^[1]
RISMEDIA, July 23, 2010—(MCT)—With a broad smile and the stroke of a
pen, President Barack Obama capped a contentious 18-month struggle and
signed into law the broadest revamp of financial regulation since the
Great Depression.

“Passing this bill was no easy task. To get there, we had to overcome
the furious lobbying of an array of powerful interest groups and a
partisan minority determined to block change,” Obama said in a
pre-signing speech, surrounded by cheering congressional leaders and
administration members.

Alternating between hitting Wall Street and acknowledging its economic
importance, the president said that the historic Restoring American
Financial Stability Act of 2010 seeks to strike a balance that would
protect consumers while allowing the vital financial sector to prosper.

“The fact is the financial industry is central to our nation’s ability
to grow, to prosper, to compete and to innovate. This reform will foster
innovation, not hamper it. It is designed to make sure everybody follows
the same set of rules,” he said. “Unless your business model depends on
cutting corners or bilking customers, you’ve got nothing to fear from
reform.”

The signing marked the third major legislative accomplishment for Obama,
after an $800 billion stimulus and tax-cut package and a regulatory
revamp of the health care sector. Still, the president has slumped in
the opinion polls, dragged down by a sluggish economy. Polls also
suggest that the broader public is ambivalent about the new measure.

To combat that, Obama and congressional Democrats went to extremes to
highlight all the consumer provisions in the legislation. There are
numerous measures to combat predatory lending, and the president invited
borrower Robin Fox of Rome, Ga., to the speech. She’d been hit with
unexpected interest rate increases on a credit card balance. “With this
law, unfair rate hikes, like the one that hit Robin, will end for good,”
Obama said.

Underscoring the historic nature of the legislation, which updates many
rules that date to the 1930s, the televised signing ceremony wasn’t at
the White House but at the Ronald Reagan Building, in a large auditorium
where about 400 invited guests could bask in the accomplishment.

The legislation seeks to fix much of what went wrong in the lead-up to
the nation’s deep financial crisis. It gives regulators the power to
dissolve large, interconnected financial institutions and allows the
Federal Reserve to break up companies that it thinks are so large that
their failure would pose a risk to the U.S. and global economy.

The lack of this authority forced the Bush administration and a
Democratic-led Congress to choose unpopular bank bailouts over a
disruptive bankruptcy process that Fed Chairman Ben Bernanke warned
could have led to a global economic depression.

“The bill isn’t perfect, since it represents what was politically
achievable in an election year. But it sets some important starting
points for more detailed work in areas where oversight has been lacking,
such as viewing risk from a systemic point of view and increased
consumer protection,” said Scott McCleskey, the author of the new book
When Free Markets Fail, which seeks to explain the crisis in layman’s
terms. “In the end, though, the crisis made abundantly clear the fact
that we need more regulation because the markets have become too complex
to regulate themselves.”

For ordinary Americans, the legislation will be felt most directly
through the creation of a new and independent Bureau of Consumer
Financial Protection. It will police credit extended to consumers, be it
mortgages, credit cards, student loans, auto loans or even payday loans.

“For the first time, families will have a tough, independent cop in
Washington to help clear out the tricks and traps hidden in consumer
credit agreements,” Elizabeth Warren, a Harvard University professor
who’s credited with developing the idea of the bureau, said in a statement.

Gail Hillebrand, a senior attorney for the advocacy group Consumers
Union, added that “millions of Americans have been hit by shady loans,
hidden fees and surprise rate increases, and this Consumer Financial
Protection Bureau will take dead aim at these kinds of problems.”

Business groups frowned on the new law. “This legislation, while drafted
with the best intentions, paints the U.S. business community with a
broad brush and will have many unintended consequences for the more than
12,000 nonfinancial publicly traded companies,” Larry Burton, the
executive director of the Business Roundtable, said in a statement.

The U.S. Chamber of Commerce, which aggressively lobbied against the
legislation, didn’t pull punches in its statement upon signing. “Such a
broad, sweeping bill epitomizes a law with unintended consequences that
creates more uncertainty for American businesses,” said Thomas J.
Donohue, the chamber’s president and CEO. “For years the chamber has
called for reform that modernizes our financial system. Yet this law is
like adding new paint on an old car; it’s still not going to run at the
pace and with the agility that is currently demanded.”

Regulators will sit together on a special council to collectively study
risks to the broader financial system. They’ll be empowered to order
that banks keep more capital on hand to guard against future losses, and
they’ll have knowledge that they didn’t have before about the complex
financial instruments called over-the-counter derivatives. The size of
the market for these private bets between parties is valued in the
trillions of dollars, yet these deals largely have been hidden from
regulators.

Now, most trading in these complex instruments will be done on public
exchanges or clearinghouses, and regulators will have the authority to
limit a financial player’s overall holdings in contracts for oil,
natural gas, wheat or other commodities if it appears that anyone is
seizing so much of the market that prices could be manipulated.

“It gives us the transparency, tools and teeth we need to better
regulate the markets we already oversee and to bring light to the more
than $600 trillion over-the-counter markets which are currently
unregulated,” said Bart Chilton, a commissioner on the Commodity Futures
Trading Commission (CFTC). “Many key items will be decided in the near
future: How do we actually oversee and regulate the OTC markets? How do
we implement position limits? And how are we going to use some of these
new professional-grade regulatory tools to police these markets? For
example, CFTC has had only one successful manipulation prosecution in 35
years. The law was broken but the bill gives us new authority to go
after disruptive trading practices.”

(c) 2010, McClatchy-Tribune Information Services.

–
Bojana (Bo) Foster, Broker
Voted Best Agent 2006 ~ 2009 in the Best of Nisqually
Signature Service Real Estate, Rainier
360 446-4646 ext 11
Bo@SignatureService.com
www.SignatureService.com

“…Buy Land. They’ve stopped making it”.
Mark Twain

The Pending Home Sales Index, a forward-looking indicator, dropped 30%
to 77.6 based on contracts signed in May 2010 from a reading of 110.9 in
April, and is 15.9% below May 2009 when it was 92.3. The falloff comes
on the heels of three strong monthly gains as home buyers rushed to take
advantage of the tax credit.

The data reflects contracts and not closings, which normally occur with
a lag time of one or two months. However, many closings have been
delayed recently from a rush of buyers into the system and slow
processing of short sales, in addition to the heavy volume and a more
thorough loan underwriting process. As many as 180,000 buyers who signed
contracts by April 30 may have missed the June 30 closing deadline for
the tax credit. However, Congress passed legislation recently to extend
the deadline for delayed contracts and President Obama is expected to sign.

NAR chief economist Lawrence Yun said, “Consumers are rational and they
rushed to meet the tax credit eligibility deadline in April. The sharp
decline in contract signings in May is a natural result with similar low
levels of sales activity anticipated in June,” he said. “Surprisingly,
though, some local markets such as Portland, Maine and Jacksonville,
Fla., actually experienced an increase in contract signings from a year
ago without the tax credit. Existing-home sales that close in June will
remain elevated, but we’ll then see a notable decline for July and August.”

Congress also reauthorized the National Flood Insurance Program. Many
lenders were hesitant to approve mortgages on homes needing flood
insurance without congressional action and numerous sales have been on
hold. The action is retroactive to a temporary authorization that
expired May 31, and also is expected to be signed by the president.

Yun noted the tax credit has broadly stabilized home prices. “Without
the tax credit, there will be more aggressive price negotiations between
buyers and sellers. The key test on whether the housing market can stand
on its own without stimulus medicine will depend critically on private
sector job creation in the second half of the year. We’ll also keep a
close eye on market conditions on the Gulf Coast.”

Through May of this year, 495,000 net private sector jobs have been
created; NAR’s forecast for employment growth is about 1 million
additional net new jobs over the balance of the year and another 2
million in 2011.

“If jobs come back as expected, the pace of home sales should pick up
later this year and reach a sustainable level of activity given very
favorable affordability conditions,” Yun said.

“In most areas of the country, there will be no sharp snap back in home
prices in the upcoming years, although some local markets have
experienced double-digit gains this year,” Yun said. NAR forecasts the
national median home price to rise only 4% cumulatively over the next
two years.

“One factor that could lead to price acceleration in upcoming years for
some markets is if the very low levels of new home construction were to
persist for another year or two,” he added.

The PHSI in the Northeast fell 31.6% to 67.0 in May and is 14.8% lower
than May 2009. In the Midwest the index dropped 32.1% to 70.8 and is
20.2% below a year ago. Pending home sales in the South fell 33.3% to an
index of 82.5, and are 14.4% lower than May 2009. In the West the index
declined 20.9% to 85.3 and is 15.1% below a year ago.

For more information, visit www.realtor.org ^[2] .

Based on activity among its member institutions, the Federal Reserve has released its predictions on which parts of the country are likely to see a rise, or a drop, in business.

The predictions come out of the Fed’s “Beige Book” breakdown of economic conditions in the 12 Federal Reserve Bank districts marked by cities. When the economic conditions show signs of increase, that’s usually followed by an increase in jobs.

Some highlights from the report:

*The New York, Cleveland, Kansas City, MO, and San Francisco regions are showing “signs of stabilization.”
*Chicago and St. Louis reported that the pace of economic decline appeared to be “moderating.”
*Boston, Philadelphia, Richmond, Atlanta and Dallas described activity as “slow,” “subdued” or “weak.”
*Minneapolis was the only region that indicated its downward slide in economic activity had worsened.

That’s the overall picture. The Fed also breaks down activity in economic sectors. For instance:

*Boston, Kansas City and San Francisco reported retail activity described as “modest increases or less negative.”
*Philadelphia, Atlanta, St. Louis, New York and Dallas regions reported “flat or mixed sales.” The remaining Fed regions described retail sales as “soft.”
*Auto sales were mixed; travel and tourism was down almost across the board.
*For manufacturing, Richmond, Chicago and Kansas City showed some improvement. St. Louis and Dallas said the rate of decline in factory activity is moderating. The Philadelphia and Minneapolis regions saw manufacturing activity drop, while the rest of the regions described activity at “low levels.”
*Residential real estate remained “soft” in most Fed regions, and commercial real estate dropped.

In a related story, the U.S. Department of Labor issued its report on what it calls the Employment Cost Index – essentially, the rise or fall in what it costs employers to provide wages and benefits.

DOL’s statistics for the 2nd quarter of ’09 show a rise of 0.3%, about the same as the figure for the 1st quarter. That measurement nearly matches the 0.2% figure estimated by economic forecaster Global Insight.

At least for now, the economies, and business, in these five cities and their surrounding areas don’t appear to be rebounding, especially in one market that saw its worst decline ever.

Standard & Poor’s Case-Shiller Index shows that the slide in housing prices eased in most markets in February and March – and that’s good news. The index and data from the National Association of Realtors painted a different picture for five major markets in the United States, indicating that business in general in those markets is still seeking a bottom before rebounding.

The five down-trending markets:

Detroit
Housing prices fell 4.9% in Detroit in March, according to the latest figures in the Case-Shiller Index. That marked the city’s largest monthly decline since January 1991, when S&P’s began data collection. Houses in Detroit are selling at about what they cost in 1995, and could go lower.

New York City
In March, the Big Apple saw its largest-ever monthly decline, at 2.5%. The interesting part of the trend is that until March, the city had avoided the steep decline in prices that afflicted many other metro areas. Then the bottom fell – and it appears it’ll keep falling.

Economists speculate that the layoffs and reorganizations in the financial markets are just beginning to have a long-lasting effect on New York.

Phoenix
Homeowners in Phoenix, dizzy from a 53% drop in prices from their peak in June 2006, are likely to see further declines, as shown in March, when prices  fell 4.5%.

Phoenix is the poster city for rampant Sunbelt overbuilding that took place in the last 10 years. The hope is that such cities are still attractive to those looking to make a move when the economy picks up. The reality is that the city hasn’t reached that point yet.

Portland, OR
The Pacific Northwest remains a desirable place to live, witnessed by the fact that Portland’s home prices are above the national average. That market may be threatened, however, as prices fell 2.1% in March. (Home prices in Seattle were down 2.0%.)

The culprit: a lagging local job market. Portland’s unemployment rate was 11.6% in April, well above the national average of 8.9% for the month.

Minneapolis
The dubious “winner” in the worst-market sweepstakes was Minneapolis, where prices fell 6.1% in March, the largest monthly decline of any metro area since data tracking began in 1987.

What fueled the drop: More than half of all March home sales in Minneapolis were due to foreclosures, mostly “short sales,” according to the Federal Reserve Board. When a lot of houses get sold for less than what the seller originally paid, the indicators are bad for housing and economic prospects in general.

One expert, Dennis Torres, of Pepperdine University Real Estate, attributes much of the difficulties to his “four horseman” theory. He suggests that the main destructive trends causing the housing market decline are based off high consumerism debt, rising unemployment, the collapse of the sub prime loan, and the coming inflation.

In 2005, he delivered the news of these worrying developments during a conference at Pepperdine University. At the time Mr. Torres was met with skepticism. His dire warnings were dismissed in favor of unwarranted optimism and the belief that there would be a “soft landing” with only slight impact on the market. Unfortunately, with 3.2 million foreclosure settlements filed in 2008, much of what he spoke has come to pass.

Now, Mr Torres is projecting that inflation will take hold over the upcoming two years and that this will naturally impact the property market. He suggests that prudent buying at this time could generate great long term benefits to both personal finances and also the general economic well being of the country. This could be very good advice.

As inflation takes hold and the value of property begins to rise, there could be many opportunities for the smart investor. Some buyers would be deterred by the rising prices and others will rush to purchase when the prices of houses are already appreciating. But the astute buyers will be buying soon and in anticipation of the effects of inflation.

Overall the trend will be of benefit Home owners would enjoy seeing the prices of their homes go up, and sellers will be making more of a profit. This may not completely stabilize the market but, in a time rampant with foreclosures and short sales, this rise will at least give some relief.