POCATELLO’S ELECTRONIC NEWSLETTER
June 1997
Volume 1 * Issue 6
WELCOME to the sixth edition of POCATELLO’S ELECTRONIC NEWSLETTER.
There is a new and interesting site that can provide you with additional information about Pocatello. The site is found at http://www.Mykro.com/pocatello . There you will find information about the city as well as (so I am told) a few new pages will be added with links to businesses and community pages where you can add your site. The site is not yet complete but you can send you inquiries to mailto:pocatello@mykro.com . Good luck!!
VISIT OUR WEBSITE AT http://www.mykro.com/news where soon you will find the archives of all past issues of this newsletter!
If you enjoy our free newsletter, please feel free to talk about it with others. Ask them to contact us at http://www.mykro.com/news to begin receiving their own subscription!
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THE ECONONY & FINANCE UPDATE
by Larry Bell with Citizens Community Bank
Senior Vice President, Manager Mortgage Lending
Email:
Site Address:
This month I would like to provide the newsletter readers with information concerning real estate appraisals. Applicants often have several questions concerning real estate appraisals and the process that the lender goes through to obtain an appraisal. One of the most frequently asked questions is who will do the appraisal? The answer to this question is the appraiser must be on the lenders approved appraisers list which means the lender has reviewed the appraisers work and found it to meet their companies standards. The appraiser must also be licensed under the State of Idaho, Real Estate Appraisal Licensing Laws and authorized to do business in the State of Idaho.
Another question we are frequently asked is who selects the appraiser. Several years ago Congress passed a set of laws dealing with reforms in the real estate lending industry. One section of these laws dealt with appraisal requirements for real estate loans. This law states that the lender must select the appraiser to be used and that the lender must order the appraisal. If the seller or another interested party in the transaction orders the real estate appraisal it can not be used for loan purposes. Many people may consider this somewhat of a minor item, however a loan originator could lose their job, face possible fines and jail time should they be found guilty of violating this section of the law. Next time you apply for a real estate loan be aware it is solely the lenders decision on which appraiser will do the appraisal.
Another question often asked by applicants is why do I need an appraisal for a real estate loan? The appraisal is obtained to document to the lender that the property meets mortgage underwriting standards and that the value is sufficient for mortgage lending purposes. Should the lender be a national bank or savings and loan, the regulators of these institutions require that the lender obtain an appraisal on all real estate loans. A mortgage company is not covered under these regulations, however prudent lending practices and secondary market purchasers require that each loan be substantiated by an acceptable appraisal. Many loans are bought and sold on a daily basis in the national secondary market. Part of the sale of these loans is facilitated by the fact that the seller of the loan can warrant to the purchaser that they have an acceptable appraisal on the property.
Many home purchasers, particularly those applying for Federal Housing Administration loans, are under the impression that the house meets certain standards. Many Federal Housing Administration loan applicants are under the impression that the property meets the FHA minimum property standards. This is generally the case, however there are an occasional exception to this rule. The appraisal for an FHA loan is obtained for FHA purchases. The appraiser is one which has been approved by the Federal Housing Administration to do appraisals for FHA loans. The exception comes in that the appraisers are humans and occasionally make an error. The borrower signs a statement at application that they are aware that an appraisal will be ordered on the property however this appraisal is obtained for FHA loan insurance purposes and does not warrant the value or the condition of the property to the buyer. This is a very important consideration for all loan applicants that the appraisal is obtained for loan purposes and there is no warranty to the borrower that the property value is the purchase price or greater or that the property meets any minimum property standards. The phrase "every man for himself" applies in this situation, the appraiser inspects the property and offers his opinion on behalf of the lender and subsequent purchasers of the loan, it is up to the buyer to satisfy themselves that the property meets minimum property standards and the value is sufficient for their purposes.
One alternative available to buyers that are concerned about the condition of a property they may purchase is a home inspection. There are several home inspectors in the Pocatello market. There fees typically range from $100 to $400 depending upon the inspector and the depth of the inspection required. This fee can be a good investment if a purchaser of a property is unsure as to the condition of the property they are purchasing. Should the buyer be applying for an FHA loan, the cost of the home inspection can be added to the loan amount.
There are many aspects to real estate appraisals however I have tried to emphasis the items of most importance to a home purchaser.
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PUBLIC SCHOOLS
by Chris Williams, Public Information Officer
School District #25
Email: mailto:williach@d25.k12.id.us
Site Address: http://www.d25.k12.id.us
(208)235-3257
HIGHLAND TRIO IS TOP IN THE NATION
Three Highland high school students recently grabbed 1st place in the Nation honors during a recent business professionals of America competition In Orlando, Fla.
Junior Tanner Willey and seniors Amanda Milbrandt and Melanie Smith took Top honors in the small business management team portion of the competition
And came home with a three-foot trophy, plaques and medals.
The trio were given a situation about a troubled small business and were Required to come up with ideas on how to solve the business's problems.
They had an hour-and-a-half to organize their ideas and to prepare a Ten-minute presentation for the judges.
Their advisor, Doug Bosen, hand-picked the students and knew they were a
Talented group, especially after they took first-place honors in Idaho Before going to Florida.
TEACHER TO GO TO JAPAN AS FULBRIGHT PARTICIPANT
Joshua Nielsen, a world geography teacher at Alameda junior high school, Has been selected as the Idaho representative in the Fulbright memorial fund
Teacher program for June 1997.
As a participant, he is part of an inaugural group of teachers to go to Japan under the sponsorship of the program.
"This is an honor for him, Alameda and the district," said Alameda junior
High school principal Gary McCurdy.
The FMF teacher program is fully funded by the government of Japan and Involves the cooperation of many organizations: the government of Japan, Representing the ministry of foreign affairs and the ministry of education, The institute of international education, which administers the recruiting and preliminary screening in the united states, and, in Japan, the council on international education exchange-Japan, not to mention the many Japanese
Teachers and administrators at the local level.
The program is intended to provide participants with an opportunity to raise their awareness of and interest in Japan and to directly or indirectly apply the cross-cultural experience back in their home schools and communities.
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REAL ESTATE
by W. James "Jim" Johnston, Associate Broker
Coldwell Banker Landmark
Email: mailto:jimj@mykro.com
Site Address: http://www.HomeSpecialists.com
Come visit our website and take a look at all that we have available.
http://www/homespecialists.com
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WEATHER HISTORY
by Steve Cannon, weatherman
KIDK TV 3
Email: mailto:kidktv3@msn.com
Site Address: http://www.srv.net/~kidktv3/homen.html
The month of June is another transition month… between spring and summer! With that transition comes a fairly dramatic increase in temperatures for the month. The average high temperature in June in 77.6 degrees, compared with 67.7 in May. Overnight, the average June temperature is 47.3 degrees, compared with 40.3 in May… a nearly ten degree swing on both ends of the scale. June is also a fairly moist month, with the normal rainfall being 1.06’’. The heat starts to manifest itself in June, however. Of the 30 days in the month, the record high temperature stays in the 80’s only one day… the 2nd… the record high temperature exceeds 100 degrees on 5 days… the 17th, 18th and 19th, as well as the 25th and 29th. Overnight, the record low drops below freezing only five times… 29 degrees on the 1st; 31 degrees, on the 7th; 30 degrees, on the 21st and 30th; 31 degrees on the 25th.
The highest temperature recorded during June was a very warm 103 degrees, recorded on two dates; June 19th, 1940, and June 25th, 1988. The lowest overnight temperature in June came on June 1st, 1920, with a reading of 29 degrees. The wettest June was back in 1944, when 3.39’’ of precipitation fell… an inch of snow was recorded in June, 1944 and again 1924.
Since June is such a busy month, the heavens are unusually quiet this month… the only astronomical event of note is the summer solstice, marking the change of the season. That event takes place at 2:20 AM, mountain daylight time.
Other notes of interest… Flag Day is June 14th; Father’s Day is June 15th. The first U.S. Breach of Promise suit was filed on June 14th, 1623… Oil started flowing through the Alaska pipeline on June 20th, 1977… the temperature reached 100 degrees at Ft. Yukon, Alaska on June 27th, 1915… Beatle Paul McCartney was born on June 18th, 1942… June 18th also marks the anniversary of the U.S. declaration of war against Great Britain, beginning the war of 1812!
With all the high water this wet season, beware of mosquitoes! They will be plentiful and hungry. Outdoor activities should be planned with a constant battle with these flying distractions in mind!
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ECONOMIC SUMMARY- STOCKS & BONDS- INVESTMENTS
by Lynn Baldwin
Manager & Regional Trust Officer
U.S. Bank of Idaho
120 N. Arthur
Pocatello, Idaho 83204
email: f_baldwin@usbc.com
Site address: http://www1.usbank.com/personal/investing/
phone: (208) 234-5544
SUMMARY
The economy expanded faster than most economists expected. First quarter
Gross Domestic Product (GDP) grew at a 5.6% annualized rate.
We are now seeing some signs of economic slowing. We believe that the first
quarter’s upward spike in GDP was an aberration, and second quarter GDP
growth will likely return to the historical normal 2-3% range.
Our outlook remains very positive toward the fixed income markets. The Fed
has credibility and there is no real sign of an uptick in the inflation rate.
The economic environment sets a very positive backdrop for the stock market.
However, we continue to be concerned about relatively high market
valuations.
THE ECONOMY
The economy expanded faster than most economists expected. First quarter
Gross Domestic Product (GDP) grew at a 5.6% annualized rate. On closer
examination, this growth is even more impressive. Bolstered by strong
employment gains and higher wages, consumption (which makes up two-thirds of GDP) increased at a 6.4% annualized rate. Durable goods spending was also up solidly. Investment in plant and equipment rose 11.9%, roughly double its
fourth quarter growth rate.
May marked the 74th month of the current business cycle. In six months this
will become the third longest economic expansion in American history.
We are now seeing some signs of economic slowing. Some chain stores have
reported a slowing in sales, auto sales have leveled off, and housing growth
has begun to slow. Inventory replacement is not likely to contribute as much
to economic growth second quarter as it did earlier this year. The Purchasing Managers Survey (NAPM Index) slipped in the latest release but still remains over 50, which is in positive territory. The April employment release did not indicate any acceleration in hours worked, implying no additional economic strength in the first month of the second quarter. Firms selling overseas are reporting that the strong U.S. dollar is starting to slow the growth rate of exports. We believe the first quarter’s 5.6% GDP growth rate will not be repeated this quarter. Although there is only limited evidence right now to support our conclusion, we believe that the first quarter’s upward spike in GDP was an aberration, and second quarter GDP growth will likely return to the historical normal 2-3% range.
Employment grew by 142,000 in April, compared to 139,000 in March (revised
downward from 175,000), 316,000 in February, and 160,000 in January. Analysts believe the labor force can expand by 150,000 jobs per month without generating meaningful inflation.
More people are re-entering the labor force, which is consistent with a
relatively tight labor market. Men 55-64, as a group have been a declining
percentage of the labor force over the last decade, are finally re-entering
the labor market. Because employees in this age range have considerable
experience, productivity gains may result. In addition, the recently passed
Welfare Reform Act appears to be influencing a greater number of younger
women to look for jobs. These additional entrants to the labor force are
likely to help limit growth in labor costs.
The employment costs index increase of 0.6%, was far below expectations,
providing further evidence that labor is exerting limited cost pressure in
the current economic environment. Profit margins are holding, even though
firms are having more difficulty finding skilled labor. Productivity gains
may be holding down pricing pressures. The price index for domestic
purchases rose by only a 2.2% annualized rate, down from the previous
quarter. Even during this extended period of expansion, we are still
experiencing a year-over-year inflation rate of only 2.8%, as measured by the
Consumer Price Index.
It is anybody’s guess on how the Federal government’s balanced budget talks
will develop into final policy and how that policy will impact the economy.
Few details of the proposals on capital gains, tax reductions, or changes in
spending have been released. Most of us can remember Gramm, Rudman, Hollings #1 and #2, and many other proposed and debated balanced budget deals. Keep in mind the proposals they are talking about will be obligating Congresses and Presidents that have not yet been elected.
We do not know all that is going to come out of the process, but initial
discussions have included a $135 billion cut in taxes with a $50 billion
increase in spending. Policies in place since the late 80’s, have reduced
the Federal deficit considerably. In the early 90’s, the deficit reached 6%
of GDP. Consistent economy growth has increased government revenues. In
addition, the Clinton Administration has taken a conscious action to tighten
fiscal policy. Government spending as a percentage of total revenues has not
increased for the last five years, so the Federal deficit has shrunk every
year. The deficit this year will be under 1% of GDP (now a $7 trillion a
year economy). The whole idea of deficit reduction and balanced Federal
budget has become more credible and the financial markets have come to accept Congressional efforts in that direction.
It’s possible the Federal Reserve may postpone raising short-term interest
rates at their May meeting. If Congressional action to balance the budget is
considered restrictive, the Fed will be more reluctant to raise interest
rates. Also, if the initial signs of slowing in the economy continue, the
Fed may feel the rate increase can wait. The Fed will tighten if necessary
to keep inflation under control. They are undoubtedly watching the
tightening labor market to see whether real labor inflation is likely to
result. Labor costs are a combination of wages and benefits, and for the
last several years a squeeze on the benefits side muted any effects of the
modest wage increases. The most recent employment cost index indicated that
benefits were flat. Most analysts assume that we should expect to see some
increase in benefit costs soon.
Another factor in the game of guessing what the Fed will do at their upcoming
meeting has to be the incredible recent strength in the stock market. Fed
Chairman Alan Greenspan, has already indicated his sensitivity to investors'
exuberance in the stock market. Even without credible signs of inflation, he
may be inclined to raise interest rates because of the stock market’s
strength. However, real interest rates are already at fairly high levels.
Fed funds are currently 5.5%, and with inflation running at 2.5%, the 3%
real interest rate seems fairly tight. The Federal Reserve is certainly more
restrictive now than they were back in early 1995. However, the shift to
more restrictive fiscal policy, coupled with the strong U.S. dollar and
expected slowing of the economy, may incline the Federal Reserve to wait, and
not feel pressured to raise interest rates right now.
FIXED INCOME
Our outlook remains very positive toward the fixed income markets. The Fed
has credibility and there is no real sign of an uptick in the inflation rate.
We assume some increase in inflation is already priced into the bond market.
As a result, valuations are attractive and real rates of return are quite
high. Of course real returns will be affected by changing inflation rates
going forward.
If the Fed does tighten again in the months ahead, the short end of the yield
curve could be vulnerable. If further tightening does occur, we believe that
longer term bond yields are not likely to rise above 7.25%. The current
market psychology now assumes the Fed can cap inflation and that Congress and the Administration will keep fiscal policy fairly restrictive.
The Treasury is paying down $60 billion of debt this quarter. If the capital
gains tax reduction goes through, we expect there will be a windfall of tax
revenues that will probably result in further Federal deficit reduction.
This additional deficit reduction could result in a significant bond market
rally. We believe the long treasury yield could drop as low as a 6.25%,
which is the top of the price range (lowest yield) which treasury bonds
approached last year.
EQUITIES
The economic environment we have described so far sets a very positive
backdrop for the stock market. However, we continue to be concerned about
relatively high market valuations. We continue to look for problems that
might trip up this market against a positive background of continuing
economic growth, continued positive earnings surprises, low inflation and
friendlier talk in both houses of Congress about tax reduction and deficit
containment.
If capital gains tax reduction is passed into law, the current 28% capital
gains tax rate could be lowered to 20%, or perhaps a compromise rate of 22%
or 24% . The fact that we receive any capital gains tax reduction at all may
be more important than the specifics; investors have long awaited any measure
of capital gains tax relief. Such legislation could result in some
short-term downward pressure on the stock market, however. The capital gains
tax has been lowered before, and then raised again. Investors may want to
quickly take advantage of what they perceive as a limited window of
opportunity.
The stock market has risen strongly over the last several years, and it may
be tempting for people to take their profits and reinvest to better diversify
their holdings. We expect that most of this money will make its way back
into the stock market, but after capital gains taxes are paid. Something
less than 80% of equity sales could be reinvested in the stock market. Lots
of real estate investors have also been waiting to take capital gains. Much
of this money may find its way into the stock market given the current
prevailing attitudes that the stock market is currently a good place to
invest.
We assume that there will be more selling pressure on larger company stocks
which have performed well over the last several years, compared to the
smaller companies which have been basically flat for the last year. It is
possible that investors are taking more risk now purchasing large company
stocks, particularly if they have appreciated significantly; and there is
selling pressure because the capital gains tax has changed. We believe the
variance in performance between small capitalized company stocks and large
capitalization stocks will narrow in the months ahead giving more potential
return to investors in smaller companies.
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CHAMBER OF COMMERCE
by Sam Nettinga, General Manager
Greater Pocatello Chamber of Commerce
Email: mailto:pocchamber@sisna.com
Site Address: http://www.sisna.com/idaho/pocycoc
WHAT IS GOING ON IN POCATELLO
You will encounter road construction in Pocatello nearly every place you turn this summer.
Work is in progress on the Monte Vista overpass. When it is completed we will have a new four lane crossing to the east bench. The expected time of completion is late fall of 1997.
More projects for the summer are scheduled as follows: Yellowstone Overpass will get a new look this summer. Traffic will be restricted to one lane with no left hand turn lanes onto Yellowstone or onto the freeway. You will find this area a real mess as the normal amount of traffic across that overpass is 22,000 units per day. That is with two lanes each way- plus a left turn lane. When that traffic is merged to one lane with no left turn lane you can imagine the problem. While that project is going on you will also be faced with a seal coat and rock chip from Arbon Valley Road to the Flying J interchange, plus a new mat will be put down on I-15 from Pocatello Creek interchange north several miles. Then in the spring work will start on the Pocatello interchange and widening of I-15 and Clark Street exit lanes.
Sounds like a real mess, right? We will all just have to start a few minutes early- stay a few minutes longer at the end of each trip- find another route to use and most of all, be very tolerant of the other drivers- both local and out of town guests. In a year we will all feel good about the improvement we will have.
I did not talk with either Chubbuck or Pocatello street departments, but I will bet they may also have a surprise or two in store for us as well. Bannock County may also add to the congestion in this whole mess.
Have a nice day!
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THE LAST WORDS
POCATELLO’S ELECTRONIC NEWSLETTER is published monthly by Michael James Johnston. Any questions, concerns, ideas or criticisms are to be directed to him via Email at mailto:editor@mykro.com
Please distribute the Email address (mailto:newsletter@mykro.com) for this newsletter or the web site address ( http://www.Mykro.com/news ) to anyone that you find that may have interest in knowing more about the Pocatello area. We hope you find the information provided to be worthwhile and beneficial.
Copyrighted 1997 by Mykro Computer Company. All Rights Reserved. No part of this material may be used or reproduced in any form or by any means, or stored in a database or retrieval system, without prior written permission of the publisher except in the case of brief quotations embodied in critical articles and / or review.