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The Jana Caudill Team


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Experts: Housing Marking in Good Shape

by Jana Caudill


A top economist and market strategist at Citigroup both say they did not think the housing slowdown is going to cause the economy to plunge into a recession or the stock market to fall into a tailspin in 2007.

Speaking at a breakfast for financial reporters at the company's headquarters in New York in November, Citigroup senior economist Steven Wieting said that concerns about a recession due to softness in the housing market are overdone.

In fact, Wieting said that if the housing market had not cooled this year, that would have presented a greater risk to the economy since it most likely would have led to increased inflation and probably more interest rate hikes from the Federal Reserve.

"Without the housing downturn, the economy would be overheating and there would be more inflation and tightening pressures," he said.

Wieting indicated that perhaps too much attention is being paid to the housing market and that there would need to be more than just a real estate slowdown to cause widespread pain to the consumer. He pointed out that consumers have so far withstood weakness in housing as well as a steady rise in the price of oil and gas over the past few years.

"There is this perception of an extremely vulnerable consumer that you've heard about for every day of your career and so have I," he said, in response to one reporter's question about consumer spending. "Consumer stability is nothing new."

Tobias Levkovich, the chief U.S. equity strategist for Citigroup, added that as long as the labor market remains healthy, consumer sentiment will likely remain relatively strong as well.

"Job growth should support continued spending growth," he said.

With this in mind, Levkovich said he conservatively expects the stock market to be up in the high-single digits to low double-digits in 2007. He has a year-end 2007 target for the S&P 500 of 1,500, about 8 percent higher than current levels.

Levkovich said one of the most encouraging signs for investors is that many companies are sitting on a large amount of cash. He pointed to figures that showed cash as a percent of total market capitalization for the S&P 500 is near a 20-year high.

As such, many companies are likely to increase stock buyback programs, pay down debt and boost their dividends in order to keep shareholders happy. "There is a lot of cash at companies that can be used to stabilize stock prices," he said.

Levkovich also said that large cap stocks should outperform small caps because he thinks the pace of earnings growth is expected to moderate to about 7 percent in 2007. Larger stocks tend to perform better when earnings growth is slowing. In addition, valuations for large caps are currently more attractive than smaller companies.

As for specific sectors, Levkovich said media stocks, technology stocks and retailers should outperform the market in 2007 while real estate, basic materials and utilities should lag.

Wieting added that investors in some housing-related stocks, particularly appliance and furniture companies, may not be factoring in the lag effect of this year's housing slump. He argues that weakness in housing this year could translate to soft sales of some big-ticket items that people normally would buy for their new houses next year.

So this could be the one consumer-oriented area that does not do well in 2007, both Wieting and Levkovich said, especially since many housing-related stocks have run up recently on hopes that the worst is over for the real estate market.

For example, shares of furniture and home furnishings maker Leggett & Platt (Charts) are up 5 percent in the past three months while appliance manufacturer Whirlpool (Charts) has gained more than 9 percent. Shares of carpet maker Mohawk Industries (Charts) are up 12 percent.

Shares of retailer Bed Bath & Beyond (Charts) and tool maker Black & Decker (Charts) have each gained nearly 20 percent in the past three months and furnishings retailer Pier 1 Imports (Charts) have shot up almost 25 percent.

Levkovich and Wieting also cautioned investors to be wary of emerging markets stocks, which have been extremely hot this year. Latin American stock mutual funds have soared 34 percent this year according to fund tracking firm Morningstar,while Asia-Pacific mutual funds (excluding Japan) are up 36 percent.

Levkovich called the recent performance of emerging markets stocks "frightening" and reminiscent of the U.S. tech bubble in the late 1990s.

And Wieting argued that even though the economies of many Latin American and Asian countries are likely to remain hot, this can't go on indefinitely, which could disappoint investors with increasingly high expectations.

"Improving fundamentals in emerging markets may be perfectly sustainable but not easily repeatable," he said.

Mortgage Rates Drop... Lowest in 10 Months

by Jana Caudill

Courtesy: The Times of Northwest Indiana

Mortgage rates around the country fell this week, with rates on 30-year mortgages sinking to their lowest level in 10 months.

Freddie Mac, the mortgage company, reported Wednesday that 30-year, fixed-rate mortgages averaged 6.18 percent for the week ending Nov. 22. That's down from 6.24 percent last week and was the lowest rate since the week ending Jan. 26, when 30-year mortgage rates averaged 6.12 percent.

It marked the second week in a row that mortgage rates dropped, a development that economists attributed to easing inflation pressures. Inflation is calming down amid stabilizing energy prices, slower overall economic activity and the housing slump.

"Slower growth usually means less inflation and less inflation means lower interest rates. Hence, the drop in mortgage rates this week," said Frank Nothaft, Freddie Mac's chief economist.

After five years of booming activity, the housing market has lost its sizzle this year. Sales have fallen, home builders have cut back on construction and home prices have lost considerable altitude, falling in some markets or rising more slowly in others.

The housing slump was the major culprit behind the slower economic growth rate that was logged in the late summer.

All categories of mortgage rates surveyed by Freddie Mac showed declines this week -- offering some welcome news to those wanting to buy a home.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, averaged 5.91 percent. That's lower than last week's rate of 5.94 percent.

For one-year adjustable rate mortgages, rates fell to 5.49 percent, compared with 5.53 percent last week.

Five-year adjustable rate mortgages dropped to 5.99 percent this week, from 6.04 percent last week.

The mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages each carried a nationwide average fee of 0.5 point. One-year and five-year ARMs each carried a fee of 0.6 point.

A year ago, 30-year mortgages averaged 6.28 percent. Fifteen-year mortgages stood at 5.81 percent, one-year ARMs were at 5.14 percent and five-year ARMs averaged 5.75 percent.

Federal Assistance for Northwest Indiana Flood Victims

by Jana Caudill

Many homeowners in Northwest Indiana have had some major flooding problems over the last month. Today, President Bush declared Lake County a major disaster area. He ordered Federal aid to supplement State and local recovery efforts in the area struck by severe storms and flooding from September 12-14.

Assistance can include grants for temporary housing and home repairs, low-cost loans to cover uninsured property losses, and other programs to help people and business owners recover from the flooding.

Homeowners and business owners who sustained losses can apply for assistance starting tomorrow (October 11th) on-line at or by
calling 1-800-621-FEMA. The toll-free telephone number will operate from 8AM-6PM CT.

I posted some info on how to protect your home from a flood. Just visit and click "Just for Sellers."

Federal Assistance for Northwest Indiana Flood Victims

by Jana Caudill

Many homeowners in Northwest Indiana have had some major flooding problems over the last month. Today, President Bush declared Lake County a major disaster area. He ordered Federal aid to supplement State and local recovery efforts in the area struck by severe storms and flooding from September 12-14.

Assistance can include grants for temporary housing and home repairs, low-cost loans to cover uninsured property losses, and other programs to help people and business owners recover from the flooding.

Homeowners and business owners who sustained losses can apply for assistance starting tomorrow (October 11th) on-line at or by
calling 1-800-621-FEMA. The toll-free telephone number will operate from 8AM-6PM CT.

I posted some info on how to protect your home from a flood. Just visit and click "Just for Sellers."

Is the Real Estate Market in Bubble Trouble?

by Jana Caudill

From Yahoo! Real Estate

By Kendra Todd - September 26, 2006

You can't go anywhere without hearing people talk about "the real estate bubble." Such talk drives me to distraction, and I'll tell you why. It's because there is no real estate bubble. Bubbles are for bathtubs.

Despite a thousand articles in Sunday newspaper real estate sections, the bubble is a myth. The real estate markets in many areas are going through a normal correction cycle. I'm going to tell you how to recognize the signs of a correction in your market, how you can avoid getting sucked into "bubble trouble" and how you can even benefit from the current environment.

Pop Goes the Market?

A bubble is a market in which the value of the key asset is inflated based on speculation and psychology. Because of this, true bubble markets can burst overnight when something happens to shatter the perception of value. That's why the Internet boom of the late 1990s was a true bubble; people suddenly realized that ninety percent of the dotcoms were companies with no way to make money. Talking about a bubble implies a sudden burst, and real estate does not work that way. You don't go to sleep one night with your house worth half a million dollars and wake up to find it's lost half its value. Also, the real estate market is a regional phenomenon based on all kinds of factors: migration to or from an area, job growth and local economies. So while there is no bubble, there are areas in the U.S. that are experiencing corrections that will continue over the next six to 24 months. There are also markets that will appreciate over that same period. The trick is keeping your cool and taking advantage of the opportunities.

A Bubble is a Matter of Perception

Take the Southern California real estate market. It's reached a median price of well over half a million dollars after three years of 30, 40, and 50 percent appreciation. That's unsustainable. There are not enough people with the income to keep buying homes in that market now that the Federal Reserve has raised interest rates. Before, buyers could slip into a $500,000 home with a 5.25% mortgage, but the cost of money has gone up, so those people can't buy.

The result? The L.A. metro market is coming back to a more realistic level where homes appreciate more slowly and sell for less. This is where perception comes in. If you haven't gotten the memo that the market is changing, this will appear like a reason for panic. If you're still thinking you can buy a house, hold it for a year and "flip" it for a 30% profit, you're in for a reality check. But if you can spot the signs in your area that the market is slowing, you can stay calm and even profit.

Signs of a correcting market:

  • More inventory on the market.
  • Houses stay on the market longer.
  • Sellers are forced to drop their prices, often multiple times.


Real estate is cyclical, and the cycles last for years. It's a mistake to react based on what has happened in the last six months. Speculation throws everything out of whack because it's a short-term strategy. Real estate investing must be for the long term.

The Hot Markets

Because real estate is regional there are many "secondary markets" that remain promising. These are usually smaller cities with attractive lifestyles or "feeder" cities that serve larger, overpriced metro areas:


These areas are still affordable, which makes them very attractive. They have healthy economies and are good opportunities to get into now. That's the question you should ask as an investor: "What markets should I be getting out of, and what markets should I be getting into?" Even when the hottest markets are in correction mode, there are always high-value markets for the smart investor, as long as you look at price point and the potential for appreciation.

Stay Cool for the Long Haul

The most important thing you can do in this real estate environment is avoid panic selling. Real estate is not like the stock market. It's like a drive through the Rocky Mountains. You will have rises and dips. Hold tight and wait it out, especially if you live in a market that has strong fundamentals, like lots of people still moving to the area. Over the long term, the value in real estate will stabilize and you'll profit. Now is not the time to sell. But it is a great time to buy.

Is the Northwest Indiana Real Estate Market Slipping? You Decide...

by Jana Caudill

As I'm sure you've seen in newspapers and on TV, the national real estate market is falling in 2006. The national average of home sales is down, so people always ask me, "How is the Northwest Indiana real estate market doing?" It's an easy answer... great!

It's important to remember that real estate is a local market driven by local conditions. You also need to remember that if the national AVERAGE is down, that means that some areas must still be doing well... that includes Northwest Indiana.

More homes will be sold in Northwest Indiana this year than ever before. And in most communities, sellers are getting more for their home than in 2004 and 2005. Here is a look at how some major Northwest Indiana communites are doing.

KEY: HS: Homes Sold; DOM: Days on the Market; ASP: Average Sales Price

Community 2004 HS 2004 DOM 2004 ASP 2005 HS 2005 DOM 2005 ASP 2006 HS 2006 DOM 2006 ASP
Hammond* 420 73 $79,874 449 72 $84,479 528 70 $81,124
Griffith 123 63 $126,171 153 60 $131,610 157 65 $132,521
Highland 167 57 $142,966 226 63 $148,435 247 70 $142,023
Munster 222 78 $230,476 215 79 $232,871 230 74 $238,615
Dyer 143 67 $204,581 185 73 $206,951 179 74 $230,617
Schererville 380 72 $187,678 405 67 $203,709 410 76 $217,351
St. John 108 94 $212,313 122 76 $257,327 135 85 $291,186
Cedar Lake 139 86 $132,843 123 98 $159,145 168 76 $181,789
Crown Point 385 75 $165,718 448 72 $181,271 430 70 $192,965
Winfield** 91 95 $211,179 146 99 $227,363 81 134 $244,826
LOFS** 110 95 $154,543 166 83 $159,385 122 88 $189,465
Merrillville 439 72 $114,644 379 77 $119,222 479 59 $122,570
Hobart 357 87 $122,519 367 79 $129,997 406 81 $136,351
Valparaiso 492 85 $176,420 528 79 $189,392 486 81 $192,504

Data is from GNIAR MLS: January 1-September 20 of 2004, 2005 & 2006.

*Hammond includes MLS Areas: Hammond North & Hammond South

**LOFS: Lakes of the Four Seasons (not included in Winfield Township information)

What does this mean? In most markets the Days on the Market is about the same (give or take a few days). The only market with a huge increase in DOM is Winfield, but home values are continuing to rise. Only two markets, Hammond and Highland, saw a decrease in home values from 2005 to 2006. And both Merrillville and Cedar Lake are seeing a decrease in days on the market... homes are selling faster in those two communities than in 2004 and 2005.

Bottom line... if you're thinking about selling your home two things ring true: 1) YOUR HOME MUST BE PRICED RIGHT! When you overprice, you miss your buyer. 2) YOUR HOME MUST BE MARKETED CORRECTLY! You need to find ways to make your home stand out from all the other homes on the market. I know my team does both of those well, call or email me anytime and we'll be happy to help you get your home sold!

Indiana city leads the nation in housing affordability

by Jana Caudill
Most affordable housing markets
Midwest cities lead the nation in housing affordability, according to an index by the National Association of Home Builders and Wells Fargo.

Story from - August 22, 2006

When it comes to affordable housing, no region can top the Midwest: Nine of the top ten of the nation's most affordable housing markets are there, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index.

The report said that affordability suffered just a little during the second quarter of 2006, as housing prices stayed about the same but mortgage rates ticked up.

Indianapolis has retained its status as the most affordable large city in the United States for home buyers and Springfield, Ohio was No. 1 when smaller cities were included in the rankings.

About 40 percent of homes in the United States were deemed affordable to families earning the national median income of $59,600. That was down from 41.3 percent in the first quarter.

The index tries to capture a snapshot of affordability by calculating housing expenses and comparing them to income. Housing expenses include property taxes and insurance as well as the mortgage payment. The formula calls for all that to be no more than 28 percent of income.

The final index number is the percentage of homes sold during the quarter that families earning the median income could afford to buy.

In Indianapolis, 87.4 percent of all the homes sold there during the second quarter were affordable to anyone earning metro area's median household income, $65,100. The median price for a home was $120,000.

Contrast that with the Los Angeles /Long Beach/Glendale housing market, the nation's least affordable, where just 2 percent of all the homes sold during the quarter were affordable for those earning the median family income of $56,200. The median home in Los Angeles costs $521,000.

Other major metro areas suffering severe affordability problems were Santa Ana/Anaheim and San Diego, in California, and the New York metro area.

Smaller unaffordable metro areas include Salinas, Merced and Modesto, all Golden State cities.

The most affordable markets were located mostly in the Midwest. Detroit/Livonia/Dearborn, Michigan; Grand Rapids/Wyoming, Michigan and Buffalo/Niagara Falls, New York led the way.

Natural gas prices head up

by Jana Caudill

From The Times of Northwest Indiana
September 6, 2006

Natural gas prices for utility customers are again headed up, but predictions are they will be less severe than last year, when two Gulf Coast hurricanes blew prices up.

NIPSCO on Tuesday announced the natural gas supply portion of a customer's bill will increase 15.5 percent in September. A typical customer using 50 therms of natural gas can expect an increase of $7.22 from his or her August bill.

Nicor customers in Illinois will see an increase of about 18 percent in their September bills.

NIPSCO has 712,000 natural gas customers in northern Indiana, and Nicor has more than 2 million customers in Illinois.

Some very hot weeks this summer drove up consumption of natural gas by gas-fired electric generation plants, according to Jim Deering, president of Nordic Energy Services LLC, of Willowbrook, Ill. That drove up demand and caused some gas in storage to be withdrawn, driving up prices.

Still, last year at this time, utility customers were paying almost double what they are now for natural gas.

"Historically, it's still pretty high, but it's significantly below where it was last year," Deering said.

Nordic provides energy management services for more than 500 industrial and commercial facilities with annual energy requirements of $150 million. It is an approved supplier for Nicor Customer Select and NIPSCO Choice programs.

Prices for utility customers spiked in September and October of last year, when Hurricanes Katrina and Rita knocked out a good portion of natural gas production in the Gulf of Mexico. Prices fell through the winter and were stable for most of the summer.

Going into this fall, natural gas in storage in the United States is running about 12 percent higher than the average for the past five years, according to the U.S. Energy Information Agency.

That ample storage should keep prices stable, according to the agency's most recent short-term outlook. The agency predicts natural gas prices will actually drop about 3 percent in 2007 as compared to 2006.

Wild cards like hurricanes and the face-off between Iran and the United Nations over Iran's nuclear ambitions could still cause dramatic swings in prices, Deering said. But overall, the ample storage situation bodes well for consumers.

Energy consumers also are getting more savvy about conservation and hedging energy prices, which is also helping smooth out price shocks, Deering said.

Local utility companies like NIPSCO and the Energy Information Agency will be making detailed winter energy forecasts in October, which will give a more exact picture of where prices are heading.

Mortgage rates dip to lowest level since early April

by Jana Caudill

From The Times of Northwest Indiana - September 1, 2006

WASHINGTON -- Rates on 30-year mortgages fell for a sixth consecutive week, providing home buyers with more relief from an earlier rise in rates.

Mortgage giant Freddie Mac said Thursday that 30-year, fixed-rate mortgages dipped to 6.44 percent this week, down from 6.48 percent last week.

That was the lowest level for 30-year mortgages since they averaged 6.43 percent the first week in April.

Mortgage rates hit a four-year high of 6.80 percent the week of July 20, before beginning a sustained decline as financial markets became more convinced that a slowing economy would keep inflation under control.

"Mortgage rates continued to drift lower this week in large part because of the cooling in the housing market and in consumer confidence, thus giving financial markets reason to believe that economic growth will moderate and inflation will remain in check," said Frank Nothaft, chief economist at Freddie Mac.

Sales of both new and existing homes set records for five consecutive years through 2005 as buyers reacted to the lowest mortgage rates in more than four decades.

But sales activity has slowed this year with many analysts forecasting a decline in both new and existing home sales of around 10 percent.

The Federal Reserve at its last meeting on Aug. 8 left interest rates unchanged, breaking a two-year period of rate increases. Many private economists believe the central bank may be finished raising rates as long as inflation pressures remain reasonable.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, averaged 6.14 percent this week, down from 6.18 percent last week.

For one-year adjustable-rate mortgages, rates dipped to 5.59 percent, down from 5.60 percent last week.

Rates on five-year adjustable-rate mortgages fell to 6.11 percent this week, down from 6.14 percent last week.

The mortgage rates do not include add-on fees known as points. Thirty-year mortgages and 15-year mortgages both carried a nationwide average fee of 0.4 point. One-year ARMS carried a nationwide average fee of 0.7 point while five-year ARMs carried a fee of 0.5 point.

A year ago, 30-year mortgages averaged 5.71 percent, 15-year mortgages stood at 5.32 percent, one-year ARMs were at 4.48 percent and five-year ARMs averaged 5.30 percent.

NWI Home Sales Continue to Climb

by Jana Caudill
From the Times of Northwest Indiana - August 24, 2006

Bucking the trend seen in Northwest Indiana, house hunters across the United States shied away from buying in July, driving down sales of previously owned homes to a 2.5-year low. The inventory of unsold homes climbed to a record high.

The figures released Wednesday provided fresh evidence of how much the once-sizzling housing market has cooled.

Prospective home buyers have turned cautious about making such a big-ticket purchase as mortgage rates have gone up and uncertainty has risen over whether the economy and job creation will keep slowing, analysts said.

Existing-home sales dropped 4.1 percent in July from the previous month to a seasonally adjusted annual rate of 6.33 million units, the National Association of Realtors reported. That was the lowest level since January 2004.

In Northwest Indiana, sales of new and existing homes jumped by 5 percent from a year ago, to hit 755 in Lake and Porter counties combined, according to information from the Greater Northwest Indiana Association of Realtors.

That could put the region on track for another record year, topping previous high marks set in 2004 and 2005, GNIAR President Nancy Smith said.

"Seven months into it," Smith said, "we're still ahead of last year," when a total 7,942 homes were sold across Northwest Indiana.

Nationally, however, the latest snapshot of housing activity was weaker than analysts anticipated; they were forecasting a sales pace of 6.55 million.

On Wall Street, the housing report rattled investors and pushed stocks lower. The Dow Jones industrials lost 41.94 points to close at 11,297.90.

Although sale prices for homes are no longer bounding ahead, some prospective buyers are still waiting for better deals, just one more factor in the weak showing, economists said.

"Many potential home buyers have been on the sidelines, some kicking the tires but mostly waiting for sellers to compromise on prices and terms," said David Lereah, the association's chief economist.

The median nationwide price of a home sold last month was $230,000, up just 0.9 percent from the same month last year. The median price is the middle point, where half sell for more and half sell for less.

Meanwhile, the inventory of unsold homes in July rose to a record high of 3.86 million. At the current sales pace, it would take 7.3 months to exhaust that overhang. That is the longest period to exhaust the supply of homes since the spring of 1993.

By region, sales tumbled 6.4 percent in the West in July from the previous month. Sales fell 5.9 percent in the Midwest and 5.4 percent in the Northeast. In the South, sales dipped 1.2 percent.

Wednesday's report shows that the bloom is off the rose.

For five years running, home sales had hit record highs as low mortgage rates lured buyers. But the housing sector has lost steam this year as mortgage rates have gone up and would-be buyers have grown cautious amid high energy prices and a slowing economy.

Against that backdrop, the Federal Reserve this month decided to halt a rate-raising campaign that had pushed interest rates steadily higher over the last two-plus years to fend off inflation.

Displaying blog entries 171-180 of 181