Housing Recession: Is It Over Yet

According to Donald Kohn, a top Fed official, the Fed will give serious attention to cutting rates again at the Dec 11 meeting. As of this date we have seen a 3/4 of a point drop in rates and still inventory is increasing and the foreclosure rates are going through the roof. No doubt, only to get worse because we have so many ARM's beginning to reset.

His remarks sent the stock market up over 300 points on the possibility of a rate cut to keep the economy from slowing down, seems the credit tightening is now slowing economic activity. Generally, rate cuts take 6-9 months to better economic activity.

NAR's LAwrence Yun doesnt predict any major who said low mortgage rates and job growth should keep sales from falling. Personally, I think we have quite a ways to go. It takes a long time for peoples perception to change and as of now that perception is to wait for more price decline and possibly lower rates. Not yet stabilized in my opinion.

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www.yourpropertypath.com

Mortgage Rates and Market Opportunity

Freddie Mac Weekly Updates

The 30-year fixed-rate mortgage (FRM) averaged 6.24 percent unchanged from last week when it averaged 6.24 percent as well. Last year at this time, the 30-year FRM averaged 6.24 percent. Note: The 30 year rate has not changed since last year.

The 15-year FRM this week averaged 5.88 percent . A year ago, the 15-year FRM averaged 5.94 percent. Note: The shorter term 15 year rate is lower by 6 basis points year over year.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.96 percent this week. A year ago, the 5-year ARM averaged 6.04 percent. Note: The short term variable rate is lower 8 basis points year over year.

The Take-Away

The Fed rate reductions are hardly impacting mortgage rates which means to me that they are not interested in bailing our the homeowner. If we cant count on the Fed to stimulate sales and keep homeowners in their homes then where is the market opportunity.

Market Opportunity

1. Rental Property: The apartment sector is doing well because when people are not buying they will rent. This is soaking up rental supply and boosting cash flow and property value.

2. Foreign Buyers: The dollar keeps dropping relative to other currencies. When interest rates drop, other currencies "pay better" than the dollar. I think that if you are an investor or agent in areas that are of investment interest to foreigners, then there may be opportunity in marketing to investors who see our property as inexpensive vs. their own currency.

Thanks for reading

Howard Bell
www.yourpropertypath.com

Is the Fed Really Helping Homeowners

Chairman Ben S. Bernanke speaks before the Joint Economic Committee, U.S. Congress on the economic outlook on November 8, 2007

Developments in Financial Markets

Chair of the Federal Reserve system spoke before Congress on Nov 8 to report on the state of the economy. I read the report and Here is a summary of what I got out of it.
1. Financial turmoil was triggered by investor concerns about the credit quality of mortgages, especially subprime mortgages with adjustable interest rates.
2. Delinquencies on these mortgages are likely to rise further in coming quarters as a sizable number of recent-vintage subprime loans experience their first interest rate resets.

Federal Reserve Policy Actions
1. August 17, the Federal Reserve Board cut the discount rate ( read short term rates, mortgages are long term rates) the rate at which it lends directly to banks--50 basis points, or 1/2 percentage point, and subsequently took several additional measures.
2. These efforts to provide liquidity appear to have been helpful on the whole, but the functioning of a number of important markets remained impaired.

The Risks
1. Financial market conditions would fail to improve or even worsen, causing credit conditions to become even more restrictive than expected
3. House prices might weaken more than expected, which could further reduce consumers' willingness to spend and increase investors' concerns about mortgage credit.
4. Financial market volatility and strains have persisted.
5. Sharp increases in crude oil prices have put renewed upward pressure on inflation and may impose further restraint on economic activity.

KEY: The FOMC will continue to carefully assess the implications for the outlook of the incoming economic data and financial market developments and will act as needed to foster price stability and sustainable economic growth. Note: Sounds like another cut in interest rates to me. But whats the impact? Where is the homeowners in this reduction. We know that credit card owners and home equity loans are the kind of debts that respond to short term reductions, but where is the help for the homeowner?

KEY: From Freddie Mac - the 30-year fixed-rate mortgage (FRM) averaged 6.24 percent, Last year at this time, the 30-year FRM averaged 6.33 percent. The 15-year FRM this week averaged 5.90 percent, A year ago, the 15-year FRM averaged 6.04 percent. Now, I have read that the variable mortgages will be readjusting for 3-5 years and that the average households annual mortgage increase will be $10,000. The long term rates are hardly affected by the .75% decrease already provided by the Fed. The total decline in rates from last year to this is not enough help. Can the Fed possibly think that .09% on the 30 year and .14% decrease on the 15 year mortgage rates will be enough to keep people in their homes and supply off the market? Im afraid as far as price and supply there is much more bad news to come, unless Congress steps up and significantly helps the home owner.

Thanks for Reading
www.yourpropertypath.com