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economy

Developer Courts Global Elite

December 7, 2011

With stock markets churning and the economy questionable, New York developer Gary Barnett has picked a strange time to erect Manhattan’s tallest residential building.

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Another Day, Another Housing Program

October 25, 2011

The Obama Administration is taking another crack at addressing a core problem hindering the economic recovery: underwater homeowners (that is, borrowers who owe more on their mortgages than their homes are worth) and the ripple-effects of that financial hardship. The Federal Housing Finance Agency announced plans Monday to revamp the three-year-old Home Affordable Refinance Program [HARP] to allow more underwater borrowers to refinance. Ideally, qualified homeowners who have been consistently paying their mortgages would be able to refinance their loans at lower rates thereby staving off the threat of default and freeing up spending money for other purposes. Both outcomes would ostensibly help the economy, if the program works exactly as designed. But given HARP’s lackluster results in its first three years of existence, the new initiative has its share of skeptics. Anthony Sanders, a finance professor at George Mason University, said a “fundamental disconnect” exists between HARP’s goal of lowering monthly mortgage payments and the larger economic issues facing many Americans. “There’s no evidence that lowering a mortgage payment a few hundred dollars a month prevents defaults,” he said. “Giving $200 a month to people who already have a job doesn’t really make any sense.” Homeowners aren’t defaulting on their mortgages over a few hundred dollars, he said. They’re defaulting because they’ve lost their job and can’t find another one, or have suffered some other financial catastrophe. To open HARP up to more financially strapped homeowners, the FHFA has removed an earlier cap that disqualified borrowers whose mortgages were valued at 125% or more than the value of their homes. The program is open only to those borrowers whose loans are backed by Fannie Mae and Freddie Mac , the troubled quasi-government entities that provide financing for an estimated 80% of all U.S. mortgages. (The government seized control of Fannie Mae and Freddie Mac in 2008 as they teetered on the verge of collapse.) “This is an appropriate balancing of risk that’s being borne by Fannie and Freddie, and hence the American taxpayer,” FHFA’s acting director, Edward DeMarco, said Monday during a conference call with reporters. “This will make HARP more available.” The Obama Administration claimed the original HARP program would help 5 million borrowers. But the actual number has been less than 900,000. The FHFA predicted Monday that by easing the restrictions on the old program and reducing some refinancing fees and streamlining the process as many as one million underwater homeowners could get help by 2013. Critics say it still barely makes a dent. In August, Corelogic, a housing research firm, said 11 million mortgages, or nearly 25% of all residential home loans, are underwater. The FHFA also hopes the revamped HARP gives banks with substantial mortgage portfolios additional incentives to participate. To that end, FHFA altered the program so that lenders won’t be forced to buy back HARP loans if underwriting problems are later discovered. Under the previous, tougher restrictions, banks had little incentive to refinance mortgages, said Leif Thomsen, CEO of Mortgage Master, a large Massachusetts home lender. Default rates haven’t reached critical mass for the big commercial banks, Thomsen explained, consequently they saw no reason to renegotiate a loan made at 6% interest down to 4%. Banks are, after all, in the business of making money by lending money, he noted. Besides, given the federal guidelines that capped underwater loans at 125% of the value of the property, many struggling homeowners couldn’t refinance anyway.  But lifting the cap should create strong competition for refinancing underwater loans, Thomsen predicted, a factor that could spark the big banks to renegotiate and refinance on their own or see all that refinancing business move to independent firms like Thomsen’s. “It’s about time that this program came out,” Thomsen said. “I’ve been calling for something like this for three years.” JPMorganChase (NYSE:JPM) is already on board, issuing a statement Monday in praise of the new HARP and saying it could save consumers as much as $2,500 a year. But Sanders said the program – and its creators – are still missing the point. “I think they’re making the assumption that everyone who saves money on a refinanced mortgage will spend it on consumer durables. But they might put it away in their savings account or put it aside for their kid’s college education, like they should have in the first place,” he said. Sanders said the government is essentially wasting its time on housing programs that he described as chronically “too small in scope” and off the mark in terms of targeting what’s really ailing the  U.S. economy. “The government needs to step out of the way and let the housing market heal itself,” he said. “Lack of jobs is what causing the problem right now.” See the original post here: Another Day, Another Housing Program

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Week Ahead: Spotlight on Bernanke in Jackson Hole

August 20, 2011

It’s a relatively light calendar for economic data next week, perhaps offering a breather to harried investors. A deluge of bad economic news this week sent stock markets on a roller coaster, soaring up and down (mostly down) as traders tried to gauge the impact of another possible recession. A lot of attention will be focused on a speech scheduled for Friday by Federal Reserve Chairman Ben Bernanke at an annual conference in Jackson Hole, Wyo., hosted by the Kansas City Fed. It’s anyone’s guess what, if anything, new Bernanke has to say about the direction of the U.S. economy and the Fed ’s ability to impact that direction. On Aug. 9, the Fed said it plans to keep interest rates at extraordinarily low levels at least until mid-2013. It’s also unclear, given the current political climate as well as widespread skepticism over the success of earlier Fed measures, what other options the Fed has at its disposal. Before Bernanke’s speech investors can digest data on new home sales due Tuesday. The numbers are expected to be weak, as the housing market has remained consistently sluggish since the real estate bubble burst in 2008. A report on durable goods is due Wednesday. Analysts believe the July report will show some improvement over dreadful June numbers. The data is viewed as a good gauge of business investment. A second reading on second-quarter GDP, scheduled for release Friday, is expected to put numbers to the strong belief that the economy is slowing. Economists this week lined up to issue reports slashing growth expectations for the rest of the year. The Richmond Federal Reserve manufacturing survey is due Tuesday and the Kansas City Federal Reserve’s survey will be released on Thursday. There’s little reason to believe either will be markedly better than a similar regional manufacturing report issued this week by the Philadelphia Fed, which was awful. The final reading of the Reuters/University of Michigan Consumer Sentiment Index is due on Friday. Consumer confidence has melted in recent months as unemployment has remained high and the value of homes continues to plummet. Data on mass layoff activity for July is due Tuesday, while initial jobless claims for the week ended August 20 are due Thursday. View original post here: Week Ahead: Spotlight on Bernanke in Jackson Hole

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Week Ahead: A Flood Of 2Q Earnings

July 16, 2011

When they’re not fretting over the nation’s credit rating, investors next week will be dissecting second-quarter earnings reports and keeping tabs on key housing data. Corporate earnings have been strong throughout 2011, fueling stock market growth. But those results  haven’t translated into support for the broader U.S. economy. Companies that stripped down during the worst of the recent financial crisis seem to be doing more with less. Consequently, with the economy still in flux, they’re in no hurry to expand their businesses and hire new employees. Shareholders have benefited and workers’ 401k programs are being replenished, but U.S. unemployment remains stubbornly high. Bellwether companies set to report their quarterly results next week, according to Reuters, include IBM (NYSE:IBM), Halliburton (NYSE:HAL), Charles Schwab ( NASDAQ :SCHW) and Gannett (NYSE:GCI) on Monday; Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), Bank of New York Mellon (NYSE:BK) Coca-Cola (NYSE:KO), Goldman Sachs (NYSE:GS), Johnson & Johnson (NYSE:JNJ) and Wells Fargo (NYSE:WFC) on Tuesday; American Express (NYSE:AXP), eBay (NASDAQ:EBAY), and Intel (NASDAQ:INTC) on Wednesday; Chubb Corp . (NYSE:CB), Microsoft (NASDAQ:MSFT), and Travelers (NYSE:TRV) on Thursday; and Caterpillar (NYSE:CAT) and General Electric (NYSE:GE) on Friday. On the housing front, the July NAHB/Wells Fargo Housing Market Index is due Monday. The June data on housing starts and permits is due Tuesday. The National Association of Realtors will release data on sales of existing homes on Wednesday. Housing data was dreadful throughout the spring and economists are hoping the numbers start to tick upward, although there’s no pressing reason to believe they will. Housing prices are still tumbling and inventories are still overflowing with foreclosed homes. Potential buyers are sitting on the sidelines wondering how low prices will fall before they should step in. It will be a slow week for economic data, but not barren. The Philadelphia Fed’s Business Outlook for July and the Conference Board’s Leading Economic Indicator for June are both due Thursday. Meanwhile, of course, the debate over raising the debt ceiling and how best to rein in future deficits will go on in Washington, D.C. View post: Week Ahead: A Flood Of 2Q Earnings

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Week Ahead: FOMC and Bernanke’s Second Press Conference

June 18, 2011

Everyone will be watching the Federal Reserve next week, trying to read the tea leaves to determine how Fed policy makers will respond to the recent spate of lousy economic news. The Federal Open Market Committee will meet on Tuesday and Wednesday, to be followed by the release of formal announcements of Fed positions and a press conference by Chairman Ben Bernanke . Bernanke’s press conference on Wednesday afternoon will be his second and part of the Fed ’s new policy of seeking to explain its decisions to an often nonplussed American public. Bernanke’s first press conference in April was well received. No one expects any significant changes in Fed monetary policy. Interest rates will almost certainly remain at a range of 0% to 0.25%, where they’ve been for two and a half years, and there will be no expansion of the quantitative easing program scheduled to end in June. But, as has been the case for months now, investors will be closely parsing Fed language for any indication that fiscal policy could be shifting down the road. Earlier this year the thought was that the Fed would be tightening fiscal policy as the economic recovery took hold. But that sentiment has changed in the past few weeks as one economic report after another has indicated that a real recovery may be some ways off. Housing data due next week is likely to receive most of the attention in an otherwise sparse week for economic reports. A report on May sales of existing homes is due Tuesday, and one for new single-family houses on Thursday. Home sales have been at a virtual standstill for months as potential buyers sit on the sidelines waiting for prices to fall even further. The FHFA House Price Index for April is due Wednesday. Late last month, a widely watched housing index showed home values have fallen in 20 large markets. That trend isn’t expected to end any time soon. The Richmond Fed’s Survey of Manufacturing for June is due Tuesday and follows two disappointing reports from the New York and Philadelphia regions. The New York and Philadelphia reports were especially troubling because manufacturing had been one of the lone bright spots on an otherwise bleak economic landscape. In fact, the lousy manufacturing numbers out of the Northeast paired with higher inflation numbers led some to raise the specter of stagflation, a dreaded economic condition in which prices go higher but economic growth is stagnant.   An advance report on durable goods orders for May is due Friday, as is the release of the third estimate of first-quarter GDP. Read the original: Week Ahead: FOMC and Bernanke’s Second Press Conference

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Housing Recovery Begins When Foreclosures Turn To Closings

June 17, 2011

Before anyone starts talking about a housing recovery, the conversation needs to shift from foreclosures to closings. For months, the only “good news” out of the relentlessly stagnant U.S. housing market has been reports that foreclosures are slowing. On Thursday, for instance, RealtyTrac reported that foreclosure filings in May fell for the eighth straight month and are down 33% from a year ago. But that was inevitable given the fact that there is a finite number of homes in America and record numbers of foreclosures were filed in 2009 and 2010 as homeowners struggled to pay their mortgages during the worst of the recent financial crisis. Simply put, it was almost statistically impossible for the number of foreclosures to keep rising. The numbers eventually had to go down so there’s really nothing positive to glean from these figures. Barry Bramlett, president of Equity Depot LLC, which compiles real estate data in Georgia, compared the steady decline in foreclosures to an army that on each successive day of a battle loses fewer soldiers. “You start out with a large number of soldiers and on the first day of battle a large number are lost. The next day there are fewer soldiers to lose so fewer are lost, and so on and so on,” he said. A battle with lots of casualties seems an apt metaphor for the current housing market. And there doesn’t seem to be any end in sight for this war. Last week Ara Hovnanian , CEO of the giant homebuilder Hovnanian Enterprises (NYSE: HOV), sought during a conference call with analysts to ease concerns that the prolonged housing slump was taking a heavy toll on his business. He said at one point, “We remain confident that we have the liquidity to weather the remainder of this downturn, and will continue to position ourselves in preparation for the inevitable housing recovery.” But when is inevitable? No one seems to know. Jay Butler, an associate professor of real estate at Arizona State University, said it all depends on your definition of recovery. According to Butler, for many Americans recovery will mean that their mortgages are no longer ‘underwater,’ an increasingly common predicament in which homeowners have seen the value of their homes fall so much that they owe more than their home is worth. Underwater mortgages have been cited as a primary reason so many homeowners have defaulted on their loans, forcing foreclosure. The thought being, why continue to make monthly payments on a $400,000 mortgage when the house is now worth only $300,000?  Underwater mortgages have also cut into the housing market because homeowners who owe more than their homes are worth can’t sell without incurring significant losses. Butler said that, for others, the key to a recovery will be when “the housing market is driven by owner-occupants, not foreclosed properties.” “Typically, when one thinks of housing the main theme is people wanting to buy a place for their family. Now, foreclosures are the dominant force,” he said. Butler said recovery could be “many years down the line” in hard hit areas of the country such as Phoenix. In less beleaguered regions such as Texas, perhaps not as long, he said. There are many obstacles that need to be overcome, some of them specific to the industry itself as the pendulum has swung sharply from the lax lending standards of a decade ago to a markedly different lending environment today. Now, potential homeowners face increasingly tougher loan-qualification guidelines, lower limits on U.S. Federal Housing Administration-backed mortgages and higher down-payment requirements. While a common-sense approach to lending might have avoided the catastrophic fallout from last decade’s housing bubble, the sharp turn in the other direction is now acting as an impediment to lifting the housing market out of its doldrums.   The rest of the economy isn’t helping either. “It’s been two-and-a-half years and we’re still heading down,” said Steve Palm, president of Smart Numbers, an Atlanta-based real estate data firm. That trajectory isn’t expected to change if unemployment continues to hover above 9%. “Housing will not lead us out of this thing,” said Palm. “We’ve got to get businesses to start hiring.” A significantly reduced unemployment rate is widely seen as the lone economic index that could single-handedly affect the housing market. But in lieu of that unlikely scenario it will take jumps in a range of housing-related data points — sale closings, homes under contract, building permits, etc. — before anyone is convinced the housing market is turning around. Bramlett said none of those numbers is likely to move higher while a huge glut of housing inventory remains. “Nothing is going to change while there’s that glut,” he said. “Until that changes I don’t see anything driving any prices upward.” But jobs are the key. High unemployment bleeds across all sectors of the economy and has impacted housing in particular. Said Bramlett: “There is no mobility right now, people aren’t moving for jobs. It used to be that when you got a better job you got a better house. Now no one is getting that better job so they’re not moving into that better house. It’s unchartered territory at the moment.” Excerpt from: Housing Recovery Begins When Foreclosures Turn To Closings

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Acquire Florida Commercial Real Estate the Right Way

June 17, 2011

And because of the purchasing power of its population and healthy economy, Florida is indeed a good place to start your business. Fortunately, there are plenty of businesses in the state. Continued here: Acquire Florida Commercial Real Estate the Right Way

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theGrio: Dream of black home ownership fading

June 10, 2011

After peaking at 50 percent in 2006, the African-American homeownership rate has now fallen to 44.8 percent, Census Bureau data show. By comparison, the homeownership rate for whites in the U.S. is 74.1 percent, and the nation’s overall homeownership rate currently stands at 66.4 percent. Continued here: theGrio: Dream of black home ownership fading

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Week Ahead: May Jobs Report Takes Center Stage

May 28, 2011

In a week shortened by the Memorial Day holiday, all eyes will be on the monthly employment report for May due on Friday. Economists expect May nonfarm payrolls to show an increase of about 200,000 and for the unemployment rate to drop slightly to 8.9% Stubbornly high unemployment has been a thorn in the side of the U.S. economic recovery. The high jobless rate bleeds into virtually every other facet of the economy, affecting consumer spending, which makes up 70% of the U.S. economy, and cutting into another long-suffering sector, housing. The modest improvements expected in the May numbers continue to confirm what economists said months ago — the economic recovery is going to be a long, slow slog. Other job-related economic indicators due next week include the ADP National Employment Report for May on Wednesday. Coming ahead of the government’s monthly job report, the ADP numbers frequently offer a preview of what’s likely to come. Also due on Wednesday is the Challenger report on layoff intentions for May. While hiring has been spotty for months as companies question whether the economy is strong enough to expand, the number of companies actually slashing payroll has fallen, according recent Challenger reports. That trend is expected to continue in May. Weather could play a role keeping weekly initial jobless claims at a high level. The report, due Thursday, could be impacted by the flooding of the Mississippi River and the tornadoes that have destroyed towns and wreaked havoc across the Midwest. Those natural disasters could impact jobless claims for several weeks to come. The Conference Board’s Consumer Confidence Index for May is due Tuesday. Confidence is expected to have risen in May as political turmoil in Middle East has eased, lowering concerns for fuel shortages. Gasoline prices, soaring through most of the spring, leveled off ahead of the Memorial Day weekend and the unofficial kickoff of summer. “There is some relief for consumers and retailers, since gasoline prices started falling in the latter part of May after briefly crossing over and then dipping below the $4 per gallon mark. This has boosted consumer confidence and will help increase spending as we enter the summer season,” said IHS Global Insight economist Chris Christopher. Housing data in the form of the S&P/Case-Shiller Home Price Index for March is due Tuesday. Home values continue to decline due to bloated inventories. It’s a bit of a self-fulfilling prophecy as buyers delay purchases, hoping prices will fall even further. And prices continue to fall. The severe weather could also affect economic reports due from the Institute for Supply Management, which will release its data for manufacturing and non-manufacturing on Wednesday and Friday, respectively. Flooding and tornadoes around the country have disrupted supply chains, making it harder for factories to distribute their goods. See more here: Week Ahead: May Jobs Report Takes Center Stage

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Malls Face Surge in Vacancies

April 7, 2011

Even as the economy picks up steam, many of the nation’s shopping malls are suffering a hangover, thanks to changing consumer habits and the fallout from a massive building boom.

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Obama Turns to Economy in Ohio to Highlight Administration’s Stimulus Jobs

February 26, 2011

By Kate Andersen Brower and Roger Runningen June 18 (Bloomberg) — President Barack Obama pivoted from the Gulf of Mexico oil spill back to the economy today with an emphasis on the jobs created by his administration’s $862 billion economic stimulus package. At a groundbreaking in Columbus, Ohio, for the 10,000th road project funded by the stimulus, Obama said improving the nation’s infrastructure is one of the keys to long-term prosperity. “If we’re going to rebuild America’s economy, then we’ve got to rebuild America, period, from the ports and the airways that ship our goods, to the roads and transit systems that move our workers and connect cities and businesses,” Obama said at the project site near the Nationwide Children’s Hospital . The president is seeking to remind voters of his efforts to revive the economy five months ahead November’s midterm elections. Republicans have criticized the stimulus legislation as a wasteful spending program that hasn’t fulfilled the administration’s promises on job creation. Unemployment in Ohio is 10.7 percent, one percentage point higher than the national average. While the Federal Reserve’s regional business survey showed last week that the economy expanded in all the central bank’s districts in April and May for the first time in more than two years, job growth has lagged. Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed yesterday. ‘Summer of Recovery’ “The economy is still lousy,” Transportation Secretary Ray LaHood told reporters before today’s trip. “We want to put the message out: This is going to be the summer of recovery.” LaHood, who traveled with the president to Ohio, said the project being highlighted today is expected to create more than 300 new jobs and is one of 462 transportation projects in Ohio funded by $1.1 billion in stimulus money. The work being done under the stimulus will “pay dividends to our communities for generations to come,” Obama said. “While the recovery may start with projects like this it can’t end here.” In a report to the president released yesterday, Vice President Joe Biden said the government has spent $620 billion from the stimulus and created or saved between 2.2 million and 2.8 million jobs. He predicted jobs created or retained by the end of 2010 will number “at least” 3.5 million. Republican Critics “We have created over 17,000 jobs in the last month” in Ohio, Republican state auditor Mary Taylor , a candidate for lieutenant governor, told reporters on a conference call today before Obama arrived. “But it’s an important fact to note that 16,800 of those jobs created were government jobs.” The White House is kicking off a six-week focus on scores of public works projects under way across the nation and into the election season. “This summer a lot more people are going to be working on highways, building clean water projects, weatherizing homes, and — and they’ll be drawing paychecks that they wouldn’t have otherwise drawn,” Biden said at a briefing yesterday that was part of the administration’s focus on the stimulus. The economy will be a top issue in the November elections that will determine which party controls the House and Senate. The Columbus area is represented in the House by freshman Democrat Mary Jo Kilroy . She was elected in 2008, the first Democrat to represent the district since 1982, according to the Almanac of American Politics. The non-partisan Cook Political Report rates her race against Republican former state Senator Steve Stivers as a toss-up. “There’s a feeling of disenchantment, disillusionment, discouragement — a feeling that no politician is going to be able to do much to turn the situation around,” Paul Beck , a political science professor at Ohio State University in Columbus, said of voter sentiment in the state. “Until the private sector really turns around you’re not going to have a big surge of jobs,” said Beck. Still, Beck said, “the stimulus money has been very important to Ohio, it’s prevented wrenching cutbacks in Ohio.” To contact the reporters on this story: Kate Andersen Brower in Columbus, Ohio at kandersen7@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net

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