The Fed's round-up of economic conditions known as the beige book portrays an economy that is recovering. The survey covers the timeframe of late October and November and is compiled in preparation for the next FOMC meeting December 15. The majority of districts reported a pick-up in activity, including consumer spending and residential real estate, the commercial real estate market continued to struggle. Inflation was subdued, labor market remained weak and credit was still an issue. The economy is in the beginning stages of a  recovery and so monetary policy is expected to be good for the foreseeable future.  Only 11K jobs were lost in November, much less than what was expected.

If you have never heard of Dubai, it is the second largest of the seven sheikhdoms that make up the United Arab Emirates.  It is located in the southern Persian Gulf.  Dubai is known around the world for its man made palm tree shaped islands. 

With Dubai announcing that it is requesting a six month delay in paying back billions of dollars in debt, it will likely cause problems for US Banks.   Dubai World Group is a holding company that is 100% owned by the governement of Dubai.  Abu Dhabi the capitol of the UAE has taken steps during the past year to try and find some new funding for Dubai.  Abu Dhabi has the sixth largest crude oil reserves in the world.  Abu Dhabi participated in a $10 billion dollar bailout of Dubai.  The central bank in Abu Dhabi, purchased all of the five year 4% debt paper.  The world is waiting to see what Abu Dhabi might do to help Dubai out of its latest announced troubles.

Dubai World owes about $60 Billion in debt.  It ran up most of this debt building the world's tallest skyscraper. The Burj Dubai (Dubai Tower), which was begun in September 2004 and is expected to be completed soon.  The tower is 2,684 feet tall.  In addition to be being the tallest man made structure in the world, it also has an indoor ski slope.   It is suspected that Dubai World will default on all of this debt.

In the US, Citigroup has the most expoure to default risk with 1.9 billion estimated.

Other major banks in the US have little direct exposure, the ripple effect is what analyst are worried about.

The European banks with the most exposure are Standard Chartered, HSBC, The Royal Bank of Scotland and Barclays with a total of more than $30 billion in risk of default.  Because US banks have extensive dealings with UK banking institutions, this could create a ripple effect also.

Dubai may have to unload some of their most pricey properties at distressed prices, this will  cause commercial properties values to go lower.  This will obviously be another problem for US banks.  It is thought this could put a damper on all commercial credit markets world wide.  Banks may need to set aside funds to cover growing default risks.  When lending goes down, banks profits go down.

Dubai not only waited for the Thanksgiving to announce its request to delay its debt payment by at least six months,  it also timed the news to take place on the eve of the three day Islamic holiday of Eid al-Adha. 

All of this could help add fuel to Congresses thought that all people involved in the US financial system should be regulated.

Fannie Mae has been a complete failure as a company.  Their mortgage back securities issuance has fallen by 14% from Sept to Oct. 

Fannie Mae has decided to tighten their underwritting.  They are going to make it even harder to get a loan.  Starting December 12th, 2009 Fannie Mae's automated service will reject less than 20% down and a credit score lower than 620.  Your debt and monthly income can not exceed 45%.  So go FHA for now. 

FHA is going to streamline their lender approval process.

FHA will require that the net worth of the lender who is funding to go from $250,000 to 2.5 million.

You do need to expect more conditions, delays, requirements and denials. 

Ginnie Mae and HUD have slammed the door on Lend America.  They are going to be fined $500,000.

This has been one of the most stressful weeks of my real estate career.  I took my blood pressure today, it was 170 over 95, that is really really high for me.  People get their RE license thinking this is an easy way to make money.  I tell you I have earned every penny I am going to make over the next week with four closings.  All four of them have been like pulling teeth.  I hope I never see another short sale or foreclosure as long as I live.  From now on I am referring all short sales and foreclosures to other agents.  I like a challenge, these short sales and foreclosures are crazy.  Banks that supposedly want to get loans off their books make it virtually impossible to get them closed. 

Existing home sales showed another big gain in October 2009, with a strong uptrend over the past seven months.  Sales jumped 10.1% in October to an annual rate of 6.10 million.  The larger than expected gain in October follows another strong gain of 8.8% in September.  This is evidence of a solid housing market recovery.  One third of the sales were first time home buyers and another third were distressed sales.  It is an impressive increase and the recovery we are seeing is durable one, says cheif economist for Barclay's. 


The south jumped by 12.7% to an annual level of 2.30 million in October and are 25.7% higher than in October of 2008.  The median price in the south was $151,100., down 6.3% from a year ago.  The national median existing home price for all housing types was $173,000 in October, down 7.1% from October 2008. 

In Florida there have been reports of multiple offers in the lower price ranges with foreclosed properties getting absorbed quickly. 

A recent consumer survey shows that 13% of successful first time buyers had a previous contract that was cancelled or fell through - there likely are many more buyers who were attempting to purchase and simply ran out of time. 


The inventory of available homes fell 3.7% in October to 3.574 million which reflects a 7.0 month supply at the current sales pace.  The supply of homes on the market is now at the lowest level in over two and a half years.  We are getting closer to a even balance between buyers and sellers. 

Sales activity is at the highest pace since February 2007 when it hit 6.55 million.  A measurable decline should be anticipated in December and early next year before another surge in spring and early summer.  

 Mortgage interest rates last month were the third lowest on record dating back to 1971.  the national average commitment rate for a 30 year conventional fixed rate mortgage fell to 4.95% in October from 5.06% in September.  Chicago Fed's Charles Evens said the Fed's target funds rate could remain near zero into late 2010 or longer due to the weak job market and low inflation. 

Household debt has declined in recent quarters for the first time since 1951.

Households are spending less than they did last year on big ticket durable goods typically purchased with credit.

Banks have tightened lending standards by more than would have been predicted by the decline in economic activity alone.

Since December 2007, the U S economy has lost, on net, about 8 million private sector jobs and the unemployment rate has risen from less than 5 percent to more than 10 percent.  Both the decline in jobs and the increase in the unemployment rate have been more severe than in any other recession since World War II.

Ben Bernanke expects moderate economic growth to continue next year. 

Two of the principal factors that may constrain the pace of the recover, namely restrictive bank lending and the weak job market.  Banks reluctance to lend will limit the ability of some businesses to expand and hire.  I expect this situation to normalize gradually, as improving economic conditions strengthen bank balance sheets and reduce uncertainty; the fallout for banks from commercial real estate could slow that progress.

The outlook for inflation, many factors affect inflation, including slack in resource utilization, inflation expectations, exchange rates and the prices of oil and other commodities. 

George Washington said of American Christians, "they would rather die on their feet than live on their knees."