This is a recession - and there simply aren't too many levers left for the Fed to reverse the trend. Interest rates really cannot be lowered. TIPS (a form of security) are a bargain, because of the rates as they exist and the hedge against inflation they provide.
The heavy investment in the housing sector represents investment in non-productive goods. Houses don;t produce anything for the economy, households do (and businesses do). Homes for many are a bad investment by comparison to many other, because in the absence of inflation homes do not increase in value and mortgage payment are mostly interest. Mortgages are the pledge of death.
The mortgage foreclosure crisis has caused a drop in cities' revenues, a spike in crime, more homelessness and an increase in vacant properties, a survey of elected local officials out today shows. About two-thirds of 211 officials surveyed by the National League of Cities reported an increase in foreclosures in their cities in the past year, according to the online and e-mail questionnaire. A third of them reported a drop in revenues and an increase in abandoned and vacant properties and urban blight. About one in five subprime mortgages made in the last two years are likely to go into foreclosure, according to a report released yesterday, ending the dream of homeownership for millions of Americans.
Federal Reserve Chairman Ben Bernanke publicly urged lenders yesterday to forgive a portion of the principal owed on loans. Bernanke insists the time has come for banks to consider this tactic if they want to prevent foreclosures.
This is bad news for many, but will create opportunity for many others. The level of equity in home is at a 50 year low, which makes it difficult to sell out of a property, particularly for those who recently purchased, and many people will not be able to cover the closing cost for a second time in such a short period.Labels: Mortgages, subprime |
