Declining home prices in some areas of the country and very low consumer confidence have investors fleeing stocks to the safety of bonds as of this morning. The economy continues to provide signs that it is struggling and will continue to do so for some time. The Fed is expected to announce another .25% short term interest rate cut tomorrow. Economists expect this to be the last cut for a while as it will come in the face of increasing inflation and an extremely weak dollar. Corporate America continues to struggle with diminished earnings and write-downs due to bad loans. Tomorrow should be another volatile day for the markets on the heels of the Fed’s decision. Also, based on inflationary pressures mostly due to fuel prices and job loss concerns, we feel any future Fed rate cut would take some time to have a positive effect on the economy at this point.
On a positive note, the 30 year fixed mortgage interest rate is currently at 5.5% for AAA borrowers (certain terms and conditions apply and rates subject to change)and real estate inventory is shrinking slowly as prices in areas in some areas continue to fall. We view this as a significant buying opportunity with solid long term equity gains for investors and homeowners, alike. Also, we continue to see the rewards of razing and rebuilding, and renovating homes in highly desirable micro-markets throughout the country.
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Stay tuned and stay in touch with your mortgage professional. Thank you for the opportunity to serve you and your clients. David. 919.851.0999.