Federal Reserve Lowers Interest Rate
In a much anticipated move, the Federal Reserve lowered is prime interest rate by a full half of a percent to 4.75%. The move was the Fed’s first rate reduction of any kind in four years, the steepest in nearly five years and its most abrupt reversal of course since January 2001, when policy makers sharply cut rates at an unscheduled emergency meeting just before the last recession. For consumers, the Fed’s move could mean lower borrowing costs for mortgages and automobile loans. With home prices down and lower interest rates, the Fed is hoping that home sales return to a normal pace to help stabilize the economy. Much of our economy is driven by the housing market. When housing slows, so does the economy.
A large majority of home buyers are under the misconception that there is no mortgage money for them to buy a home. That is not true. There is plenty of money for people looking to buy homes using standard mortgages, like FHA, VA or Conventional loans. If a home buyer is looking to buy a home and is financing less than $471,000, if they can document their incomes and have fair credit, they can buy a house today. It is the sub-prime borrowers that are having a hard time finding financing. The days of financing 106% of the purchase price, with a 1.5% teaser rate and not providing any income documentation are gone.
In the last 6 months, we have seen the majority of home sellers drop their asking price, which is a good thing. We have also seen many sellers just give up and take their homes off the market for good, stating that they are not going to give their homes away; they will just stay where they are for a few more years.
What does all this mean for the average home buyer? – Lower mortgage payments. Home prices are down, sellers are helping with closing costs, interest rates are historically low and there is an abundance of houses on the market. Buyers who come out in this market will be able to take advantage of the new market conditions. Those buyers who wait until Spring could find home prices are back on the rise again.
Stumble It!