183747 Resource 164804 165387 165387 1190241561948 1190241561948 Controlled Will cheaper money reduce the home inventory in Greater Phoenix?

The Federal money rate was cut by a half percent. What does this bold move mean?

<p>In a surprising move, the Fed has reduced the Fed money rate by 50 basis (1/2%) points. Many anticipated a 25 basis point cut.&nbsp; This is the single largest reduction in the rate in over four years. It is currently at 4.75%.&nbsp; The move was to deter the U.S. economy form going into recession. The current slowdown in housing has contributed to the move.&nbsp; Fixed rate mortgages fell last week as they are tied to the ten year Treasuries, a different index.&nbsp; </p><p>What does it mean? </p><p>The effect of this dramatic reduction in the key interest rate is significant:<br />The stock market soared, lenders like Wells Fargo, cut their primate rate by 1/2% to their preferred customers; credit card rates are tied to this rate as well, many will see reductions in rates, though consumers may not see the reduction in for a few billing cycles.<br />The adjustable rate change is dictated by which index the rate is tied. For example, it may be tied to the COSI, LIBOR rate or the Treasuries.&nbsp; The 0.5% reduction in the Fed's rate will have a positive impact on the emotions of consumers, fueling confidence. <br />This real estate downturn is part emotional, as is any market, whether it&rsquo;s going up or down.&nbsp; But, besides emotions and psychology, its finances that rule.&nbsp; If it&rsquo;s more difficult to obtain financing because the lenders require a bigger buyer investment or better documentation of the borrowers finances then it will be harder for persons to buy a property.&nbsp; This is true for any sector, whether residential or commercial.&nbsp; </p><p>This increases confidence will push many to start buying again and lenders may feel the same and loosen up their guidelines. FHA loans changes may also help.</p><p>The Phoenix market will continue to experience difficult times until lenders, once again take on a bit more risk.&nbsp; This means allowing lower down payments.&nbsp; The subprime market, as well, needs to regain its health. It&rsquo;s this market that drives housing starts and move-up buyers.&nbsp; Only a very small portion of subprime lenders went out of business.&nbsp; These were the lenders who focused on variable rate loans with teaser rates.&nbsp; Others remain strong.&nbsp; <br />This recent rate cut will allow more lenders to survive the slowdown and others to thrive.&nbsp; None the less, we are not out of the hole yet.&nbsp; We still have a 13 month supply of homes and some large builders still can't come to grips with the reality that if they pump more inventories into the market, they are only shooting themselves in the foot.</p><p>As I have said before, this is the time to buy real estate.&nbsp; Don't expect to get rich quick, though some will, expect to hold the property for at least 5 years and you will see great benefits.&nbsp; Rates have come down; financing at 6.5% is cheap money.&nbsp; <br />It may be scary to buy now, that's why you should do it.&nbsp; The Phoenix business market is just too strong and the influx of people (100,000+ per year) just too great for inventories to remain high and prices to stay where they are now.</p><p><br /></p> 10 application/xml false equity line of credit federal funds rate future of real estate in phoenix mortgage rates in phoenix phoenix real estate recession in America Mozilla/4.0 (compatible; MSIE 7.0; Windows NT 5.1; Tablet PC 1.7; .NET CLR 1.0.3705; .NET CLR 1.1.4322; .NET CLR 2.0.50727) 127.0.0.1 127.0.0.1 aciesielski false true false false true 176502 false false true false false false true 164804 blog blogsite/ArturCiesielski/web