“KNOWLEDGE IS POWER.” It’s a phrase used by many, and last week was an important one to be in the know, as Bonds and home loan rates were affected by many big newsmakers and market shakers. Bonds and home loan rates found some improvement in the early part of the week, leading into the Fed’s big announcement on Wednesday of another .25% cut to the Fed Funds Rate.

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The media may be broadcasting that the “sky is falling” in the real estate industry but the savvy GenXers are not letting the media stop them from taking full advantage of the current market.

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“If you don’t like the weather, wait a minute”…That’s a saying heard often in places where the weather can turn on a dime, making it very difficult to forecast. And while the weather patterns can change direction quickly, the recent movement of stocks and bonds rivals the rides at an amusement park.

“Turbulent” and “volatile” best describe the action in the markets. Stocks and bonds have had wild swings of late as the possibility of a recession loom. The Federal Reserve is concerned about a recession, but doesn’t want to cut rates too deeply because it may stoke the flames of inflation. In a speech last Thursday, Fed Chairman Ben Bernanke signaled the Fed will step in with interest rate cuts as necessary in an effort to prevent a full-blown recession from taking place. It sure looks like the Fed will break off a 50 basis point (1/2%) interest rate cut in its battle to fight a potential recession when the Fed next meets to determine monetary policy on January 30th.

But remember that because Fed rate cuts may add to inflation pressures, home loan rates may actually increase after a cut by the Fed. We have seen this type of chilly response to Fed cuts many times before. Just back in September, the Fed cut by 50 basis points, but home loan rates worsened by 0.25% in just 3 days!

THE MARKET ACTION SURE IS HEATING UP, BUT IT MAY BE TIME TO PUT A FREEZE ON YOUR CREDIT PROFILE TO STOP IDENTITY THEFT. FIND OUT IN THIS WEEK’S MORTGAGE MARKET VIEW!

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Dr. Lawrence Yun, Chief Economist for the National Association of Realtors recently said that “Commenting on the National Housing Market is like discussing the National Temperature…like the weather, all real estate is local.” This couldn’t be truer than in Santa Barbara where both our climate and real estate market are different than most parts of the country.

The news media paints a very bleak picture of the housing market with headlines talking about slumping sales, decreasing values, and a rampant escalation of foreclosures. However, it is important to consider the source of these headlines. The majority of television news media is targeted to a national audience and therefore is summarizing countrywide housing trends. Even local newspapers are primarily printing articles from wire services which again tout national statistics. Other media sources focus on California, but don’t generally provide relevance to the Santa Barbara real estate market which is behaving very differently than most other communities across the state. Sometimes you will hear or read reports about Santa Barbara County which can still be misleading because they include statistics that lump together Southern Santa Barbara County (Carpinteria through Goleta) with North County (Lompoc and Santa Maria). Even these two neighboring communities are currently experiencing very different real estate markets.

Here’s my take on the recent headlines as to how they apply to the Southern Santa Barbara County real estate market:

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This article is being written in August 2007, and by the time you read this some things may have changed, yet I hope to provide insight into the real estate and mortgage markets. It can be difficult to understand what’s happening and the media can add to the confusion. There are mixed opinions out there, but I hope to help clarify things.

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