Posts tagged They might be dropping the Fed Funds rate – so what?

They might be dropping the Fed Funds rate – so what?

The WSJ’s Development blog has a good Q & A today about the Fed Funds rate.Whenever the Fed debates dropping the rate, inevitably buyers and sellers will ask me – that will help the market, right?……  The interest rate on a 30-year fixed-rate mortgage tracks the yield on the 10-year Treasury note (at yesterday’s close 4.383%….  Lenders typically set their base mortgage rate around two percentage points higher than the 10-year bond yield….So if you want to know the direction of mortgage rates, you need to get a sense of where bond yields are headingLet’s not discount the psychological impact of buyers and sellers hearing that “rates have dropped.”  The perception that “rates are lower” may have a real impact on the local real estate market, whether they’ve dropped or not – particularly because nearly 40% of our active inventory (in Charlottesville/Albemarle) is priced above the $417,000 threshold that indicates “jumbo loan” territory.That said, rates really aren’t high at all (look at March 1982, or March of 2002).

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