Less rate cuts expected in 08

Roughly half of metropolitan areas continued to show rising home prices in the fourth quarter of 2007, according to the latest quarterly survey by the National Association of Realtors®.

In the fourth quarter, 73 out of 150 metropolitan statistical areas(1) show increases in median existing single-family home prices from a year earlier, including 11 areas with double-digit annual gains and another 12 metros showing increases of 6 percent or more; 77 had price declines including 16 with double-digit drops.

Despite the annual decline in the fourth quarter median home price, the typical seller who purchased their home six years ago still saw a very healthy gain.  The median increase in value for sellers who purchased that home in the fourth quarter of 2001 is 31.2 percent, and the median home equity accumulation is $49,000.

Meanwhile Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee on Feb. 14 that the central bank is likely to make fewer rate cuts in the immediate future.

Over the past six months, the Fed has cut rates by a total of 2.25 percentage points; but the aggressive moves have not done much to alleviate the credit squeeze. Bernanke said the economy is more likely to see the benefits of the rate cuts in the second half of the year, and analysts now say the markets still expect the Fed to cut rates at its next meeting on March 18 but do not expect it to be as aggressive in doing so.

The Fed "is signaling less rather than more in the way of future rate cuts and this is disappointing to those who feel more is necessary," says Richard DeKaser, National City Corp. chief economist.

Housing is a growing issue in this contentious election year and even The National Association of Home Builders announced that its political action committee has decided to stop making contributions to candidates for Congress “until further notice.” because lawmakers and the Bush administration, "have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward"

Investor's Business Daily  (Scott Stoddard 02/15/08) reports that Congress is eyeing more incentives as ways to address problems in the housing market.

Top Democrats, who successfully backed the just-passed economic-stimulus bill, say they will push through a second measure that — among other things — will allow bankruptcy judges to alter the terms of certain mortgages.

Another measure under consideration is a tax break allowing companies with operating losses this year or the two previous years to apply them to past years for a refund. This idea is popular with home builders.

A third proposal would allot an additional $10 billion in bonding authority so housing-finance agencies can give more help to people refinancing subprime loans or first-time buyers. President Bush recently backed this idea.

Lawmakers also are considering $4 billion in block grants so localities with high foreclosure rates can buy and rehabilitate unoccupied property and $200 million for pre-foreclosure housing counselors.