The manager of the world's largest bond fund predicted that the Federal Rate "cannot afford" to let U.S. housing prices fall and will have to cut interest rates aggresively to prevent it from happening.
"A Fed cannot afford to let homes go down by 10-15 percent" Bill Gross chief investment officer of Pacific Investment Management Co., said on CNBC Television. Gross expects the Fed to cut the federal funds short-term rate to 3.5 percent, which implies that the 30-year mortgage rates will come down to 5 percent to 5.5 percent. (Source:Real Estate News & Reuters News 11/05/07)
I prefer to see the glass half full and, I beleve that if the preceeding does take place that more buyers will finally move beyond their fear (that the media has fed) and take the pluge into home ownership or trading up. I have already begun to see an increase in buyers so, a decrease in interest rates I believe, will only be a motivating force.
Speaking of the media and their doom gloom reporting...the only thing I percieve is high oil prices (which is definatley bad enough) which they say is because of the low interest rates which makes the dollar go lower etc.. I am no economics major but it just doesn't look that bad to me. I've lived long enough to see this happen before, we'll get through it. The housing market was getting outrageous. I am glad to see it correct.
My son and daughter-in-law both have excellent jobs, he a journeyman, she employed by the state and even with a large down payment their mortgage is well over $2000.00 a month. I hate to think of them being that tied down. Now, with the interest rates lowering, an election year looming and all is said and done maybe they can get into something lower or refinance but, then again, I am the only one that the mortgage payment seems to bother. Everyone(including my kids) act like a mortgage payment well above $2000.00 for a modest home of around 1200 square feet is average.
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