The Federal Open Market Committee, led by beleaguered Chairman Ben Bernanke, lowered the short-term federal funds rate Wednesday down 50 basis points (half a percent) to 3 percent. That’s two hefty cuts — a combined 1.25 percent — in little more than a week! Way to go Ben!!!
But is it enough to save the faltering real estate market in this time of crisis? There were more than 1 million more foreclosure filings in 2007 than there were in 2006, and 2008 promises to be equally surprising in terms of foreclosure levels.
For its part, the Fed has wavered in its view of the crisis begrudgingly, early on calling it a “correction” in FOMC statements last year. In its latest statement the FOMC is now calling it a deepening “housing contraction!”
You can use all the “C” words you want Ben, but housing usually leads the country in and out of economic “recession” (that “R” word you refuse to give into) and bluntly some areas of the country are probably feeling like they are already there.
Frankly, not everybody believes these latest cuts are going to help. Either they are too little too late, or it’s going to take too long to figure out if they helped at all, and by then we may already be in a recession.
Talk to the folks in Detroit and Cleveland right now who are experiencing high levels of foreclosure activity and unemployment. Try to sell the notion that our present economy is sustainable and won’t take a further dip with out-of-control inflation to the vanishing middle class of America. Good luck Ben. You’ll need it!
Yes, the credit market has tightened its stranglehold on funds, and yes, the financial markets are hurting and under tremendous stress, but people need a place to live and more and more of them are losing their homes and seeking rental arrangements in this time of soaring rents, energy costs and food costs. Not a conducive environment for homeownership to say the least.
In any case, these latest interest rate adjustments are good news for people who can rightfully qualify for home mortgages these days — particularly investors looking to pick up some good bargains in local real estate markets around the country where less fortunate folk have already lost their homes to foreclosure.