Real Estate New York

Market Update January 2008

Feds Look to End Credit Crunch

Ben Bernanke and the Fed join up with other central banks to help beleaguered financial institutions borrow more easily.

By Paul R. La Monica CNNMoney.com editor at large

The central bank plans to hold four special auctions between Dec. 17 and Jan. 28 to allow banks to bid for the right to borrow money directly from the Fed. The first two auctions will be for up to $20 billion each. The amounts of the third and fourth will be determined in January, the Fed said in a statement.

The Fed is giving beleaguered banks the opportunity to access funds without having to borrow money directly from the Fed at the usual short-term discount rate, which stands at 4.75 percent.

The Fed added that it was coordinating with the Bank of Canada, European Central Bank, Bank of England and Swiss National Bank on the auction process in order to "address elevated pressures in short-term funding markets."

The other central banks will hold auctions similar to the Fed's. The Fed also set up foreign exchange swaps to allow the European Central Bank and Swiss National Bank to make loans in dollars instead of their much stronger currencies. The hope is that this will lead to lower interest rates abroad.

"This was a global effort among a number of central banks. We wanted to announce that together. We couldn't announce that yesterday as Europe was closed," the Fed official said.

Feds Urged to Cut Rates Again

FORMER US Treasury Secretary John Snow has called on the Federal Reserve to cut interest rates again to offset the housing slump and indirectly slammed Goldman Sachs for the "duplicitous" short-selling of mortgage backed securities.

"The Fed has responded with a series of measured policy actions, but more will still need to be done to avoid a steep downturn, despite the most recent inflation reports,'' Mr Snow, now chairman of Cerberus Capital Management LLP, wrote in an opinion piece published in the Wall Street Journal.

The US central bank has slashed interest rates by a full percentage point, to 4.25 per cent, since September. Its next scheduled policy meeting is Jan. 29-30.

The Fed has been pushed to act by the US housing crisis, which spilled into a global credit crunch in August. Tighter lending standards and falling house prices could undermine US consumer spending and badly sap growth.

Mr Snow outlined other action that would help buffer the ailing economy, including the speedy recognition of banking losses, followed by recapitalisation and the takeover of weakened financial firms by their stronger rivals.

He also argued that banks should be required to "stay on the hook''  for their home loans by making them keep a portion of the debt on their balance sheets, rather than distributing it to other investors via securitisation.

This would encourage banks to be more careful in writing loans in the first place.

"It would also help avoid the duplicitous behavior of publicly marketing an asset-based security to customers, while privately betting it will fall in value,'' said Mr Snow.

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Be Ready When the Time Comes

The current credit crunch and price decline presents a once in a lifetime opportunity for the savvy home buyer

But now, more than ever, future home owners need to have their financial house in order to take advantage of upcoming bargains in the Capital Region real estate market.

A realistic budget that includes all of your monthly expenses is the first step to a stronger financial footing. As you create your budget for the year ahead, be on the lookout for areas where you can easily save money — you'll find that every little thing counts.

For help on your path to budgeting success, read these savings tips and download this budget worksheet from Buffini & Co., a Carlsbad, Calif., coaching organization.

7 Savings Tips

• Take note of extra income. If you receive regular income from other sources — such as referrals, teaching, or broker price opinions — add line items so can track these income sources and grow them. For example, realizing you've earned $4,000 by teaching a homeownership course at a local college may encourage you to look for additional teaching opportunities.

• Make smart car decisions. Use online calculators at sites such as LeaseGuide.com or Bankrate.com to determine if it's more cost-effective to own or lease a car. Hint: In a lease, car price is the most negotiable item.

• Buy in bulk. Many vendors offer a discount for buying in bulk. If you find a closing gift you like, buy all your closing gifts for the year at once to save money, as well as the time for last-minute shopping trips.

• Change the bulbs! This is an easy one. Reduce your energy costs at home and at work (if you rent space) by using compact fluorescent light bulbs. Each CFL bulb will save you $30 over the life of the bulb, according to the U.S. Environmental Protection Agency.

• Factor in depreciation at tax time. Based on IRS calculations, most computers and office equipment should be depreciated over a five-year period. However, office furniture is depreciated over seven years.

• Rethink your insurance deductibles. If you have a $250 or even $500 auto deductible but haven't made a claim in several years, you'll probably save money by raising your deductible.

• Stow away money for retirement. If you earn less than $110,000, or you and your spouse earn less than $160,000 annually, you can contribute to a Roth IRA. For the 2007 tax year, each spouse under 49 can contribute $4,000; spouses 50 or over can contribute $5,000

Click for more budgeting tips from the National Association of Realtors

Architectural Coach: Shed Homes

A subset of the Modern style, including (insert links) Shed homes were particular favorites of architects in the 1960s and 1970s. They feature multiple roofs sloping in different directions, which creates multigeometric shapes; wood shingle, board, or brick exterior cladding; recessed and downplayed front doorways; and small windows. There's virtually no symmetry to the style.

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