Huge discounts on the American house market.

New statistics indicate that the American house market will not recover immediately. In November there were sold more new houses than in the month before but that was due to the considerable discounts which the customers received. The average price for a house in the United States decreased in October with 13 per cent, the largest fall in more than 35 years.

In November 728,000 new houses were sold in the USA, a lot smaller than the average expectation of 750,000. Compared with previous year the quantity decreased with 25 per cent is. Many people can’t buy a house because of the new credit conditions. Everyone fears that the crisis on the house market will give a bad influence to the rest of the American economy.

In the third trimester the American GDP still grew with 4.9 percent but for the last three months of 2007 economist counts on less than 1 per cent increase.

According to me, the American economy will indeed be in a debt point due to the house market prices. However, I think that the American policy have to intervene much more is this subject in stead of making war in other countries.

http://www.tijd.be/nieuws/economie_financien

Benjamin

Credit crisis just started.

The American credit crisis will become much more terrible, warns the bank of America, the largest bank in the United States. According to the bank the interest feet of the mortgage loans are accelerated soon, as a result of which today people want to be able to pay back their credit. The credit crisis has already caused a disorder on the financial markets since the end of June.
According to the newspaper it’s assumed that many Americans can’t longer pay off their loan because the interest of their credit has increased. Sale of houses decreased in October to the lowest level in eight years. An estimate says that the prices in the twenty main cities shrank this year already with at least 5 per cent. Houses which have been confiscated by a bank or credit supplier, are being sales with a discount of 20 up to 25 per cent. The energy prices are also increased and it’s much difficult to get consumer credits, as a result of which people with financial problems don’t have a solution for the upcoming months.

For the population of America it will become difficult the upcoming months. In America they don’t know social benefits like in Belgium, it will be very hard for most of the families.

http://www.tijd.be/nieuws/economie_financien/artikel.asp?Id=3405775

Benjamin

Recession, mortgage crisis

Due to the crisis in America the house prices stand worldwide under pressure, in Spain for example, complete streets are standing already for sale. In our country the damage seems to be better than expected, mainly by our almost unique mortgage interest calculation.
Meanwhile we know that the credit crisis is much deeper then we thought and that the impact will remain a couple of months. The American economy is still well for 26% of the world economy. The rest of the world has little choice and must participate to solve the problem. The American economy is (still) too large and (still) too powerful and the American question is (still) too important for the rest of the world. America has less credit possibilities, meanwhile for example China has a surplus of almost 1500 billion dollars. Without American question the Chinese economy survives also, purely on the internal question, the same applies to Europe. The USA can’t continue lend no longer. concerning a couple year the rest of the world will not care what happens there in the USA.

It is true in this way, that how more we show that we want to help America with there bad economy, how less they will solve the problem themselves. Problems must attain solved by looking at to the causes. I am convinced that a bad political policy influence to a bad economy.

http://www.dft.nl/goeroes/finanscoop/2613367/Een_spelletje_kwartetten.html

Benjamin

Fed lowers growth prognosis for the year 2008.

The Fed now believes that the American economy will grow between 1.8% and 2.5% in the following year. The average of 2.15% is a lot less than the 2.4% that Wall Street predicts. In June when the subprime crisis started the Fed still predicted a growth of 2.6%. In order to become more transparitive, the Fed is going to give a growth prognosis four times a year in stead of 2 time a year.
It's remarkable that the Fed only estimates a maximal growth of 2.5%. This depressed point of view is bad news for Wall Street. Due to this negative point of view it is not likely that the interest will be lowered soon, dispite a deceleration of the growth. The Fed is doing so because she is the only central bank in the world who has double objectives, price stability and full employment.
The Fed admits that the lowering of the interest on October 31 was a close call. Big problems in the housing market were eventually the incentive to lower the interest.
The Fed also states that a significant decrease of the dollar could bring inflation along. Hereby they are leaving the door open for a possible increase of the interest rate.

If the Fed wants to become more transparitive they'll have to hurry up. Nobody knows what to expect: higher or lower interest rates? There are discussions about interest rates but such decissions should be unanimous.
Secondly it's becoming very hard to interprete the released figures. Mostly they are smukked up and only in the next period they are adjusted. This means that people are working with the wrong figures for months. Therefor I think it's a good idea to give 4 growth prognosis a year instead of 2. But this is hardly enough...

Thomas

source: http://www.tijd.be/nieuws/economie_financien/artikel.asp?Id=3395594

American mortgage crisis will even get worse.

Next year many people who have a mortgage will have to deal with an interest adjustment adjustment. Many of those borrowers won't be able to deal with this, so there will be even more house who get sold. The interest adjustment will eventually result in a surplus of 362 billion dollar interest. The main part of the subprime adjustable-rate mortgages are the
2-28-loans. Here the interest rate is fixed the first two years but is adjustable every year in the following years. If a mortgage with a fixed rate of 7% gets adjusted to 9.5% in the third year, it means an extra $350 interest for the average borrower.
An other point wich indicates that the crisis will even get worse is that if houses eventually have to be sold, it will be hard to sell them and they will be worth less. The value of houses already decreased by 25%...
Meanwhile the American government is trying to do something about the crisis. Arnold Schwarzenegger made an agreement with four main bank to freeze the adjustable rates of some adjustable mortgages. This could mean a lot for people who still can pay their interests but wouldn't still be able if the rates got adjusted.

The crisis will get worse for sure. A $350 dollar extra interest is a disaster for someone who already struggles with the current rate. Those people will be forsed to sell their homes. But the gains from this sale won't be enough to pay their loans back. The value of houses already dropped by 25%. There will be social dramas, poverty will increase, employment will drop, it will be harder to maintain social wellfare,... .
The reaction of Arnold Schwarzenegger is a beginning but he won't be able to freeze the rates forever. The main problems like the prices of the houses have to be solved. They will have to do something rapidly about this or social disasters will happen!

Thomas

source: http://www.tijd.be/nieuws/economie_financien/artikel.asp?Id=3405177