It's a big day in the economy as all eyes turn toward the Federal Open Market Committee meeting, where it is widely expected by many economists that the Federal Reserve will keep short-term lending rates the same, at 5.25 percent.

LendingTree's Chief Economist Jim Svinth believes that the Fed will pause interest rate hikes for the eighth straight meeting since June 2005 when it started raising short-term interest rates.

"The Fed is stuck in neutral and will likely keep the Fed Funds target at 5.25 percent at their next meeting," says Mr. Svinth. "The two driving variables right now are the domestic housing market and global inflation risk. The FOMC will continue to watch both of these indicators closely to see which one tips the scale before a rate change is made."

Short-term interest rates, the rates at which lenders borrow money to loan to consumers at a higher rate, have stayed the same since August 8, 2006.

Many feel that housing has just tipped the scale. The National Association of Realtors has predicted that 2007 will be the first year since the Great Depression that home prices will fall year-over-year.

What's scaring Wall Street and Main Street is that loans held by prime borrowers entered foreclosure at record paces in the first-quarter

Countrywide, the nation's largest lender participates in one-fifth of mortgages. With the company's announcement that it would miss quarterly earnings targets for the third quarter in a row due to widening defaults, stricter lending standards, and the refusal of institutional investors to buy securities packages backed by higher risk home loans, cash and liquidity are beginning to dry up.

Soon to follow was the news that the nation's tenth largest lender, American Home Mortgage Investment Corp. closed most operations, laid off 7,000 employees and filed bankruptcy yesterday.

The negative climate is causing some, including Countrywide, to change their predictions of a housing turnaround from 2008 to 2009. With prices continuing to fall, buyers are reluctant to step in without more incentive. Inventories are still swollen in both new and existing homes.

Falling interest rates could do the trick without the Fed lifting a finger. Mortgage interest rates are already drifting downward.

Judging from the nearly 300-point rally of the Dow Industrials, investors are betting that short-term interest rates will be lowered, or that they at least won't be raised. Either is good for mortgage interest rates to remain low.

Published: August 7, 2007

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.