AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREWhicker: Clemson demonstrates that it’s tough to knock out the champRising inflation is also a problem for consumers, whom retailers rely on during the holidays to fuel their profits. With only a week left until Christmas, sales data has suggested tepid spending by Americans, who are struggling with higher food and energy costs and tumbling home values. The Dow Jones industrial average fell 72.02, or 0.54 percent, to 13,267.83. Broader stock indicators also declined. The Standard & Poor’s 500 index dropped 9.19, or 0.63 percent, to 1,458.76, and the Nasdaq composite index fell 16.40, or 0.62 percent, to 2,619.34. Last week, the Dow dropped 2.10 percent, the S&P 500 index fell 2.44 percent and the Nasdaq lost 2.60 percent. Government bond prices rose as stocks fell. The yield on the 10-year Treasury note, which moves opposite its price, slipped to 4.19 percent from 4.24 percent late Friday. The dollar rose against most other major currencies Monday, while gold prices fell. Light, sweet crude futures fell $1.07 to $90.20 a barrel on the New York Mercantile Exchange. In economic data, the U.S. government said the current account deficit, the broadest measure of international trade, narrowed in the third quarter compared to the second quarter, as expected, to the lowest level in two years. Meanwhile, the New York Fed’s Empire State Manufacturing Index fell much more sharply in December than economists anticipated. Later on Monday the National Association of Home Builders is scheduled to release its housing market index, which is expected to hold steady. Wall Street, which started 2007 soaring due to strong merger-and-acquisition activity, found little consolation in deal-making Monday. Ingersoll-Rand Co. – the manufacturer that makes, among many things, Thermo King refrigerated trucks – said it will buy Trane Inc. for $10.1 billion to access its building and transportation cooling systems. The deal will create one of the world’s largest makers of air conditioners. Ingersoll-Rand shares fell $3.36, or 6.8 percent, to $45.82, Trane surged $8.65, or 23 percent, to $45.85. Meanwhile, Aon Corp. announced it will sell two insurance units for $2.75 billion in separate cash deals, and the conglomerate Loews Corp. said Monday its board approved a spinoff of Lorillard Inc., one of the nation’s largest cigarette makers. Loews rose $1.77, or 3.8 percent, to $48.57. Aon rose 52 cents to $49.46. Overseas, Japan’s Nikkei stock average fell 1.71 percent, and Hong Kong’s Hang Seng index fell 3.51 percent. Britain’s FTSE 100 dropped 1.37 percent, Germany’s DAX index lost 1.30 percent and France’s CAC-40 declined 1.26 percent. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! NEW YORK – Wall Street extended last week’s losses Monday as investors remained skeptical that the Federal Reserve’s first credit auction will be effective in loosening up a tight market. The Fed is offering $20 billion in 28-day credit through an auction Monday. The aim of the auction is to encourage commercial banks to borrow from the central bank, and in turn, boost banks’ lending to businesses and consumers. Last week, the Fed disappointed investors when it cut interest rates by only a quarter-point, which was less than some analysts expected. Wall Street is pleased that policy makers say they are continuing to try to lift market confidence, which has dwindled since home foreclosures started soaring, but the market is so far unconvinced that the auction will work. A speech Sunday night by former Fed Chairman Alan Greenspan added to the market’s ill humor. Greenspan said “stagflation” – simultaneous inflation and economic slowdown – is a growing possibility, given last week’s data showing spiking consumer prices. With inflation on the rise, the Fed, which has reduced the target federal funds rate three times since the summer to calm the markets and stoke the economy, may feel less inclined to lower rates again.
More than 70 percent of those surveyed believe that the creative loans might be a solution for some borrowers but risky for others. The association warns buyers to make sure they understand all of the terms and conditions of a loan before signing any documents. More than 80 percent of brokers who responded expect rates to continue increasing. Nima Nattagh, an analyst who does research for the mortgage industry, notes that variable-rate products are a popular option when rates are low. But long-term and short-term rates are getting closer together. “As rates go up, I think the consumers are going to find fixed-rate mortgages a lot more attractive at the expense of variable rate,” he said. Robert Kleinhenz, deputy chief economist at the California Association of Realtors, said not every lender offers a 40-year mortgage. But the time frame should not matter because loans on average are turned over every five to seven years as homeowners move or refinance. “It certainly is another avenue lenders can go down to enable households to be able to afford homes at the kind of prices we’ve been seeing in the last few years,” Kleinhenz said of the 40-year mortgage. Gregory J. Wilcox, (818) 713-3743 [email protected] 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! AD Quality Auto 360p 720p 1080p Top articles1/5READ MORERose Parade grand marshal Rita Moreno talks New Year’s Day outfit and ‘West Side Story’ remake But a moderate increase in rates should not be worrisome, association members said. A survey of association members found that 60 percent believe 40-year fixed-rate loans will become more economical for homebuyers next year. A loan of this duration will generally lower the monthly payment by several hundred dollars, depending on the home price, said Marcell, who is also president of Better Mortgage Brokers Inc. in Upland. “It’s just another way for people to try to get a home in today’s economy (because) in California it’s extremely difficult.” Also in the forecast: Other popular mortgage products will include reverse mortgages, 100 percent financing and adjustable loans, with low starting rates or beginning interest rates from which fluctuation can occur. With little improvement expected next year in housing affordability, mortgage bankers are predicting a surge in 40-year mortgages, which are becoming increasingly popular because of their lower monthly payments. The California Association of Mortgage Brokers, in an annual forecast released Monday, also expects the interest rates to hit 7 percent in 2006. Affordability will continue to be a critical issue for the state, even though prices are expected to stabilize. “It is alarming that the housing affordability crisis will continue, making it difficult for first-time buyers to qualify for adequate financing,” said the association president, John Marcell.