Federal Reserve Cuts Key Interest Rate

As was widely expected, today the Federal Reserve dropped its Fed Funds Rate to 4.50%, a 0.25 % reduction. There are hopes that this will kick-start the economy and shorten the life of our current housing slump. It has also been mentioned that with Christmas and its spending splurge rapidly approaching, some believe that consumers will be more inclined to spend if rates remain low.

I am not sure if we will see a turnaround in the housing market or not, just yet. For quite a while interest rates have been very low from a historical perspective, yet buyers are still hesitating. Part of this is because they have a home to sell and just cannot stand to sell it for less than they could have a couple of years ago. No matter that the home they will be buying will also be cheaper. Another worry is that buyers are not sure the price drops have bottomed out. I think that once the mind-set of the public becomes more positive and less fearful, the housing market will finally begin to rebound. If interest rate cuts will do it, fine. I am not sure that this will be enough.

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