Can you say volatility with a capital V? The Federal Reserve cut rates today by 3/4 of a percent in an effort to aid the U.S. economy. This is no surprise in the wake of the Bear Stearns financial crisis, coupled with everything everything else going on in the market. The Fed has cut the benchmark lending rate by 2 percentage points just this year, the most significant cuts in nearly three decades! Sofia Nadjibi, mortgage broker at Union Trust in Greenbrae had this to say in an email today about the rate cut:
History shows us that in the wake of a Fed cut, Bond pricing may initially pop a bit higher in response, but generally very quickly reverses direction and gets worse. Fed cuts fuel inflation, because the lower rates just serve to make it more attractive to buy and finance goods and services…and remember, inflation is BAD for Long-Term Interest Rates, so we will likely see higher interest rates in the next few weeks.
Strap your seatbelt on and hold on tight. We are in tough times and they are going to continue for a while. This is a great opportunity for aggressive buyers to take advantage of the current economic climate and to negotiate hard. There are some amazing opportunities in the marketplace and in general, buyers are in the driver’s seat.