As of 11:41AM CST on 06/30/10

The home buyer tax credit extension is with the Senate now.  The House passed this piece of the bill and it is now with the Senate.  From there it will have to go to the President’s desk.  If the extension passed the Senate and Obama signs it in to law it will be retro-active.

Here is a great flow chart that shows how a bill becomes a law.

http://www.lexisnexis.com/help/CU/The_Legislative_Process/How_a_Bill_Becomes_Law.htm

A little brush up from grade school history classes.

If you need assistance in getting closed quickly please don’t hesitate to contact us.  888-525-3861

The estimate is that at least 200,000 loans nationwide will not close by the original June 30th deadline date.

8 Phony ‘Bargains’ and Better Alternatives

Big discounts!  Big sales!  Big freebies!  Enticing deals abound, but you need to distinguish those from the raw deals masquerading as bargains.  Many of them come with so many strings attached that they could cost you plenty.  (Those frequent-flier rewards cards, for example?  They often cost you a bundle — and the airline miles are often more restrictive and harder to use than what you’d get from a cash-back credit card.)

For consumers, a little homework goes a long way.  Here are eight would-be deals to steer clear of, as well as our suggestions for better options.

1. Unlimited Long Distance

Many telephone plans bundle “free” unlimited long-distance service with local calling service.  If you don’t make a lot of long-distance calls — or if you make a lot of them from your cell phone — these plans may not be cost effective.  A bundled plan typically costs about $20 more than a local plan, but the average American consumer makes fewer than two hours of long-distance phone calls a month, according to the Federal Communications Commission.  That’s about 17 cents per minute.

Better Deal: Skip the extra fees, and buy your long-distance service from a reseller such as ECG or Pioneer Telephone.  These companies buy their long-distance service wholesale from the larger telecommunications firms but offer the same general quality for far lower prices, billing by the minute or fraction thereof.  (ECG charges 2.5 cents a minute for interstate phone calls; Pioneer’s price is 2.7 cents.)

Alternately, sign up for a voice over Internet protocol (VoIP) plan from a carrier like Vonage, whose plans start at $15 a month (climbing to $26 after a six-month trial) for both local and long distance.  Calls travel over the Internet, though, so you need a stable, active cable or DSL Internet connection for this to work.

2. Frequent-Flier Rewards Cards

Credit card rewards tied to airline miles or gift points were the earliest players in the sector, but it’s time to dump them.  For one thing, the benefits have shrunk, particularly on airlines: They’ve increased the number of miles needed for a free flight; reduced flight schedules, making free seats harder to find; and, in some cases, imposed a booking fee on rewards flights.

On certain rewards cards, annual fees may also outweigh the benefits.  The perks-laden American Express Platinum, which costs $450 a year, offers a complimentary airline ticket for every first- or business-class fare purchased on select international flights, plus a business-class fare purchased on plus a concierge service, free access to airport lounges, and other bonuses.  It all sounds great, especially if you are booking lots of international business-class travel.  But if not, you just paid $450 to have someone else make your restaurant reservations.

Better Deal: Try cash-reward cards instead.  Airline miles and gifts are fine, but if you have the cash in your wallet, you can make your own purchasing decisions.  Peter Flur of Credit Card Goodies, a 10-year-old Web site that monitors rewards cards, recommends Blue Cash from American Express, which offers up to 5 percent cash back on purchases at gas, groceries, and drugstores, as well as 1.25 percent on all other purchases once a cardholder rings up $6,500 in purchases any given year.

3. Checking Accounts That Pay Interest

Interest-bearing checking accounts at traditional brick-and-mortar banks often pay only 0.13 percent interest but require high minimums to avoid a monthly maintenance fee.  On, for instance, a deposit of $3,400 — the average minimum required to avoid monthly fees, according to Bankrate.com data — that amounts to just $4.42 in annual interest.

Better Deal: In this low-interest environment, forget about getting any interest from your checking account, advises Richard Barrington, an analyst with MoneyRates.com.  Instead, look for a no-fee checking account — and “be sure to check the minimum balance requirement,” Barrington says.  ”These minimums have been rising, so make sure it’s a minimum balance you can realistically maintain.”

Meanwhile, if you have extra cash, shop around for banks and credit unions that offer good deals.  Mike Moebs, an economist whose firm surveys bank fees says there are a few banks and credit unions that combine checking and money-market deposit accounts into one, offering a high rate on balances over $2,500.

4. Overdraft Protection

Many banks used to offer it automatically when you opened an account, making it sound like a valuable safeguard.  After all, if you bounced a check or tried to withdraw more cash from the ATM than you had in your account, you wouldn’t suffer any embarrassment when the bank refused to process a transaction.

But consumer advocates long argued that overdraft protection was just a way for banks to earn money at your expense, charging $20 to $35 per overdraft — a substantial penalty, considering the typical transaction prompting the overdraft fee is $20.  That’s why the government has ordered new rules to take effect this summer that will require banks to get your approval before enrolling you in overdraft protection.

Better Deal: If you want back-up protection without the overdraft fees, consider setting up a savings account linked to your checking account so funds can be transferred in case of an overdraft.  There may still be a fee to transfer funds between accounts, but it’s typically lower — only $10.

Meanwhile, keep a careful tab on your bank account balance: If you opt out of overdraft protection and then make an ATM or debit-card transaction that exceeds your balance, your transaction could be denied.

5. Extended-Warranty Protection

Don’t buy additional warranty coverage for electronics and major appliances.  For one thing, some repairs are already covered by the standard manufacturer warranty.  And Consumer Reports’ researchers have found that products seldom break within the extended-warranty window — and that when electronics and appliances do break, average repair costs are about as much as an extended warranty.

Better Deal: Check the fine print on your existing Visa, MasterCard or American Express.  Many of these cards, particularly if they are platinum or gold, will extend the warranty for a year.  ”It’s one of the greatest freebies from credit card companies ever,” says Edgar Dworsky, a consumer lawyer and founder of the Consumer World Web site.  The warranty protection varies, so review the policies on your existing cards before you make a purchase, and use the one offering the best warranty protection.

6. Going-Out-of-Business Sales

They don’t offer the bargains you’d expect — at least at the outset, when the promoted discounts are usually off the full retail price.  That “30 percent off” sale may not be any better than the deals you could get before the liquidation process started.  In some cases, you may actually be better off buying from a rival store that is trying to compete with the bankrupt retailer — and will be around to take care of any problems after the liquidating store is out of business.

Better Deal: Shopping robots, such as PriceGrabber.com and Shopping.com, are good places to comparison shop and may be particularly useful before visiting any liquidation sale, says Dworsky.  One of his favorite sites, PriceSpider.com, posts historical prices; the range of prices should help you determine whether the price is likely to hold or continue to drop.

7. Paying for a Credit Report

Despite its name, FreeCreditReport.com is not gratis.  Here’s what the fine print really says: Order your free report and you get a seven-day free trial membership in a credit-monitoring service.  If you don’t cancel within seven days, you’ll be billed $14.95 a month until you bail out.  Be wary of other sites making similar come-ons.

Better Deal: Visit AnnualCreditReport.com instead — the government-approved Web site where you can get a free credit report from each of the three major credit bureaus once a year.  It won’t give you your actual credit score, but most people don’t need it.  (The exception: If you’re actively shopping for a loan right now, go to myFICO.com to get your current score — and a report from Equifax or TransUnion — for $16.)

If you’re merely curious about how lenders perceive your credit record, you can get a good estimate of your credit score for free at CreditKarma.com.  You can also try the credit score estimator at Credit.com; you will probably need your actual credit report to answer some of the site’s key questions, such as the age of your oldest credit account and the number of outstanding loans and credit cards.

8. Fraud Alerts

Don’t pay for identity-theft-protection services that automatically put fraud alerts on your credit report.  You can do that yourself; it’s easy — and free.  But be careful: Don’t put a fraud alert on your credit report as a general matter, because that means you can’t easily open new accounts.  You should use fraud alerts only if you’ve had your wallet stolen or something else has happened to put you at real risk.

Better Deal: Review your monthly credit card and bank statements regularly to make sure there are no unauthorized charges.  Also, don’t forget to obtain a copy of your free credit report annually from each of the three major credit bureaus — using AnnualCreditReport.com, of course.

By: Caroline E. Mayer, www.cbsmoneywatch.com

MMRecap for June 28

Last week began on the downside for Treasuries.  Concerns that future trade with China could foster domestic inflation and the possibility of the Chinese backing away from bonds sparked selling in Treasuries.  But they recouped their losses and more.

A series of weak economic reports and the Fed’s less-than-glowing outlook for economic growth kept prices on the benchmark 10-year note up and the yield, which moves inversely to price, down.

On Tuesday existing home sales data for May showed a 2.2% decline to an annual rate of 5.66 million units — far short of the 6.1 million units predicted.  The news wasn’t all bad, as inventories fell 3.4% to an 8.3-month supply and the median sales price rose 2.7%.

The housing numbers, a tremendously successful auction of 2-year notes and continued concern about global economic growth spurred aggressive buying that continued through Thursday.

Wednesday’s report of a 33% drop in new home sales in May to a record low annual rate of 300,000 units — the worst since 1963 when the government began tracking such data — spurred still more buying.  And the Fed’s statement after its adjournment that afternoon reiterated that, although recovery is progressing and inflation is subdued, rates will stay low for an “extended period.”  It also noted that financial conditions are “less supportive” of economic growth due to the European debt crisis.

Buying in Treasuries was frantic, with the 10-year note yield hitting 3.11% — a 52-week low.

The bond rally continued into Thursday, with the yield hitting 3.05%.  But a disappointing auction of 7-year notes turned buyers to sellers and the yield rose to 3.12%.

First-time jobless claims for the week ended June 19 fell by 19,000 to 457,000, and continued claims slid by 45,000 to 4.55 million.  But this was followed by disappointing durable goods orders for May, which fell 1.1% after rising 3.0% in April.  Excluding transportation, orders rose 0.9%, when a 1.3% increase was expected.

Friday’s final revision of 1^stquarter GDP fell to 2.7% from 3.0%, but some numbers inside the report rose.  The yield on the 10-year held steady until the final Reuters/University of Michigan consumer sentiment survey for June was released.  It jumped to 76, the highest it’s been since January 2007.  This put light selling pressure on the 10-year note.  The yield edged up to a still-low 3.14% shortly after the release.

According to the Mortgage Bankers Association, the week ended June 18 was not a good one.  Refis declined 7.3%, while purchase apps fell 1.2%.

This week’s schedule of reports could make it a good one for Treasuries, as analysts are forecasting declines on almost every release.

The exception is Monday’s personal income/spending report for May, which should show income increasing by 0.5% and spending up 0.1%.  The PCE, a major inflation indicator, could rise by a bond-friendly 0.1%.

Tuesday’s report on consumer confidence in June should show a decline to 62 from 63.3.  This will be followed on Wednesday by the Chicago PMI index on June manufacturing conditions.  It, too, is expected to edge down to 59.5 from 59.7.

Thursday follows with construction spending in May.  It’s predicted to fall 0.9%, a big turnaround from April’s 2.7% increase.  This will be followed by the ISM index on the service sector in June, which is also forecast to decline to 58.8 from 59.7 in May.

First-time unemployment claims for the week ended June 26 are also due.  They could influence trading — or not.  The day’s final report is pending home sales for May.  This usually isn’t a big market mover, but the expected 10.5% decline could have a positive effect on Treasuries, especially when compared with the 6.0% increase in April.  But we’re looking at the tax credit factor.

Friday’s June employment report will look very different from the May report, which showed a revised 436,000 jobs added to nonfarm payrolls.  Most, however, were census workers.  This time we could see 70,000 jobs lost.  The unemployment rate, however, should hold at 9.7%.  Earnings are expected to rise 0.1% versus a 0.3% increase in May.

And finally, May factory orders are predicted to fall 0.6% versus the 1.2% gain in April.  This report has little influence on trading.

5 Reasons to Get Excited about Real Estate Again

Remember when real estate investing was the “in” thing?

Back then, there were two kinds of people: those who invested in real estate and those who wish they were investing in real estate.  Back in the day, there were as many articles about real estate investing as there were about Paris Hilton, Britney Spears, and Lindsey Lohan combined.  Real estate was the water cooler conversation, especially since Seinfeld has been long off the air.

If you could not buy real estate, you could still dream, and make no mistake about it, it was the American dream.  Many people still think it is.  And mortgages?  If you could fog up a mirror while breathing, you qualified.

Yes, not too long ago, real estate was the hot topic, the in thing, an ideal retirement vehicle, and the way to become wealthy.  In the past 3 years or so, it has fallen out of favor for most of us.  Fortunes have been lost, time has been seemingly wasted, and we all learned a lesson we will never forget.  Many people have washed their hands of ever investing in real estate again.  They have been burned once, and never want to be burned like that again.  Some people don’t believe it will ever come back, and that, if it does, it won’t reach the high point where it once was.

Yes, real estate investing has certainly made an impact on many people.  For those who still have some hope and faith left for real estate, there are very good reasons to want to invest once more.  Here are 5 reasons to get excited about investing in real estate again:

1. We are at the bottom of the real estate market.  Each location is unique; one area may be on an upswing, while another location may still be suffering.  Overall, most would agree that our country has gone through a rough time economically, and the declining real estate market and mortgage crisis was the main reason behind this depressive time.  There are very good indicators that we are at the bottom.  Foreclosures have been slowing up, sales have been rising, and some locations claim to not have enough inventory.  Only after we are out from the bottom, we will know we were at the bottom.

2. There is less competition.  Sales are brisk in some areas, but it is still considered a buyer’s market.  Many people would like to buy and take advantage of the good deals, but do not have the money, or cannot get a mortgage.  As these buyers come out of the woodwork, prices will start to move up.

3. Sellers are truly motivated.  Many sellers do not want to sell in this depressed market, but they have limited choices.  Many owners are selling at prices below what they paid for the property.  This market is ripe with motivated sellers and perfect, therefore, for motivated buyers.

4. The term “short sale” is now part of Americana, just like Watergate and Monica Lewinsky.  Foreclosures have been rampant, and some banks are now being reasonable and making smart decisions for this particular market.  The short sale purchasers of today will spend their wonderful retirement bragging about the great real estate deals they made.

5. Our country is now deeply in debt, and each day it sinks even further into a hole we can only hope to one day crawl out of.  Most of us will not live to see the day our country is out of debt.

One day, the eggroll may replace the hot dog, and the fortune cookie may replace the apple pie.  This certainly is not something we look forward to.  We cannot control what government does; only try to vote for the right politicians.  Because of all of this debt our country owes, it is only inevitable that taxes will increase.  That is one very important reason to have real estate investing as part of your financial plan.  Besides all of the wonderful benefits that real estate has to offer, being able to write off part of your income taxes is something that you will come to appreciate more each day.  There will come a time when more people will realize that they need real estate to stem the rising cost of taxes, and that will cause properties to appreciate even more.

So, what are you waiting for, 5 more reasons?  Share this information with your customers, and remember to always be an informed investor yourself.

By: Patrick Esposito, www.realestateproarticles.com

Luxury Sales Bounce Back

Bidding wars for a $2 million house? In some markets, sales of high-end homes return to levels not seen since the boom

By JULIET CHUNG and JAMES R. HAGERTY –  WS Journal                                                                                                                                                                                                                 May 28, 2010

For years, Jennifer Metz and her husband John yearned for a bigger home in San Francisco. Three months ago, the couple started looking, figuring that in this shaky economy, their $3 million budget should provide them a pick of attractive homes and accommodating sellers. They were wrong. Hours after seeing a 5,000-square-foot fixer-upper in Presidio Heights with an asking price around $2.7 million, the Metzes put in a bid—and lost. Soon after, they made another offer on a four-bedroom in Russian Hill. Their bid was rejected.

Last week, the Metzes rushed over to a large, dilapidated home in Pacific Heights that needed a lot of work but was asking the (relatively) low price of $2.25 million. The Metzes put in their over-ask bid the next day, but lost that one too: There were nine offers; the winning bid was $2.56 million.

“It’s frustrating,” says Ms. Metz, a 44-year-old stay-at-home mom whose husband works in finance. “You think you put in a good offer but, no.”

After a near-disastrous 2009, the luxury market appears to be making a comeback, driven by growing buyer confidence, improved financing conditions and more-realistic seller pricing. Despite the housing downturn, attractively priced homes in some of the nation’s most coveted neighborhoods are selling, sometimes fast and sometimes with multiple offers. Nationwide, sales of homes selling for $2 million to $5 million in the first quarter totaled 2,461, up 32% from a year before, says CoreLogic.

That sales are up from last year shouldn’t come as a big surprise. The shock of the financial panic in the fall of 2008 left many potential buyers too nervous to bid, and those who were willing to wade in found it hard to get financing. But a study for The Wall Street Journal by MDA DataQuick, a real-estate data provider, found that in some areas of the country, sales of homes over $2 million in the first quarter were actually on par with the levels of 2005, the peak year for existing-home sales volume nationwide.

In San Francisco, 49 homes sold for $2 million or more in this year’s first quarter, according to the study, compared to 47 in 2005. In Manhattan, there were 402 sales of $2 million or more in the latest quarter, compared with 311 in the first quarter of 2005, according to the appraisal firm Miller Samuel Inc. Other areas with strong rebounds included New York’s Hamptons, Menlo Park, Calif., and Beverly Hills.

Even a couple of troubled housing markets experienced a strong uptick. In Las Vegas, there were 21 such sales in the first quarter, up from 15 in the first quarter of 2005, according to DataQuick. In Miami, 21 such sales of $2 million or more were recorded in the first quarter, up from 15 last year and close to the 23 that sold in that time five years earlier.

Of course, many markets including Greenwich, Conn. and parts of New Jersey are still ailing. Brokers say pricey homes in outlying suburbs are more likely to sit than sell. Miami-Dade County still has enough homes priced at $2 million or more to last 41 months at the current sales pace, though down from 116 months a year earlier, says Ron Shuffield, president of EWM Realtors, a large local brokerage.

The recent stock market tumble could unravel the turnaround. Unlike the rest of the housing market, which is driven largely by employment trends, housing analysts say high-end buyers are much more sensitive to changes in the stock market, which for the first quarter was helping them feel even wealthier. “If the markets don’t recover soon, it will scare people” and hurt demand for high-end homes, says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.

In the meantime, some high-end renovators are making quick sales. Koby Kempel bought a colonial in Brookline, a posh suburb of Boston, last year for $1.45 million. He raised the ceilings, rebuilt the interior, expanded the home by about 50% and added a heated garage. The six-bedroom home was listed by Mona Wiener of Hammond Residential on a Friday in early May and was under contract the next day for the asking price of nearly $3.5 million.

Back in San Francisco’s Pacific Heights neighborhood, a four-bedroom home on Broadway, with a spa and views of the Golden Gate Bridge, was renovated by Gregory Malin. It went on the market in late January and sold two weeks later for $13.5 million, compared with the $14 million asking price. The listing agent, Val Steele of Sotheby’s International Realty, says the sale, at $2,146 per square foot, marked the first time a home in San Francisco topped $2,000 a square foot since early September 2008.

MMRecap for June 21

Last week was mixed for U.S. Treasuries.  A combination of friendly economic reports, lingering questions about the global economy and mixed messages regarding Spain’s financial situation kept buying in government debt steady to strong.

But there were a few bumps.  On Monday a big rise in the euro took its toll on Treasuries.

On Tuesday the NY Empire State index of June manufacturing conditions rose to 19.57 from 19.11, but analysts expected 20.  Separately, the sentiment survey of residential homebuilders in June fell to 17 from 22 — the lowest since March.  These reports should have helped Treasuries, but a massive rally on Wall Street due to the increase in the euro left Treasuries in the dust.

Treasuries turned it around on Wednesday.  It began with a huge drop in May housing starts.  They fell 10% to an annual rate of 593,000 units from 659,000, and building permits slipped 5.9% from April.

The producer price index brought good news on inflation.  In May, wholesale prices fell 0.3% versus the previous 0.1% increase.  The core rate, which excludes volatile food and energy prices, rose 0.2%.  Industrial production in May was stronger than expected, rising 1.2%.  Capacity utilization also beat predictions, rising a full point to 74.7%.

The bad news outweighed the good, however, and the yield on the 10-year note, which moves inversely to price, fell.  It declined another 10 basis points on Thursday due to reports indicating that we’re not out of this recession yet.

First-time unemployment claims for the week ended June 12 shocked the markets, rising by 12,000 to 472,000.  Wall Street keeps looking for good news on employment, but there’s not much.  Continued claims, however, fell to 5.28 million.

Separately, the consumer price index, or CPI, which looks for inflation at the retail level, saw none.  The CPI was down 0.2%, due in part to falling oil prices.  When oil and food prices were excluded, the core rate rose 0.1%.  Inflation reports like this encourage the Fed to stand pat on interest rates.  There’s no need to raise them if there’s no inflation.

Leading economic indicators for May rose 4%, with only five of the 10 industries showing growth.  The Conference Board, which releases the index, predicts slower growth the rest of the year.

The week’s final report, the Philly Fed index on June manufacturing conditions, plummeted to 8 from 21.4, when 20 was expected.  This accelerated buying in Treasuries.  The 10-year yield fell 10 basis points during the session.

With no economic news due Friday, the markets drifted in early trading.  Light selling in Treasuries pushed the 10-year yield up to 3.22%.

Purchase applications finally rebounded after a five-week decline.  The Mortgage Bankers Association reported that, for the week ended June 11, applications to buy rose 7.3%.  Refis, however, continued to soar, jumping 21.1% and pushing the index to a 13-month high.

A couple of key reports this week could definitely affect Treasuries.  On Tuesday existing home sales for May are due and economists expect strong results.  Sales could rise to an annual rate of 6.1 million units — up from 5.77 million units.  This would be good news for everyone except Treasury traders who would likely worry that a resurgence in the housing market could speed economic recovery.

Wednesday’s sole report is the Fed statement at the conclusion of the FOMC meeting.  There isn’t a chance of a rate hike, but traders will look for any clues as to when such a move might happen.  The fed funds futures say early 2011.

Thursday begins with initial jobless claims for the week ended June 19.  After last week’s big increase analysts might be looking for a drop, but with businesses being hurt badly in the Gulf region, who really knows?

Durable goods orders for May should drop 1.4% after rising 2.8% the previous month.  That number was inflated by volatile aircraft orders.  Excluding transportation, orders should increase 0.9%.

The week ends with the final revision of 1^stquarter GDP.  It’s expected to hold at 3% growth, which would have little impact.  The final reading on consumer sentiment for June could also be a non-event.  Analysts expect 75.3, which would be down a touch from the preliminary 75.5 reading.

Real Estate’s Far Reach to Continue to Pinch

Highflying property prices drove the most-recent economic boom, and a collapse in real-estate values hammered it back down.  Now, as the economy struggles to regain strength, real estate is expected to continue to act as a brake, rather than an accelerator.

Despite clear signs of revival in the larger economy, including upturns in manufacturing and consumer spending, the nation’s market for homes and office buildings remains mired in foreclosures and oversupply.  That imbalance will be worked out over time, but in the meantime, it is slowing the recovery in myriad ways.

Here’s how it breaks down:

Less construction means fewer jobs.  Construction is a big employer and one of the better-paid sectors for men who lack a college degree.  The sector has shed 2.1 million jobs from its peak in March 2007 to April 2010.  The 5.6 million construction jobs that are left comprise 4% of U.S. jobs, down from 6% when employment peaked in December 2007.

With the glut of houses, offices and malls already pressuring the real-estate market, many of these jobs will not come back for a while, putting added pressure on unemployment even as growth resumes.

Indeed, construction spending is running 13% below its year-ago level and about 25% below the boom-year peak.

Home owners who once felt rich are feeling poorer.  Throughout the boom, consumers used their home equity to borrow and spend as they watched housing prices soar.  The ratio of dollars taken out of homes to total personal income — a gauge of how much consumers are pulling out of their homes relative to how much they make in wages and other income — fell the last three quarters of 2009.  During the boom years, that ratio got as high as 9% nationwide, according to Moody’s Analytics.

While real-estate prices have stabilized, they are unlikely to regain prerecession values for years.  That has left many consumers with a pile of debt but not much home equity to be used for investment or spending, a big reason why economists believe recent gains in consumer spending aren’t sustainable.

“The housing market, since it was the epicenter of the crisis, is also central to the feeble recovery,” says Ethan Harris, an economist at Bank of America Merrill Lynch.

Small businesses aren’t borrowing as much.  While bigger companies can access the now-recovered market for bonds and other debt, many smaller companies — which are key job generators — use the value of their own property to secure bank loans.  As the value of those holdings has fallen, so too has their ability to get loans, crimping investment and hiring at a time when the recovery is gaining steam.

Some 49% of small businesses own at least part of the commercial buildings in which they are located, and the majority of them have mortgages, according to the National Federation of Independent Business.  But as real-estate values have fallen, so has this source of equity, limiting how much a bank can lend them.

U.S. nonfinancial companies had $6.3 trillion in real-estate assets at the end of 2009, down 33% from 2007, according to the Federal Reserve.  That drop is a big reason why corporations’ total net worth fell to $12.9 trillion from $15.9 trillion over the same period.

With the value of collateral so depressed “the ability for many small employers to borrow will be constrained precisely as sales begin to strengthen and new investments are warranted,” wrote the National Federation of Independent Business in a recent report on small-business credit conditions.

Lower real-estate values translate into lower property taxes, crimping government spending.  State and local governments employ 20 million police officers, teachers and other employees, roughly 15% of the work force and more than in all of manufacturing.  But much of the money to provide services and pay employees comes from property taxes, which depend on property values.  Even as the economy and job market recover, local governments are cutting employees as they grapple with the worst budget deficits in a generation.

Property taxes continued to grow through the recession and recovery, in part because local governments calculate the levy based on property assessments that are often years old.  Property taxes grew 5.7% to $170 billion in the last three months of 2009 versus the same period in 2008.  That won’t last as tax assessments catch up with reality.

In California, one of the first states into recession, Santa Barbara County saw its 2009 property taxes decline for the first time since 1978.

Property taxes “have only just begun to slump, meaning that cities and other localities will be contending with increasing budget pressure for the next several years,” writes the Brookings Institution, a left-leaning Washington think-tank, in a recent report on local government.

Real estate itself is but a small share of the U.S. economy, but its tentacles are far-reaching.

By: Conor Dougherty, www.wsj.com

More economic news for the week of June 14th.

Guaranteed Rate Report – Giannone- June 14, 2010

MM Recap for June 14

Although there was little economic news to influence traders early in the week, the benchmark 10-year note started out strong.  The continued decline of the euro pushed stock prices down on concerns about its effect on the global economy.  The rush to the safe haven of U.S. Treasuries continued.

The 10-year yield, which moves inversely to price, closed at 3.15% and stayed in that area until Thursday.

Wednesday’s Fed beige book release showed signs of economic improvement in the nation’s 12 federal districts, which provoked light selling.  But the report stated that economic growth was mild, slowed by the Gulf oil spill and the economic situation in Europe.

Treasuries were hit Thursday.  First-time jobless claims for the week ended June 5 fell by 3,000 to 459,000, and the four-week average rose to 463,000.

A German court ruling, however, allowing Germany to help prevent defaults in the euro zone sent the value of the euro up sharply; Wall Street responded in kind, with the Dow Jones industrials gaining 273 points.

The yield on the 10-year rose 14 basis points — the biggest one-day increase since March.  But there was some good news.  There was solid demand for the 30-year bond at Thursday’s auction after a “reasonably” good auction of 10-year notes on Wednesday.

May retail sales took a dive, falling 1.2% due to a downturn in demand for autos, gasoline and building materials.  The decline was worse than expected, and buying in bonds heated up.  Excluding auto sales and parts, sales fell 1.1%, whereas in April they rose 0.4%.

The preliminary consumer sentiment survey for June, conducted by Reuters/University of Michigan, beat expectations, rising to 75.5 from 73.6.  The increase took a toll on bond prices, and yield moved up a bit from the post-retail decline.

The final report for the week, business inventories for April, showed a 0.4 % increase, the same as in March.  It had no effect on the markets, nor did the 0.4% increase in wholesale inventories, released on Wednesday.

Mortgage applications for the week ended June 4 fell again — this time by 5.7% — and are down 35% from four weeks ago.  The Mortgage Bankers Association also reported that applications to refinance dropped 14.3%, the first weekly decline in the last five.

Economic news was spare last week, so this week we’ll pay for it — and it’s all due between Tuesday and Thursday.

Tuesday’s only meaningful report is the NY Empire State index on June manufacturing conditions.  It could rise to 19.9 from 19.1, which wouldn’t likely be enough to cause selling in Treasuries.  But who knows what else could be going on?

Wednesday major reports are scheduled, starting with the producer price index (PPI) for May.  It looks for inflation at the wholesale level, and analysts don’t believe it will find any.  The PPI should fall 0.4%, versus a 0.1% decline in April.  The core rate, which eliminates volatile food and energy prices, is expected to climb to 0.1%   – a tad less than the previous 0.2% increase.

Industrial production could increase by 0.7% in May, which would be slightly less than the 0.8% rise in April.  Capacity utilization is expected to increase to 74.2, which is a little better than April’s 73.7% reading.

Neither of these reports should rile Treasuries.  In fact, the only blatantly positive data expected are on May building permits, which are released along with housing starts.  Permits could jump to an annual rate of 655,000 from 610,000 in April.  Housing starts, however, are predicted to have fallen by 20,000 in May to an annual average of 652,000 units.

Thursday begins with the closely watched consumer price index for May.  It’s expected to decline 0.2% versus a 0.1% drop in April.  The more important core rate could rise 0.1% — less than April’s 0.2% increase.  Indexes showing no signs of inflation are welcomed by bond traders, but that outcome is expected.  The unexpected usually moves the markets.

May’s index of leading economic indicators should climb 0.3% after suffering its first decline in months in April.  The Philly Fed index on June manufacturing conditions could fall to 19.5 from 21.4, which is substantial and might stir mild buying in Treasuries.

Buying Insurance after Health Care Reform

For many consumers, the biggest question about health care reform centers on how the law will change the way we buy and use health insurance.

If you feel perplexed about how the law will affect your own health insurance coverage, you’re not alone.  A recent Quinnipiac University poll found that 56 percent of respondents admitted they didn’t have enough information to know how the law will impact them personally.

To help you cut through the confusion, here’s a look at how the health insurance market looks now, and how it will change in the years ahead.

A)    If you buy health insurance individually …

Shopping

Now: “There is currently a whole range of avenues to buying health insurance on the individual market,” says Bianca DiJulio, senior policy analyst at the Kaiser Family Foundation in Washington, D.C.  You can purchase coverage individually from a health insurance provider, search for policies through an agent or broker or go to a health insurance website, DiJulio says.

After health care reform: Many details have yet to be ironed out, but by 2014 individual health insurance plans will be sold on state-created exchanges available via the Web and by telephone, says DiJulio.  In order to be sold on the exchange, plans will have to provide a minimum level of coverage, so future individual plans will be more comprehensive than many of today’s plans and will cover often-excluded items such as maternity care, says Sara Collins, vice president for The Commonwealth Fund, a health care research foundation in New York.

Plans that meet this minimum will be divided into four tiers, depending on the percentage of enrollees’ medical expenses they pay on average, says Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group in Washington, D.C.

Applying

Now: The application process varies by state thanks to the patchwork of health insurance regulations.  Once you’ve found a company, you fill out an application, answering questions about your medical history.  The health insurance provider reviews your application and offers you a range of coverage options that may include a cheaper plan that excludes your pre-existing medical problems from coverage and more expensive plans with comprehensive coverage.  Or, they may decide not to cover you, Collins says.

After health care reform: The new law prohibits increasing health insurance premiums or denying coverage because of an applicant’s medical history, so applications will likely become shorter and less painful, Collins says.  The only criteria health insurance providers will use to set rates will be age, geography and whether or not you’re a smoker, she says.

Prices

Now: What you’ll pay varies considerably based on age and medical history, says Zirkelbach.  The young and healthy pay relatively little, while older and less healthy people pay much more.

For many consumers, premiums on the individual market are unaffordable, Collins says.  In a 2007 study by The Commonwealth Fund, 73 percent of those who tried to buy health insurance on the individual market didn’t end up buying a policy, with 61 percent citing expensive premiums as the main reason.

After health care reform: You’ll likely pay more for individual health insurance once the new law is in effect, Zirkelbach says.  A Congressional Budget Office report conducted last year for Sen. Evan Bayh, D-Ind., found that the Senate bill would raise premiums for an individual by 10 percent to 13 percent.

Also, the new law will eventually limit how much your premium can be based on age, so younger policyholders will likely pay more while older policyholders will pay slightly less, says Zirkelbach.

To defray cost increases, tax credits will phase in to limit the amount of income that you’ll have to dedicate to premiums, depending on how much you earn.  For instance, a family of four with an annual income of $44,100 will pay $2,778 per year, or $231 per month, in premiums to purchase a policy that covers 70 percent of their medical costs.  The federal government will pay the remaining costs.

What coverage you’ll get

Now: Policies vary widely.  Unless you live in a state with strict health insurance regulations, there is no minimum standard for health insurance coverage.  What you’ll pay out of pocket depends to a large degree on which policy you choose, your medical history and how much you’re willing to pay in premiums.

After health care reform: Policies will have much more transparent terms, broader coverage and no annual or lifetime limits.  Insurers also won’t be allowed to drop customers through rescission, the practice of canceling coverage based on unintentional mistakes in a policyholder’s application, says Collins.  Having coverage also will allow you to avoid rising tax penalties imposed on those who don’t carry coverage.

B)    If you get health insurance through an employer …

Shopping

Now: You can choose from a limited range of plans available through your employer’s human resources department.

After health care reform: You’ll still be limited to the types of plans offered by your employer as long as they meet the same standard minimum of coverage required by the exchanges, Collins says.  The number of employers with more than 50 workers to offer health insurance will likely increase, since employers whose employees receive tax credits to buy insurance on exchanges will be fined in most circumstances, says Collins.

Applying

Now: The application process varies by employer, but typically you have to opt in to a company’s health insurance plan to get coverage by filling out forms and agreeing to pay premiums charged by the company plan over and above what your employer pays.

After health care reform: As with private health insurance, applying for coverage from an employer will no longer require answering questions about your medical history.  If you work for an employer with less than 200 employees, you’ll still have to opt in.  If your employer has more than 200, you’ll automatically opt in to a company plan.

Prices

Now: Employers ask employees to pay varying amounts to help cover their health insurance, but it’s usually much less than what someone shopping for health insurance on the individual market would pay.

After health care reform: Any increase in premiums caused by the law should be negligible for most workers, according to the CBO report.

What you’ll get

Now: You’re probably part of a plan that’s more comprehensive than those purchased on the individual market, but it may have hidden limitations that you may not become aware of until a claim is denied, says Collins.

After health care reform: If your employer is offering plans with lots of limitations, you’ll probably end up with higher-quality plans after the law goes into effect, thanks to health care reform’s minimum benefit levels.  However, not much will change if your employer-sponsored health insurance meets minimum standards, says Collins.  In addition to your normal benefits, you’ll also avoid the escalating IRS penalty that will come with being uninsured.

By: Claes Bell, www.bankrate.com