Charlotte NC Real Estate - Rate Cuts Bringing Good News!

Many economists expect the Federal Reserve to drop interest rates a quarter of a percentage point today, making it cheaper and easier for consumers and businesses to borrow money.

Also, a report due this morning on gross domestic product, the leading indicator of economic health, should show modest growth.
And an employment report due Friday likely will offer encouraging news, at least for professional-services cities such as Charlotte, some economists say.

This summer, the financial system sustained a "shock, much like after 9-11," notes John Silvia, chief economist at Wachovia...
Declines in residential housing, however, have been offset by increases in commercial construction across the country.

Silvia sees better times ahead, beginning with a decrease in interest rates -- should the Fed move that way today.

The Fed cut its target for the federal funds rate -- charged on overnight loans between banks -- a larger-than-expected half a percentage point, to 4.75 percent, on Sept. 18.,br>
Although some economists say dropping interest rates too much, too quickly could fuel inflation, Silvia says that's a risk the Fed has to take...
Wachovia economist Mark Vitner said a cut in interest rates would address vulnerable parts of the economy.

Many homeowners in the Carolinas and across the country have faced foreclosure as adjustable-rate mortgages have increased to higher monthly rates. Should the Fed lower interest rates, local homeowners who bought houses with these types of mortgages won't be hit as hard. Likewise, homeowners may be able to refinance under more favorable terms.

Unlike the deep and prolonged interest rate cuts under former Fed chief Alan Greenspan, any cuts now will be relatively short-lived, Vitner says.

"My message is take advantage of the low rates," Vitner says. "What the Fed giveth, they can taketh away."

As for GDP, Silvia sees modest economic growth at about 3 percent. "Not a boom," he said, "but decent."

"Everyone's readily aware the housing market is crashing nationwide," he said, "but in Charlotte it's holding up really well."

Moreover, Vitner notes that exports have risen about as fast as housing has been falling. "And commercial construction has stepped up -- just look at the construction in downtown Charlotte."

Mike Drummond:The Charlotte Observer

October 31, 2007