Tuesday, August 26, 2014

Mixed Messages From a Schizophrenic Economy

Initial jobless claims fell to 302,000, better than expected.  That’s great news, right?  The economy is bouncing back, right?  Not so fast, my friend!

The initial jobless claims report is just another mixed message from our schizophrenic economy that stumbles through a weak recovery.  There are positive signs for unemployment, inflation, and job creation.  But GDP growth, wage growth, labor force participation, and labor productivity all remain weak.  What’s a Fed Chairwoman to do?

As QE winds down, Fed Chair Janet Yellen and the rest of the Federal Reserve Board want to begin the inevitable process of raising short term interest rates, but they won’t until the economy shows that it can stand on its own two feet.  The risk of relying completely on past statistics and waiting too long is that inflation may sneak up on us and get out of control.  That could give the economy an entirely new set of problems.

The Fed has a very difficult challenge ahead of it.  When they decide to raise rates , it will impact all of us.  But with so many weak indicators of the economy, it will be extremely difficult for them to raise rates anytime soon.

Wednesday, August 13, 2014

In Suburbia

“Let’s take a ride, and run with the dogs tonight, in Suburbia.” 

I have no clue what the Pet Shop Boys meant with that line of their 1986 hit song, “Suburbia.”  It seems to me that one would either take a ride with the dogs, or run with the dogs, but not both.  But regardless if you are riding or running, more people seem to be doing both in “Suburbia,” more commonly called “the suburbs.”

This reverses a prior trend that showed that America’s big cities have grown faster than their suburbs in recent years.  A report from the U.S. Census Bureau shows that fourteen of the nation’s 20 biggest cities saw their growth slow or populations decrease in 2013.  Only 18 of America’s 51 metropolitan areas with populations greater than 1 million people had their cities grow faster than their suburbs.  That’s down from 25 in 2012.  So now it’s Suburbia that is growing faster than the urban core of cities.

Why the change?  Just recently we were discussing the appeal of condominiums in the core of major cities.  While those projects are selling well, it seems that greater growth is attributed to single family homes with yards and fences.  Most of us that grew up in the west grew up in a suburb.  That trend continues, especially for families with children.  That’s good news for home builders, and the economy since the construction of single family homes creates more jobs than multi-family projects.

Tuesday, August 12, 2014

Ducks in a Row

We’ve all used, or at least heard, the expression, “Get your ducks in a row.”  Generally it is in the context of organizing so that we are prepared for a meeting or event.  Why ducks?  And why would ducks need to be in a row?  More on that later.

When applying for a mortgage, getting one’s “ducks in a row” makes the process move much more smoothly.  One should be sure to keep well-organized personal files with income and asset documentation, so that when the documentation is asked for by the lender, it can be delivered quickly and without much headache.  When completing a mortgage application, have the following documents ready to provide to your lender:

·         Paystubs covering most recent 30 day period

·         W-2 forms for the most recent 2 years

·         Tax returns for the most recent 2 years

·         Bank statements for the most recent 2 months

·         Explanation for any derogatory credit

·         Be ready for some additional documentation if you own your own business

Now that you know how to have your “ducks in a row” for a mortgage loan, let’s get back to the ducks.  I found quite a few explanations for the “ducks in a row” idiom.  One of them is from a newspaper story in 1901 about a game hunter that supposedly killed 42 wild ducks by baiting them with corn in a long galvanized trough and firing just once with a large shot gun.  The more likely and less gruesome origin could be the common image of the mother duck leading a straight line of ducklings waddling in a row, one behind the other.