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Weekly Market Review

By Ken Holman

Bonds walloped on tax-cut plan

Thursday, December 9, 2010 Salt Lake Tribune

The compromise on extending tax cuts crushed bonds. Bond traders are acting like it’s a done deal. Treasury prices dropped sharply, sending their yields higher for a second day. The yield on the 10-year Treasury note rose to 3.24 percent, the highest level since June 21 and a huge jump from the 2.93 percent it was trading at Monday before the tax deal was announced. Higher Treasury rates ripple through every corner of the economy, raising borrowing costs for the government, business and consumers. The Mortgage Bankers Association also reported Wednesday that mortgage applications lipped last week as refinancing activity fell. The average rate for a 30-year fixed loan rose to 4.66 from 4.56 percent the previous week.
 

Borrowers wait for lower mortgage rates and lose/Super-low loan rates fade

Friday, December 10, 2010  Deseret News/Salt Lake Tribune by Janna Herron, Associated Press

Homeowners who delayed locking in super-low mortgage rates may have waited too long. Rates are creeping back up. Freddie Mac, the government-backed company that buys and sells mortgages said Thursday that average rates on 15- and 30-year fixed loans increased sharply from last week. It was the fourth straight weekly rise. Rates have gone from 4.125 percent to 4.75 percent. Rates are rising because they tend to follow the trends set by government bonds, like the 10-year Treasury bond. Investors are selling those bonds, causing their interest rates to rise, because of the deal President Barack Obama and Republicans reached to hold off tax increases in 2011 and 2012 and cut taxes for most Americans. Some economists think the deal will help the economy heal faster. A stronger economy would make stocks more attractive than bonds, which are a safer investment in rocky economic times. 

Claim tax credits before 2010 ends

Saturday, December 11, 2010 Salt Lake Tribune by Lesley Mitchell, One Cheap Chick

Homeowners have until December 31 to take advantage of tax credits for energy-efficient upgrades made available by the American Recovery and Reinvestment Act of 2009. Improvements made in 2010 to existing homes can qualify for a tax credit of as much as 30 percent of the cost of improvements, up to $1,500. Added insulation, exterior windows and energy-efficient heating and air conditioning systems, solar hot water heaters, geothermal heat pumps, and wind turbines are included. Go to www.energystar.gov and click on “Tax Credits for Energy Efficiency” to see if you qualify. Check eligibility guidelines before purchasing any upgrades. According to the IRS, improvements must be “placed in service” by the end of the year. 

Mortgage Interest Deduction pays dividends for homeowners

Saturday, December 11, 2010  SpacesUtah.com by Lerron Little, Utah Realtors President

The Deficit Reduction Commission, an 18-member bipartisan commission created by President Obama, recently released its recommendations which included modifying the mortgage interest deduction for 75 million homeowners. Rather than eliminating the mortgage deduction, the commission suggested giving homeowners a flat 12 percent tax credit for mortgage interest and capping eligible mortgages at $500,000 instead of the current $1 million. The mortgage interest deduction, also known as the MID, has been in the U.S. tax code for nearly 100 years. It allows an individual to deduct mortgage interest paid on mortgage debt of up to $1 million for a principal residence and one additional property. The MID is largely a middle-class benefit. Sixty-five percent of families who claim the MID earn less than $100,000 per year and 91 percent earn less than $200,000. MID saves the average homeowner about $3,500 in federal taxes each year and helps American home buyers get into their first home. The National Association of Realtors oppose any changes to the current MID. “Homeowners already pay 80 percent to 90 percent of U.S. federal income tax, and among those who claim the MID, almost two-thirds are middle-income earners,” said NAR’s Chief Economist Lawrence Yun. 

Sales of foreclosed homes dropped in third quarter

Thursday, December 9,2010 Deseret News by Alex Veiga, Associated Press

Foreclosure sales plunged 25 percent in the July-September quarter versus the April-June period and tumbled 31 percent from the third quarter last year according to foreclosure listing firm, RealtyTrac Inc. Sales of non-foreclosed properties fell 29 percent sequentially and nearly 31 percent from the third quarter last year. The decline in sales of bank-owned properties and other homes in some stage of foreclosure is in line with an overall housing market slowdown that took hold after federal homebuyer tax credits expired in April. The fallout over foreclosure processing errors prompted some lenders to temporarily halt sales of bank-owned homes. “We could expect probably in the fourth quarter to see that percentage of foreclosure sales dip because buyers are a bit skittish about purchasing foreclosure properties, given the questions surrounding the foreclosure process,” RealtyTrac spokesman, Daren Blomquist said. The firm has seen a decline in foreclosure activity in November, due to the foreclosure document mess. That could mean fewer home sales in the final months of the year—already a traditionally slow period. In all, 188,748 U.S. homes in some stage of foreclosure were sold in the July-September period, accounting for a quarter of all U.S residential property sales, RealtyTrac said. As a share of overall home sales, foreclosure sales rose slightly from the second quarter. They peaked at 37 percent of all sales in the first quarter of 2009, but have ranged between 25 percent and 30 percent this year. The average sales price of foreclosure properties in the quarter was $169,523, or 32 percent below the average sales price of non-distressed properties. 

Consumer sentiment is on the rise

Saturday, December 11, 2010 Deseret News by Ruth Mantell, MarketWatch

Reuters/University of Michigan index of U.S. consumer sentiment rose in early December, reaching its highest since June, but below pre-recession levels. The gauge climbed to 74.2 in December from 71.6 in November. Pre-recession levels were more than 80. There have been some signs of improvement in the economy, but consumers remain concerned about jobs. Last week the U.S. economy added only 39,000 nonfarm jobs in November, well below the 155,000 Wall Street expected. “The rally in equities and job growth … are giving Americans a reason to be more hopeful ...,” wrote Jennifer Lee, senior economist at BMO Capital Markets. TD Securities economics strategist, Millan Mulraine, noted that the sentiment report “underscores the very positive momentum beginning in the economy.” Mullraine wrote that “… consumer sentiment is likely to bolster the growth performance … if it translates into increased consumer spending.” Consumer spending accounts for a significant portion of overall economic activity. The Michigan sentiment report also showed that consumers’ views on current conditions and expectations were also up. The one-year inflation expectation fell from 3.0 percent to 2.9 percent, while the five-year inflation outlook fell from 2.8 percent to 2.7 percent. 

Mortgage applications slipped last week

Thursday, December 9, 2010 Deseret News

Applications for mortgages slipped last week as a drop in refinance activity offset a gain in purchase applications. The Mortgage Bankers Association said Wednesday that overall applications for loans fell 0.9 percent from the previous week. The average rate for a 30-year fixed loan rose to 4.66 from 4.56 percent from a week earlier. Rates on 15-year fixed-rate mortgages, a common refinancing option, increased to 3.98 percent from 3.91 percent. Mortgage rates have ticked up in the past four weeks as investors took money out of Treasuries. That has increased their yields, which mortgage rates tend to track. Mortgage rates had been at or near their lowest levels in decades. 

Americans’ wealth grows, lifting hopes for economy

Friday, December 10, 2010  Deseret News by Jeannine Aversa and Dave Carpenter, Associated Press

Americans are gradually recovering their vast loss of wealth from the recession, thanks to larger stock portfolios. Household net worth grew 2.2 percent in the July-September quarter, fueled by a rally on Wall Street and hopes that Congress will pass a package of tax cuts. Net worth is the value of assets such as homes and stocks, minus debts like mortgages and credit cards. It totaled nearly $55 trillion last quarter compared to $49 trillion in the first quarter of 2009, its bottom during the recession. It would still have to rise an additional 20 percent to regain its pre-recession peak of $66 trillion. “Home prices are going to get weaker over the next year as more foreclosed homes get dumped on the market,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics. “We expect household net worth to keep its momentum,” said Gregory Daco, senior economist at HIS Global Insight. “Financial gains [in stocks and mutual funds] should offset real estate losses resulting from lower housing prices and very weak sales.” The stagnant values of homes and other real estate holdings are limiting the improvement in Americans’ wealth, the Fed’s report showed. The outlook for housing remains dim. Homes are most people’s biggest asset. But their values are still depressed in many markets. Most economists expect home prices nationally to decline 5 percent to 10 percent by the middle of next year. In some markets, declines will likely be steeper. Shrunken home equity, scant wage gains and high unemployment will keep spending in check. More Americans are building up savings and paring debt. That’s helping repair their personal finances. But it doesn’t help fuel the nation’s economic growth. Consumers saved 5.8 percent of their disposable income last quarter, down slightly from 6.2 percent in the April-June quarter, but much higher than the 1-percent-plus rates just before the financial crisis. 

Air Force development plan in Summit County raises concerns

Sunday, December 5, 2010  Salt Lake Tribune by Christopher Smart

An Air Force proposal to build a 1.2 million-square-foot commercial development in Summit County is raising concerns of Park City-area business people. They fear it will hurt existing businesses and send taxes out of the county. The proposed retail center would put a large shopping and commercial center near the Silver Summit area east of U.S. Highway 40, between Interstate 80 and State Route 248. Sales and property taxes would defray costs of a new resort hotel for military personnel to be built in Wasatch County near the Jordanelle Reservoir. In 2007, the Utah Legislature created the Military Installation Development Authority to help develop projects. MIDA has the authority to acquire land and handle planning, zoning and taxation, powers usually granted to municipalities. Roger Boyer, a Salt Lake City-based developer whose company built the Red Stone commercial center at Kimball Junction, objects to the Air Force project stating that it, “dwarfs anything ever proposed in Summit County and defies all planning efforts to preserve its resort atmosphere.” Utah Senator Stewart Adams, R-Layton, a real estate developer who chairs MIDA, was surprised by the reaction of Boyer. In November, 2009, Park City Manager, Tom Bakaly and interim Summit County Manager, Brian Bellamy, in a Memorandum of Understanding agreed to the 112-acre commercial development proposal. Although Summit County and Park City will not have planning and zoning authority over the project, they are attempting to negotiate a lower density, than the 1.25 million square feet approved, through a land sale agreement now being hammered out with MIDA, said Park City Mayor Dana Williams. Rick Mayfield, MIDA’s executive director, expects a sales agreement soon and construction on the commercial center to begin by summer. Mayfield noted that MIDA is willing to scale back the 1.25 million-square foot center to 800,000 square feet. Project build-out will occur as the economy allows, he said. 

Company expands to St. George

Friday, December 10, 2010 Deseret News by Jasen Lee

Czarnowski Display Service, Inc. will invest over $6.5 million in the development of a new production and distribution facility in St. George. When completed, the operation will employ 50 new full-time staff with wages in excess of 150 percent of the Washington County average. Headquartered in Chicago, CDS is an exhibit and event company with a global client base, providing design, fabrication, installation, warehousing and other related services. The new St. George facility will join Czarnowski’s 38 other North American locations. “This expansion is fueled by positive growth …,” said Mark Nagle, president of Czarnowski. The Governor’s Office of Economic Development approved a post-performance tax rebate to assist the expansion. The state expects to receive over $915,000 in new taxes over the seven-year incentive period. GOED executive director, Spencer Eccles, said Czarnowski’s joining the Utah business community “underscores the value of our State’s dynamic economy and our productive workforce to industry leaders.” 

Deer Valley adds to its upscale image/St. Regis hotel adds Deer Valley to its name

Saturday, December 11, 2010  Salt Lake Tribune by Mike Gorrell

Park City has three luxury hotels: the Waldorf-Astoria at Canyons Resort, which opened in summer 2009; St. Regis Deer Crest, which announced it was changing its name to the St. Regis Deer Valley; and Montage Deer Valley, which opened Thursday in the resort’s Empire Pass area. The 220-room, Montage Deer Valley cost more than $400 million to build. Of the 220 rooms, 154 are guest rooms rented by the hotel and 66 private suites and residences that can also be added to the rental mix. The $320 million St. Regis Deer Valley opened in December 2009 with 181 guest rooms, including 67 one-bedroom suites and 114 rooms that can be combined to form two-, three-, and four-bedroom suites. David Reis, managing partner of Deer Crest Janna LLC, owner of the St. Regis, commented, “When you have the number-one ranked ski resort in North America (according to  Ski magazine who selected Deer Valley as the continent’s best resort for four consecutive years), the greatest snow on Earth and the 100-year tradition of uncompromising St. Regis service and elegance all in one package, it’s pretty special.” Coleen Reardon, Deer Valley Resort’s director of marketing, thinks both the Montage Deer Valley and St. Regis Deer Valley are perfect brand fits. 

Stocks edge higher on hopeful economic signs

Saturday, December 11, 2010 Deseret News by Matthew Craft and David K. Randall, AP

Bond prices fell for another day as investors expected the tax deal to lead to economic growth and higher budget deficits. The yield for the 10-year note rose to 3.33 percent, up from 3.21 percent late Thursday. The Standard & Poor’s 500 index rose 7.40 or 0.6 percent, to 1,240.40, a new high for the year. The index has gained 11.2 percent this year and is trading at the same price it did in September 2008, the week before Lehman Brothers filed for bankruptcy. The Dow Jones industrial average rose 40.26, or 0.4 percent to 11,410.32. The Nasdaq composite index rose 20.87, or 0.8 percent, to 2,637.54. 

UDOT Prioritizes future road projects

Saturday, December 11, 2010  Salt Lake Tribune by Lee Davidson

Utah Department of Transportation officials say rural state highways need $7 billion worth of work over the next 30 years, but they will only have about $2.5 billion to spend on them. UDOT presented a preliminary plan to the Utah Transportation Commission on Thursday. Wasatch Front Regional Council has also proposed a 30-year plan for urban areas. Projects under consideration are: Bangerter Highway in western Salt Lake County, U.S. 89 in Davis County and Mountain View Corridor Highway in Salt Lake Valley to become full-blown freeways; widening I-80 from three lanes to four from the mouth of Parleys Canyon to Jeremy Ranch near Park City, estimated at $53 million; Kimball Junction improvements for $25 million; additional I-80 widening between the mouth of Parley Canyon and Kimball Junction for another $426 million; widening on portions of I-15 in Beaver, Iron and Washington counties for $209 million (this leaves $435 million worth of widening and freeway interchange upgrades unfunded); add passing lanes on stretches of U.S. 40 between Heber and Roosevelt for $86 million (with $12 million for widening unfunded); widening and interchange work on I-70 in Millard, Sevier and Emery counties for $309 million; I-80 in Tooele Country for $238 million; and Ogden Canyon widening for $65 million. 

Bank complaints soar even after changes to the laws

Friday, December 10, 2010 Deseret News by Pallavi Gogol, Associated Press

Complaints from customers of the 1,500 banks The Office of the Comptroller of the Currency regulates will hit 80,000 this year, the highest level in 15 years it has recorded them and double the 2008 total. Complaints about mortgages and foreclosures surged to the top spot this year. The number of grievances will almost double this year from 19,669 last year to 36,000 this year. Banks are fighting lawsuits over these issues in several states and are being investigated by all 50 state attorneys general on how they conduct foreclosures.   

BLM is building new efficient offices in Fillmore and Kanab

Saturday, December 11, 2010  Salt Lake Tribune by Mark Havnes

Mike Gates likes the Bureau of Land Management’s new 10,000-square-foot office that opened in Fillmore in late September. A second 16,350-square-foot project, which includes a 6,600-square-foot warehouse, will be built in Kanab. The Fillmore building cost just over $2 million while the Kanab project will cost $6.9 million. Ground was broken for the Kanab project last month on six acres purchased by the agency for $400,000. Both structures have green building technology and will get up to 15 percent of their electricity from grid-connected photovoltaic systems, which will be at least 39 percent more energy-efficient. Trent Duncan, manager on both projects for the state office of the BLM, anticipates both buildings will receive the Leadership in Energy and Environmental Design (LEED) gold rating from the U.S. Green Building Council.

 

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