The 22 Cities That Are In Danger Of Double Dipping

According to Smart Real Estate News & Commentary by Chris McLaughlin

A new report from Moody's Economy.com singled out 22 cities that are at risk of slipping back into a recession in as early as three months.

To come to this conclusion, the economists considered dwindling progress in employment, housing starts, home prices and industrial production.

The at-risk cities are spread across the country, ranging from Missoula Montana to Mobile Alabama, though more than half of the cities are in the South, and five are concentrated in the Midwest.

"With chances of a national double-dip recession now estimated at about one in four, several metro areas will probably experience their own downturns in the first half of 2011," said economist Andrew Gledhill, author of the report.

Private sector hiring has been tapering off in recent months compared to the start of the year, triggering Moody's to boost its forecast for a national double-dip from a 20% chance to 25% chance.

In the 22 identified metro areas, Gledhill said private sector hiring is partic ularly sluggish, increasing the chances of a slowdown.

Without a substantial pick-up in hiring, Gledhill said the number of cities in danger of a double-dip recession could grow, possibly reaching the triple-digits.

"There was a time when all 384 metro areas were in a recession. We probably won't get to that point again, but given the growing risk of another national recession, we're on the lookout for more metro areas that will be weakening substantially on several levels over the next six months to a year," Gledhill said.

He added that a handful of metro areas, particularly those that are industrial economies, are also suffering from a recent falloff in manufacturing.

MBA - Refinance Activity Increases

The Mortgage Bankers Association's (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 13.0% on a seasonally adjusted basis from one week earlier.

On an unadjusted basis, the Index increased 12.4% compared with the previous week. The Refinance Index increased 17.1% from the previous week and was the highest Refinance Index observed in the survey since the week ending May 15, 2009.

The seasonally adjusted Purchase Index decreased 3.4% from one week earlier. The unadjusted Purchase Index decreased 4.6% compared with the previous week and was 38.6% lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 2.6%. The four week moving average is up 0.1% for the seasonally adjusted Purchase Index, while this average is up 3.2% for the Refinance Index.

The refinance share of mortgage activity increased to 81.4% of total applications from 78.1% the previous week, which is the highest refinance share observed since January 2009.

The adjustable-rate mortgage (ARM) share of activity decreased to 5.7% from 5.9% of total applications from the previous week.

Obama's TAX HIKE

With Obama's tax plan in place, people making more than $195,550 in taxable income ($200,000 in adjusted gross income) and joint filers with taxable income over $237,300 ($250,000 in adjusted gross income) would be pushed up from the current 33% and 35% tax brackets into 36% and 39.6% brackets next year.

"It comes down to the greater your earnings, the greater the tax hit," said Robert Kerr, senior director of government relations at the National Association of Enrolled Agents.

"But it's all relative. For someone used to spending that money -- whether on a big family or expensive habits -- it's impossible to say how much they would be impacted."

Say you're a single filer with a taxable income of $250,000. This year, you owed $67,617 in income tax under the 33% bracket. Under the new system, you would pay $67,912 in taxes next year, a slight increase of $295. But those people making more than $300,000 are going to owe additional amounts in the thousands.

For instance, if you make $382,650 you'll owe an extra $4,095 in income tax. Single filers with $500,000 in taxable income would owe Uncle Sam an additional $9,492 from this year's tax bill.

Meanwhile, joint filers with taxable income of $700,000 would owe $232,396 in 2011, an extra $17,088 from $215,308 in 2010. Those Americans lucky enough to be earning millions each year, whether filing as individuals or jointly, could end up seeing increases in the six-figures.

A single filer with a million dollars in taxable income would owe $32,493 more than in 2010, While joint filers with the same income would owe $30,888 more than they paid in 2010.

For single filers making $5 million in taxable income, get ready to hand over $1,944,137 for the 2011 tax year, an increase of $216,493 from $1,727,644 in 2010. And a joint filer with an income of $5 million is likely to see his tax bill go up more than $200,000 next year.

HSBC to sell mortgage unit?

HSBC Bank USA is considering the possible sale of its US-based mortgage unit, HSBC Mortgage Corp., and notified employees Monday of the possible options being considered although no firm timetable for a potential decision was provided. The bank, the U.S. subsidiary of London-based HSBC Holdings Plc, bases much of its US operations in New York state.

Options for the mortgage subsidiary include "a sale, merger or other business combination," according to a statement from the bank, which also said the mortgage company may look to sell substantially all of its assets.

It's also possible that no changes at all will be made, the bank said. Bank spokesperson Neil Brazil stressed to the press that HSBC is not looking to exit US mortgage originations, but is instead assessing how it conducts its mortgage business in the United States.

HSBC's mortgage operations currently employ roughly 1,500 in the US, according to the company, and the company was the 21st largest mortgage originator in the US during 2009.

But Europe's largest bank has been moving to reduce its exposure to unsecured lending and exiting unprofitable businesses for the past two years, transferring its North American consumer finance operations into a run-off portfolio following heavy losses from sub-prime lending.

Beyond considering options for its US-based mortgage business, the bank is in the process of divesting from other assets and recently announced that a deal to sell the remainder of its vehicle finance loan portfolio, which totaled $4.3 billion at the end of June, would close in Q310.

Record low rates again

According to the Zillow Mortgage Marketplace weekly update, The national, 30-year fixed-mortgage rate (FRM) slightly decreased from a week earlier, reverting back to the record low average of 4.28% set two weeks ago.

30-year rates vary regionally, of course, but the majority of states witnessed a deflation. Most large states saw a decline in rates: California's current rate of 4.33% is down from 4.34% last week; New Jersey's at 4.26% is down from 4.28%; Pennsylvania's at 4.32% is down from 4.33%; Illinois' at 4.3% is down from 4.34%, and Florida's at 4.21% is down from 4.24%.

Rates substantially decreased in New York to 4.25% from 4.41% and Texas to 4.19% from 4.29%. Rates increased in Massachusetts to 4.22% from 4.28%. Zillow reported the national average rate for 15-year fixed home loans remained flat at 3.86%, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 3.23%.

Zillow's rates are based on real-time mortgage quotes from lenders registered with, but not exclusively bound to the company. The national average comes from thousands of daily quotes given to anonymous borrowers through their website. State averages are also available.

Now for our real estate education section...

Low-Down on Government Loans

Sometimes it seems the more things change the more they stay the same especially when it comes to the mortgage industry. However, this time it really is a bit different especially given the major upheaval in the mortgage market.

With the majority of mortgage loans now guaranteed by the U.S. government, it is a good idea to review what is available and to whom. Here is the low down on government loans as of August of 2010.

Basic FHA Loan (Home Mortgage Insurance - HUD/FHA) - This program has grown into a heavy hitter within the industry despite the fact that it doesn't lend money directly to buyers (in most cases) but rather insures or underwrites the loans.

Condominium Unit Purchase (Mortgage Insurance - HUD/FHA) - Similar to the Basic FHA loan above, this is designed with condo owners in mind.

Manufactured Home Loan Insurance (HUD/FHA) - Like the basic FHA and condo loans above, this program is designed for borrowers interested in the purchase of a mobile or manufactured home.

Hope for Homeowners - The media made a lot out of this little program which turned out to be a much smaller than originally anticipated.

Designed to help people avoid foreclosure, the program provides new, 30 year fixed interest rate mortgages for those that cannot afford their current payments. Stringent requirements have limited the number of eligible participants.

Rural Housing: Farm Labor Housing Loans and Grants - Once a major program within the federal government, the reduction in family farms has made this an all but forgotten program but one worth looking into for anyone interested in purchasing a family farm.

Loans (and a limited number of grants) are available for land, housing, machinery and other assets required to buy, build and operate a farm.

VA - Home Loans - Interest Rate Reduction Refinancing Loan - Once considered the domain of veterans, this guarantee service also provides funding for the family of service members as well as veterans and others. Additionally the VA provides vendee loans for anyone interested in purchasing a VA foreclosure.

Section 203k Rehabilitation Mortgage Insurance - Interested in a major fixer-upper? Section 203k may be the right mortgage for you; once the main mortgage is obtained, this program provides the funding needed to make necessary repairs and upgrades to the property.

Section 203h is a closely related program that provides funding for repairs and rebuilding due to natural disasters or other emergencies.

Home and Property Disaster Loans - The Small Business Administration may not be the first agency that comes to mind when you need a mortgage after a disaster but don't be so quick to mark this one off the list; the SBA is able to assist small business owners, homeowners and even some renters after an area has been declared a disaster.

See you at the top!