For Halloween, I thought it would be fun to post this video about money from Disney villains. Good stuff.

Happy Halloween!

Today, the government released GDP figures from the third quarter of 2009. The news is generally good, showing that the economy grew by 3.5%. This is after several straight quarters of declines. This marks a technical end to the recession, although in practical terms, there is a great deal of recovery left ahead.

In addition to positive GDP data, it appeared that the employment picture is once again improving. MarketWatch reports on the decline in unemployment claims:

The four-week average of new claims saw a bigger decline, of 6,000 to 526,250. This marked the lowest number since the week ended Jan. 10.

The four-week average is closely watched because it smoothes out the data to minimize the impact of one-time changes due to weather, strikes or holidays.

It is important to note, though, that for many individuals, there are still some difficulties. There are still many people out of work, and struggling. That doesn’t change just because the recession has come to a technical end. However, increased confidence on Wall Street and elsewhere may lead to some loosening of jobs and of credit, helping to ease matters for individuals still struggling.

Mortgage applications are dropping, thanks to a number of factors that is making borrowing for a home less attractive. For one thing, mortgage interest rates ticked a little higher in the past week, causing some to think that perhaps the great deals are over. Even refinancing demand dropped as people began re-evaluating their situations and the interest rates.

Another factor, especially in terms of purchases, is that the first time home buyer tax credit still has not been extended. It’s fairly obvious that if you haven’t already started the paperwork by now, you probably won’t close in time for the deadline. There has been some talk of extending the deadline, but so far nothing has happened yet. Even just changing things so that paperwork initiated by the November 30 deadline would probably help home sales.

However, in the end, the bottom line is that appetite for home buying and refinancing is petering out. Mortgage rates are creeping back up, and credit requirements remains tight.

Expectations of a slight rise in consumer confidence were frustrated as the latest numbers were reported earlier today. It is clear that consumers do not believe that an economic recovery is underway. One of the reasons is most likely the fact that the labor market remains weak. MarketWatch reports on the part employment perceptions are playing in consumer confidence:

The percentage of consumers who said jobs were “hard to get” increased in October to 49.6% from 47.0%, while the percentage who said jobs were “plentiful” fell to 3.4% from 3.6%. The net jobs plentiful number worsened to -46.2 in October from -43.4 in the prior month.

Employment and consumer confidence is important because the economy is dependent on consumers for 2/3 of its activity. With consumer confidence down, there is a chance that this holiday shopping season may not be as helpful as hoped. Additionally, there are concerns that worries about employment will stymie a recovery in the housing market, which is also considered an important part of the economy.

Ever since the subprime mortgage crisis, ARMs have been the pariahs of the home loan world. People are gravitating back toward fixed rate mortgages. However, with mortgage interest rates on fixed rate home loans moving back above 5%, some are starting to reconsider ARMs for refinancing a second mortgage. And ARMs may not be all that bad. It all depends on whether you understand the risk, and how you use the ARMs.

Here is What CNN Money points out about ARMs used for refinancing:

That’s because despite their flaws, hybrid ARMs, which start out with a fixed-rate period and then adjust on a recurring basis when that period is up, still represent a smart choice for educated borrowers who understand their risks. …

The ideal ARM borrower will have a fixed time horizon (no more than a year or so beyond the fixed-rate portion of their loan) and the wherewithal, both financially and emotionally, to absorb the higher payments that could come if the rate readjusts upward. And with rates near their nadir, it’s unlikely they’ll go much further down, especially when the economy starts to recover.

This type of loan can be useful now, because in some cases, rates on a second mortgage are in excess of 7%. If you can get an ARM with fixed 4.5% rate for 3 years, and then terms that say that the loan will not increase by more than 2% a year after that, it will take at least another year beyond the fixed term to reach the 7%. You can refinance to a fixed rate at that point, or pay off the loan.

In any case, choosing an ARM because that’s the only way you can afford the payments is a bad idea. Instead, you should base your decision to get an ARM on whether or not you can afford the payments after the rate adjust upwards. Choosing an ARM because it’s the only way to afford a home is a good way to find yourself in foreclosure in a few years.

(Learn more about ARMs from the Federal Reserve Board.)

Here’s something from waaaaaay back — back when I was under the age of 10 and my mom didn’t allow me to watch the Simpsons. I thought it was funny.

Happy Friday!

Reading Taxgirl has once again tipped me off to an interesting situation in the world of the housing market. This time, it’s the fact that the first time home buyer tax credit is (gasp) being abused. This isn’t terribly surprising; criminals will always find a way to profit dishonestly from just about anything. But with talk of extending the deadline for the first time home buyer tax credit, it becomes to figure out just how rampant this fraud is. Here is what Taxgirl reports on the situation:

The IRS announced earlier this week that it is investigating more than 100,000 “doubtful claims” related to the credit. In fact, to date, the IRS has instigated 107,000 civil claims related to the credit – about 8% of the taxpayers who’ve applied for the credit. A quick turn of the math shows that to be up to $800 million in potentially false credit.

That’s a lot of money. And it could also mean that some people who have bought homes may have to repay their tax credit. If you figure that in, it becomes clear that more foreclosure are on the horizon, since repaying the tax credit is probably something that these fraudsters can’t afford to do.

And, of course, there is likely to be taxpayer outrage over this whole thing. After all, it’s our money that is being wasted on these fraudulent schemes.

Mortgage applications are taking another hit this week. Mortgage interest rates have moved higher, and, of course, the end of the first time home buyer tax credit is on the horizon. Indeed, if you haven’t already managed to initiate the mortgage loan paperwork, you probably won’t be able to close on the loan in time to meet the November 30 deadline.

Would-be buyers are also on the fence as they wait to see whether or not Congress will act to extend the current deadline. Since they will be unlikely to make the deadline now, many are just waiting to see whether or not they can buy later, and still get the tax credit. So it’s not surprise that mortgage applications are down. It’s going to be an interesting couple of weeks — especially if Congress does decide to extend the tax credit deadline.

The big focus right now, as the deadline for the first time home buyer tax credit extension approaches, is on plans that will extend the first time home buyer tax credit — and maybe even expand it to include all buyers, and not just first time home buyers. As expected, industry groups including the Mortgage Bankers Association and the National Association of Realtors are lobbying hard for an extension of the credit. HousingWire reports on a letter the groups sent to various Obama Administration officials:

“Our fragile economy is just beginning to show signs of recovery. We should not jeopardize that recovery by letting this tax credit expire,” said the letter, sent to the White House and the secretaries of the departments of Treasury and Housing and Urban Development (HUD). “Problems in the housing industry led us into a global recession, and housing incentives can help lead us out of the recession.”

The debate over what to do about the first time home buyer tax credit is one that has far reaching implications. Indeed, there is speculation that the dependence that the housing market has on the tax credit right now might become permanent. In that case, some say, what is to prevent giving a tax credit to anyone buying a home in the future, in the same way that a tax advantage is offered for mortgage interest paid over the course of the year.

As you might image, people on both sides of that argument are weighing in. Some feel that a permanent tax credit would be helpful in allowing more people to buy homes in the future. On the other side are those that worry about cutting tax revenue and getting further into debt as a country with yet another generous tax credit.

What do you think? Should a tax credit for buying a home be made a permanent part of the tax code?

Bulls are getting a boost today as earnings send the stock market higher. After dropping below 10,000 at the end of last week, the Dow is surging upward, with a gain of more than 100 points so far today. Last week, J.P. Morgan Chase posted phenomenal earnings, which were a little overshadowed by Citi, CIT and Bank of America news.

It’s not just the financial sector that is providing good news for the stock market, though. Apple, is expected to do well, and both Hasbro and Eaton reported better than expected earnings. While overall losses are expected, there is evidence that there will still be an improvement of the third quarter over the second quarter. And, as we head into the holiday season, there are hopes that economic recovery can begin in earnest for the fourth quarter.