Revival of Real Estate Market
Fed cuts the Fed Funds Rate 3/4 of a point.
“Don’t take today’s move … to mean that the FOMC is through,” said Richard Moody, chief economist at Austin-based Mission Residential, in a note to clients. “We expect another funds rate cut at the scheduled January 29-30 meeting, with possibly more to come in the spring.” The federal funds futures market now points to a 2% fed funds rate by September, Fed watchers said. (http://www.marketwatch.com/news/story/fed-isnt-finished-rate-cuts/story.aspx?guid=%7BFE058836%2D414C%2D4CC9%2D8F04%2D866CF0AB29DE%7D)
What does this mean for the mortgage and real estate market
Well this shows us there is one thinking that the “reduction of interest rates” is a magic pill to solve any problem. This concept is told best by the comments of “Investing Lawyer” who states that
unlike /11 where the problem was ONLY confidence after a recent terrorist strike against on of the financial capitols of the world… (and the economy doing so so)… This time cutting rates won’t be the magic bullet ( http://www.marketwatch.com/news/story/fed-isnt-finished-rate-cuts/story.aspx?guid=%7BFE058836%2D414C%2D4CC9%2D8F04%2D866CF0AB29DE%7D)
This shows me that the market is headed for a deep reduction this year and the reduction of the interest rates is a way to put out a pillow to save the falling ass of homeowners. The market in my opinion will see another correction of 5 to 10% until stabilizing by the last quarter of 2008 and then developing a flat trend and holding steady values for a fixed period of time. This all is a result of our natural greed and our need for instant gratification; this is best put in the quote below:
“Historically, societies that seek high levels of instant gratification and are willing to borrow against future incomes to achieve it have more often than not suffered inflation and stagnation. The economies of such societies tend to run larger government budget deficits financed with fiat money from a printing press. Eventually, the ensuing inflation leads to recession, or worse, often because central banks are forced to clamp down. Then the process starts all over again. Many countries in Latin America have been particularly prone to this “populist” malady, as I discuss in chapter 17. I regret that the United States may not be wholly immune to it.” (Greenspan, The Age of Turbulence on page 255)
Your friend,
