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INTEREST RATE OUTLOOK
Fed cut rates to boost the economy so that it is cheaper for business to borrow money to conduct business. Fed is trying to encourage corporate and consumer spending. Each time Fed cut interest rate, stock market has boosted little bit, but we haven't seen significant recovery. It sure helped real estate industry resulting historically low interest rate. Interest rate has been around little lower than 6% roughly. That resulted first home buyers to purchase their new home and many home owners to refinance their home. Many people has took out home equity loan and applied for credit cards. 0% financing for purchasing cars sure took off with auto industry. High demand of homes boosted real estate market and the price of home has gone up. First time home buyers wanting to move out of their rental homes, resulted vacancy in rental properties. Low demand pushed rental prices to go down.
Low interest rate also resulted high price and low yield of bond market. Poor performance in stock market drove investors to put their money in bond and real estate market. Some people say government's action to boost the economy by cutting interest rate could result deflation or inflation but it hasn't happened yet. One thing for sure, high demand of homes encouraged homebuilder companies to build more homes. And real estate market has benefited from low interest rate significantly. Now there has been more real estate books, tapes, seminars wanting people to jump into piece of the action.
Investors should know what to do in both bad and good economy, bad and good real estate market. The important thing is to know how you can use the situation in your advantage. Many analyst say Fed may cut rate again. As soon as Fed raise rates, the price of homes may slow down with slower demand for homes. Some analyst has been pointing out how real estate industry has increased for little amount of time and there may be "housing market bubble". If the bubble has formed and the real estate market is to go down, it may be the time to buy when the prices and demand are lower. Then there is advantage for buyers to negotiate better in a slow market. The outlook of economy, interest rate and market is hard to tell right now but you should always keep track with them so that you can come up with strategy to win in any market or economy
Find out how to protect yourself from coming crash in the housing market.
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