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Show Volume XVI Issue I The Ogden Valley news Page 17 December 15, 2008 The Truth About the Mortgage Market Subprime mortgages have now been credited for bankrupting well over 110 lenders and seriously damaging operations at many major mortgage firms. they’ve reportedly wiped out five hedge funds, tens of thousands of jobs, and have led to millions of foreclosures with millions more on the way. And, as if that weren’t enough, subprime mortgages are also blamed for massive volatility in the stock, bond, credit, futures, and real estate markets here in the U.S. and around the globe. Some say losses in the mortgage securities market alone could reach hundreds of billions of dollars this year. this means that for Americans looking to buy, sell, or refinance a home, they are confronting a very different market from the one that existed just 6 to 12 months ago. How did this happen? the recent real estate boom was fueled by a period of record home appreciation and historically low interest rates. banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or “exotic” mortgages. these ideal lending conditions persisted for several years supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street. then, in 2006, a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today’s tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. many Americans who had tapped into their equity were suddenly tapped-out and overextended as home values fell. Foreclosures followed in record numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity domino effect we’re now experiencing. Unfortunately, it’s going to get a lot worse before it gets better. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARm) holders will face payment increases of up to 30% to 100% when their loans reset in the next 2 to 18 months. these loans make up less than 40% of the total mortgage market, but the negative effects, as we have seen of increased foreclosure activity can have a ripple effect throughout the industry and around the globe. What does this mean to you and your mortgage? Sellers: If you’re planning on selling your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and diminishing mortgage products could knock out as many as 15% to 30% of potential qualified buyers. now is not the time to sit and wait for the best possible price. Have a serious talk with your real estate agent. Having experienced buying/selling transactions in your area, he or she can help you price your home accordingly. He or she can also help ensure that your buyers are pre-approved and stay preapproved throughout the entire transaction. Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it’s taking longer and longer to complete a transaction. Remember, what you qualify for today could change tomorrow in a volatile market. For those looking to refinance, keep this in mind. there is no time to delay! Rates are back to the all-time lows! communicate with your lender. Don’t do anything that could negatively affect your credit, and make sure you get all your documentation in on time. ARMs Borrowers: If your ARm is scheduled to reset in the next 2 to 18 months, you need to schedule an appointment with a mortgage professional right away. Whether your ARm is subprime, Alt-A, or even if you have a pre-payment penalty, don’t let a default or foreclosure situation sneak up on you. Did you know that your monthly payments can increase anywhere from 30% to 100% once your loan resets? At the very least, give yourself the peace of mind of knowing what your adjusted payment will be. Borrowers with less-than-perfect credit: Each week it seems lenders are shedding more and more mortgage products. many lenders have stopped offering noDoc loans and are reducing all forms of Stated-Income loans. While it might be challenging, borrowers with credit issues need to see a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals. Finally, there’s an important concept to embrace: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. the correction we’re experiencing now—while it seems harsh and could get much worse—is in a sense “natural” and directly related to the extremely loose guidelines and perhaps overzealous lending and leveraging during the boom cycle. Note: This article courtesy of Bruce Warburton, a licensed broker, affiliate with Home Loan Xperts. For a free consultation or more information about the mortgage market, contact Bruce at 801-564-0569 or email him at <bruce@homeloanxperts.net> Make it Light and Bright in the Winter Are you already dreading the winter season? Do you feel like crawling into bed with a package of cookie dough, pulling the covers over your head, and not coming out until spring? Plenty of people feel the same way. UW Health psychiatrist Dr. nancy barklage says that nearly 25 percent of people who live at northern latitudes suffer from at least some symptoms of SAD, the depression that hits during the darkest times of the year. besides depression, symptoms include low energy levels, overeating, a craving for carbohydrates, weight gain, an increased need for sleep, and a lack of interest in sex and in socializing. Dr. barklage, associate professor of psychiatry at University of Wisconsin School of medicine and Public Health, specializes in treating patients with the disorder. She says that about eight percent of us have full-blown SAD and another 17 percent have a milder version with some of the symptoms, especially carbohydrate craving, decreased energy, and increased need for sleep. “that means that about one in four people are affected,” she said. Fortunately, since the disorder was documented in the 1980’s, an effective treatment regimen has been established. “the treatment of choice is light therapy,’’ says barklage. “I was initially skeptical that it would work, but I have been very impressed with the results.” Researchers once thought that winter’s short days were to blame, and so they advocated light therapy before sunrise to extend the length of the day. Since then, barklage says, research has shown that it is the intensity of light that is important. For light therapy to work, the light needs to penetrate the retina. barklage often recommends that patients with SAD begin their morning under a bright light, to energize them for the day ahead. “I have a lot of patients who have their full-spectrum light next to their beds,’’ she says. “they roll over, turn off the alarm and turn on the light. It also helps them to wake up.” timing of the light treatment is important. too much light too late in the day can be too stimulating, making it difficult to fall asleep. She recommends afternoon light only if patients find themselves coming home from work and falling asleep right away. “It can change circadian rhythms and reset your sleep clock,’’ she said. “bright light in the morning resets the sleep onset, allowing people to fall asleep earlier. bright light late in the day will keep you up later.” She tells patients to get a bright light with at least 10,000 lUX, a white light that includes the full-spectrum light minus the ultraviolet, which can harm eyes and skin. Going outside on a sunny winter day helps, too, as long as you protect your eyes and skin from UV light. barklage is less willing to recommend blue lights, which are being marketed for SAD treatment, because there is concern they may damage the eyes. more research is needed, she says. tanning beds aren’t recommended because the UV light they give off can cause skin cancer and damage the eyes. In patients who don’t fully recover their energy with light therapy, she sometimes prescribes anti-depressants. So an investment in full-spectrum lights might, for at least a quarter of the population, make as much good sense as investing in a snow blower. “People can suffer from SAD all the way into march, April and even into may if we have a dark spring,’’ she says. but hating winter doesn’t necessarily mean you have SAD. It could just mean that you accurately remember the long winter of 2007-2008 that set snowfall records from colorado to maine. “I have never heard so many people say they are dreading winter,’’ barklage says. “It was such a brutal winter last year, it’s like people never really recovered.” Lengthy U.S. Recession Hurting Weber County’s Small Business Sector Highlights • the Zions bank Small business Index for Utah was 82.9 in november 2008, down from a revised 83.7 in October 2008. • Weber county experienced a decrease of 900 jobs (-0.9%) from a year ago. Joblessness registered 4.0%, up from the 3.3% unemployment rate one year ago. • Utah's unemployment rate was estimated at 3.5% in the latest month, unchanged from the prior month's rate. total Utah employment is down an estimated 2,200 jobs during the past 12 months. • the current U.S. recession—likely to be the longest in the post-WWII period—has combined with the global credit crisis to have a major negative impact on Utah's small businesses. • the U.S. economy lost an estimated 533,000 net jobs in november, the worst monthly performance in 34 years. In addition, job losses in September and October were revised higher by a combined 199,000 jobs. the U.S. unemployment rate rose to a 15-year high of 6.7%. A Long Recession the business cycle Dating committee of the national bureau of Economic Research (nbER), the “official scorekeeper” of the U.S. economy, announced on December 1, 2008 that a peak in economic activity occurred in the U.S. economy in December 2007. As a result, the current U.S. recession officially began in December 2007. the national media typically describes a recession as two consecutive quarters of declining GDP. According to the nbER, however, a recession “is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”the current recession, now in its 13th month, is likely to be the longest since the Great Depression. the current recession already exceeds the duration of 8-month recessions during July 1990 to march 1991 and march 2001 to november 2001. consensus estimates of economists in recent weeks suggested a return to modest, but positive, U.S. economic growth was likely during 2009’s second half. Such a development would see the current recession last 18-20 months. However, the severity of employment losses announced on December 5, combined with highly anxious domestic and global credit markets, suggest such economic forecasts could be stretched out by a quarter or two. Greater-than-expected job losses during november, combined with major upward revisions to previously announced job losses in September and October, have heightened the odds that a tenth and perhaps final interest rate cut by the Federal Reserve could occur on or before December 16, 2008. the Fed’s critical federal funds rate is already at a 50-year low of 1.00%. Interest rate cuts have picked up speed around the globe in recent weeks, with substantial cuts by central banks in Europe, the U.K., china, Sweden, and new Zealand. Such reductions, with more to come, were made in response to a growing awareness that the global economy is now likely in recession. For the first time in the postWWII period, the U.S., Europe, and Japan are all in recession at the same time. One component of the Utah Small business Index relates to U.S. economic performance, with weaker performance pulling the Index lower. the Index also assumes that most small businesses are net borrowers, with another interest rate cut pushing the Index higher. the Zions bank Small business Index for Utah was 82.9 during november 2008, down from a revised 83.7 during October 2008. the Index measures business conditions from the viewpoint of the Utah small business owner or manager. A lower Index number is associated with less favorable business “conditions” for Utah’s small businesses. the Index uses 100.0 for calendar year 1997 as its base year. the Index includes revisions to various historical and new forecast components as they become available. Utah Employment the Utah unemployment rate—the most heavily weighted component of the Zions bank Small business Index for Utah—was estimated at 3.5% in the latest month, unchanged from the 3.5% rate of the prior month. the 3.5% rate compares to a 2.8% rate during the same month one year ago. A higher Utah unemployment rate is a positive contributor to the Index as it implies increased access to Utah labor. Utah’s unemployment rate averaged 2.7% in 2007, 3.0% in 2006, 4.2% in 2005, and 4.9% during the 2000-2004 period. these rates compare to an average Utah unemployment rate of 3.5% between 1995 and 1999. total Utah employment declined by an estimated 2,200 jobs (down 0.2%) over the past 12 months. this decrease compares to a revised gain of 700 jobs in the prior yearover-year period. the 0.2% decline marks the first 12-month employment decline since the July 2002 to July 2003 period. Utah added 47,800 jobs in 2007, 55,700 jobs in 2006, 43,700 jobs in 2005, and 30,200 jobs in 2004. these totals compare to gains averaging 38,000 new jobs annually during the 1994-2000 period and a net loss of 1,300 jobs in 2001 through 2003. more recently, job losses, leading to lesser income creation and softer retail spending, have a negative impact upon Utah’s small businesses...and therefore, the Index. Local Performance • Weber county experienced a decrease of 900 jobs (-0.9%) from a year ago. Joblessness registered 4.0%, up from the 3.3% unemployment rate one year ago. • Davis county payrolls increased by 300 jobs (0.3%) in the past year. the unemployment rate was 3.1% in the latest month, up from 2.6% one year ago. • Salt lake county employment fell by 500 jobs (-0.1%) over the year. the county's unemployment rate was 3.2% in the latest month, up from 2.6% last year. • cache county employment grew by 200 jobs (0.5%) in the latest 12-month period. the area's jobless rate was 2.5%, up from the 2.0% rate of one year ago. • Utah county employment declined by 2,000 jobs (-1.0%) over the last 12 months. the area's jobless rate was 3.0%, up from the 2.4% rate of one year ago. • Washington county payrolls declined by 2,100 jobs (-3.8%) in the past year. the unemployment rate was 4.7% in the latest month, up from 2.7% one year ago. National Employment the U.S. Department of labor reported a net loss of 533,000 jobs in november 2008, the 11th monthly decline in a row, and the worst monthly job report in 34 years. In addition, previously estimated job losses during September and October were revised higher by 199,000 jobs. the U.S. unemployment rate jumped to 6.7% in november, the highest in 15 years. the current 6.7% jobless rate is a full 2.0% higher than the 4.7% rate of one year ago. the average hourly wage rose 0.4% (seven cents) to $18.30 hourly, a rise of 3.7% over the past 12 months. Goods-producing employment continued to decline in november, with a net loss of 163,000 jobs. manufacturing employment fell by 85,000 positions, while construction lost another 82,000 jobs. mining added 4,000 jobs during the month. Service-providing employment also declined sharply in november by 370,000 positions. the professional & business services sector lost 136,000 jobs, while the leisure & hospitality sector lost 76,000 jobs. the retail trade sector lost 91,000 jobs in november, reflecting weak Holiday sales. the education & health services sector added 52,000 jobs in november, while the government sector added 7,000 jobs. the estimated net decline of 1.9 million jobs during 2008’s first 11 months is a painful contrast to the average annual gain of 1.9 million net new jobs during 2005 to 2007. Such losses are likely to build in coming months as the U.S. economy struggles with likely the worst recession since the Great Depression. the December 2008 Zions bank Small business Index for Utah will be released on January 13, 2009. Additional information available at <www.zionsbank.com> Therapeutic Massage Deep Tissue Sports Massage Michelle Scott lmt, nctmb 801-673-7977 Eden, Utah |