The Federal Reserve in a surprise move cut interest rates by 1/2 a point. This leaves the Fed Funds rate at 1 and 1/2 percent. What this means is that borrowing money should get cheaper. The bailout has made it easier. Lets talk economics.
In the housing market there is the notion that NOW is a great time to buy. Even in the media I am hearing it. Rates may drop some for loans. Our market may start to pick up. We are starting to see activity grow. But all is not great.
In the financial markets the news is not so good Both globally and domestically. The interesting thing about this rate cut is that it was done in co-ordination with International Banks. The liquidity problem remains. Some Markets were seeing a lot of their activity come from non US sources. So in these cases they actually may see a slow down in foregin buying. This may be true especially in the Florida, California and Texas market. 2 of these markets were hard hit in the housing downturn. So for Florida and California the International aspect of this crisis is not good news. Also the overall ability to ,get a loan, has gotten tougher. So the credit crunch plays a roll in our recovery. Remember almost a year ago my blogs were , this is not a housing crisis but a credit crisis. Well now the crisis is here.
Our economy is not good. The bail out was aimed at restoring liquidity and hopefully helping companies borrow. But it does nothing for a weak economy. We can talk about great mortgage rates and great housing prices all day but if people do not have jobs and money none of it matters. Our economy is not good . This is the biggest variable in the whole picture in my opinion. I think we have seen and know about the housing situation. I think we know and kind of understand where this credit crunch is, and is going. But we are yet to see where the economy is going. This last issue more than the other 2 right now is why I think you are seeing the sell off on Wall Street. Investors are nervous about the economy. They are worried about credit but they see Governments acting in this area. So in the end it boils down to the economy.
Our bumpy ride in Real Estate is not over yet. Many of us are suffering. Many hvae left the business. The good news is we know where housing is and credit is. If the economy lands softly I believe the worst is behind us.
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Charlie Ragonesi All Mountain Realty Big Canoe and Mountain Blog
On line at www.allmountainrealty.com Call at 706 579 1098
