Fed's do it again

Once again the Feds decided to cut the key interest rate in hopes of helping the country to avoid a recession.

The federal funds rate was cut by a quarter point, down to 4.25 percent this morning. Though this cut isn't going to have a direct impact on the dragging real estate market, it should help ease the impact of consumer spending during this holiday season. The rate cut will help some homeowners who are currently holding high interest adjustable rate home equity loans.

Although we all wish and dream that these rate cuts would help boost the housing market out of it's current slump, there's too many impending issues that will continue to hold it down. As a record number of adjustable rate mortgages will reset January 1, 2008, there are a large number of homeowners who won't qualify for the proposed interest rate freeze. These folks are facing higher mortgage payments, and some will likely be forced to file for foreclosure. In other words, there's a good chance that it's only going to get worse before it gets better.

For the housing market to improve the inventory needs to go down. There's an extremely large inventory of homes for sale nationwide right now, currently 6956 single family homes in Tucson. Until this inventory shrinks, we can't expect to see home sales or prices increase. Buyers have too much choice and no real need to negotiate. Many homeowners are still filing for foreclosure, resulting in lower average sales prices for neighboring homes. The fact that lenders are working more closely with borrowers to avoid foreclosure is a step in the right direction, but unfortunately there's no quick fix for solving the issues at hand.