Contracts to buy homes fall to a 7-month low
May 27, 2011, 11:11 a.m. EDT Associated Press
Journal By Calvin Lee Ledsome Sr.,
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WASHINGTON (AP) — The number of people who signed contracts to buy homes fell sharply in April, hitting its lowest point since fall and renewing fears that a recovery in the housing market is far off.
An index of sales agreements for previously occupied homes sank 11.6 percent last month to a reading of 81.9, the National Association of Realtors said Friday.
A reading of 100 would be considered healthy.
The last time the index reached at least 100 was in April 2010.
That was the final month when people could qualify for a home-buying tax credit of up to $8,000.
Signings are still nearly 8 percent above June’s reading of 75.9, the lowest figure since the housing bust.
Contract signings are considered a reliable indicator of the housing market’s direction. That’s because there’s usually a one- to two-month lag between a sales contract and a completed deal.
But the Realtors group has noted a larger-than-usual number of contract cancellations in recent months. Some buyers have canceled purchases after appraisals showed that the homes were worth less than the buyers’ initial bids. A sale isn’t final until a mortgage is closed.
There “appears to have been a sudden arrest in willingness to commit to a home purchase,” said Pierre Ellis, a senior economist at Decision Economics.
“April sale closings came in noticeably less strong than March contract signings — hinting at mortgage problems,” Ellis said.
The Realtors group said Friday’s report “implies a slower-than-expected market recovery in upcoming months,” in light of rising oil prices, severe weather across the Midwest and South and a rise in applications for unemployment benefits.
Some analysts noted that recent natural disasters are causing a slowdown in construction. They point to the flooding Mississippi River, which has devastated homes and farmlands and closed factories; the tornado in Joplin, Mo., which has killed at least 132 people; and a tornado outbreak in April, which caused an estimated $8 billion in damage in Alabama and six other Southern states.
The Realtors index showed that contract signings were uneven across the country: They rose 1.7 percent in the Northeast but dropped 8.9 percent in the West, 10.4 percent in the Midwest and 17.2 percent in the South.
High unemployment, tighter credit and a lingering fear that home prices have yet to hit bottom are preventing many Americans from buying homes. That’s true despite super-low mortgage rates and home prices that are falling in some areas to their lowest points in a decade.
Overhanging the entire housing sector are waves of foreclosures. They are forcing down home prices.
Economists say it could be several years before the nation’s housing market recovers. Sales of previously occupied homes fell last year to their lowest level in 13 years.
This year is shaping up to be equally bleak. The number of purchases is running at just half the pace of 1963 — even though there are 120 million more people in the United States now.
A reading of 100 indicates the average level of sales activity in 2001, when the index was created. The reading exceeded the 100 threshold from March 2003 to April 2007, before sinking as the country fell into a deep recession.
G-8 leaders to marshal support for Arab nations
May 25, 2011, 9:57 a.m. EDT
Associated Press
Journal By Calvin Lee Ledsome Sr.,
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PARIS (AP) — Arab uprisings are pushing aside deficits and austerity as the biggest worry of the leaders of the Group of Eight industrialized nations this year.
President Barack Obama and the other leaders will seek to marshal their combined economic might behind the grass-roots democracy movements that have swept the Arab world — and driven away tourists and investors.
Egypt and Tunisia, where popular revolts this year overthrew authoritarian regimes, want to show G-8 leaders and international financiers that they are still sound investment destinations — which might be a tall order as the future shape and policies of their governments remains unclear.
The discussions starting Thursday in the chic Normandy resort of Deauville will see the host, French President Nicolas Sarkozy, bring together the heads of wealthy nations for what one of Sarkozy’s top advisers describes as “the founding moment” of a partnership between the G-8 and the Arab countries.
That partnership may be strained, however, by tensions over how to handle Libya’s rebel movement and entrenched leader Moammar Gadhafi. NATO appears to have no exit strategy, and efforts to oust Gadhafi remain elusive.
The leaders of the U.S., Canada, Britain, Germany, France, Japan, Italy and Russia will greet counterparts from Tunisia, Egypt and the head of the Arab League to hash out details of what some are calling a new “Marshall Plan” for these countries, similar to the massive U.S. aid to Europe after World War II that helped the continent rebuild and stave off communism.
The historic parallel is fitting, as Deauville is just a short drive along the English Channel from the D-Day landing beaches where the U.S. and its allies began to roll back the Third Reich in 1944.
A top Sarkozy official drew another historical analogy, saying the aid and investment to be promised to the Arab nations would resemble that which the G-8 offered to Eastern and Central European nations after the collapse of communism in 1989.
Last week President Barack Obama said the U.S. has asked the World Bank and the International Monetary Fund to present a plan at the G-8 summit that sets a path to stabilize and modernize the economies of Tunisia and Egypt.
The U.S. will forgive up to $1 billion in Egyptian debt and guarantee another $1 billion to finance infrastructure and new jobs. Obama said he will ask Congress to finance enterprise funds that will provide money for investment in both countries — a request that comes as Congress seeks to cut spending.
Tunisia, followed by Egypt, kicked off change around the Arab world, as broad-based popular movements took to the streets demanding greater rights and political representation from their authoritarian governments.
But the street demonstrations in Cairo and Tunis that thrilled and inspired the Arab world also drove away the tourists and investors on which these economies are heavily dependent.
“The first thing they will be looking for is direct financial aid,” said Said Hirsh, a Middle East economist with Capital Economics consultancy in London. “Both countries need quite a lot of money considering the hit to their economies and their revenues.”
While U.S. officials say G-8 countries will discuss their role in the process, they say it is too soon to reach a deal on dollar amounts for assistance.
The European Bank for Reconstruction and Development, a London-based institution set up in 1991 to foster transition to market economies in post-communist Europe, could be “repurposed” to focus its expertise on the southern Mediterranean region, a top official in Sarkozy’s office said, speaking on condition of anonymity because of protocol.
The heads of the World Bank and the United Nations will also be present and add their signatures to the partnership declaration. Former IMF chiefDominique Strauss-Kahn, under house arrest in New York following his indictment for sexual assault, will be replaced for the event by the institution’s acting managing director John Lipsky.
Finding a permanent replacement for Strauss-Kahn is likely to take up a good part of the summiteers’ small talk.
Nuclear safety will be another topic, with Japanese Prime Minister Naoto Kan scheduled to provide leaders with an update on the continuing crisis at the Fukushima Dai-ichi nuclear power plant.
The future of the Internet will also figure in the G-8 leaders’ talks. Mark Zuckerberg of Facebook and Eric Schmidt of Google and other Internet executives took part in two days of debates focused broadly on the Internet’s impact on the global economy. Several of the Internet conference’s speakers will then take policy recommendations to Deauville in talks with the G-8 leaders.
Police have established one security cordon around the conference center where the leaders are meeting, and another perimeter encompassing all of Deauville. Local ports, train stations and the airport will be shut from Wednesday to Friday, and a no-fly zone enforced over the town.
The show of force may have discouraged radicals and other protesters from attempting to organize demonstrations close to the summit. Anti-G8 protesters plan symbolic demonstrations in the neighboring towns of Caen and Le Havre, but they do not plan to try to disrupt the event in Deauville itself, according to a statement circulated by radical groups online.
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Associated Press writers Julie Pace in Washington, D.C., Geir Moulson in Berlin, Charmaine Noronha in Toronto, David Stringer in London and Paul Schemm in Rabat, Morocco contributed to this report.
Greg Keller can be reached at http://twitter.com/Greg_Keller
US stock futures edge up after steep declines
May 24, 2011, 8:44 a.m. EDT Associated Press
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NEW YORK (AP) — Stock futures rose Tuesday, a day after fears about European debt sparked steep declines in financial markets around the world.
Ahead of the opening bell, Dow Jones industrial average futures are up 39, or 0.3 percent, at 12,401. Standard & Poor’s 500 futures are up 5, or 0.4 percent, at 1,319. Nasdaq 100 futures are up 7, or 0.3, at 2,322.
The modest advance in futures trading came despite more troubling news about the state of European debt management.
Greece‘s main opposition party said it opposed the government’s new austerity measures. The announcement dashed hopes that the country might be able to repair its finances enough to get another loan package from the International Monetary Fund.
Ratings agency Moody’s warned that a Greek restructuring of its debt would constitute a default. Moody’s said such a move would hurt the credit ratings of Greece and other debt-laden European countries. The ratings agency also said it would review 14 British financial institutions for a possible downgrade.
Nonetheless, European stocks recovered Tuesday after Monday’s declines.
The FTSE 100 index of leading British shares rose 0.4 percent in midday trading. Germany’s DAX rose 0.7 percent and the CAC-40 in France was 0.2 percent higher. The euro also rose slightly against the dollar after falling to a two-month low Monday.
In economic news, the Commerce Department is expected to report at 10 a.m. Eastern on how many new homes were bought in April, offering traders a glimpse at the housing market.
Analysts expect sales to have been roughly flat, rising slightly to an annual rate of 303,000 from 300,000 in March. That is still far below the 700,000 in annual sales seen as representing a healthy market.
New homes are unappealing to budget-conscious families because their median price is nearly 31 percent higher than previously-occupied homes. That’s twice the price difference typical of a healthy economy. At their current rate, new-home sales are on track to experience a sixth straight year of declines.
The Dow fell as much as 180 points Monday before paring back some of its losses after Greece, Italy and Spain suffered weekend setbacks in their attempts to control their debt. The Dow fell 130.78 points, or 1 percent, to close at 12,381.26.The S&P 500 index lost 15.90, or 1.2 percent, to 1,317.37. The Nasdaq dropped 44.42, or 1.6 percent, to 2,758.90.
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WASHINGTON (AP) — They’re not buying it. Most Americans say they don’t believe Medicare has to be cut to balance the federal budget, and ditto for Social Security, a new poll shows.
The Associated Press-GfK poll suggests that arguments for overhauling the massive benefit programs to pare government debt have failed to sway the public. The debate is unlikely to be resolved before next year’s elections for president and Congress.
Americans worry about the future of the retirement safety net, the poll found, and 3 out of 5 say the two programs are vital to their basic financial security as they age. That helps explain why the Republican Medicare privatization plan flopped, and why President Barack Obama’s Medicare cuts to finance his health care law contributed to Democrats losing control of the House in last year’s elections.
Medicare seems to be turning into the new third rail of politics.
“I’m pretty confident Medicare will be there, because there would be a rebellion among voters,” said Nicholas Read, 67, a retired teacher who lives near Buffalo, N.Y. “Republicans only got a hint of that this year. They got burned. They touched the hot stove.”
Combined, Social Security and Medicare account for about a third of government spending, a share that will only grow. Economic experts say the cost of retirement programs for an aging society is the most serious budget problem facing the nation. The trustees who oversee Social Security and Medicare recently warned the programs are “not sustainable” over the long run under current financing.
Nearly every solution for Social Security is politically toxic, because the choices involve cutting benefits or raising taxes. Medicare is even harder to fix because the cost of modern medicine is going up faster than the overall cost of living, outpacing economic growth as well as tax revenues.
“Medicare is an incredibly complex area,” said former Sen. Judd Gregg, R-N.H., who used to chair the Budget Committee. “It’s a matrix that is almost incomprehensible. Unlike Social Security, which has four or five moving parts, Medicare has hundreds of thousands. There is no single approach to Medicare, whereas with Social Security everyone knows where the problem is.”
That’s not what the public sees, however.
“It’s more a matter of bungling, and lack of oversight, and waste and fraud, and padding of the bureaucracy,” said Carolyn Rodgers, who lives near Memphis, Tenn., and is still working as a legal assistant at 74. “There is no reason why even Medicare, if it had been handled right, couldn’t have been solvent.”
In the poll, 54 percent said it’s possible to balance the budget without cutting spending for Medicare, and 59 percent said the same about Social Security.
Taking both programs together, 48 percent said the government could balance the budget without cutting either one. Democrats and political independents were far more likely than Republicans to say that neither program will have to be cut.
The recession cost millions their jobs and sent retirement savings accounts into a nosedive. It may also have underscored the value of government programs. Social Security kept sending monthly benefits to 55 million recipients, like clockwork; Medicare went on paying for everything from wheelchairs to heart operations.
Overall, 70 percent in the poll said Social Security is “extremely” or “very” important to their financial security in retirement, and 72 percent said so for Medicare. Sixty-two percent said that both programs are extremely or very important.
The sentiment was a lot stronger among the elderly. Eighty-four percent of those 65 or older said both programs are central to their financial security. Compare that to adults under 30, just starting out. Just under half, or 46 percent, said they believed both Social Security and Medicare would be extremely or very important to their financial security in retirement.
Old, middle-aged or just entering the workforce, most people are keenly aware of the cost of health care, and that may be helping to focus more attention on Medicare.
“Health insurance these days is very costly, and it’s not something that most people can afford to go out and buy on their own,” said Tim Messner, 38, a technology quality assurance analyst from Barberton, Ohio. “I don’t know that we could possibly plan ahead for medical insurance, but if you had to replace Social Security or investments, you at least have an idea of what you can live on.”
Numbers tell the story. As health care goes up, the value of Medicare benefits is catching up to Social Security’s. A two-earner couple with average wages retiring in 1980 would have expected to receive health care worth $132,000 through Medicare over their remaining lifetimes, and $446,000, or about three times more, in Social Security payments.
For a similar couple who retired last year, the Medicare benefit will be worth $343,000, compared to Social Security payments totaling $539,000, less than twice as much. The numbers, from economists at the nonpartisan Urban Institute, are adjusted for inflation to allow direct comparison. For low-income single retirees and some couples, the value of expected Medicare benefits already exceeds that of Social Security.
The poll found a deep current of pessimism about the future of Social Security and Medicare. As much as Americans say the programs are indispensable, only 35 percent say it’s extremely or very likely that Social Security will be there to pay benefits through their entire retirement. For Medicare, it was 36 percent.
Again, there’s a sharp difference between what the public believes and what experts say. Most experts say the programs will be there for generations to come. But they may look very different than they do today, and Americans should take note.
“Do they have a basis for worrying that these programs are going to pay them much less than they’re currently promising?” asked economist Charles Blahous. “Yes, absolutely. Do they have a basis for being concerned that the programs may have to be structurally changed in order to survive? The answer to that is yes, too.” A trustee of Social Security and Medicare, Blahous served as an economic adviser to President George W. Bush.
Republican lawmakers don’t inspire much confidence right now when it comes to dealing with retirement programs, the poll found. Democrats have the advantage as the party more trusted to do a better job handling Social Security by 52 percent to 34 percent, and Medicare by 54 percent to 33 percent. Often, but not always, major revisions have been accomplished through bipartisan compromise.
Sue DeSantis, 61, a store clerk from West Milton, Ohio, worries she won’t be able to rely on either program. Both are important to her well-being, but she thinks changes are inevitable. And she has little confidence in lawmakers.
“I don’t put my faith in politicians, and I don’t put my faith in the government,” said DeSantis. “I’m a Christian. I believe that God will take care of me. That doesn’t mean I should be foolish and not look at anything, but I don’t believe that the politicians are necessarily going to do the best for the common ordinary person like myself.”
The Associated Press-GfK poll was conducted May 5-9, 2011, by GfK Roper Public Affairs & Corporate Communications. It involved landline and cell phone interviews with 1,001 adults nationwide and has a margin of sampling error of plus or minus 4.2 percentage points.
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Associated Press Polling Director Trevor Tompson, Deputy Director Jennifer Agiesta and AP News Survey Specialist Dennis Junius contributed to this report.
