With the recent interest rate cuts working there way down to you and I, many wonder what the effect will really be.
Here are some thoughts, but, as always, your prespectives are welcome.
The first immediate benefit will be seen in lower home equity line payments that are tied to the prime rate (also called Wall Street Prime, published daily in the Wall Street Journal or most any financial news site like www.Blooomberg.com ). Congratulations...your disposable income just went up (but don't be too quick to spend it!).
As banks now have a lower cost to borrow, some of that will trickle down to us in the months to come in the form lf lower interest rates on consumer credit. Lower rates on credit cards, even longer terms on interest free financing (just make sure you pay it off before that period is up or you're in for one heck of a bill!!) and 0% financing on cars to name a few.
Many analysts are predicting increased spending in home improvement as rates retreat. This has been seen in the small rally in stock prices for home improvement companies. As many people cannot sell, might as well make your place as comfortable as possible.
What are your thoughts?
I will later cover the anticipation of the financial stimulus package and it's affects. Anyone with insight on this, please share.
Best to all!
Thursday, January 31, 2008
Wednesday, January 30, 2008
Busy Day -Economic Stimulus Package & Rate Cut
The House passed it's version of the Economic Stimulus Package around the same time the Fed announced another 1/2 point rate cut. That's 1.25% in 8 days. A new record.
The stimulus may have little tangible affect on the day to day for you and I. We just need to make sure a lot of the pork isn't added and that benefits are directed towards the segment that helps build the economy, the working class as well as employers. Extending welfare, unemployment and other Pelosian pork will do little to spark growth.
Part of the package is to TEMPORARILY raise the conforming loans limits. What that means is that the current limit ($417,000 for 2008 per Fannie and Freddie Mac guidelines) will be raised in high cost areas. What that means to the Reno market is yet to be seen. The package calls for conforming loan amounts to be raised 125% of the median home price in the high cost areas. If that is the case, there may not be a change in the Reno market, as the median home price is now roughly $350,000. A 125% increase would raise the limit to $437,500. Not much change.
The 2nd Fed cut in a little over a week was a good move, albiet a little late. As Greenspan and crew did, the cuts should have been coming all along, in a gradual fashion, vs. this seemingly knee jerk reaction. At any rate, hat's off to the Fed for acting promptly. They say they are trying to avoid a recession. News Flash....we're already in one!
As for mortgage rate watchers, stop watching and start acting. Keep in mind, any good economic news (if the stock market starts picking up again, for example), is not so good for mortgage rates. Prime rate will go down (most certainly) with the Fed lowering. This will have an immediate affect on your home equity lines and, witin a few months, consumer financing (credit cards, car loans, etc).
Keep an eye out, be prudent, and keep the cards and letters coming!
The stimulus may have little tangible affect on the day to day for you and I. We just need to make sure a lot of the pork isn't added and that benefits are directed towards the segment that helps build the economy, the working class as well as employers. Extending welfare, unemployment and other Pelosian pork will do little to spark growth.
Part of the package is to TEMPORARILY raise the conforming loans limits. What that means is that the current limit ($417,000 for 2008 per Fannie and Freddie Mac guidelines) will be raised in high cost areas. What that means to the Reno market is yet to be seen. The package calls for conforming loan amounts to be raised 125% of the median home price in the high cost areas. If that is the case, there may not be a change in the Reno market, as the median home price is now roughly $350,000. A 125% increase would raise the limit to $437,500. Not much change.
The 2nd Fed cut in a little over a week was a good move, albiet a little late. As Greenspan and crew did, the cuts should have been coming all along, in a gradual fashion, vs. this seemingly knee jerk reaction. At any rate, hat's off to the Fed for acting promptly. They say they are trying to avoid a recession. News Flash....we're already in one!
As for mortgage rate watchers, stop watching and start acting. Keep in mind, any good economic news (if the stock market starts picking up again, for example), is not so good for mortgage rates. Prime rate will go down (most certainly) with the Fed lowering. This will have an immediate affect on your home equity lines and, witin a few months, consumer financing (credit cards, car loans, etc).
Keep an eye out, be prudent, and keep the cards and letters coming!
WaMu Next
With Countrywide finally being absorbed by Bank of America (not complete, still plenty of due diligence, lots of corners and closets full of bodies and bones). That process started months ago with the 'loan' (or shall we say, down payment!) B of A made to Cwide. Their CEO will walk away with at least an 8 digit package, a lot of their employees will by walked to the door with a brown bag with something smelly in it!
Next up....Washington Mutual. The lender and bank who's lending and employment practices are only outdone by their abysmal customer service is looking for a suitor. It's a short list, tainted by the same foul order and taste of the prize in the bag that many Cwide employees will walk away with.
Many of the the posters on the current mortgage crisis are correct. It comes down to greed and thinking the gravy train has no caboose. Well, there is no station for that train, just a cliff into a deep abyss that the engine has already gone over and into.
It time for an extreme makeover for the lending industry (maybe real estate and title will follow). Alvin Toffler in Future Shock predicted many of these changes, as what is always inevitable is change. Either be an agent or victim of it. Many of the financial industries decided to drink the koolaid and be a victim of it. The unfortunate part is they are taking a lot of consumers with them, having been seduced by the lure of easy money first in the stock market and then in the real estate market.
This culling out process is healthy and, if by some chance, we learn from it, the global economy will be stronger (remember, what doesn't kill you makes you stronger...but it still hurts!!). Bottom line...Be Prudent...Take Responsibility...Be Sufficiently Cynical!
Next up....Washington Mutual. The lender and bank who's lending and employment practices are only outdone by their abysmal customer service is looking for a suitor. It's a short list, tainted by the same foul order and taste of the prize in the bag that many Cwide employees will walk away with.
Many of the the posters on the current mortgage crisis are correct. It comes down to greed and thinking the gravy train has no caboose. Well, there is no station for that train, just a cliff into a deep abyss that the engine has already gone over and into.
It time for an extreme makeover for the lending industry (maybe real estate and title will follow). Alvin Toffler in Future Shock predicted many of these changes, as what is always inevitable is change. Either be an agent or victim of it. Many of the financial industries decided to drink the koolaid and be a victim of it. The unfortunate part is they are taking a lot of consumers with them, having been seduced by the lure of easy money first in the stock market and then in the real estate market.
This culling out process is healthy and, if by some chance, we learn from it, the global economy will be stronger (remember, what doesn't kill you makes you stronger...but it still hurts!!). Bottom line...Be Prudent...Take Responsibility...Be Sufficiently Cynical!
The state we're in
Latest News that foreclosures are up 600% may be a little decieving. Foreclosures are up, that is certain. How many actually go all the way to sale, that's another subject.
Without question, the greed that permeated the real estate market is now taking it's toll. Just like with day traders before the stock market crash, everyone that got into the craze during the run up of property values and now find themselves with escalating ARM mortgage payments and now equity are scrambling. The greed also was bolstered by the mortgage, real estate and investments industries that did little to educate consumers that nothing lasts forever. Not to say that consumers are not responsible for their financial ills. We are all consumers, and, as such, should be held accountable for our decisions.
Most people that are in trouble right now are hard working individuals or couples that wanted a piece of the American dream, others to move up to a more functional home. Many of these people may have stretched themselves to buy the home, especially combined with the allure of little or no down and historically low interest rates, especially the often misleading pay option ARMS that less than scrupulous loan officers were hawking due to the high commissions paid on them by the banks. In reality, this started a long time ago. We are just in the midst of a financial 'perfect storm' that is causing many up and down the economic scale to scramble. In regards to real estate, it's not just the 1st Time homebuyer; track and custom builders, 2nd and investment property owners as well as McMansion dwellers all have a place on the foreclosure/bancruptcy list. Combine that with a the administration's push early on for an 'Ownership Nation', where banks were pressured to provide high risk financing to put more people into homes and you have a recipe for unsustainable growth and potential (and now real) financial chaos. I agree, we are all adults and must take responsibility (read everything you are asked to sign, perform due diligence, etc). At some point, emotion takes over. I have worked with people and have been involved with real estate and finance for over 20 years. Without exception, during every interest rate dip that sparked a refinance boom, people, as a whole, spent more time picking a breakfast cereal than they did a mortgage product. "What is rate and fees?" was the question of the time. Don't be concerned about what this 'killer rate' is going to look like in a couple of years. I am in the mortgage industry. We are part of the problem. The problem is correcting itself, as it would in any free market economy. This is a cleansing process and will undoubtedly make renters out of many people that were not in a position to own in the first place. I don't mean to be harsh. Just hard fact. Sensibility will return. Next time we enter into a hard charging economy, put the Koolaid down. History always repeats.
Without question, the greed that permeated the real estate market is now taking it's toll. Just like with day traders before the stock market crash, everyone that got into the craze during the run up of property values and now find themselves with escalating ARM mortgage payments and now equity are scrambling. The greed also was bolstered by the mortgage, real estate and investments industries that did little to educate consumers that nothing lasts forever. Not to say that consumers are not responsible for their financial ills. We are all consumers, and, as such, should be held accountable for our decisions.
Most people that are in trouble right now are hard working individuals or couples that wanted a piece of the American dream, others to move up to a more functional home. Many of these people may have stretched themselves to buy the home, especially combined with the allure of little or no down and historically low interest rates, especially the often misleading pay option ARMS that less than scrupulous loan officers were hawking due to the high commissions paid on them by the banks. In reality, this started a long time ago. We are just in the midst of a financial 'perfect storm' that is causing many up and down the economic scale to scramble. In regards to real estate, it's not just the 1st Time homebuyer; track and custom builders, 2nd and investment property owners as well as McMansion dwellers all have a place on the foreclosure/bancruptcy list. Combine that with a the administration's push early on for an 'Ownership Nation', where banks were pressured to provide high risk financing to put more people into homes and you have a recipe for unsustainable growth and potential (and now real) financial chaos. I agree, we are all adults and must take responsibility (read everything you are asked to sign, perform due diligence, etc). At some point, emotion takes over. I have worked with people and have been involved with real estate and finance for over 20 years. Without exception, during every interest rate dip that sparked a refinance boom, people, as a whole, spent more time picking a breakfast cereal than they did a mortgage product. "What is rate and fees?" was the question of the time. Don't be concerned about what this 'killer rate' is going to look like in a couple of years. I am in the mortgage industry. We are part of the problem. The problem is correcting itself, as it would in any free market economy. This is a cleansing process and will undoubtedly make renters out of many people that were not in a position to own in the first place. I don't mean to be harsh. Just hard fact. Sensibility will return. Next time we enter into a hard charging economy, put the Koolaid down. History always repeats.
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