Fixing the economy can all be described with one word: Confidence. We need the consumer to be confident enough to make long-term decisions such as purchasing a house for their long-term security. We need businesses to be confident enough to hire workers so that they can expand in the long-run. We need investors confident enough to purchase financial instruments so that banks are confident enough to lend to businesses and consumers. Certainly, the past few years have not been a period of confidence. On the other hand, sometimes events outside our own control give us another perspective. The tragedy beset upon Haiti is of a magnitude that is hard to conceive. Yet, the response of the world to the aid of this small country also is of a magnitude that is hard to conceive.

While we expect major economic powers such as our country to step forward, the realization of this world effort comes from stories of countries such as Norway. Norway, with a population about half the size of New York City, is contributing over $17 million to the cause. The plight of Haiti puts our crisis in perspective. This country knew of their vulnerability to an earthquake, but did not have the financial resources to rebuild. Our problems are many and many have suffered. But we are a great and resilient country and we must have the confidence that we can overcome our issues. Perhaps as we rally around Haiti, it will move us to rally our country out of our own crisis of confidence. We can do so much more for the world if our own economy is stronger. One indication would be a positive preliminary report of economic growth for the fourth quarter. This indicator is just around the corner.

Real Estate News

Its going to be harder to get a government-backed mortgage from now on. Looking to shore up its weakening finances, the Federal Housing Administration has announced stricter standards. The agency, which insured nearly a third of new mortgages in 2009, will increase the premium it charges for its mortgage insurance and require those with weaker credit scores to come up with larger downpayments. The FHA will also reduce the amount of money a seller can provide a homebuyer for closing costs, as well as tighten its enforcement of lenders. 'Striking the right balance between managing the FHAs risk, continuing to provide access to underserved communities, and supporting the nations economic recovery is critically important,' FHA Commissioner David Stevens said in a statement. Source: CNN/Money. Editors Note: These changes go into effect shortly and anyone who is thinking about purchasing a home can benefit by using the old rules if they act quickly.

Real estate investors are moving back into the market, according to a recent survey from Move.com. According to the Move.com survey, 12.1 percent of home buyers today plan to buy a home as an investment property, compared to 5.6 percent in March 2009. The survey found that 15.8 percent of those interested in investment property were men and 8.1 percent were women and 52.6 percent of the investment buyers were between ages 35 to 49. Of the 25.3 percent of buyers who are focusing on foreclosure properties, 42 percent regard the purchase they are considering an investment and dont plan to live in the property themselves; 13.2 percent plan to rent out the property; 11.3 percent are going to fix up the property and resell it; and 17.4 percent plan to house a family member until the property can be sold profitably. Of the 9.8 percent of buyers who say that they plan to purchase and live in a property in the next two years, 5.4 percent plan to purchase in the next 12 months; 48.3 percent are first-time buyers; 52.8 percent are women, and 44.1 percent are men. Source: Move.com

Home prices are expected to grow modestly this year and sales will keep rising as the housing market continues to recover from the worst downturn since the Great Depression, the National Association of Realtors said in their latest report. Home resales are projected to total 5.7 million this year, up from an estimated 5 million last year. Prices will climb about 4 percent after a projected decline of 13 percent last year, according to Lawrence Yun, chief economist for the trade association. 'Going into 2010, I anticipate that prices will also begin stabilizing or begin to modestly improve,' Yun indicated at the associations annual conference. 'That should help ease buyers anxiety.' Yun said. The housing markets rebound has been aided by an aggressive federal intervention to lower mortgage rates and bring more buyers into the market. Home resales rose in the previous quarter to the highest level in more than two years, something Yun said shows buyers are eager to get back into the market. A federal tax credit of up to $8,000 for first-time homebuyers has helped stoke sales last year. The buyers can claim the credit if they sign a contract by April 30 and close the deal by the end of June. Lawmakers also expanded the program to include a $6,500 credit for existing homeowners who have lived in their current residence for at least five years. Source: National Association of Realtors

Despite warnings from everywhere that the recovery would be full of 'stops and starts,' the employment report from November and preliminary positive Holiday sales reports had the markets getting ahead of themselves before the December jobs report was released late last week. We are not only talking about the stock market. Bonds had fallen significantly in December, the dollar was rallying and oil prices were marching upward. These are all indicative of a strong recovery and many were expecting a positive employment report for December. Well, 85,000 jobs lost in December shows that we are not out of the woods yet. The Federal Reserve Board and most economists keep saying that, while things are looking better, the world will not turn rosy for some time. 

The case of oil prices is one exception. We have had frigid temperatures in many parts of the nation since late December and this has given energy prices a substantive reason for increases on the upside. Not only is this a temporary factor, but higher energy prices such as $3.00 per gallon at a pump can actually slow the economy down as consumers curb spending on other purchases. It is expected that increased energy consumption by buildings will actually give a boost to economic growth in the short run, but once again that is temporary. Expect the sobering but not surprising employment report to spur more stimulus activity such as the 'cash for caulkers' program as well as more support from the Fed with regard to keeping long-term rates down through purchases on Treasuries and mortgage-backed-securities on the open market. At least until the jobs picture turns positive permanently.

We are ending the year with some strange statistics to chew on. In a quiet week, we received some disparate news. First, the GDP economic growth figures for the third quarter were revised downward again. The growth rate is now at 2.8% down from the 3.5% initially reported. While this seems to be bad news, apparently much of the total revision was because businesses pared inventories. Lower inventories are actually good for the recovery in the long run. This means as sales pick up, manufacturers must gear up to meet demand.

On the other side of the coin, existing home sales rose a sizzling 7.4% in November after rising 10.0% in October. The real estate markets continue their recovery from the deep slump we endured last year. The problem is these sales were mostly due to the tax credit which was supposed to expire at the end of November. We definitely 'borrowed' some sales from future months and even from new homes that take longer to close and we are likely to see the sales figures quiet down in the next few months despite the fact that the tax credit was extended. Expect the next feeding frenzy to come in the spring as buyers take a break for the Holidays. So the bad news can be considered good and the good news should be tempered as well. Even though the economic growth figures have moderated for the third quarter, the sizzling real estate market and improving job market should carry us to another positive quarter as we end the year. Two positive quarters are exactly what we need heading into the new year.

Of the more than 113 million occupied homes covered in the US Census Bureaus 2008 American Community Survey, 15.6% have more than $2,000 in monthly housing costs. The survey provides a statistical snapshot of the characteristics of the US population in 2008, including the finances of housing consumers. The data collected by Census Bureau officials determines where more than $400 billion goes to state and local governments each year. The Census surveyed roughly 250,000 addresses for the foundation of the data. The total number of family households increased from 2007 by approximately 72,000 units, according to the survey. California homeowners had the highest monthly median housing costs in the country at $2,384. New Jersey narrowly trailed with $2,360. Hawaii, with $2,265, and the District of Columbia, at $2,218, followed. California led all states with 53.3% of the states home owners spending 30% of their households monthly income on housing costs. Hawaii came in second with 49.3% and Florida was third with 49.1%. Minnesota led the nation with 74.7% of its occupied housing units that are owner-occupied. Michigan and West Virginia rounded out the top three with 74% and 73.7%, respectively. At the bottom was the District of Columbia with 43.4%, New York with 53.3% and California with 57%. Source: HousingWire.

While obstacles to short sales remain, real estate practitioners say the process is becoming more efficient. Rather than waiting six months or more to push through a deal, agents say banks are more willing to negotiate prices up front. 'My gut feeling is that short sales seem to be the preferred avenue for distressed property now,' says Cindi Hagley of San Ramon, Calif.-based Windermere Welcome Home. 'Its cheaper for [banks] to do a short sale than go all the way to foreclosure.' The short-sale process has become more manageable now that banks are willing to pre-approve prices, reach out to underwater borrowers who have listed their homes for sale, implement Web-based systems that manage the short sale process, and add staff dedicated to short sales. Additionally, the U.S. Treasury is set to implement a streamlined short sales framework and offer incentive payments of $1,500 to home owners and $1,000 to both loan servicers and second-lien holders. Borrowers also prefer short sales because Fannie Mae requires them to wait only two years to own another home or even less than that if they were not delinquent. By contrast, those who lost their homes to foreclosure have to wait five years. Source: San Francisco Chronicle.

People who live in warm, sunny states where the living is easy are happier than people who live where the weather, prices, air quality, and congestion arent so agreeable, according to comparison of statistics compiled by the Centers for Disease Control and Prevention. The study asked participants: How satisfied are you with your life? The results showed that the happiest state is Louisiana; rounding out the top five are Hawaii, Florida, Tennessee, and Arizona. New York State is at the bottom of the happiness scale. California ranks 46. Economists Andrew J. Oswald of the University of Warwick in England and Stephen Wu of Hamilton College in Clinton, N.Y., published these finding in Fridays edition of Science magazine. Oswald says the happiest people tend to live in states that do well in quality-of-life studies, and people who live in states where there are long commutes, congestion, and high prices are more likely to be unhappy. Source: Associated Press.

We are one week away from the end of an extraordinary year. The financial crisis peaked during the fourth quarter of 2008 and the economic consequences were absolutely devastating. For one, we are digging out from a long and deep recession. Witness the fact that the economy lost 2.8 million jobs in 2008, the highest figure in more than six decades. To that figure we have added over 4.0 million in jobs lost during the first 11 months of this year. Yet, we move into the new year with a renewed sense of optimism. The economy lost almost 750,000 jobs in January, but only 11,000 jobs in November.

The markets have reflected this wild ride. For example, the Dow was as low as 6,500 early in the year and now has gained approximately 4,000 points. Because of the drop at the beginning of the year, the YTD gain is around 20%. Wild swings also beset other markets with the price of oil bottoming around $40.00 per barrel, down from over $130.00 last year and then bouncing back as high as $80.00 just a few weeks ago. From the dollar, to real estate to gold it has been quite a ride. The effects of the recession are not over but we will move into 2010 in a better frame of mind than twelve months ago. The question now remains, will the momentum continue and carry us clear of recession or will we muddle along? For those not familiar with economics, we are sorry for using such a technical term as 'muddling.' The strength of the recovery may very well depend upon us shaking off some of that mud.

We are subject to many cycles within our economy. Whether we are booming or in a recession, we have seasonal, economic, rate and other cycles which affect our economys well being. One very important cycle that is a foundation of our weak economy and financial crisis is the credit cycle. We dont have to tell you that banks have tightened up their lending requirements on homes, commercial properties, credit cards and more. If it is hard to borrow, it is hard for the economy to grow.

In order for this economic cycle to end, the credit cycle must ease. We know it this has not yet happened as our Treasury Secretary and Chairman of the Federal Reserve Board both have indicated that the tight credit conditions continue. The cycle continues despite the fact that the government has lent billions of dollars to banks in order to ease the financial crisis. So what will ease the credit cycle? For one, creditors need to be convinced that the catalyst of this whole crisis, real estate, is no longer depreciating. We have had some very good signs, including stable prices and rising sales for much of the year. However, with many foreclosures to come, banks are not jumping back to the table on residential or commercial real estate. That is why the government extended the home buyer tax credit and Treasury Secretary Geithner has extended the TARP program as wellto support this important asset. The government is determined to support the most important industry in America. We believe their focus is right on target in this regard.

The Gulfport-Biloxi area is expected to be one of the best places in the country to keep or find a job during the first quarter of 2010.

The new Manpower Employment Outlook Survey ranked the Gulfport-Biloxi Metropolitan Statistical Area tied for the ninth-strongest employment outlook in the country. The MSA consists of Harrison, Hancock and Stone counties.

The survey showed 11 percent of area companies interviewed plan to hire more employees from January to March 2010. Two percent expect to reduce their payrolls, 83 percent expect to maintain their current staff levels and 4 percent are uncertain of their hiring plans.

• Story: Employment outlook survey

Compared with the previous quarter when 12 percent of companies interviewed intended to add employees, and 9 percent planned to reduce staff levels, area hiring levels appear to be stronger, said Manpower representative Leslie Dean. Nationwide 12 percent expect to increase staff in the first quarter and 12 percent expect to reduce staff.

The the results are encouraging, but employers are slightly less optimistic about hiring than a year ago.

The third-quarter survey by the Gulf Coast Business Council reflected an increase in Coast employers expecting to hire, said GCBC President Brian Sanderson. The national figures show South Mississippis economy is stronger than many areas of the country, and he said future construction contracts are up in Harrison and Hancock counties and jobs are being added in retail.

Last week we advised that the statistics tend to get unpredictable as we approach the Holiday season. We did not indicate that you should ignore these statistics and it is very hard to ignore the employment data released on Friday. The strength of the data was pretty shocking. Even more important than the contraction of jobs lost from October to November was the revision downward of previous months. The Holidays have nothing to do with these revisions. We have been sending out warnings regularly that rates would increase in the face of strong economic data and Friday was an example of this.

Do not think that everything is now rosy. Yes, we are ending the year a lot stronger than it started. Witness a loss of over 700,000 jobs in January compared to 11,000 in November. With Fed Chair Bernanke appearing in Congress for his confirmation hearings, he continued to indicate that the recession is ending, but not to expect a strong recovery. We are not out of the woods by any means. On the other hand, having strong data going into the Holiday season should help the mood of the country. The mood of the consumer is very important as Americans go shopping for gifts in the next few weeks.


Parents who are looking for a gift to give their kids this holiday season should consider a house. With prices in the cellar, this could be a terrific year to give a down payment or even the whole home. The Internal Revenue Service says a married couple can each give gifts of $13,000 of money or property without triggering taxes for the gift givers or the recipients. That means a married couple can give another married couple a total of $52,000 a year. To maximize that they can give $52,000 in December and another $52,000 in January for a total of $104,000 to be used on a property before the federal tax credit expires. This would buy a house in some parts of the country and be sufficient for a down payment in most others. Source: The Wall Street Journal

It is now December. Therefore, it is right that we start looking at the first of the year. We are not trying to downplay the data released in December. However, for example, the employment numbers tend to be skewed by seasonal factors and even though there are adjustments, this year the adjustments may be hard to analyze because of the rapidly changing environment. Witness the precipitous drop in the weekly unemployment claims reported the last week in November. The volatility of the markets the Friday after Thanksgiving was due to the Dubai debt crisis and certainly it did not help that many participants were on the sidelines for the Holiday.

Come the first of the year we will have a whole new ball game. By the end of January and early February, we will have retail sales figures that measure Holiday spending. We will also have the first reading on the economy in the last quarter of the year. Finally, we will have the first 'post-Holiday' employment report. If we are indeed recovering and not in danger of a double-dip, these numbers will be critical. Meanwhile, the downward revision in the third quarter economic growth was widely expected. The fact that it was partially due to a paring down of inventories actually bodes well for future growth. Of course, this brings us back to the future. If the markets are to stay strong as they have for most of this year, rates will have to stay low as they have for all of this year. Right now rates on home loans are at record lows. And we must show that the economy will stay in positive territory but not overheat so that rates do not rise.

It has been a rough year for many around the world. The economic crisis which started three years ago as a downturn in an overheated United States real estate market has spread world-wide. Many would ask what they have to give thanks for in a year in which so many have lost their jobs and houses. Well, we believe there is a lot to give thanks for. For one, after declaring that the economy could withstand the downturn, the government soon came to realize that we must apply strong medicine. Starting in 2008, we did apply this medicine in a variety of ways from record low rates to making sure that the banking system did not collapse. We have not addressed the long-term issue of deficit spending, but most would agree strong measures were warranted.

In every challenge there are opportunities. For example, the down market has made real estate a bargain and millions are becoming owners for the first time. The recent extension and expansion of the tax credit shows the government will continue to apply strong medicine. Low rates, low prices and a government subsidy point to a bargain that many have not seen for many years. Even the recent lull in housing starts bodes well for the long-term prospects of real estate because analysts agree that the market will not rebound permanently until the excess inventory is off the shelves. As the bad news has brought opportunities for millions, the good news of a rebounding real estate market can also create problems. For one, dont expect record low rates to be with us forever. The Federal Reserve Board has kept short-term rates close to zero and also has brought long-term rates down as well by purchasing mortgage securities. As the market rebounds, less help will be needed and when the government backs off, the record sale on real estate we have witnessed may be over.

All logic would have to say that the markets would pause after such a big run and Dow 10,000 seemed to be the ideal spot. Indeed, the markets have seasawed above and beyond the 10,000 mark, with a contraction of approximately 5.0% from top to bottom. But then an interesting thing happened. As soon as all the big economic numbers were released and digested, the markets hit the second week in November with all guns blazing. Now one strong week does not mean the rally is going to continue, but it is interesting that the markets would start moving positively so quickly after the weak employment numbers were released. Obviously, the markets are satisfied with a tepid recovery.

And why should the markets not be happy with a weaker recovery? There is a lot to like about the economy not gaining strength too quickly. For one, oil prices should remain subdued. Higher oil prices can make the recovery weaker. Also, rates should stay low. Low rates can support an economic recovery that is more sustainable. Finally, with the concern about government spending, inflation will be a threat. A slower recovery has the potential to hold off that threat indefinitely. Of course, the markets could have just been reacting to the good news that the tax credit for homeownership was extended and expanded. With low rates and housing prices, real estate is quite a bargain and a government subsidy will serve to boost demand as we go through the typically slow winter home-buying season. If demand runs high during the winter, the spring market could be very strong.