The Federal Reserve lowering the Funds rate helps everyone. It lowers many home equity loans and business loans which look at the funds rate to set their index rate. It should also lower home mortgage rates although since the crisis started the yield risk spread, availability and willingness to lend effects the rates too.
Interest rates are coming down. Mortgage rates are coming down for real estate, finally. The Fed buying agency paper from Fannie and Freddie to provide funds to loan for mortgages. Sooner or later it will stick. It takes a bit of time to turn the Queen Mary and that is what they are doing.
However, one thing I learned about monetary policy is that when it is altered, it take a certain level of critical mass and time and then suddenly it will take affect.
It will happen! The actions of investors entering the market a speculate along with low rates and finally available funds will pull this real estate market together. Yes I believe investors will start to buy up properties and turn them into rental for speculation, when the money flows.
Homes will sell, new homes will sell, real estate in general will sell. It's all about money!
Richard
view my new homes for sale
P.S. Cars will sell too!
So true and very exciting ! I think we are witnessing first hand the market slowly starting to turn... in some markets, it may have already turned.
Sure, if you give money away, at least in this country, people will take it. But, is this really healthy? Isn't too much credit, low interest rates, and irresponsible lending what got us into this problem in the first place? Won't the billions being spent for the bailout simply prolong the inevitable and lead to more inflation, lower long term growth rates, and higher taxes? Of course, no one wants to feel the pain now, but we are running out of room as far as monetary policy is concerned. We will have to face up to the fact someday that there is a fundamental misalignment that will have to be adjusted. The question is, do we want to face the pain now, or a long drawn out period of lower growth, or possibly a long term recession like Japan had during its lost decade. Simply putting off the problem into the future does not fix it.
Brian : I very much respect and admire your opinion.
I would like to see investors and buyers putting in good cash deposits. The lower interest rates exist in principle, but there are no givers for the money. What I want is the system to be able to fix itself though normal transactions by strong buyers. I am not saying a free lunch. The rates by rights should be 3.5% on 30 year, based on everything I see but we don't have a liquid market.
This would put money back to the banks and firm real estate prices.
The consequence is the "D" word.
Best,
Richard
I think interest rate sensitivity is not as great as most people would have you believe. Talk to the older Realtors, they were selling houses at 20% rates. People don't want to put money down or take risks right now mainly because they are not sure they will have a job tommorrow.
Brian: I thank you again for your ideas.
It is an important point that jobs are a major concern. I have been selling real estate for 31 years. I have sold over 1000 houses, 5million sq. ft of retail/office space. And about 600 lots.
I have managed 100's of agents. If that qualifies me as a experienced real estate person, I will continue.
We can't fix everything. We can only start the ball rolling. More home sales will create jobs. It all starts from somewhere. In our area it is picking up as rates drop.
To understand it, there are many people who have money and a level of security and want to buy. This will help them do so. There are people with money who will invest and buy and rent out property. To say it simple we can not be saved by the foreclosed but by the one that are in good shape.
Starting a turn in sediment is tough, but when it turns it will get us going. We will this time go back to a affordability model of old. People with capital will own, people without capital will rent. It is a readjustment of risk.
Richard
Richard, well said in the comments. There will be a lot of opportunity out there for new buyers and people looking to REFI to take advantage of the lower rates. 2009 is shaping up to be a turnaround year.
I think we are all waiting for this to kick start into a recovery mode.
Chris and Jim;
I emailed a bunched of thing a couple of days ago about the real estate markets to Jim Cramer, the next day he suggest it is a time to buy on Mad Money.
The money needs to go direct to where it is needed, just like bring disaster relief. food in the high and dry warehouse doesn't help, it needs to get to the victims.
Richard
You bring up another good point Richard. This readjustment of risk you mention could hamper appreciation for many years to come. I saw an article the other day that says there are over 5000 vacant homes in the Atlanta area alone. About a fourth of the listings I see in our little community are vacant as well. People that can't afford to buy will indeed go back to renting, but that means there will be all these vacant homes, or excess inventory if you will, clogging the market for years to come. There has been an overcapacity on all fronts in this country for many years, just witness the car companies. With a population that is beginning to stagnate, and fewer immigrants being allowed since 2001, there could be many years before prices improve. I am not saying prices are bound to fall much further, it is just hard to believe there will be a quick turnaround in prices given the current overcapacity.
Brian: How are you?
I believe most of these units should go to investors and be rented. Markets are funny to judge their capacity based on known data this is why most people loose money trading. You must be ready for a change that is not quantifiable. Crude last year for example. No one believed in any stretch of the imagination it would go to $147.00 when it was $40.00 .
I'm not saying we can't go through a malase that lasts a long time, however there are forces in place, that if they click, will make you shake your head if it works. Inventory can disapear, if there is capital to buy it. We are like little babies, we will do things because we can, and sometimes, no other strong reason.
It is interesting!
Richard