So what's the impact on the general public and real estate markets of the Federal Reserve's rate cut on January 22, 2008? If you're watching the cable news channels, it's probably hard to say how the various commentators are reading their tea leaves...especially depending upon how ratings-conscious they might be. Interestingly, this morning (1/24/08) on MSNBC's "Morning Joe" show, the host was asking why so much bad financial news gets blown out of proportion....of course, that never is the case on their channel. Context of the complaints was the fact that unemployment claims have been down for a number of consecutive weeks.
Conventional wisdom and history would suggest that the cut, which is the biggest in over 20 years, won't decrease 30-year mortgage rates. Per the norm, it should lighten the load for those facing various consumer credit challenges (non-home loans, credit cards, etc.) as well as adjustable rate mortgages.
The economist (from CNBC) who was being interviewed on today's Morning Joe show stated that it would be far more preferable to let the market run it's course....and if that means and uncertain market and lower stock prices, "that's too bad." The host suggested that the rate cut, along with other expected upcoming financial actions by the President and Congress, make for a case of "too little, too late." The guess here is that neither was thinking too much about the average homeowner, but rather the daily stock market traders. The points they made about the need to encourage capital development was well made, though.
In any case, another rate drop by the Federal Reserve is expected later this month. Mortgage folks are suggesting that there's no good reason to expect fixed home loan rates to fall any further...and that it's more likely that the opposite will occur. So the ongoing NAR campaign about "a great time to buy" might be even more pointed at the start of 2008.
©2008, Doug Parker, ikarensell Enterprises Inc. http://www.ikarensell.com
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