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Economy Stabilizing as Banks Deteriorate

by Doug & Gwen Campbell at Sun Bay Associates

According to the Wall Street Journal, despite the possible stabilizing of the economy, more banks are endangered.  The banking industry has a gloomy outlook, at least for the short term as federal regulators have added 111 lenders to the list of endangered banks, despite signs that the economy is stabilizing.

FDIC now reports that at the end of June 2009 there are 416 banks on its problem list, which is about 5% of the nation's banks.  This is up from 117 at the end of June 2008.  These problem banks have just under $300 billion of assets.

Being on FDIC's problem bank list means that the bank is at a high risk of insolvency, said the Wall Street Journal.  So far this year, state and federal regulators have closed 81 banks.  Gerard Cassidy, an analysit with RBC Capital Markets said that he believes "there are hundreds of failures to come."

On a more positive note, housing units sold in the past month have stabilized or increased and the prices appear to be stabilizing as well.  So, despite the continuing troubles with the banking industry, the US economy is showing signs that it has or is about to be stabilizing.

Existing Home Sales Lead Market Surge

by Doug & Gwen Campbell at Sun Bay Associates

Friday morning stocks surged as the Dow Jones average went up 139 points to 9489 and the Nasdaq Composite Index was up 1.4% to climb above 2000, reported the Wall Street Journal.

After the National Association of Realtors reported a better than expected jump of 7.2% in existing home sales for July, the stock markets began the Friday morning surge.  The 7.2% increase in home resales was the biggest monthly increase in at least 10 years as first time home buyers rushed to take advantage of the first time home buyer credit that expires at the end of November.

Ben Bernanke, Chairman of the Federal Reserve, stated "economic activity appears to be leveling out in the United States and abroad."  He added that prospects for the near-term growth "appear good" but the recovery is likely to be relatively slow with unemployment only gradually declining from its current high levels, reported the Wall Street Journal.

Where is the real estate market going?

by Doug & Gwen Campbell at Sun Bay Associates

Does anybody know where the bottom of the real estate market is?  According to the Wall Street Journal, it is not here yet.  The latest newsworthy drag on the real estate housing market is the subprime mortgage bonds that are now flooding the market at prices that are much lower than where many banks want to sell, according to the Wall Street Journal.

Many experts commeted that this is a bad omen for residential real estate market prices and homeowners trying to sell their homes.  The glut of the subprime instruments is even having an impact on homeowners who are trying to refinance their homes.  The very low prices for the subprime loans is putting heavy downward pressure on the value of homes in nearby neighborhoods, continuing to drag home selling prices even lower.  These subprime loans are having a negative impact on the federal government's efforts to stabilize the housing market, and thus the broader economy.

According to Karen Weaver, global head of securitization research at Deutsche Bank AG, the steepest losses are on subprime loans, were lenders generally are recovering only 26% of the original loan amount.  These prices continue to decline because investors won't buy these properties until they become attractive for investment.

Many regions across the country with the most depressed real estate prices are those same regions that only a few years ago experienced building frenzies and wild price increases, with no justification.  Experts feel that the currently depressed prices are a market correction from the recent price explosion and that eventually the real estate market, nationally as well as in the hardest hit areas, such as Tampa Bay and Las Vegas, will return to historical norms and resume slow and steady growth.

Displaying blog entries 1-3 of 3

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Photo of Gwen and  Doug Campbell - Sun Bay Realty Group Real Estate
Gwen and Doug Campbell - Sun Bay Realty Group
at Keller Williams Realty
30522 US Hwy 19N, Suite 107 S
Palm Harbor FL 34684
Doug's Cell 727-741-4189
Gwen's Cell 727-741-7260
Fax: 888-447-7908