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Market Report Monday September 10, 2007

By
Real Estate Agent with RE/MAX Elite

Monday, 9/10/07 4:30 PM 


 

Two Federal Reserve bank presidents suggested that the U.S. economy is weakening after the labor market shrank in August, and that the housing market shows no sign of recovery. Janet Yellen, head of the San Francisco Fed, cited "significant downward pressure based on recent data indicating further weakening in the housing sector and the tightening of financial markets.'' Atlanta Fed President Dennis Lockhart said employment began softening in June. He also declined to repeat remarks he made just four days ago that there weren't "conclusive'' signs of a faltering economy. 

 

The interest rate market continued to get safe haven buying as the recession outlook is becoming hard a cement after the jobs fell in August. According to Yellen, the decline in employment actually began in June. It shouldn't be much of a debate anymore that the US (and then the global economy) will settle into inflation after six years of expansion and most importantly, reckless lending by every sector.

 

The past lending in the mortgage industry, from the loan ranger originator to the highest towers in the New York financial center, has come to a shocking end and after it is all said and done the mortgage lending industry will not be the same again. And it won't stop there, consumer lending, car lending, and home equity loans will be squeezed almost to death. Not quite, but almost dead. It took 15 years of gradually relaxing lending standards with the decline escalating rapidly in the past six years. The pessimism is growing everyday and will continue when additional economic data is released between now and the end of the year. But will Fed cutting interest rates solve this financial mess?

 

Any cuts in rates will be welcomed and will have some positive impact, if not real, it will help the psychology momentarily, but will not forestall the coming losses. Cutting interest rates, the Fed will be playing catch up unless they really jump head first into the pool filled with piranhas by cutting 50 BPs, isn't going to make a lot of difference. The credit squeeze isn't likely to relax just because borrowing rates decline; it has to run its course with huge almost unimaginable losses yet to be realized in the spread market, in the residential real estate market, in the consumer credit market, and in LBO arena. No short cuts to re-balancing the credit markets.

 

No economic data again tomorrow; Bernanke will speak in Germany tomorrow at 11:00 am EDT. We would applaud if Bernanke stops his don't worry, be happy thoughts and admits that the Fed has found itself in a rapid economic declining spiral---but we won't hear it. Central bankers are along for the ride in this credit crisis and really can't (and shouldn't) do anything to salvage the speculators, hedge funds, and others that were lining their pockets. The shame is that in the process of this multi-year correction ahead, many innocent consumers will feel the pain.

Vanessa Stalets
www.vanessastalets.com
RE/MAX Elite
615-957-6333 cell
615-661-4400 Office

*courtesy CTX Mortgage, Franklin TN*

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