Wednesday, March 21, 2007

The Fed and Interest Rates - Part 2

After a two day summit by the Federal Reserve's policy-making committee, a definitive answer to whether US interest rates will change was given:

No... at least, not yet.

The FMOC made the decision to let rates remain unchanged (at 5.25%) for the sixth session in a row. The disbursed fear from Wall Street that rates may increase led investors to buy heavily, raising the Dow Jones by nearly 160 points. However, the decision disheartened those in the real estate industry, who were hoping that a cut in rates would improve the current housing slump.

Although the Fed chose not to drop rates, the issue of the weak housing market was a top concern. Many see the lame real estate industry as a leading contributor to the current overall economic state. Fourth quarter numbers of 2006 show a 19.1% drop in home building and renovation. How much of an impact did this have on the quarter's mere 2.2% overall economic gain? No one can be sure, but it certainly did not help.

Obviously, the home market may be the leading culprit for Fed policy-makers, as they noted that a future rate "adjustment" may be in order. As for now, mortgage rates appear to be stagnant, although default rates are steadily rising.

As for home buyers, sellers, and real estate agents, the only thing to do is hope for next time.

As always, discover the latest in IDX tools from and keep up with Seattle real estate news at


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