The darkest days in the housing industry may soon be behind us. Although the National Association of REALTORS® has reported dismal figures for existing home resale’s for June, July, August and September for this year other figures such as new home and condo sales hint of renewed consumer confidence on the horizon.

With the drop in both interest rates and the median home price nationally it may be time to purchase as the cost of housing is more affordable now than in recent years.

While the sub-prime lending fiasco made great headlines for the liberal press the reality is that it affected a very small segment of the housing market. Even a smaller portion of the market was affected here in Missouri as the sub-prime loans were never truly embraced by local lenders. Missouri banks and mortgage companies based in Missouri primarily stayed with conventional loans requiring income verification and down payments of 10-20%.

The indirect affect on the local housing market was the shaken confidence of home buyers with all the media attention given to the credit crunch created by sub-prime loans going into default even though it was a national, not a local phenomenon.

While the Dow quickly soared back to over 14000 shortly after the Federal Reserve dropped interest rates by a half of a point, today Wall Street fell 140 points at the time of this article after Citigroup’s dismal earnings numbers and news of a potential $100 billion emergency fund to help out three of the largest U.S. banks hit by the chaos created by sub-prime mortgages.

So is the worst behind us? That depends entirely on consumer confidence really and unfortunately the media can all too easily sway and shaken this confidence. The press has begun irresponsibly throwing about the “recession” word of late. Keep in mind that a recession is defined by two consecutive quarters of negative GDP (Gross Domestic Product) and we have yet to log the first. Is this once again an attempt of the media to create rather than report the news? Given the deep hatred of President Bush by the liberal press it is a distinct possibility.

Before you decide not to buy another home or continue to put off a purchase you should do the research for yourself. This is far too important of a decision to leave up to a clearly biased media. And while researching check out how much new housing starts have declined in the past few months. This will lead to a much lower inventory in months to come and could begin a substantial increase in new home costs. Especially if the Federal Reserve again cuts interest rates soon as has been predicted by many.

~Rhonda McMillan

As anticipated on September 18th, the Federal Reserve cut interest rates. To the delight of many the expected quarter point reduction was doubled with a half point reduction in the “Prime” rate.

This will give welcomed relief to many homeowners laboring to pay increasing monthly mortgages created by the sub-prime lending debacle. While the decrease in interest rates may not be enough to save all distressed homeowners the fact that the Fed was willing to intervene was more than enough to spark this year’s highest daily gain in the stock market of 335 points.

In an unrelated press conference today President Bush stated “these are unsettling times in the housing market”. President Bush reiterated that steps are being taken for the government to assist some homeowners refinance and again stated that the tax code was being revised to exclude any debt forgiveness by financial institutions in mortgage refinancing as income to the borrower.

The current tax code views this type of debt reduction as taxable income and would only add to the woes of distressed homeowners.

The President’s proposal of the tax code revision is a positive step for the housing industry and will help curtail the rising tidal wave of foreclosures.

~ Rhonda McMillan
Broker

Federal Reserve Chairman Ben Bernanke is expected to cut prime interest rates today in an effort to lessen the impact of the credit crunch that was created by the sub-prime mortgage market.

Most economists are predicting a quarter point cut while some economists are asking for a bolder half point slash.

The current 5.25 percent that banks charge other banks has not been cut in over four years.

It is unclear how much this expected cut will help distressed home owners that were caught up in the sub-prime lending schemes that offered teaser rates going into a mortgage that eventually place monthly home payments at an unsustainable rate that has lead the industry to record foreclosures.

I will keep you posted as we are most defiantly in a very volatile housing market.

Rhonda McMillan
~Broker

The Labor Department announced today that an estimated 4,000 US jobs were lost last month despite a forecasted 110,000 job gain.

These job losses in August reflect the first and largest decline since August 2003 and are attributed to losses primarily in the construction, manufacturing and transportation sectors.

The fact is that all of these sector job losses are a direct result of the housing slump and we have NOT seen bottom yet. Our strong economy throughout the Bush Administration has had a record housing market as its core.

The lack of Consumer confidence created by the latest housing crisis and credit crunch has filtered through to employers that sense a storm on the horizon and have begun to “batten down the hatches”. I tend to agree we have only begun our journey down this slipper slope that sub-prime lenders have placed us on.

We will continue to see the economy adversely affected as this housing crisis plays out through all on next year as some mortgages will as much as double and thousands of homeowners are forced into foreclosure.

~Rhonda McMillan
Broker