good news today from the feds...

Below is the statement released by the Federal Open Market Committee after its September 18 meeting on interest rate policy:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.

Opportunity with Boni and Joe

September 5, 2007

Boni and Joe remain on the cutting edge of service, garnering ground-breaking prices for our listings and finding opportunities for our buyers. How? First, by the two of us combining the power of west-side connections with an intimate knowledge of east-side neighborhoods. Next, the power of Sotheby’s guarantees that you get respect from other agents and their clients, allowing for greater opportunity.

How are we leveraging opportunity for our clients?

Have you heard the news regarding increases in foreclosures? The housing industry in LA is faced with unstable news as some highly-leveraged (mostly) first-time buyers have defaulted on their loans.

Please remember, however, that real estate is a very LOCAL industry and that by a WIDE margin foreclosures are occurring on the outskirts of LA in places like Lancaster, Palmdale, Moreno Valley, Temecula and to a lesser extent Riverside and San Bernardino. (Call us and we will send you the local foreclosure map)

Why are foreclosures up? Several homeowners’ have gotten used to using their houses like a piggybank, thereby living over their means. When appreciation slowed down, they were unable to extend their equity lines or refinance. In addition, rates are up so many short-term “teaser rates” are re-setting at much higher payments, and some are finding themselves short.

So why does that effect us here in “the city”? Well, money is more expensive as the “Fed” has steadily raised interest rates. Banks have knee-jerked back to old (more sane) qualifying standards, requiring borrowers to have a job (gasp!) and good credit (huh?). This has definitely resulted in fewer buyers in the starter home category and has made buyer’s who previously could afford $1.5M now have to settle for a house at $1.2M-$1.3M. In addition, there are media reports creating doubt.

What’s real? Locally, we are seeing correctly priced homes selling quickly (and surprisingly often) with multiple offers. We are also seeing a lot of unrealistic seller’s who are leaving their houses on the market at too high a price. This is compounded by a psychological shift in buyers, reacting to national news stories and to a lesser extent the increase in rates.

Here in “the city”, many buyer’s are pulling the trigger, and in many cases getting really good deals. In addition, many sellers are having success and while they may not be getting prices from 2005-2006, they are none-the-less making quite a profit as long as they have owned the property for a while.