Federal Reserve: “A sluggish Real Estate Market affects all sectors of the economy.”

So I got this article last week, but decided it was a great topic to kick off October with.

In my last blog I talked about how a housing market recovery wasn’t likely to happen any time soon, because more foreclosures were on the horizon.

“Remember, we can only say we are in an actual “RECOVERY” when home prices are higher, and people are actually making EQUITY on their investments.”

Well it turns out the Federal Reserve met in Sweden last Wednesday to discuss what more foreclosures means for the economy as a whole, and are finally realizing they may need to re-think how they are dealing with the situation…

Fed's Rosengren says allow underwater borrowers to refinance

So, as many of you may know, right now interest rates are at an all time low. ESPECIALLY on mortgages. True, this is GREAT news for people wanting to buy a home because they will be able to qualify for more money, but what about for those of us whom already have homes, but want to try and take advantage of those rates and refinance…?

"In the U.S., most homes are financed by 30-year fixed-rate mortgages, so a fall in long-term interest rates really only affects existing homeowners to the extent they refinance… This scenario is not working in an economy where many borrowers have fixed rates and homes underwater are keeping them from refinancing.”

That’s right… Interest rates being at an all time low mean nothing to those of us whom are already in a home, because the only way we can take advantage of those low rates is IF we can refinance… The only way a person(s) can refinance is if they actually have EQUITY in their home… EQUITY is something real hard to come by these days because home prices are dropping like crazy, due to SO many foreclosures hitting the market… See the cycle…?

The semi-good news is that this article is pointing out that the head of the Federal Reserve is now open to allowing banks to refinance a home, even though there is no equity in that home… The REAL-bad news is; just because he is open to the idea, doesn’t mean it will happen. In fact, in my opinion, it won’t happen any time soon because there is too much legislation that would have to pass in order for it to work…

The whole reason I wanted to blog about this topic is because I wanted to congratulate the Federal Government on realizing they need a plan B for their economic recovery, and good job on realizing that plan needs to start with aiding in the recovery of the housing market…

“Rosengren stressed that no recovery can be fueled without restoration of the housing market. Residential investment grew more than 30% in the first years of past recoveries, while in the recent recovery, residential investment actually fell in the first two years following the end of the recession… declines in real estate prices can have a substantial impact on the capital of financial institutions, which impacts their ability to finance not only the housing sector, but also other sectors of the economy…”

Here’s hoping it doesn’t take them another 10-years to actually get things going.