The predicition from economists is now that if the Fed Chairman lowers the key Federal Funds Rate it will be by only .25%. Or, Bernanke may leave things the same in an attempt to curb the rising commodity (Oil/gas, wheat, gold..etc) prices (inflation?) that we are all very aware of.

Some say the Federal Reserve Board has lost sight of one of their main objectives to curb or keep inflation under control by sharply lowering interest rates from 5.25% at the start of the Mortgage/Subprime Meltdown to the now very low 2.25%. The Prime Interest Rate (Prime)is very closely tied to the Federal Funds Overnight Lending Rate which stays right at 3% below the Prime. The Prime Rate (Prime) is what credit card, car loan, personal loans, & Home Equity Lines of Credit (HELOC) are calculated on. By lowering rates, The Fed, helps to stimulate the economy by reducing the cost of credit for consumers which usually causes people to get out in the market and buy more stuff.

Example: Due to an unforeseen flood, my wife and I had to remodel our home. As this was unplanned I used our HELOC to pay for a portion of the cost. The balance on our HELOC is approx $90,000. The monthly Interest Only (I/O) payment before The Fed began lowering interest rates in Fall of '07 was $581.25/mo. After the 3% decrease, the payment on the same balance (it's I/O so doesn't get paid down unless extra payments are made) is only $356.25. That's over a $200 difference.

The lowering of rates was put in motion in an attempt to keep the US Economy out of a recession as a result of the Subprime Mortgage/Credit Crisis. Has it worked? We'll see--it can take 6-12 months to see the full results of The Fed lowering rates. Unfortunately, unlike consumer credit like I mentioned before, mortgages aren't directly affected when The Fed lowers rates. So, we haven't seen a dramatic decrease in the interest rates for 1st Mortgages. We have seen many of the more creative and higher Loan-To-Value (LTV) programs being eliminated. This is causing there to be fewer buyers and, as a result, home prices have declined even in strong economic areas like the Puget Sound. What does all this mean? Investors: Now is a great time to pick up some Real Estate! Home prices are currently a bit lower, sellers are more flexible, and consumer credit is less expensive.

Example: Get your Integrated Agent (like myself) to find you a good quality home at a below market price (short sales are a plenty right now). Negotiate the seller to buy your interest down & possibly accept an extended closing, so the property will cash flow immediately (more rent than expenses=$$$/mo.). Maybe do some minor quick fixes, using low cost consumer credit, if absolutely necessary. Plan to hold the property for a minimum of 5-10 years. The results of an investment like this will include ongoing cashflow, a build-up of equity, plus additional bonuses which may include tax advantages.

This is investing 101 - Buy Low, Sell High. When is a better time to buy low? Contact me for a personalized investment analysis.