In recent months, the US real estate market has seen its fair share of turbulent weather as house prices continue to fall. While the Federal Reserve has taken significant steps towards making lending cheaper, interest rates remain artificially high as the troubled financial sector continues record write-downs. So far, only a quarter of the IMF-estimated $1 trillion in sub-prime losses have been reported, which means mortgages won't be affordable for a long while, even if homes continue to decline in value. According to the Case Schiller house price index, which covers 20 major metropolitan areas, house prices are depressing at an annual rate of 12.7%, though its rate of descent is accelerating. As long as homeowners continue to lose equity, loans will become increasingly difficult to obtain.

As this feedback loop works itself out, a regionally dependent phenomenon has begun to emerge. Although home prices averagely dropped in the US the story doesn't end there. Despite lowered economic growth forecasts and commodity-related inflationary pressures, (which are felt much more diffusely throughout the economy) several metropolitan areas have remained more robust, which explains dissenting votes on the past two rate cuts by the regional Fed chairs from Dallas and Philadelphia, respectively. Part of their reasoning is based on working against what they view as a misconception about the scope of the Fed's powers among many investors; namely, that the central bank is the only agent responsible for assisting challenged markets. Political jockeying has and will continue to play a role in their decisions, especially in the charged climate of an election year, but their dissenting votes represent the resilience of many areas of the US that continue to experience growth. From Charlottesville, North Carolina to Austin, Texas, many metropolitan areas continue to develop quickly, seemingly insulated from much of the speculation and predatory lending that has defined tracts of the US. While some of the worst affected markets in the Southwest like Phoenix, Arizona and Las Vegas will take considerable time to rebound, some price correction was inevitable. This is partially due to property value spirals in recent years, without corresponding increases in infrastructure and demand. In markets where growth had already been steady, home prices have been relatively stable.

If the federal government steps in further to freeze or help re-negotiate more of the estimated two million sub-prime mortgages projected to default over the course of 2008, prices may stabilize more quickly. Politicians, closing ranks in a show of solidarity, will likely be reluctant to make bipartisan efforts a priority while the presidential race remains in the limelight, which makes investment in the near and medium term likely to be more profitable, both in markets where prices have overcorrected and in stable markets. This is because any government-based mortgage interest rates freeze may be less favorable than current rates, which are firmly negative. Moreover, refinancing remains available should climates change. In any case, the worst may not be over for a lot of America, but some places have weathered the past eight months relatively unscathed.

Escapesomewhere Real Estate is a small brokerage working in the Austin real estate market. They host a free search of the Austin MLS along with providing updated commentary on their Austin real estate blog.

On April 30th, the Federal Reserve announced a cut in their main interest rate by 25 basis points, to 2% from 2.25%. This is the seventh such cut by the US central bank since the beginning of the credit crunch some eight months ago, totaling 3.25% in cuts to the key rate that banks charge each other for overnight loans. These cuts have been made in an attempt to lower mortgage rates to help bolster the real estate market. As the fragile US economy staggers towards recovery, two major agents are working against American consumers: record inflation in food and energy. What can we expect in the future for these troubled yet lucrative markets?

In the short term, volatility will probably continue to dominate, but in the middle term inflation may take precedent over combating the slowdown, both for the central bank and regular consumers. Just as the Fed began to cut interest rates, the dollar's 5-year slide accelerated, pushing commodities that are priced in dollars like oil down relative to other currencies. This self-reinforcing process means that their futures markets are cheaper to buy in other currencies, which has led to a massive increase in speculation by flustered investors looking for a safe haven for their assets.

If the Fed were to continue to cut interest rates further, this process could keep consumer spending, which accounts for two thirds of the US economy, tamped down for some time. In March, spending only increased more than projected (0.4%) because of highly inflated energy and food costs. In addition, businesses have continued to feel the pinch of higher secondary costs that affect many other prices, even as output continues to fall. Nevertheless, the strong March activity index from the Institute for Supply Management was still stronger (48.6, with 50 meaning zero growth) than many economists had expected, implying some underlying resilience.

The lingering question remains: what is the Federal Reserve doing by cutting an inter-bank interest rate? It appears now that they are stoking inflation through price distortion, if the positive effects thereof (some stabilization of the troubled financial sector) is ignored. By making dollars cheaper, the value of oil and food is cheapened and necessarily must rise accordingly. Now exchange rates between the dollar and the euro have statistically matched fluctuations in oil prices for 52% of the last six months, compared to less than 1% for the years between 1999 and 2004. Investors and speculation have turned commodities into a superb place to dump cash, but such simplistic reasoning should be setting off alarms in the wake of the credit crunch.

In Washington and abroad, few have challenged the Fed's decisions, which have not been as noticeably correlated to price increases until recently. That may change as eurozone inflation remains stubbornly above target levels, mostly because the European Central Bank takes energy and food into its purview. While the Fed are still supposed to fight inflation first, their smaller focus means that their culpability is limited. As the election looms over Ben Bernanke's head, he is likely receiving pressure to stabilize first and ask questions later. However, a housing bubble and top-teir mismanagement led to the credit crunch now dragging down global growth. No one is looking to repeat this experience, especially because a commodity bubble is surely the worst kind.

Ki has a site dedicated to covering Austin Texas real estate. His site provides a graphical search of the Austin MLS for visitors along with providing up to date commentary on his blog about Austin real estate.

It started off simply enough. I had been updating site by hand to keep mortgage rates up to date. So I wanted to create a widget that would automatically update my website with current mortgage rates. Sounds easy enough right? But once I got started I just kept going. As long as I was putting in 30 year mortgages why not put in 15 year and 5 year and 1 year arms. I mean as long as I was doing it.

Then I discovered I could graph rates. How cool was that!



Not very cool according to my wife. And every new instance of "oh look at this" was meeted with "I thought you were finished with that last weekend". Anyway once I discovered I could graph rates why not create a tool so I could look at historical mortgage rates then I could look at rates back until the 1970's. Sweet. I mean it wouldn't take that much longer? Right? Ok well maybe it did take that much longer. But it was kind of cool. And then as long as I had a tool why not put in toggles so you could look at mortgage rates over the last few years but you could also switch the graph to see what the mortgage would be on a 200k loan for the last few years. I mean thats kind of interesting?

About this time I had realized this was all getting kind of ridiculous. And my wife was kind of doing ok considering I was ignoring her for a mortgage rate graph but I wash kind of pushing my luck.

So anyway now I have a little widget on my homepage that automatically updates each week with current mortgage rates. So to justify my time if any Active Rain members want a widget on their page with updated mortgage rates I wrote a page here Mortgage interest rates that gives details on how to install it on your site.

Ki is an Austin realtor. He helps buyers interested in Austin real estate and provides a free search of the Austin MLS along with information on his Austin real estate blog

On March 14th, Bear Stearns, the fifth-largest investment bank in the United States, entered a period of insolvency. As growing lack of confidence in the firm's subprime exposure grew, other banks eventually refused to lend to the stricken company, which has existed for over 85 years. Were Bear Stearns a commercial bank, (i.e. institutions that loan money to people or businesses) it would be able to, as a last resort, take advantage of the Federal Reserve's so-called "discount window," thus receiving a government loan at the lowest available interest rate. The reasoning behind making loans to private businesses is sound, because overall confidence in banks is much stronger. But for equally obvious reasons, the discount window cannot by definition extend to institutions that take on risk as their business because they have less or no accountability to taxpayers.

However, after Bear Stearns seemed on the brink of collapse, everything changed. Bear Stearns shares began to falter as investors took flight. The Federal Reserve took decisive action to save the beleaguered bank by guaranteeing a $30 billion loan to their biggest competitor, JPMorgan Chase, so they could buy BS without fear of acquiring more dangerous subprime mortgage-related debt. In effect the government has now bought a troubled investment bank for pennies on the dollar, (their first offer was $2 a share, when BS traded at a high of $170 a year ago) knowing that taxpayers might have to foot the entire bill themselves. At the same time, the Bush administration has maintained that no government bailouts would extend to the financial sector. Moreover, wealthy BS shareholders balked so much at the firesale of their investments that the Fed, under pressure from potential litigation, increased the bid for BS by five times, to $10 a share. This means that, while the potential losses will be felt by millions of taxpayers (many of whom are in danger of losing their homes to foreclosure), while profits will most certainly be reaped by the corporate executives at JPMorgan.

Even with its exceptional exposure to subprime securities, BS is still worth well over a billion dollars. Profit-taking was the name of the game on the heels of the announcement, as day traders bought up huge amounts of BS stock at $2 or $3 a share and sold after the bid increased. By taking responsibility for the BS takeover, the Fed has changed the course of America's financial future. By guaranteeing the discount rate to BS, they implicitly must be able to do so for other investment banks in trouble in the future, which implies continued taxpayer absorption of Wall Street failures without any corresponding kickback from banks. Unless the Fed intend to rein in on banks more as the economy struggles through the recession, this policy clearly demonstrates a dramatically different view of finance than the Federal Reserve of 1913, when there was a real discount window you could use to keep your bank alive. Now, it seems, the most secure economically secure institutions are those most separated from average American lives. Politicians who recognize the increasing resonance of populist messages in the present climate are sure to turn this takeover into a major issue.

Ki works and lives in Austin Texas. As a realtor he helps investors interested in Austin real estate. His site provides a search of the Austin MLS for visitors along with a Austin real estate blog to keep people up to date on the market.

During the subprime crisis we saw the advent of numerous bizarre loan products. In general the new loan products were designed to get people into houses they could not normally afford. As people started to default on their mortgages banks realized many of these loan products were not a good idea. During the subprime crisis we saw most of these new loan programs fall to the wayside. I think in most cases this is a good thing. Many of these new loan products reduced the chances that individuals could gain equity in their homes by paying off principle. When difficult times arose for people they were in a difficult position because although they had made years of payments their loan balance had not changed. The worst of the new loan products had "teaser rates" so that individuals made low payments for a few years until the rate and their mortgage shot up. Its a wonder why banks are surprised by the number of foreclosures.

The one product that has seemed to survive the subprime meltdown is the 40 year loan. I am not a fan of the 40 year loan. Mostly because the savings are minimal. Lets look at the current mortgage interest rates from Wells Fargo for a 40 year, 30 year and 15 year loan.

40 Year Loan = 6.375
30 Year Loan = 5.75
15 Year Loan = 5.125

Now using a mortgage calculator lets look at the mortgage payments on a 200k house.

40 Year Loan = 1153.14
30 Year Loan = 1167.14
15 Year Loan = 1594.64


While the difference between a 30 year loan and a 15 year is substantial, $441.50, the difference between a 40 year loan and a 15 year loan is only $14 per month. A little savings but is it really worth adding a whole extra 10 years to your mortgage. So over 30 years $14 dollars a month amounts to $5040. On the other hand an extra 10 years of mortgage payments comes out to $138,377. To run the numbers a different way by putting down a mere $2400 on your 30 year loan you would get the same mortgage payment as you would on a 40 year loan.

Obviously everyone's situation is different and in a small number of cases a 40 year loan might be warranted. But in general the 40 year loan adds extra years to a person's loan for a minimal benefit.

Ki works as a realtor in the Austin real estate market. He provides updated stats on the market on his Austin real estate blog along with a free search of the Austin MLS.

As the sub-prime mortgage crisis continues to unfold, new figures emerge from the Mortgage Banker's Association: A record .83. That means that, in three months, almost one out of one hundred homeowners have been foreclosed on. Because of America's size and diverse population, the statistics are somewhat skewed: In many places like Austin, Texas and New England, growth remains steady and house prices remain strong. However, in placed like Cleveland, Ohio and other pockets throughout the Midwest, foreclosures are much higher. One in every three mortgages has defaulted recently in these smaller, white-collar towns due in large part to predatory lending, as well as increasing energy costs.

But the other half of the subprime crisis plays out on Wall Street. As investment banks like big player Bear Stearns fail and the credit crisis remains, markets are pinched for investors in sub-prime securities, which have worked their way into the larger economy through such complex financial instruments as Structured Investment Vehicles, or SIVS. These entities don't consist of money per se, but "commercial paper," and therefore aren't reflected on a balance sheet, making them difficult to track.

As the Federal Reserve continues to slash discount rates, mortgage interest rates remains stubbornly above historical levels, meaning that credit is not available to banks in quantities that can allow cheaper home loans. By hoarding cash, banks are less likely to spook investors or lose needed capital. But by doing so, they exacerbate the problem, leaving central banks responsible for massive injections of liquidity to keep the cogs moving. In addition, the Fed has taken the unprecedented step of offering its "discount window" to investment banks in addition to commercial ones. Such behavior represents a fundamental break in policy for both the central bank and the president. There may be good reason for them getting their hands dirty. The extent of this credit crunch has been recently compared to the Great Depression, painfully reminding America of its most desperate moments.

Faced with the twin serpent of financial market volatility and increasing consumer pressure, it is no wonder investors are reeling. As the economy has cooled, oil prices have maintained record highs, peaking above $110 a barrel. While crude futures have reflected speculation more than lack of supply, recent falls suggest that investors may be recognizing a slow in oil demand. This also reverses the dollar's lurching fall, thus absorbing some lost profits to oil-producing countries, who peg their currency to the dollar. However, this reflects the exception rather than the rule.

In general, this cycle is self-reinforcing until a new equilibrium is reached, which cannot happen until the full extent of sub-prime exposure is known. This factor depends on the number of foreclosures on sub-prime borrowers, a mechanism for resolving both the individual defaults (necessarily a lengthy process) and subsequently assessing the potential devaluation of all its reinvested components. Until then, the economy remains like a proverbial deer in headlights, unable to understand how much risk it has taken on but running out of time.

Ki helps buyers and sellers navigate the Austin Texas real estate market. His web site has a free search for Austin Homes along with information on Austin Foreclosures

The US appears to poised on the very brink of recession. Investors are reacting as news of a contraction within the service sector for the first time in five years, an FBI investigation into predatory lending, and increasing unemployment statistics, has sent shock waves of panic through stock markets worldwide. Who wins out in a crisis of this magnitude? And how can an individual take advantage of such a difficult scenario? While volatility in recent months is hardly a comforting phenomenon, recognizing its continued presence (within relatively unstable areas of the economy such as the stock markets) is key to weathering such a crisis. Even though most areas of the US economy are contracting in some fashion, the saying that the US's sneeze makes the world catch cold is less true than ever before. As China and other Asian economies become increasingly decoupled from America, the tendancy of compensating mechanisms to come into play should increase. Someone will be able to profit from the US shoring up spending, even if it is only oil companies for some period of time. Most of these companies are reinvesting the money they make in stable companies like American financial institutions, thus tying their fate to that of the US without risk of takeover bids or boardroom posturing. While the transmission of wealth from the American middle class to wealthy overseas oil giants is gradually becoming a less attractive proposition to the average American (with increasing energy prices helping this along), the climate crisis may be able to facilitate a reduction in dependence on foreign oil that balances this feedback loop in the future. Americans are right to begin saving on a more realistic scale, if a bit slow to react. Most of America's weaknesses in this regard are only sustainable if nothing goes wrong, and the sub-prime crisis is destined to affect many other industries such as credit card companies. If a significant amount of consumer spending turns into savings, Americans will be hurting. But like an unpleasant vaccination, they will be safer in the long run. Perhaps a lesson or two in solubility and risk management has been learned. As far as an individual's best chances for taking advantage of these weakened sectors, buying a house couldn't be smarter now as the glut of unsold houses in many areas continues to drive down prices. Emerging economies will continue to grow even if America stagnates for some period of time, so investment in these regions is a safer bet than ever before. Global GDP will still grow, even if the rest of the world no longer wants to hold the West's hand while they cross the street. In fact, the complex financial instruments that have fueled the credit crunch were created in order to minimize risk. As we can see, they have only made it less obvious and harder to bring ontol a balance sheet, which costs much more. If layoffs begin to increase, government action on a larger scale is practically inevitable. The Federal Reserve is obviously prepared to drop interest rates considerably further, which means there is still some breathing room (even if it is shrinking). Ki works as a realtor helping people interested in Austin real estate mostly central. His site is filled with information such as profiles of the downtown Austin condos. He also has a blog devoted to Austin Texas real estate.

In recent months, the sub-prime crisis has reached unforeseen heights, infiltrating banks and financial institutions worldwide and causing many to report multi-billion losses due to the risky investments going sour. While the underlying economy of the US appears to be relatively robust, and the dollar's continued weakness has made investment and exports more attractive to foreigners than ever before, these factors have not salvaged pessimistic markets: The FTSE has dropped more in the past two business days than any other point since September 11th. In order for global markets to respond in such a definitive manner, they must either believe that the US is already in recession or that it is close. Ben Bernake referred to the economy as being on "a knife's edge" just as President Bush has unveiled a lackluster economic stimulus package that, if it is even able to make a substantial difference, may be implemented too late to do so. As banks continue to report record losses, in swoop foreign "sovereign-wealth funds," investment vehicles financed from state coffers in Asia and the Middle East, to shore up capital to the tune of $69 billion over the past ten months, according to Morgan Stanley. While the investment is needed badly, and no other source of capital has come running so willingly, the intentions of such funds is shrouded in secrecy. Most of this comes from genuine differences in the purposes of a given fund. Russia calls theirs a stabilization fund aimed at keeping energy prices consistent for Russians, but others are less obvious. As US citizens continue to be concerned about free trade's potential impact on American jobs, foreign investment is reaching new peaks, with their total value measured at $2.9 trillion. The downside to this gigantic increase of investment is also an upside, depending on how future events transpire. If oil prices continue to maintain their strength, oil-producing countries with huge surpluses will have more purchasing power than ever before, but at a price: By taking all the oil out of the ground, it cannot be spread out over decades and thus has limited reliability. But if that oil is converted into wealth, deposited into a sovereign-wealth fund, and invested in American firms, then the yield on their investment will keep GDP high and revenue stable. Plus, the US government won't breath down their necks (in the case of oil-related funds like the United Arab Emiritates-held Abu Dhabi Investment Authority) if they don't have oil to sell. The obvious problem here is that continued investment will be beneficial until controlling stakes in those companies are held, at which point an American backlash will be inevitable. One of the best publicized protectionist policies was the ban on Japanese companies operating radio stations, made under national security concerns. Other such problems have happened in the past, usually to the detriment of the investors, but never on the scale that economists predict will occur in the next couple of years. While looking a gift horse in the mouth is a bad policy, until sovereign-wealth funds have similar accountability to other financial vehicles, firms may be somewhat spooked. Ki is a realtor and broker in Austin helping clients searching for Austin homes. His website focuses on Austin real estate and offers a free home search. His Austin real estate blog offers insight and analysis on the market.

In the last week, many encouraging signs have been on the economic radar: The Bush administration has stated that a consensus has been reached about the impending $145 billion economic stimulus package, the Federal Reserve has cut their most important interest rate by the largest margin in a quarter century, and bond insurers are to receive government help in order to guarantee that banks will be able to avoid further damaging losses. But are these steps enough to curb a recession in the global economy, or even the US? It would appear that investors are optimistic. The 22nd and 23rd of January both saw rallies, first in emerging economy markets and later in the US, with the Dow finishing up a stunning %2.5 in a single day. Encouraging, yes. Guaranteed to succeed. hardly. Let's go over the effectiveness of each of these strategies individually, and then assess them together. First, the Bush tax break: $300 per household, allowing up to $1,200 if you have four children. Due to Democratic pressuring, the rebates even go to poor people who can't pay taxes (re: sub-prime mortgage holders). And because Republicans need something for their constituency as well, the rebates are good for couples with income up to $150,000 a year (so that their spending will trickle down into the greater economy, thus providing enormous benefit to all related industries). This represents a meager sum when compared to the average mortgage payment, which on sub-prime loans tends to roughly double once the adjustable rate kicks in. Moreover, the deficit is sure to be off the charts next year as a result of what amounts to pulling money out of thin air. Now for the Federal Reserve cut. While it took most everyone by surprise, it didn't keep the Dow from ending down %1 the day it was announced (Jan. 22nd). While the stock market made substantial gains over the next couple of days, volatility is the name of the game these days, and cutting the interest rate cut so suddenly on the heels of MLK Day's depressing Asian market performance looked to many like a panic move. The Fed have the unenviable task of attempting to appear composed when they may not always be, and minimizing the impression that they aren't responsive to falling consumer confidence. As no other central bank saw fit to act in concert with the Fed, (save Canada, whose meeting was scheduled and whose cut was a mere quarter-point) many analysts speculate that their motives are driven by short-term need for stability in financial markets, and less by the still-ominous sub-prime threat. Finally, the bond insurance bailout. If it weren't for this action, few would doubt that the US is headed for imminent recession of a particularly painful variety. But if the mechanics of the financial system, much of which depends on companies being able to confidently lend money (insured with solid capital) to one another, is allowed to grind to a halt? The sub-prime crisis would pale in comparison to the amount of profits that would instantly be lost, which some speculate would be in the hundreds of billions. This is clearly unacceptable, but an inherent danger still exists: Without the course correction on housing prices (and the debt which was transferred to major banks, and then to their, we may be doomed to something similar to the Japanese housing bubble of the 1990's wherein bank managers actively colluded with policy makers to obscure their collateralized debts in a similar fashion to the structured investment vehicles of today's credit crunch. Taken together, these factors would probably lessen a recession if it were impending. But unless people are able to get more credit, exacerbating existing problems, the downturn the US is now experiencing will likely be long and harsh. The kinks have to be worked out, and the unfortunate aspect of this reality is that those who have the least must pay the most. Escapeso is an Austin realty company. Their site is filled with information about Austin real estate along with a free search of the Austin MLS.

As the sub-prime mortgage scandal continues to play out badly for many US companies, more and more questions have been raised as to whether the impact of a slowdown in one area will translate into a nationwide, or even global, recession. Growth prospects within the US are limited for this year by the unprecedented scale of bad securities that have become investments for many companies around the world, exposing them to grave losses and destroying investor confidence. According to polls, more and more Americans are becoming wise to the potential crises and have shored up spending, in turn triggering further softening of retail markets. One cause of this problem with American consumer spending, the practically guaranteed market for many goods even in tough financial times, is that the borrowing people must first default on their mortgages before the securities (that their loans have been repackages and distributed) can truly become worthless. The speculation (or realization) that they will be unable to pay off their loans has led to the economic slowdown of the past several months, even though mortgage defaults have barely hiccuped in the same period. Nevertheless, the certainty of two million or more foreclosures over the next year cannot translate into hefty consumer spending, because so many consumers will be unable to make ends meet and many more will be on the verge. While a plan has been introduced by the Bush administration to freeze mortgage loans for an unspecified number of borrowers, no reference to the specific criteria used to decide who is eligible has yet been made. Thus the underlying cause of this shifty-eyed economic malaise is in no way addressed. Now the President has stated that the economy at large runs a great risk of recession without his impending stimulus package. Unfortunately, no one who can't pay for their house will be able to pay any taxes or credit card bills (which famously outpaced the median income this year), or for other things that cost money. A tax cut may be able to stem the defaults for a little while if implemented quickly, but if the Federal Reserve (the other institution that can help steer the economy) is any example, lip service and hawkish reticence is likely all the average American can expect. As job creation slowed to terrifyingly low numbers in November, (a paltry 18,000 new occupations) the US government finally issued a statement that growth cannot be expected to surpass 2% this year. Before it even started. So, is recession inevitable? Well, if the definition of a recession includes "no longer being able to spend more money than one makes," or collectively changing expectations about wealth and the common good, then the answer is yes. If we continue on a path of breakneck consumerism, we will trade our economic security. No one is going to complain that Americans will always spend. After all, as a market of last resort, the US consumer has, time and time again, been able to keep the growing world economy robust and secure. But if these attitudes don't change, a recession will be the least of America's worries. Escapeso is a realty company that helps buyers locate Austin homes. Buyers can start looking for homes online using their Austin MLS search. Escapeso also provides a blog focusing on Austin real estate.

In recent months, fallout from the sub-prime mortgage scandal has been estimated in the hundreds of billions, up from figures of $100 billion maximum from the Federal Reserve only three months ago. While the Fed has, in an unprecedented move, cut interest rates three consecutive times in as many months, their cuts have always given investors the impression that a later cut was inevitable, cycling in a self-fulfilling prophesy that has played out poorly for the American economy as investment and stocks have been relatively cool. This behavior reflects a prevalent attitude that the situation will get worse before it gets better, and that uncertainty is the single biggest enemy of economic growth. An interesting point of comparison for the Fed's actions in recent months is to use other central banks, such as the European Central Bank (ECB) and the Bank of England (BoE). These banks have taken a somewhat different tact against the sub-prime problems. As early as August, the ECB and BoE decided to tighten lending standards and require that potential borrowers be have informed consent, so as to avoid a repeat problem of this magnitude. The Fed had to be threatened with losing their ability to set policy in a similar fashion for them to take action. When they did, their rules did not apply retroactively in any respect to the predatory loaning, but it did at least set some precedent for responsibility in the mortgage market. These actions beg the question: Why is the Fed so darn sluggish? At nearly every turn, the US central bank has taken too little action far too late. All of their rate cuts have been anticipated like thunder after the lightning starts a massive forest fire. Their one response that wasn't completely acknowledged beforehand was the joint decision by the major banks to inject billions into the financial system overnight, which only worked because it was such a concerted effort. These circumstances bely an important aspect of the Fed's ability to help guide the economy: Sometimes a surprise is in order. The only reason for the Fed's reticence against a large, definitive rate cut is because of the ever-present threat of inflation. Yet as oil reaches the $100- a- barrel mark and food and commodity demand consistently outstrips supply, it seems their ability to exercise control over inflation seems a bit dubious. Granted, this scenario is without precedent, but so would be a 1% Fed cut in a single day. The difference is that a cut of that size would send a message that the economy is in real danger, but that the Federal Reserve is capable of taking that threat seriously and in a timely fashion- something that they have obviously failed to do in recent months. Their single remaining hope is that the sub-prime crisis will not be felt as heavily outside of the money markets it has already impacted, but as credit card companies and other financial institutions that have no primary connection to the crisis have begun complaining that, if people can't pay their mortages, they probably won't be able to pay their mounting credit card bills, the Fed's options seem increasingly limited. If nothing else, hopefully recent events will stimulate quicker action on the part of Bernanke and associates. Ki runs a website covering the Austin real estate market. If you want to start your search on the web they provide a Austin mls search on their site. They also have a blog with information and news on Austin real estate.

The recent sub-prime crisis is unlike any faced by the financial system before in one dubious distinction: Its effects are exacerbated by globalization to an unprecedented degree. Recent developments help illustrate exactly how this credit crunch can be differentiated from others, such as the savings and loan scandals of the 1980's, by its fundamentally larger scale and complexity. To explain the sub-prime crisis adequately, first the causes must be clearly identified. Like the savings and loan problems, predatory lending on the part of real estate brokers and agents, combined with a fair amount of financial fan-dangling, many banks loaned out more money than they normally were allowed to. By keeping these loans off their balance sheets, they were able to loan out much more than the rule-of-thumb ten times their deposits. If you consider that the sub-prime fallout is considered by most to be over $250 billion dollars, then the loans made could be in the trillions. The vehicles in which the debt was stored were basically invented for the purpose of deceiving potential investors into believing that they were sound investments, not risky sub-prime mortgages. The savings and loan crisis took a similar tact, and ended in similar levels of indignation, consumer despair, and regulation. As the years have gone by, those who cried for deregulation in order to help the already unprecedented economic growth skyrocket higher still have gotten their wish, but at a price: now that the Fed has instituted more clear standards for informed consent for borrowers, a crisis like this will likely not emerge again for some time. However, this is a lone consolation for the amazing amount of debt that has yet to be declared throughout the financial system. The reason this crisis is so much larger is because the repackaged sub-prime debt was sold not just to other Americans, or even Canadians and Europeans. It was sold all over the world, to China and India and many other countries. This means that the problem increases in complexity, as differing international regulations for the timetable on debt declaration and a financial system that has turned a boom into a spider's web of uncertainty contribute to higher risk to any institution that lends money. This, in turn, places a de facto cap on the amount of economic growth that can happen. But the problem is also much, much larger because the entire world has some degree of stake in it. Now European central banks are cutting their interest rates as well, in order to combat a problem that won't even really exist in a measurable form until two million Americans default on their mortgages in the new year. When the fallout was limited to the US, as was the case with the savings and loan banks, the turnaround time was a matter of two years, give or take. Now, the sub-prime crisis has been high on the international public radar for well over a year, but less than a tenth of the lowest estimates on the total debt have been acknowledged by lending companies. This means that recession is a much more likely outcome of this global problem than it seemed even three months ago. Living in Austin Ki works for a small realty company focused on Austin real estate. They provide information about the market on their blog about Austin real estate news along with a allowing users to start searching for Austin homes online through the Austin MLS.

The number of new home starts in Austin for the last quarter of 2007 is lowest since 2004. It looks like builders are pulling back on building new homes in Austin which is probably a wise move considering the Austin real estate market has slowed over the last few months. Apparently they have learned from their mistakes in other real estate markets where they failed to respond to market changes quickly enough. Read more on my Austin real estate blog

Ki is a realtor in Austin he runs a site about Austin Real Estate

The number of new home starts in Austin for the last quarter of 2007 is lowest since 2004. It looks like builders are pulling back on building new homes in Austin which is probably a wise move considering the Austin real estate market has slowed over the last few months. Apparently they have learned from their mistakes in other real estate markets where they failed to respond to market changes quickly enough. Read more on my Austin real estate blog

Ki is a realtor in Austin he runs a site about Austin Real Estate

In recent days, the Federal Reserve, the European Central Bank, the Bank of Canada, the Bank of England, and the Swiss National Bank have teamed up to auction $110 billion off to world money markets in order to ease the recent liquidity crisis. But what is liquidity? Why should banks auction off money to deal with it? And how does inflation play into this phenomenon? Well, for starters, liquidity refers to the amount of money available in a given market that can be loaned from one entity to another. If an economy is looked at as a machine, with thousands of interconnected parts, then liquidity functions like oil, keeping all the moving components lubricated. If there is not enough liquidity in the market, loans become more expensive and time-consuming, and economic growth is inherently restricted because banks are less willing to lend to each other, in case they are unable to cover their deposits. The Northern Rock bank runs in England are a perfect example of what happens when a bank cannot make good on their deposits. In today's globalized economy, banks depend on lighting-fast transactions of large sums through all parts of the world. If they are wary of lending to each other, as recent events have shown, currency supplies start drying up. With this in mind, the sub-prime crisis of recent months seems poised to further restrict growth, especially in the US. The central bank's decision to add money into the economy is designed to keep cash-flow consistent in markets, which will also hopefully help boost investor confidence. Unfortunately, the sub-prime debt still exists, and banks are unlikely to lower the inter-bank borrowing rates much until all the debt is declared on balance sheets. And with 2 million more defaults likely to occur within the next year, the crisis is far from over. This injection of cash implies that central banks are trying to stem a problem they recognize to be quite severe, as they have never taken such concerted, coordinated action before. But their course will certainly impact the other primary concern, that which central banks must balance liquidity with: inflation. This refers to price increases, which make currencies less valuable. If it takes $10 tomorrow to buy a Big Mac, then the US dollar has lost about 40 all at once, likely the outcome would be different. Only time will tell whether the huge cash injection will be enough to help banks lower their rates back to more growth-friendly levels. Working as a realtor in Austin Texas Ki runs a site about Austin Texas real estate which provides users a map based Austin MLS search. Also if you are looking for in depth commentary on real estate market Ki has a blog covering Austin real estate.

As a result of the recent sub-prime mortgage scandal, the Federal Reserve has taken many actions to avoid a global credit crisis, which it now aims to further mitigate through tightening the standards that lenders use to determine whether a potential borrower is eligible to receive a mortgage loan. Chairman Ben Bernake has stated that more rigid restrictions would "promote responsible lending," even as 2 million Americans with sub-prime predatory loans will likely default over the next year, furthering the housing slump. The first area in which restrictions have been made is on the borrower's end. Now, all lenders must ask prospective borrowers to prove that they have an income, or that the assets they rely upon to be able to pay off the loan under the terms agreed by the individual contract are soluble. The lender or creditor is now required to verify this income, and must also consider each borrower's ability to pay off the loan from other assets besides the value of their home. Furthermore, each new borrower is required to set aside other funds, specifically earmarked for property taxes and for homeowner's insurance. These funds are to be kept in escrow accounts, established by the creditor. These new rules are a drastic change in policy for the Fed, as they generally have not taken any actions towards adjusting lending responsibility, instead using their powers to control interest rates and try to ease economic hardship through making borrowing in general cheaper. Another area in which the Fed has taken regulative action involves the advertisements used to lure potential homeowners to buy. No longer can "deceptive or misleading" ads be used. Though the wording in this instance is vague, they do provide some examples. The rate for a loan cannot be stated to be "fixed" if it can change, for example. Also, brokers are unable to encourage or coerce a home appraiser into artificially changing home prices. This means that the housing bubble is less likely to inflate by a similar proportion in the future, thus limiting potential losses from another such crisis if it were to arise. Creditors are also now required to list all rates associated with a mortgage in an advertisement "with equal prominence as [their] advertised introductory or 'teaser' rates." The last section of the market to be adjusted involves servicing practices that have often contributed to the record mortgage defaults seen recently. Now, payoff statements are required more regularly, and must reflect all payment received by the lender. This regulation is designed to respond to the often problematic statements issued by lending companies to many sub-prime borrowers. Many mortgage balances would not reflect real payments, and fee notices would often fall through the cracks, building up until, finally, the borrower is financially overwhelmed all at once and cannot make repayments, thus losing their home. Repayment penalties have also been slightly adjusted, such that now penalties must meet the condition of expiring sixty days before the lender can increase the required mortgage payment. Each of these measures is designed to ensure that the days of predatory lending are over for now. Escapeso Realty helps buyers and sellers interested in purchasing property in the Austin real estate market. Visitors can either use their site to check the Austin MLS or find updates about the Austin market on their Austin real estate blog.