutions to continue lending to credit worthy borrowers and to work with mortgage borrowers to avoid defaults. In addition, the guidelines encourage the banks to set dividend payments for shareholders and compensation for executives with the current crisis in mind.

The guidelines address criticism that banks obtaining funds from the rescue plan are simply using the money to replenish their balance sheets and make acquisitions rather than lending more money to businesses and consumers.

“If underwriting standards tighten excessively or banking organizations retreat from making sound credit decisions, the current market conditions may be exacerbated, leading to slower growth and potential damage to the economy,” the regulators said in a joint statement.

The Fed, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and Office of Thrift Supervision said all financial institutions were expected to follow the new guidelines, even those not receiving federal assistance.

In addition to the $250 billion committed to the purchase of bank stock, the Bush administration this week allocated another $40 billion toward a $150 billion bailout of troubled insurance giant American International Group.

That leaves only $60 billion of an initial $350 billion approved by Congress under the bailout bill. To access the second $350 billion, this administration or the next will have to make a request to Congress for the money.

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Business, Business school, Colleges and Universities, Donald Trump, Education, Harvard Business School, Master of Business Administration, Master's degree, Top MBA Programs, Top MBA programs 2009

ELYAC Realty- To MBA, or Not to MBA?

If you’re thinking of getting an MBA, you’re not alone. According to the MBA Association, more than 100,000 new MBAs enter the work force every year.

A master’s degree in business administration is considered a prerequisite in some fields, particularly for anyone who is on the executive track. But is it beneficial for everyone? Is it necessary to spend a significant chunk of time — and a substantial financial investment — to get an MBA?

A wise investment
Over the last several years, the demand for MBAs has remained steady. In a 2007 survey by the Graduate Management Admissions Council, recruiters indicated they were competing to hire qualified MBA graduates.

The number of positions recruiters intended to fill with MBAs grew by 18 percent in both 2006 and 2007. Those recruiters stated they were willing to pay 84 percent more to MBA degree holders than to an employee who held an undergraduate degree.

“I think getting the MBA played a great role in my life and career and helped shape what I do now,” declares Jeffrey Swedarsky, founder and director for DC Metro Food Tours, a Virginia-based company.

“I utilized my newfound knowledge to start my own business,” Swedarsky says. He agrees, however, that not everyone’s experience is the same. “I believe not all MBAs are created equal. Mine was from a top 20 school, and the name recognition and reputation put me a step ahead.”

Going to graduate school while working a full-time job might seem counterintuitive, but Kirk Imamura, president of recording facility Avatar Studios in New York, believes it can make it easier financially.

“One way I made the investment less burdensome was to have my employer pay part of it,” Imamura explains. “I did the program in two years with no breaks. This makes the experience more valuable because you can apply concepts immediately.”

Attending business school can also be a valuable way to network with new industry contacts. Today’s classmate can be tomorrow’s hiring manager, recruiter or valuable inside contact for an opportunity.

Mark Phelan, assistant manager at Sodaro Estate Winery in Napa, Calif., is convinced his MBA made a difference between good and great. “The enthusiastic networking I did in that environment is what made the difference between having an expensive piece of paper and putting my knowledge and skills to good use.”

Not having an MBA can definitely be a liability. Just ask Troy McClain, who was a contestant on the first season of “The Apprentice.” McClain remembers the moment where he and fellow contestant Kwame Jackson were under review by Donald Trump. “Looking at a man with a high school diploma, versus another with an MBA from Harvard, the choice was obvious,” McClain recalls. “I was fired.”

Just say no
Although an MBA can clearly enhance a stellar résumé and educational background, there are concerns that it may not be a great return on investment for everyone. With new graduates saturating the job market — and a volatile financial sector — MBAs are no longer a guaranteed golden ticket to professional advancement.

“Aside from providing a fundamental understanding of accounting and finance, the courses were a waste of time,” says Benjamin Atkinson, director of risk management at New Jersey-based PeopleLink LLC. “My own reading provided me with vastly more useful and timely information; my professors weren’t even aware of some of the current writings on these subjects.” Atkinson eventually abandoned his quest for an MBA. “I’d hire business experience over a business degree, every time,” he declares.

Though pursuing the degree may not be a waste of time for everyone, some professionals have wondered if the investment of time and tuition makes the MBA a worthwhile goal.

Dave Taylor, a Colorado-based new media and management consultant, isn’t sure his MBA has a substantial impact. “I have to say that the knowledge I gained in terms of business fundamentals has been useful, but I don’t believe that having an MBA has, per se, helped my career,” he summarizes. “It seems more important to have experience with new media than to have a piece of paper or credential.”

Should you stay or should you go?
If you’re on the fence about whether to pick the MBA career path, take a moment to ponder these points before you make the leap:

Think it through. If you recently completed an undergraduate program, and are unsure about your next step, don’t rush into an MBA program. Work in your industry for a few years. Get some practical experience and a professional perspective.
Research your field. Don’t get an MBA simply because it’s icing on the cake. Make sure it acts as a springboard to advancement in your field. There are a number of specialized MBA programs tailored for different industries, including human resources, information technology and property management.
Talk to your employer. Many companies offer tuition reimbursement, or will pay for part or all of an MBA for their employees. Talk to your employer and see what costs they can cover. If it’s not an existing part of your benefits package, see if you can negotiate it as a perk at your next performance evaluation.

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Center for Disease Control and Prevention, FHA home loans, google, Google Flu Trends, Google Trends, Google.org, Hal Varian, Influenza, mortgage brokers Los Angeles, United States

ELYAC Realty- Google Uses Web Searches to Track Flu’s Spread

Google Uses Web Searches to Track Flu’s Spread

SAN FRANCISCO – There is a new common symptom of the flu, in addition to the usual aches, coughs, fevers and sore throats. Turns out a lot of ailing Americans enter phrases like “flu symptoms” into Google and other search engines before they call their doctors.

That simple act, multiplied across millions of keyboards in homes around the country, has given rise to a new early warning system for fast-spreading flu outbreaks, called Google Flu Trends.

Tests of the new Web tool from Google.org, the company’s philanthropic unit, suggest that it may be able to detect regional outbreaks of the flu a week to 10 days before they are reported by the Centers for Disease Control and Prevention.

In early February, for example, the C.D.C. reported that the flu cases had recently spiked in the mid-Atlantic states. But Google says its search data show a spike in queries about flu symptoms two weeks before that report was released. Its new service at google.org/flutrends analyzes those searches as they come in, creating graphs and maps of the country that, ideally, will show where the flu is spreading.

The C.D.C. reports are slower because they rely on data collected and compiled from thousands of health care providers, labs and other sources. Some public health experts say the Google data could help accelerate the response of doctors, hospitals and public health officials to a nasty flu season, reducing the spread of the disease and, potentially, saving lives.

“The earlier the warning, the earlier prevention and control measures can be put in place, and this could prevent cases of influenza,” said Dr. Lyn Finelli, lead for surveillance at the influenza division of the C.D.C. From 5 to 20 percent of the nation’s population contracts the flu each year, she said, leading to roughly 36,000 deaths on average.

The service covers only the United States, but Google is hoping to eventually use the same technique to help track influenza and other diseases worldwide.

“From a technological perspective, it is the beginning,” said Eric E. Schmidt, Google’s chief executive.

The premise behind Google Flu Trends – what appears to be a fruitful marriage of mob behavior and medicine – has been validated by an unrelated study indicating that the data collected by Yahoo, Google’s main rival in Internet search, can also help with early detection of the flu.

“In theory, we could use this stream of information to learn about other disease trends as well,” said Dr. Philip M. Polgreen, assistant professor of medicine and epidemiology at the University of Iowa and an author of the study based on Yahoo’s data.

Still, some public health officials note that many health departments already use other approaches, like gathering data from visits to emergency rooms, to keeping daily tabs on disease trends in their communities.

“We don’t have any evidence that this is more timely than our emergency room data,” said Dr. Farzad Mostashari, assistant commissioner of the Department of Health and Mental Hygiene in New York City.

If Google provided health officials with details of the system’s workings so that it could be validated scientifically, the data could serve as an additional, free way to detect influenza, said Dr. Mostashari, who is also chairman of the International Society for Disease Surveillance.

A paper on the methodology of Google Flu Trends is expected to be published in the journal Nature.

Researchers have long said that the material published on the Web amounts to a form of “collective intelligence” that can be used to spot trends and make predictions.

But the data collected by search engines is particularly powerful, because the keywords and phrases that people type into them represent their most immediate intentions. People may search for “Kauai hotel” when they are planning a vacation and for “foreclosure” when they have trouble with their mortgage. Those queries express the world’s collective desires and needs, its wants and likes.

Internal research at Yahoo suggests that increases in searches for certain terms can help forecast what technology products will be hits, for instance. Yahoo has begun using search traffic to help it decide what material to feature on its site.

Two years ago, Google began opening its search data trove through Google Trends, a tool that allows anyone to track the relative popularity of search terms. Google also offers more sophisticated search traffic tools that marketers can use to fine-tune ad campaigns. And internally, the company has tested the use of search data to reach conclusions about economic, marketing and entertainment trends.

“Most forecasting is basically trend extrapolation,” said Hal Varian, Google’s chief economist. “This works remarkably well, but tends to miss turning points, times when the data changes direction. Our hope is that Google data might help with this problem.”

Prabhakar Raghavan, who is in charge of Yahoo Labs and the company’s search strategy, also said search data could be valuable for forecasters and scientists, but privacy concerns had generally stopped it from sharing it with outside academics.

Google Flu Trends avoids privacy pitfalls by relying only on aggregated data that cannot be traced to individual searchers. To develop the service, Google’s engineers devised a basket of keywords and phrases related to the flu, including thermometer, flu symptoms, muscle aches, chest congestion and many others.

Google then dug into its database, extracted five years of data on those queries and mapped it onto the C.D.C.’s reports of influenzalike illness. Google found a strong correlation between its data and the reports from the agency, which advised it on the development of the new service.

“We know it matches very, very well in the way flu developed in the last year,” said Dr. Larry Brilliant, executive director of Google.org. Dr. Finelli of the C.D.C. and Dr. Brilliant both cautioned that the data needed to be monitored to ensure that the correlation with flu activity remained valid.

Google also says it believes the tool may help people take precautions if a disease is in their area.

Others have tried to use information collected from Internet users for public health purposes. A Web site called whoissick.org, for instance, invites people to report what ails them and superimposes the results on a map. But the site has received relatively little traffic.

HealthMap, a project affiliated with the Children’s Hospital Boston, scours the Web for articles, blog posts and newsletters to create a map that tracks emerging infectious diseases around the world. It is backed by Google.org, which counts the detection and prevention of diseases as one of its main philanthropic objectives.

But Google Flu Trends appears to be the first public project that uses the powerful database of a search engine to track a disease.

“This seems like a really clever way of using data that is created unintentionally by the users of Google to see patterns in the world that would otherwise be invisible,” said Thomas W. Malone, a professor at the Sloan School of Management at M.I.T. “I think we are just scratching the surface of what’s possible with collective intelligence.”

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ELYAC Realty- Critics say new federal mortgage plan not enough

WASHINGTON – Once again, the government has offered another plan to help troubled homeowners. Once again, critics say it doesn’t go far enough. The plan announced Tuesday by federal officials and mortgage giants Fannie Mae and Freddie Mac sounds sweeping in its approach: Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.

But there’s a catch. The plan focuses on loans Fannie and Freddie own or guarantee. They are the dominant players in the U.S. mortgage market but represent only 20 percent of delinquent loans.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., said the plan “falls short of what is needed to achieve wide-scale modifications of distressed mortgages.”

With the government spending billions to aid distressed banks, “we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans,” Bair said in a statement.

Democrats on Capitol Hill aren’t satisfied, either. “When the loan is chopped up into a million pieces and any investor can block a modification from happening, a program like this will only scratch the surface of the mortgage crisis,” said Sen. Charles Schumer, D-N.Y.

The economic crisis is still unnerving Wall Street. Stocks fell again as investors found few industries safe from the consumer spending slump. With Starbucks Corp. and luxury homebuilder Toll Brothers Inc. both posting disappointing quarterly results, the Dow Jones industrial average closed down nearly 180 points.

The financial crisis took on a new dimension on Capitol Hill. House Speaker Nancy Pelosi called for “emergency and limited financial assistance” for the battered auto industry and urged the outgoing Bush administration to join lawmakers in reaching a quick compromise during a postelection session of Congress.

The new mortgage assistance plan was announced by the Federal Housing Finance Agency, which seized control of Fannie and Freddie in September, and other government and industry officials.

Officials say they hope the new approach, which takes effect Dec. 15, will become a model for loan servicing companies that collect mortgage payments and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.

James Lockhart, director of the housing finance agency, urged investors to “rapidly adopt this program as the industry standard.”

Still, government officials had no estimate of how many homeowners would be able to qualify. Fannie and Freddie own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. But they have far lower overall delinquency rates — under 2 percent.

To qualify, borrowers would have to be at least three months behind on their home loans and would have to owe 90 percent or more than the home is worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.

Qualified borrowers would get help in several ways: The interest rate would be reduced so that they would not pay more than 38 percent of their gross income on housing expenses. Another option is for loans to be extended to 40 years from 30, and for some of the principal to be deferred, interest-free.

Though lenders have beefed up their efforts to aid borrowers over the past year, their action hasn’t kept up with the worst housing recession in decades.

More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.

Indeed, Tuesday’s announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer.

He moved out of his home in Mill Valley, Calif., earlier this month — taking his children, three dogs and one cat with him — after failing at several attempts to get a loan modification or a short sale. A short sale occurs when the lender agrees to receive less than the loan is worth.

Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end, he couldn’t persuade Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan.

“I feel like I missed the boat,” he said of the new efforts to help more homeowners. “I’m just mad at the whole system.”

One reason the problem has been so tough to solve for borrowers such as Courtney is that the vast majority of troubled loans were packaged into complex investments that have proved extremely hard to unwind.

Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors worldwide. Most of those loans won’t likely be helped by the new plan.

The rest are “whole loans,” which are easier to modify because they have only one owner.

Still, after more than a year of slow and weak initiatives, there seems to be a serious effort among major retail banks to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.

Citigroup said Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments.

JPMorgan Chase & Co. last month expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The bank already has modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

Starting Dec. 1, Bank of America Corp. plans to modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.

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ELYAC Realty- Fannie Mae Loses $29 Billion on Write-Downs

Fannie Mae Loses $29 Billion on Write-Downs

All the profits, and then some, that Fannie Mae reaped as home prices soared in recent years vanished in a mere three months, the mortgage giant said on Monday, leaving many analysts wondering where the red ink will end.

The numbers are staggering. Fannie Mae lost $29 billion during the third quarter, more than it earned from 2002 to 2006. So many homeowners are falling behind on their mortgages that Fannie Mae could seek tens of billions of dollars in government handouts next year.

But the broader implication of the grim results – the first since Fannie and its sister company, Freddie Mac, were seized by the government in September – is that home prices could continue to fall.

With home values falling across much of the nation, Fannie Mae said that it was bracing for billions of dollars in additional losses and that it may need more than the $100 billion that the Treasury Department has pledged to keep the company afloat.

The hole at Fannie could get even worse if the economy confronts a deep, prolonged recession, as many economists predict. Of particular concern is the hostile reception the company is getting in the capital markets. Since the government guaranteed certain kinds of debt issued by banks last month, investors have shunned Fannie and Freddie debt that comes due in more than a year because those debts do not have an explicit federal guarantee.

Herbert M. Allison, who was appointed chief executive of Fannie by regulators, is taking a far darker view of the company’s prospects than his predecessor, Daniel H. Mudd, who presided over the near total wipeout of shareholders.

The $29 billion third-quarter loss eclipsed the $28.1 billion the company earned from 2002 through 2006, and was more than 20 times the loss Fannie Mae reported for the third quarter of 2007. Most of the new red ink reflected a $9.2 billion charge for credit expenses and a $21.4 billion write-down of deferred tax assets that are valuable only if the company makes a profit.

“Credit losses are rising, and need for reserves is still increasing,” said Moshe Orenbuch, an analyst who follows Fannie and Freddie for Credit Suisse. “This is bad news, not just for Fannie, but for the whole economy. The message from these results is that we’re going to continue seeing housing problems for at least a year.”

Fannie Mae said the number of loans in its portfolio that were in foreclosure or delinquent by more than three months jumped to 1.72 percent in the third quarter, up from 0.78 percent a year earlier. Furthermore, the company estimates that home prices have fallen 9.7 percent from their peak in the second quarter of 2006 and will fall a total of 19 percent before hitting bottom.

Steve Persky, the chief executive of Dalton Investments in Los Angeles, said the stark drop in home prices and rise in delinquency rates suggest that Fannie Mae could suffer steep losses in the coming months and that the government will have to inject significant capital into the company.

“Prices are going to decline and losses grow for the foreseeable future,” he said. “If they are talking about taking money now, it means they are eventually going to take more than we probably expected over the long run.”

It is unclear how much money the Treasury Department might have to put into the companies. Fannie Mae said it now has $9.3 billion of capital after its write-downs. But the company said it would have a capital deficit of $46.4 billion if it calculated its securities on a “fair value basis,” or according to what they would fetch in the market.

A spokeswoman for the Treasury declined to comment on Fannie’s results. The Treasury has said it would invest as much as $100 billion each in Fannie and Freddie through preferred shares, though it has not put in any money yet. The government has also said it would lend as much money as the companies need.

Policy makers are relying on Fannie Mae and Freddie Mac. The companies are supporting the financing of about 70 percent of all home loans being made. When other federal agencies like the Federal Housing Administration are included, the government’s share of the mortgage market climbs to as much as 90 percent.

Bush administration officials have said they would like Fannie and Freddie to step up their acquisitions of home loans to support the real estate market. The Treasury Department had said it wanted each company to amass a mortgage portfolio of $850 billion.

But Fannie said on Monday that it had not been able to increase its portfolio much because of weaker demand for mortgage securities, tighter lending standards and weaker demand for its long-term debt from investors, particularly foreigners. The company’s portfolio of loans and securities stood at $744.7 billion at the end of September, up less than 1 percent from June.

So far, the government’s support for Fannie and Freddie has not reduced mortgage rates, as some had hoped. The average interest rate on a 30-year fixed rate loan was 6.2 percent last week, little changed from late August before the government took over the companies.

“The fact that these companies have not been buying mortgages in size, and that mortgage rates are higher than before these companies were taken over, shows that the government has failed to achieve its goals,” said Howard Shapiro, an analyst at Fox-Pitt Kelton.

Analysts say the government might have to explicitly guarantee debt issued by Fannie and Freddie to give it the same status as bank debt to allay the concerns of investors. The government might also have to amend or waive a restriction that bars the companies from increasing their total debt by more than 10 percent from the level at the end of June.

Pressure is also building on the two companies to do more to help struggling homeowners avoid foreclosure. Fannie Mae said on Monday that the majority of its loan workouts have been done through its “Home Saver” program, under which the company provides personal loans to delinquent borrowers so they can catch up with their missed payments. The company also helps borrowers by extending their loans, reducing their interest rates or temporarily lowering monthly payments.

Advocates for homeowners and some policy makers have said Fannie Mae, Freddie Mac and private mortgage companies need to do more to lower monthly payments either permanently or for an extended time. Studies show that as many as 50 percent of borrowers who receive a loan modification, but not a reduction in payments, default again.

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ELYAC Realty- What Crisis? Some Hedge Funds Gain

By ELYACRealty

Bernard V. Drury is a rarity on Wall Street: a hedge fund manager who is making money rather than losing it.

While most hedge funds are sinking into red this year and unsettling the markets in the process, a handful of them are posting spectacular gains. Mr. Drury’s fund, for instance, is up 60 percent since Jan. 1.

How did he do it? Mr. Drury, a former grain trader, is not giving away his secrets. He relies on proprietary computer models to chart tides in the markets and to ride the prevailing currents.

But however smart or lucky the moneymakers have been, a few bad trades can end any hot streak. Despite Wall Street’s reputation as a place of big money and bigger egos, many of the winners are reluctant to boast, particularly given the gaping losses threatening some rivals.

“There’s going to be, naturally, a lot of forms of disillusionment with hedge funds,” said Mr. Drury, who opened his fund, Drury Capital, in 1992.

Indeed, gloomy talk of an industry shakeout is getting louder as returns at most funds sink lower. Over the last few months, some funds have been forced to dump stocks and bonds because their investors want their money back. Wall Street traders worry that another big wave of withdrawals in mid-November could further unsettle the markets.

All of which makes the big winners stand out even more. Hedge fund returns, on average, are down 20 percent. But one in every 50 funds is up more than 30 percent – an astonishing performance, considering the broad stock market is down even more than that.

Winners include trend-followers like Mr. Drury; market-spanning macro funds, which dart in and out of an array of markets and bet on everything from Apple Inc. to zinc; and niche players that are buying insurance policies or making loans to small companies.

Some of this year’s stars are familiar names on Wall Street. For instance, a fund managed by John Paulson, who reportedly was paid $3.7 billion in 2007 after betting against the subprime mortgage market, has gained nearly 30 percent this year in his largest fund, investors say.

But some of the other moneymakers are not well known, and could benefit as competitors close and investors look for new places to park their money. Hedge-fund traders who make a killing are often lionized within the industry. One good year can vault a small player to the big leagues.

But with so many funds down – only one in three has made any money this year – the price of admission to the winner’s circle has fallen. A showing that would have been considered dismal only a year ago is now viewed as a standout success. Traders even joke that down 10 percent is the new break-even. Actually making money is all the more rare.

“This year, anything north of 10 percent is spectacular,” said Pierre Villeneuve, managing director of the Mapleridge Capital Corporation, a $750 million hedge fund in Canada that is up 18 percent.

Other funds with big winnings include R. G. Niederhoffer Capital Management; Conquest Capital Group; MKP Capital Management; the Tulip Trend Fund, run by Progressive Capital; and funds run by John W. Henry & Company.

Never before have so many funds been down. In 5 of the last 10 years, fewer than 15 percent of hedge funds lost money. Even in the worst year, 2002, 31 percent finished down, according to estimates from HedgeFund.net, a unit of Channel Capital Group. This year, some 70 percent of hedge funds had lost money from Jan. 1 through the end of September.

To a degree, hedge funds are hostage to their stated investment strategies, and investors judge them accordingly. Funds that specialize in convertible bonds and stocks, for example, are among the worst performers this year because those markets have been hard hit in the financial crisis.

Losers include well-known traders like Kenneth C. Griffin, who runs the Citadel Investment Group; Lee S. Ainslie, head of Maverick Capital; and David Einhorn, the head of Greenlight Capital, who called attention to the troubles at Lehman Brothers before many others.

Still, funds that specialize in investment strategies that have suffered could come out looking good if they manage to post even modest gains. For instance, Exis Capital, a $150 million fund that trades stocks, is up 9 percent this year, even after the fund’s manager took their 50 percent fee, according to investors. The average stock fund, by comparison, is down 22 percent, according to estimates from Hedge Fund Research. In commodities trading, Touradji Capital Management is up 11 percent even as its competitor, Ospraie Management, was forced to liquidate a large fund.

At some hedge fund companies, this year’s performance is mixed. Trafalgar, a hedge fund in London, manages 10 funds. Three are down, but two – a volatility fund, and “special situations” fund – are up more than 20 percent, according to an investor.

Trafalgar declined to say what special situations it had pounced on. Volatility funds, a category that is broadly doing well, focus on trading options and try to profit when the markets swing wildly as they have lately.

Lee Robinson, co-founder of Trafalgar Asset Managers, said his firm’s success set it apart from competitors.

“Every investor is going to say, ‘What did you do in September ‘08, what did you do in October ‘08?’ and if you were down significantly, you’re going to have trouble raising money,” Mr. Robinson said. “The most important question is not, ‘How much money am I getting back?’ it’s ‘Do I get my money back?’ “

Several managers who are doing well did not want to brag at a time when so many of their industry colleagues were struggling.

“You don’t do victory laps,” said Adam Stern, a partner at AM Investment Partners, whose volatility fund is up 6.75 percent this year. “It’s a very sad time for a lot of people. People worked very hard, and they’re losing a lot of money and net worth.”

Marek Fludzinski, one of this year’s winners, remembers what it was like to be a loser. Mr. Fludzinski, the chief executive of Thales Fund Management, was among the computer-loving quantitative fund managers who suffered in 2007, when his fund lost 8 percent. Investors immediately began asking for their money back, so Mr. Fludzinski shut the $1.6 billion fund and started anew.

Now his computer-driven fund, created in May, has grown to $350 million from $80 million in assets and is up 14 percent.

Mr. Fludzinski said the important factor in running a hedge fund these days was simply surviving.

“Don’t do something that will kill you,” said Mr. Fludzinski, who uses a database with 14 years of prices on thousands of stocks to try to spot patterns like the forced selling of stocks.

Marc H. Malek, a former UBS trader who manages $611 million, is up 44 percent in his macro fund. But even as new investors approach his company, Conquest Capital, the firm is also receiving redemption requests from investors who want their money back, Mr. Malek said. Investors are pulling cash from wherever they can.

A growing number of troubled hedge funds are temporarily refusing to give investors their money back by freezing their funds, in industry parlance. But others are profiting from the waves of panic that have convulsed the markets this year.

Roy Niederhoffer, founder of R. G. Niederhoffer Capital Management, whose more famous brother, Victor, made and then lost a fortune trading, is up more than 50 percent. To predict how investors will behave, Roy Niederhoffer, who majored in neuroscience at Harvard, delves into psychological research.

But Mr. Niederhoffer does not need much research to tell him that some investors chase winners. With his fund soaring, investors are piling on. His assets under management have climbed to $2 billion, from $700 million earlier this year.

Still, Mr. Niederhoffer is not planning any celebrations.

“The greatest danger at a time like this is hubris,” he said. He has banned fist-pumping victory poses on his trading floor.

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ELYAC Realty- Obama to center stage, promises action on economy

By NEDRA PICKLER and TERENCE HUNT, Associated Press Writers Nedra Pickler And Terence Hunt, Associated Press Writers Fri Nov 7, 6:00 pm ET

CHICAGO – Inheriting an economy in peril, President-elect Obama warned on Friday that the nation faces the challenge of a lifetime and pledged he would act urgently to help Americans devastated by lost jobs, disappearing savings and homes seized in foreclosure. But the man who promised change cautioned against hopes of quick solutions.

“It is not going to be easy for us to dig ourselves out of the hole that we are in,” Obama said at his first news conference since winning the presidency on Tuesday.

The No. 1 priority, Obama said, is to get Congress to approve an economic stimulus plan that would extend jobless benefits, send food aid to the poor, dispatch Medicaid funds to states and spend tens of billions of dollars on public works projects. If the plan is not approved this month, in a special session of Congress, Obama said that “it will be the first thing I get done as president of the United States.”

In his first appearance since a jubilant election-night celebration, Obama sought to project an air of calm and reassurance to a deeply worried nation. He stood in a presidential-like setting with an array of eight American flags and a lectern showing a presidential seal above the words “The Office of the President Elect.” The stage behind him was lined with advisers he had summoned, his economic brain trust.

Almost 20 minutes late to his first meeting with reporters, Obama spoke for just 20 minutes and broke no ground with new policy announcements or disclosures of who would be in his Cabinet. In lighthearted moments, he joked about seances with dead presidents and the appeal of animal shelter dogs that are “mutts like me.”

Constrained by the fact he will not take office until Jan. 20, Obama deferred to President Bush and his economic team on major decisions. “The United States has only one government and one president at a time,” he said.

Declaring he would not respond to issues “in a knee-jerk fashion,” Obama declined to say how he would deal with Iran, whose president sent a letter of congratulations to Obama. “I want to be very careful that we are sending the right signals to the world as a whole that I am not the president and I won’t be until January 20th,” he said.

A new jobless report offered no comfort. The unemployment rate climbed to a 14-year high in October,and 10.1 million people were out of work. In Detroit, General Motors reported a huge third-quarter loss and said it may run out of cash next year. Ford planned more job cuts after burning through billions of dollars of its own.

While standing back as long as Bush is president, Obama said his advisers would keep close watch on the administration’s efforts to unlock frozen credit and stabilize financial markets. Obama said he wanted to make sure the Bush administration was “protecting taxpayers, helping homeowners and not unduly rewarding the management of financial firms that are receiving government assistance.”

Obama spoke after he and Vice President-elect Joe Biden met privately with economic advisers to discuss ways to stabilize the economy.

“We are facing the greatest economic challenge of our lifetime, and we’re going to have to act swiftly to resolve it,” Obama said.

He said he was confident that “a new president can have an enormous impact,” but he tempered that optimism by adding, “I do not underestimate the enormity of the task that lies ahead.”

“Immediately after I become president, I will confront this economic challenge head-on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity,” Obama said.

“Some of the choices that we’re going to make are going to be difficult,” he said. “It is not going to be quick. It’s not going to be easy for us to dig ourselves out of the hole that we are in.” But he said he was confident the country could do it.

Obama left the door open to the possibility that economic conditions might prompt him to change his tax plan that would give a break to most families but raise taxes on those making more than $250,000 annually.

“I think that the plan that we’ve put forward is the right one, but obviously over the next several weeks and months, we’re going to be continuing to take a look at the data and see what’s taking place in the economy as a whole,” Obama said.

Democratic congressional leaders want to pass a broad economic aid package in a postelection session later this month, but prospects appear dim because of Bush’s opposition.

Rep. Steny H. Hoyer, D-Md., the majority leader, said the House wouldn’t reconvene for a postelection session unless Bush did an about-face and drops his opposition. Senate Majority Leader Harry Reid, D-Nev., isn’t sure such a package could get through the Senate either, he added.

“Clearly there’s no point in us doing something if the administration’s going to take a position that they’re not going to sign something,” Hoyer said.

If Congress and Bush can’t come to terms on a stimulus bill this fall, lawmakers have spoken with Obama’s team about a Plan B: The new Congress could quickly pass an economic aid package when it reconvenes in early January, readying it for Obama’s signature as his first official act after being inaugurated, Democratic leadership aides said.

That measure would probably be just the first installment of a broader package, including a middle class tax cut, that Congress could pass separately after Obama is in the White House.

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Central bank, credit crisis, ELYAC Realty Los Angeles Mortgage Broker- 310.562.0572, Federal Reserve Bank of New York, Federal Reserve System, Wall Street Journal

ELYAC Realty- AIG repays more of $85 billion Fed loan

AIG repays more of $85 billion Fed loan
Friday November 7, 1:01 pm ET
By Ieva M. Augstums, AP Business Writer

AIG repays more of $85 billion Fed loan as possible change in original loan terms loom CHARLOTTE, N.C. (AP) — American International Group Inc. reduced the amount it owes the U.S. government by another $2.3 billion as the insurer continues to use the Federal Reserve’s new commercial-paper-funding program.

The updated figures come as reports circulated Friday that New York-based AIG may receive less stringent loans terms.

Shares of AIG jumped 27 cents, or 14.4 percent, to $2.14 in afternoon trading.

The Wall Street Journal said Friday that federal officials were considering a possible change in the terms of an $85 billion loan made to AIG in September.

AIG spokesman Joseph Norton declined to comment on the report. Federal Reserve Bank of New York spokesman Andrew Williams also declined to comment.

Figures released by the Federal Reserve Thursday showed that as of Wednesday, the government has loaned AIG $81.2 billion under two emergency facilities that were to help the company stave off bankruptcy. That figure was $83.5 billion a week ago.

In September, the Fed said it would provide AIG a two-year, $85 billion loan at an interest rate of about 11.5 percent. In return, the government received a 79.9 percent stake in AIG and the ability to remove senior management.

The central bank later said it would loan the company an additional $37.8 billion.

Last week, AIG said it would be able to access up to an additional $20.9 billion under the new commercial-paper-funding-facility program.

In total, the government has put about $144 billion at AIG’s disposal.

By using the commercial-paper program from the Fed, AIG has been able to reduce the amount it had borrowed under the original $85 billion line of credit, Norton said.

As of Wednesday, AIG’s borrowings under the $85 billion credit facility totaled $61 billion, down from about $65.5 billion a week ago. The total paydown in the past two weeks totals $9.1 billion.

In addition, AIG has drawn $19.9 billion under the $37.8 billion lending agreement, he said. That amount is up $2.2 billion from a week ago.

Although Norton would not provide details of the amounts borrowed under the new commercial-paper-funding facility, he did say the decrease in the $85 billion facility is “due primarily to AIG’s access” to the program.

On Oct. 3, AIG said it would sell off certain business units to pay off the $85 billion loan. The company, however, said it plans to retain its U.S. property and casualty and foreign general insurance businesses. It also plans to keep an ownership interest in its foreign life-insurance operations.

Since then, no deals have been announced.

More details may be announced Monday, when AIG reports third-quarter results.

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Business, California, california forclosure properties, California real estate agents, California Realtors, Florida, homes for sale, National Association of Realtors, real estate, United States, US, WASHINGTON

ELYAC Realty- After big jump, pending home sales fall, again

After big jump, pending home sales fall, again

Index declines by more-than-expected 4.6%, still above year-ago levels

The Associated Press

updated 9:04 a.m. PT, Fri., Nov. 7, 2008

WASHINGTON – Pending U.S. home sales fell more than expected in September, after posting a big jump in the previous month.

The National Association of Realtors said Friday that its seasonally adjusted index of pending sales for existing homes fell 4.6 percent to a reading of 89.2. That’s down from an upwardly revised August reading of 93.5.

Economists surveyed by Thomson Reuters expected a September reading of 90.6.

The index was 1.6 percent above year-ago levels. It sunk to a record low of 83 in March, and stood at 87.8 in September 2007.

The reading should provide a preview of October’s existing home sales numbers when the Realtors group releases them on Nov. 24.

Home sales are considered pending when the seller has accepted an offer, but the deal has not yet closed. Typically there is a one- to two-month lag before a sale is completed.

The U.S. has been coping with the worst housing recession in decades, and many in the real estate and mortgage industries are poring through each month’s data for signs of a bottom.

An index reading of 100 is equal to the average level of sales activity in 2001, when the index started.

National Association of Realtors Chief Economist Lawrence Yun highlighted one positive sign: The pending sales index has been above year-ago levels for two straight months, though prices continue to sink.

Yun noted sales increases in California, Florida, Long Island, Boston, Minneapolis, Denver and Washington, D.C. Much of that gain, however, likely comes from buyers who are snapping up foreclosed properties at discounted prices.

The Realtors group forecasts U.S. home prices will rise slightly next year to a median of $200,800 after two consecutive years of declines. It forecasts existing home sales will pick up next year to 5.3 million after sliding to a projected 5 million this year.

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Barack Obama, Bush administration, Dow Jones Industrial Average, Ford Motor Company, General Motors, Unemployment, United States, US

ELYAC Realty- Employers cut 240,000 jobs in October

Employers cut 240,000 jobs in October

Nation’s unemployment rate jumps to a 14-year high of 6.5 percent

The Associated Press

updated 9:10 a.m. PT, Fri., Nov. 7, 2008

WASHINGTON – The nation’s unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, far worse than economists expected and stark proof the economy is deteriorating at an alarmingly rapid pace.

The new snapshot, released Friday by the Labor Department, showed the crucial jobs market quickly eroding. The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the rate in March 1994.

Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 percent in June 2003.

October’s decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared. Over half the decrease occurred in the past three months alone.

The unemployment report was worse than expected, and was accompanied by more bad news from the auto sector.

Ford Motor Co. reported dismal third-quarter results and announced plans to cut more than 2,000 additional white-collar jobs, and General Motors said it lost $2.5 billion in the third quarter and could run out of cash in 2009.

Yet Wall Street investors appeared to take it in stride. The Dow Jones industrial average was up sharply after steep losses in the previous two sessions.

About 10.1 million people were unemployed in October, an increase of 2.8 million over the past year. A year ago, the unemployment rate stood at 4.8 percent.

President Bush said the dismal employment figures reflect “the difficult challenges confronting the economy” and urged the country to have patience, saying a flurry of unprecedented government measures — including a $700 billion financial bailout package — will take time to work.

“I understand that Americans deeply concerned about the challenges facing our economy, but our economy has overcome great challenges before, and we can be confident that it will do so again,” Bush said.

The employment market is much weaker than economists expected. They were forecasting the unemployment rate to climb to 6.3 percent in October and for payrolls to fall by around 200,000.

“The U.S. recession is deepening,” said Michael Gregory, economist at BMO Capital Markets Economics. The final quarter of this year is getting off to a “particularly ugly” start, he said.

Job losses were widespread, reflecting the mounting carnage from a trio of crises — housing, credit and financial.

Factories cut 90,000 jobs, the most since July 2003. Construction companies got rid of 49,000 jobs with heavy losses in home building. Retailers cut payrolls by 38,000. Professional and business services reduced employment by 45,000. Financial activities cut 24,000 jobs, with heavy losses in mortgage banking and at securities firms. Leisure and hospitality axed 16,000 positions.

All those losses more than swamped some gains elsewhere, including in the government, as well as in education and health care.

Racing to assemble his new Democratic Cabinet, President-elect Barack Obama was scheduled to huddle with economic advisers Friday. His team has been in close contact with the Bush administration to pave the way for a smooth hand-off of power.

All the economy’s woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval — will confront Obama when he assumes office early next year. And, the employment situation is likely to get worse.

Many expect the jobless rate to climb to 8 percent, possibly higher, next year. In the 1980-1982 recession, the unemployment rate rose as high as 10.8 percent before inching down.

The grim numbers spurred calls from Democrats on Capitol Hill to provide fresh relief. House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, will push to enact another round of economic stimulus of around $100 billion, possibly including provisions to create jobs through big public works projects.

White House press secretary Dana Perino appeared to suggest that additional action may not be needed.

“Today’s employment numbers are a stark reminder of how critical it is we keep focused on utilizing the tools we now have to return our country to the strong job creation we had in recent years,” Perino said. “We know what the main problems are tight credit and housing markets and we have the tools to solve them.”

The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since 2001 recession, and reflected a massive pullback by consumers.

As U.S. consumers watch jobs disappear, they’ll probably retrench even further, spelling more trouble for the sinking economy.

That’s why analysts predict the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.

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Asia, Bank of England, Dow Jones Industrial Average, Hang Seng Index, Hong Kong, New York Mercantile Exchange, Stock market, US

ELYAC Realty- Oil steady at $61 after 2-day plunge

Oil steady at $61 after 2-day plunge
Friday November 7, 3:40 am ET
By Alex Kennedy, Associated Press Writer

Oil steady at $61 in Asia after 2-day plunge on fears US recession worse than expected SINGAPORE (AP) — Oil prices were steady near $61 a barrel Friday in Asia, pausing after a two-day plunge, but vulnerable to another steep fall as evidence of a severe U.S. recession continues to mount.

Light, sweet crude for December delivery was up 38 cents at $61.16 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore. Oil prices overnight fell $4.53 to settle at $60.77 after dropping $5.23 the previous day.

“There’s a lot of gloom and doom right now,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. “Mounting bad news on the economic front is negatively affecting oil.”

A slew of grim economic news Thursday led traders to dump oil on concerns over weakening demand for crude products, such as gasoline.

The number of Americans continuing to draw unemployment benefits surged to a 25-year high, the Labor Department said Thursday, and the U.S. retailers saw their sales plummet last month to the weakest October level since at least 1969.

The bad news sparked a sell-off in equity markets as well. The Dow Jones industrial average fell 4.9 percent Thursday, while Asian markets were mixed Friday. Japan’s benchmark Nikkei 225 stock average fell 3.6 percent while Hong Kong’s Hang Seng index rose 3.1 percent.

“Oil continues to trade in lockstep with stock markets,” said Shum. “More bad news could push oil into the $50s.”

Oil prices have fallen nearly 60 percent since peaking at $147.27 a barrel in mid-July.

The dollar retreating after a sharp rally Thursday gave some support to oil prices in Asia. The dollar surged after the European Central Bank cut its key rate by half a percentage point to 3.25 percent, joining the Bank of England, Swiss and Czech central banks as they confront a looming recession.

Commodities such as oil are used as a hedge against inflation and a weak dollar. When a central bank cuts interest rates, it tends to weaken that nation’s currency, meaning the dollar typically trades higher against it.

The euro gained to $1.2762 on Friday from 1.2681 on Thursday while the dollar was steady at 97.40 yen.

In other Nymex trading, gasoline futures rose 0.9 cent to $1.35 a gallon. Heating oil gained 0.6 cent to $1.95 a gallon while natural gas for December delivery fell 5.4 cents to $6.93 per 1,000 cubic feet.

In London, December Brent crude rose 15 cents to $57.59 on the ICE Futures exchange.

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Barack Obama, John McCain, New Hampshire, New Jersey, Presidential Election, United States

ELYAC Realty- Obama inspires historic victory

Story Highlights
NEW: Sen. Barack Obama to voters: “This is your victory”
NEW: Sen. John McCain congratulates Sen. Barack Obama
Obama projected to win Virginia, a traditionally Republican state
Supporters in Chicago cheer “Yes, we did”

(CNN) — Barack Obama told supporters that “change has come to America,” as he addressed the country for the first time as the president-elect.

“The road ahead will be long. Our climb will be steep. We may not get there in one year or even one term, but America — I have never been more hopeful than I am tonight that we will get there. I promise you — we as a people will get there,” Obama said in Chicago, Illinois.

Police estimated that 125,000 people gathered in Grant Park to hear Obama claim victory.

Obama said he was looking forward to working with Sen. John McCain and Gov. Sarah Palin “to renew this nation’s promise in the months ahead.” Watch as Obama addresses the country »

McCain on Tuesday urged all Americans to join him in congratulating Sen. Barack Obama on his projected victory in the presidential election.

“I pledge to him tonight to do all in my power to help him lead us through the many challenges we face,” McCain said before his supporters in Phoenix, Arizona.

“Today, I was a candidate for the highest office in the country I love so much, and tonight, I remain her servant,” he said.

McCain called Obama to congratulate him, Obama’s campaign said. Watch McCain concede »

Obama thanked McCain for his graciousness and said he had waged a tough race.

President Bush also called Obama to congratulate him.

Bush told Obama he was about to begin one of the great journeys of his life, and invited him to visit the White House as soon as it could be arranged, according to White House spokeswoman Dana Perino.

With his projected win, Obama will become the nation’s 44th president and its first African-American leader.

Supporters in Chicago cheering, “Yes, we can” were met with cries of “Yes, we did.”

More than 1,000 people gathered outside of the White House, chanting, “Obama, Obama!”

Obama’s former rival for the Democratic nomination, Sen. Hillary Clinton said in a statement that “we are celebrating an historic victory for the American people.” iReport.com: Share your Election Day reaction with CNN

“This was a long and hard fought campaign but the result was well worth the wait. Together, under the leadership of President Barack Obama, Vice President Joe Biden, and a Democratic Congress, we will chart a better course to build a new economy and rebuild our leadership in the world.”

The Illinois senator is projected to pick up a big win in Virginia, a state that hasn’t voted for a Democratic president since 1964. Watch how this election is history in the making »

Obama also is projected to beat McCain in Ohio, a battleground state that was considered a must-win for the Republican candidate. Watch more on Obama’s Ohio win »

Going into the election, national polls showed Obama with an 8-point lead.

Obama will be working with a heavily Democratic Congress. Democrats picked up Senate seats in New Hampshire, New Jersey, North Carolina and Virginia, among others. Read about the Senate races

Senate Minority Leader Mitch McConnell held onto his seat in Kentucky.

CNN’s Ed Henry said there were lots of long faces in the lobby of the McCain headquarters at the Arizona Biltmore hotel as McCain allies watched returns showing Senate Republicans losing their seats. Watch what McCain says about the race »

Voters expressed excitement and pride in their country after casting their ballots Tuesday in what has proved to be a historic election.

Poll workers reported high turnout across many parts of the country, and some voters waited hours to cast their ballots. Read about election problems

Reports of minor problems and delays in opening polls began surfacing early Tuesday, shortly after polls opened on the East Coast.

The presidential candidates both voted early in the day before heading out to the campaign trail one last time. Watch Obama family at polls »

Tuesday also marked the end of the longest presidential campaign season in U.S. history — 21 months.

As McCain and Obama emerged from their parties’ conventions, the race was essentially a toss-up, with McCain campaigning on his experience and Obama on the promise of change. But the race was altered by the financial crisis that hit Wall Street in September.

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U.S. on Brink of History as Barack Obama and John McCain Await Election Day Results

Barack Obama, Barack Obama presidential campaign 2008, California real estate agents, Della Volpe, Democratic Party, John Kerry, John McCain, mortgage brokers Los Angeles, North Carolina, United States

ELYAC Realty- Young voter turnout likely sets new record

Young voter turnout likely sets new record

About 50 percent of those ages 18-28 voted, early reports show

By Melissa Dahl

Health writer

msnbc.com

updated 3:22 p.m. PT, Wed., Nov. 5, 2008

Young Americans can finally shake off their reputation for civic apathy. Young people appear to have voted in higher numbers than ever before, preliminary reports show. And analysts say this demographic’s heavy tilt toward Barack Obama was a determining factor in his historic victory.

An estimated 24 million Americans ages 18 to 29 voted in this election, an increase in youth turnout by at least 2.2 million over 2004, reports CIRCLE, a non-partisan organization that promotes research on the political engagement of young Americans. That puts youth turnout somewhere between 49.3 and 54.5 percent, meaning 19 percent more young people voted this year than in 2004, estimates John Della Volpe, the director of polling for the Harvard Institute of Politics. And that’s a conservative estimate, Della Volpe says.

“It looks like the highest turnout among young people we’ve ever had,” says Della Volpe, adding that 12 percent more Americans in the overall electorate voted. The youth share of the vote also rose to 18 percent — a one-percent increase over the last three presidential elections.

“But I think one of the biggest stories is not so much the turnout but the balance of Obama versus McCain among young people — it’s pretty extraordinary,” says Peter Levine, the director for CIRCLE.

Exit polls show 66 percent of voters ages 18 to 29 preferred Obama and 32 percent preferred McMain. The gap closed among those ages 30 to 44 who preferred Obama 52 percent to McCain’s 46 percent. Among those ages 45 to 64, the vote was fairly evenly split between the candidates. Fifty three percent of voters 65 and older leaned toward McCain, compared to 45 percent who supported Obama.

“The reason he won the majority (of the overall vote) was the strong showing from voters 18 to 29. If you subtracted some of their turnout, or if you raised the voting age to 21, it’s a much closer race — or maybe he loses.”

‘Driving force’
Della Volpe estimates that Obama won the youth vote by 8.3 or 8.4 million — and he won the overall popular vote by about 8 million.

“Young people, no question, were the driving force behind this election,” Della Volpe says.

In North Carolina, Obama won the youth vote by nearly 50 points, with 73 points over John McCain’s 27. He lost every other age group in that state. “That turned the state from red to blue,” Della Volpe says. (NBC News has not yet projected a winner in the close presidential race in North Carolina.)

That same kind of wide margin also applied to Indiana, where he won the youth vote 63 to 35 — and again, lost every other age group. “And this is a state where John Kerry lost the youth vote in 2004,” says Della Volpe. Overall, Obama won 4 1/2 times the number of youth votes Kerry won in 2004.

“The difference is the margins — that’s what Obama deserves credit for,” Della Volpe says. “Young people were going to turn out anyway. He took that passion, that excitement, and really mobilized it.”

For Democratic party or only Obama?
Historically, young voters have never before been so solidly united under a single party, says Levine. In fact, the trend for years — here in the U.S. and internationally — has been for younger voters to consider themselves more independent. The question now is: Was it truly a tilt toward the Democratic party, or did the excitement belong solely to Obama?

“Young people have in at least the last 10 years have been pretty resistant to identify with any party,” Levine says. “I think it’s an open question whether Obama will try to and whether Obama will succeed in translating his support to the party.”

There is a possibility that these young people will continue to align themselves with the Democratic party. A comparable election is when Ronald Reagan was elected in 1984, gaining a large chunk of the youth vote; most of those young people continued to consistently vote Republican decades later.

This election season seems to have seen a surge in young people eager to immerse themselves in political involvement, perhaps especially those involved in campaigning efforts for Obama. Sarah Crisman of Dallas, 29, has spent the better part of the last 19 months devoted to the Obama campaign. And now that the election is over, she doesn’t plan to stop her volunteer efforts.

In February 2007, Crisman joined what was then a 100-person meet-up group for Obama, which by Election Day had ballooned into Obama Dallas, a 7,500-person strong grassroots volunteer organization to help campaign for the now president-elect. At an election party Tuesday night, the group’s leaders announced that the organization had a new name: The Progressive Center of Dallas.

“We’re not just going to twiddle their thumbs; we’re going to stay together, we’re going to keep moving, we’re going to keep working,” Crisman says. “It’s not over. This has changed my life; I’m not going to let this die out.”

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Young voter turnout likely sets record

Barack Obama, Barack Obama presidential campaign 2008, Bill Clinton, Democratic Party, Politics, President of the United States, Rahm Emanuel, Senate, White House, White House Chief of Staff

ELYAC Realty- Obama turns to building administration

CHICAGO – After eight years of Republican rule, Barack Obama turned Wednesday to the task of building a Democratic administration to lead the country out of war and into the financial recovery that he promised.

Pressing business came at him fast, with just 76 days until his inauguration as the 44th president.

Obama chose Rep. Rahm Emanuel, a fellow Chicago politician, to be his White House chief of staff, his first selection for the new administration, Democratic officials said Wednesday.

If Emanuel accepts, he would return to the White House where he served as a political and policy adviser to President Bill Clinton. Emanuel is the fourth-ranking Democrat in the House of Representatives as the Democratic Caucus Chair.

Two campaign officials said the appointment of a chief of staff was not expected for at least a day.

Kerry seeking spot
Several Democrats also said Massachusetts Sen. John Kerry, the party’s 2004 presidential nominee, was actively seeking appointment as secretary of State in the new administration.

James Steinberg, a former Clinton adviser, remained a top contender for National Security Adviser. Susan Rice, another former Clinton aide, could be considered for that job or another senior post.

Obama also relies heavily on three foreign policy experts on his campaign staff who are likely to end up in the White House or State Department. Those three aides are Mark Lippert and Denis McDonough, both former Senate aides, and Ben Rhodes, Obama’s foreign policy speech writer.

With wars under way in Iraq and Afghanistan, Obama might consider keeping Robert Gates on as Secretary of Defense. He might also consider tapping former Navy secretary Richard Danzig, a close adviser.

Obama issued a written statement announcing that his transition team would be headed by John Podesta, who served as chief of staff under Clinton; Pete Rouse, who has been Obama’s chief of staff in the Senate; and Valerie Jarrett, a friend of the president-elect and campaign adviser.

The officials who described the developments did so on condition of anonymity, saying they were not authorized to discuss events not yet announced.

Emanuel moves up
After leaving Bill Clinton’s White House, Emanuel turned to investment banking, then won a Chicago-area House seat six years ago. In Congress, he moved quickly into the leadership. As chairman of the Democratic campaign committee in 2006, he played an instrumental role in restoring his party to power after 12 years in the minority.

Emanuel maintained neutrality during the long primary battle between Obama and Sen. Hillary Rodham Clinton, not surprising given his long-standing ties to the former first lady and his Illinois connections with Obama.

With hundreds of jobs to fill and only 10 weeks until Inauguration Day, Obama and his transition team confronted a formidable task complicated by his anti-lobbyist campaign rhetoric.

The official campaign Web Site said no political appointees would be permitted to work on “regulations or contracts directly and substantially related to their prior employer for two years. And no political appointee will be able to lobby the executive branch after leaving government service during the remainder of the administration.”

But almost exactly one year ago, on Nov. 3, 2007, candidate Obama went considerably further than that while campaigning in South Carolina. “I don’t take a dime of their money, and when I am president, they won’t find a job in my White House,” he said of lobbyists at the time.

Because they often have prior experience in government or politics, lobbyists figure as potential appointees for presidents of both parties.

Ten weeks
The president-elect had breakfast with his wife and daughters, then left his house for a workout at a nearby gym. Aides said he intended to visit his campaign headquarters later in the day to thank his staff.

Obama has less than three months to build a new administration. But his status as an incumbent member of Congress presents issues unseen since 1960, when Democrat John F. Kennedy moved from the Senate to the White House.

The Senate is scheduled to hold a post-election session in two weeks, and Speaker Nancy Pelosi held a news conference Wednesday to reinforce her call for quick action on a bill to stimulate the economy.

That places Obama in uncharted territory — a president-elect, presumably first among equals among congressional Democrats. Yet his and their ability to enact legislation depends almost entirely until Inauguration Day on President Bush’s willingness to sign it.

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The global financial storm rolled across the Persian Gulf

Barclays, Global Markets, Gulf Bank, International Monetary Fund, London, Middle East, Persian Gulf, Saudi Arabia, United Arab Emirates, United States

ELYAC Realty- The global financial storm rolled across the Persian Gulf

Few banks have done as much twisting and turning in the past 18 months as Barclays. The British bank has picked its way through global banking turmoil and is emerging in one piece — just about.

But Barclays shareholders have paid a price for management’s determination to retain the bank’s independence and reject funds from the British government. Two Gulf investors stepped in instead, buying £3 billion ($4.94 billion) of reserve capital instruments. The 14% coupon compares with the 12% on preferred stock other banks are issuing to the U.K. government.

Associated Press

The London headquarters of British bank Barclays, in London, Friday Oct. 31, 2008.

Barclays also has placed £4.3 billion in mandatory convertible notes with investors. They pay a 9.75% coupon and will convert at 153 pence, a 22.5% discount to Barclays’ average stock price Wednesday and Thursday.

Those numbers aren’t quite as punitive as they look. The coupon on the RCIs is tax deductible so Barclays says the net cost is closer to 10%. But when the attached warrants are priced, that climbs back to 13%.

Barclays does spare itself the months it would take to get an orthodox rights issue off the ground. And it ends up with a Tier 1 ratio of about 11.3%. While not as robust as Credit Suisse’s 13.7%, that is stronger than the other European banks that haven’t taken state funds.

Barclays believes this is a competitive advantage, coupled with having Lehman Brothers’ U.S. assets under its belt and an enhanced emerging-market footprint in a much consolidated industry. But as the global economy slows, Barclays still has plenty more bullets to dodge before that position can start to pay off.

According The Wall Street Journal, The global financial storm rolled across the Persian Gulf on Sunday, as Kuwait’s central bank guaranteed bank deposits and cobbled together a hasty bailout for one of the country’s largest banks.

By Oil prices down more than 50% from their July highs, The Gulf now looks suddenly vulnerable at the same time as international and local investors are pulling back sharply after the Gulf had seemed relatively immune to the current crisis.

High oil prices have allowed state and private investors across the Gulf to funnel billions of dollars into property markets, infrastructure projects and, more recently, foreign-exchange speculation. In particular, many foreign and local investors earlier in the summer made speculative currency trades, betting that regional governments would drop their currency pegs with the dollar to help tame rising domestic inflation.

International investors — many of whom simply opened up local bank accounts in anticipation of a strengthening of regional currencies if they abandoned their peg to the dollar — rushed out of those trades late in the summer and early last month when it was clear governments weren’t going to act.

Chart courtesy of WSJ

That left many banks strapped for cash, and scrambling for ways to make new loans. When international borrowing seized up last month, the region found itself stuck in its own credit crunch.

But it was currency trades — not bad loans — that plunged Kuwait into a banking bailout on Sunday. Gulf Bank said defaults by counterparties on bad euro-dollar derivatives contracts forced the bank to seek government intervention.

The bailout further roiled Kuwait’s stock market, which fell 3.5%, adding to losses that have pushed the country’s main market index down 19% this year. Other regional markets fell sharply as well.

Companies, banks and individuals have been burned by sharp moves in global currency markets as fears of economic distress prompt an unwinding of trades that have depended on borrowed money. The dollar and the yen have both soared against nearly every other global currency over the past month as investors became convinced that a world-wide recession was looming. This has been particularly problematic because investors have bet heavily on emerging-market currency positions.

Several governments even took dramatic pre-emptive moves, funneling billions of dollars of cash into their relatively small but liquidity-starved banking systems. Earlier this month, Saudi Arabia promised $40 billion in lending facilities to banks that needed cash. The United Arab Emirates pledged a sweeping three-year guarantee on domestic bank accounts and promised to back up interbank lending.

Much of the Gulf has budgeted for much lower oil prices. Gulf states, on average, need prices above $47 a barrel to keep from running budget deficits. But some states are more vulnerable than others: Bahrain’s so-called break-even price is $75 a barrel, compared with Saudi Arabia’s $49 and Kuwait’s $33, according to the International Monetary Fund. The speed of crude’s tumble — to about $64 a barrel — has unnerved officials despite the apparent cushion. At an emergency meeting on Friday, the Organization of Petroleum Exporting Countries hastily decided to cut output by 1.5 million barrels a day, the biggest single cut in almost eight years.

Real-estate markets in Dubai is now a clear slowdown. Speculators, especially those who were financing their property investment, have largely fled the market.

Gulf Bank Customers Rush for Deposits After Currency Losses

According to Bloomberg today, Customers rushed to withdraw money from Gulf Bank KSC, Kuwait’s second-biggest bank, after clients defaulted on currency contracts and the central bank was forced to guarantee deposits. In the first signs of a bank run in the Persian Gulf, some Gulf Bank customers demanded money in a panic.

Gulf Bank may have losses of as much as 200 million dinars ($746 million) on the trades, Ibrahim Dabdoub, chief executive officer of National Bank of Kuwait SAK, said yesterday. Gulf Bank had assets of 5.09 billion dinars at the end of March and deposits of 3.2 billion dinars, according to Bloomberg data. It has 44 branches across Kuwait, its Web site says.

Central Bank Governor Sheikh Salem al-Sabah said yesterday that Gulf Bank lost money on currency derivatives after the euro declined against the dollar, state news agency KUNA reported. Gulf Bank will absorb the losses until it can work out an agreement with clients.

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ELYAC Realty- How to spot a lemon

1. Check the reliability record.

A good way to reduce the risk of purchasing a trouble-prone vehicle is to select models with a good reliability record before you begin shopping. Consumer Reports‘ annual subscriber survey provides exclusive real-world reliability information that can help you narrow your selections. See Best and worst used cars for a quick-reference list of the best and worst used cars from our most recent survey. Also read the reliability-history charts that accompany most of CR’s vehicle profiles to get a more detailed view at how specific models have held up in 16 trouble areas as well as overall.

2. Read the window sticker.

The Federal Trade Commission requires dealers to post a Buyer’s Guide in every used vehicle offered for sale. Usually attached to a window, it must contain certain information, including whether the vehicle is being sold “as is” or with a warranty, and what percentage of repair costs (if any) the dealer is obligated to pay. The Guide information overrides any contrary provisions in your sales contract. In other words, if the Guide says that the vehicle is covered by a warranty, the dealer must honor that warranty. If any changes in coverage are negotiated, the Guide must be altered to reflect them before the sale.

If a sale is designated “as is,” it means that the dealer makes no guarantees as to the condition of the vehicle, so any problems that arise after you have made the purchase will be your responsibility. Many states do not allow as-is sales on vehicles selling for more than a certain price.

3. Check the exterior.

Begin by doing a walk around of the car, looking for dents, chipped paint, mismatched body panels or parts, broken lamp housings, and chipped windows. Gaps between body panels should be of a consistent width and line up.

A closer inspection can reveal paint overspray on chrome or rubber trim or in the vehicle’s wheel wells. This is a telltale sign of body-panel repair.

Test for the presence of body filler with a small magnet. If the magnet doesn’t stick to the panel, the car may have filler under the paint (some vehicles with plastic or fiberglass panels, however, won’t attract a magnet at all). A door, hood, or trunk that doesn’t close and seal properly is evidence of previous damage and/or sloppy repair work. A CAPA (Certified Automotive Parts Association) sticker on a body panel means the part has been replaced. Inconsistent welds around the hood, doors, or trunk also indicate repair.

4. Check the interior.

A long look into the cabin can reveal many obvious problems, such as a sagging headliner, cracked dashboard, and missing knobs, handles, and buttons. Frayed seat belts or ones with melted fibers (because of friction) may be evidence of a previous frontal impact above 15 mph–damaged safety belts should always be replaced.

Prematurely worn pedals or a sagging driver’s seat are signs that the vehicle has very high mileage. An air bag warning light that stays lit may indicate that a bag has deployed and been improperly replaced–or not replaced at all. A mildew smell, caused by a water leak, can be very hard to get rid of. Discolored carpeting, silt in the trunk, or intermittent electrical problems may be signs of flood damage.

5. Check under the hood.

At first glance, the engine, radiator, and battery should be relatively grease-free and have very little or no corrosion. Belts and hoses should be pliable and unworn. Look for wet spots, which can indicate leaking oil or fluids. Melted wires, tubes, or lines, or a blackened firewall may be signs of overheating or even an engine fire.

With the engine cool, insure that all fluids are clean, filled to the proper level, and do not have leaks. Check the engine oil while the engine is cool. Remove the dipstick from its tube and clean it with a dry rag, reinsert it and remove it again. The oil level should be between the “full” and “add” marks. Normal engine oil is brown or black, depending on when it was last changed. Gritty or gelatinous oil may indicate long stretches between oil changes. Thin, frothy oil that’s the color of chocolate milk may point to a blown head gasket or to a severely damaged block or cylinder head. Fine metal particles in the oil indicate internal damage or heavy wear.

The transmission fluid dipstick is usually located in the rear of the engine compartment. Check it right after the car has been driven for more than 10 minutes. With the engine at idle and both the brake and parking brake applied, shift through all the gears. Leave the engine running and put it in neutral or park (according to the owner’s manual) and check the level in relation to the dipstick marks. Also inspect the fluid’s condition. The transmission fluid should be bright red to light reddish brown, not dark brown, black, or mustard colored; those colors can indicate serious problems. If it has a strong burned smell, that can indicate severe wear.

6. Check the tires.

Wear should be even across the width of the tread and the same on the left and right sides of the car. Tires that are frequently used while over-inflated tend to have more wear in the middle; tires driven while under-inflated tend to wear more on the sides. Heavy wear on the outside shoulder near the sidewall of the tire indicates a car that has been driven hard. This can be a sign that other parts of the car may suffer from excessive wear due to aggressive driving. Cupped tires, those that have worn unevenly along the tread’s circumference, can indicate various problems with the steering, suspension, or brakes.

7. Check the steering.

With the car idling, turn the steering wheel right and left. Check that there isn’t any slack or “play,” or clunking noise in the steering. Excess play may indicate a worn steering gear or damaged linkage.

While driving at normal speeds on smooth, flat pavement, the car shouldn’t wander or need constant steering corrections. A shaking steering wheel often indicates a need for a wheel balancing or front-end alignment, which are easily remedied. However, this may also be a clue that there’s a problem with the driveline, suspension, or frame, which could mean expensive repairs are in order.

8. Check the suspension.

Check the suspension by pushing down hard on each fender and letting go. The car should rebound softly, once or twice. More than two severe rebounds indicate worn shock absorbers or struts. Also, drive the car over a bumpy road at about 30 mph. A car that bounces and slams at moderate speeds over common pavement may have a worn or damaged suspension.

9. Check the tailpipe.

A puff of white smoke upon start-up is probably the result of condensation and not a cause for alarm. Black smoke after the car has warmed up indicates an overly rich air-fuel mixture–usually due to a dirty air filter, a faulty oxygen sensor, or mass-air meter (which measures the amount of intake air). Blue smoke indicates oil burning–a bad sign, requiring expensive repairs. Billowing white smoke indicates water in the combustion chamber, usually because of a blown head gasket, damaged cylinder head, or even a cracked block–all expensive repairs.

10. Step on the gas.

While driving, does the engine rev excessively before the car accelerates? This is a common sign of a misadjusted or worn-out clutch, or a damaged automatic transmission. A clutch adjustment is a relatively inexpensive service, but a damaged clutch or automatic-transmission repair can be extremely expensive.

Listen for knocks and pings while accelerating. These indicate bad ignition timing or an engine beginning to overheat.

11. Check for recalls and TSBs.

Check to see if any recalls were issued and if recall service was performed. The National Highway Traffic Safety Administration (www.nhtsa.dot.gov; 800-424-9393) lists all official recalls. Ask the seller for documentation on recall service. If any recall work has not been performed on a car that you’re considering, it should be done as soon as possible. Automakers are required to perform recall service free of charge, regardless of the vehicle’s age or how long ago the recall was issued.

Technical Service Bulletins, or “TSBs,” are reports a manufacturer sends its dealers about common or recurring problems with a specific model, and how to rectify them. Because TSBs aren’t typically safety related, manufacturers are not obligated to notify owners or pay for the repairs, though an automaker may pay for some or all of the work–if an owner asks them to. Lists of TSBs can be found at www.nhtsa.dot.gov/cars/problems/tsb/index.cfm. Check for any TSBs that were issued for the model you’re buying and if the seller had any necessary repairs performed.

12. Check the vehicle’s history.

A vehicle-history report from CarFax (www.carfax.com) or Experian Automotive (www.autocheck.com) can alert you to possible odometer fraud; reveal past fire, flood, and accident damage; or tell you if a rebuilt or salvage title has ever been issued for the vehicle. To access this information, provide the vehicle identification number, or “VIN,” which is on the top of the dashboard, near the driver’s side roof pillar. Reports should cost $15 and the process takes about five minutes. (CarFax’s Web site provides Consumer Reports’ advice and information on buying used cars.)

13. Visit a mechanic.

Before you buy a used vehicle, have it inspected by a qualified mechanic that routinely does automotive diagnostic work. A thorough diagnosis should cost around $120. An organization called the Car Care Council (www.carcarecouncil.org) certifies diagnostic shops. If you’re an American Automobile Association (AAA) member, you could use one of the organization’s recommended facilities.

In addition to doing the basic diagnostic, ask the mechanic to put the vehicle on a lift and inspect the undercarriage. Kinked structural components and large dents in the floor pan or fuel tank can indicate a past accident. Welding on the frame suggests a damaged section might have been replaced or cut out during repairs. Have the mechanic look for fresh undercoating, which can be used to hide recent structural repairs.

A dealer should have no problem lending you the car to have it inspected as long as you leave identification. A private seller may be more reluctant, however. You should offer to follow the seller to the shop where the inspection will take place.

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ELYAC Realty- U.S. economy shrank in the third quarter

U.S. economy shrank in the third quarter

Contraction at 0.3 percent pace suggests the onset of recession

The Associated Press

updated 12:20 p.m. PT, Thurs., Oct. 30, 2008

WASHINGTON – The government reported Thursday the economy shrank in the summer, the strongest signal yet that a recession may have already begun, a day after the Federal Reserve slashed a key interest rate to battle an economic downturn.

The Commerce Department reported that the gross domestic product, the broadest measure of economic health, fell at an annual rate of 0.3 percent in the July-September period, a significant slowdown after growth of 2.8 percent in the prior quarter.

The spring activity had been boosted by the $168 billion economic stimulus program, but the economy ran into a wall in the summer as the mass mailings of stimulus checks ended and consumer confidence was shaken by the upheavals on global markets. Consumer spending, which accounts for two-thirds of the economy, dropped by the largest amount in 28 years in the third quarter.

The classic definition of a recession is two consecutive quarters of negative GDP. Many analysts believe the GDP will decline in the current October-December period by an even larger amount and they are forecasting a negative GDP figure in the first three months of next year.

The National Bureau of Economic Research, which is the official arbiter of recessions in this country, has not said when it will make its determination of whether the country has entered a recession.

Meanwhile, the Labor Department reported Thursday that applications for unemployment benefits remained at an elevated level last week, another sign of the economy’s struggles. The number of laid-off workers filing new claims totaled 479,000, the same as the previous week, disappointing analysts who had expected a small drop.

On Wednesday, the Fed cut the federal funds rate — the interest banks charge each other on overnight loans — by half a percentage point, and the government finally began distributing funds from the billions in the financial rescue package.

Those efforts were part of a concerted drive by officials, just days before a national election, to demonstrate they are moving as quickly as possible to deal with the most serious financial crisis to hit the country since the 1930s.

“Policymakers have their foot to the accelerator and they are using every effort at their disposal to stop the slide in the economy and financial markets,” said Mark Zandi, chief economist with Moody’s Economy.com. “And it’s not a moment too soon given the serious damage that has already been done.”

While Wall Street posted its second biggest point gain in history Tuesday in anticipation of the Fed rate cut, the bleak economic reality appeared to ensure that the euphoria was short-lived. The Dow Jones industrial average rallied Thursday morning after closing down 74 points on Wednesday, a drop analysts said partly reflected growing worries about whether the government’s actions will be sufficient to avert a deep and prolonged recession.

The Fed, as investors had hoped, announced the half-point cut in the federal funds rate, driving it down to 1 percent, a low last seen in 2003-2004. That rate has not been lower since 1958 when Dwight Eisenhower was president.

Reducing the rate as low as zero cannot be ruled out, some analysts said, but they cautioned that reducing rates that far carried some risks, including that if the credit crisis suddenly worsened, the Fed would have used up its ammunition.

Analysts also noted that just lowering rates cannot serve as a panacea to overcome a credit crisis. While the goal is to encourage banks to begin lending again, financial institutions are skittish about extending new loans given the huge losses they have racked up in bad mortgages.

Meanwhile, the administration announced that the spigot had been opened on the $700 billion fund created by Congress Oct. 3 to rescue the U.S. financial system. Treasury issued a report showing checks had been disbursed for $125 billion in payments to nine major banks, including Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley. The goal is to bolster their balance sheets so they will resume more normal lending.

And the administration was nearing an agreement on a plan to help around 3 million homeowners avoid foreclosure, according to sources who had been briefed on the matter. The program would be the most aggressive effort yet to limit damages from the severe housing slump.

Besides cutting interest rates, the Fed announced it was extending credit lines worth $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore in an effort to bolster financial markets in those countries and relieve investors’ anxieties.

It brought to 14 the number of central banks that the Fed has entered into so-called swap arrangements for currency as a way to pump more liquidity into global credit markets, part of an effort that the Bank of England estimated has resulted in $5 trillion in support being put forward by governments worldwide.

The International Monetary Fund unveiled a new streamlined lending process to get support to countries caught up in the credit crisis, another effort by the 185-member institution to show it was prepared to perform its job as lender of last resort to countries facing difficulties. The IMF already has moved to help Iceland, Ukraine and Hungary with other nations quickly lining up for aid.

The Fed’s half-point interest rate cut marked the second rate reduction this month. The Fed slashed the rate by a half-point on Oct. 8 in a coordinated action with other foreign central banks. Economists predict foreign central banks will follow suit with another round of rate cuts over the next week.

In a brief statement explaining Wednesday’s action, the Fed said that “downside risks to growth remain” holding out the promise of further rate cuts if needed. The rate-cut decision was unanimous.

Many analysts said they believe the Fed will not stop at 1 percent if officials see the need to cut rates further. Some are forecasting another half-point move at the Fed’s last meeting of the year on Dec. 16.

But other economists said with rates already so low, the Fed may decide to hold at 1 percent, leaving some room for a further reduction next year should the country’s economic troubles intensify.

The Fed’s action was quickly followed by a reduction by commercial banks in their prime lending rate, the benchmark for millions of consumer and business loans, which was cut from 4.5 percent down to 4 percent, its lowest level in four years.

The central bank also announced that it was lowering its discount rate, the interest it charges to make direct loans to banks, by a half-point to 1.25 percent. This rate has become increasingly important as the central bank has dramatically increased direct loans to banks in an effort to break the grip of the credit crisis.

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ELYAC Realty- Consumers Drag Economy Down

The gross domestic product numbers released this morning were better than I expected, and depended in part on some optimistic guesses about statistics not yet measured. I expect the 0.3 percent rate of decline will be much worse by the time they finish revising the figure.

That will, however, be long after the election. So this is the figure that voters will be able to consider on Tuesday.

And it is bad enough. Consumers are clearly in retreat, and the economy is suffering. The year-over-year increase in real G.D.P. is 0.8 percent, the lowest for any four-quarter period since 2001.

Real personal consumption spending is estimated to have fallen a tiny bit (0.04 percent) over the four-quarter period. That is the first decline for that segment since 1991.

Another number worth noting is final sales to domestic purchasers, whether businesses, consumers or governments. That leaves out gains from exports, and it ignores changes in business inventories. It is down 0.1 percent on a year-over-year basis. Again, that is the first decline since 1991.

This recession, in other words, is already deeper than the 2001 downturn. And there are clear signs it is, or soon will be, worse than the 1990-91 recession as well.

If only consumer purchases were counted in G.D.P., it would have fallen at a 3.1 percent annual rate in the quarter. That is the worst quarterly performance in that regard since the second quarter of 1980. Then, in a desperate attempt to control inflation, the Fed imposed credit controls. Now we have credit controls imposed despite every attempt by the Fed to stimulate the economy.

With consumers fearful, what kept the overall quarterly decline so small?

Government spending, for one. It added 1.1 percent to the growth rate. Another 0.6 percent came from increases in private inventories, which probably represents items that were not sold because customers were not buying. The government also thinks that non-residential construction — stores and office buildings — added 0.3 percent to the growth rate. And a big contributor was net exports, which added 1.1 percent.

Will any of those be repeated? Federal government spending may accelerate, but unless Washington sends cash increases are less likely in state and local government outlays. Inventories may fall, particularly if it does not get easier for businesses to finance them. Non-residential construction is clearly slowing.

And net exports? For exports to rise there have to be increases in imports somewhere else, and that is looking less and less likely. Today the consumer sentiment figure for the euro zone came out. It fell to a 15-year low. Here is what Jennifer McKeown, an economist for Capital Economics in London, had to say about that survey:

“We had been hoping that the region’s relative lack of imbalances would mean that it escaped the severe recession facing the U.S. and the U.K., but this and other recent surveys suggest that the economy will continue to contract for some quarters at least.”

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ELYAC Realty- U.S. to unveil effort to help homeowners

U.S. to unveil effort to help homeowners

Government may spend $50 billion to provide relief on 3 million mortgages

The Associated Press

updated 3:46 p.m. PT, Wed., Oct. 29, 2008

WASHINGTON – The government is preparing to unveil a plan that would help around 3 million homeowners avoid foreclosure, sources briefed on the matter said.

A final deal had not been reached as of Wednesday afternoon and negotiations could still fall apart, but government agencies were contemplating using around $50 billion from the recently passed bailout of the financial industry to guarantee about $500 billion in mortgages.

The plan could include loan modifications that would lower interest rates for a five-year period, according to two people briefed on the plan, who asked not to be identified because details were still being worked out and the plan was not yet public.

The plan would be the most aggressive effort yet to limit damages from the collapse of the housing bubble that has shaken financial markets around the world and sparked fears of a global recession.

More than 4 million American homeowners were at least one payment behind on their mortgage loans at the end of June, and 500,000 were in some stage of the foreclosure process, according to the most recent data from the Mortgage Bankers Association.

The government’s program would be run by the Federal Deposit Insurance Corp. The agency’s chairman, Sheila Bair, said last week she was working “closely and creatively” with the Treasury Department on such a plan, but revealed few details.

The plan had been scheduled to be announced Wednesday but was pushed back because the details were still being finalized.

Andrew Gray, an FDIC spokesman, said it would be “premature to speculate about any final framework or parameters of a potential program.”

Treasury Department spokeswoman Jennifer Zuccarelli called details of the loan modification plan “simply inaccurate.” She said the Bush administration “is looking at ways to reduce foreclosures, and that process is ongoing,” but has not decided on a final approach.

Borrower frustration is growing over the government’s slow and limited assistance programs.

On Wednesday, about 100 demonstrators marched in front of the headquarters of Fannie Mae and forced a midafternoon meeting with the company’s chief executive, Herbert Allison.

Some held signs that read “Restructure our loans now,” “Fannie Mae destroys lives” and “Foreclose on Fannie Mae.”

Bruce Marks, chief executive of the Boston-based Neighborhood Assistance Corp. of America, said Fannie Mae should adopt a program similar to the one the FDIC put in place at failed IndyMac Bank of Pasadena, Calif. Borrowers there are getting interest rates of about 3 percent for five years.

Fannie Mae, as the largest buyer and guarantor of mortgages “sets the standard” for the industry, said Marks. “They talk and they talk and they never do.”

After the meeting, which included Allison and other top managers, company spokeswoman Amy Bonitatibus said “we agreed to continue to meet with them and work together on foreclosure prevention.”

Over the past 10 weeks, Fannie Mae says it has received more than 40,000 defaulting loans and stopped 80 percent of them from going into foreclosure.

Last month, the government seized control Fannie Mae and Freddie Mac, the two biggest U.S. mortgage finance companies, with a rescue plan that could require the Treasury Department to inject as much as $100 billion into each to keep them afloat.

It was unclear Wednesday what role Fannie and Freddie would play in the government’s sweeping plan to help millions of American homeowners. But lawmakers on Capitol Hill want the companies to take a more aggressive approach.

Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, said in a statement Wednesday that “federal agencies and financial institutions must do more to modify the mortgages they hold in order to stop foreclosures and help families keep their homes.”

By guaranteeing millions of mortgages, the government could help restore confidence in the market for securities backed by mortgage loans. That was where the global credit crisis started.

As a surprising number of homeowners began defaulting on their loans, investors could no longer put a value on the securities which were backed by pools of mortgages. So trading of these securities froze, sending shock waves through the financial industry.

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ELYAC Realty- The Worst Appetizers in America

85% of users found this article helpful.

Aggressive Fed Cuts Key Rate by a Half-Point

Bowing to growing concerns about a deep recession and the remarkable declines on Wall Street, the Federal Reserve lowered its benchmark interest rate by half a percentage point on Wednesday, tapping its most visible policy tool to free up more money for banks and businesses.

The move brings the Federal funds rate to 1 percent. While Fed policy makers now have less room to maneuver on interest rates if the economy deteriorates further, investors had been hoping for the relatively aggressive cut as a sign of vigilance among American central bankers seeking to restore the free flow of credit. The move brought the rate down to near the lows reached in 2003 and 2004.

But the economic outlook is much grimmer than it was in 2003. Back then, policy makers were trying to vanquish the last remnants of a downturn.

This time, policy makers face an economy that is sputtering on all fronts — consumer spending, job creation, business investment, housing and possibly even exports — and the downturn has only begun.

The Federal Reserve is within striking range of reducing the overnight lending rate to zero, a point that Japan reached in the 1990s and remained at for years while it struggled to revive its economy.

If the Federal funds rate were to reach zero, the Fed would not be out of tools for stimulating the economy. But it would have to resort to unconventional tools that it has never used before. Instead of trying to reduce rates on overnight loans between banks, for example, it might start buying longer-term Treasury securities in order to push those rates down.

The Fed’s biggest weakness at the moment is that the economy’s problems have less to do with interest rates than the reluctance of banks and financial institutions to lend money. Even though the Fed has loaned out almost $600 billion to financial institutions in the last month alone, banks are still reluctant to lend to businesses or consumers.

Since the credit crisis began in August 2007, the Federal Reserve has slashed the Fed funds rate from 5.25 percent to 1.5 percent. But interest rates for 30-year fixed-rate mortgages are about 6.3 percent, roughly where they were when the credit crisis began.

Many economists contend that the United States economy has already slipped into a recession that could well last longer and be more severe than any downturn since the early 1970s.

The crisis in financial markets and banking, which began more than a year ago and has choked off lending to corporations and consumers, is spreading to the broader economy. But credit remains tight, even though the Federal Reserve has tried to jumpstart credit markets by lending nearly $700 billion over the last month.

Both consumers and businesses have ratcheted back spending. Major corporations from General Electric to Coca-Cola have announced layoffs, and Detroit’s car makers are struggling to survive.

Consumer spending, which accounts for about two-thirds of the nation’s economic activity, appears to have declined in the third quarter and will probably remain low for some time. The Conference Board’s closely watched measure of consumer confidence declined in October to the lowest point in the survey’s history.

Private forecasters expect that the Commerce Department, which on Thursday will release its initial estimate of third-quarter growth, will report that the economy contracted about one-half of 1 percent. But most forecasters expect the fourth quarter to be worse.

The United States has been shedding jobs every month this year, for a total decline of more than 700,000 jobs so far. What makes that alarming to many analysts is that the job losses have come so early in the downturn.

Traditionally, companies have been cautious about laying off workers at the start of a downturn and equally cautious about adding workers after a recovery begins.

“The ground is moving from underneath us,” said Diane Swonk, chief economist at Mesirow Financial, an investment firm in Chicago.

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ELYAC Realty- Consumers Feel the Next Crisis: It’s Credit Cards

By ERIC DASH

First came the mortgage crisis. Now comes the credit card crisis.

After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers.

The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create.

Lenders wrote off an estimated $21 billion in bad credit card loans in the first half of 2008 as more borrowers defaulted on their payments. With companies laying off tens of thousands of workers, the industry stands to lose at least another $55 billion over the next year and a half, analysts say. Currently, the total losses amount to 5.5 percent of credit card debt outstanding, and could surpass the 7.9 percent level reached after the technology bubble burst in 2001.

“If unemployment continues to increase, credit card net charge-offs could exceed historical norms,” Gary L. Crittenden, Citigroup’s chief financial officer, said.

Faced with sobering conditions, companies that issue MasterCard, Visa and other cards are rushing to stanch the bleeding, even as options once easily tapped by borrowers to pay off credit card obligations, like home equity lines or the ability to transfer balances to a new card, dry up.

Big lenders — like American Express, Bank of America, Citigroup and even the retailer Target — have begun tightening standards for applicants and are culling their portfolios of the riskiest customers. Capital One, another big issuer, for example, has aggressively shut down inactive accounts and reduced customer credit lines by 4.5 percent in the second quarter from the previous period, according to regulatory filings.

Lenders are shunning consumers already in debt and cutting credit limits for existing cardholders, especially those who live in areas ravaged by the housing crisis or who work in troubled industries. In some cases, lenders are even reining in credit lines after monitoring cardholders who shop at the same stores as other risky borrowers or who have mortgages from certain companies.

While such changes protect lenders, some can come back to haunt consumers. The result can be a lower credit score, which forces a borrower to pay higher interest rates and makes it harder to obtain loans. A reduced line of credit can also make it harder for consumers to manage their budgets, because lenders have 30 days to notify their customers, and they often wait to do so after taking action.

The depth of the financial crisis has shocked a credit-hooked nation into rethinking its habits. Many families once content to buy now and pay later are eager to trim their reliance on credit cards. The Treasury Department, which is spending billions of dollars in taxpayer money to clean up an economic mess brought on in part by all sorts of easy credit, recently started an advertising campaign inviting consumers to check into the “Bad Credit Hotel,” an online game that teaches the basics of maintaining good credit.

At the same time, the fear factor among lenders has deepened just as the crisis makes it harder for some financially stretched consumers to wean themselves from credit cards for even basic needs, like gas and food.

“We are not going to say, ‘Yahoo, this is over,’ and extend credit like we did without fear,” Jamie Dimon, JPMorgan Chase’s chief executive, said in a recent conference call. “If you’re not fearful, you’re crazy.”

Even those with good credit ratings are not excepted. American Express, which traditionally catered to more upscale cardholders, said it would be increasing effective interest rates by 2 or 3 percentage points for some of its credit card holders — a move that could, for example, push a 15 percent rate up to 18 percent.

“We think it’s prudent given the nature of those products and the economic environment we face,” Daniel Henry, its chief financial officer, said in a recent conference call.

Some reward programs have also gotten stingier as lenders cut corners to save money. Card companies, for example, have taken to substituting cheaper brands for a Sony big-screen television as a way of lowering the cost of their redemption prizes.

For less creditworthy customers, issuers are pulling back on promotional offers that allowed borrowers to pay no interest for months as they try to get ahead of stiffer lending rules that have been proposed by federal banking regulators and Congress.

The regulations, while beneficial to consumers, will curb profits on card issuers’ riskiest customers. JPMorgan said that it was withdrawing some teaser-rate loans that were only marginally profitable. Discover Financial shortened the duration of its zero-balance offers.

And lenders, over all, are slowing the flood of mail offers to a trickle with moves that would translate for the average American household into about 13 fewer pieces of credit card junk mail a year than its peak in 2005. Mail offers to new and existing customers are on pace to drop below 8.4 billion pieces, the lowest level since 2004, according to Mintel Comperemedia, a direct marketing research firm.

Online credit card applications have fallen for the first time in five quarters, in part because customers are receiving fewer mail offers that drive them to the Web, according to data from comScore, an Internet marketing research firm.

“We used to get a couple of offers a week, but I haven’t seen a credit card offer in over a year,” said Brett Barry, who owns a real estate agency outside Phoenix and described his credit record as strong. “What blows me away is these companies are in the business of extending credit, but they don’t want to do it for me.”

Mr. Barry said that, without any notice, American Express had reduced the credit limit on his business and personal credit card at least four times in the last year, which he said had lowered his credit score. The moves have also made it difficult for him to manage his payroll and budget, he said.

“Credit card issuers have realized their market is shrinking and that there is no room for extra credit cards, so they have to scale back,” said Lisa Hronek, a research analyst at Mintel. “People are completely maxed out with mortgages, home equity lines and credit card debt.”

At the same time, credit card profit margins have been narrowing, largely because lenders’ own financing costs remain elevated as investors spurn credit card bonds, just as they did mortgages. Another factor is that the interest rates banks charge even creditworthy borrowers have come down after the emergency actions taken by the Federal Reserve to ease the credit crisis.

Meanwhile, bank executives say consumers are starting to curb their spending, to an extent that may become clearer Wednesday when Visa reports its third-quarter results.

In previous downturns, banks could make up the missing profits by raising fees. This time, there may be less room to maneuver.

“The last time credit costs spiked, the late fees were much lower, so card issuers could turn to that and reprice more nimbly,” a Morgan Stanley analyst, Betsy Graseck, said. “There is just more scrutiny now, and coming after the subprime mortgage crisis, the world is more sensitive to the way lenders behave.”

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ELYAC Realty- Dow ends up almost 900, but no one is exhaling

Wall Street’s best day in two weeks — and one of its best ever — was a joyless rally. Even a manic, final-hour stampede of buying that sent the Dow Jones industrials soaring almost 900 points did nothing to dispel the feeling that the market could turn on investors in an instant.

But the extraordinary, lurching volatility that has gripped Wall Street since the financial meltdown began in mid-September meant there were no guarantees the rally would hold, not even for a few days.

Investors are expecting a cut in interest rates when the Federal Reserve announces its decision Wednesday. But they’re also staring into an economic abyss, bracing for a recession of a depth no one knows for sure.

Any other day like this — the Dow and the Standard and Poor’s 500 both rose almost 11 percent — might have ended with boisterous cheers and paper tossed into the air. On Tuesday, 4 p.m. came with meager applause.

“I don’t think it will be a sustained move,” said Matt King, chief investment officer at Bell Investment Advisors.

The Dow finished 889 points higher to close at 9,065. On Oct. 13, the Dow rose 936 points, its best ever; no other single-day rally has come close in terms of points to what happened Tuesday.

Analysts ventured a number of explanations for the sudden rally — including coming interest rate cuts, bargain hunting, a market desperate to find a bottom and the expectation that banks, at the urging of the White House, will quit hoarding money and start making loans.

“There is nothing fundamental that came out today or yesterday that would take it up or down. We’re all groping for something meaningful to talk about,” said Bob Andres, chief investment strategist at Portfolio Management Consultants. “The market is exhausted from going down.”

The mood on Main Street is decidedly more pessimistic, and new data Tuesday showed Americans are more depressed than market analysts had expected.

The Conference Board’s consumer confidence index plunged to the lowest level in its 41-year history in the wake of this month’s financial meltdown, the sharp drop in home prices and increasing job losses.

The index fell to 38, down from a September reading of about 61 — the third-steepest monthly decline since the board started the measure in 1967. Analysts, way off the mark, had expected 52.

“It’s the worst consumer environment since the 1981-1982 recession,” said Adam York, an economist at Wachovia Corp. Americans believe “there’s a very dire situation in the U.S. economy right now, and they’re not far from being right,” he added.

Financial market turmoil and falling housing prices have wiped out trillions of dollars of household wealth in recent months. The S&P 500 had fallen 27 percent in October, and 40 percent for the year, before Tuesday’s jump.

In addition, companies cut 760,000 jobs in the first nine months this year, sending the unemployment rate to 6.1 percent last month. Many economists expect layoffs to continue and the unemployment rate to rise to 8 percent or higher in 2009.

After the last recession, in 2001, the unemployment rate rose as high as 6.3 percent in June 2003.

On Tuesday, Whirlpool Corp. said it will cut 5,000 jobs. That’s on top of other recent layoffs of thousands of workers by Xerox Corp., drugmaker Merck & Co. Inc. and financial services firm National City Corp.

“The collapse in confidence is directly tied to perceptions about economic conditions and that is likely to mean that households will keep their wallets closed,” said Joel Naroff, an economist with Naroff Economic Advisors.

If they do, it’ll happen at a bad time. The holiday season is just weeks away, and it’s expected to be anemic.

“I don’t know how long this is going to last,” said Johnny Hunt, 50, a carpenter in Deltona, Fla., who says he is cutting back on a lot of things. “So I got to save money. You’ve got to hold onto what you do have.”

S&P said in a report earlier this week that holiday retail sales would probably fall 2 percent to $250 billion this year, “the most difficult holiday season in memory for U.S. retailers.”

Holiday sales have increased an average of 4.4 percent a year in the past decade, the report said.

Meanwhile, the housing slump, which set off the mortgage crisis that has consumed Wall Street for more than a year, shows no sign of abating. A closely watched index of home prices fell Tuesday by its steepest ever annual rate in August.

The Standard & Poor’s/Case-Shiller 20-city housing index dropped a record 16.6 percent from August last year, the largest drop since its inception in 2000.

In addition, the Census Bureau reported that 2.8 percent of U.S. homes — excluding rental properties — were vacant and for sale in the third quarter, unchanged from the second quarter. That works out to 2.22 million properties, the second-highest quarterly number in records going back to 1956.

The first quarter clocked in at a 2.9 percent vacancy rate. In a normal market, it’s about 1.7 percent, said Patrick Newport, an economist at IHS Global Insight. That means there’s more than 800,000 excess vacant homes on the market.

Exacerbating the pricing environment is a rash of foreclosures, especially in once-hot markets like California, Las Vegas, Florida and Phoenix. Home prices are falling fastest there, according to Case-Shiller — dropping as much as 30 percent in August.

To move foreclosed properties off their books, lenders are sharply discounting prices, which is weighing down median prices.

On Thursday, the Commerce Department will provide its first estimate of the economy’s third quarter performance, and many economists think the economy shrank. Economic contraction for the third and fourth quarters consecutively would meet the classic definition of recession.

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ELYAC Realty- Stocks fluctuate as banks, housing stocks gain

NEW YORK – Wall Street fluctuated Monday as investors weighed a surprise increase in new home sales and the effectiveness of government aid for regional banks against worries over whether the economy can avoid a protracted downturn. The Dow Jones industrial average showed the most volatility while broader market indexes showed moderate declines.

The market’s moves, coming on light volume, appeared tentative as investors remain nervous over the possibility of a global recession. The Street’s back-and-forth was typical for a volatile market that has seen many recent rallies evaporate.

Investors’ guessing about the economy came ahead of possible interest rate moves from central banks, including the Federal Reserve, which is set to begin a two-day meeting Tuesday. The Fed is expected to lower its fed funds rate by a half-point to 1 percent on Wednesday. Investors are also optimistic that the European Central Bank is moving toward its own cut after President Jean-Claude Trichet said Monday such a step was “a possibility.”

Policymakers around the world have been trying to find a remedy for the fear of bad debt that has paralyzed parts of the credit markets in the past month. While some signs point to a recent ease in lending conditions, investors are now also worried that a drop-off in lending has damaged the economy.

The U.S. government is taking some of its first steps to steady the banking sector. The Treasury said it signed agreements with nine banks and will buy stock in the companies this week. The proceeds from the stock sales are intended to bolster the banks’ balance sheets so they will begin more normal lending.

“Clearly, what’s most important is that the funding crisis needs to be contained at this point,” said Chris Orndorff, director of equity strategy at Payden & Rygel in Los Angeles.

“The banks need to start taking on some more risks,” he said. “I think it’s going to take months.”

Beyond troubles in the financial sector, Orndorff contends investors are focusing on the outcome of the Fed meeting and any shot of confidence that a rate cut could bring.

In late afternoon trading, the Dow fell 5.89, or 0.07 percent, to 8,373.06; advances by Verizon Communications Inc. and Home Depot Inc. helped contain the blue chips‘ losses.

Broader stock indicators showed more sizable losses. The Standard & Poor’s 500 index fell 6.28, or 0.72 percent, to 870.49, and the Nasdaq composite index fell 12.32, or 0.79 percent, to 1,569.71.

The Russell 2000 index of smaller companies fell 9.69, or 2.06 percent, to 461.43.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to a light 844.1 million shares. Lighter volume can call into question the conviction behind big market advances or declines.

Light, sweet crude fell 93 cents to $63.24 per barrel on the New York Mercantile Exchange.

The gyrations in U.S. stocks have been sizable since the market’s peak a year ago, but particularly since last month’s bankruptcy of Lehman Brothers Holdings Inc. and the government rescue of insurer American International Group. With investors uncertain about the economy, the market appears to be bouncing along a rocky bottom after falling sharply earlier this month.

Wall Street was cheered Monday by news that sales of new homes showed an unexpected increase in September. While median home prices have dropped to the lowest level in four years, investors appeared pleased that the market was beginning to chip away at an inventory glut. The Commerce Department reported that sales of new single-family homes rose by 2.7 percent in September to a seasonally adjusted annual rate of 464,000 homes. Economists had expected sales would drop from August.

The median price of a new home declined by 9.1 percent from a year ago to $218,400, its lowest level since September 2004.

Regional banks advanced after the Treasury began rolling out its investments. Fifth Third Bancorp. rose 77 cents, or 9.5 percent, to $8.84, while SunTrust Banks Inc. rose $1.86, or 5.3 percent, to $36.97.

Home builders rose after the housing data. Centex Corp. advanced 7 cents $6.59, and Lennar Corp. rose 8 cents to $6.60. Some companies dependent on the housing sector rose as well. Home Depot rose 60 cents, or 3.2 percent, to $19.11, while Target Corp., which sells home-decorating items, advanced 73 cents, or 2.2 percent, to $33.65.

Verizon rose $2.97, or 11.8 percent, to $28.05, making it the strongest advancer among the 30 stocks that comprise the Dow industrials. The company reported that its third-quarter earnings rose 31 percent after its wireless business showed stronger-than-expected results.

Even with several pieces of welcome news, investors around the world remain worried about the prospects for economic expansion. A surge in the yen illustrated investors’ nervousness about how much economic activity could slow. Japan’s Nikkei 225 index dropped to its lowest close in 26 years. The yen is seen as a safe haven holding for investors who contend the Japanese economy will fare better in a global recession.

The ongoing selling is due in part to the belief that a worldwide recession is likely inevitable, but it’s also being triggered by hedge funds and other investors unloading stock because they’re being hit by margin calls. In a margin call, a broker who lent money to an investor calls in the loan, forcing the investor to sell stock to repay the loan.

Greg Church, chief investment officer of Church Capital Management in Yardley, Pa., contends the markets likely will remain volatile as hedge funds and mutual funds step into the market to sell. He also expects that some skittish investors will look to sell their positions as rallies emerge but that the severity of the market’s recent sell-off has left it overdue for a rally, even if it’s only temporary.

“We probably are due for some type of a bounce. Bear market rallies can be beautiful things. I think we could get one of those things sooner than later,” he said.

Investors uneasy about where the market is headed continued to propel demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.74 percent from 3.72 percent late Friday. The dollar was higher against most other major currencies, except the yen, while gold prices rose.

The yield on the three-month bill, regarded as the safest asset around, fell to 0.78 percent from 0.82 percent late Thursday.

A key bank-to-bank lending rate slipped Monday. The London Interbank Offered Rate, or Libor, on three-month loans in dollars dipped to 3.51 percent from 3.52 percent on Friday. While Libor has fallen steadily for over 10 days as confidence slowly returns to the banking system, investors remain skittish, particularly overseas.

The Nikkei fell 6.4 percent to its lowest level since October 1982, while Hong Kong’s Hang Seng Index tumbled 12.7 percent, its lowest finish in more than four years and its biggest single-session drop since 1991.

Selling spread to Europe. Britain’s FTSE 100 fell 0.79 percent, Germany’s DAX index rose 0.91 percent, and France’s CAC-40 declined 3.96 percent. Stocks in Europe pulled well off their lows after Wall Street sidestepped the steep sell-off that hit Asia and after Trichet raised the prospect of an interest rate cut.

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ELYAC Realty- Existing home sales see largest gain in years

September number possible glimmer of hope housing bottoming out

msnbc.com staff and news service reports

updated 3:06 p.m. PT, Fri., Oct. 24, 2008

WASHINGTON – Sales of existing homes rose by the largest amount in more than five years in September. But analysts cautioned against reading too much into the gain, noting that it reflected conditions before the latest upheaval in financial markets increased the likelihood of a recession in the overall economy.

The National Association of Realtors reported that sales of existing homes rose by 5.5 percent from August to September to a seasonally adjusted annual rate of 5.18 million units — far better than the flat results analysts had expected. On an unadjusted basis, sales were up 7.8 percent from September last year.

But even with the gain in sales, prices kept falling. The median sales price has dropped to $191,600, down by 9 percent from a year ago.

In Richmond, Va., Jack Jebo sold his three-bedroom house last month for $267,000, after lowering his price $18,000. He carried two mortgages for two months before the house was sold in the Richmond area.

“In retrospect, (the experience) probably wasn’t too bad,” said Jebo, 32, an attorney. “At the time, it probably felt pretty difficult because we didn’t get an offer before we lowered the price.”

But analysts said that the current financial crisis, which has contributed to the biggest upheavals on Wall Street since the 1930s, was sending consumer confidence down, unemployment up and had greatly increased the prospects that the country was either in or about to enter a full-blown recession. All these factors were expected to add to the headwinds buffeting housing in the months ahead.

“In October, mortgage applications sank to six-year lows,” said Sal Guatieri, an economist at BMO Capital Markets. “This suggests house sales, like the rest of the economy, fell off a cliff because of the worsening credit crunch.”

Many analysts are predicting that home prices — already down 18 percent nationally from their peak in mid-2006 — could decline another 10 percent, as a continued glut of foreclosed homes being dumped on the market depresses prices further.

The National Association of Realtors estimated that 35 percent to 40 percent of sales currently are distressed sales — either foreclosed homes or short sales in which the owner is selling the house for less than the value of the mortgage.

Distressed sales are having a big impact in lowering prices in some formerly red-hot sales markets in such regions as the West, where sales prices fell in September by 18.5 percent from a year ago.

Lawrence Yun, chief economist for the Realtors, said there were some glimmers of hope that the bottom of the housing slump may be near. He said that a sales turnaround first seen in California was beginning to broaden to other regions of the country including Colorado, Kansas, Minnesota, Missouri and Rhode Island.

And the number of unsold existing homes on the market dropped by 1.6 percent in September to 4.27 million units. That marked the second month in a row inventories have dipped, but the level still represented a 9.9-month supply — about double what’s normal.

Yun cautioned that this rebound could be aborted by what he said was the high likelihood that the country has fallen into a recession. For that reason, he said, it was important for Congress to pass a second stimulus package including measures that would bolster the housing market.

Other economists, including former Federal Reserve Chairman Alan Greenspan, are expressing concerns that the financial market turmoil will further weaken housing activity and prolong the current slump.

Greenspan told Congress on Thursday that the country had been hit by a “once-in-a-century credit tsunami.” He said he did not expect the overall economy to make a sustained rebound until housing, where the economic troubles began, stabilized. He said that was still many months away.

Congress on Oct. 3 passed a $700 billion rescue package for the financial system. Shelia Bair, the head of the Federal Deposit Insurance Corp., is pushing Treasury to include in that package a new program to prevent more mortgage foreclosures as a way to provide further support for housing.

Under Bair’s proposal, the government would provide guarantees for mortgages that have been reworked by banks to lower the payment schedules to more affordable levels.

By region of the country, sales in the West soared by 43 percent, on an unadjusted basis, from September last year, and rose a more moderate 5 percent in the Midwest. In the South, sales dipped 1.2 percent and in the Northeast they slipped 1.4 percent.

Housing has been suffering through its worst downturn in decades following a five-year boom that ended in 2006. Since that time sales and prices have plummeted.

Builders have responded to the huge glut of unsold homes by sharply cutting back on construction as their confidence levels have fallen to record lows. The National Association of Home Builders is projecting that construction of new homes and apartments will total just 936,000 units for this year, which would be the weakest performance since 1945.

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ELYAC Realty- U.S. to announce about 20 banks receiving capital

WASHINGTON (Reuters) – The U.S. government is expected to shortly announce a list of about 20 banks in the next round of companies receiving capital injections under a $700 billion rescue package, according to a source familiar with the U.S. Treasury Department’s thinking.

The Treasury in recent days has detailed a plan to directly inject $250 billion of capital into U.S. banks in exchange for preferred shares. Nine of the largest U.S. banks were essentially arm-twisted last week into signing on for the first $125 billion in capital infusions.

Neel Kashkari, Treasury’s interim manager for the rescue program, told lawmakers on Thursday that more banks are expected to receive capital infusions within a few weeks, meaning that Treasury is expected to announce those banks in the coming days.

The announcement of an additional 20 to 22 banks receiving capital is expected as soon as today, the source said.

(Reporting by Karey Wutkowski, editing by Gerald E. McCormick)

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ELYAC Realty- Greenspan Concedes Error on Regulation

WASHINGTON – For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.

But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

Now 82, Mr. Greenspan came in for one of the harshest grillings of his life, as Democratic lawmakers asked him time and again whether he had been wrong, why he had been wrong and whether he was sorry.

Critics, including many economists, now blame the former Fed chairman for the financial crisis that is tipping the economy into a potentially deep recession. Mr. Greenspan’s critics say that he encouraged the bubble in housing prices by keeping interest rates too low for too long and that he failed to rein in the explosive growth of risky and often fraudulent mortgage lending.

“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

On a day that brought more bad news about rising home foreclosures and slumping employment, Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken.

He noted that the immense and largely unregulated business of spreading financial risk widely, through the use of exotic financial instruments called derivatives, had gotten out of control and had added to the havoc of today’s crisis. As far back as 1994, Mr. Greenspan staunchly and successfully opposed tougher regulation on derivatives.

But on Thursday, he agreed that the multitrillion-dollar market for credit default swaps, instruments originally created to insure bond investors against the risk of default, needed to be restrained.

“This modern risk-management paradigm held sway for decades,” he said. “The whole intellectual edifice, however, collapsed in the summer of last year.”

Mr. Waxman noted that the Fed chairman had been one of the nation’s leading voices for deregulation, displaying past statements in which Mr. Greenspan had argued that government regulators were no better than markets at imposing discipline.

“Were you wrong?” Mr. Waxman asked.

“Partially,” the former Fed chairman reluctantly answered, before trying to parse his concession as thinly as possible.

Mr. Greenspan, celebrated as the “Maestro” in a book about him by Bob Woodward, presided over the Fed for 18 years before he stepped down in January 2006. He steered the economy through one of the longest booms in history, while also presiding over a period of declining inflation.

But as the Fed slashed interest rates to nearly record lows from 2001 until mid-2004, housing prices climbed far faster than inflation or household income year after year. By 2004, a growing number of economists were warning that a speculative bubble in home prices and home construction was under way, which posed the risk of a housing bust.

Mr. Greenspan brushed aside worries about a potential bubble, arguing that housing prices had never endured a nationwide decline and that a bust was highly unlikely.

Mr. Greenspan, along with most other banking regulators in Washington, also resisted calls for tighter regulation of subprime mortgages and other high-risk exotic mortgages that allowed people to borrow far more than they could afford.

The Federal Reserve had broad authority to prohibit deceptive lending practices under a 1994 law called the Home Owner Equity Protection Act . But it took little action during the long housing boom, and fewer than 1 percent of all mortgages were subjected to restrictions under that law.

This year, the Fed greatly tightened its restrictions. But by that time, the subprime market as well as the market for other kinds of exotic mortgages had already been wiped out.

Mr. Greenspan said that he had publicly warned about the “underpricing of risk” in 2005 but that he had never expected the crisis that began to sweep the entire financial system in 2007.

“This crisis,” he told lawmakers, “has turned out to be much broader than anything I could have imagined. It has morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount.”

Many Republican lawmakers on the oversight committee tried to blame the mortgage meltdown on the unchecked growth of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage-finance companies that were placed in a government conservatorship last month. Republicans have argued that Democratic lawmakers blocked measures to reform the companies.

But Mr. Greenspan, who was first appointed by President Ronald Reagan, placed far more blame on the Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage-backed securities. Global demand for the securities was so high, he said, that Wall Street companies pressured lenders to lower their standards and produce more “paper.”

“The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of the crisis) would have been far smaller and defaults accordingly far lower,” he said.

Despite his chagrin over the mortgage mess, the former Fed chairman proposed only one specific regulation: that companies selling mortgage-backed securities be required to hold a significant number themselves.

“Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets,” he said. “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.”

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ELYAC Realty- Bear Stearns $30 billion mortgage portfolio falls 9 percent

NEW YORK (Reuters) – A Bear Stearns mortgage portfolio backed by the U.S. government racked up $2.7 billion of losses in the third quarter, amounting to a 9 percent decline on about $30 billion of assets, the Federal Reserve said Thursday.

Roughly $2 billion of those losses will be borne by the U.S. taxpayer. As of the end of September, the portfolio, originally worth about $30 billion, was worth $26.8 billion.

The Bear Stearns mortgage portfolio’s risk ended up mainly in taxpayers hands in June, after JPMorgan Chase & Co agreed in March to buy the faltering Bear Stearns. JPMorgan Chase would only agree to buy Bear Stearns if the government guaranteed some of the failing investment bank’s assets.

The U.S. government has provided well over $1 trillion in support to the financial system this year, through steps ranging from extra deposit guarantees to a $700 billion fund that is buying bad assets and injecting capital into financial companies.

“The government is stemming the crisis by socializing companies’ losses,” said Steve Persky, chief executive at Dalton Investments.

The decline in the value of the Bear Stearns mortgage assets so far has been about $3 billion, an amount equal to about a quarter of the book value, or accounting value of the company at the end of February. The assets’ decline would have severely cut into Bear Stearns’ capital had the company survived into the third quarter.

In other words, Bear Stearns could have had trouble surviving even if it hadn’t faced a run on the bank in March, analysts said. The four other major U.S. investment banks have either sold themselves, converted to banks, or filed for bankruptcy.

JPMorgan agreed to take about the first $1.15 billion of losses from the portfolio, with the U.S. taxpayers bearing the rest of the losses.

The United States, like other major global economies has been hammered by the credit crisis. U.S. housing prices in major metro areas have fallen 20 percent since July 2006, while the Standard & Poor’s 500 index has dropped by almost 40 percent so far this year.

Vast swathes of the corporate bond and mortgage markets are frozen, although many are showing some signs of thawing.

In that kind of an environment, the Bear Stearns portfolio decline seems relatively mild, said William Smith, chief executive of Smith Asset Management.

“When I saw the decline, I said, ‘is that all?’” Smith said.

(Editing by Gary Hill)

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We are looking to expand our business and seeking to bring on hardworking Real Estate Agents and Mortgage Loan Officers who have a passion for making money.

Why you should join ELYAC Realty:
1. One of the top pages on Google and Yahoo Directories for both “Real Estate Agents Los Angeles” and “Mortgage Brokers Los Angeles”. It took us one year of heavily investing in SEO to get these positions
2. We actively invest in our company: advertisements, sponsorships, newspapers, online banners, etc. all to get leads for our agents
3. We have an email list serve of more than 50,000 emails that we actively send: agent listing blasts, news blasts, rate discount blasts, new agent hire blast, market info blasts, etc
4. Depending on your closings ability and experience level, you should get 1-2 qualified leads a month.
5. The agents who generate business through personal referrals get more company leads
6. We are in this business for the long haul and we understand that in order for us to be successful our agents have to be successful
7. We provide every real estate agent or loan officer an opportunity to succeed even if it means we have to hold their hand through their first few transactions
8. We have a hands on approach to help every agent with any problems he or she may have
9. When you join ELYAC Realty, you are joining a family and we are always here to answer any inquires and to help with any situation

What you receive when you join ELYAC Realty:

1. Experienced agents receive: 85% commission on self generated Real Estates/Loans with a flat fee of $150 per file. 50% commission on company generated Real Estate/Loans with a flat fee of $150 per file.
2. New agents with little or no experience get: 75% commission on self generated Real Estates/Loans with a flat fee of $150 per file. 50% commission on company generated Real Estate/Loans with a flat fee of $150 per file. 3. Professional brochures made to market your listings and to market yourself (see attached)
4. Professionally made flyers with your pictures on them so you can send out to your own email list
5. We also have a staff of highly trained & qualified professionals, to process your Loans or coordinate your Real Estate Transactions at no extra charge to you.
6. Help with writing contracts and contract negotiations
7. A real estate transaction checklist for buying and selling
8. No sign up fees & No monthly fees only a flat $150 per files to cover E&O and other charges
9. We pay out same day as close of escrow
10. Flexibility to work from home or your self-provided office
11. If you do commercial real estate, get help with underwriting, financial analysis, due diligence, investment book preparation, discounted cash flow modeling, pro-forma projects, etc.
12. Although this is much easier than selling real estate on your own because we provide some clients for you to work with, you still have to work hard to follow up with clients and to close them.
13. Approved with 70+ major lenders (Sub-prime, A-paper, Alt A, Commercial, Hard Money)
For more information please contact us direct at 408-898-4650 or email Jake at jake@elyacrealty.com

ELYAC Realty
Brokerage | Financing | Insurance
Tel: 310.562.0572 | Toll: 877.44.ELYAC | Fax: 310.882.6848
Email: info@elyacrealty.com | Web: ww.elyacrealty.com

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Company Name:	ELYAC Realty
Industry:	Real Estate
Employee Type:	Contractor

vFlyer Id: 1970504

Birmingham, Denver, Des Moines, Downtown Los Angeles, Duwamish River, Las Vegas Nevada, Los Angeles, Los Angeles California, Nevada, Philadelphia, Raleigh, Salt Lake City, seattle, Southern California, United States

ELYAC Realty- Where are home prices going up?

When the headlines about the housing market are apocalyptic, the last thing a homeowner wants to do is sell. But a funny thing happened to Jeff and Jennifer Boyd when they put their three-bedroom house in Philadelphia’s Graduate Hospital district on the market this summer: They turned a profit. Just 45 days after the listing went up, a buyer snapped up the property for $555,000-$29,000 more than the Boyds paid in 2006. “We were pretty hesitant, knowing what the market is like,” says Jeff. “But a few weeks later, it was gone.”

Here’s a surefire way to start an argument: Suggest that the housing market has reached bottom. To be sure, the near-term outlook is still grim, and nobody is forecasting a rapid nationwide rebound. But there are signs that the overbuilding and speculative pricing that inflated the bubble are working their way through the system. In October 2005, near the peak of the boom, the median sales price for a U.S. home reached 7.3 times per capita income; by this May it had fallen to 5.7, in line with historical norms. Nationally, the rate of decline in sales is slowing, and in some regions sales numbers have actually perked up. “The indicators are starting to look better,” says Adam York, an economic analyst with Wachovia.

Why the disconnect? For starters, the national sales figures that get so much attention-and remain depressing-are brought down by boom-and-bust markets like Las Vegas, Miami and Phoenix. David Berson, chief economist with mortgage insurance firm The PMI Group, says that if hard-hit states like California, Arizona, Nevada and Florida are taken out of the statistical mix, the picture is much more promising. According to PMI’s “risk index,” which estimates the odds of prices falling in a given market, at least 65 percent of the nation’s 386 metro areas have less than a 10 percent chance of seeing lower prices two years from now. What’s more, the government’s sweeping bailout of the financial sector could boost the housing market by making borthe rowing easier for buyers.

We dug into those numbers as well as other forecasts and analysis to determine which markets are in the best shape for a rebound. We also talked with housing experts to learn which kinds of neighborhoods and suburbs are thriving. Our search led us to 25 metropolitan areas that look particularly promising, and there are more than a few surprises. Here, we profile seven of the best-looking markets; for the full list of 25, see November’s issue of SmartMoney magazine.

Seattle

The Emerald City is that rare major metro area near the coast that is not on a nausea-inducing roller-coaster ride. While home prices in Florida and Southern California are in a free fall, homeowners here are experiencing a gentler landing. Of course, that’s partly because the ride up was not as euphoric-home prices here peaked at 65 percent above January 2003 levels, compared with more than 95 percent in Los Angeles. Thanks to well-paying mega-employers like Microsoft, Amazon.com and Boeing, unemployment remains under 4 percent. That, in turn, has kept median sales prices from falling far. Just as encouraging: Only 11.5 percent of local homeowners who bought within the past five years have negative equity on their property, well below the national average of 29 percent, according to the real estate services firm Zillow. That indicates there won’t be a flood of foreclosures and short sales around the corner.

Among Seattle’s neighborhoods and suburbs, yesteryear’s star performers-affluent areas like the Victorian-studded Queen Anne district or Redmond, home of Microsoft-are beginning to slide back a bit. The most resilient part of the region lies across the Duwamish River from downtown, in West Seattle. The small community is directly accessible by only one bridge. That can lead to traffic snarls, but many residents simply bike 20 minutes to jobs downtown. On weekends the relative seclusion means the 2.5-mile Alki Beach promenade along Elliot Bay doesn’t get too crowded. As long as people like great views of water, mountains and city skylines, “those homes will always maintain their value,” says local broker Febe Cude. Dave and Alison Keith recently sold their two-bedroom townhome in West Seattle for $289,000, up more than 25 percent from their purchase price four years ago. They plowed that windfall into a home in the same neighborhood with twice the living space and a fenced-in yard, for $429,000. “You’re always nervous, but I feel like things are holding up well here,” Alison says.

Des Moines

The specter of a prior real estate bubble helped Iowa avoid the current bust. After an agricultural debt crisis in the 1980s, when many farmers found themselves owing much more than the value of their land, Iowa began an aggressive push to diversify its economy. Many of the resulting development subsidies have contributed to a thriving region around Des Moines, the capital. Major insurance and financial-services companies call Des Moines home, including the Principal Financial Group. The media company Meredith Corporation, publisher of Ladies’ Home Journal and Better Homes and Gardens, also maintains its headquarters in the city. Young people flocking to jobs here from other parts of Iowa have helped keep housing demand steady. But homebuyers in these high-paying, white-collar jobs don’t need to stretch much to afford the metro area’s median home price of $156,600.

Though it’s undergone a slight slowdown this year, Des Moines’s real estate market never crashed, in part because it didn’t experience much of a run-up. “Nobody here was flipping houses,” says David Swenson, an economist with Iowa State University.

The suburb of West Des Moines is a particularly strong market, with only six to seven months of inventory, compared with 10 or 11 months in other parts of the metro area. Much of West Des Moines’s housing stock is new construction, both condos and single-family homes, but some historic flavor remains in the Valley Junction neighborhood, a collection of antique shops and other retailers in storefronts dating from the late 19th century. Tom Bernau, 47, moved this spring with his wife and 2-year-old son into a new, five-bedroom home on the third fairway of a private golf course in the city. The couple moved to West Des Moines for its excellent public schools, but before their son starts kindergarten, he’s keeping busy at the country club next door. “We can take our golf cart from our house and go to the pool without going on a city street,” Bernau says.

Raleigh

North Carolina’s capital seems to have gotten a free pass where the housing slump is concerned. Prices have been buoyed by job growth in the Research Triangle, home to dozens of tech firms. Total sales in the first quarter of this year were the fifth highest on record. In some cities, suburbanites stung by gas prices are moving downtown in favor of walkable neighborhoods. But not in Raleigh. “People move here to get away from that type of living,” says local market analyst Stacey Anfindsen, only partly in jest. Although downtown Raleigh has added hundreds of condos and lofts, the real growth has come in suburbs like Cary, Morrisville and Apex, all on the western side of Raleigh, where home prices have risen steadily.

The subdivision of Preston, where prices are up 3.5 percent over last year, reigns as the area’s übersuburb. The northwest Cary neighborhood was bankrolled in the 1990s by Jim Goodnight, founder of software giant SAS, and supersizes the standard suburban amenities: Most lots are at least a quarter-acre, double the size of newer developments, and prices approach $500,000. Parents can choose from a roster of lauded private and public schools. John Minicucci, a technology analyst, moved his family to Preston in May after stints in New York and Vancouver, B.C., and chose the neighborhood in part because it is already built out; it doesn’t run the risk of being flooded with discounted properties because of overbuilding. “Since this area didn’t really experience the boom, it won’t be as susceptible to tanking,” he says. And he’s loving perks like abundant tee times. Like more than 60 percent of Preston residents, Minicucci belongs to the local country club, which hosts 54 holes of championship golf, two tennis facilities and three swimming pools.

Salt Lake City

Salt Lake City supports a diverse economy that could be called “Mormons and more.” The Church of Jesus Christ of Latter-Day Saints remains a large employer here, but the area has also seen steady job gains in health care, education and natural resources. That diversity has offset tough times for local home builders and information technology companies, keeping job growth in positive territory–and putting a safety net under home prices. “There’s a very pro-business, pro-development atmosphere,” says Jeff Thredgold, the economist for regional Zions Bank.

The city’s downtown is a testament to that. The 40-square-block area buzzes with construction projects, many of them related to City Creek Center, a $1.5 billion development that will include retail stores, offices and condos. The downtown area is home to several of Salt Lake City’s hottest residential neighborhoods, along with the Utah Jazz NBA team, outdoor concerts, theater and nightlife (though you may have to join a private club to be served alcohol). Of the seven zip codes in Salt Lake County that saw median prices rise in the second quarter of this year, three were downtown locales.

This fall, Kolaleh Rahimi, 40, moved with her daughter into a historic 1934 home in the Avenues, a popular neighborhood with an eclectic mix of Victorians, bungalows and ranch homes just north of downtown. Rahimi, a pharmacy manager, bikes five minutes downtown for shopping, music festivals and the Saturday farmers’ market. “Whatever you can do in downtown New York these days, you can do in downtown Salt Lake,” she says. But there’s nothing New Yorkish about home prices: Three-bedroom houses in the Avenues sell for around $360,000.

Philadelphia

Philadelphia bashers like to note how the city doesn’t quite keep pace with its northeastern neighbors New York and Boston. When it comes to real estate, that may be a good thing. While prices in the Big Apple and Beantown soared during the bubble years from 2003 to 2006, the City of Brotherly Love charted slow and steady growth. Over the past year, Philadelphia prices have stayed stable, while New York and Boston suffered small declines. And only 7 percent of Philly-area homeowners sold for a loss in the past year, according to Zillow—well below the national average of almost 24 percent.

The region did see some overbuilding, but employers such as pharmaceutical and other health care companies are drawing an influx of newcomers to the suburbs. That’s especially true in Collegeville, a former bedroom community 30 minutes northwest of Philly’s city center that is now home to operations of both Wyeth and GlaxoSmithKline, with mutual fund giant Vanguard just a few towns down the road. So named for the leafy campus of Ursinus College, Collegeville offers multi-acre horse farms and country estates for executive types, with more quaint accommodations in town for tweedy academics. Prudential Fox & Roach, a brokerage with about 4,000 agents in greater Philadelphia, says Collegeville prices are up 16 percent this year. “We are getting a lot of lowball offers, but we are negotiating them up,” says realtor Megan Goldstein. Other Philly suburbs are benefiting from the more traditional migration of young families from the city center. The Boyds, the couple who sold their house in town at a profit, are using the proceeds to buy a four-bedroom, 3,000-square-foot home in a new development in Skippack, Pa.

Birmingham

The University of Alabama at Birmingham anchors this city’s economy, operating an 18,000-student campus and major medical center whose recession-proof demand has helped the local economy weather the current downturn. And even the manufacturing sector is relatively healthy here: About 40 miles outside Birmingham, two auto plants—for Mercedes and Honda—employ workers whose textile jobs moved offshore over the past couple of decades. The city’s low labor and land costs attract businesses to locate here rather than in rival cities elsewhere in the region like Atlanta or Charlotte. Birmingham holds its own in the culture department as well: It boasts two restaurants with chefs nominated for James Beard Foundation Awards, in addition to the Alabama Symphony Orchestra, Opera Birmingham and the Birmingham Museum of Art, whose popular Art on the Rocks programs draw young professionals to sip cosmos amid the Cassatts.

The region’s attractions have helped cushion the impact of the national housing slump. Median home prices in the area that encompasses Birmingham’s Jefferson and three other counties have held up well. “We have avoided the peaks and the valleys,” says Russell Cunningham, president of the Birmingham Regional Chamber of Commerce. The suburb of Mountain Brook has fared particularly well, with a median home price increase of just under 5 percent in the first half of this year. The affluent community’s three villages, most of them laid out in the 1920s and ’30s, form a leafy triangle in the Appalachian foothills. At $535,000, Mountain Brook’s median home price for the first half of 2008 is well above the region’s median of $163,500. And the area lies less than five miles from Birmingham’s downtown business district, so residents are anything but cut off from the city’s amenities.

Denver

Denver’s overall outlook is sunnier than for most western cities because neither inventory nor prices spiraled out of control during the boom. Dinged by a telecom bust earlier in the decade that cost the city 5 percent of its jobs, the local economy wasn’t primed for irrational exuberance. Now with six months’ worth of homes in inventory—the level most experts judge to be roughly in balance—the city offers considerable upside.

In particular, upscale buyers are flocking to Cherry Creek, the tony neighborhood that’s home to Neiman Marcus and the Cherry Creek Arts Festival, one of the country’s top urban arts fairs. Here, prices leaped 16 percent in the past year, according to Integrated Asset Services, an firm specializing in mortgage investments. The area’s popularity illustrates a common theme in U.S. housing markets: established, close-in neighborhoods are often holding up better than suburbs, because they didn’t endure overbuilding and because higher-income owners were less likely to need subprime or adjustable-rate mortgages.

Cherry Creek’s success also highlights the strength of the envy factor. In a recent Coldwell Banker survey of luxury homeowners, 17 percent said they’ve considered moving to get into a certain address or zip code—a reminder that the lure of prestige or good schools moves homes even in a shaky economy. Cherry Creek’s 80206 zip code may be Denver’s ritziest—as seen in the new development North Creek, which features a mix of million-dollar tower condos and brownstones along with a private garden courtyard, à la New York’s Gramercy Park.

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Ben Bernanke, Economic, Federal Reserve System, Great Depression, Inflation, Stock market, United States, United States Economy

ELYAC Realty- The dark side of lower prices

October 17 2008: 05:54 AM EDT

NEW YORK (CNNMoney.com)
Stock prices have plunged in recent weeks. So have oil prices.

Most Americans probably see the former as terrible news and the latter as a ray of sunshine at a dark time.

But both could contribute to a growing concern among economists – deflation.

Simply put, deflation is the opposite of inflation: It’s when prices for a wide range of products start falling, rather than rising.

And while consumers struggling with the high cost of gas and food might think the idea of deflation sounds attractive, economists almost universally agree that it would be very bad news.

“When prices start to fall because of lack of demand, they can go well below the cost it takes to produce products,” said Bernard Baumohl, executive director of the Economic Outlook Group. “Companies have no alternative than to cut back production and lay off a lot of workers. That cuts demand more. You get this vicious downward spiral in prices.”

Most economists point out that the current economic conditions do not yet suggest that deflation is present, or even imminent.

The Consumer Price Index, the government’s key inflation measure, did show no rise in prices in September. But prices are still up 4.5% over the past 12 months.

Baumohl puts the risk of deflation about 10% to 15%, and no more than 20%. But he said only a month ago he would have thought the risk of deflation was less than 5%.

The credit market crisis, combined with the recent stock market declines and the plunge in home values over the past two years, is setting off the deflationary alarm bells for economists.

Paul Kasriel, chief economist with Northern Trust in Chicago, said most bouts of deflation have started with sharp declines in assets such as stocks or homes. That has tended to lead to a loss of value of collateral for loans and ultimately, large losses by lenders and very tight credit.

“I still don’t think deflation is going to happen,” said Kasriel, who puts the chance at between 10% and 30%. “But these are the initial conditions that lead to it.”

In the United States, the worst period of deflation was the Great Depression.

While a recent CNN poll found 59% of Americans thinking that another depression is likely, most economists dismiss the threat of a depression. But they say deflation is something that gets them worried. And they are very careful using the word.

This week, San Francisco Federal Reserve Bank President Janet Yellen broke a taboo among Fed officials when she said in a speech that the economy “appears to be in a recession.”

But in the same speech, she was reluctant to use the word deflation, even though she danced around the concept. She said falling commodity prices, job losses and weak demand for products were likely to “push inflation down to, and possibly even below, rates … consistent with price stability.”

Her reluctance to say deflation, even in a speech notable for the use of the word recession, doesn’t surprise economists.

“Deflation is very scary, scarier than a recession, because once you get into it, it’s hard to get out of,” said David Wyss, chief economist for Standard & Poor’s.

Wyss said deflation doesn’t have to lead to a 1930s style depression, with double-digit declines in economic activity and unemployment of 25%.

But it can lead to the kind of extended economic pain seen in Japan’s so-called “lost decade,” a period that left Japan with little economic growth from the early 1990s until the middle of this decade.

“The Japanese had deflation during their lost decade when their banks were unable to create credit,” said Kasriel.

The Fed’s attention to the rising threat of deflation is encouraging, Kasriel said. The central bank has pumped hundreds of billions of dollars into the financial system to try to spur lending and support spending and prices.

This is a sign that inflation is no longer a concern for many Fed policymakers.

“It maybe premature to worry about deflation but it’s long past the time to talk about inflation,” Wyss said.

Kasriel added that American consumers should be concerned about deflation as well – even if lower prices sound like a good “problem.”

“Sure, you feel like you’re on top of the world when you pay less than $3 for gas,” Kasriel said. “But it’s not because we’ve discovered new oil reserves. It’s because demand is very weak. It’s a symptom of a global recession rather than a cause for hope of a quick recovery in the economy.”

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ELYAC Realty- How Wall Street’s Bust Threatens Dubai’s Boom

Saif Ahmed began living the Dubai dream five years ago. The University of Toronto business school grad moved to the Gulf city-state and quickly co-founded property developer Universal Canlink Inc. By 2006, the firm was turning over $15 million a year as its brochures lured foreign investors with tales of “meteoric” growth in the Dubai real estate market. Lately, as the global credit crisis spirals from Wall Street to the Middle East, Ahmed has been coming back down to earth. There’s still interest, he explains, but the buying frenzy in Dubai is gone. “Before, people were buying blindly, without asking much about the details,” says Ahmed, a Canadian. “Now such risk takers have disappeared from the market.”

Among the harbingers of the changing mood: Nakheel, the developer of Dubai’s proposed kilometer-high skyscraper near Jebel Ali airport, recently announced that it is reassessing its overall staffing needs in line with “predictions of a downturn in the global economy.” Boardrooms and coffee shops alike are buzzing with talk about the coming fall. The Cairo-based investment bank EFG-Hermes recently predicted that Dubai property values could tumble as much as 20% in the next three years. Share prices of Emaar, a public Dubai company that has become one of the biggest real estate developers in the world, have fallen by two-thirds since January.

To be sure, nobody’s calling it a bust — not yet, anyway. Mid-sized builders like Ahmed are still open for business. And a record 70,000 visitors attending Dubai’s annual Cityscape property show this month, where mega-projects worth a total of some $180 billion were unveiled.

Yet Dubai and its real estate market are vulnerable to an international economic downturn, especially compared to many of its Gulf neighbors. As the region’s premier business, transportation and tourism hub, it is by definition more entwined with the global economy. And in tight times, Dubai lacks the windfall oil profits that have enabled sister emirate Abu Dhabi,for example, to amass a financial cushion in sovereign wealth funds totaling hundreds of billions of dollars.

But Dubai’s biggest risk is its daring reliance on debt to drive its breath-taking building boom. Last week, Moody’s estimated that in 2006, the most recent year for figures, Dubai’s government and public sector company debt was at least $47 billion, a staggering 103% of Gross Domestic Product. The investment rating agency said it expected Dubai’s debt to continue outpacing GDP for another five years, exposing Dubai to pronounced financing and geopolitical risks.

Dubai officials insist that they can meet their debt obligations for the next two years. Analysts point out, however, that the credit squeeze compounds a growing challenge to Dubai’s revenue streams. The most obvious is the halving of the price of oil from $147 to $70 a barrel since July, sending Middle East stocks tumbling and rendering regional investors increasingly cautious. Likewise, a global recession is likely to tighten the belts of the international investors and holidaymakers that Dubai relies on for its real estate and tourism developments. Even before the global crunch, banks in the United Arab Emirates were being hit by an outrunning stampede of billions of UAE dirhams — so-called “hot money” that one report valued at $55 billion — in 2008 led by speculators giving up on hopes that the country would de-peg its currency from the U.S. dollar.

All is not gloom and doom, however. The UAE government has funneled $33 billion into the country’s banking system to calm the nerves of depositors and investors, promising coverage to foreign as well as local institutions. If the credit crunch shakes out speculators, known as “flippers,” from Dubai’s real estate market, that could help stabilize wildly inflationary conditions. “I am not necessarily thinking we are in a crash scenario,” EFG-Hermes managing director Hashem Montasser tells TIME. “There is still genuine demand. Economies here are still growing. Overall, the economic situation is still very sound. We will see a deceleration of prices and it’s probably a good thing as long as it’s done in an orderly way and doesn’t turn into a panic. The market has gone to where it is too quickly.”

An underlying reason for the relative lack of panic so far is that Dubai real estate remains a financial haven for wealthy individuals from riskier nearby countries like Iran and Pakistan. What’s more, Dubai’s real estate sector is dominated by a handful of major companies — collectively dubbed “Dubai Inc.” — that are directly or indirectly owned and controlled by the government. This means, analysts say, that Dubai authorities could effectively stave off a bubble burst by keeping finished projects off line until market conditions improved. In the event of a systemic threat, Dubai can probably rely on super-rich Abu Dhabi for a bailout. “We consider it highly likely that the authorities will step in at some level to support entities that are strategically important for the economy,” Moody’s analyst Tristan Cooper tells TIME.

That kind of reassurance is what keeps Dubai property builders like Saif Ahmed plugging away. Believing that foreign interest in Dubai is alive, he’s planning a major sales exhibition in Los Angeles in December. He acknowledges, however, that the days of the easy sell may be over. “People are more educated and calculated about their investments,” Ahmed explains. “Now they are asking for a more detailed sales pitch. They want to know about the developer’s track record.” As it faces the most serious financial challenge in its history, Dubai Inc.’s reputation is now on the line, too.

—With reporting by Shadiah Abdullah

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Barack Obama, Barack Obama presidential campaign 2008, Colin Powell, Democrat Barack Obama, economic crisis, financial crisis, George H. W. Bush, John McCain, Joint Chiefs of Staff, United States

Powell endorses Obama, chides McCain campaign tone

WASHINGTON – Colin Powell, a Republican who was President Bush’s first secretary of state, endorsed Democrat Barack Obama for president Sunday and criticized the tone of Republican John McCain’s campaign.

The former chairman of the Joint Chiefs of Staff said either candidate, both of them senators, is qualified to be commander in chief. But he said Obama is better suited to handle the nation’s economic problems as well as help improve its standing in the world.

“It isn’t easy for me to disappoint Sen. McCain in the way that I have this morning, and I regret that,” Powell, interviewed on NBC’s “Meet the Press,” said of his longtime friend, the Arizona senator.

But, he added: “I think we need a transformational figure. I think we need a president who is a generational change and that’s why I’m supporting Barack Obama, not out of any lack of respect or admiration for Sen. John McCain.”

Powell’s endorsement has been much anticipated because he is a Republican with impressive foreign policy credentials, a subject on which Obama, a first-term senator from Illinois, is weak. Powell is a Republican centrist who is popular among moderate voters.

At the same time, Powell is a black man and Obama would be the nation’s first black president. Powell said he was cognizant of the racial aspect of his endorsement, but said that was not the dominant factor in his decision. If it was, he said, he would have made the endorsement months ago.

Powell expressed disappointment in the negative tone of McCain’s campaign, his choice of Alaska Gov. Sarah Palin as a running mate and McCain’s and Palin’s decision to focus in the closing weeks of the contest on Obama’s ties to 1960s-era radical William Ayers. A co-founder of the Weather Underground, which claimed responsibility for nonfatal bombings during the Vietnam War-era, Ayers is now a college professor who lives in Obama’s Chicago neighborhood. He and Obama also served together on civic boards in Chicago.

“This Bill Ayers situation that’s been going on for weeks became something of a central point of the campaign,” Powell said. “But Mr. McCain says that he’s a washed-out terrorist. Well, then, why do we keep talking about him?”

Powell said McCain’s choice of Palin raised questions about judgment.

“I don’t believe she’s ready to be president of the United States,” Powell said.

McCain seemed dismissive of Powell’s endorsement, saying he had support from four other former secretaries of state, all veterans of Republican administrations: Henry Kissinger, James A. Baker III, Lawrence Eagleburger and Alexander Haig.

“Well, I’ve always admired and respected Gen. Powell. We’re longtime friends. This doesn’t come as a surprise,” he said on “Fox News Sunday.”

Asked whether Powell’s endorsement would undercut his campaign’s assertion that Obama is not ready to lead, McCain said: “Well, again, we have a very, we have a respectful disagreement, and I think the American people will pay close attention to our message for the future and keeping America secure.”

Obama called Powell to thank him for the endorsement, Obama spokesman Robert Gibbs said.

“I am beyond honored and deeply humbled to have the support of Gen. Colin Powell,” Obama said in remarks prepared for a rally in Fayetteville, N.C. “Gen. Powell has defended this nation bravely, and he has embodied our highest ideals through his long and distinguished public service. …And he knows, as we do, that this is a moment where we all need to come together as one nation — young and old, rich and poor, black and white, Republican and Democrat.”

Powell said he remains a Republican, even though he sees the party moving too far to the right. Powell supports abortion rights and affirmative action, and said McCain and Palin, both opponents of abortion, could put two more conservative justices on the Supreme Court.

“I would have difficulty with two more conservative appointments to the Supreme Court, but that’s what we’d be looking at in a McCain administration,” Powell said.

Powell, 71, gained popularity while serving as chairman of the Joint Chiefs of Staff, the nation’s top military commander, during the first Gulf war under President George H.W. Bush. After retiring from the military, speculation mounted that he would run for president in 1996 — perhaps becoming the nation’s first black president — but Powell opted against it.

As secretary of state, he helped make the case before the United Nations for the U.S.-led invasion of Iraq, launched in March 2003.

Powell said the nation’s economic crisis provided a “final exam” of sorts for both Obama and McCain.

“In the case of Mr. McCain I found that he was a little unsure as to how to deal with the economic problems that we were having,” Powell said. “Almost everyday there was a different approach to the problem and that concerned me, sensing that he doesn’t have a complete grasp of the economic problems that we had.”

In contrast, Powell said Obama “displayed a steadiness, an intellectual curiosity, a depth of knowledge and an approach to looking at problems like this. …”

“I think that he has a definitive way of doing business that would serve us well,” Powell said.

Powell said he does not plan to campaign for Obama.

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ELYAC Realty- The Bank Bailout’s Side Effect: Rising Mortgage Costs

The government’s effort to boost bank lending to end the credit crisis is hurting one of the areas critical to the nation’s recovery: mortgage rates. In the past week, the average mortgage rate on a 30-year fixed home loan has jumped more than one half a percentage point to 6.74%, according to Bankrate.com. That might not sound like much, but it is the biggest one-week rise in the normally stable lending rate in 21 years. Some economists say mortgage rates could soon top 7%, a level they have not seen in more than six years.

“Certainly the moves the administration have made so far are not directly attacking the financial issues that affect American homeowners,” says John Vogel, a finance professor at Dartmouth’s Tuck School of Business. “We need to refinance million of homeowners into affordable mortgages, and if rates go up that makes that job just much harder to do.”

Rising mortgage rates could also put downward pressure on housing prices, which have already dropped 20% since their peak in July of 2006, according to the S&P/Case-Shiller Home Price index. The increase in mortgage rates means that the average borrower will pay $1,296 a month in mortgage payment for a $200,000 loan. That’s $100 more a month, and $1,200 more a year, than the same loan would have cost them a few weeks ago. For buyers on a budget, that means they can afford less house for the same amount of money. Conversely, sellers would have to drop their prices to attract that same buyer.

What’s more, a new “Adverse Market Fee” recently instituted by lenders for borrowers with less than perfect credit (regardless of the market) could raise the cost of a loan another half a percentage point – or an additional $70 a month on that same $200,000 loan – for nearly 20% of Americans. “For individuals looking to buy a home this is going to be just one more obstacle in their way,” says Barry Ziggus, who tracks housing issues for the Consumer Federation of America.

The story is worse for people in areas of the country, such as Scottsdale, AZ, or Glen Ellyn in suburban Chicago, where even modest houses can be in the $500,000 range. A $600,000 mortgage will now cost $4,319 a month, or nearly $500 more a month, and $6,000 more a year, than it did six months ago.

Last month, when the government took control of mortgage giants Fannie Mae and Freddie Mac and pledged to inject $200 billion in capital into the home loan guarantors, administration officials said the moves would make it easier and cheaper for people to get home loans. Unfortunately, it hasn’t worked that way. Mortgage rates fell sharply after the move, but soon reversed quickly, and are now higher than they were before the Fannie/Freddie rescue plan was launched.

The problem is that other moves the government has made to render bank debt safer has had the unintended consequence of making Fannie and Freddie’s bonds less safe by comparison. So Fannie and Freddie’s investors have to be compensated for the increased risk. In particular, traders say, the move in the past week by the Federal Deposit Insurance Corp. to temporary offer unlimited deposit insurance for non-interest bearing accounts and guarantee roughly $1.4 trillion in new unsecured bank debt has caused a rush of selling of the bonds of Fannie and Freddie. That’s because the FDIC’s move makes bank debt more attractive at a time when traders are looking for safety. Sheila Bair, the head of the FDIC, was initially against backing this new bank debt, but eventually went along with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson.

Lower prices (and thus higher interest rates) for Fannie and Freddie bonds make it more expensive for the government mortgage guarantors to borrow, and that means that Fannie and Freddie have less money to purchase home loans. Which means a lower supply of capital available for mortgage issuers. The result is higher mortgage rates for the average American. The higher mortgage rates have left some people wondering just what the government can do next. “Just what would you do differently,” says John Weicher, a director at the Hudson Institute and a former assistant security at the U.S. Department of Housing and Urban Development. “I’m inclined to believe that the efforts we have made to help homeowners have been successful, they just haven’t been enough.”

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ELYAC Realty- Home starts crawl to slowest pace since 1991

Construction of new homes plunged by a bigger-than-expected amount in September as builders slashed production yet again, putting the country on track to build the fewest homes this year in more than six decades.

Friday’s housing report was yet another piece of evidence that the nation is struggling with a weak economy that, if the financial crisis is not solved, could dive into a sustained downturn.

A barometer of future building also dropped, falling to the weakest level in more than 25 years. Analysts blamed the renewed swoon on the financial crisis which erupted with force this fall, raising new anxieties among potential home buyers and making it harder for builders to get construction loans.

The Commerce Department reported Friday that construction of new homes and apartments dropped by 6.3 percent last month, a much bigger decline than the 1.6 percent decrease that had been expected. It pushed total production to a seasonally adjusted annual rate of 817,000 units. That’s the slowest pace since January 1991, when the U.S. was in a recession and going through a similar painful housing correction.

“This is pretty bleak. The home building market continues to slide away and it is not over yet,” said Mark Zandi, chief economist at Moody’s Economy.com. “Demand is now weakening as a result of the financial panic and the hit to the job market.”

President Bush on Friday defended the government’s extraordinary interventions to rescue the financial system as a “last resort” that would work eventually to stabilize the economy.

The construction declines last month reflected weakness in many parts of the country. It was led by a 20.9 percent drop in the Northeast, where construction of single-family units fell to the lowest level on record.

Construction slipped by 16.8 percent in the West with single-family building hitting a record low there, too. The Midwest saw a gain of 5.6 percent, although that came from strength in apartment construction as single-family building also hit a record low in that region. Construction activity in the South was up a slight 0.5 percent.

Applications for building permits, considered a good sign for future activity, also fell sharply in September, dropping by 8.3 percent to an annual rate of 786,000 units, the weakest level since November 1981.

The housing industry, which enjoyed a five-year boom, is suffering its worst downturn in decades.

The weakness in housing, where prices have been falling sharply in many parts of the country, has triggered severe economic problems. The government has been forced to rush through a $700 billion rescue package for banks which have been hit with billions of dollars in losses from soaring defaults on mortgages.

Banks, worried about their cash reserves and the health of other banks and businesses, have tightened lending, causing credit markets around the world to freeze, stock markets to tumble and anxiety about a global recession to rise.

Builder sentiment dropped to a record low in October, according to the latest survey from the National Association of Home Builders which said builder confidence had been shaken by the recent financial market troubles. Builders have been facing tighter lending standards as they try to get financing for new projects.

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ELYAC Realty- Oil Prices Slip Below $70 a Barrel

By JAD MOUAWAD

Oil prices dropped below $70 a barrel for the first time in 14 months Thursday, prompting the OPEC cartel to call for an emergency meeting next week to establish some stability in prices that have plummeted recently after rising for months.

Oil prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel.

The decline in oil prices could provide a form of stimulus to the economy as consumers pay less to fill up their tanks. If oil prices stay at current levels, consumers would have $250 billion more, over a year, to save or spend elsewhere, according to Lawrence Goldstein, an energy economist. Some analysts expect oil prices to keep declining, perhaps to as low as $50 a barrel in coming months.

Americans will probably see lower energy bills this winter, as gasoline and heating oil futures also dropped sharply on Thursday. Gasoline prices now average $3.08 a gallon, down from a summer peak of $4.11 a gallon, according to AAA.

The decline in oil prices came after a government report showed domestic crude oil stockpiles rose more than expected as Americans use less oil, in part because they are driving less. In the last month, domestic oil demand has fallen to its lowest level since June 1999, at 18.6 million barrels a day, according to the Energy Department.

Oil settled down $4.69 a barrel, at $69.85. The drop, along with other promising signs on the inflation front, was among the reasons investors bid stocks higher, with the Dow Jones industrial average closing up 401.35 points at 8,979.26.

Natural gas prices have also tumbled since their summer peak of $13.58 per thousand cubic feet. On Thursday, natural gas futures rose 19 cents, to $6.81, after a report showed that stockpiles rose less than expected.

While consumers may have reason to cheer the falling oil prices after such a sharp run-up, the wild roller coaster of volatility is a nightmare for oil producers and petroleum executives who say they need more stability to plan long-term projects to develop new sources of oil.

If they cannot be confident that they will get a stable return on their investment, they may hold back. That in turn could set the stage for possible shortages of oil and higher prices when global demand picks up again.

The sharp drop-off has forced OPEC’s hand. The cartel said just last week that it would meet in mid-November, after the United States elections. But on Thursday, it rescheduled its emergency session for next Friday, Oct. 24.

The cartel’s producers, which control 40 percent of global exports, could curb their output by about a million barrels a day to try to stem the drop in prices, according to analysts.

It is unclear what price range for oil the cartel wants to establish. But the meeting “sends a clear signal that OPEC is concerned about the speed with which oil prices are slipping away from a preferred price of around $80 a barrel,” said Lawrence Eagles, an oil analyst at JPMorgan.

Iran’s oil minister, Gholamhossein Nozari, told reporters in Tehran on Tuesday, “I think the low price is a real damage to the future of production.”

From its inception, the oil industry has gone through countless cycles, with oil companies cutting investments when prices fell. The price collapse of the 1980s forced companies to slash investments and prompted a wave of large mergers through the industry. But this retrenchment left the world scrambling for oil when demand from Asian and Latin American economies soared.

Concerns that this pattern might be repeated were mentioned frequently during an industry conference in Venice last weekend, where oil executives said they worried that a prolonged recession, tighter credit and lower energy consumption would mean slower growth in energy supplies in coming years.

The credit freeze has already forced some projects to be scaled back, some energy analysts and executives said. “This is a real test,” said Jeroen van der Veer, the chief executive of Royal Dutch Shell, in an interview at the conference. “Some people will be overstretched, and there will be some delays in some projects.”

Over the last decade, growth in oil consumption has outpaced the ability of producers to meet that demand with more production. Many experts have predicted a new squeeze within the next five years that could once again propel oil prices over $100 a barrel.

The drop in prices has already created problems for oil producers. Iran and Venezuela both need oil prices at $95 a barrel to balance their national budgets, Russia needs $70 and Saudi Arabia needs $55 a barrel, according to Deutsche Bank estimates. Algeria’s oil minister, Chakib Khelil, said on Thursday that the “ideal” price for crude oil was $70 to $90 a barrel.

In Russia, which is not part of OPEC, the drop in prices is threatening the country’s ability to increase production. The Russian government has reportedly agreed to allocate $9 billion to its four major producers — Lukoil, Gazprom, Rosneft and TNK-BP — to help them cope with investment needs amid the credit crisis.

In the United States, Chesapeake Energy, a gas producer, has recently indicated it will reduce its capital investments over the next few years in response to falling prices.

Global oil demand is undeniably slowing down, particularly in developed nations. Japanese oil consumption tumbled by 12 percent in August over the same month a year ago, while in the United States, demand fell by 8 percent in September.

Consumption is still growing in developing nations, but at a slower pace than in recent years. The International Energy Agency expects global oil demand to grow by just 400,000 barrels a day this year, to 86.5 million barrels a day. The agency, which had been revising downward its predictions all year, forecast growth of 2 million barrels a day for 2008 when the year started.

The two-day energy meetings last week were held in private in the baroque setting of the island of San Giorgio Maggiore, home to a 10th-century Benedictine monastery. In many conversations with senior executives outside of the conference meetings, they voiced concerns about their industry becoming increasingly vulnerable to a slowing economy.

“We pretty much know where supplies are going to come from in future years, but today the biggest uncertainty is demand,” said Christophe de Margerie, chief executive of Total, the French oil company.

Some executives, though, are still holding out hope that Asian economies may weather the economic storm and help the global economy recover faster. Lower oil prices could also make it harder for some companies to survive on their own, leading to a new wave of mergers and acquisitions.

“This new environment is not all doom and gloom,” said Mr. van der Veer, of Shell. “It can also provide some opportunities. Certain assets may become available.”

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