Foreclosure and Real Estate Blogs

Well, tomorrow’s the big day.  The Fed is going to be cutting the federal funds rate, the only question seems to be will they drop .50%, .75% or possibly a full percentage point.  These are certainly interesting times for rate watchers.  The Federal funds rate doesn’t have much impact on mortgage rates, but it does have impact on other parts of the economy and that’s where the Fed wants to provide some stimulation.

What happens, though, when the Fed exhausts it’s ability to drop rates to provide economic stimulus?  A full percentage point drop will put the federal funds rate at 2% and according to the government, we aren’t even in a recession.  If this non-recessionary economy continues to worsen, that leaves the Fed with only 2% for future adjustments.  Is that going to be enough?  Who knows.

A lot of the U.S. economy is driven by consumer spending.  With the home equity ATM closed, it’s highly unlikely the U.S. economy will be able to spring back quickly no matter what changes the Fed brings about.  2010 is a good possibility for the end of this non-recession, but I also wouldn’t be surprised if it went so long as 2011 or 2012.  Just make sure anything you buy either cash flows or is at a very significant discount or you’re willing to keep it for awhile.