All posts by Alison Meadows

About Alison Meadows

Alison Meadows has a PHD in Economic Trends in Modern Times and is a known writer who focuses on hedge fund investments. Meadows, her husband, and three kids live in Boston, where she grew up and attended college. Contact Alison at alison[at]businessdistrict.com

Obama Announces Expanded Refinancing Plan for Homeowners

Economy, Real Estate, , , ,
President Obama

In an attempt to help boost the sluggish economy’s growth President Obama announced a proposal which will allow all homeowners to refinance their mortgages at more attractive rates, even if what they owe on their mortgages is actually more than the worth of the house. This is a crucial issue in many states which are pivotal to Obama’s re-election.

Details

Obama wanted to outline more specific details of the proposal he only outlined in his State of the Union Address concerning finding a way for homeowners to cash in on the nation’s record low mortgage rates. It is estimated that the average homeowner could save about $3,000 a year by re-financing.

Will Congress Agree?

The proposal, however, will need to pass through Congress, which is not necessarily in favor of such a plan if it would allow homeowners to refinance even if they own more to the bank than the actual value of the house, a situation which many homeowners find themselves in today due to the housing slump.

Not As Popular as Predicted

The plan is an enlargement of an already existing program, the Home Affordable Refinance Program. This plan lets borrowers who have government affiliated mortgages from Fannie Mae and Freddie Mac to refinance at more affordable rates. A disappointing one million people have use the plan, much fewer than the 4 to 5 million the Obama administration was predicting. The new plan also expands to include “underwater” borrowers; those that own more than the value of their homes.

Economists in the private sector believe that if the plan is expanded to all borrowers, then about 10 million homeowners would be qualified to refinance, giving the economy a jumpstart not to be underestimated. The Federal Reserve has been more conservative in their assessment of the plan’s impact, saying closer to 2.5 million additional Americans would be eligible to refinance under the terms of the expanded program.

CoreLogic, a real estate data firm, notes that about 11 million Americans are “underwater,” about 1 out of 4 homeowners who have a mortgage.
 

Hotel Industry Optimistic About Coming Year

Economy, Investments, Real Estate, , ,
Arthur de Haast of Jones Lang LaSalle

Movers and shakers from the hotel industry were gathered together last week in Los Angeles for the Americas Lodging and Investment Summit, where they discussed the prospects for business this coming year.

Bracing for Better Business Climate

Real estate companies as well as hotel businesses are looking towards the coming year with hope despite the fears they have about the European economic situation and challenges finding debt financing.

The economic recovery has been business-led, which has given a boost to US hotel occupancy rates. Nevertheless development of new projects seems to still be stalled as credit conditions remain tight, making the building of new hotels difficult. Yet, the hoteliers remain optimistic.

“People are expecting 2012 to be a pretty positive year, with solid performance by the industry in terms of the demand for hotel accommodations and the ability to get deals done,”

Arthur de Haast, chairman of Jones Lang LaSalle Hotels, said at the summit.

Billion Dollar Industry

Jones Lang, a hotel investment services firm, predicts that hotel deals in the Americas will at least do as well as last year’s level, reaching about $15 billion in value.

Hotel deals increased in their activity in the first two quarters of 2011, but substantial slowing down occurred at the end of last year due to the economic troubles in Europe began to make headlines.

Even though Europe has by no means recovered from its woes, most people at the three-day hotel summit believed that a further recovery which includes room-rate rises, will make the hotel sector seductive for investment.

“There’s a lot of money on the sidelines waiting to pounce and find opportunities,”

said Christian Charre, president and chief executive of the Charre Group, a Florida-based hotel brokerage and consulting firm.

Once Hot Utilities Stocks Losing Popularity

Economy, Investments, , ,

Just like everything else powered by the whims of crowds, types of stocks also have their “five minutes of fame.” Take, for instance, the coolness surrounding Chinese Internet stocks one month, solar energy manufacturers another month, or daily-deal sites like Groupon a third month.

Dust Off Grandma's Stocks

But who would have ever thought the boring, safe, old-fashioned, faithful utility stock would become the darling of 2011? Well maybe you grandmother, but regular investors? Yes they sure were popular last year; in fact, utility sector stocks were the be-all and end-all best-performing stock sector, up 8.7% overall in 2011, says the fund-tracking firm Lipper. We don’t have to tell you this was quite a bit better than the go-nowhere, do-nothing, S&P 500.

Proceed with Caution as Economy Recovers

But before you sell the farm and buy out the electric company, heed the warning that this unlikely hero has likely wilted back into the safe haven of slow growth, where it is usually found. Investors bestowed their beneficence on utility sector stocks because of their reputation for being safe and sound, but now their price to earnings ratio has gone a bit high; up to 14, well above the S&P’s average of 12.2, a warning to proceed with caution.

"Utilities stocks were red-hot, but the public needs to know the tide has turned against them," says Alec Young, global equity strategist for S&P Capital IQ. "It's an untold story, and there hasn't been enough coverage of it."

What makes Young say this? During recessions, such as the one we are hopefully emerging from, investors flee to utility stocks for their lovely mix of stability and yield. But as the economy recovers with decent GDP growth and jobless rates lowering, history has shown that counter-cyclical stocks like utilities tend to fall behind.

"The macro picture is improving, and we're past the point of maximum fear," says Young. "Now there will be less focus on yield and capital preservation, and more willingness to speculate. All of that is bad news for utilities."

Survey Shows Gas Prices Climbing in the US

Commodities, Economy, ,

The average price of gasoline at the pumps has been steadily climbing for the past five

Going Up

weeks, a survey conducted by Trilby Lundberg has shown.

In the latest survey, which covers the two weeks ending on January 20, the average price of gas went up by an average of 3.48 cents, reaching the price of $3.3944 per gallon. The survey polled 2,500 gasoline stations located throughout the continental United States.

This is considered a modest increase, especially compared to the huge jump the price of gas took during the prior three week period ending on January 6. During those 21 days gas prices shot up by 12 cents per gallon.

Part of the reason for the increases is higher prices for crude oil. The price surge can also be attributed to crisis developing in Iran and Nigeria which has put pressure on the supply of crude oil. However, there has been a slowing of demand for oil coming from Europe due to their debt crisis, so it is hard to say whether or not prices will continue to climb, hold steady, or even drop.

Last week’s slight rise in crude oil prices leads Lundberg to say that gas prices could easily continue to increase, perhaps by another 5 cents, at least in the short term.

The survey showed that, among the cities taking part in the survey, Salt Lake City, Utah, had the lowest gas prices on average, of about $2.94 per gallon; Los Angeles had the highest price of $3.71 per gallon.

Poll Shows New Hiring Lagging Behind Recovery

Economy, , ,

A new survey conducted by the National Association of Business Economics showed that about two-thirds of those polled do not expect to see any change in employment in their companies over the coming six months. This is the largest number of employers in recent quarters who do not plan on taking on new employees, despite the fact that they do believe that the economy will prove to be a bit stronger this year.

The US economy seems to be reaching a plateau as the jobless rate falls to its lowest in three years, 8.5%, yet fewer businesses seem to be ready to hire new workers, compared to the previous industry poll.

The survey was done between December 15, 2011 and January 5, 2012 and found that 65% of those polled are expecting a rise in the gross domestic product of at least 2% between last year’s fourth quarter and this coming year’s fourth quarter.

This figure was higher than the 1.6% growth rate which economists suggested when a Reuters poll questioned them.

Approximately two-thirds of the polled companies do not believe that the economic crisis in Europe would have much of an impact on their own sales in the first half of 2012. A pessimistic view was taken by 27% of those surveyed, believing that they will see a decline in sales of 10 percent, or less.