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May 2008 - Posts
Home prices on existing single-family homes continued to sink further into the abyss nationally during the first quarter of 2008, according to two leading industry indicators.
 The Office of Federal Housing Enterprise Oversight (OFHEO) reported last week that prices fell 1.7 percent for the quarter, the largest quarterly price decline on record, based solely on purchase-only transactions (without refinancings). On a year-over-year basis the OFHEO reports that prices fell 3.1 percent between Q1 2007 and Q1 2008 to the lowest level seen in the 17-year history of its purchase-only house price index.
“These substantial home price declines bring positive and negative news,” said OFHEO Director James B. Lockhart. “For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets. To prospective home buyers who have been shut out of homeownership because of affordability constraints, these declines may be welcome news, as are continued low mortgage rates.”
The OFHEO collects its data from the two Government Sponsors Enterprises it oversees — Fannie Mae and Freddie Mac — the nation’s two largest lenders. Due to the nature of the data it collects, the OFHEO’s index tracks prices paid for homes financed using conventional and conforming loans, not subprime, Alt-A or any other “exotic” loan product.
“On one hand, this is the worst housing market this side of the Great Depression, and we are far from immune,” Daniel Mudd, CEO of Fannie Mae, told his shareholders earlier this month. “On the other hand, Fannie Mae also has the best opportunity in years to grow and add shareholder value, simply by doing our job. That job is to stay in the market while others have fled, and keep money flowing from investors to housing. Those who said it would rise forever were wrong, and so are those who now say it will never recover. Housing will be back — and probably in better form than ever.”
 Also reporting dismal findings for the quarter was the S&P/Case-Shiller Home Price index. Results of its first quarter 2008 survey revealed a 6.7 percent decline in home prices from the previous quarter and a 14.1 percent decline in prices from the first quarter of 2007 — the largest yearly decline in the 20-year history of the index.
“The steep downturn in residential real estate continues,” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path, with 19 of the 20 metro areas reporting annual declines, and six of those now at negative rates exceeding -20%.”
According to Case-Shiller, the weakest market in the country is currently Las Vegas, followed closely by Miami and Phoenix. Only Dallas and Charlotte reported positive numbers for the quarter.
Taken altogether, these reports should be seen as good tidings for real estate investors as well as home buyers who are interested in mining the foreclosure marketplace for bargain properties. The market is obviously nowhere near ready to bottom out and come back yet, meaning there is still time to dig in and find those properties that meet your individual purchase criteria.
 WATCH:
Here in Cleveland, watch the market for the best deals! Some sellers are against the wall and will sell well under market value. Other sellers are really the relocation companies or the banks backing a short sale. Learn the market, learn the values, watch and…
WAIT:
Know when it’s time to hop on a property. Check the history of the price reductions. Check them every 30 days? Every 40 days? When it’s close to your price, make an OFFER just BEFORE the price is reduced. If you don’t, other savvy buyers will jump in and grab it.
BUY:
NOW! The Cleveland market will correct and you will have instant built-in equity. Other locations — including Las Vegas, much of California and Florida — have two corrections to make. The first adjustment is for over-inflated “bubble” prices. The second is a natural correction to a normal market. Here in Cleveland, we only have the normal correction to go through.
SELL:
Believe it or not there are solid buyers out there looking to buy and there are not a lot of very good choices. Many sellers are waiting until the market at least begins to correct before going on the market. Your house could be the gem among very tired listings in its price range. Sell your current less expensive house and buy-up to a more expensive one. You will lose on the selling end, but pick up much more than you’ve lost on the buying side. Don’t forget that there are good interest rates waiting for you. Call me in Cleveland. I can help!
Contact Evie Braman or post comments below.
 Over the past three months, my clients and I have presented nine contracts to pre-foreclosure, REO and short sale sellers. Out of those nine contracts, nine have been beat by better offers. In the Northern Seattle area there currently very few REO properties, and in terms of real short sales, I have seen under 10 that are decent over the past month. I wish I had the finesse to illustrate the how important it is to negotiate a Win/Win offer. I can simply say writing a contract for bottom dollars in the hope of catching a whale is only going to bring up a boot. The Seattle market is not what you see on the news, hear on the radio, or read in the paper in terms of the rest of the nation’s foreclosure woes. The money in this town has just shifted from buying retail to buying wholesale, and there are a lot of hungry wallets burning holes for positive equity investments.
Here are some things to keep in mind when investing in the Seattle market:
- Land is an extremely limited resource in this city. Seattle did not experience the “urban sprawl” boom seen in so many other cities plagued with foreclosure woes.
- The Seattle metro area has a strong economic foundation with many companies doing extraordinarily well due to international business.
- Seattle has one of the most highly educated populations in the country.
- Our median household income is about $72,000 annually — among the highest in the country.
- Because of the lack of “urban sprawl” in Seattle we do not have the inventory of foreclosure homes that the rest of the country has. I say this all the time to my buyers, at auction there is a huge crowd competing over six to 10 properties. Even then these homes are being purchased at 20 percent less then market value.
So, if you want to beat the competition when it comes to an equity positive real estate investments do not think cheap, think Win/Win. It makes a transaction so much less of a nightmare, and in a few years you will have built yourself a great real estate portfolio in one of the best cities in the United States.
Contact Nova Ukariha Shank or post comments below.
Typically when you read about a politician and foreclosure, it’s in relation to some piece of legislation created to combat the recent surge in foreclosures.
But the topic of foreclosure recently became much more personal for one Long Beach, Calif., politician.
 Multiple media outlets are reporting that U.S. Rep. Laura Richardson has lost, via foreclosure, the 1,600 square-foot, two-story Sacramento home with three bedrooms and 1.5 bathrooms on a 4,800 square-foot lot she purchased after being elected to the state assembly back in 2006.
Located in the upscale Curtis Park neighborhood of Sacramento, the property has gone through the foreclosure auction process and reportedly been purchased by Red Rock Mortgage for $388,000, a far cry from the $535,000 Richardson paid for it back in January 2007. RealtyTrac estimates the current market value of the property at $503,000.
Details of the property’s history on the RealtyTrac website show that a Notice of Default was recorded against it on Dec. 14, 2007 for $18,356, followed by a Notice of Trustees Sale being recorded on March 19, 2008. The Trustee’s Deed transferring the property to Red Rock was recorded on May 19, 2008, according to the Long Beach Press-Telegram.
At the time of sale Richardson allegedly owed her lender, Washington Mutual, more than $578,000 thanks to the 100 percent financing used to purchase the home and the additional fees and costs incurred by foreclosure. The home’s former owner also claims that she kicked in $15,000 towards Richardson's closing costs, according to the Los Angeles Times.
A story released by Capitol Weekly says that Richardson let the property slip into default when she was running for the seat she now occupies in the U.S. Congress — a seat that was vacated because of the untimely death of Rep. Juanita Millender-McDonald due to cancer.
In addition to defaulting on the mortgage payment, the MercuryNews is reporting that Richardson had a lien against the property for unpaid utility bills in the amount of $154, and was delinquent in property taxes to the tune of almost $9,000.
In a statement released by her office, Richardson denies being foreclosed on or that the bank ever seized the property. Published by the Times, Richardson’s statement says: “I have worked with my lender to complete a loan modification and have renegotiated the terms of the agreement — with no special provisions. I fully intend to fulfill all financial obligations of this property.”
Still, Red Rock’s recorded deed seems to contradict Richardson’s statement.
In the same statement Richardson answers her critics who claim she recused herself from voting on some key pieces of legislation dealing directly with the foreclosure issue.
Politically correct or not, this case goes to prove just how fast personal finances can get out of hand in the current economic environment. Fortunately for Richardson, her primary residence is in Long Beach. Still, few people can afford to walk away from a home like this — unless you’re someone famous like Jose Canseco, who has more than one home.
Real estate investors and potential home buyers who want to find the type of deal that Red Rock apparently realized at the foreclosure auction of Richardson’s property can start mining the foreclosure marketplace. But they should be very cautious in doing so given that there is no clear sign the housing market has reached bottom yet.
It’s not just average Americans who are losing their homes to foreclosure these days. Even rich and famous athletes who earned millions of dollars during their careers can be subjected to the emotional highs and lows of losing a home.
Two recent cases in point: record-setting baseball player Jose Canseco, and former NBA star Latrell Sprewell.
 Canseco, who first came to prominence as a right fielder with the Oakland Athletics back in the 1980s, has decided to walk away from his home in the Los Angeles suburb of Encino, Calif.
Canseco owed Washington Mutual more than $2.5 million on the 7,300 square foot mansion with four bedrooms and six bathrooms on an 18,000 square-foot lot. Neighbors reportedly call it “The Hotel” because it was the biggest house in the neighborhood.
The home went to auction on April 14 with an opening bid of almost $2.1 million. The property has since gone back to the lender as an REO. Canseco bought the property back in April 2005 for almost $2.8 million with a first trust deed equal to the opening bid, according to RealtyTrac.
Recently appearing on the Inside Edition television show, the one-time American League Rookie of the Year — who went on to establish batting records in many categories during his storied career — said much of the money he made as a ball player went to supporting his family for two decades. Plus he has paid out an estimated $7 to $8 million to settle “a couple of divorces.”
Canseco told Inside Edition, “I do have a judgment on my home and it to me is very strange because it didn’t make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else. I decided to let it go, but in most cases and most families, they have nowhere else to go.”
The author of two books, Canseco has most recently made headlines in the controversy over the use of steroids by professional athletes. He now lives in a smaller home in an unknown location.
 As for Sprewell, just last week he lost the home he purchased for $405,000 back in 1994 in the affluent Milwaukee suburb of River Hills to foreclosure, according to the Milwaukee Journal-Sentinel.
Citizens Bank filed foreclosure proceedings against Sprewell because he failed to make his mortgage payments of $2,593 per month since last September and owed the bank $320,284. The home was assessed at $610,000, according to RealtyTrac, and the property has an estimated fair market value of $667,980, the Journal-Sentinel reported.
Sprewell played 13 seasons in the NBA for three teams. Last year, he turned down a three-year, $21 million contract extension from the Minnesota Timberwolves, claiming, “I’ve got to feed my family.” At the peak of his career, Sprewell was making $14.6 million a year. Now he can’t pay $2,600 in monthly mortgage payments.
For Sprewell and Canseco, as for other celebrities, it’s just goes to show that the ball doesn’t always bounce their way. Will Sprewell and Canseco be the last high-profile statistics of the foreclosure crisis? Or are more high ticket homes due to become casualties in the future?
Let us know what you think!
There’s a warm wind swirling around this country right now, and it may just blow the hat off of your head…and take along with it everything else you own as well. This breeze that is gaining strength is yet the latest fallout from the foreclosure hurricane sweeping the nation.
The New York Times recently reported in two related stories that in some instances, homeowners who have already lost their homes to foreclosure are now faced with suffering the greatest embarrassment of all — having their personal items auctioned off.
In the case of Newington, Conn., the story says that it’s the town itself that is required by an antiquated 19th Century state law to collect and store the belongings of people who have been ejected from their homes by state marshals. The law requires the town to store the items for a minimum of 15 days before it can auction off the personal property if no one should claim it.
This law used to present no problem at all. However, with the rise in foreclosure activity throughout the state, more and more personal property is being stored, causing a growing problem for municipalities around the state.
Attempts to repeal and reform the law have proven unsuccessful.
By contrast, the other Times article speaks to people who have lost their homes to foreclosure and have stored their personal belongings in pay-as-you-go storage facilities. In the present economic environment, evidence is mounting apparently that people who can’t keep up with their mortgage payments also can’t keep up with paying the monthly rent on their storage unit. This goes on for just so long before the management of the facility auctions off the contents of the unit — basically sight unseen — to the highest bidder.
It’s a growing cottage industry, as the Times notes. And again it is just further proof that the national economy is not getting better fast enough for many people who are being forced to start from ground zero in the aftermath of the subprime crisis that is still winding its way through the system.
It is also evidence that the foreclosure market has not bottomed out yet and that for patient and cautious home buyers and real estate investors, there are people out there who can use your help in the midst of a really critical financial storm that is literally blowing them away.
 What a great time to buy! Yes, I know you have heard all the nasty media hype. Just remember BAD news sells papers and good homes find good buyers. Do you have a good home? The market in the Dallas area is doing well and leading the nation with higher values every year. Yes, every year values do go up. Now, I know you’re saying yeah, yeah, yeah. But, the Multiple Listing Service (MLS) does not lie. The numbers do not lie. With all that said, values are up in Dallas, but the number of Metroplex home sales are down. Yes, down. So, what does that mean? Sellers better price your home right and they better be move-in ready for the buyer. Fresh paint, nice carpet and shined up hardwoods if you have them. And do not forget to clean the bathrooms.
Contact Brian Weast or post comments below.
It’s amazing what’s happening in Corona, Calif., a community in Riverside County Over the last month, I’ve witnessed over 500 properties go into pending status. I’m constantly hearing of agents submitting well above asking price offers on what some may say are above average homes, only to get rejected or beat out by buyer with large cash down deposits.
 In Corona, newly built foreclosures, with approximately 3,000 sq.-ft. of living space, are being under-priced by the bank, creating phenomenal bidding wars. The lenders are now starting to really move their inventory in Corona. Bank-owned foreclosure properties with 3,000 sq. ft of living space listed at $350,000 are selling for $430,000.
Some people are still concerned with the smell of the cows, while others aren’t bothered at all by it. If you want to stay away from that country aroma, just go to south Corona. There are very few cows there.
Corona has some beautiful communities. The Retreat, for example, is an area that many foreclosure buyers are flocking to. A couple of years ago, newly built homes — with spiral stair cases and beautiful, wrought iron details, golf course views, huge 16,000 sq. ft lots, custom flooring, dramatic entry ways, custom brick fireplaces — sold for $1 to $1.6 million.
Now those same homes are in foreclosure and are selling for $515,000 to $729,000. What an amazing decline in value. People just walked away from their homes. On some streets in Corona every other home is vacant.
While there are still a few overpriced foreclosures in Corona, the banks don’t really want to lose their shirts. So some lenders are holding out in the hopes that someone that will pay whatever price for these foreclosure properties.
So, if you think you can put in a lowball offer in Corona — don’t waste your time. Corona foreclosures are gone in 2 to 5 days maximum — if it’s priced right.
I believe this is the perfect market to find a phenomenal deal, but don’t try to underbid these homes too much. Buyers need to remember that there are 25 buyers right behind you.
Good luck on your deals!
Contact Vickie Lobo at (909) 496-2082 or post comments below.
Shari Springer
Springer Realty
The Greater Las Vegas Association of Realtors reported May 6 that 1,794 single-family homes were sold in April, a 21.4 percent jump over the 1,478 homes sold in March. The sales are 29.9 percent higher than April 2007.
Properties owned by banks and other lenders are accounting for more than half of all the homes sold each month. The medium price of a single-family home sold in the Las Vegas area decreased by 3 percent from $243,169 in March to $235,875 in April, and down 22.7 percent from April 2007.
Through April, 53 percent of all single-family homes and 49.1 percent of all condos and townhomes sold within 60 days. In March, 47.3 percent of all single-family homes and 52 percent of all condos and town homes sold within 60 days.
Las Vegas has an upside — a very strong job market. Rents are rising, in areas where I own investment homes. I have seen an approximate 30 percent increase in rents over the last two years. Homebuyers that have been sitting on the side lines are facing increasing rents and many are asking themselves whether to continue renting or to buy.
Bank-owned homes in many areas that are priced under $270,000 and are approximately 1,900 sq.-ft. or more, with a potential monthly rent of $1,800 to $2,000 are seeing multiple offers.
It is important to evaluate what to buy and where to buy it for the best overall return.
Contact Shari Springer or post comments below.
The data is deemed reliable but is not guaranteed and is subject to errors, omissions or revisions and is not warranted.
Editor's Note: This is the first in a series of guest blog posts from members of the RealtyTrac Agent Network. The agents will be sharing their insights about what is happening on the ground in their local housing market, particularly as it relates to foreclosures. Your comments, questions and feedback are welcome.
Gloria Tate
Raso Realty, Inc.
 I work with buyers in my area; new jargon and issues are making buying a home more difficult than ever before. It is great to see prices drop. The opportunity to own a home at affordable prices has never been greater, but getting to the closing table is so much more difficult. Many of the best deals in our area are bank-owned properties. The homes sit for a very long time and the property continues to fall into disrepair. In our city, the bank has taken the property back but they may not have paid all the liens from our code enforcement and generally speaking that does not come up until the final title search is done, so a delay is normal.
Many lenders are working with major law firms on the east coast. This presents a whole new challenge, they use mobile closers who rarely have time to speak with you, and all the fees they charge are usually higher than if you close with a local title company. In my most recent transaction I had a law firm, a title company for the law firm, and a title company on this coast for the title company in Miami. The buyer pays a $185.00 fee for a mobile closer that must be used as per the law firm. I am sure there are many people benefiting from this procedure, but it is the buyer who loses some of the joy of purchasing a home and working with local people in the community.
Multiple offers are not new, but have taken on a new meaning in this market. The lender prices the property below market to create a bidding war and then makes a call for the highest and best bid. It is like being at an auction, but you don’t see any of the competition and you have no idea if you are bidding against the listing agent and or listing office, or how high you should bid. We also have bank-owned properties in our MLS that you may only purchase through an online auction although they are in the MLS. Commissions are lowered, and I am okay with that, but I feel like I have a much more difficult time walking my buyer through the process when the listing agent is in another part of the state.
Bulk Sales in developments are almost becoming the normal procedure to really find a great deal. The largest problem I have found with these is that a group of investors close on the properties in bulk, and then they offer the homes at a greatly reduced price; however, they are not able to be financed through FHA because of the investor/flip rule. Buyers are really the big winners in this market, but the key to a successful closing is truly in the hands of the agent representing that buyer.
These are just a few of the issues in my market. Please let me know if you have any questions or comments.
Contact Gloria or post comments below.
According to the RealtyTrac U.S. Foreclosure Market Report issued today, the total number of properties with foreclosure activity in April reached the highest level on a monthly basis since RealtyTrac began issuing the report in January 2005. Foreclosure filings were reported on 243,353 U.S. properties during the month -- certainly a big number, although only a tiny fraction of the nation's 126 million total housing units. Still, nearly a quarter million properties in one month can have a significant impact on a housing market that is registering about 5 million existing home sales for the entire year.
"Although only about 2 percent of households nationwide will be in some stage of foreclosure this year, these properties contribute to already bloated inventories of homes for sale, and put downward pressure on home values," said James J. Saccacio, chief executive officer of RealtyTrac. "Areas of California, Florida, Nevada and Arizona continue to be particularly hard-hit. Property tax bases are eroding, putting municipal budgets in peril. For example, the city council in Vallejo, California -- part of a metropolitan area with a foreclosure rate that ranked sixth highest in the nation in April - last week voted to have the city file for bankruptcy."
View full RealtyTrac report.
We'd like to know more about how foreclosures are affecting local housing markets across the country. To get the conversation started, we've asked some members of the RealtyTrac Agent Network to provide insight into their local markets in a series of blog posts on Foreclosure Pulse over the next few days. The first post is provided by Gloria Tate of Raso Realty, Inc., in Cape Coral-Fort Myers, Fla. -- where the foreclosure rate ranked fifth highest among the 230 metro areas tracked by the RealtyTrac report.
View Gloria Tate's post about the Cape Coral market.
Look for more local market perspectives coming soon and please post a comment on any of these posts if you have something to add, a question or a different perspective.
It may have been created and chartered by the federal government, but Fannie Mae (the Federal National Mortgage Association) is first and foremost a private company responsible to shareholders for running at a profit. And as with many corporations in this country, the national economy is kicking Fannie around…fast and hard!
 One of the nation’s two Government Sponsored Enterprises (GSEs), Fannie reported a first quarter net loss of $2.2 billion — attributable at least in part to an increased number of foreclosures. Although an improvement over the $3.6 billion loss reported for Q4 2007, it pales in comparison to the $961 million profit the GSE reported for the same quarter a year ago.
CNNMoney reported last Tuesday that Fannie’s CEO Daniel Mudd is optimistic overall about the company’s future, but sees more challenges lying ahead for the rest of 2008 and possibly beyond.
“As the initial shock of home price declines dissipate and markets settle down from volatility of the last nine months, we’re seeing tremendous opportunity. As the market recovers, we will be a prime beneficiary,” Mudd said during a conference call with investors Tuesday morning.
As a result of the losses, Fannie is revising its forecast for home price declines from a 5 to 7 percent loss nationally for all of 2008, to a 7 to 9 percent loss for the year, with significant regional differences in the rate of home price declines.
Credit-related expenses for the quarter rose from $3 billion for Q4 2007 to $3.2 billion for Q1 2008 as a result of higher charge-offs, defaults and average loan loss severities, the company release notes.
However, foreclosed property expenses decreased to $170 million for the latest quarter, from $179 million in Q4 2007. Still, Fannie’s largest credit losses were concentrated in the states with the largest home price declines — California, Florida, Michigan and Ohio — four states that have remained among RealtyTrac's top foreclosure states in the nation for more than a year now. And it recognized $1.1 billion in losses for the quarter for mortgage-related securities backed by Alt-A and subprime loans.
In order to buffer it’s balance sheet to ride out the rest of the economic downturn, Fannie also announced that it will lower its stock dividend to $0.25 a share starting in Q3 2008, and plans to raise $6 billion through public stock offerings.
Fannie’s outlook for 2008 anticipates further weakness in the housing market that will lead to more delinquencies, defaults and foreclosures on mortgage loans and slower growth in U.S. residential mortgage debt for the year.
In the end this translates into continued opportunity for patient home buyers and real estate investors to pick up some good deals on real property for at least the remainder of 2008 and potentially into 2009 as well.
The prolonged housing slump is having a measurable effect on the overall economy, and not just on home furnishings and housing supply chains (like Linens N’ Things, which recently filed for bankruptcy protection).
Results of a survey conducted during the fourth quarter of 2007 by The NPD Group, a market research firm servicing the retail sector, revealed a direct correlation between areas hard hit by the housing crisis and a marked decrease in the sale of consumer electronics — like LCD televisions and notebook computers — and related products such as printer ink and paper.
Five of the hardest hit designated market areas (DMAs) were among the top 30 based on population. The five — Sacramento, Tampa, Phoenix, Detroit and Orlando — were also among the nation’s top metropolitan statistical areas (MSAs) ranked by foreclosure rate, according to RealtyTrac, for the quarter studied by The NPD Group.
Sacramento ranked No. 5 on RealtyTrac’s Top 100 metro areas for the first quarter of 2008, reporting a 135 percent year-over-year increase in foreclosure activity and a foreclosure rate of one in every 55 households receiving a foreclosure filing during the period. Detroit was No. 6 despite a 4 percent decline in activity with a rate of one in every 68 households receiving a foreclosure filing. Phoenix was No. 7 with a 294 percent increase in activity on a yearly basis and a rate of one in every 70 households receiving a foreclosure filing during the quarter.
Orland ranked No. 13 with a 249 percent yearly increase in activity and a rate of one in every 81 households receiving a foreclosure filing, followed by No. 21 Tampa, where one in every 110 households received a foreclosure filing and a 127 percent increase in foreclosure activity was reported from the first quarter of 2007.
The point here is simple. People who bit off more than they could swallow in the last upswing of the real estate market now can’t afford to pay their readjusting mortgages, or their credit card debt, or higher prices on gas and food. So as the effects of the mortgage meltdown continue to trickle down further, how can consumers continue to afford the electronic toys and the supplies for them?
The answer is…increasingly…THEY CAN’T!
We’d be interested to hear your comments on how this trickle-down effect is impacting the market where you live and work, and the ability of homeowners to keep their homes.
One day after President Bush pointed the finger at Congress and told the American public to blame lawmakers for all of their recent financial woes, an inkling of actual positive news came out of Washington Wednesday with two announcements from government agencies.
In the first, and the more closely watched of the two, the Federal Reserve took a much anticipated move to lessen the pressure on the nation’s economy by lowering the federal funds rate another 25 basis points to 2 percent (that’s a long way down from the 5.25 percent the Fed started with when it cut the first 50 basis points off in Sept. 2007).
After 17 consecutive upward “adjustments” as they were called under former Chairman Alan Greenspan, the Fed under current Chairman Ben Bernanke has now cut short-term rates seven times in eight months.
General weakness in the economy was citied by the Federal Market Open Committee as the primary reason for this latest cut. More specifically, however, the Fed announcement highlighted a number of factors for its decision such as subdued household and business spending, soft labor markets, stressed out financial markets, tight credit conditions and the continuation of the housing contraction.
The vote was 10-2 in favor of the cut in the federal funds rate. However, in a similar action taken at the same meeting, FOMC members unanimously approved a 25 basis point cut in the Fed’s discount rate down to 2.25 percent.
In the second announcement made earlier in the day, the Commerce Department said that real Gross Domestic Product (GDP) increased at an annual rate of 0.6 percent during the first quarter of 2008, the same rate of increase as tracked for the fourth quarter 2007.
With this second straight quarterly expansion in the U.S. economy — no matter how slight it is — the New York Times is reporting that the current situation does not fit into the classic definition of a recession, which is a "significant decline in economic activity spread acorss the economy, lasting more than a few months." This is a positive sign to many people (except those who believe we’re already in a recession).
On the plus side, personal consumption expenditures for services, private inventory investment, exports of goods and services and federal government spending helped prop up the nation’s economy for the quarter.
Those positives were offset by an upturn in imports, a downswing in personal consumption expenditures for personal goods, and the housing slump (which the Commerce Dept. calls the “real residential fixed investment”), marked by a 26.7 percent decrease in home sales following a 25.2 percent decrease the previous quarter.
Generally speaking, both announcements are signs that something positive is being done to keep the nation’s economy moving forward, although it seems to be at a snail’s pace right now. However, both reports also reveal the devastating impact housing is having on the overall health of the economy.
There is no quick fix for the current weak state of the economy. Consumer spending is down, while the costs of energy and food are surging, resulting in lower consumer confidence for the immediate future anyway.
What potential homebuyers and investors need to recognize from all of this is that hoping to catch the market at or near the bottom before values start appreciating again is most likely not going to happen.
2008 is definitely a good time to jump into the water and find that property that meets your criteria — and at bargain prices too for the time being (however long that is).
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