East Bay Blog

We received some good news today from the Federal Reserve, which cut the Federal Funds rate by 0.5 point. Although the federal funds rate does not directly affect all mortgage rates, it does have an indirect affect, and this most recent move by the fed is bound to move mortgage rates lower. The markets had already priced in a 0.25 point move by the fed, but the more aggressive half point cut was a bit of a surprise and the stock markets rallied on the news.

This is good news for housing. The real estate market has been hit hard lately with all of the bad news about subprime, it is nice to see some good news starting to come out. The below article from CNN has a good perspective on how this move by the Fed may help housing.

http://money.cnn.com/2007/09/18/real_estate/low_impact_rate_drop/index.htm?postversion=2007091815

So what does this mean for our blog readers? Well for one, if you are on the fence about buying real estate, this should be the push you needed to get off the fence. Lower rates will undoubtly mean an increased demand for housing. This however will take 6 to 8 months to work itself into the economy. We won’t see prices stabilize immediately, but lower rates will increase demand. If you want to take advantage of the strong buyer’s market we are in now, and be able to aggressively negotiate, you need to start looking now.

If the Fed cuts again and if housing prices stabilize we may see a return to a balanced market by next spring. Once we are in balance, the low offers will not be considered as much as they are now. If you have been waiting for a sign to get back into the market, you just got one. Thanks for stopping by, until next time…