Has The Economy Hit Its Bottom?
For the battered the housing market, falling mortgage rates are a badly needed booster shot, reports CBS News chief business correspondent Anthony Mason.
"I have never seen anything like this at all," says Laura Sosa-Rocha, an Atlanta mortgage broker. "This is crazy."
Sosa-Rocha says falling mortgages rates have triggered a rush.
"By 8 a.m., I had 29 e-mails by people who wanted to lock in," she said.
The 30-year fixed rate has dropped below 5 percent. The 15-year fixed rate has hit its lowest level - 4.61 percent - in more than 5 years. The fall came after the Federal Reserve said it will pump another trillion dollars into the economy to trigger more lending and to try the pull the economy out of a nosedive:
"It's very hard to pull out of these things quickly," says Harvard University's Ken Rogoff. Rogoff is co-author of a new study on the impact of severe financial crises. Studying 66 major crises, he found that, on average: Stocks fall 55 percent, home prices fall 35 percent, and unemployment rises 7 percentage points.
We've already exceeded those drops for stock prices and home prices.
"So we would see, if we keep following in the tracks of past financial crises, having unemployment reach 11 or 12 percent by the end of 2011," Rogoff says.
But the scariest statistic in Rogoff's study is what happens to government debt, which rises on average 85 percent.
"So in the case of the United States that's 8.5 trillion dollars within 3 years," Rogoff says. "It seem to me we're on track for doing that."
The key to recovery, Rogoff found, is fixing the financial system. If we don't, he says, we could twist in the wind for a decade.
