The FEDs step in...finally.......

Yesterday was a highly volatile but poignant day on Wall Street. With news that the overseas stock markets were plunging before the opening bell in New York, stocks here plummeted in the early morning hours of trading. But the Federal Bank had a plan and it could mean revision and some much needed relief for the housing market.

The FED lowered the discount rate, or the interest rate that banks pay to buy money from the government. This is important because it is a chief index by which mortgage companies and banks measure their own interest rates. This means the banks and mortgage companies are paying less to loan money to borrowers. It's something we've needed for quite a while, but it seems the Federal Reserve chief, Ben Bernenke, has been quite a bit more conservative than our old friend Alan Greenspan. He has adopted a "wait and see" mentality while many have been struggling with foreclosure and an inability to refinance.

So what does this mean in the long haul? It means that consumers trapped in adjustable rate mortgages will finally see the life boat and buyers waiting out the mortgage market are likely to hop on that life boat and purchase. This is not a long-term fix, but certainly a long overdue stimulant that may create a sense of normalcy in the housing market and spark some activity.

While the media remains skeptical at best regarding the housing market, I see this as an opportunity for first-time homebuyers to get a lot of house for a very little bit of money and with a stunning interest rate. While FHA loans have become increasingly popular over the past few months, we will start to see more consumers obtaining conventional mortgages still at historically low interest rates. Banks will also begin to romance the consumers once more to borrow. And with appreciation climbing slowly in this state, the deals are there for the taking.

You may have heard that median prices of homes in Florida have fallen about 30%, but the media does not go one step further in telling you that median prices ROSE 50% in 2004 which was an anomaly. I keep saying we are back to normal and it doesn't seem that too many buyers are listening.

I peruse other real estate blogs of note to keep my finger on the pulse of the consumers. I read a posting yesterday saying that sellers should "stop listening to your realtor! your house is overpriced and won't sell." I was forced to respond. I've said time and time again that Realtors (capital R) don't price homes, the market does. And there are still unreasonable sellers out there who believe they can turn back the hands of time and make a killing on the house they purchased just 3 years ago. It's not going to happen. The people selling in this market should only be the people who NEED to sell. But the buyers win because they can get lots more house for less money.

All in all, good news. And as the Presidential primaries approach, things should get even better.