Money For Nothing
CNN reports that the Fed slashes key rate to near zero
NEW YORK (CNNMoney.com) — In its latest effort to try and stimulate the U.S. economy, the Federal Reserve cut its key interest rate to a range of between zero percent and 0.25%, and said it expects to keep rates near that unprecedented low level for some time to come.
The central bank typically sets a specific target for its federal funds rate instead of a range. The rate had previously been at 1% and this marks the first time the Fed has cut rates below 1%. Most investors were expecting the Fed to cut rates to either 0.25% or 0.5%.
Taking the rate so close to zero leaves the Fed with little room for additional moves if the economy does not start to show signs of improvement soon.
Raising rates started the foreclosure mess, and mortgage rates have not been tracking back down with the funds rate, although the banks have been thrilled to lower the rates they pay on savings when the funds rate drops. This widens the gap between what the banks pay you and what you pay them, which is a major reason for the abysmal savings rate in the US.
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Housing here has finally gotten down to where I can afford it. The problem: You need a credit score of 740 and at least 10% down to get a mortgage loan. I could manage 5% down right now, but 10% down is out of the question at the moment. So I’ll try to save my pennies for the next six months… sigh.
— Badtux the Unhoused Penguin
(who is sick of apartment living)
The 10% is better than our requirements which are 20%, but I think your market will probably start back up sooner than ours as it didn’t have breadth of the change that was experienced in coastal Florida, and many people who say they are buying as a principle residence, aren’t down here to live year around.
That’s another thing I hold against Coral Gables – that’s where the housing bubble started, along it’s gravel beaches.
Well, a house that I’m looking at sold for $198K in 1999, $550K in 2005, and is listed at $229K right now. So I think we’re getting pretty much back to where we should be. The 10% is thru my credit union, I have no idea what it’d be at a bank.
The town houses on my block started at $125K in 2004 and were at $500K at the beginning of 2007. No one has been able to sell one, so it’s hard to say what they are valued at today.
Having watched them being built, I wouldn’t have paid more that $50K for one.
Our credit unions don’t offer mortgages which has kept them out of trouble.
Our credit unions offer mortgages via a common mortgage pool that handles bundling the mortgages, but they use “traditional” lending standards, i.e., won’t lend more than 29% of income, etc. Very, very conservative people. Old school, the way banks used to be when it was their own money at risk.
As for town houses selling for $125K in 2004 and selling for $500K in 2006, that’s just nuts. And I thought a house selling for $190K in 1999 selling for $600K in 2006 was nuts…
Anyhow, things are coming back down to earth here (finally!) and in *some* neighborhoods are now back down to pretty much where they should be, if you accept 1998 as the base and factor in inflation. But there’s still some morons out there who think they can get $300K for a 640 square foot condo (an apartment, basically). Not Happenin’!
What ticks me off is that I have a line on a cute little cottage that’s near light rail and bus lines (going to be important in the future) for a price I can afford, and I didn’t expect prices to fall this fast so I used some of my down payment money for other things (like my new motorcycle, sigh!). Talk about your bad timing. I didn’t expect the bottom to hit until the end of *next* year. Well, maybe it *will* hit around the end of next year… gives me time to build up my down payment fund again I guess. Sigh.
The housing market in California was always absurd, but what happened in coastal Florida was insane, and got more insane the further South you went. We are so over-built that it will be years before anyone thinks about putting up new houses, assuming the coast hasn’t moved North due to climate change.
Having cash is always a good idea in a period of probably deflation, so save it and sit on it.