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Opes Advisors Weekly Economic Update

by Andy Block

        Weekly Economic Update

          

Jobs market is strong; Greek default closer; rate increase in September? Here is what we are watching:

Payrolls and Wages Jump

The Fed’s decision on when to lift interest rates is data dependent as we know from previous statements and a big piece of data dropped today. The May employment report was very strong as payrolls and wages both jumped. Jobs were up by 280,000 and the April gain was revised up by 32,000. Average hourly earnings increased 0.3% for a year-on-year gain of 2.3%. Both results were at the top end of analyst expectations. An economist at Indeed.com wrote that, “This is the best combination of numbers we have seen in many months” and the US Labor Secretary described this as “undeniably the best report of 2015.”

On Thursday, the Labor Department reported applications for unemployment benefits fell to 276,000. Applications have been below 300,000 for 13 straight weeks – an indicator of increased job security for Americans. 

Good news, but …

Some trends were mixed. More Americans are working boosting the labor participation rate to 62.9%, although this is still trending at a historically low level. And more Americans are optimistic about the job market and hunting for work again, which increased the unemployment rate from 5.4% to 5.5%. The number of part-time workers who want full-time work remains stuck at 10.8%. 

Average hourly earnings looks like the number to watch. Rate hawks at the Fed are looking for signs that inflation is heating up and if a tightening labor market leads to higher wages, policy is sure to swing clearly in the direction of a rate increase. As a result, investors were jittery after the data release today with bond yields increasing. This will mean more expensive mortgages for US home-buyers. 

Greek Default?

Greece moved a few steps closer to the edge of the cliff this week by delaying debt payments. Prime Minister Alexis Tsipras’ comments that the conditions attached to the release of bailout funds were unrealistic, humiliating and amounted to strangulation were less than diplomatic and suggest that Greece is increasingly desperate to both secure the funds needed to stay solvent and turn back the austerity measures that have reduced GDP by 25% and increased unemployment to 26%. Many leaders in the governing party are vehemently against any concessions to the country’s lenders. 

A Greek default would likely not be a financial catastrophe, but it may trigger a chain of outcomes that Central Bankers are unable to predict or control. The Fed will want to consider when to time a rate hike to avoid disrupting financial markets if a default happens, which may moderate pressure from a strong jobs market.

While Opes Advisors, Inc. uses all reasonable efforts to ensure that the information contained in this email is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, Inc., therefore, cannot be held liable for any loss arising directly or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.

Andy Block

Mortgage Advisor and Personal Finance Advisor

NMLS 293174

(650) 931-0605 Office

(650) 533-0756 Cell

ablock@opesadvisors.com

Weekly Economic Update

by Andy Block

Job growth continues despite freeze; Wages show meager increase, and Factory orders sluggish.  Here is what we are watching:

Headline employment numbers on Friday made investors wary. Markets were volatile as the leading equity indexes moved sharply lower and mortgage rates nudged higher. So what is all the fuss?

Employers added 295,000 jobs in February with growth in all sectors and regions.  The unemployment rate dropped to 5.5%, the lowest level since May, 2008. Job growth has exceeded 200,000 for 12 months, the longest such streak since 1995. With small business reporting unfilled job openings at the highest level since April 2006, it is reasonable to expect continued strength in the labor market. 

 

Have the odds of a June rate increase by the Federal Reserve gone up?  Probably.  However, look below the headline numbers and there are plenty of reasons the Fed could decide to hold off on hiking rates until later in the year:

  • Growth in factory orders fell for the 6th straight month in January, which is the longest stretch since start of the Great Recession.  Export orders are contracting.
  • The unemployment rate declined, but total workforce participation fell as more Americans dropped out of the labor force.  And wage growth remains sluggish. Average hourly earnings rose a meager 0.1% in February. Fed Chair Yellen noted last week that wage growth was a significant factor in determining when to raise rates
  • Initial jobless claims rose 7,000 to a much higher-than-expected 320,000 last week. The 4-week average is above 300,000 and trending roughly 5,000 higher than a month ago – this is at odds with an improving labor market.  
  • Inflation is still well below the Fed's 2% target thanks to lower energy costs

That being said, big events in the news hint at reasons why the Fed may ultimately decide in favor of a June rate increase:

  • Walmart, the nation’s biggest employer announced a wage hike for its lowest paid workers - this may be an early indication that wages will start to move higher. 
  • West Coast port delays and severe winter weather in the Northeast and Midwest have not slowed job growth, unlike the polar vortex in 2014 which throttled the economy. This increases expectations for a jump in consumer spending once these temporary factors have lifted.

The next big Federal Reserve meeting is on March 17-18. Look for the word “patience”, because if this has worn out, short-term rates could be heading up in June.

 

While Opes Advisors, Inc. uses all reasonable efforts to ensure that the information contained in this email is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, Inc., therefore, cannot be held liable for any loss arising directly or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.

 

 

Andy Block

Mortgage Advisor ǀ Personal Finance Advisor

NMLS 293174

 

Reverse Mortgage Specialist

 

411 Borel Avenue, Suite 320, San Mateo, CA 94402

650.931.0605 D | 650.533.0756 C | 650.931.0601 F

ablock@opesadvisors.com

Opes Advisors Weekly Economic Update

by Samia S. Morgan

Welcome Back Job Seekers

A firming labor market and increased consumer spending are expected to drive growth in 2015. We’ll focus on the labor market in this update.

Job Growth is Accelerating

Employers added 257,000 position in January. The Labor Department also revised gains up in November to 423,000 and December to 329,000 for a combined gain of 147,000 additional jobs. These are blockbuster numbers – the best 3-month run in 17 years. Queue the Prince reference – the US economy is creating jobs like its 1999.  Once economist even suggests that we may soon run into a labor shortage.

Workforce Participation is Expanding

The unemployment rate in January actually clicked up to 5.7% from 5.6%; however, this was due to 700,000 Americans entering the job market.  Total US labor force participation rose to 62.9 percent from 62.7 percent as discouraged job seekers return to the market. This is very good news for economic growth in 2015. One example: Employment among 25-34-year-olds was at 76.6% in January, up from 75.8% at this time last year and the highest rate since the end of 2008.  This is the prime cohort for housing demand, so we may finally see a housing recovery.

Pay is Increasing

Average hourly earnings rebounded 0.5%, following the surprise disappointment of a 0.2% drop in December. The average workweek held steady at 34.6 hours. Two qualifiers: First, part of the boost in wages resulted from minimum wage hikes in some areas. Second, the December number might just be a false reading.  So what we are likely experiencing is a lower, steady lift in wages. Over the last 12 months average hourly earnings increased 2.2%, comfortably above inflation, which registered at 1.6%. Combine this with lower gas prices and we have a scenario for a boost in consumer demand.

Looking forward from this super strong jobs report, the strength of the labor market in recent months makes it more likely the Federal Reserve will boost short-term rates, possibly as early as June.

What’s Next for Greece?

Last Wednesday, the European Central Bank (ECB) cutoff direct access to its liquidity lines for Greek banks. They had been securing euros at an interest rate of .05%.  Now those billions of euros in liquidity will come from the central bank in Athens at a cost 1.55%. And the ECB has the power to cut off all support Greek banks, which would trigger the collapse of the Greek financial system.  The stock market in Athens declined 10%, borrowing costs hiked 20%, and capital flight picked up as Greeks move to safeguard their savings. In January, 7.7% of all deposits fled the country.

A debt deal with Greece’s new government was anticipated once election fever wore off and cooler heads prevailed, but now analysts aren’t as certain. Greek Finance Minister Yanis Varoufakis left his meeting with the German Finance Minister sniping that, "We didn't even agree to disagree."  Failure to reach an agreement and a subsequent Greek exit from the euro would flatten the Greek economy in the short-run and reduce investor confidence in weaker euro countries such as Portugal and Spain. An extreme, though unlikely, outcome is a deep global recession as banks pull back from lending to safeguard their capital and consumers pull back from spending out of fear of losing their jobs.  A youthful, inexperienced government in a peripheral euro zone economy is now one of the biggest dangers to the global financial system.

In The Week Ahead

This week is very quiet on the economic calendar. On Thursday, February 12th, we have the usual Jobless Claims followed by Retail Sales data.

While Opes Advisors, Inc. uses all reasonable efforts to ensure that the information contained in this email is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, Inc., therefore, cannot be held liable for any loss arising directly or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.

Andy Block

Mortgage Advisor ǀ Personal Finance Advisor

NMLS 293174

 

Reverse Mortgage Specialist

 

411 Borel Avenue, Suite 320, San Mateo, CA 94402

650.931.0605 D | 650.533.0756 C | 650.931.0601 F

ablock@opesadvisors.com

Lock in Low Rates With 10% Down Using a HELOC

by Samia S. Morgan

For your clients who are looking to make a smaller down payment on properties up to $1,176,000, the second mortgage option is still a great option! Freddie Mac reports an average increase of around 0.25% since December in mortgage rates. As rates begin to slowly increase, this presents a good opportunity for buyers with smaller down payments to secure a great rate.

Completed simultaneously with a first mortgage, a second mortgage allows buyers to:
Put as little as 15% cash down on purchase prices up to $1,176,000
Put as little as 10% cash down on purchase prices up to $834,000
Eliminate the need for mortgage insurance
Purchase money second mortgages offer up to a $350,000 credit line – with low fees and easier cash reserve requirements than most jumbo loans. They can be a good option for clients who want more buying power while avoiding additional private mortgage insurance.
For example, a $1,000,000 home can be purchased with as little as $150,000 down, with a $625,500 first mortgage and a $224,500 second mortgage to cover the balance.
Aside from lowering the down payment necessary for many borrowers, a second mortgage can add the benefit of avoiding the cost of mortgage insurance. Mortgage insurance protects lenders from loss if the borrower loses their home through foreclosure. It is required for home loan borrowers who have less than 20% down payment or less than 20% equity in their home.  The cost of borrowing to offset mortgage insurance is almost always lower than the premium for mortgage insurance, the money paid goes towards the equity of the home, and can end up saving buyers hundreds of dollars monthly.

If you’re interested in learning more about second mortgages or how to help your clients make better financial decisions when purchasing a home, don’t hesitate to give me a call, or have your clients call me directly.

Best regards,
Andy
 

How Companies Can Earn Their Customers' Trust

by Samia S. Morgan

How companies can earn their customers' trust

Trust is a valuable asset, but it can also be extremely fragile, writes Nick Cowling, general manager of Citizen Optimum. Companies can foster trust by fulfilling their commitments, acting with integrity and building relationships with their customers. "If you can provide a human connection with a positive experience, it will provide your audience with a reason to trust you," he writes. HuffingtonPost.ca (Canada)/The Blog (2/25)

 

Samia Morgan is proud to be listed with the Better Business Bureau - 
BBB Accredited business since 03/01/1994

Your San Mateo Real Estate Advisor

BBB - TrustBrief - Advancing trust in the marketplace

Keep Your Receipts to Defend Your Tax Deductions

by Samia S. Morgan

Keep your receipts to defend your tax deductions

As a small-business owner, you should hang on to your receipts so you can prove that the deductions you claim on your tax return are legitimate, certified public accountant Mark J. Kohler writes. He recommends making electronic copies of your receipts and avoiding making purchases with cash, which can be hard to track. Entrepreneur online (2/22)

 

Samia Morgan is proud to be listed with the Better Business Bureau - 
BBB Accredited business since 03/01/1994

Your San Mateo Real Estate Advisor

BBB - TrustBrief - Advancing trust in the marketplace

How to Pick the Right Travel Agency for Your Next Trip

by Samia S. Morgan

How to pick the right travel agency for your next trip

Ask your acquaintances for recommendations, and check out BBB's website before selecting a travel agency, BBB recommends. You should confirm your reservations and pay for your trip with a credit card, BBB advises. Patch.com/Easley, S.C. (2/24)

 

Samia Morgan is proud to be listed with the Better Business Bureau - 
BBB Accredited business since 03/01/1994

Your San Mateo Real Estate Advisor

BBB - TrustBrief - Advancing trust in the marketplace

How to Prepare Your Small Business for Success

by Samia S. Morgan

How to prepare your small business for success

You will be better able to deal with challenges your company faces if you have an understanding of basic accounting, writes Steve Greenbaum, CEO and founder of PostNet. "A lot of small businesses fail because of mismanagement and undercapitalization," he notes. You should also act strategically to find new customers and develop a consistent brand for your business, he writes. Fox Business Small Business Center (2/22)

 

Samia Morgan is proud to be listed with the Better Business Bureau - 
BBB Accredited business since 03/01/1994

Your San Mateo Real Estate Advisor

BBB - TrustBrief - Advancing trust in the marketplace

Some Business Advocates Support Minimum-Wage Hike

by Samia S. Morgan

Some business advocates support minimum-wage hike

Some business groups oppose President Barack Obama's proposal to raise the federal minimum wage, but others are supportive of the idea. "If the customer base is undermined because wages are so low, they feel it directly," said Holly Sklar, founder of Business for a Fair Minimum Wage. Many small businesses already pay their employees more than the federal minimum wage to make jobs more appealing to qualified workers, experts say.Bloomberg Businessweek (2/21)

 

Samia Morgan is proud to be listed with the Better Business Bureau - 
BBB Accredited business since 03/01/1994

Your San Mateo Real Estate Advisor

BBB - TrustBrief - Advancing trust in the marketplace

How to Respond When Your Business Has Been Hacked

by Samia S. Morgan

How to respond when your business has been hacked

Knowing how your network usually operates can help you determine whether you've been hacked, says Martin Roesch, founder of SourceFire. The next steps are to determine the scope of the security breach, address the issue and look for ways to prevent future problems. Fox Business Small Business Center (2/19)

Small businesses and lenders find P2P lending attractive

Peer-to-peer lending as a finance option is gaining traction among small businesses, Robert Moskowitz writes. Transaction costs are lower than those of a financial institution, and underwriting criteria are less onerous than those for a small-business bank loan. For lenders, the risk is slight because of careful vetting and the ability to spread money across multiple loans. Intuit Small Business Blog (2/18)

 

Samia Morgan is proud to be listed with the Better Business Bureau - 
BBB Accredited business since 03/01/1994

Your San Mateo Real Estate Advisor

BBB - TrustBrief - Advancing trust in the marketplace

Displaying blog entries 1-10 of 606

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Samia S. Morgan, Inc.
dba Samia Realty Group
BRE# 00967165
San Mateo CA 94403
650-678-3633