FED cuts rates, housing market reacts!

By Tim Hall | Monday, September 17, 2007, 03:12 PM

Okay, I admit the title is misleading. Considering that the Federal Reserve does not meet until tomorrow, this is a presumptuous post. However, consensus has it that the FED will lower the Fed Funds Rate by either 1/4 point or 1/2 point. I just wanted to go on record that I believe it will be 1/4 point. What’s the significance? Well, the last rate cut was January 3, 2001. That’s over 6 1/2 years ago. So that alone makes the cut significant. Further, the fact that our new FED Chairman Ben Bernanke was trying to rein in inflation but had to reverse course to prevent a recession, that’s a big story.

So is the rate cut good for the housing market, especially here in Dayton? Yes, without question. Will it impact our market? Again, yes, but it is more symbolic than practical. First of all, lenders have already priced in the cut, so whatever impact it has on the actual cost of a home loan is already at work. Secondly, we still have an 18 month supply of homes nationally, so it will take time, and, I think, multiple rate cuts to get things back in balance.

Have a different opinion? Think the FED will drop rates 1/2 point or not at all? Post your comment soon as all bets are off after tomorrow! The FED meets at 2:30 EST, I think. I will post more after the meeting.

Permalink take away? | Comments000 (2) | Post your comment here!!!! |