Following the stock markets is a good way to understand whats next. We have a full on panic right now and the mortgage originator and mortgage hedge fund owners will continue to show us weakness. Although the Fed and other world banks have injected a lot of money into the system, its being reported that they are not meeting the demand.
What this means to me is that we will continue to see the weakest players make headlines as they pass. This should keep buyers away and credit very tight. The NY Times reports:
When an investment banker set out to buy a $1.5 million home on Long Island last month, his mortgage broker quoted an interest rate of 8 percent. Three days later, when the buyer said he would take the loan, the mortgage banker had bad news: the new rate was 13 percent.
The investment banker’s problem was that he was taking out a so-called jumbo mortgage — a loan greater than the $417,000 mortgage that can be sold to the federally chartered enterprises, Freddie Mac and Fannie Mae. The market for large mortgages has suddenly dried up.
The worlds central bankers will not let the system falter, but it will not save everyone either. So, I think more to come. Heres what they have been up to this week. According to CBS Marketwatch
Central banks in Europe, Asia and the U.S. injected billions of dollars into banking systems Friday, moving to further boost liquidity in markets suffering the ripple effect of the subprime-credit crisis and saying they stood willing to provide more cash.
The European Central Bank said it had provided 61 billion euros ($84 billion) to banks in a three-day tender offer, and the U.S. Federal Reserve carried out two three-day repurchase agreements totalling $35 billion, while the Bank of Canada injected C$ 1.68 billion ($1.78 billion).
In Asia, the Bank of Japan supplied 1 trillion yen ($8.48 billion) after a rise in the overnight call rate. And The Reserve Bank of Australia added A$4.95 billion ($4.17 billion).
Although real estate sales and prices are flat or down in dozens of metropolitan areas, micro-markets within them are performing differently, with prices and sales up over last year and plenty of buyers still wanting to move in.
Good Markets Have These Things in Common
- Above median income -- often well above -- with home prices to match. Typically, these are not first-time-buyer markets, nor do they have a lot of new subdivision construction. Residents' education levels exceed regional norms, local school systems are highly regarded, and crime rates generally are low.
- Prime, not subprime, mortgage territories, with little to none of the negative neighborhood impacts of rising foreclosures caused by payment-shock loans going sour.
- Close-in, established neighborhoods convenient to the urban center's employment and cultural attractions. They don't require residents to make long commutes, sit in traffic for hours or worry about gas prices.
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