Economic Highlights of the Past Week Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free Real Estate * Federal government considering using Fannie and Freddie to refinance loans in order to lower mortgage payments * 30-year fixed rate mortgage average down to 4.12%, the lowest since Freddie Mac started tracking this in 1971. The 15-year fixed rate came in at 3.3% — also a record low (9/8 MarketWatch) * Labor Dept. is investigating pay practices at many top home-building firms (9/8 WSJ) * Federal Housing Finance Authority filed lawsuits against 17 of the biggest banks for selling $196B of risky loans to Fannie and Freddie (9/3 WSJ) General * Job growth ground to a halt (no change) and the employment to population ratio dropped to 58.2%. The unemployment rate in August remained at 9.1% (9/3 WSJ) * Nearly 1 in 3 Americans who grew up middle class are now in a lower income rung (9/6 Washington Post) * Euro-zone still a mess, with austerity measures in Greece and Italy being challenged * 39% of households with heads aged 60-64 had primary mortgages in 2010, up from 22% in 1994 (9/7 WSJ) As I write this blog a few hours before President Obama addresses the nation and tells us his plan this time to cure the nation’s economy, my concerns about our nation only grow. He will propose payroll tax cuts, jobs programs, extending unemployment, etc., and none of it will help more than a miniscule amount. If you doubt this, look at the results of previous government programs such as buying toxic assets from banks, various foreclosure-relief programs, financial regulation, home buyer tax credits, cash for clunkers, and on and on. None of them did much more than raise false hopes and dramatically increase the country’s debt. Congress, both Republicans and Democrats, haven’t done any better. They, like the administration, want to be seen as doing something, regardless of the longer term costs. Those longer term costs – meaning the country’s huge debt – will prevent any meaningful economic recovery for years. Meanwhile, unemployment stays high and the percentage of adult Americans who are working remains relatively low. Household debt as a percentage of after-tax income has decreased, though mortgage debt as a share of home values is quite high (9/8 WSJ). Companies are nervous about what is coming down the pipe, so they delay hiring or major investments as long as they can. For real estate, this is all bad news. People without sufficient incomes or savings can’t buy properties. Even when they think they can, the banks get stingy about giving loans to all but their best-credit customers. While there will be pockets of the country where values may climb – parts of Texas and North Dakota affiliated with energy discoveries and sections of the San Francisco Bay Area that are close to high-tech jobs spring to mind – vast swaths of the country will see price declines. San Diego, where I live, and several areas in the L.A. region still seem way overpriced to me and ready for another big drop. Even areas that have historically been less volatile are going through tough times. For instance, I owned a mortgage note on a house in Oklahoma City, OK. The payer defaulted, so I had to foreclose and then spent a lot of money refurbishing the entire property. The house was transformed from being a dump into beautiful living quarters, albeit in a middle/low-income neighborhood. That house has been on the market for over three months with no offers and only a handful of interested people. I’ve even dropped the price two times and offered owner financing, to no avail. From discussions with other investors, it’s clear that my situation is fairly typical. Does this mean that you should park your money in a savings account and forget about it for the next few years? Of course not. What it does mean is that you’ll need to be pickier about what you buy, possibly be creative with financing arrangements, and know your exit strategy. Don’t expect a recovering in housing to save you by jacking prices back up, so your fundamentals have to be sound.