Fed Lowers Benchmark Rate: Scream Till Daddy Stops the Car

yes of course it is great they lowering the Prime Rates ; I have much rather have seen tighter Regulations in 2005 & 2006 so some of those that gotten into a home would had not qualified for !

Unfortunate reaction for the Stock market but fortunate for rates! 

I'm hoping that the majority of people will learn to be a little more frugal with their money! What do you think?

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I don't believe this is what's needed at all. 

In my market high home prices are still the problem.  Unless the market is permitted to bring priced down, even through some bankruptcies, our buyers are not going to buy.  They have just dropped out of the market. 

It's like the unemployment figures.  You it doesn't count the folks who just stopped looking and ran out of insurance.  Unemployment is always higher than the fed reports. 

It would talk another 1.5% drop to get folks back out to buy real estate.  Problem is, that will just feul another buying frenze and it will be 2004 all over again. 

We seem to be going in a vicious circle.

I agree with Lenn, this is not going to change the market at all.  I think we need to let it run its course. 

Hi Mike,
Do you think there is going to be another rate drop?  It's going to be interesting to see if this causes the activity to pick up.  What's your take?

It really was not a good day for the market. We are breaking trend lines all over the place.  Now I am talking about the stock market not the Real Estate market or Index. But the market does love to over-react to everything (good and bad)...

Yeterday's market reaction was predictable.  A client and I were talking on Friday and I told him that the market was leaning heavily toward a 50 basis point reduction, and pricing it in.

I predicted that a 25 basis point drop would cost the market a few hundred points, but that no cut at all would drop it 1,000 points.

He is applying for a mortgage today, and probably feeling good about it.

A professor of mine once compared the stock market to a 16 year old girl? Dramatic

Mike, Even though prime does not directly effect mortgage rates (HELOC's and Credit Cards) I have noticed in that  my phone is ringing more..:-)

Mike, Interest rates already low.  It's buyers' poor credit, too much debt, and no money down that keeps most of them from buying, in my opinion.

Mike  I love the sign sentiments and thanks for the update

Mike, I for once, would like to see the FED be proactive instead of reactive.

Dan,

You and I have known each other for awhile now, so I'm putting you in charge of making that happen!

Joeann,

Thanks for visiting and commenting.  I wish I could have found that sign on the internet.

Kay,

I'm sure all of those things are factors, but what I'm seeing are buyers who want to buy for 80 cents on the dollar.  Everyone is looking for a deal.

Matt,

So is mine!  I'm a one man shop, but we closed two purchase loans in the first two weeks of December, and another coming this week.

Rebecca,

LOL  I like the comparison!

More later

Mike in Tucson

Rate cuts and price drops will likely bring the buyers back into the market.  Maybe if we all just scream louder Daddy will really stop the car!

Mike:  CNN's so out of the loop... what do they think the Federal Reserve's responsibilities are, for goodness sakes?

What's really interesting is the FED annoncement today that it will be working with other Central Banks to improve world wide liquidity.  This kind of concerted effort has not been seen since the attacks of 9/11.

Kate,

I'm interested in seeing what happens with the FED initiative.  You would think they would have announced that before the rate cut.

Jan,

I miss the quiet, measured evening news the way it was before it became a 24 x 7 enterprise.  So I'm a dinosaur!

Josette,

LOL.  I can hear you all the way from Tucson!

Mike in Tucson

Mike- I have a feeling that if they dropped the rate lower there would have been an adverse effect on the mortgage rates.

Another rate cut is not the answer... it's just another misguided reaction.  The damage was done by leaving the monetary floodgates open for too long.  Artificially sustaining the market is just going to prolong the inevitable thumb at the bottom.  Let it happen already so we can get back to normal.

Mike,  I don't think that the drop will effect the mortgage markets, since there are really not directly inter-related.  Now, will it have anything to do with public perception - that may be so.  But, it will not have enough effect to help ease our present conditions.  Nor will this gov't intervention into the subprime loans which I feel will be more detrimental than helpful to the overall market.  Don't get me wrong, I don't want to see people foreclosed on, but this is not the correct answer.  Granted, I'm not fully sure what is, but...

Mike - Every little bit helps!

Marlene,

You're right.  Woulda, coulda, shoulda doesn't move a single thing forward.

Marc,

The drop hasn't affected the mortgage markets much either way, but things have stabilized a bit on the perception that they won't tank.

Jesse & Kathy,

Do you mean "finger in the dike," a phrase from Holland surrounded by the sea?

Mark,

We can speculate, but we'll never know.  I can only deal with what IS,  and  so far, it seems like the Fed didn't make a bad move.

Mike in Tucson

I agree with you - although I think the DOLLAR and not the jobs numbers will be what we watch in 08 - along with home appreciation / depreciation rates across the country. With new legislation - IMHO the country's savings rate, and therefore their ability to put funds INTO equity in their home will be more important than ever.

Mike;

Fortunately, in my neck of the woods buyers have been historically conservative in addition to having plenty of room for growth in our local communities (largest community in the area is about 60,000 souls).  As such, we saw neither the huge upswing in home prices - a steady 2.4% increase per annum - nor a ton of predatory lending.  Our forclosure rate has increased from 2.6% to about 3%,  but overall I don't see that the lowered interest rates are going to do much for anyone in our area besides new homeowners.  I think this is yet another emergency bandaid, and quite frankly isn't going to stick for the areas of our fine country that have suffered most from predatory lending and soaring home values.

Carrie,

Predatory lending gets all the press, but I think the biggest problem had to do with investors (both ad hoc and professional) buying on margin.  Thanks so much for commenting.

Eleanor,

Someone commented yesterday on another blog that owning a home should be a blessing.  Equity adds to blessings! Thanks for stopping by to comment.

Mike in Tucson

Mike;

We also don't have any large investors that buy on margin in our area.  And you are right, some things do get all the press and that really riles up buyers and sellers, causing more problems than solutions.

Have a gorgeous day!

Carrie,

Buying on the margin is putting down a little bit, and promising the rest at a later date.  If the value of the commodity drops below the purchase price, the piper has to get paid.  That usually happens in the stock or commodity markets, but it's happening right now in real estate.  The margin buyers are the little guys--the would-be investors who bit off more than they could chew.

Thanks for visiting and commenting.

Mike in Tucson