Feds Ride to the Rescue - Good for the Stock Market but what about Homeowners?

Stocks plunged due to fears of a recession and I am sure you've heard by now that the Feds cut the funds rate by three quarter of a percentage point to 3.5% down from 4.25%.  This is the biggest rate change since November 1994.  Market conditions were deteriorating rapidly and fear being a very strong motivator, caused the Feds to ride to the rescue and try to calm the market.  This action by the Feds also signals their concern about a recession but even they say the rate cut is not an instant fix.

Surely, it is a step in the right direction in boosting the economy but is it enough?  I think it's very doubtful that this rate cut alone will be the cure all.  Economic indicators have not changed which means the economy is still facing a recession.  Some would argue that we are already in a recession because of some formerly hot market areas (not limited to just these states) in Florida, Nevada and California where a dramatic decline in the housing sector and an increase in foreclosures have occurred.

Bush will meet with his congressional leaders this afternoon and the feeling is Bush is not going to close any doors that could be viable options.  His strategy is to get money into the hands of the people who will spend it most effectively to directly stimulate the economy.  There is a possiblity that an economic stimulus plan could be given to the President within three weeks but will this be good enough for WallStreet and Mainstreet? 

The market rallied this morning and it may have been due to more opportunistic buying.  So the rate cut is a big day for the markets...  

BUT, what about Homeowners?  

• More immediate help would come in loosening constraints for Fannie Mae and Freddie Mac
• Loan rates have started to fall
• 30 year fixed rate at 1:05 eastern time had dropped a quarter point down to 5 3/8 from 5 1/4 just yesterday.  This is a 2 1/2 year low
• ARM resets will be lower
• Home Equity Loan rates will be lower

The National Association of Realtors reports in the next few months, existing home sales will probably hold steady based on pending sales which is a forward looking indicator.  By summer, we may see home sales rise throughout the year and continue to improve in 2009.  Homeowners need to remember that real estate is a long term investment.

Donna Yates, Georgia Realtor
North Georgia Blue Ridge Mountains
Mountain Investments of North Georgia
706-633-0644 cell
donna@ellijay.com

www.move2northgeorgia.net