Impending Rate Cuts: Good News for Real Estate Market?

band-aid is selling well at the duane reade and lowering the interest rate is nothing more than bad psychology. don't understand why people have to listen to bernenke or listened greenspan who was nothing but an economic charlatan. - mad cramer

Posted by: guest at January 11, 2008 9:14 AM

Did anyone see Bernanke's speech yesterday? Anyone with even limited powers of observation could see that he looked extremely nervous and I'd even say scared shitless. Not a good sign.

Johnife is spot on.

Posted by: guest at January 11, 2008 9:17 AM

Suits me, as every quarter point reduction saves me $143.75 per month on my HELOC.

I don't see that it will have much of a short term effect in increasing liquidity in the mortgage market though. And given the unease in regard to house valuations I can see lenders reducing their LTV %'s which will not help maintain current house prices as these over the last few years seems to have been based more on what people can afford each month rather than the true value of the dirt & the bricks.

Posted by: guest at January 11, 2008 9:18 AM

This isn't good for my real estate investments in the hood.

Posted by: guest at January 11, 2008 9:23 AM

whole time they were raising rates people said would hurt housing. And it didn't. And lowering is not going to help.
The rate Fed sets is not mortgage rates.
The market determines that.

Posted by: guest at January 11, 2008 9:24 AM

My BONUS check bounced. WTF!!!

Posted by: guest at January 11, 2008 9:28 AM

We don't need further rate cuts. It weakens an already weak dollar.

We need to let the markets do their thing right now.

Posted by: guest at January 11, 2008 9:30 AM

"Dollar will fall even further, Chinese will pull out their their financial investments; "

Not so fast. I think the dollar will rally this year also the Bond Market say "Fuck you, Pay Me"! People are going to need cold hard cash to do things with and will refuse to pay high asset prices (deflation).

To the assholes The FED does NOT control interest rates!!!!!! They control overnight rates between the 22 banks in their system. The Bond market set rates!!!

When the assholes get tired on low return or high inflation on their money, Rates will go to the moon.

The FED cannot save asset prices because people cannot service their debts anymore. Joe 6 pick and Chuckie is out of money. Look at Japan in the 90's they had 0% rates and people didn't want the money!!! You cant force someone to loan you money and the Banks will use low interest rates to shore up their reserves.

Understand!!! We are in a world of fucking shit and I think we have a DEPRESSION on our hands. A fucking shit storm of DEFLATION!!!!
We are fucked.

The What

Someday this war is gonna end...

Posted by: guest at January 11, 2008 9:39 AM

martis,

what firms are you talking about?

I don't understand why people believe that Wall Street bonuses drive the NYC market when half of them don't even live in the city. Many bankers live in Westchester and CT.

I think this rate cut is not going to affect anything. People are already reeling.

Posted by: guest at January 11, 2008 9:45 AM

"I don't understand why people believe that Wall Street bonuses drive the NYC market when half of them don't even live in the city. Many bankers live in Westchester and CT."

For the WS folks who don't live in the city, the city is where they keep their piece on the side.

Posted by: guest at January 11, 2008 10:02 AM

"Deflation is not necessarily a bad thing. "

Oh yes it is!!! If you been banking on appreciation of asset prices.

"The banking system may very well collapse, but we aren't going to have massive repossessions or anything - that would lead to total chaos."

Yes asshole, Profit thru chaos! They will buy things pennies on the dollar.

"Perhaps this is our chance to finally sweep the banksters and usurers off the temple mount and begin anew."

Keep fucking dreaming. The American dream requires you to be asleep. They have been doing this shit for years. The Big Boys will be bailed out. You (assholes) will foot the bill.

The What

Someday this war is gonna end....

BTW Lookie at the market!! Homie the Clown says "I don't think so" LMMFAO!!

Posted by: guest at January 11, 2008 10:03 AM

If by bankers and usurers you mean Jews, you are an anti-semite. If by bankers and usurers you mean actual bankers and money lenders, you are a crank. Not great options!

Posted by: guest at January 11, 2008 10:04 AM

While The What is laughing, I'm stripping his car. Silly What.

Posted by: guest at January 11, 2008 10:05 AM

Per The What's instructions, I'm beginning construction of an organic, locally sourced bread-line/soup kitchen in the burned out hull of one of the soon to be defunct 5th Avenue eateries.

Posted by: guest at January 11, 2008 10:07 AM

"While The What is laughing, I'm stripping his car. Silly What."

I'm laughing because my gun is pointed at you,

The What

Someday this war is gonna end...

Posted by: guest at January 11, 2008 10:09 AM

10:02,

LOL...that's probably right.

Posted by: guest at January 11, 2008 10:28 AM

i love this country keep dropping the rates so i can refinance yet again . i love the new benz dont you?

Posted by: guest at January 11, 2008 10:43 AM

Dear would be economists on this sight:
GET A CLUE. There is no chance of a 3/4 point rate cut. The most possible is half a basis point.
The FED is caught between a rock (Not Iraq) and a hard place trying to teeter totter between inflation (Low dollar, high gold and oil) and recession (18 straight months of decline in factory employment).
The issue for NYC real estate is how long can prices hold out against the tide? Interest rate cuts are unlikely to bolster NYC prices much against a nation wide trend.

Posted by: guest at January 11, 2008 10:56 AM

Agreed with 10:56. The only thing that is going to seriously adversely effect NY real estate is a recession. So the real question should be whether or not an interest rate cut (1/2 pt max), would help the economy fend that off. Also, fyi, even at a firm that wrote down $15 Billion in subprime losses for FY07, bonuses were down 20% across the board. Of course some FI traders fared worse (if they're still around), but hardly an end of the world scenario.

Relax everyone.

Posted by: guest at January 11, 2008 11:18 AM

Given that most signs point to the fact that the economy is already in recession, a rate cut should help mitigate the duration. However, the liquidity/asset bubble of the last 7 years will take a while to work through...with tighter underwriting standards etc. don't expect any immediate improvement in liquidity/lending etc. The financial service industry is significantly weakened and this will have a trickle down affect throughout the NY economy...layoffs to come, 2009 bonuses to be hit, increase in taxes to cover budget shortfalls and so on. It won't be the apocalypse, but it will not be pretty either.

Posted by: guest at January 11, 2008 11:50 AM

I think the article actually suggests a 50 bps rate cut at the next meeting and then another 75 bps of cuts through to the summer taking the funds rate down to 3% or lower by the summer. I dont know how you can rule this out given the sharp deceleration that seems to started sometime around Oct. Still wouldnt see that helping real estate too too much given stricter underwriting and the fact that prices are still pretty high most places and consumers are pretty stretched.

Posted by: guest at January 11, 2008 12:36 PM

How soon until we can see the mortgage rates and especially the jumbo loans being affected by the proposed 50bbp reduction at the end of the month and proposed rate reductions in the spring & summer? Will the loans that are being written today and to the end of this month see any reductions?

Posted by: guest at January 11, 2008 12:42 PM

12:42

15 & 30 yr fixed mortgages are tied to the Bond/Treasury markets - only loans linked to Prime really see any short term effect from Fed interest rate changes.

Posted by: guest at January 11, 2008 12:58 PM

@12:42 PM.

I'm curious as well. I'm in the process of buying and I need to contact my mortgage lender and get some answers! I hope it's good news for us.

Posted by: guest at January 11, 2008 12:59 PM

12:58pm

So, 5/1, 7/1, & 10/1 ARM's IO could be benefiting from this? Thanks for your prior info also.

Posted by: guest at January 11, 2008 1:02 PM

If that's true, how come my HELOC payments got bigger this month even though the feds have been cutting rates? Can I expect them to go down again next month?

Posted by: guest at January 11, 2008 1:14 PM

"So, 5/1, 7/1, & 10/1 ARM's IO could be benefiting from this? Thanks for your prior info also."

Forget about Arm and Interest only Mortgages. Banks don't make those loans anymore. FYI The Arm and IO loans are tired to LIBOR at the 10 yr T-Bill.

If that's true, how come my HELOC payments got bigger this month even though the feds have been cutting rates? Can I expect them to go down again next month?

OH Fuck, You know that HELOC's are 'callable loans' right?? I know some of you assfucks are going to argue with me!! Look at the HELOC the bank can say "Fuck you pay me!" at a moments notice. Pray to GOD you did not buy bullshit with that money because, they will make you SELL that shit to recover their money!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

The What (Laughing My Ass Off)

Someday this war is gonna end...

Posted by: guest at January 11, 2008 1:51 PM

How much ass do you have left, exactly, What-boy?

Posted by: guest at January 11, 2008 1:53 PM

It's funny, on bankrate, Countrywide is offering 5.780% on jumbo loans and BofA is offering it at 7.100%. Yeah, I know, those flash results are nothing to take to the bank about but it is interesting that the rates for Countrywide are lower today than yesterday. Especially considering their sell and the announced Fed rate cuts.

1:51pm Banks are not lending 5/1, 7/1, & 10/1 ARM IO loans anymore? Yeah right.

Posted by: guest at January 11, 2008 2:26 PM

10:04: "If by bankers and usurers you mean Jews, you are an anti-semite."

I'm an anti-semite. I'm tired of Jews constantly playing victim to non-existent persecution. Thanks for your help and confirmation!

Or did I misread that, and you're an anti-semite, too? If so, nice work on stereotyping then passing it off as tho it came from someone else...

Posted by: guest at January 11, 2008 2:26 PM

The following article appeared today in the New York Law Journal:

Cadwalader, Wickersham & Taft, a leading law firm in the area of mortgage-backed securities, announced yesterday it was laying off 35 lawyers in the face of slumping credit markets.

New York-based Cadwalader is not the first law firm to have announced cutbacks in the face of the securitization slowdown, but it is arguably the most prominent. Cadwalader's large practice advising on the issuance of mortgage-backed securities helped catapult the firm to the top of the legal profession's profitability charts over the past few years.

But the market for such securities has all but disappeared since late summer, when a wave of defaults among subprime mortgage borrowers shattered investor confidence. Gregory A. Markel, the head of Cadwalader's litigation department and a member of the firm's management committee, said yesterday the firm decided to take action only after studying the market and determining that the downturn was likely to continue for some time.

"We concluded that this was not a three-month phenomenon or even a six-month phenomenon," he said.

Mr. Markel said most of the laid-off lawyers worked in Cadwalader's New York headquarters though the firm's Charlotte, N.C., office was also affected. All were in the firm's global finance and capital markets practices.

Almost all of the affected lawyers were associates, said Mr. Markel, though he said one or two counsel may also have been let go. He said all of those laid off were talented lawyers that the firm had hoped to avoid losing.

"It's a difficult situation because human beings are involved," he said. "This was not a green-eyeshade decision."

The affected lawyers will receive around three months' severance as well as health coverage for the rest of the year, he said. Those who qualified for year-end bonuses in 2007 will receive them. In addition to the layoffs, the firm is redeploying around 25 securitization lawyers to other practices within the firm.

Mr. Markel also said the firm was confident there would be no more layoffs in the future. After yesterday's action, the firm will still have around 260 lawyers in the two affected practices.

Cadwalader is hardly alone in facing a difficult market. Wall Street investment banks have announced billions in losses related to mortgage-backed securities and most have drastically pared groups working in the area, with some declaring their intention to leave the market altogether.

A number of law firms active in the area have already announced cutbacks. Clifford Chance terminated a six-lawyer group in November. Thacher Proffitt & Wood and McKee Nelson both have offered buyouts to large numbers of associates working in the area.

Thacher Proffitt Chairman Paul Tvetenstrand said yesterday that 24 of its associates had accepted buyouts and the firm would not be resorting to layoffs. He noted that all of those associates had since found other work.

Given its large practice in the area, layoffs had long been anticipated at Cadwalader. Other firms with large securitization practices are Sidley Austin and Orrick, Herrington & Sutcliffe.

Few firms are as identified with the practice as Cadwalader though. The firm's chairman, Robert O. Link, and many of its top partners work in the area, and growth in the area has led to a meteoric rise in the firm's profitablity. Once dismissed as a second-tier firm, Cadwalader ranked third in New York with profits per partner of $2.9 million in 2006, lower only than perennial leaders Wachtell, Lipton, Rosen & Katz and Cravath, Swaine & Moore.

The firm has used its strong profits from securitization to expand into other practices and promulgate a new business model for practicing law. The firm pays its rainmakers extremely well but eases out partners who fail to meet revenue targets of $5 million or more.

Cadwaladers' compensation model has attracted a number of high-profile lateral partners in recent years, and Mr. Markel said yesterday the diversification of the firm's practices would help cushion the blow from the credit market slump. Among those lured to Cadwalader in the past several months were a four-partner bankruptcy group from Weil, Gotshal & Manges, an intellectual property litigation group from Morgan & Finnegan and a star antitrust partner from Fried, Frank, Harris, Shriver & Jacobson.

Along with the new practices, some parts of the securitization and structured finance practices continue to be busy, said Mr. Markel. He said the firm's 2007 financial results would be slightly down from 2006 but still strong and that a slight dip was also projected for 2008. "We are going to continue to be an extremely successful, first-tier firm," he said.

Mr. Markel also predicted that the securitization market would bounce back, though he said it would probably be a long time before it reached its levels from a year ago. He said even banks that have said they are pulling out may eventually change their minds.

"The world is not going to stop financing real estate or securitizations forever," he said, "and, when it comes back, we will be a leader."

Layoffs among lawyers have accompanied many economic downturns in the past. In 2001 and 2002, law firms active in the technology sector laid off scores of lawyers. The dropoff in mergers and acquisitions also led to layoffs at Shearman & Sterling and other New York firms. In the early 1990s, the collapse of the high-yield debt market led to major cutbacks at firms like Latham & Watkins.

Posted by: guest at January 11, 2008 4:48 PM

Depression are you mad? It's unlikely that the dollar will keep falling. It's artificially low now. The US economy is stronger than the EU economies (especially France, Italy and Germany); our GDP is acceptable (no we're not in a depression); our debt to GDP ratio is good in historic terms and far, far better than EU countries.
Regarding Iraq we spend a billion a day in the GWOT and a little less than 2 billion a day including ALL defense spending (650B) in a 14,000 B economy that turns out to be a defense spending of (2.6% on GWOT, 4.6% total defense budget). This, as far as US defense spending and especially war spending is VERY LOW. Let's not get into a debate over the merits of the war, I'm opposed to it too but as far as it being a drain on the economy it's less than was being spent during the Reagan era build up (which peaked at about 7%)
Are we going to enter a recession, yes of course. The economy is cyclical. So, what else is new? New York had real estate bull market lasting 15 years – did you think it was going to last forever?

MHN

Posted by: guest at January 11, 2008 5:57 PM

Is this the same Cadwalader that has that college in Nevada who pulled the shocking upset over Nevada State??

Posted by: guest at January 11, 2008 5:58 PM

Only 40 comments??? Well, I guess there's only so many times you can debate the current and future state of the market. The Carroll Gardens HOTD thread got 200 more posts than this one!

Posted by: guest at January 11, 2008 9:01 PM

I feel like such a loser now, 9:01. Now I'm probably priced out of that thread!

Posted by: guest at January 11, 2008 9:12 PM

The feelings the same on Wall Street. It affect the market too much. This should have happened three months ago. Now, it's too late really. But, on a bright note (well, not really) you do realize that it isn't a recession until the Fed Chairman actually says it is. So, in theory we could have a Nero denying anything is wrong while the country goes bankrupt.

Posted by: guest at January 12, 2008 12:05 AM