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 XoomPad.com and keep up with Seattle real estate news at UrbanTango.com.

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Federal Reserve Discusses Interest Rates, Mortgage Defaults

Policy-makers in the Federal Reserve sat down this afternoon to begin a two-day summit to discuss a possible change in US interest rates, among other financial trends.

One subject that looks to be high on the list is the radically rising rate of mortgage defaults among American homeowners. Rising mortgage rates coupled with falling homeprices have meant that many homeowners that otherwise could have avoided default by refinancing, could not. These disturbing trends will surely weigh heavy on the minds of members of the Federal Open Market Committee as the weigh the Fed's options.

Most leading economists predict that a shift in the interest rate is unlikely - which would make it the sixth session in a row that the rate remained at 5.25%. However, the rising default rate, on top of a slower economy, could raise discussion of cutting rates in the future.

The Fed will announce its decision mid-afternoon tomorrow.

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

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