Saint Louis MO Real Estate Today

Countrywide slashes up to 12,000 jobs – What does this mean for St. Louis real estate?

Loan originations will be 25% lower in 2008.

Struggling mortgage lender Countrywide Financial Corp. announced as many as 12,000 jobs will be cut over the next 90 days.  This dramatic announcement was made via a company statement released late yesterday.

The cuts represent 20 percent of its workforce and follow elimination of 500 jobs at its subprime lending unit Full Spectrum announced previously in August and an additional 900 jobs mostly from its mortgage processing and production divisions announced this past Wednesday.

Since the mortgage marketplace meltdown began earlier this summer, Countrywide, the largest mortgage lender in the US, along with many other mortgage companies has struggled to gain its balance again.  This massive job cut was expected by many blogs, analysts and investors on Wall Street

Countrywide indicated in the announcement that it, like most other lenders, is shifting gears with a new focus on conforming loan programs which are considered more conservative.  These mortgages would either be held as long-term investments in the portfolio of the savings bank that is owned by Countrywide or sold to government backed mortgage purchasers Fannie Mae or Freddie Mac.  In addition, Countrywide also plans an additional increase in loans made via the programs offered under the Housing and Urban Development’s FHA loan programs.

Countrywide said that it also expects a 25% decline in loan origination volume in 2008 based on interest rate levels and disruptions in the mortgage marketplace. 

The bottom line:  This job cut was widely expected and confirms what we’ve been stating for the Saint Louis MO market.  Fewer home buyers will be getting loans – As a St. Louis home buyer make sure you are working with a professional and experienced mortgage consultant.  For Saint Louis MO home sellers, insist that every offer from a home buyer be re-screened and qualified from a mortgage professional such as Jerry Vitale at Gorman & Gorman. 

We recommend that home sellers in St. Louis MO not move forward with offers unless they have a reliable second option for loan approval.  Just like walking a tight rope without a net, it doesn’t make sense for a home seller to not have a backup either.

Unfortunately, the mortgage meltdown has made things even more difficult for Saint Louis MO homesellers attempting to sell For Sale By Owner (FSBO).  It was extremely challenging to qualify potential St. Louis home buyers prior to the mortgage meltdown, now it is nearly impossible.  Every Saint Louis MO FSBO (for sale by owner) should be working closely with a mortgage professional who is experienced and highly professional.

Photo courtesy of bloomberg

Good or Bad for Saint Louis MO Real Estate - If the Fed Changes the Federal Funds Rate?

 

The Federal Reserve’s Open Market Committee (FOMC) meets September 18 and Wall Street’s financial wizards are in a quandry on what to expect as far as a change in the Fed Funds Rate (FFR).

Will the Federal Reserve leave the rate as it stands now? What are the implications for Saint Louis MO’s Real Estate Market and housing sector from a rate decrease?  If the Federal Reserve does implement a decrease, by how much will it decrease the FFR?  These very questions have analysts from Wall Street to the halls of AG Edwards, JD Edwards and Stifel Nicholaus in St. Louis MO confounded. Any Saint Louis MO resident who turns on CNBC can’t miss the active debate and discussions. 

Most analysts point to options trading as one of the best ways to evaluate the probability and direction of a change in the Fed Funds Futures.

Based on the most recent analysis dated 9/5/07 for Fed Funds Futures Options the following table summarizes predictions for a change (and amount of change)

Expected FFR	Probability
5.25%	12%
5.00%	28%
4.75%	42%
4.50%	10%
4.25%	8%

The bottom line: Wall Street and options overwhelmingly expect a drop in the Federal Funds Rate. It is anyone’s guess by how much however. Don’t forget about the Jobs Report Coming out Friday (tomorrow). This will be a major market indicator and most analyses will adjust – as well as options pricing – based on whether the report is weak or strong and by how much.

Stay tuned St. Louis!