October 31, 2007

Fed Lowers Rates Today

Today the Fed cut rates a 1/4 of a point to 4.5%. This is going to provide immediate impact to HELO loans and credit cards. ARM's, resetting now are expected to increase monthly payments by as much as $10,000 a year per household. I expect these people to get some immediate relief, since banks want to own loans not property.

The Fed cut rates by a half point only six weeks ago on Sept. 18. The rate reduction was designed "to forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets."
This rate cut may help consumers and variable owners stay in their homes (we hope), but the larger economy needs more time for the good news to trickle down because rate cuts take 6-9 months to work their way through the economy.

Michael Corkery's article in the Wall Street Journal today quotes an economist at Goldman Sachs. The latest decline in the homeownership rates indicates that this year, as many as 900,000 households moved from owning homes to renting them, says Jan Hatzius, an economist at Goldman Sachs. "It's a very big deal," Mr. Hatzius says. "It implies a very low level of housing demand over the next several years."

Good News
Property managers will do well since people relocating or owning more than one home will have trouble selling.

Multi family housing (rentals) should do well. All those people who would like to buy will now rent and wait out the market hoping to "catch the bottom".

Thanks for reading
Howard Bell
Your Property Path

No comments: