Tricia Morris | Hawaii’s Premiere Mortgage For the week of Nov 15, 2010 – Vol. 8, Issue 46“INFLATION IS WHEN YOU PAY $15 FOR THE $10 HAIRCUT YOU USED TO GET FOR $5
Last Week in Review “INFLATION IS WHEN YOU PAY $15 FOR THE $10 HAIRCUT YOU USE TO GET FOR $5 Right now, the headline numbers in the US show little inflation overall… but we are already seeing significant inflation in particular items like commodities, food, other shopping products that you find in some shopping reviews sites, and oil – which are being driven by a weak US Dollar, and increasing demand from emerging countries like China and India. In addition, the global market reacted late last week to higher-than-expected inflation in China. This is important to us because Bonds and home loan rates hate inflation, no matter where the whiff of it comes from. Here’s why. Think of inflation as a hot air balloon and rates as the basket under that balloon. As the balloon (or inflation) rises, the basket (or rates) must rise as well.
So, if inflation moves higher in China, their government has to raise rates to fight inflation. And if rates move higher in China, global investors seeking the highest yield will move away from the relatively meager returns seen in US Bonds – and move their Bond buying money into juicier yields found abroad. There are so many opinions by so many smart people on both sides of the inflation argument, but right now it is all about what the Bond market thinks. And the recent market action shows just how quickly sentiment in the market can change. Remember, it was just a few weeks ago that fears and whispers of deflation helped the Bond market – and home loan rates – improve.
While those goals may be good for the overall economy, we need to remember that all three are very unfriendly to Mortgage Bonds and home loan rates. The good news is, despite ending the week worse than where they started, home loan rates are still near historic lows for the time being. If you or someone you know is looking to take advantage of low rates, now is the time. Please call or email me today to get started.
Chart: Fannie Mae 3.5% Mortgage Bond (Friday November 12, 2010)
The Mortgage Market View… Financial Benefits of Decluttering My husband and I usually go through our closet once a year to clear out clothes we no longer wear. But an article in the New York Times about people who decided to wear only six items for a month made me aware that there still is a lot in my closet that I don’t need. We occasionally go through other closets, cabinets and drawers to rid them of items that don’t get used and just take up space. After reading G.E. Miller’s 3 Guerilla Tactics to Get Rid of Clutter on 20somethingfinance, I realized my haphazard keep-or-toss tactics weren’t cutting it. What resonated with me most, though, was a reader comment on the Opinionator blog post How to Lose a Legacy. The reader wrote about cleaning out his (or her) parents’ home after his mother died and father moved out: “I wonder why we (me) hang on to stuff that really just takes up physical and emotional “room” in our lives; I s’pose it’s because the “stuff” (as George Carlin so aptly and comically put it) signifies a longing to hang on to, or dare I say, cling, to memories using physical things… even if we actually wish we could just throw a lot of it in the trash.” It feels good to get rid of the clutter. This is a personal finance column, so I won’t advocate just throwing your stuff in the trash because you’d miss out on the financial benefits of decluttering. Here’s what getting rid of things you don’t need can do for your finances. 1. Lower your tax bill. If you itemize on your tax return, take all that stuff to Goodwill or any other charitable organization and claim a deduction for your contribution. Goodwill has a list of price ranges for items sold in its stores that can help you figure out the market value of items you donate. If your noncash contributions total more than $500, you must complete Form 8283 and attach it to your tax return. Single items valued at $5,000 or more, regardless of condition, require a written appraisal. 2. Put money in your pocket. You’ve heard it before: One man’s trash is another man’s treasure. Have a yard sale ( see these tips) or sell your wares on eBay, Craigslist and other sites ( watch this video). 3. Eliminate financial mess. While you’re decluttering, take the time to get rid of documents you no longer need and go digital with the rest. See Paper Records: What to Toss, What to Keep and Create a Digital Archive of Tax Records for help. This exercise can help you get your remaining documents organized, save you time as you prepare your next tax return and perhaps prompt you to find ways to streamline more of your financial responsibilities (by setting up automatic bill pay, for example, and eliminating all those monthly paper bills). Reprinted with permission. All Contents ©2010 The Kiplinger Washington Editors. www.kiplinger.com. ————————– This Week’s Economic Calendar Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of November 15 – November 19 Tricia Morris
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Affordable-housing plan needs county's OK
A Big Island project’s land-use change approval is subject to certain conditions
The state Land Use Commission has provided conditional approval for urbanizing 272 acres on the Big Island, advancing a plan to develop 2,330 homes initiated by the state to provide work-force housing.
Last week’s decision, opposed strongly by the property’s former owner, advances the estimated $734 million master-planned community called Kamakana Villages at Keahuolu for consideration by various Hawaii County entities, including the County Council.
On Friday the LUC filed an order to convert the land from agricultural use to urban use after a 7-2 vote by commission members.
However, the approval was granted subject to several conditions.
One condition is that the production and distribution of affordable homes be agreeable to the county.
Developer Forest City Hawaii LLC has proposed providing 1,169 homes — or just over half of all Kamakana homes — at affordable prices under federal guidelines.
The developer has committed to providing 1,138 multifamily homes and 31 single-family homes at prices estimated between $200,000 and $400,000, though about 400 homes would be rentals.
Market-price homes at Kamakana would include 531 multifamily homes and 630 single-family homes at estimated prices from $300,000 to $700,000.
Another condition is that the developer produce a traffic impact analysis report that is approved by the county and state Department of Transportation, and that the developer implement any mitigation measures recommended by the government related to direct impacts from the project. Also, the developer must contribute its fair share of regional transportation improvements.
The traffic mitigation issue was a main point of objection to the project from the Queen Liliuokalani Trust, which expressed concerns that other landowners and taxpayers would be left to make traffic improvements necessitated by adding so many homes in the area.
The trust also argued that the state, which bought the property from the trust in 1992 under threat of condemnation, originally wanted the site and neighboring land for a broader range of public uses, including a University of Hawaii campus and a sports complex.
A state agency charged with facilitating affordable-housing development, the Hawaii Housing Finance and Development Corp., initially advanced the conceptual plan for Kamakana, and selected Forest City to develop the state property with assistance of a $25 million loan.
HHFDC said Kamakana will help meet an acute need for affordable housing in West Hawaii and reduce regional highway traffic that is bad in part because many workers at nearby hotels commute to the area from far away.
The development agreement between the agency and the developer requires that at least 50 percent of the homes be sold at prices affordable to people earning no more than 140 percent of the Big Island’s median income, or $65,370 for a single person or $93,380 for a family of four.
Forest City has proposed making 58 of the 1,169 affordable homes affordable to residents earning up to the maximum limit. Another 286 homes would be affordable to those earning 100 percent to 120 percent of the median income, and 825 homes would be affordable to those earning between 80 percent and 100 percent of the median income.
The state Land Use Commission has provided conditional approval for urbanizing 272 acres on the Big Island, advancing a plan to develop 2,330 homes initiated by the state to provide work-force housing.
Last week’s decision, opposed strongly by the property’s former owner, advances the estimated $734 million master-planned community called Kamakana Villages at Keahuolu for consideration by various Hawaii County entities, including the County Council.
On Friday the LUC filed an order to convert the land from agricultural use to urban use after a 7-2 vote by commission members.
However, the approval was granted subject to several conditions.
One condition is that the production and distribution of affordable homes be agreeable to the county.
Developer Forest City Hawaii LLC has proposed providing 1,169 homes — or just over half of all Kamakana homes — at affordable prices under federal guidelines.
The developer has committed to providing 1,138 multifamily homes and 31 single-family homes at prices estimated between $200,000 and $400,000, though about 400 homes would be rentals.
Market-price homes at Kamakana would include 531 multifamily homes and 630 single-family homes at estimated prices from $300,000 to $700,000.
Another condition is that the developer produce a traffic impact analysis report that is approved by the county and state Department of Transportation, and that the developer implement any mitigation measures recommended by the government related to direct impacts from the project. Also, the developer must contribute its fair share of regional transportation improvements.
The traffic mitigation issue was a main point of objection to the project from the Queen Liliuokalani Trust, which expressed concerns that other landowners and taxpayers would be left to make traffic improvements necessitated by adding so many homes in the area.
The trust also argued that the state, which bought the property from the trust in 1992 under threat of condemnation, originally wanted the site and neighboring land for a broader range of public uses, including a University of Hawaii campus and a sports complex.
A state agency charged with facilitating affordable-housing development, the Hawaii Housing Finance and Development Corp., initially advanced the conceptual plan for Kamakana, and selected Forest City to develop the state property with assistance of a $25 million loan.
HHFDC said Kamakana will help meet an acute need for affordable housing in West Hawaii and reduce regional highway traffic that is bad in part because many workers at nearby hotels commute to the area from far away.
The development agreement between the agency and the developer requires that at least 50 percent of the homes be sold at prices affordable to people earning no more than 140 percent of the Big Island’s median income, or $65,370 for a single person or $93,380 for a family of four.
Forest City has proposed making 58 of the 1,169 affordable homes affordable to residents earning up to the maximum limit. Another 286 homes would be affordable to those earning 100 percent to 120 percent of the median income, and 825 homes would be affordable to those earning between 80 percent and 100 percent of the median income.
Gold hits record $1,400 per ounce
Silver and palladium prices also reach highs as concerns mount over European debt
Gold topped $1,400 an ounce, extending a rally to a record, on investor demand for an alternative to currencies. Silver reached a 30-year high, and palladium climbed to the highest price since 2001.
On the Comex in New York, gold futures rose to a record $1,410.40 yesterday as the euro dropped after concerns mounted that governments in the region will struggle to pay debt. The metal has jumped 28 percent this year, heading for the 10th straight annual gain.
“No one wants to hold currencies now,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago.
“The big money is looking at gold as an alternative asset.”
Gold futures for December delivery traded at $1,409.40 as of 4:30 p.m. in New York after gaining $5.50, or 0.4 percent, to settle at $1,403.20 in regular trading.
Gold for immediate delivery jumped as high as $1,410.60, a record.
Ireland is seeking support from the European Union this week to avoid a Greek-style bailout as investors shunned buying the country’s bonds. Gold reached a previous record in June when investors were concerned that Greece would go bankrupt.
“Gold will benefit from any sovereign-debt fallout,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “Gold is going to continue to be bought on dips because no one believes the dollar can stage a significant rally.”
Last week the greenback dropped against a basket of major currencies to the lowest level since December after the U.S. Federal Reserve said it would buy $600 billion in bonds to support the economy.
“The debt load that countries are carrying makes people want to go into gold,” Zeman said.
Precious metals will benefit as China invests in more commodities, Klopfenstein said. The country has become the world’s biggest market for commodities-futures trading, Jiang Yang, the chairman assistant of the China Securities Regulatory Commission, said at a conference in Guangzhou on Saturday.
Silver futures for December delivery rose 68.4 cents, or 2.6 percent, to settle at $27.432 an ounce on the Comex.
In after-hours trading the price reached $27.735, the highest level for a most-active contract since March 1980.
Palladium futures for December delivery gained $25.50, or 3.7 percent, to $710.90 an ounce on the New York Mercantile Exchange. Earlier the metal reached $713.95, the highest level since April 2001. Platinum futures for January delivery rose $2.20, or 0.1 percent, to $1,771.10 an ounce.
'Resilient' tourism lifts outlook
First Hawaiian Bank economic adviser Leroy Laney says visitor arrivals are ahead of this year’s estimates and in 2012 could challenge the 7.5 million arrivals record achieved in 2006 and 2007.
The state’s tourism industry is recovering faster than expected, and visitor arrivals could approach record levels in 2012, according to one of Hawaii’s leading economists.
“Hawaii tourism has proven to be more resilient than most of us thought a year ago, and hopefully that will be the leading edge of economic growth as it spreads to other sectors of the local economy,” First Hawaiian Bank economic adviser Leroy Laney said yesterday at the bank’s 41st annual business outlook forum at Dole Cannery Ballroom.
Laney said visitor arrivals — as well as spending — are tracking ahead of this year’s estimates, and he expects arrivals to easily exceed his 2010 estimate of a 5.5 percent increase.
Through September, visitor arrivals were up 7.2 percent to 5,298,830, and expenditures were ahead 13.7 percent to nearly $8.4 billion, according to data released yesterday by the Hawaii Tourism Authority.
Laney said a 4.5 percent increase in arrivals next year would be “realistic” and bring the state above the 7 million threshold so that in 2012 it would be in position to challenge the 7.5 million arrivals record achieved in 2006 and 2007.
But as critical as tourism is to the state, a sustained recovery is dependent on a return to health of the construction industry as well, he said.
“The statewide construction picture still has a while to go,” Laney said. “The decline in construction coincided with the local recession and would have happened even if other blows had not occurred. But it was felt acutely, especially because construction had been such a major underpinning to our economy in the previous boom years.”
He said even though construction permits rose 14 percent in the second quarter from the year-ago period, the growth is uneven because Honolulu and the Big Island fared better than Maui and Kauai. Laney also said construction jobs continue to decline even though the pace has decelerated.
“The general picture that emerges here is that construction jobs still have a bit further to go before growth starts to turn the corner,” Laney said.
He said Hawaii is undergoing an “L-shaped recession,” and there is still some question “how steep a slope the bottom of that L will be.”
But he said key economic numbers are showing increases, and those that are falling are doing so at declining rates.
“That at least constitutes a recovery, something that was still a way off last year,” he said.
Laney said he expects job growth to edge up 1 percent next year from his estimated decline of 0.5 percent for 2010. He sees unemployment improving to 5 percent in 2011 from his 2010 estimate of 6.2 percent.
He expects inflation to rise 2 percent — the same as he estimates for 2010 — while he projects real, or inflation-adjusted, personal income to go up 1 percent next year from his no-growth estimate for 2010.
“For the last couple of years, I’ve been saying that 2010 would be a year of stabilization in the Hawaii economy, but it will likely be 2011 before sustained recovery sets in,” Laney said. “That projection has been borne out so far, so I have no reason to revise it now.”
Laney said the median prices of single-family homes are starting to rise in Honolulu after a two-year decline but that those on the neighbor islands are still falling. Overall, he said economic weakness has been concentrated more on the neighbor islands than in Honolulu, which is more diversified.
“Not only were the neighbor isles hit harder by the recession with their greater dependence on tourism and their lesser degree of diversification, the greater share of higher-end offshore second homes drags prices down there,” he said.
However, Laney said an overall trend toward more of a seller’s market in the state is favorable, and it eventually could bode well for the stimulation of construction.
“Led by its economic mainstay of tourism, Hawaii can look forward to better times in the future if we aren’t blindsided by other setbacks,” he said. “I couldn’t have said that last year or the year before.”
Richard Koo, chief economist of the Tokyo-based Nomura Research Institute, also spoke at the forum and said it’s important that the United States and other countries keep fiscal stimuli in place while the private sector is reducing its debt. Otherwise, he said, the economies will get weaker.
“You don’t cut fiscal stimulus when the private sector is sick,” Koo said. “Someone has to pick up the pieces and put money back into the income stream, and the only one who can do that … is the government.”
Mac nut producer sees net loss rise
Big Island-based ML Macadamia Orchards LP suffered a wider net loss in the third quarter over the same quarter last year due to lower nut production and effects from its purchase of another nut producer.
The state’s largest macadamia nut producer lost $308,000, or 4 cents a share, in the July-September period compared with a loss of $42,000, or 1 cent a share, in the same three months last year.
Much of the degraded financial results stemmed from a 14 percent decline in ML Macadamia’s third-quarter harvest, which totaled 5.4 million pounds of nuts. The company said drought conditions in its Kau orchards caused the drop.
Lower production translated to $4.1 million in nut sales in the quarter, down from $4.4 million a year earlier.
Revenue from work ML Macadamia performs for other orchard owners also declined in the quarter, falling 51 percent to $615,000 from $1.27 million.
The contract work was reduced largely because ML Macadamia acquired a company from which it previously derived farm service revenue.
Hawaii Real Estate Blog 