| Stimulus deal promising; housing risks still plentiful
Analysts are currently trying to decide if interest rate cuts and a stimulus packages will help or hurt.
Mark Zandi, of Moody's Economy.com, sees Fed cuts and Washington's proposed tax rebates as a step in the right direction. Consumers with mortgages about to reset to new rates might now be able to hold onto affordable rates rather than facing payments they cannot tolerate. That should keep people from losing homes and pouring more houses for sale into an already glutted market.
Meanwhile, consumers may have lower interest rates on everything from credit cards and car loans to home-equity lines of credit and college student loans. But lenders are monitoring credit histories closely, so those who have overindulged may not find relief.
And the housing mess that's been weighing on the economy and stock market is far from over.
Economic stimulus a big break for home buyers
You could get a big break on your mortgage from the economic stimulus package announced Thursday. Besides its core purpose of providing tax refunds, the tentative package - which still has several hurdles to clear - essentially rewrites the definition of "jumbo" loan, raising the cap from its current $417,000 to as high as $729,750 in high-cost areas for one year. That would mean home buyers who need the high-ticket mortgages this area requires could qualify for the benefits now limited to non-jumbo, or conforming, loans: an interest rate that's roughly a full percentage point lower. On a $650,000, 30-year fixed-rate mortgage, the savings could be $417 a month, according to California Sen. Barbara Boxer's office. "This is exactly what we need for California," said David Crane, Gov.
Bad Advice
Once a farmer told his neighbor that his best had the colic. His neighbor volunteered that when his mule had colic, he gave him a quart of whiskey. "Really?" the farmer asked. "Yep." A few days later the farmer saw his neighbor again and said in a huff, "I gave my mule a quart of whiskey like you said and he keeled over and died on the spot." "Hmm…" his neighbor mused, "mine too." Bad advice comes easy. And it's obvious looking at the current home mortgage crisis that plenty of it's been going around. Just like the neighbor/large animal vet, I routinely hear would-be experts offering lousy financial advice. Over the past decade, millions of Americans have used historically low interest rates to get over their heads in debt buying houses, cars, and toys they couldn't afford. Rather than looking at overall costs or value, a generation of consumers grew up focusing only on whether they can make the monthly payment.
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