Rates are already very low and are not playing much part in the credit crunch that is strangling the economy.Investors should know that the Fed still has plenty of ways to stimulate the economy, even with rates near or at zero.
The bottom line on Fed policy is supply of money. The Fed typically targets the price of money, but, with the price so low, it will focus on increasing the quantity of money through its balance sheet.In a word,, PRINT MORE MONEY. Inflation is not on the horizon.
Many in the real estate industry have relied upon the rate sheets to provide some guidance of the forward velocity of their marketplace. However, with credit rates currently sinking to levels not seen in generations the affects of increase sales are not improving against the foreclosure trends. Additionally we should expect 2009 to bring forth the affects of 0% financing and Option ARM’s to start to reset in the spring of 2009. This tide of credit leverage may have a negative affect on the consumer spending and credit activity. The home equity loans and Option ARMs marketplace may become a victim of the job market downturn and fear which comes during those times of negative job growth. Hold onto equity leverage without non fixed capital cost. If possible place tang-ables necessities in long range free and clear of the income stream. Expect credit leverage to loosen in 1st Q. of 2010 ….yes 2010.
