up soon. The Federal Reserve chief is mindful that unemployment remains high and the housing industry is still weak. The New York Federal Reserve President, William Dudley, indicated on Friday that helping to improve the economy’s growth rate is more on the minds of the Federal Reserve Board than the need to fight inflation. Right now there is no real threat of inflation, according to Dudley.
Posted on February 24, 2010 by IC N in Residential
There has been speculation that the Fed’s decision to raise the discount rate to .75% would also trigger a higher benchmark interest rate. Dudley said that the two are not connected. The discount rate was raised to “normalize” lending between banks.
Jobless Claims Are Falling
The Labor Department has posted a total of 440,000 initial jobless claims posted the week ending February 6, a drop of 43,000 from 483,000 posted the week before. This was a lower jobless total than economists had been expecting, according to Briefing.com.
There were 4,538,000 people already on the unemployment rolls who continued their claims in the week ending Jan. 30. That was a decline of 79,000 from the previous week. Economists were expecting continuing claims to have declined 2,000 to 4,600,000. The 4-week moving average of continuing claims was 4,603,500, which is 17,750 less than the preceding week’s revised average of 4,621,250. Of course, many of the claimants have dropped off the unemployment rolls because they moved into programs providing extended unemployment benefits, have stopped looking for work already, or are “under-employed” with part-time jobs instead of full-time.
Investors are Snapping Up Residential Lots
One of the next big movements in real estate investment is in residential lots. Throughout the west in particular are housing developments gone sour during the real estate crash that are now just waiting for a resurgence in the housing market to bring builders back to these abandoned projects.
Finished lots, while they are beginning to disappear fast, can still be found at 50 cents on the dollar. Larger projects are going to well funded investor groups at 30 cents on the dollar.
Investor groups are particularly looking at the Phoenix area and Southern California in expectation of the next big boom. It is estimated that there are 40,000 unfinished single family lots in Phoenix alone.
Keep in mind, however, that single lots of this kind are not good material for flipping. Investors who are into this market have money for a buy and hold strategy that will eventually mean doing off-book rolling options to home builders who are currently still money-strapped and unable to carry much inventory on their books.
Expect to hold these lots for 12 to 36 months and bank on the pent-up demand of 1.2 million new housing units needed in the next 10 years just to meet population growth.
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