According to the Conference Board, consumer confidence is at its lowest in the last 16 years. Since 1982, consumers have not faced such a bleak future in terms of jobs and inflation. With housing prices at low ebb, gasoline costing more and inflation affecting food and medical bills, consumers are indeed hard hit.

This is reflected in the fact that fewer people are spending on high expenditure items like cars and homes. Consumers appear confronted with the walk away prices for all sorts of goods.

With rising gas prices, 2007 saw fewer people using their own vehicles and resorting to public transport instead. Statistics from the American Public Transportation Association support this, showing a two percent increase in the usage of public transportation last year. In fact, the Department of Transportation recorded that Americans drove 4.3 percent fewer miles in March 2008 than a year ago. This amounts to 11 billion miles less in the overall count. The Energy Information Administration too anticipates a 0.4 percent fall in gas consumption as compared to last year.

As with gas consumption, a pullback has also been observed in the housing market. With fewer people investing in homes the prices have fallen steeply. The Office of Federal Housing Enterprise Oversight (OFHEO) reported that housing prices went down by over 3 percent in the first quarter of 2008. In 43 states the purchase index reflected a fall in prices with California and Florida showing the highest decline. Wyoming, Utah, Montana, Texas and Alabama however showed an appreciation in home prices.

The purchase index bears testimony to the all encompassing credit crunch as well as the fear holding the housing market in its grip, even in areas which are economically strong.

The trends reflected by the purchase index are significant. The calculation of the price declines are based on homes that have been purchased with conventional loans from the government sponsored Fannie Mae and Freddie Mac. These secondary market providers are overseen by OFHEO. This makes the report all the more significant as these calculations exclude volatile jumbo and sub-prime loans unlike other purchase indices.

The Commerce Department offers a ray of hope in this situation. According to it, April 2008 saw new home sales going up by over 3 percent. Although this figure is still 42 percent less than what it was at the same time last year, it is an optimistic sign. And maybe, home buyers are not at the walk away price yet.

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The last year saw a lot of trouble in real estate markets, with a massive crumble foreseen by March 2008. The federal government had taken a lot of measures to give homeowners their rightful relief so that they are empowered to maintain their current real estate properties. They have also come forward to help lending companies from going under or suffering massive losses. The ARMS or adjustable-rate mortgages have been scheduled in such and such ways that the property can refinance and reset itself by 3% or more equity along with the fixed-rate mortgage. This fixed rate is going to be backed up by Federal Housing Authority. Under the current plan, around 80,000 homeowners have been estimated to receive quality relief.

The Mortgage Forgiveness Debt Relief Act of 2007 has been signed by President George W. Bush on the final week of December 2007. According to this, homeowners were no longer coerced to pay the excess amount of taxes on their debt amount and a lender was thereby not expecting the money back any longer.

In other terms if homeowners became completely disabled to repay their money back, they were to negotiate a kind of short sale in regards to the bank. Here the bank agrees to the terms and conditions of the deal and the bank agrees to take complete charge of a full or lesser payment than what is there to the mortgaged amount. The agreements entering the clause after January 1^st 2007 and prior to December 31^st 2009 will be covered by this condition only. The Mortgage Forgiveness Debt Relief Act of 2007 has been available concerning mortgage indebtedness up to about $1 million and extended the tax insurance involved with mortgage taxing deduction in about three years.

The administration reaching out to groups offering a solid and grounded counselling on foreclosures include organizations such as, NeighborWorks America, mortgage lenders as well as loan services. FHA as well as government sponsored links, such as; Fannie Mae and Freddie Mac have had the initiative to include the vast and spreading mortgage finances with various options. Identifying homeowners before they get to face any terrible loss and enduring hardship, is important. The organizations offering aid help in ways such as, a good deal of financial understanding, identifying the homes which are on the borderline or on the imminent perils of being faced with default or foreclosure. These organizations help the properties falling in the danger zone find a mortgage product that would work well for them.

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Move aims at aiding high cost funding in real estate and prevents foreclosures by investors. All those who always wanted to invest in real estate or were contemplating foreclosures, now have some great news to cheer about. The economic stimulus plan initiated by the government has many provisions to tackle the current slack in the housing market and avert the mortgage crisis. It provides many measures in order to ease and aid mortgage loans and reduce cost especially in high-cost housing markets.

For a start, the plan proposes the removal of the cap on the loan amount which can be purchased by these government funded enterprises - Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM) insurable by the Federal Housing Administration (FHA). There is also a change on the cap limit (now increased to $725,000) on these FHA loans; this limit serves as a protection to lenders against any loan defaulters.

These enterprises currently have a provision to guarantee a loan of up to $417,000 in the secondary loans’ market. However, this amount has been increased to $625,000 for a ONE year period as an initiative for buyers to get mortgage loans and /or refinancing. This move surely would aid those buyers interested in investing in real estate in high-value areas like California.

With the existing situation (cap of $417,000) where there is no assured secondary market for loans, lenders assume higher risk in loaning huge amounts to investors in real estate. This in turn allows them to charge a higher rate of interest payable by the borrower – which means that loans are hard to come by and investors heavily opting for foreclosures.

The increase in this cap limit focuses on an assured secondary market thus making it easier for lenders by a reduced level of risk and making it easier for buyers to borrow at lower interest rates for investing in real estate.

This specifically helps those wanting to invest in high-cost areas and promotes real estate development and sales in slack markets. For example, according to Bankrate.com, the existing interest rate difference between loans within the cap limit and those exceeding the cap limit was more than 1 percent on Thursday - 6.39 percent versus 5.30 percent; which means that on a $500,000 mortgage, this difference is about $350/month.

Richard DeKaser, chief economist for National City Corp. indicated that it was about time that such a change was initiated as many analysts agreed that loans exceeding cap limits were hard to avail due to lender flight (situation where lenders refuse to lend funds).

Lawrence Yun, chief economist for the National Association of Realtors said “This will have a big, immediate impact, especially in California where sales have been down most significantly,”. The 1 percent drop is a huge factor, in California, it could create a mini-boom”.

Analysts like Merrill Lynch indicated dire forecasts for housing markets in the next two years; however with this initiation of the Stimulus Plan things seem to look a lot brighter.

An analyst with Weiss Research also welcomed the move stating that this could bring a change in the real estate investor psychology as they are hoping for a price fall. Lawrence Yun also says that with the current situation, there is the existence of a pent up demand for investing in real estate and with this new provision coming in place, buyers who have not yet made up their mind now can definitely vouch for investing.

This move initiated by the Congress and Bush’s administration would bring in changes like a boom in the home sales market, making it easier for buyers to avail mortgage loans and refinancing, thus reducing the rate of foreclosures and also reducing the lead time –from property developers putting up houses for sale to the sale conversion by buyers.

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