Buy Phoenix Real Estate NOW, Blood is Running in the Streets

IGNORE THE HEADLINES; NOW IS THE TIME TO BUY REAL ESTATE
Article by:
Robert W. Hand
Designated Broker/Owner
Equity Alliance Properties
www.equityallianceproperties.com


Ignoring the headlines is no easy thing to do with so much media buzz about recession, housing, sub-prime woes, the credit crunch, rogue traders, insolvent bond insurers, and nukes in Iran. People are afraid to make any big purchases right now when consumer confidence is, understandably, low.
When prices are falling, few people have the counter-intuitive discipline to buy homes, stocks, gold, or art but those who do pull the trigger come out way ahead in the long run. As John D. Rockefeller so graphically put it, “The way to make money is to buy when blood is running in the streets.”
That statement is absolutely timeless as it is profound and harkens to a day when that statement would have been made and taken in a more literal sense. Isn’t it just another way of saying, “Buy when the market hits bottom?” Hard to argue that we are not in a time when “blood is running in the streets,” literally in some instances. We are in a war that the world is tired of and our troops are fatigued from, the streets are lined with houses in foreclosure, home prices have dropped just as much as they so quickly rose during the boom, and the costs associated with real estate financing have dropped to an all-time low. Stocks have been pummeled this year, the GDP dropped last quarter, and talk of a recession has been running high.
Real estate consumers and investors have been standing on the sidelines “waiting” to buy real estate, looking for signs that the market has hit bottom. Well folks, we’re there. Just like with stocks, once you finally hit the absolute bottom of a cycle the only true indicator is that the prices are already up again. Prices have already started going up in many parts of the country as well as here in the Phoenix metro area. Location, location, location has always been the cry in real estate activity. And, in locations throughout the Phoenix Valley, prices have already been on the rise again: Paradise Valley, Scottsdale, and North Central Phoenix
The Federal Reserve is slashing short-term interest rates at the fastest clip in decades. Fed rate cuts always lift the economy eventually and the stock market typically starts to recover just when the headlines get the gloomiest. Sure, the market could take a dip again before a full recovery. But the recession may be halfway over already-or we may avoid one altogether.
As for housing, sure some skepticism is an appropriate response to the market events of the last couple of years. The formerly smokin’ hot markets of Arizona, Florida, California, and Nevada probably haven’t seen the worst headlines yet though they may be well close. And in Arizona, we are already seeing signs of a recovery in some areas.
Now, let’s say you want to be a homeowner, have good credit, plan to be in the area for several years, and have been waiting for the perfect entry point. The time is now to get serious, before an inevitable rise in interest rates wipes out your advantage. Interest rates will go up again and will make those monthly payments go up to where you can’t afford the house you want to buy and can buy right now.
For every 1% that interest rates go up, that is 10% less house that you can buy. For example, with interest rates at 5.5% if you can afford a home worth $210,000, then if interest rates go up to 6.5% then the most you could spend for a home would drop to $189,000, the same monthly payment as for the $210,000 home.
Now, let’s assume that interest rates go up to 7.5% (which is very likely). The amount of home you can afford will have dropped to $168,000 with the same monthly payment as a $210,000 home at the current 5.5% interest rate.
We are close enough to the absolute bottom of the real estate market that the bigger concern for homebuyers and investors has to be the inevitable rise in interest rates. That will have far greater impact on a buyer’s purchasing power, and in their capability to increase wealth through equity gains in their real estate. Stop standing on the sidelines, folks. Homebuyers and investors, the time to buy real estate is now. By the time you can read about it in the headlines, you will have lost a great deal of your purchasing power and opportunity for equity gains.

Citrus Season, Citrus Pickers Needed!

You must be thinking, "he can't be talking to me?" Well, just maybe.

It is citrus season again in Arizona and the United Food Bank (UFB) is in need of volunteers to help pick fruit.

Many generous homeowners who have citrus trees would like to donate their fruit to UFB, but are unable to pick it. UFB will provide the equipment and is asking the public to provide the labor.

This is a great opportunity for group projects for the likes of service clubs, schools, scouts, and businesses. Individual volunteers are also encouraged to call.

To help, please call DeAnna Yazzie at 480-926-4897 x218 or e-mail dyazzie@unitedfoodbank.org.

Thanks for helping out in this cause. So much of this fruit goes wasted every year that it is truly a shame, given that so many people right here in our own country are starving and going without, not to mention globally. One Love!!!

Living in Paradise, Valley Residents and Outdoor Living Spaces, Kitchens

Yes, we all love our outdoor living spaces. Here in Arizona where our climate is welcoming year round we use our outdoor living spaces more than many other parts of the U.S. For those of you who have traveled to Europe, the Mediterranean, North Africa, South America, Hawaii, and the like you will most likely have noticed how much care is taken in relegating importance to outdoor living spaces. For one, populations have crowded these older civilizations, space is much more limited, and so folks in those parts are so very motivated to make beautiful, comfortable outdoor living areas an extension of their home. I have been in such lovely outdoor living spaces where I have wanted to spend all day whiling away the hours in peace and tranquility...all of the comforts of "home" but in a gorgeous outdoor setting where the soul can drink in the spirit of place and time.

We have all seen modern floorplans that are "open" with the kitchen often connected both to a dining area and a large living area, some variation of the 'great room'. With kitchens sort of morphing into living areas doesn't it make sense then that outdoor living areas should evolve to include kitchen features? Well, that is exactly what we are seeing more and more in these days of modern living. Check out the article below for some inspiration on designing a world class outdoor living area complete with food preparation and dining space. You too can bring home the romance and charm of the old world while taking advantage of new products availble in this modern age. Enjoy! Robert Hand, http://www.equityallianceproperties.com/

New Homes: Cooking on Both Burners
by Dena Kouremetis

If the trend has been for kitchens to extend into living areas, then doesn't it follow suit that outdoor spaces are morphing into kitchens?

According to Hanley-Wood's CustomHomeOnline, one of the most popular new trends for custom homebuyers is to make big plans for outdoor entertainment.
People are looking at outdoor spaces differently and want to turn them into something they can use year-round -- no longer the little barbecue that Dad used to roll out from the garage on the first warm spring day. Outdoor kitchens, complete with built in BBQs, sinks, cook tops, refrigerators and cabinetry have become all the rage.
Backyards, side yards and (where space is limited) even enclosed front courtyards are seeing fully furnished living spaces in areas previously relegated to a patio chairs, dog runs or swing sets.
In a recent analysis by the HPBA -- Hearth, Patio & Barbecue Association -- this trend for outdoor kitchens is being perpetuated by a number of factors, not the least of which is the statistic that nearly 60 percent of all grill owners now cook outdoors year round (70 percent for gas grill owners).
To accommodate them, manufacturers who supply the barbecue hardware industry are offering increasingly higher quality, all-weather outdoor cooking appliances for both primary and the vastly popular vacation home markets. Couple that with the idea that a lot of existing homeowners are choosing to stay put for a while during this real estate market shakeout, and you've also got a remodeling explosion of outdoor kitchen additions!
Weber, a name in grilling known to even the apartment dwellers among us, recently asked homeowners what their "dream grill" would be. The overwhelming response was that it be self-cleaning and have side burners. Sure doesn't sound like the little dome-shaped grill with charcoal briquettes from the 1960s, does it?
Today's built-in deluxe grilling systems go even further and are outfitted with extras like storage and warming drawers, smoking systems, wok elements, infrared rotisserie burners and Teflon coated catch pans for easy clean-up.
Outdoor kitchens can include beer taps, patio heaters, halogen lighting, gas ovens, and gourmet bar and entertainment centers.
Who knows? With as sophisticated as some outdoor living spaces are becoming, we wouldn't be surprised if someday real estate appraisers began counting outdoor kitchens as a part of a home's overall square footage!
But if all this talk of food and the outdoors doesn't either make you hungry or give you a touch of spring fever, then we don't know what would.

Archeticts of Sup-Prime Securites over Chinese, Not Kosher

Hey Folks,
Found a great article from Bloomberg on the sub-prime debaucle. It's not as dark, jaded, and cynical as my own blog posts regarding the same matter, BUT it is also a far cry from the milk toast rhetoric being sung by today's pundits. The article describes from a bird's eye view, how the whole thing was put together. This is some really good reading, written by Mark Pittman.

Subprime Securities Market Began as `Group of 5' Over Chinese
By Mark Pittman

Dec. 17 (Bloomberg) -- Representatives of five of Wall Street's dominant investment banks gathered around a blonde wood conference table on a February night almost three years ago. Their talks over take-out Chinese food led to the perfect formula for a U.S. housing collapse.
The host was Greg Lippmann, then 36, a fast-talking Deutsche Bank AG trader who aspired to make mortgage securities as big a cash cow for Wall Street as the $12 trillion corporate credit market.
His allies included 34-year-old Rajiv Kamilla, a trader at Goldman Sachs Group Inc. with a background in nuclear physics, and 32-year-old Todd Kushman, who led a contingent from Bear Stearns Cos. Representatives from Citigroup Inc. and JPMorgan Chase & Co. were also invited. Almost 50 traders and lawyers showed up for the first meeting at Deutsche Bank's Wall Street office to help set the trading rules and design the new product.
``To tell you the truth, it's not very glamorous,'' Lippmann says. ``Just a bunch of guys eating Chinese discussing legal arcana.''
Those meetings of the ``group of five,'' as the traders called themselves, became a turning point in the history of Wall Street and the global economy.
The new standardized contracts they created would allow firms to protect themselves from the risks of subprime mortgages, enable speculators to bet against the U.S. housing market, and help meet demand from institutional investors for the high yields of loans to homeowners with poor credit.
Boom Turns Bust
The tools also magnified losses so much that a small number of defaulting subprime borrowers could devastate securities held by banks and pension funds globally, freeze corporate lending, and bring the world's credit markets to a standstill.
For a while, the subprime boom enriched investment bankers, lenders, brokers, investors, realtors and credit-rating companies. It allowed hundreds of thousands of Americans to buy homes they never believed they could afford.
It later became clear that these homeowners couldn't keep up with their payments. Defaults on subprime mortgages have so far produced about $80 billion in losses on securities backed by them. The market for the instruments is so opaque that many firms still aren't sure how much they've lost.
Chief executives at Citigroup, Merrill Lynch & Co. and UBS AG were replaced. To forestall a housing-led recession, the Federal Reserve has cut its benchmark rate three times since August and is injecting as much as $40 billion into the credit system to encourage banks to lend to each other.
`You Can't Wait'
This is the story of how Wall Street transmitted the practices of southern California's go-go lending industry and the inflated U.S. real estate market to the global financial system:
-- In Orange County, California, a mortgage lender named Daniel Sadek was among those who took notice of the increase in Wall Street's appetite for subprime loans. He turned the staff at his firm, Quick Loan Funding, into a subprime mortgage factory. ``You can't wait,'' said his ads, aimed at high-risk borrowers. ``We won't let you.''
-- In Dallas, a hedge-fund manager named Kyle Bass taught himself to use the contracts pioneered by Lippmann's group, then went looking for mortgage-backed securities to bet against. He found them in instruments based on loans Sadek made.
-- In New York, the ratings companies Standard & Poor's, Moody's Investors Service and Fitch Ratings put their stamp of approval on securities backed by loans to people who couldn't afford them. They used historical data to grade the securities and didn't adjust quickly enough for the widespread weakening of criteria used to qualify high-risk borrowers. Among the securities on which they bestowed investment-grade ratings: those backed by Sadek's loans.
`Robert Parker of Raw Fish'
Lippmann was a Wall Street renaissance man, with a strong appetite for sushi and an online restaurant guide so comprehensive one blogger labeled him ``the Robert Parker of raw fish.'' He opened the kitchen of the $2.3-million Manhattan loft he lived in then, complete with six burners, two grills and 20- foot island, to an Italian cooking class.
The goal of Lippmann's group on that winter evening in 2005: to design a new financial product that would standardize mortgage-backed securities, including those based on high-yield subprime loans, paving the way for their rapid growth. Of the firms participating that night, Lippmann's Deutsche Bank is based in Frankfurt, UBS in Zurich and the others in New York.
In February 2005, pension funds, banks and hedge funds owned fixed-income securities that were earning returns close to historic lows. AAA-rated securities based on home loans offered yields averaging a full percentage point higher than 10-year Treasuries at the time, according to Merrill.
Lure of Subprime
The trouble was that most creditworthy borrowers had already refinanced their houses at 2003's record-low mortgage rates. To meet demand for mortgage-backed securities, Wall Street had to find a new source of loans. Those still available mainly involved subprime borrowers, who paid higher rates because they were seen as credit risks.
While the group of five banks had packaged billions of dollars in subprime-based securities, in February 2005 none was among the leaders in the home-equity bond business. Countrywide Securities, RBS Greenwich Capital Markets, Lehman Brothers Holdings Inc., Credit Suisse Group and Morgan Stanley dominated the industry.
The banks wanted more mortgage-backed securities to sell to clients. Creating a standardized ``synthetic'' instrument, or derivative, would leverage small numbers of subprime mortgages into bigger securities. In this way, the firms could produce enough to meet global demand.
Building the Rocket
``We called up the guys we felt like we knew and could work with,'' Lippmann says.
Deutsche Bank sprang for the take-out food, and traders and lawyers sat down to design a new product and create what would soon become one of the hottest capital markets in the world.
The meetings were monthly, beginning at 5 p.m., after the trading day, and lasted more than three hours each.
``In the beginning, everybody brought their lawyer,'' says Lippmann.
Eventually, the Chinese food was replaced with deli fare because some participants complained it wasn't kosher.
The group sought to bring ``transparency,'' or openness, and ``liquidity,'' or trading volume sufficient to ensure ease of buying and selling, to the mortgage market.
The most important issues centered on how to account for the eccentricities of mortgage bonds, perhaps the most difficult-to-value securities on Wall Street. Unlike corporate bonds, home loans can be paid back at any time.
`Pay as You Go'
Traditionally, the best mortgage traders have been those who can read macro-economic trends to guess when homeowners will pre-pay their loans. Until recently, early repayment was perceived as the biggest risk faced by Wall Street's mortgage desks.
One concern with creating a standardized contract for mortgage-backed securities was that it was difficult to agree on a simple method of determining how market-changing events affected the values of the complicated, layered instruments.
To deal with the complexity, the group of five decided to install a ``pay-as-you-go'' system. When something happened affecting the cash flows underlying the security, the seller would have to make cash payments to the buyer immediately, and vice versa.
ISDA Steps In
As the group nailed down the details, the International Swaps and Derivatives Association, which sets trading terms for dealers, arranged conference calls including more of Wall Street.
To this point, some of the biggest mortgage underwriters -- Lehman Brothers, Merrill, Bank of America Corp. and Morgan Stanley -- hadn't been included in the negotiations. These firms heard about the talks and demanded to be let in.
On the conference calls, which included the market leaders, things got testy. One point in dispute was whether the contract should be traded on the basis of price or yield.
``Some of those points of detail were getting a little heated on the calls, and it was just thought it would be better to have a meeting face to face to move beyond those points,'' says Edward Murray, a London-based partner of the international law firm of Allen & Overy who was the chairman of the meeting and the outside counsel for ISDA. ``To be frank, the dealers that were not in the group of five were not that happy that there was a group of five.''
ISDA sought to resolve the differences by calling a sit- down meeting at its New York headquarters. Over coffee and pastries, Murray faced a crowd of dozens of traders and lawyers. Kamilla and Kushman acted as discussion leaders.
`Talk Was Very Firm'
``Rajiv would say something, and I'd be absolutely convinced about what he said,'' Murray says. ``And then Todd would say, `Well, I don't agree.' And I would be absolutely convinced about what Todd said. And then Rajiv would say `Well, the reason you're wrong is' and so on, et cetera.'' Kamilla and Kushman declined to discuss the negotiations.
Michael Edman, one of Morgan Stanley's representatives at the ISDA conference, was less chipper, Murray says.
``Arms folded, frown on his face, I'm not sure that's exactly true, but he wasn't in a happy-go-lucky mood,'' Murray says. ``There wasn't any shouting or anything, but the talk was very firm.'' Edman, who no longer works for Morgan Stanley, declined to comment.
By June, the differences were sorted out, the new contract was endorsed, and banks that hadn't been party to the group of five negotiations signed on. The banks would go on to create similar derivative contracts to trade securities backed by loans for commercial buildings and collateralized debt obligations, or CDOs, which are securities backed by various kinds of debt.
Creation of Index
Another necessary step was to create an index to represent the market and help hedge general market exposure. It was called the ABX-HE and would be similar to the indexes traders use for baskets of stocks. This, participants believed, would add to the market's liquidity, or depth, by attracting more trading.
By September 2005, some within Deutsche Bank were beginning to worry about defaults on subprime mortgages and how that might affect the securities based on them. A team of Deutsche Bank analysts that month warned of growing subprime market risks.
The ABX-HE index started trading on Jan. 19, 2006. At 8 a.m. on the first day, John Kane of Sorin Capital started phoning dealers. Kane, then 27, was a trader at Sorin, which runs hedge funds that invest in mortgages and other securities.
His auto mechanic, in describing the debt burden he was carrying to own a home, had planted the idea in Kane's mind that the housing market might be in trouble. Kane thought it through, ran an analysis on available data, and decided to wager against, or ``short,'' subprime. To do that, he turned to the portion of the ABX index dealing with the lowest investment-grade subprime securities.
Investors Go Short
The trouble was that quotes from brokers selling the ABX were already dropping, an indication that a number of investors wanted to do the same thing.
``All the other dealers were already scared'' and dropping their bids, Kane said while on a panel at a November industry conference. ``All but Goldman. So I bought from them.''
On its first day, the index traded more than $5 billion. The cost of wagering against the securities was rising, a sign that traders saw an increased chance of default. An early warning was visible to anyone who knew where to look.
The new derivatives were a hit among the group of five's customers -- the banks and other institutional investors that bought them to lock in high yields.
In the months to come, Deutsche Bank and at least one other member of the group of five, Goldman Sachs, began using subprime derivative contracts to bet the other way and guard against the possibility that subprime mortgages might default.
Lippmann Explains
For Lippmann's part, he says, it wasn't that he had ``any secret knowledge'' of the damaging events that were about to unfold in the U.S housing market. Rather, he says, he thought the risks of a downturn were significant enough to justify the millions of dollars it would cost to ``short,'' or wager against, subprime securities.
He says he told his bosses: ``If we're right, we're looking at a sixfold gain. And since a housing market slowdown is not as big a long shot as that, we should take the risk.''
Lippman disputes that the derivatives the group of five helped create -- which banks packaged into CDOs -- caused the subprime crisis.
``The problems in subprime are what they are and derivatives did not cause them,'' Lippmann says. ``Derivatives enabled more CDOs to be created and the stakes to be bigger. But the transparency made people realize the problem faster.''
Others see things differently. Derivatives, or ``synthetics,'' are ``like wearing a seatbelt that allows you to drive faster,'' says Rod Dubitsky, director of asset-backed research for Credit Suisse. ``The total dollar amount of losses, all these losses you're seeing, are from synthetics. No question, it changed the game dramatically.''
(TOMORROW: A California lender heeds Wall Street's call.)

Paradise Valley Homeowners go Green: Recycled Glass Countertops are "IN", Granite is "OUT"

Well, we all enjoy living in our luxurious homes in the desert. It's a blissful, peaceful lifestyle and yet for me anyway, at times I get to feeling a little bit like, "wow, do I really need all this, seems a bit like overkill." Seems alot of us have a growing conscience and perhaps collectively we all are gathering in a place of an expanding consciousness leading us down the path to GREEN building concepts. Well, if you are like me and you build your home before the whole Green thing came into play, don't fret. There are still plenty of ways to go green or at least greener when it comes to your existing home. We can replace our outdated A/C and Heating units with the highly efficient units containing variable speed motors (TRANE is the best, the innovator). We can decorate with green materials, remodel with green materials, put in gas-filled dual pane glass (if you don't already have it).

Of late, one of the very easiest things we can do to go green is to use recycled glass countertops for our kitchen and bathroom remodels. There we go...finally. Were you wondering when in the heck granite and marble was going to finally be "out"? I was, for sure. And I thought, man it is so beautiful and natural and everyone expects to see it in luxury homes and we all KNOW that granite has been so OVERDONE! Yep, granite has been overdone as have been the 3 or 4 "Tuscan" designs that every builder has copied over and over with some variations (turrents?....who on God's green earth needs a turret in their house?). These times will be marked by the whole silly phenomenon...same way the mid '80s to mid '90s are marked by the white stucco with pink tile roofs. Luxury homeowners; please stick with timeless architectural lines, don't copy others' work. When it comes to architectural features, think art. When it comes to redecorating/remodeling think ART from Recycled materials. Glass countertops are every bit as interesting as any sculpture or other work of art in your house. A bit more expensive than granite and marble, but a refreshing new look. The article below tells a bit more about this bold new move, from granite and marble to glass.

Green Living: Recycled Glass Is In
by Drew Johnson
Consumers wanting a beautiful-looking home while also doing their part to protect the environment have a myriad of options for decorating their kitchen.
And those looking to replace or install their counter tops should know, marble and granite are out and recycled glass is in.
Marble looks great, especially in the hands of master sculptors, but it is a limited resource. If you are looking to build or remodel your kitchen, check out recycled glass instead.
Recycled glass surfaces look good, are unique, and come in many different colors and styles. They also last just as long as marble and granite.
Vetrazzo, a company making glass surfaces since 1996, is located in Richmond, California, and has had its counter tops showcased in the Ritz Carlton hotel in Miami south beach and on the nationally televised program "Living with Ed."
Vetrazzo uses discarded glass from sources such as decommissioned traffic lights, windshields, used bottles and plate glass windows to create their surfaces. 85 percent of their surfaces are made of glass, and 100 percent of that glass is recycled.
Vetrazzo's surfaces comes in a wide range of colors, ranging from "Alehouse Amber" to "Firehouse Red." They determine the color of the surface by using different colored glass ingredients. For instance, "Cubist Clear" surfaces are created using clear glass from recycled windows, and "Bistro Green" comes from recycled soda bottles, olive oil containers, pickle jars and wine and water bottles.
According to Vetrazzo's website, their product is comparable to granite and marble in scratch resistance, heat resistance and stain resistance.
And as far as price goes, James, a sales rep for North Star Services, says, with installation, Verazzo is somewhat more expensive than non-exotic marble and granite, but buyers appreciate the fact their surface is recycled and completely made in America.
Our customers think of their surface as a work of art," says James, "It's as much of a conversation piece as a sculpture or a painting."

Thank you,
Robert Hand
http://www.equityallianceproperties.com/

Kudlow on Bernanke; Wants More Tax Breaks for the Rich & Corporations

Well, Larry Kudlow, the all-too-predictable, bright but not brilliant economics journalist is coming to Bernanke's defense that much of the criticism aimed at him was undeserved. Mr. Kudlow's head is buried so deeply in the sand that I should feel sorry for him, but I don't. In the article below, he got it about 1/4 right, but only on the issue of the Fed's involvement in the mortgage crisis....so ok, he got the whole thing about 1/16 right. He addressed that one with all the vim and vigor of a naive school girl who still believes in Santa Claus and blushes in fury when those mean kids keep laughing at her (Larry Kudlow) for still believing and poke fun at the fact that she is still bed wetting. Sorry, but the gloves are off and have been for some time in this arena. See my earlier blog post(s) on the mortgage crisis, not for the naive little school boys and girls. The masses are idiots and Larry Kudlow is showing, once again, that his is just one of the sheep. And this yahoo is a pundit and well respected journalist? Where is the outrage? Oh yeah, I keep forgetting that the average American reads and listens for a comprehension level of a 7th grader.

After Kudlow sings Bernanke's praises, he then goes on to give us a look at his own economic policy, or perhaps more appropriately, what he wants for Christmas. That's right, he wants more tax cuts for corporations, eliminate the corporate capital gains tax. That's such a wonderfully democratic proposal; harkens back to Reagan years and the introduction of Reaganomics, the trickle down economy. That sort of top-down law making is not democratic at all but serves only the elite, the super rich, the few. Let's be clear, this type of legislative policy does not serve the common good of the people but of the few. How much more tax burden should the middle class bear? ALL OF IT? Apparently so according to Kudlow, and Republican front runner John McCain. JUST ELIMINATE ALL CORPORATE TAX! That will fix our wagon. Well, enough of me on Kudlow. You can garner a glimpse this maroon's own finite vision in his latest rant below. Merry Christmas, Larry Kudlow! I hope you get nothing but a big fat lump of coal in your stocking, God willing. Ya know, I'm being unfair. Larry Kudlow would make a great Fed Chief...really, just ask him and he'll tell you! In fact, he would make a great leader of the free world if we could just get him potty trained.

February 07, 2008, 5:52 p.m.
Bernanke’s Next Challenge
The Fed chief needs to end the stop-and-go policies he inherited from his predecessor
By Larry Kudlow
Charlie Plosser, president of the Philadelphia Federal Reserve Bank, warned this week about the risks of inflation, overly aggressive interest-rate cuts, and further damage being done to the Fed’s credibility. I agree with Plosser.I say this as a supporter of the “shock and awe” Fed policies that brought the fed funds target rate down from 5.25 percent to its present 3 percent. These aggressive actions were necessary, and they’ve paid off. The target rate is now properly below the 10-year bond yield, while the Treasury curve is upward sloping for the first time in nearly twenty months. The overly tight money period of 2006-07 has finally come to an end. And even though in its aftermath the economy could skip into mild recession, this is a positive, watershed event.Most economists ignore the fact that the sub-prime credit crisis, along with the extraordinary downturn in housing construction and home prices, is largely the result of the Fed’s massive tightening move that lifted the funds rate above 5 percent in the first place. Fed chair Ben Bernanke inherited this bucket of smelly molasses from his predecessor, Alan Greenspan. In straightening the situation out, Bernanke has opened the door to a rapid economic recovery. It’s a signal achievement for the former Princeton professor.Bernanke has taken a lot of criticism in the last year, and I think much of it is undeserved. Wall Street claims that he’s an isolated academic, unaware of the real-world difficulties of sagging capital markets, slumping stock prices, and slowing growth. But he moved aggressively once he saw the credit problem develop last summer. And new information obtained under the Freedom of Information Act reveals how he has been meeting with leaders in business, finance, and government all along. He has talked with John Chambers, the CEO of Cisco Systems, Sam Palmisano, the head of IBM, JPMorgan’s chief Jamie Dimon, former Senate banking head Phil Gramm, and international central bankers Jean Claude Trichet and Mervyn King. The street was wrong about Bernanke. He’s been on top of the situation. He took remedial action and the economy will be the beneficiary faster than people think.But here’s his next challenge. Bernanke needs to end the stop-and-go policies he inherited from his predecessor. Greenspan became a supreme monetary tinkerer in his final years, putting the Fed’s interest rate and monetary levers in constant overdrive. Go. Stop. Go. Stop. This Keynesian central-planning has damaged the Fed’s credibility. It has weakened the dollar. Entrepreneurs and investors can’t possibly plan ahead when interest rates bob up and down like yo-yos.I suspect Charlie Prosser was referring to all this when he talked about the Fed’s credibility this week. If so, he’s right. So let’s say good-bye to Fed tinkering once and for all, and say hello to permanent enhancements to the economy’s incentive structure. How about lowering tax rates on corporations? How about lowering the corporate capital-gains tax rate? Why not abolish the individual capital-gains tax? Or the dividend tax? Or the estate tax? Why not eliminate the multiple-taxation of savings and investment?At some point, the entire corporate tax structure should be thrown out, along with all the murky K-Street tax-earmark loopholes that litter the IRS code. We need to broaden the tax base and lower marginal rates. This is the key to maximizing future economic growth on the supply side. Without strong tax-reform measures to expand the production of goods and services, further Fed money injections are only demand-side “solutions” that will surely inflate prices and depreciate the currency.Back in the 1970s, policymakers in Washington were obsessed with increasing aggregate demand, but they forgot about aggregate supply. Today’s short-term-stimulus rebate package is a throwback to that era. It’s not economic stimulus; it’s political stimulus. Congressmen up for reelection are trying to “do something” in response to primary-season exit polls that say Americans are totally unhappy with the economy. But these rebates are budget busters. And how will Congress attempt to pay down $400 billion in budget deficits? Higher tax rates, of course. And then we’ll really be back in the 1970s.Out on the campaign trail, Sen. Hillary Clinton has a Nixonian idea to freeze interest rates on sub-prime mortgages. Exactly wrong. Doing so would cause financial havoc at home and abroad. Perhaps Sen. McCain, who is now campaigning as an heir to Ronald Reagan, will argue for strong, pro-growth tax reform to expand economic growth and a steady monetary policy to protect the dollar and reinforce domestic price stability. One can only hope.But if Bernanke can officially put the yo-yo interest-rate days behind us, we’re halfway there.

Getting the Word Out: It's a Good Time to Buy Real Estate

Realogy, the parent company of some of the biggest player/names in the industry such as Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, ERA® and Sotheby’s International Realty® has started generating a campaign to spread the word that the Real Estate Market is back! They are making this effort in attempt to combat all of the negative press that the media has being stirring in their big, black caldron for the last couple of years. The article below by Beth McGuire of Rismedia best describes this effort by parent company Realogy. Please enjoy.

Get the Word Out: It’s a ‘Good Time to Buy’
By Beth McGuire
RISMEDIA, Feb. 8, 2008–”It’s a good time to buy real estate.” That’s the message Realogy, the nation’s largest real estate franchisor, wants agents to broadcast to buyers across the country.
The company is spreading the word through a national advertising campaign in USA Today, which began this past Wednesday and will run again on Feb. 13th and 20th. This is Realogy’s second national push in as many years to take a strong stance against the barrage of negative press directed toward the real estate industry over what is reported as the declining condition of the housing market.
The Parsippany, New Jersey-based parent of the Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, ERA® and Sotheby’s International Realty® brands, ran a full-page advertisement in the front section of USA Today and expects to reach more than 3.9 million consumers with its message. The ad lets consumers know that recently-cut mortgage rates and a wealth of available properties, make today a “great time” to purchase a home.
The timing of the ad, titled, “Think You Can’t Get a Home Loan? Well Think Again. You May Be Pleasantly Surprised.,” aligns with the recent Federal Reserve interest rate cuts, and lets consumers know that: money is available for those who meet basic requirements; affordability has improved; rates are attractive; and inventory is plentiful.
In an exclusive interview with Alex Perriello, president & CEO of the Realogy Franchise Group, he said the ads aim to educate consumers who might be at the positive tipping point on buying a home.
“We want to educate the consumer with relevant facts about today’s real estate market,” he said. “There are a lot of positives, and we feel that reinforcing the positives will help clarify things for consumers who are on the fence what to do in today’s market. I travel a lot to real estate offices and I hear from a lot of our agents that buyers are out there, but that they are not sure what to do. We felt that talking openly about the opportunities may help people to see that it is a good time to get into the market, and we believe it is.”
Perriello said there are three common misconceptions consumers have about the real estate market right now :people can’t get a loan: affordability is out of reach: and consumers should wait for rates to go lower.
“I was watching a news show last week after the Federal Reserve made its second rate cut on Tuesday, and the host of the program said, ‘I don’t know if it will help because you can’t get a mortgage.’ You hear this over and over again. We want to set the record straight on that. If you meet very basic requirements - you have a job for the past two years, you can make the payments, you plan to live in the property and you have a credit score that suggests you are responsible, you can get a mortgage. These are all reasonable requirements.”
He added that affordability today is better than it has been in almost three years, and that interest rates are now at 40-year historic lows, so people shouldn’t wait to buy.
In the national scope of the economy, Perriello said that the Federal Reserve is doing a good job of doing what it can to avert a recession, but stopped short on any market predictions for the remainder of 2008.
“It’s too early to know how it will go,” he said. ‘We’ll see what the impact of the rate cut brings. Another wild card is [President Bush’s economic] stimulus package, which has gotten through the House but is now stalled in the Senate.”
To combat negative press, Perriello believes that all real estate professionals need to take a very proactive position in the marketplace. “We recommend they absolutely follow our lead,” he said. “We are providing to our franchisees the ad template so they can customize it with their branding and information in their local markets. There are some great talking points in these ads.”