Okay, I know there is so much talk about all the awful things that people see happening in our world. Lucky for me I DO NOT  buy into that.  There will always be challenges and struggles and while this one seems to be very daunting I have learned that those that find the bright spots and DO NOT operate out of fear end up on the top and better yet they enjoy getting there.

Please go to this link and read this incredible hot dog story that just might convince you to just keep on doing those things that you know work.  I have always loved this story and it is quite relevant today.  Do not give in to the negative small minded thinking and talking that we hear so much of. Most of us have more than we need and plenty that we could be sharing with others.

I am so grateful to all of you that have made my life so bright and always filled with promise.  I decided a long time ago to align myself with people that were looking for the possibilities rather than the problems.  I have been writing gratitude list since I was 10 years of age and it has never failed that my life is so filled with more goodness than not.

Thanks to all of you and go read that story and share it with others…. lets the spread the good stuff.   I believe the world needs a shot of happy stuff and I am just the girl to deliver it.

Remember my get even list, it is really long…. “The only people we need to get even with are those that have helped us”

with overflowing gratitude,

Karen Key Smith

Through a series of rate cuts and capital market tinkering, the Federal Reserve has finally managed to push down long term mortgage rates to levels not seen in nearly forty years. The rate on the conforming thirty-year,  fixed-rate mortgage was hovering close to 5% on Friday as the yield on the ten year treasury note sank to 2.07%. This thaw in the mortgage credit market is a welcomed sign that the ingredients are coming together to hopefully re-energize the comatose housing sector.

This huge swing came after the Fed lowered the funds target rate to a range between 0% and .25%.  This marks the tenth time for the Fed to cut rates in the last 15 months.

The Mortgage Bankers Association reported a surge in mortgage application activity over the past week as homeowners rushed to refinance their existing mortgages.  The combination of low rates and low housing prices should also create some demand in the purchase money market as well as consumers look for safe investments in these difficult economic times. Though a flood of buyers is unlikely, we can be optimistic that the first quarter of 2009 and beyond may see an increase in real estate sales and, hopefully, an end to home price declines.

For this and more, visit my blog at www.activerain.com/blogs/hpalmer

Hunter Palmer

The Federal Reserve’s Open market Committee announced Wednesday it was lowering the federal funds rate to 1%, it’s lowest level since 2004. Yet mortgage rates rose on the news and continue to rise today. Though, on the surface, this may seem contradictory it exposes a symptom of the larger financial crisis we face. Since seizing Fannie Mae and Freddie Mac and passing the bailout plan, the Federal government has committed hundreds of billions of dollars in an attempt to thaw frozen credit markets and get the economy back on track. Unfortunately, all of that money is essentially borrowed.

Now the Feds are forced to sell billions in government bonds to fund their various bailouts and bank rescues flooding the market with an oversupply and thus driving down bond prices and driving up rates. This has a ripple effect throughout the capital and debt markets and increases the cost of borrowing for Fannie and Freddie. The higher borrowing costs are reflected in higher mortgage rates for consumers.

The bigger problem facing the Federal Reserve is that higher mortgage rates will have the effect of further weakening demand in the housing market. This will further amplify what is at the heart of this whole mess – declining home prices. As mortgage rates rise and home prices decline further, the rate of foreclosure is sure to rise putting even greater strain on banks and credit markets as well as Fannie Mae and Freddie Mac as the value of their assets depreciate and their ability to raise capital becomes more tenuous. To stop this vicious cycle the Fed and the Treasury must find a way to halt, and eventually reverse, the decline in home prices rather than continuing to merely react to each emergency caused by it. So how could they do it?

There have been a lot of proposals floated in recent weeks that aim to shore up the housing market, stop home price decline and prevent foreclosure. Some of these sound bizarre but viewed in the context of this historic financial crisis I’m willing to entertain anything.

One suggestion has been for Fannie and Freddie as well as banks taking part in the government bailout to offer mortgagors the option of a sixty year amortization. This would dramatically lower payments while not reducing the principal owed and provide an incentive to lenders in the form of greater interest income. Others say to allow everyone to refinance to some set fixed rate such as 5.25% that would provide payment stability and offer most borrowers some relief in the form of lower payments.

Still others have called for an outright principal reduction to lower mortgage balances to a point where borrower’s are no longer upside down in their homes. All of these ideas may have some merit but, in my opinion still do not address the root of the problem. We must create demand in the housing market so home prices will stabilize. How might that be done?

With thirty year mortgage rates creeping upward towards 7% for many borrowers, it is time the Feds start using some of the bailout money to back a program that would allow for a dramatically lower interest rate for all home-buyers coupled with a federally backed mortgage insurance plan to allow for lower down payments and longer amortizations. The lower rate, say 5.00% fixed for 40 years, along with a required down payment of 5% offset by a federal mortgage insurance premium of .75% annually but paid monthly would surely bring reluctant buyers back into the market. The increased demand for housing would drive up prices thus creating a win-win for the government in that the value of the bank stocks they now own would rise along with the portfolios of Fannie Mae and Freddie Mac’s mortgage backed securities. Banks, not wanting to miss out, would begin lending again and the resulting competition would increase liquidity in the credit markets and benefit the economy as a whole and reduce the number of foreclosures.

This plan would not be a reward for bad behavior, would not punish homeowners who have paid their mortgages on time and could be easily implemented through the FHA, Fannie Mae and Freddie Mac. Yes, it would be expensive in the short-run. But given the impotent attempts by the Feds to stop this snowballing housing crisis by hoping banks will lend again by throwing more at them are obviously not working. We need a better idea.

For this and more, visit my blog at www.activerain.com/blogs/hpalmer

Hunter Palmer

Yesterday, at the Federal Reserve’s regularly scheduled meeting, it was decided to leave the key interest rate at 2%.  Economists had predicted a likelihood of the Fed raising the rate to help ward off inflation and slow economic growth.

This was the second scheduled meeting that the Fed chose to leave the key interest rate the same.  Over the last 11 months, the Fed has lowered the key rate seven times.  Given the economies fragile state with the weak labor and financial markets, it would seem that no move was the best move at this point.

In anticipation of the meeting yesterday, the markets rallied, up around 225 points before the Fed’s announcement.  With the services sector falling less than expected and oil futures dropping to around $118 a barrel, the Dow had gained 330 points by the end of the day yesterday.

The S&P 500 rose just over 2.87% or 35.87 points and NASDAQ rose 64.27 points or 2.81%.

In what is likely to be the last rate cut – baring any more financial market blowups – in a while, The Fed cut the federal funds rate another quarter point Wednesday from 2.25% to 2%.  The rate 5% as recently as September.

The statement “downside risks to growth remain” was removed from the Fed statement indicating to many analysts that we should start to see signs of recovery and that we are showing fewer signs of a downturn.

“They haven’t closed the door to further cuts, but they’ve shut it part way,” said Mark Zandi, chief economist for Moody’s Economy.com. “They’re saying they believe they’ve done enough.”

The next scheduled meeting is June 24th.

Fed cuts rates again and hints at pause

Has the real estate market nationwide hit bottom?  I hear Realtors all the time say that business is picking up for them.  In addition, I was looking through the New York Times Real Estate section, and not one article in the  18+ articles posted was negative.  Not one article was telling of how we are all doomed to suffer endless real estate woes for the next million years or that prices have dropped again for the umpteenth time.

The National Association of Realtors is predicting a “notable improvement” in the real estate market in the second half of 2008. Lawrence Yun, cheif economist for the NAR, said “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he said.  “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets.  The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”

Credit should be more available, but is a loan on a home easy to get right now?  I’m in the process of a refinance; I qualify full doc now with FHA, whereas two years ago I did not.  This translates to a savings of over 2% or a few hundred dollars a month.  However I’m having a problem with the appraisal.  It came back $1000 short of where it needs to be for the 97% LTV, and I’m not taking out any cash.  The big problem is, I put $15,000 down when I bought it two years ago and put $10,000 into it since.  We thought we were getting a deal at the time, guess not.

Back to the point, I’ll post more details on my refi when it either completely falls through of closes.

NAR is estimating fourth quarter sales to be up at around 5.9 million, up from 4.9 million in the first quarter.

New home sales and housing starts are expected to fall 25.7% and 26.3% respectively and the new home median price to fall to $238,400 in 2008, but projected to rise 4% in 2009.

The only negative real estate article that I found on USAToday > Real Estate was an article speaking into the market’s decline three months in a row, posted in February.

Have we finally made it to the bottom?  Are we flattening out, officially arriving at the back end of the slump?  Is the worst over?

About this time last year, we were all saying we still needed to see all the foreclosures come through.  At that time, there were still tons of owners still holding on.  Foreclosure rates are high now, up 60% in February compared to February 2007. Foreclosure rates are down in February 2008, however, from January 2008 4%, but this is just a seasonal decline according to Rick Sharga, a RealtyTrac spokesman as quoted on CNNMoney.com.  I expect the foreclosure rates to stay fairly high for a while, but has the flushing began? Will the foreclosure rate plateau and start to gradually fall?  I think it is too early to tell, but I think we’ll know in a matter of months.

I was telling my dad the other day that we won’t wake up one day, look out the window and notice the housing downturn is over.  It may be years before we’ll stroll into the office and realize that things have been going pretty good for quite a while.  These things take lots of time to work themselves out and I’m looking for things to stabilize in the next year and in 2009 to be able to start seeing some noticeable real estate product sales.  My company has a project in the Keys that has 2 homes sold in the last 60 days and 4 other deals in the works.  The difference in the buyer now compared to a couple of years ago is that these are end-user/lifestyle buyers.  They are not buying to rent, hold-then-flip, etc.  They want to use their new homes.  Another distinguishing difference is that we have new completed product.  The community is under construction, but the first phase (13 homes) have just been completed and all the amenities are already in place, waiting to be used.  If there was nothing there, I feel confident we would have no sales to speak of.

I think it is safe to say, we’re getting through this; the market downturn, that is.  And, if you have money to spend, you better be buying right now.  In five years, you’ll wish you had.  Me?  I’m working on it.  Being in the real estate business, I’m not exactly loaded right now, but I’ve got a plan that will add more real estate to my portfolio in the next two years.  Plus, I’m fortunate to not be holding multiple homes purchased two and three years ago.  I know many who are, and I can’t say that I feel your pain, but I know you’re hurting right now.  Hang in there, we’re almost done.

Ben Bernanke, a student of the Great Depression, knows what a depression looks like and previously served on the panel that unofficially determines when a depression begins and ends. On Wednesday, Bernanke acknowledged that the US could be headed for a recession. More after the break.

Many economists expect the Fed to cut the key interest rate again at their regularly scheduled meeting at the end of the month, although the Fed has given no indication of their intentions.

The stock market fluctuated yesterday after the Fed’s remarks with the Dow Jones ending yesterday -45 points.

Employers cut jobs both January and February with March’s numbers anticipated be not much different. The unemployment rate is currently at 4.8%.

“Besides lowering interest rates, the Fed has taken a series of extraordinary steps in recent weeks and months to prop up the nation’s financial system. . . In a controversial move, the Fed backed a $29 billion lifeline as part of JP Morgan’s deal to take over the troubled Bear Stearns, the nation’s fifth largest investment house. . . which was on the brink of bankruptcy. Bear Stearns had invested heavily in risky mortgage-backed securities. . . That brought criticism from Democrats and others who contend the Fed is bailing out Wall Street and putting billions of taxpayer dollars at potential risk. . .” (entire article)

The Federal Reserve cut interest rates by .75% in their regularly scheduled meeting on Tuesday, March 18, 2008. Stating that the economic outlook is not good, the Fed indicated that more rate cuts could be on the way.

The short-term rate is now down to 2.25%, down from 5.25% in September. The Dow went down at first, but then rose to an astonishing gain of 420 by the time the markets closed.

Many economists were predicting a full point cut and were surprised with the 3/4 cut.

For the entire article, click the “more” link.

Stocks cheer latest cut in rates.

As if January wasn’t bad enough with 22,000 job cuts, the February report showed job cuts of 63,000 marking two months in a row in declines. Most of the big cuts came from construction , manufacturing, retailing , financial services and a variety of professional and business services.

With a total of $160 billion short-term loans provided to banks since December, the Federal Reserve announced that it will increase the amount of loans it will make this month to $100 billion.

In response, Federal Reserve Chairman Ben Bernanke indicated that he is prepared to lower interest rates at their next meeting to help continue to give the economy a boost. Some economists are estimating a .75% cut.

Click the “more” link for the entire article.

Employers slash jobs by Most in 5 Years – Associated Press

With oil prices hitting record highs ($100.88) and the dollar falling to $1.51 for 1 Euro, the Federal Reserve is talking about interest rate cuts again. Many are predicting a .5% cut again with the term stagflation resurfacing in economic conversations.

According to Wikipedia, stagflation is a “term used to describe a period of inflation combined with stagnation (that is, slow economic growth and rising unemployment, possibly including recession). This term first came to be recognized in the 70′s.

Click the “more” link below for the rest of the post and a video.

video

Chief economist at Wochovia Corp, John Silva thinks Bernanke may have “overweighted the economic risks relative to inflation”.  Many believe the rate cuts and rebates due out this summer are ok for the short term, but very dangerous decisions for our economy in the long term.

Spurred by higher fuel and food costs, consumer prices reached 4.1% in 2007, the highest in 17 years.  In January, the Labor Department showed the largest 12 month climb in wholesale costs since 1981.

(click here for the entire article)

AP – Bernanke Signals Another Rate Cut