market update   August 26, 2008
Fed minutes from the August 5th FOMC meeting were
released today revealing continued concerns over inflation.
At the center of concern is the question of whether
inflation will moderate in 2009. It may be this concern that
also has the DOW selling off mildly today, perhaps due
to fears that the Fed may tighten credit sooner than Wall
Street would like. But for now, Fed rates are unchanged
and the benchmark rate is a mere 2%. Don’t count on this
rate lasting into 2009 however, because the minutes also
reveal consensus that a rate hike will be the next move.
The big question left is “when?” Also of note were comments
about mortgage rate’s relationship to the housing
market and broader economy, which was termed “fragile”
by several participants. There is concern that care should
be taken to keep mortgage rates low or run the risk of potentially
higher payments further stressing home values by
making affordable mortgages even harder to come by.
An increasing number of analysts are indicating they believe
the bottom of the housing market is being seen right
now in several areas of the US, including the Bay Area.
Fresh monthly home sales (volume) numbers are up 2.5%
in July over June, but the numbers still show a dramatic
dip in sales volume when compared to last year. The Case-
Schiller index shows home prices down 2.6% nationally
in the second quarter. There is little doubt that the average
worker is feeling pinched, and discretionary spending
numbers signal declines in sales across multiple sectors.
Home buying incentives can help buyers when tax time
rolls around since newly signed legislation offers a $7500
tax credit to folks who buy by June 30, 2009. Check out
http://www.federalhousingtaxcredit.com/ for more information.
HUD has received a permanent raise to it’s loan
limits beginning in 2009 and FHA loans are, in some cases,
helping sub-prime borrowers avoid foreclosure with its
FHA Secure program. I’ll be giving you more information
about this next month after a seminar I’ll attend in mid-
September. More options may be opening up for jumbo
loan borrowers also. There are some new loan programs
available recently that again allow stated income jumbo
loans to $2 million with rates potentially below 7%. Sure
money is tight right now, but there are also some fantastic
opportunities to buy with a lot of upside potential. Smart
investors are buying right now. Are you among them?