Posted: Apr 01, 2008
I just heard the most amazing news. I still cannot believe it. Bush, Paulson and Bernanke just announced sweeping changes to take place at the Federal Reserve. If I understand it correctly, the FED - which now lends to institutional banks at the Discount Rate of 2.25% - will allow these same banks to lend this same money to home buyers at just ONE PERCENT above what they have to pay for the money!
This means that the banks make a few bucks (1% on the rate spread), while enabling home buyers to borrow at the incredibly low rate of 3.25%! Here's the catch: This money will only be available for 6 months at these low rates! The program begins May 1, 2008 and ends on October 31, 2008. It is open to any home purchaser, including investors. The buyer simply has to qualify for the payment!
The expected results are quite amazing! Housing inventory levels are expected to substantially drop around the nation. Prices of homes will firm and possibly begin increasing again. As a result of the lower inventories and price firming, foreclosures are expected to drop drastically as home owners see light at the end of the tunnel.
Related to this action, it is expected that Wall Street brokerages will no longer need the FED to print money to bail them out. This will most certainly firm up the dollar and turn our economy around and out of a recession. Consumer confidence should rise; which also aids in moving the economy forward once again. On top of it all, it "is NOT a government bailout", but a program that allows the "private sector" to come to the rescue! A "joint effort" if you will between the government and the people, and one that is "politically correct!"
I personally believe this is the best thing they could have done. I only wish they would have done it sooner. Most of all, I wish it was true... April fools!
Even though this is not true, I believe this is something that could happen and most certainly should happen. I am not an economist, but this does make sense. If you're going to print money, print it wisely. Put it to good use.
Unless the government provides some buying incentives for buyers, the market will most likely continue its decline. A turnaround is needed, and fairly quick, to prevent more foreclosures which are resulting in something I call "market drag." I believe that tax incentives, lower interest rates and easing borrowing guidelines (which are now too stringent) are the 3 essential components for turning the markets positive again.
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Our nation is at an interesting juncture. Our economy and banking system is under incredible pressure; one of a serious nature.
The mortgages which were written between 2004 and 2006 paved the way for the collapse in real estate prices, which in turn has been pulling down all other areas of the U.S. economy. Currently there are over 1 million foreclosures across America. The frightening fact is that there are more than 6 million mortgages that are 30 days or more in arrears! This is potentially more serious than anything we’ve seen yet.
Posted: Sep 25, 2008
We are in the midst of tough real estate recession; the worst this country has seen in decades. Real estate prices in some areas have fallen to the point where many people are paying more on a mortgage than their property is actually worth!
Posted: May 14, 2008
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