East Bay Blog

It's move up time!
April 25th, 2008 6:02 PM
It was bound to happen, yet I had my doubts...  For a long time now I've seen property values in some of the hardest hit East Bay neighborhoods drop and continue to drop.  In some of the hardest hit areas like Oakland, Antioch, and Richmond properties have dropped over 50% from their high.  In some cases I've seen properties that just sold a couple of years ago, during the boom, going for 70% below what they had sold for.   Up until now however, I had not seen any drop in the more expensive markets of the East Bay.  Cities like Pleasanton and Danville seemed to be immune to what was happening in other areas.  I am starting to see price reductions in these areas as well.  Nothing like the drops we see in the hard hit areas, but I dare say prices in these cities are probably around 5% to 10% lower this year then last.  Not a huge decrease percentage wise, but when you calculate that these homes have a much higher average price, this equates to tens of thousands of dollars.
 
I see two tempting opportunities for buyers in this market.  First is for investors.  Looking for break-even or positive cash flow?  In the hard hit areas of the East Bay rents continue to be strong.  All of those people walking away from mortgages have to move somewhere. They are becoming renters, and that is keeping rents high.  With a lower purchase price and high rents, investors have a better opportunity now than they've had in years to put little down on a home and still have break even or positive cash flow.  If you've got some money in the bank you've been waiting to invest, good for you, now is the time to start thinking about heading back into real estate.
 
The second opportunity I see is for move up buyers.  If you've lived in your home for some time, you should still have a nice equity cushion.  If you've been thinking about moving up into a larger home, now might be your opportunity to get into that neighborhood you've had your eye on.  The prices have dropped a bit even in the best neighborhoods, and with more inventory you'll have more room to negotiate.  If you can rent your current home and not have much negative cash flow all the better.  This is the best market you could hope for.  Keep your current house, rent it out, and move into the home you want.
 
Sellers: The truth is that if you don't have to sell in this market, don't.  Buyers want to negotiate in this market.  No matter what the asking price, you are going to get offers under asking unless you are trying to price your house so low that you expect "over asking" bids.  That is a risky and foolish strategy in this market that is bound to backfire.  The best you can hope for is asking price.  I must say that I don't apply this to other areas of the Bay Area however.  I am hearing that some neighborhoods in San Francisco are still fetching multiple offers.  A weak dollar and foreign investors may have a lot to do with that phenomenon.
 
As always these are just my opinions based on what I am seeing in the East Bay real estate market.  If you or someone you know need professional real estate assistance, don't hesitate to let us know, until next time...
Posted by Ted & Lucy Ramos on April 25th, 2008 6:02 PMPost a Comment (0)

Take Advantage of This Time
March 20th, 2008 7:24 PM
I read a very interesting article this last week regarding real estate.  The article was in last week's issue of Time magazine.  It is entitled "Ignore the Headlines" by Dan Kadlec.  It echoes a lot of the things that I have been blogging about over the last several months.  The essence of the article is that now is a great time to invest.  The article talks about stocks as well, but addresses real estate specifically.  Prices are down significantly, and although it is a real possibility that they could continue to drop, moves by the markets will wipe out any price decrease with an increase in interest rates.
 
The Fed has been making a lot of moves lately to try to stimulate the economy, especially with all of the recent developments.  Most recently with the near failure of Bear Stearns, the Fed lowered the Fed Funds rate by 0.75%.  One of the biggest one time moves in recent memory.  Although there is no direct link between mortgage rates and the Fed Funds rate, it will still have the indirect effect of lowering mortgage rates.  The Fed can not make the same mistake it made last time of keeping rates low for too long.  Many blame that for our current problems.  Once the economy begins to stabilize and recover, you can bet that the Fed will begin to raise rates again.  Once most people decide that it is a better time to invest in real estate, two things will already have happened:
 
1.  You'll have competition.  When you realize that the market has recovered and it is a good time to get back in so will everyone else.  Currently buyers hold the advantage in negotiations, that is because of the lack of other buyers competing and the surplus of homes for sale on the market.  You can bet that once sellers see more buyers walking through there homes, they won't be as willing to take a lower price.
 
2.  Once we recover you will see interest rates rise and this will wipe out any benefit you may have gained by waiting.  Here is an example of a home purchase now, and in one year:
 
            Today                                                         
$218,900 (put 20% down/30 year fixed)        
5.5% interest rate                                  
$994.31 monthly payment 
 
                                                                                               
  Cost in 12 Months?
$197,010 (If price drops an additional 10%)
6% interest rate (recession ends, Fed raises rates)
$994.94 monthly payment
 
 
After waiting a year, and assuming that the market continued to move down you would still spend the same amount of money per month because as we recover the Fed will begin to raise rates.  By waiting a year you saved nothing and ended up living a year somewhere you would rather not have been.  Further, this assumes that the real estate market continues to drop.
 
The point of that article and the point that I have been making over the last several months is that if you are considering looking into buying a home, now could be the perfect time.  As always, these are my opinions, until next time...
Posted by Ted & Lucy Ramos on March 20th, 2008 7:24 PMPost a Comment (0)

Getting Back to Basics
March 17th, 2008 8:14 PM
There is a slowly changing mindset among today's homebuyers. It is a change back to how people used to look at a home purchase before the run up in values from the start of this decade. It has been a slow process, but one that I think is healthy, and ultimately the smart way to look at purchasing property.
 
Until last year, people were always looking at a home purchase as an investment. They would ask me how the home was priced, and how fast I thought the property would appreciate in value. Of course I would always answer that no one could know that, and that appreciation is never guaranteed, but in the long run I always believed that eventually a home will go up in value. I still strongly believe that today, that is why I think today's prices are reaching a bargain level, but that is a topic for another blog...
The frame of mind today when a buyer is looking for their primary residence they think "can I imagine myself happily living in this house for a long time?" That is the number one factor in looking at the home, not "how much will this home's value increase?", which was the mindset over the last couple of years. Homebuyers are not as interested in neighborhood "comp's" to set value (it is difficult to set values using comparables today since some bank owned homes, or short sales can skew the value of a neighborhood very quickly.) The important factor is whether they like the home, can afford the payments and can see themselves living there for a long time.
 
For investors, cash flow has become much more important again. Over the first part of the decade, the biggest variable on investor's minds was how much do I have to pay now, and how much will it be worth in a year or two. The appreciation of property was the primary driver. In today's market, the investor looks at how much do I have to pay now, and how much income will the property produce at a monthly/annual rate. How cash flow positive/negative is this investment. Appreciation is always in the back of their minds, but as it will probably take years to see any significant increase in overall values, cash flow is now the #1 consideration of an investment property.
 
On a side note, I believe that the second home market may be in for a harder fall depending on how the economy continues to hold up against the continuing waves of bad news (today Bear Stearns was purchased by JP Morgan for $2 a share. It was either that or bankruptcy. This stock was over $150 per share just over a year ago). If we fall into a deeper recession, many people's discretionary spending will begin to disappear, and the thought of buying that second home in Tahoe, Santa Cruz, etc... will be put on hold. This will have a negative effect on real estate values in may resort cities. That still remains to be seen...
Again, these are just my thoughts about what I'm seeing in today's market, if you or someone you know is in need of professional real estate advice, don't hesitate to give us a call, until next time...
Posted by Ted & Lucy Ramos on March 17th, 2008 8:14 PMPost a Comment (0)

My thoughts on the days news
March 10th, 2008 7:36 PM
The news keeps coming...  Today we find out over the news wire that Countrywide Financial, the largest U.S. Mortgage Lender is being investigated by the FBI for securities fraud.  Although it is surprising to hear that a company as large as Countrywide is being investigated by the FBI, I have to say it probably should have been expected.  After any economic event where people lose a lot of money, and where it affects our economy as a whole, there needs to be someone/something to blame for the mess.  Just think back to the last major economic event that had such a broad effect on people's pocket books.  Back in the late 90's we had the tech boom, followed by the bust.  After the stock market corrected the government started to investigate who was to blame...hence we had the CEO's of WorldCom, Enron... and all the rest.  These executives were the villains of the tech boom/bust.
 
Now we are in the midst of another slumping economy due in large part to the slumping housing market.  Many of the problems can be traced to the lax lending standards that the large mortgage lenders had during the run up of real estate values during the years of high appreciation.  Now there must be someone to blame for this mess, my bet is we will see some mortgage executives getting carted off to jail before all is said and done.
 
Don't get me wrong, I have no idea if any type of fraud occurred at Countrywide or any of the other mortgage lenders that are being investigated.  However, if the economy continues to head toward recession, which many economists believe we are already in, there will need to be some villains where we can lay the blame...  
 
As always these are only my opinions, and you are always free to respond, until next time...
Posted by Ted & Lucy Ramos on March 10th, 2008 7:36 PMPost a Comment (0)

Today's Buyers
February 25th, 2008 8:56 PM
I am starting to see more buyers in the market this year.  That is good news because it means that activity is starting to return to the market to some extent.  Over the last year and a half, there has been a pretty sharp downturn in home sales activity, as you probably already know if you watch TV, read a newspaper, listen to the radio...  The second half of last year was particularly slow.  Over the last two months however I am starting to see some buyers return.  That is good news for sellers since today's report by the National Association of Realtors shows a 10 month supply of homes for sale.  That means if no new homes were to be put on the market, it would still take 10 months to sell the existing inventory.  The buyers I am seeing most fall into 2 different categories, bargin hunting investors looking for that great deal, and move up buyers looking for a nicely upgraded home. 
 
Many investors and flippers have just started to step back into this market, but at this point only the best deals will attract their attention.  If you are looking to sell a property in need of repair, be prepared to get a low price or start fixing your home now to get a fair price.  Flippers know that if they are going to try to flip a house in this market, the price they pay will have to be extra low, because the market is still moving, so they can't be sure what they will get for it when they try to sell.  These types of buyers are usually just looking in the low price range for a particular area.  They will focus on an area and only look at homes that are priced at 20% to 30% below the average price for the neighborhood.  Once they do find a good buy, they will usually offer well below the asking price, and won't be afraid to walk away from a house if they think they are not getting the best deal possible.  If you are a seller trying to sell a fixer, be prepared to get an extremely low price for your home.  Your only other option is to fix up the property.
 
Upgraded homes in good condition are also getting attention, but from buyers looking to move.  These people will also be looking for deals, but because they are not as interested in the properties in need of repair, they are more likely to focus on the homes that are in "move-in" condition.  If you are selling a nicer home in this market, these are probably the type of buyer your home it attracting.  Make sure your house looks sharp.  Be realistic about your price.  It is hard to be the highest priced home on the block in this market.  The right price for your home will probably be at least 10% below what homes were fetching in your neighborhood last year.  Depending on where you are, you may have to adjust more than that.  If you are just testing the market to see what you can get for your house, don't waste your time.  This is not the market for sellers who are not serious.  If you don't need to sell right now, don't sell.
 
Finally if your home lands in between a fixer, and an upgraded home, you are in a more difficult situation.  Chances are that folks that are looking to move will skip over your house completely if it does not look great, and investors will skip over your house completely if you are not priced aggressively.  You best bet is to wait this market out.  Rent your home for a while and see how things develop this spring.  Just be prepared to wait a long time if things get worse.  If you can't wait, start fixing your home up so that you can attract the move-in buyer, and if you don't have time for that either, than be prepared to bite the bullet and get low-balled by investors looking for only the best deals.
 
Again, these are only my opinions.  Every market is a bit different, and I am only speaking on what I see that is occurring in the East Bay.  If you want to discuss your particular market, or are looking to get in the market as either a buyer or seller, give us a call, we'd love to help, until next time...  
Posted by Ted & Lucy Ramos on February 25th, 2008 8:56 PMPost a Comment (0)

What to watch for in 08
February 13th, 2008 7:18 PM
As we enter 2008 there are going to be a lot of opportunities popping up that you should be on the look out for.  If you are paying attention, you can really profit from the current downturn in the real estate market.  Everywhere you look you'll find news about how horrible the current market is.  Just last week, 60 minutes had a special about the crash of the housing market.  We don't have to look too far to see an example of some of the hardest hit areas.  Stockton, CA is #2 on the list of most foreclosures in the United States.  Stockton has seen its foreclosure filings jump 276% year over year.  So with all of this negativity, where are the opportunities you might ask?  Well, here are some things that are happening that you may or may not be able to take advantage of.
 
If you are having mortgage troubles and you are 90 days or more delinquent on your mortgage payments, you should get informed about "Project Lifeline".  This is a new initiative just announced by the government in cooperation with some of the nations top mortgage lenders.  What this initiative does is delay the foreclosure process for you for an extra 30 days.  If you are in the process of foreclosure, you may have given up and decided to just walk away from your home.  Don't do that until you try to renegotiate with your lender first.  Give them a call and ask for a renegotiation.  Also, ask them if you qualify for Project Lifeline.  If nothing else, this will at least give you the opportunity to stay in your home for another 30 days before having to leave.  Renegotiation with your lender should be your first option when you cannot afford to pay anymore.  A short sale or foreclosure should only be options after you've heard "no" from your lender.
 
Another big opportunity that looks like it will happen this year is the temporary increase of the conforming loan limits by Fannie Mae and Freddie Mac.  What does this mean to you?  If you need to refinance anytime in the next 3 years, and you currently have a jumbo loan, you should definitely look into refinancing during the window where conforming limits are raised.  If this proposal passes, which at this point looks like it probably will, it will allow you to qualify for a confirming loan up to 125% of the median home value for properties in your county.  If you currently have a jumbo loan, and are able to qualify for conforming, this will give you a much better interest rate.  It will also be a lot easier to qualify for this type of loan.  Jumbo loans are currently difficult to qualify for because these loans are sold on the secondary mortgage market, and there aren't many buyers for these types of mortgages currently.  This means lenders will only give jumbo loans to people with great credit who can prove there income.
 
If you are currently in a short sale situation.  The government is in the process of passing a law which will eliminate the requirement for you to claim your loan forgiveness as income.  Currently, if you sell your home in a short sale, you will receive a 1099 next year for the difference between what your home sold for and what the loans against it are for.  This will then need to be claimed as income on your taxes, and you will have to pay taxes on this money you did not receive.  If you need more information on short sales, give us a call.  We have lots of experience with these types of transactions.
 
Property values have dropped too far in many areas, this is a buying opportunity.  You remember 4 or 5 years ago when there were all of those multiple offers on homes and properties sold in 1 day.  Well today in some of the hardest hit areas, we are in the exact opposite place.  If experience can teach you one thing it's this: market extremes never last.  Some of the communities where many subprime buyers purchased homes are now seeing prices drop up to 65% from the high!  Yes, properties were too expensive in these areas, but not 65% too expensive.  In the coming years these areas will stabilize and believe me, a normalizing price adjustment will have to occur to put things back in balance.  Some communities where you can find real bargains are in Oakland, Hayward, San Lorenzo, Antioch, Tracy...  It will take some time, but overall these areas are now becoming undervalued because of the extent of foreclosures and short sales going on.  Not to mention the many homes that are already bank owned in these areas. 
 
The best advice I can give you in regards to the coming opportunities would be just to stay informed, especially if you are in a tough spot.  Everyday the big banks and the government are coming up with new  programs to help homeowners.  The market is tough right now, and it has started to drag down the whole economy.  The last thing the government wants is a recession.  This is something the current government wants to address quickly in an election year.  Keep watching the news and if you have questions or just need advice don't hesitate to contact us.  As always, if you, or someone you know is in need of real estate help, call us, until next time...
 
 
Posted by Ted & Lucy Ramos on February 13th, 2008 7:18 PMPost a Comment (0)

Help is on the way!
January 28th, 2008 7:17 PM
A busy week for the markets.  It is amazing how quickly outlook can change in the matter of one week.  At the start of last week, the markets were poised for the big drop.  On the Martin Luther King Jr. holiday last Monday markets around the world dropped precipitously as fears of recession in the United States and disappointment in George Bush's stimulus package caused stock markets in Europe and throughout Asia to dive.  The $7 billion dollar fraud perpetrated by a trader working for a large French bank did not help confidence in Europe.  Then on Tuesday we saw Ben Bernake drop the Federal Funds rate by 75 basis points.  This is the largest single drop since 1982 .  The Fed has become accustomed to dropping the rate by a quarter or half point at the most.  This showed investors how serious the Federal Reserve is taking the threat of recession.  Still the stock markets dived at the begging of the week.  Then toward end of the week markets began to stabilize, and we received some good news that the government stimulus package will include checks in the mail and part of it will include a temporary increase of the conforming loan limits.  A much needed shot in the arm for housing.
 
So how will the developments of the last week affect the East Bay Real Estate market?  Well, this is a strong one-two punch that should help us start digging our way out of this market to a more normal and balanced market.  The drop in the Federal Funds rate will not have a direct impact on 1st mortgages but will more directly effect 2nds loans and equity lines.  With the amount of foreclosures seen in the market today, this will be good news for people on the verge of not being able to afford their mortgage payments.  Many people with 2 loans may have seen there payments climb recently, to a pace where they may be stretched to the limit or perhaps even unable to afford their payments anymore.  With a reduction in the payments on their equity lines, this move may have just saved them from having to face foreclosure, or short sale.  The second move, the raising of the conforming loan limit is even better news for the housing market.  Many of today's homeowners are facing rate adjustments in their mortgages very shortly.  Many of these people were going to be in serious trouble if they had to go back out and refinance into a jumbo loan.  The reason is that jumbo loans are harder to qualify for then they were just one year ago.  Also, with home values dropping in many areas, some people were not going to be able to refinance into a jumbo loan because of the loan-to-value limits.  By raising the conforming limit, more people will be able to take advantage of Fannie Mae guaranteed loans (non-jumbo) which offer a lower interest rate, and are available at higher LTV's. 
 
With the two developments of the last week, and the growing focus the government is putting on the economy, I am confident that we should see the bottom of the housing recession this year.  With a flattening out and eventual climbing of median prices in the next several years.  For the serious long term inventor, this will be the year to make a move back into the market.  Prices are currently still dropping as inventory remains high.  With all of the stimulus we are seeing, things should begin to improve very soon.  As always if you or someone you know is in need of professional real estate help, don't hesitate to contact us, until next time...
Posted by Ted & Lucy Ramos on January 28th, 2008 7:17 PMPost a Comment (0)

Happy 2008 and sorry for the delay, here we are.
January 20th, 2008 8:38 AM

First I must apologize profusely for my lack of updating this blog in the last couple of months. If you stop by regularly, you know that I try to update our blog on a regular basis, but with all of the changes that have been occurring in the mortgage and real estate markets it has been quite hectic.

So, I think a good way to kick off a new blog update, and my first one for 2008 is to let you know where we are today. At this point, unless you have been living under a rock, you are aware that we are in a challenging real estate market. For months now we have been getting the barrage of news every night telling us how bad the real estate market is, how there is a glut of inventory, and foreclosure rates are soaring. In reality, the market is challenging, if you are a seller, it is going to take a while for your home to sell and you MUST price appropriately. With that said, I would say that it is no where near as bad as what we see on the news. Watching TV you are liable to think that owning property is a mistake, but most people know that in the long run real estate is a great investment. The current state of the market is a correction from the soaring increases we had in the last 3 to 5 years. At this point I think we are starting to swing a bit too much in the direction of correcting to the down side... In my opinion 2008 will be a good year to get back into the market. I think we should probably be seeing the bottom sometime in the middle of this year, with a flattening out after that for a year or two.

In regards to some statistics, the below price averages are from a Data Quick article dated January 17, 2008. These stat’s show that as expected we have seen price declines everywhere on average over the last year. This is in addition to the declines we saw in 2006. To read the entire article, go to http://www.dqnews.com/RRBay0108.shtm

All Homes

Number Sold
Dec-06

Number Sold
Dec-07

Percent
Change

Median
December 2006

Median
December 2007

Percent
Change

Alameda

1,589

983

-38.1%

$589,000

$540,000

-8.3%

Contra Costa

1,788

971

-45.7%

$569,500

$505,000

-11.3%

Marin

268

193

-28.0%

$804,750

$760,500

-5.5%

Napa

127

72

-43.3%

$590,000

$590,000

0.0%

Santa Clara

2,106

1,265

-39.9%

$656,000

$655,000

-0.2%

San Francisco

589

445

-24.4%

$745,000

$731,000

-1.9%

San Mateo

685

468

-31.7%

$735,000

$733,500

-0.2%

Solano

622

360

-42.1%

$439,500

$370,000

-15.8%

Sonoma

598

308

-48.5%

$525,000

$410,000

-21.9%

Bay Area

8,372

5,065

-39.5%

$618,000

$587,500

-4.9%

Although everywhere is showing an average price decrease, you must drill down further into individual cities, not counties to see how we are doing. Some cities like Oakland, Antioch, and Hayward are dropping quite a bit more than average in Alameda County, while other cities in the same county such as Pleasanton and Castro Valley are holding up better than average. It really depends on your neighborhood, but a good rule of thumb is the more sub-prime loans that were issued in your neighborhood, the further your price has dropped.

I hope you found some of this information useful. You will be getting more regular updates in the future from me, and again I apologize for the delay in posting this. Remember, if you need any assistance in regards to real estate, do not hesitate to contact us, until next time…

Posted by Ted & Lucy Ramos on January 20th, 2008 8:38 AMPost a Comment (0)

Update East Bay Numbers
September 28th, 2007 1:11 PM

Thanks for stopping by the East Bay Real Estate Blog. So the recent home sales numbers just came out for the East Bay, and as I expected, they show some areas holding up a lot better than others. Below you will see home sale totals for August. Some areas like Union City seem to be keeping up pretty well. I suspect this is due to their proximity to Silicon Valley where jobs are plentiful. In the outlaying areas pain is becoming very severe. Take Antioch for example, which is showing a staggering 25%+ price drop in average home sale price from August of last year. These outlaying communities which grew tremendously in the last decade and see lots of commuters normally always get hit harder during real estate downturns.

As I mentioned in previous posts, many cities where the average price was lowest also had a larger percentage of sub-prime loans. During the boom those cities had huge price increases; they are also falling on hard times now. Another example being Stockton, CA which now as the dubious honor of the foreclosure capital of the United States. One article on www.cnbc.com says that 1 out of every 34 homes there is now in foreclosure. It will take some time for these areas to recover. The more expensive and more desirable areas however, are just returning to normal.


County/City

# Sold

August 2007

August 2006

% Change

Alameda County

992

$625,000

$600,000

4.17%

ALAMEDA

67

$690,000

$655,000

5.34%

ALBANY

15

$600,000

$672,500

-10.78%

BERKELEY

56

$750,000

$706,500

6.16%

CASTRO VALLEY

37

$580,000

$645,000

-10.08%

DUBLIN

40

$629,500

$677,500

-7.08%

EMERYVILLE

26

$428,000

$425,000

0.71%

FREMONT

165

$646,500

$640,000

1.02%

HAYWARD

62

$498,500

$565,000

-11.77%

LIVERMORE

71

$646,000

$610,000

5.90%

NEWARK

23

$580,000

$605,000

-4.13%

OAKLAND

238

$577,500

$535,000

7.94%

PLEASANTON

78

$792,500

$770,000

2.92%

SAN LEANDRO

50

$480,000

$550,000

-12.73%

SAN LORENZO

12

$506,250

$580,000

-12.72%

UNION CITY

52

$655,000

$550,000

19.09%

Contra Costa County

1,100

$575,000

$579,000

-0.69%

ALAMO

20

$1,587,500

$1,524,500

4.13%

ANTIOCH

85

$385,000

$517,500

-25.60%

BRENTWOOD

67

$515,000

$640,000

-19.53%

BYRON

34

$535,750

$599,000

-10.56%

CLAYTON

16

$635,000

$775,000

-18.06%

CONCORD

91

$500,000

$545,000

-8.26%

DANVILLE

112

$942,000

$1,000,000

-5.80%

EL CERRITO

22

$645,000

$625,000

3.20%

EL SOBRANTE

11

$505,000

$575,000

-12.17%

HERCULES

22

$581,250

$587,500

-1.06%

LAFAYETTE

38

$1,212,500

$1,147,500

5.66%

MARTINEZ

48

$504,750

$525,000

-3.86%

MORAGA

22

$1,008,000

$882,500

14.22%

OAKLEY

51

$468,000

$542,000

-13.65%

ORINDA

15

$950,000

$1,328,250

-28.48%

PINOLE

12

$505,000

$512,500

-1.46%

PITTSBURG

44

$406,000

$460,000

-11.74%

PLEASANT HILL

36

$585,250

$672,500

-12.97%

RICHMOND

70

$437,000

$430,000

1.63%

RODEO

2

$380,500

$525,000

-27.52%

SAN PABLO

25

$437,000

$490,000

-10.82%

SAN RAMON

145

$813,000

$800,000

1.63%

WALNUT CREEK

104

$620,500

$677,500

-8.41%

We hope you find this information helpful and useful. Please remember we are here to assist you with all of your real estate needs, until next time…

Posted by Ted & Lucy Ramos on September 28th, 2007 1:11 PMPost a Comment (0)

Good News from the Fed!
September 18th, 2007 1:10 PM

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.