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Real Estate Market Commentary - March 2010
by Peter L. Zachary, MAI, MRICS

On Sunday, February 21, 2010, the New York Post has an article, "New Credit Card Rules Set to Bow". The article states: "New federal protections for America's 165 million credit-card holders kick in tomorrow. Starting tomorrow, card-holders will find some relief on rates, fees, billing and payment practices when the second stage of the 2009 CARD Act takes effect. Key changes include:

  • Customers get 45 days notice before interest-rate increases or other major changes.
  • Rate hikes generally apply only to new charges, not the entire balance.
  • Before scoring some plastic, consumers under 21 must demonstrate an ability to repay their debts or have co-signers on their accounts.
  • Payments are applied first to highest-interest-rate balances.
  • A consumer's monthly bill will spell out how long it will take to pay off the balance if only minimum payments are made.

Yet the new provisions don't limit interest rates to 20 percent and late fees to $35. The Consumer Federation of America (GFA) recommends consumers pay their monthly credit-card bills on time - avoiding the penalty of late fees and higher interest rates. In addition, consumers should look out for:

  • Interest-rate hikes. Average interest rates have jumped to about 20 percent from 17 percent, according to David Roberston, publisher of The Nilson Report, which tracks credit-card trends.
  • Annual fees. David Bach, author of "Start Late, Finish Rich," expects annual fees of $50 to $100.
  • Fees for not spending enough or using a card infrequently. Mike Moebs, CEO of economic research firm Moebs Services, expects inactive fees of $5 a month
  • Shorter grace periods before payments are due.

In my opinion, if possible, mail a check to the credit card company within 5 days of receipt of the bill. Only one of my credit card companies had a section on their statement saying how long it would take to pay off the credit card by paying the monthly payment. It was 22 years and if you pay 3 times the monthly minimum, you will pay off your debt in 3 years.

The website Consumerism stated on November 12, 2009, "Federal Reserve issues new rules on overdraft fees." The website stated: "With Congress threatening to create new consumer protection agencies to protect the public from customer-unfriendly banking practices, the Federal Reserve stepped in to prove it is still relevant and involved with banking regulations. The Federal Reserve announced that as of July 1, 2010, for new bank accounts or August 15, 2010 for existing bank accounts, banks must have received permission from the customers for charging overdraft fees. Overdraft protection will only be an "opt-in" service for debit or ATM cards. If your overdrafts are covered by a linked savings account or credit card, you can still be charged a fee. Usually these fees are lower such as $5 rather than $35. However, if a customer writes a regular check that creates an overdraft, when cashed, the bank is still free to charge an overdraft fee without the account holder's permission. Banks that argue that this overdraft coverage is a benefit that customers want and don't mind paying the fee. Customers would rather have their rent or utility check go through if it costs $35 to cover the overdraft than to have their checks bounce. To prevent overdraft fees, always have a $500 "cushion" in your checking account.

On Sunday, February 21, 2010, the New York Times article on its front page was "Despite Signs of Recovery, Chronic Joblessness Rises - The Unemployed Face Years Without Jobs, Exhausting Savings and Benefits". It states:

"Even as the American economy shows tentative signs of a rebound, the human toll of the recession continues to mount, with millions of Americans remaining out of work, out of savings and nearing the end of their unemployment benefits. Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.

Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives - potentially for years to come. Yet the social safety net is already showing severe strains. Roughly 2.7 million jobless people will lose their unemployment check before the end of April unless Congress approves the Obama administration's proposal to extend the payments, according to the Labor Department.

Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces - some embedded in the modern-day economy, others unique to this wrenching recession - might make it especially difficult for those out of work to find their way back to their middle-class lives.

Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years. Some labor experts say the basic functioning of the American economy has changed in ways that make jobs scarce.

Large companies are increasingly owned by institutional investors who crave swift profits, a feat often achieved by cutting payroll. The declining influence of unions has made it easier for employers to shift work to part-time and temporary employees. Factory workers and even white-collar jobs have moved, in recent years, to low-cost countries in Asia and Latin America. Automation has helped manufacturing cut 5.6 million jobs since 2000 - the sort of jobs that once provided lower-skilled workers with middle-class paychecks.

During periods of American economic expansion in the 1950s, '60s and '70s, the number of private-sector jobs increased about 3.5 percent a year, according to an analysis of Labor Department data by Lakshman Achuthan, managing director of the Economic Cycle Research Institute, a research firm. During the expansions in the 1980s and '90s, jobs grew just 2.4 percent annually. And during the last decade, job growth fell to 0.9 percent annually.

'The pace of job growth has been getting weaker in each expansion,' Mr. Achuthan said. 'There is no indication that this pattern is about to change.' Before 1990, it took an average of 21 months for the economy to regain the jobs shed during a recession, according to an analysis of Labor Department data by the National Employment Law Project and the Economic Policy Institute, a labor-oriented research group in Washington. After the recessions in 1990 and in 2001, 31 and 46 months passed before employment returned to its previous peaks. The economy was growing, but companies remained conservative in their hiring.

Traditionally, three sectors have led the way out of recession: automobiles, home building and banking. But auto companies have been shrinking because strapped households have less buying power. Home building is limited by fears about a glut of foreclosed properties. Banking is expanding, but this seems largely a function of government support that is being withdrawn. At the same time, the continued bite of the financial crisis has crimped the flow of money to small businesses and new ventures, which tend to be major sources of new jobs."

Need I say, the situation seems hopeless. No automobile, no homebuilding and no banking. President Obama and our entire government has failed the American people.

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