[mvbird]

If the Federal Reserve finally lowers (and continues to lower) interest rates in September, I think house prices may increase. If buyer's monthly financing costs are lower they qualify to buy at a higher price.

Another part of my argument is that money market rates will continue to sink, causing some to want to invest in real estate instead, hoping or renting, for a better return.

The other side of this argument is Villages house prices will remain the same because many buy Villages homes with cash, no financing, and they won't care.

Discussion ?

[tophcfa]

Originally Posted by mvbird

If the Federal Reserve finally lowers (and continues to lower) interest rates in September, I think house prices may increase. If buyer's monthly financing costs are lower they qualify to buy at a higher price.

Another part of my argument is that money market rates will continue to sink, causing some to want to invest in real estate instead, hoping or renting, for a better return.

The other side of this argument is Villages house prices will remain the same because many buy Villages homes with cash, no financing, and they won't care.

Discussion ?

The fed should not be lowering rates with the inflation we are experiencing. I don’t care what inflation numbers are being officially reported, inflation is real and badly needs to come under control. Also, the Fed needs to act as an independent agency and not bow to outside influences, lowering rates now would be a very bad look.

[Pugchief]

Originally Posted by tophcfa

The fed should not be lowering rates with the inflation we are experiencing. I don’t care what inflation numbers are being officially reported, inflation is real and badly needs to come under control. Also, the Fed needs to act as an independent agency and not bow to outside influences, lowering rates now would be a very bad look.

The Fed should be abolished and let the free market set rates on short term securities like it currently does on longer term ones. Government manipulation of the free market rarely works as intended.

[Aces4]

Originally Posted by tophcfa

The fed should not be lowering rates with the inflation we are experiencing. I don’t care what inflation numbers are being officially reported, inflation is real and badly needs to come under control. Also, the Fed needs to act as an independent agency and not bow to outside influences, lowering rates now would be a very bad look.

If rates are lowered again to nothing so the economy can keep functioning, we'll all know what deep doodoo in which we are living. An overvalued stock market so prices need to rise to fund the dividends and there will be unaffordable housing if a rate decrease goes through. The sad part is no one realizes free loan money (under 5%) is not normal and will eventually strangle us because there is no room for adjustment when the next severe recession rears it's ugly head. Inflation will go crazy and I agree, housing will be out of the reach of the younger generation because of the inflated prices. It's not pretty out there, enjoy the moment.. it's all we have.

[Aces4]

Originally Posted by Pugchief

The Fed should be abolished and let the free market set rates on short term securities like it currently does on longer term ones. Government manipulation of the free market rarely works as intended.

This is true, abolish the Fed and interest rates will rise accordingly to where they should be. The overvalued stock market will return to normal and prices decrease since the products won't have to be overpriced to make up for the over valuation.

[vintageogauge]

Small businesses will benefit greatly with a reduction as their cost of inventory and equipment as well as administration costs has skyrocketed along with an increase in employee wages in order to attract competent employees.. Strong small business is the backbone of our economy. In addition to lower rates helping, the new investments in the US promised by large corporations both domestic and foreign over the last 6 months will keep us going strong well into the future. Most everyone I know that owns or manages a business is excited with what is happening out there.

[CoachKandSportsguy]

Originally Posted by mvbird

If the Federal Reserve finally lowers (and continues to lower) interest rates in September, I think house prices may increase. If buyer's monthly financing costs are lower they qualify to buy at a higher price.

Cerebus paribus "all else being equal" yes

however, by how much will they rise will be the question. .
confounding influences to your hypothesis
1) the reduction will add more buyers to the current market, yes BUT will the number of buyers increase beyond the available supply to create a demand push price increase? currently highly unlikely.
2) many home owners with 3% mortgages are unwilling to sell or move for a small reduction in interest rates. . many of the current homes for sale increase is coming from distressed buyers, investors not getting the needed return or cash flow to support their ownership.
3) retirees may sell to downsize with cash, but will the interest rate reduction allow more buyers into that price range, highly appreciated housing?

4) currently the labor market is perfectly in balance, and if the rates are lowered for deteriorating labor market reasons, there will be fewer buyers and the prices will still need to go down for housing sales growth significant increase.

5) given the decline in the US Dollar, given the failure of the last two treasury auctions with a 50 % sold rate, 3 year and 10 year, given that the mortgage rates are not set by the federal reserve overnight lending rate, but are set by the free market, with a large influence by the treasury bond rates, the federal reserve funding rate might not impact long term rates as much as needed for significantly higher rates.

So the answer is not as simple as the fed lowering their overnight lending rate. . and in most cases, very small movements in the FFR has minimal impact on lending rates, as compared to other influences.

and don't forget about any potential minsky moments with the huge increase in the federal debt limit for spending increases. .

[jimhoward]

I think the downward pressure on home prices is so severe that it will take more than slightly lower interest rates to make them stabilize or rise. I think it will take sustained inflation for a couple of years.

[Aces4]

Originally Posted by jimhoward

I think the downward pressure on home prices is so severe that it will take more than slightly lower interest rates to make them stabilize or rise. I think it will take sustained inflation for a couple of years.

There should be severe downward pressure on home prices, they are ridiculous right now and people jumped in like crazy during the "free money" rates period.

[Topspinmo]

IMO Government spending always causes inflation. Until government stops spending more than takes in prices will continue to go up. Course prices always go up anyway but, with government out of control it’s 3 fold or more. IMO need go back to gold standard, IMO that would limit government spending (they couldn’t just print paper money by train loads and give it away like Halloween candy.).

[BillyGrown]

Originally Posted by mvbird

If the Federal Reserve finally lowers (and continues to lower) interest rates in September, I think house prices may increase. If buyer's monthly financing costs are lower they qualify to buy at a higher price.

Another part of my argument is that money market rates will continue to sink, causing some to want to invest in real estate instead, hoping or renting, for a better return.

The other side of this argument is Villages house prices will remain the same because many buy Villages homes with cash, no financing, and they won't care.

Discussion ?

I doubt it. The market is flooded with 9 months of inventory. Some out and much on the shelf

[vintageogauge]

Originally Posted by jimhoward

I think the downward pressure on home prices is so severe that it will take more than slightly lower interest rates to make them stabilize or rise. I think it will take sustained inflation for a couple of years.

Agree and as long as TV continues to build an abundance of new homes priced lower than re-sales they will sit for months if not lowered to compete with the new homes.

[Papa_lecki]

In the Villages, the first thing that will happen will be the inventory will see relief.
Couples who want to move to The Villages will be able to sell their primary home more quickly.

I don’t think a 0.25 reduction will do it. 0.50 or 0.75 will do it - then families will refi in 12 months when the Fed rate is around 2%

[Stu from NYC]

As an Economics professor once said lets get a dozen economists in a room to discuss this issue and we will get a minimum of 13 different opinions.

[Normal]

The Fed cut rates last fall and it resulted in lending rates actually going up slightly. It will take a lot more than a quarter or half point cut to turn the housing market around.