Fed rate cut won’t help subprime borrowers

So, the fed cut the rate on short term money by .5% to help out the “little guy”.  Does it really help?  No, not really.  Most subprime loans are based on the LIBOR (London Interbank Offered Rate), not the fed rate. 

The cut in the fed rate WILL help people with floating rate mortgages that are tied to that rate, such as home equity loans.

Denver Post Article on New Foreclosure Law

Excellent article on the new Foreclosure Protection Act:

http://www.denverpost.com/economy/ci_6900465

Are You Waiting on the Sidelines?

Deja vu – this is 1988 all over again.  Are you sitting on the sidelines, or are you in the game, buying up bargain properties?  Time Magazine ran a cover story article this week on the housing market, which quoted me about the opportunities of buying when things are down:

http://www.time.com/time/magazine/article/0,9171,1661679,00.html

Many investors are waiting on the sidelines of this real estate bust for things to get better.  They will… eventually.  While the news is mixed on when the next boom will happen, they all agree on one thing – it will boom again.  Population explosion from immigration and demand for U.S. Housing will continue on a steady pace for at least 40 years.  Real estate doesn’t boom and bust, it just comes and goes in waves, causing a doubling in prices every time around.

Many are sitting on the sideliness waiting for the green light to buy, and this may not be the best idea.  Bargains are everywhere, and interest rates are still cheap. 

The federal reserve cut the funds rate by 1/2 percent today for the first time in 4 years.  The fed rarely does anything like this once, so expect further cuts ahead.  What does this mean for investors?  Lower rates means more buying power, which may stimulate more buyers back into the market.  If the fed continues in this direction, we could see an earlier recovery of the market, and those that wait it out may lose out on bargains!

When the overwhelming news is negative, that generally signals the bottom of a market.  If you are waiting until TIME magazine cover says the market is rebounding, it’s a mistake. By the time the media signals the green light, it will be a year too late! 

Sign up for the 10th Annual Real Estate Investors Wealth Building Convention now:

–>>> http://www.realestateconvention.com

Is Real Estate Ready for a Comeback?

This kind of headline is a dumb question, I know, because I’ve already said there’s no “housing market”and all real estate is local.  One exception to that rule is that interest rates and lending criteria will affect real estate nationwide.  So, if the recession fears are strong enough and the Fed thinks dropping rates is more important than inflation, what will this do to real estate?

Theoretically, dropping rates .25 of a point won’t change the payment much on those who ARM mortgages will adjust.  However, if the fed signals another rate change downward, this could bring more investors back from the turbulent stock market and into real estate.  After all, the best bargains are found not when things are good, but when things are bad.

As Baron Rothschild aptly put it, “The time to buy is when the blood is running in the streets”.  Some say this is 1988 all over again – would you have rather bought in 1988 or 1998?