December 14, 2007
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Our local real estate market is experiencing accelerated slowdown. In November in the Silver Lake and Echo Park areas there were 13 active sellers for every home buyer. In the Los Feliz area there were 8 sellers for every home buyer. Only a year ago we had two sellers for every buyer in both areas.
Most of the housing slowdown is related to growing inventory of homes for sale, declining prices, and current lending crisis. Many potential buyers employed in the entertainment industry are taking very cautious approach to home buying these days.
The Hollywood writers strike entered its sixth week and still there is no apparent agreement between the writers and the studios on the horizon. The strike directly affects our local economy, and if continues much longer, it will cause severe pain not only to the real estate business, but also to many local businesses.
On the economic front the Federal Reserve cut the funds rate on Monday by a ?% to 4.25%. The major banks followed lowering the prime rate to 7.25%. Wall Street did not believe the rate cut was sufficient and stocks lost ground after the Fed rate cut announcement. Is another rate cut sufficient to revive the housing market?
There are fundamental credit and liquidity problems in addition to high consumer debt which are dragging the market and the economy down. These problems can not be solved in a short time. The mounting foreclosures and a prospect of millions of homeowners loosing their homes are supposedly of high concern to the government.
Last week Bush administration unveiled its plan to help homeowners that face the prospect of higher mortgage rates in the next few years. However there are so many restrictions that only few will qualify. Whom is the administration trying to help when only few borrowers will qualify for this bailout? Obviously this plan is a PR attempt to show compassionate side of the government. The main beneficiaries of the proposed government bailout would be big banks facing huge write offs in their portfolios due to declining property values.
We are approaching the holiday season with uncertainty and many clouds on the horizon.
The big banks are almost daily writing off huge mortgage related losses, the econmy is still facing recession, and the consumers are hard hit with rising energy and food prices.
I wish you all joy and happiness. Let's hope that the New Year will bring our nation peace, prosperity, and a change not only in Washington.
Copyright Andrew C Maleski 2007. All rights reserved.