Chester County residents to see tax increase in U-CF

Residents in the Unionville-Chadds Ford School District will see an increase in next year’s tax bills in Chester County, while Delaware County residents will see a slight decrease. The administration presented a preliminary budget for the 2012-13 tax year which will set spending at $71.6 million. That figure means an increase in millage rates of 3.87 for Chester County residents and an 0.60 percent decrease for Delaware county residents. A mill is a tax of $1 for every $1,000 of assessed real estate value. In Chester County, the millage rate goes up from 24.68 mills to 25.48, a 3.87 percent increase over 2011-12 rates. In Delaware County, the millage rate drops from 21.82 mills to 21.69 mills. The preliminary budget is scheduled for adoption at the Jan. 23 school board business meeting.

Source: Daily Times; 12/14/2011

U.S. Stocks Gain on U.S. Economic Data

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Traders work on the floor of the New York Stock Exchange on December 12, 2011. Photographer: Spencer Platt/Getty Images

U.S. stocks rose, snapping a three- day decline in the Standard & Poor’s 500 Index (SPX), as data on jobless claims and manufacturing signaling a strengthening economy overshadowed concern over Europe’s debt crisis.

FedEx Corp. (FDX) jumped 6.7 percent after earnings beat analysts’ estimates. JPMorgan Chase & Co. (JPM) advanced 1.2 percent as financial stocks gained after Spain sold more debt than it had planned. Novellus Systems Inc. (NVLS) surged 21 percent as Lam Research Corp. (LRCX) agreed to acquire the company. First Solar Inc. (FSLR), the world’s largest maker of thin-film solar panels, led a decline in technology stocks, dropping 4.8 percent.

The S&P 500 gained 0.6 percent to 1,218.83 at 12:11 p.m. New York time, after rising as much as 1.1 percent earlier. The benchmark index for American equities fell 3.5 percent over the previous three days. The Dow Jones Industrial Average added 72.20 points, or 0.6 percent, to 11,895.68 today.

“We do have better economic numbers in the U.S.,” Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut, said in a telephone interview. “At the end of the day, macro economic news domestically is more important to company valuations than what’s going on internationally.”

Stocks fell yesterday as growing funding stress in the euro area fueled concern that the region is struggling to contain its sovereign-debt crisis. IMF Managing Director Christine Lagarde said at an event in Washington today that the “crisis is not only unfolding, but escalating” and cannot be resolved by one group of countries.

Jobless Claims

Stocks rallied earlier after data on jobless claims and manufacturing signaled a strengthening U.S. economy and Spain sold almost twice as much debt as targeted at an auction. Labor Department figures showed initial jobless claims fell by 19,000 to 366,000 last week, the fewest since May 2008. The median of 47 economists had projected 390,000, according to a Bloomberg News survey.

Two reports showed manufacturing in the New York and Philadelphia regions expanded more than forecast in December. The Federal Reserve Bank of New York’s general economic index accelerated to the highest level in seven months, to 9.5 from 0.6 in November. Readings higher than zero signal expansion among companies in region, which covers New York, northern New Jersey and southern Connecticut.

The Federal Reserve Bank of Philadelphia’s general economic index increased to 10.3 in December from 3.6 last month, indicating expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

‘Squaring Valuations’

“Investors are trying to get a sense of not only how the economy is performing but also looking at what happens with policy, what happens in Europe,” Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., said in a telephone interview. His firm has about $108 billion in client assets. “You still have some lingering concerns about Europe’s financial crisis. As the market tries to digest all this, it’s looking at squaring valuations with all this new information.”

In Europe, data showed that gauges of manufacturing output in Germany and France contracted this month less than economists had estimated. Services output unexpectedly rose in both countries, climbing to 50.2 in France.

FedEx, the operator of the world’s biggest cargo airline, jumped 6.7 percent to $82.49. The company, considered an economic barometer because it delivers goods ranging from pharmaceuticals to financial documents, posted a quarterly profit that beat analysts’ estimates. It also ordered 27 Boeing Co. 767 jet freighters to retire some of the older planes at the world’s largest cargo airline. Boeing increased 0.9 percent to $70.57.

Banks Rally

JPMorgan added 1.2 percent to $31.88, pacing a 0.6 percent gain among financial companies in the S&P 500. Spain sold 6 billion euros ($7.8 billion) of bonds due in 2016, 2020, and 2021 at a debt sale today, almost double its 3.5 billion-euro target.

Nine out of the 10 groups in the S&P 500 increased, with consumer staples and utilities leading gains, advancing at least 1.1 percent.

Novellus Systems surged 21 percent to $42.08, the biggest gain in the S&P 500. Lam Research agreed to buy the company for about $3.3 billion in stock, valuing it at $44.42 a share. Lam Research fell 3.8 percent to $37.98.

Technology companies were the only group to fall today, declining 0.3 percent. First Solar slumped 4.8 percent, the biggest drop in the S&P 500, to $31.84, after the company was downgraded to “neutral” from “outperform” by Robert W. Baird & Co. MEMC Electronic Materials Inc., the second-largest U.S. maker of polysilicon, erased 5.2 percent to $3.67.

Hedge Funds

Stocks favored by hedge funds fell more than the S&P 500 during the first three days of the week. A Goldman Sachs index of companies that appear most often in funds’ top 10 holdings lost 4.5 percent in the first three days of the week, a period in which the S&P 500 fell 3.5 percent. The index rose 0.6 percent today.

Hedge funds selling assets because of client redemptions may have exacerbated declines for equities and reinforced market volatility, according to Eric Green, a Philadelphia-based fund manager at Penn Capital. His firm oversees about $6 billion.

“The hedge fund exposure continues to go down — it’s year end, they’re squaring positions off, they’re preparing for redemptions,” Green said in a telephone interview. “The volatility is pretty extreme, the market is getting whipped around on nothing and most of them want to shut things down. They probably have to sell more things than buy because they have net redemptions.”

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Fed Leaves Rate Alone, More Upbeat About Recovery

At its Tuesday meeting, the Federal Reserve reaffirmed its pledge to keep interest rates low and opted to not take any new measures to bolster the economy, saying the economy has already been showing signs of “expanding moderately.” The economy has shown some improvement in employment and consumer spending in recent weeks. However, the Fed cautioned at Tuesday’s meeting that the “housing sector remains depressed.”

In reaffirming a pledge it first issued in August, the Fed said the federal funds rate — which serves as a benchmark rate for many types of loans, including mortgages — will remain near zero until mid-2013. The Fed said it will continue with plans to move $400 billion of its bond portfolio into longer-term securities, which ultimately could send long-term interest rates even lower.

Overall, the Fed said the economy has steadily been showing signs of improvement and is on track to post its strongest gains of the year in the final months of 2011. But the Fed said that the European debt crisis will continue to pose a major threat to recovery with “strains in global financial markets continue to pose significant downside risks.”

Source: “U.S. Fed Leaves Rate Unchanged, Says Economy Expanding Moderately,” Bloomberg News (Dec. 13, 2011)

By NICK TIMIRAOS

Home prices and mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years and is less expensive than renting in a growing number of cities.

The Wall Street Journal’s third-quarter survey of housing-market conditions in 28 of the nation’s largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc. Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4%, are the lowest in six decades.

As a result, monthly mortgage payments on the median priced home—including taxes and insurance—are lower than the average rent levels in 12 metro areas, according to data compiled for The Wall Street Journal by Marcus & Millichap, a real-estate brokerage that tracked 27 metro areas. It remains less expensive to rent than to buy in 15 cities. But affordability hasn’t done much to lift the sagging housing sector because many would-be buyers are unwilling to purchase a home or unable to qualify for a mortgage.

“It’s one of the most striking developments of the housing downturn,” said Paul Dales, an economist at Capital Economics. “The initial building blocks for a recovery are in place, but the legacy of the recession is really preventing households from taking advantage.”

In Atlanta, which had the most favorable values for owning versus renting, the monthly payment on the average home was $539 assuming a 20% down payment during the third quarter. By contrast, the average asking rent stood at $840, according to the Marcus & Millichap data.

But real estate agents and economists say the trend hasn’t boosted demand. That is because affordability alone hasn’t been enough to overcome the obstacles in the way of a housing recovery. Some homeowners who would like to move up to larger properties are stuck because they can’t sell their homes.

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Also, while the monthly carrying costs on a mortgage are lower than average rents in some cities, home ownership carries other costs—including taxes, insurance, homeowner association dues and maintenance—which may dissuade some potential owners.

Other would-be buyers can’t qualify for mortgages because lending conditions are tight or because they don’t have enough equity in their current homes to use as a down payments. “The reality of coming up with the down payment and the loan-qualification standards makes things much different than the raw numbers suggest,” says Hessam Nadji, managing director of Marcus & Millichap. And even those who may qualify remain skittish about buying property in a market where prices could fall amid foreclosures and weak job growth.

Ryan Young illustrates the point. He is under contract to buy a three-bedroom home in Washington Grove, Md., that will have monthly mortgage, tax, and insurance costs for around $150 less than the $1,900 he is paying to rent a slightly smaller house in Bethesda, Md. He qualified for a 30-year mortgage with a 3.95% fixed rate. Still, Mr. Young says he is cautious about owning his first home with the prospect of future price declines. “Buying a house is not a good financial decision, per se, but we needed a bigger place,” said the 35-year-old scientist, “and we don’t want to move every couple of years into a new rental.”

Other cities where owning is now cheaper than renting include Detroit, Minneapolis, Orlando, Las Vegas, Miami, St. Louis, Chicago and Phoenix.

Home ownership is also looking more affordable because after several years of declines, apartment rents will rise by around 4% this year, says Mr. Nadji. He says rents are poised “to pick up even more momentum across the country next year.”

Even cities where it is still cheaper to rent than own have seen big boosts in affordability. In San Diego, the monthly cost of owning a home has averaged around 83% more than renting over the past two decades. During the third quarter, owning was 22% more expensive than renting, according to John Burns Real Estate Consulting.

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Associated PressA new development in Canonsburg, Pa. The inventory of homes on the market has fallen from levels seen a year ago, as prices and mortgage rates continued to decline.

Mortgage rates are a big reason why affordability continues to improve. In 1991, a $1,700 mortgage payment allowed a borrower to take out a $200,000 mortgage. Today, it gets that homeowner a $350,000 loan, a 77% increase in borrowing power, says Dan Green, a loan officer with Waterstone Mortgage, in Cincinnati. At the same time, low mortgage rates aren’t spurring sales because few analysts expect rates to rise anytime soon. The Federal Reserve in August said it would keep rates at ultralow levels for two years. In a normal interest rate cycle, “when they go low, they don’t stay for very long, and people jump in,” said Mr. Dales. “This time, there is no urgency.”

Affordability could continue to improve as prices slide even lower in coming months. Price declines are likely because the share of “distressed” sales, including bank-owned foreclosures, tend to rise in the winter, when traditional sales activity cools. Banks are often much quicker to cut prices to unload properties quickly, which means that the greater the share of “distressed” sales, the more prices tend to fall.

One hopeful sign is that inventories have fallen from their bloated levels of one year ago. All 28 cities in The Wall Street Journal’s latest survey saw homes listed for sale fall from one year ago, when markets were reeling with a substantial overhang of properties amid a big drop in demand. Visible inventory was down sharply in several markets, including by almost half in Miami and 40% in Phoenix.

Low inventories have spurred more bidding wars at the low end of the market as investors compete for homes that they can convert into rentals. In Sacramento, it would take just 2.5 months to sell the listed inventory at the current sales pace. Las Vegas has a 4.3 month supply of inventory, according to John Burns Real Estate Consulting. But the potential supply of homes is much bigger because banks have yet to process hundreds of thousands of potential foreclosures.

Write to Nick Timiraos at nick.timiraos@wsj.com