Gabe's Blog

In case you were still wondering if California is a good place to purchase real estate.  Check out these stats that I came accross:

1.  35% of the homes in the U.S. do NOT have a mortgage.

2. 94.88% of all loans ARE performing.

3. The foreclosure problem in this country is really a story of seven states.

4. The BIGGEST foreclosure problems are in Michigan, Ohio, and Indiana. These are manufacturing states that had horrible job losses. Since 2001, Michigan has lost 300,000 jobs. These states would have had problems no matter what the market condition happens to be.

5. The other four states, California, Florida, Nevada, and Arizona----experienced significant overbuilding. Twenty-five per of the foreclosures in these states are on properties that are held by investors who were speculating.

6. ONLY 25% of all mortgages are subprime, and of these 75% are performing.

7. In the other 43 states, foreclosures have fallen in 2007 from 2006.

(In California which is the predictor of what is to come in Florida, the following is being said……)

According to Leslie Young, chief economist for the California Assoc. of Realtors, (which mirrors what we are seeing here) that the areas being hardest hit in California are the outlying areas where there has been overbuilding. The resale market in California’s major markets continues to be strong. In fact, the closer you are to a metropolitan area, the better the sales are. In the million-dollar plus price range, there has been essentially no change from 2006 to 2007.

TAX BREAK FOR MORTGAGE DEBT FORGIVENESS

President Bush signed into law today a new measure giving tax breaks to homeowners who have mortgage debt forgiven. Under preexisting law, the debt forgiven by a lender, such as for short sales and refinances, was generally taxable to the borrower as debt discharge income. With the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does not have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence.

This tax break applies to debts discharged from January 1, 2007 to December 31, 2009. Qualified principal residence indebtedness is debt incurred in acquiring, constructing, or substantially improving the residence (up to $2 million for refinances).

For purposes of calculating capital gains, any debts discharged excluded from income under the new law must be subtracted from the basis of the taxpayer's principal residence (but not below zero). However, taxpayers may generally exclude from capital gains income up to $250,000 (or $500,000 for married couples filing jointly) for properties owned and used as their principal residence for at least two of the last five years.

For a copy of the Mortgage Forgiveness Debt Relief Act of 2007, go to http://www.govtrack.us/congress/bill.xpd?bill=h110-3648.

Release Date: December 11, 2007

For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks.  Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.

Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation.  In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.  The Committee will continue to assess the effects of financial 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; and Kevin M. Warsh.  Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent.  In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.

2007 Monetary Policy Releases