Fed Ready To Cut Interest Rates Again

ET By Jeannine Aversa, AP Economics Writer
Bernanke Says Fed's Priority Is Shoring Up the Economy, Pledges to Cut Interest Rates
WASHINGTON (AP) -- The Federal Reserve is ready to lower interest rates again to brace the wobbly economy even as zooming oil prices spread inflation, Chairman Ben Bernanke signaled to Congress on Wednesday.
He is fighting to keep the economy afloat after mighty blows from the housing and credit crises, while trying to contain inflation.
For now, the priority is shoring up the economy, Bernanke suggested in an appearance before the House Financial Services Committee. He pledged anew to slice a key interest rate and help the economy, which many fear is on the verge of a recession, if not already in one.
"The economic situation has become distinctly less favorable" since the summer, the Fed chief told lawmakers.
Since then, the housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that combination of bad news has made people and businesses more cautious about spending and investing, further weakening the economy.
The country should prepare for "sluggish economic activity in the near term," Bernanke said. Concern is growing about the possible return of stagflation, when stagnant growth is combined with rising inflation, for the first time since the 1970s.
Were energy prices to continue to rise at a sharp clip -- something the Fed does not anticipate -- it would "create a very difficult problem" for the economy, Bernanke said. Inflation would spread and growth would be further restrained, he said. If that happened, it would be a "very tough situation," he added.
The Fed is prepared to lower rates again to bolster economic growth, Bernanke said. The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," he said, sticking closely to assurances he offered earlier this month.
The central bank started lowering a key interest rate in September. Over just eight days in January, the Fed shaved 1.25 percentage points, the biggest one-month reduction in a quarter-century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting, March 18. Some analysts believe rates will drop again in April.
Brian Bethune, economist at Global Insight, said Bernanke's remarks "keeps the door wide open for further rate cuts."
On Wall Street, the Dow Jones industrials edged up 9.36 points.
Bernanke said that at some point this year, the Fed will need to "assess whether the stance of monetary policy is properly calibrated" to foster the Fed's objectives of price stability "in an environment of downside risks to growth."
He was hopeful that previous rate reductions and the $168 billion economic aid plan of tax rebates for people and tax breaks for business would energize the economy in the second half of 2008.
As the Fed chief began his first day of back-to-back appearances on Capitol Hill to discuss the economy, there was more bad news on the housing and manufacturing fronts. Sales of new homes fell in January for a third straight month. Orders to factories for big-ticket manufactured goods dropped in January by the largest amount in five months.
Bernanke has come under some criticism for not acting sooner in cutting rates. But Alabama Rep. Spencer Bachus, the committee's top Republican, expressed sympathy. "There is perhaps no other public figure in America who has been subjected to as much Monday morning quarterbacking as you have" over the past months, Bachus said.
The committee chairman, Rep. Barney Frank, D-Mass., suggested the economy is not suffering through a garden-variety slowdown.
He made clear that he wasn't trying to put the R-word -- recession -- in Bernanke's mouth. "I'm not going to be responsible for the nervous people at the stock market who overreact when you twitch your nose," Frank told Bernanke. "But the problems we now have are different."
Many of those woes are linked to the housing meltdown. Bernanke was asked when he thought the housing market might stabilize. It's possible, he said, that by "later this year it will stop being such a big drag directly" on the economy. But home prices probably will decline into next year, he added.
"It is very difficult to know, and we've been wrong before," Bernanke said.
Even as the Fed tries to bolster the economy, it must remain mindful of inflationary pressures, Bernanke said.
Oil prices, which have set records, briefly shot past $102 a barrel on Wednesday; prices eased, but still remain close to $100 a barrel.
"Should high rates of overall inflation persist," Bernanke said, "the possibility also exists that inflation expectations could become less well-anchored." If people think inflation is escalating, they will act in ways that could make things even worse, a sort of self-fulfilling prophecy. Bernanke said that could complicate the Fed's job of trying to nurture growth while keeping inflation under control.
If oil prices continue to skyrocket this year, it would be "hard to maintain low inflation," Bernanke acknowledged.

What's a Potential Property Buyer To Do?

Day in and day out, the news goes from bad to worse. I don't know about you, but I'm a cup half full girl. Sure things are a little rough, but that's when you can get the best deals ever!! You just have to make sure the negative press does not take you over like an avalanche!!

Everyone will agree, real estate is still a great long term investment. However, you can't do a darn thing if your financial life is not in order. But isn't that how it always was? We now see what happens if you when you're not financially sound and attempting to property under less than desirable circumstances. Don't get discouraged!! The following are profiles that have a great shot at cashing in on the vast oportunities out there.......

First Time Home Buyers (ready to purchase now or as far out as two years from now)
Buyers not afraid of looking in other states
Investors with good credit and verifiable money in the bank
Seniors who are near retirement and want to downsize
Business owners who would like to purchase a building for their business
Homeowners who have equity (yes, they're out there!) and want to lower their monthly payments

If you or anyone you know fits in any of categories, CALL ME NOW!! The market is turbulent, but there is life in the storm!!!

California 2008 Home Sales

LOS ANGELES (AP) - California home sales have tumbled to the lowest level in more than 20 years.

Many areas are posting hefty price declines as buyers meet difficulty obtaining financing for jumbo mortgages or hold off on entering the turbulent housing market.

More than 19,000 homes were purchased statewide last month, for a 41% drop from January 2007's total and down about 25% from December's sales.

The figures were released today by DataQuick Information Systems. The firm's statistics go back to 1988.

The state has seen sales decline year-over-year for 28 straight months as the once-booming housing market tanked and a credit crisis forced mortgage lenders to scale back so-called jumbo mortgages that exceed $417,000.

The decline in jumbo mortgages has made it harder for buyers to finance higher-end homes, and that's contributed to a steady decline in the state's median home price.

In January, it fell to $383,000, a drop of about 17% from $462,000 a year earlier and down about 5% from December.

The statewide median home price peaked last spring at $484,000.

Copyright 2008 The Associated Press. All rights reserved.

Is This All Smoke And Mirrors?

The information is coming out fast and furious. The government has come forward with some measures that "they" feel will help. You've got to be kidding me!!!!! It quite frankly isn't enough to stop the snowball that is already rolling down hill. And it's going to affect those of us who didn't get loans we couldn't afford.

Believe me, I'm in the business and not in favor of a complete bail out of individuals and families facing foreclosure. However, what the government has implemented thus far, is just "smoke and mirrors". The problem is just too huge for the bandaids. My initial attitude has been let the homes go into foreclosure and the economy will have to deal with it and adjust. Easy to say initially. But if you own a home on a block of 20 homes and 10 are vacant and foreclosed, you're not very comfortable. Now you have to deal with the crime and all else that comes along with this phenomena, even though you've always paid your mortgage on time!!!

I actually now feel that the government must put a 6 month freeze on foreclosures and create independent agencies and companies to assist individuals and families that actually want to keep their homes. Analyze (quickly) what a family can afford to pay, accept that amount, extend the term of the loan and be done with it. We have enough foreclosures already..........what do you think??

Fed Announce Plan to Delay Foreclosures

Fed announced an initiative that would put some foreclosures on hold for 30 days. The Bush administration, trying to deal with a worsening housing slump, announced a new initiative today aimed at helping homeowners about to lose their homes. For qualified homeowners, it will put the foreclosure process on hold for 30 days.

Dubbed "Project Lifeline" the new program will be availabe to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus on previous efforts.

The program was put together by six of the nations's largest financial institutions, which service almost 50% of the nation's mortgages. These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. They will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders try to work out a way to make the mortgage more affordable to the homowner.

yahoo finance/AP 2/12/08

LET'S MAKE LEMONADE OUT OF LEMONS

The news continues to be troublesome for the most part, but there are bright spots. Low rates and plenty of inventory out there to choose from should be forcing us all into the real estate market. So why isn't it?? Yes I know certain industries are experiencing contraction (like mine) and you do need a job to buy real estate. But for those of us who have the means, let's make some lemonade out of these lemons.

I don't want to appear cruel and I will address the mortgage loan mess in another blog, but there are some serious opportunities for those who can invest for the long term. Many small investors (and large investment entities) sold a lot of real estate in 2004-2005 and are sitting on a bunch of cash!! So what are real estate vehicles these groups are starting to put their money? Here's a quick list......
Short sales
Court-ordered foreclosure auctions
Lender auctions
Developer closeouts
After-auction sales of REOs

I'll talk about each of these separately in upcoming blogs. Don't forget about our monthly Wealth Building Through Real Estate conference call, Thursday February 21, 12-12:30p.m. E-mail us for phone number and passcode.