Home Front

A blog about the economy and the Sacramento-area real estate market.

March 18, 2008
Bernanke makes his move


The Federal Reserve just announced that it has cut the federal funds rate - the rate which banks charge when borrowing from one another - by three fourths of a percentage point to 2.25 percent.

Here is the official announcement.

OK, so what does this mean here in Sacramento?
The Fed cut will have no immediate or major effect on the Sacramento-area real estate market. It WILL bring a nice drop in monthly payments for people with home equity lines of credit (plenty of those in the Sacramento area) and probably cause less severe monthly hikes when adjustable-rate loans reset to newer interest rates.
Mostly, if it calms financial markets it lessens some of the economic instability that is only making things worse for the housing market.

Above all, remember: what the Fed has done is not the same as lowering interest rates on mortgages. Home loan officials say they always get a deluge of calls after a Fed interest rate cut from people who want to refinance.

Mortgage rates do tend eventually to follow the direction of Fed cuts. But they are unpredictable and subject to a lot of bigger economic and global forces. They are also affected by the supply of money to lend, which has been limited as banks and Wall Street plow through this financial upheaval. Limited supply can equal higher prices for mortgages.

Lately, indeed, mortgage rates have been going up, even as Fed rates have been lowered. Mortgage giant Freddie Mac reported a national average of 6.13 percent last week for the 30-year fixed-rate mortgage, up significantly from a low of 5.48 percent the week of Jan. 24. That was the week the Fed cut rates by three quarters of a percentage point to 3.50. A week later it cut rates to 3.0 percent and mortgage rates have largely risen since.

As a general rule, rates fall on fears of economic weakness and rise on fears of inflation. Right now we have some of both, which reminds me of what Jeff Tarbell, managing director of Sacramento-based Comstock Mortgage said on his AM 1140 radio show last Saturday: What are rates today? What time is it?
- MSNBC Photo

About Comments

Reader comments on Sacbee.com are the opinions of the writer, not The Sacramento Bee. If you see an objectionable comment, click the "report abuse" button below it. We will delete comments containing inappropriate links, obscenities, hate speech, and personal attacks. Flagrant or repeat violators will be banned. See more about comments here.

What You Should Know About Comments on Sacbee.com

Sacbee.com is happy to provide a forum for reader interaction, discussion, feedback and reaction to our stories. However, we reserve the right to delete inappropriate comments or ban users who can't play nice. (See our full terms of service here.)

Here are some rules of the road:

• Keep your comments civil. Don't insult one another or the subjects of our articles. If you think a comment violates our guidelines click the "report abuse" button to notify the moderators. Responding to the comment will only encourage bad behavior.

• Don't use profanities, vulgarities or hate speech. This is a general interest news site. Sometimes, there are children present. Don't say anything in a way you wouldn't want your own child to hear.

• Do not attack other users; focus your comments on issues, not individuals.

• Stay on topic. Only post comments relevant to the article at hand. If you want to discuss an issue with a specific user, click on his profile name and send him a direct message.

• Do not copy and paste outside material into the comment box.

• Don't repeat the same comment over and over. We heard you the first time.

• Do not use the commenting system for advertising. That's spam and it isn't allowed.

• Don't use all capital letters. That's akin to yelling and not appreciated by the audience.

You should also know that The Sacramento Bee does not screen comments before they are posted. You are more likely to see inappropriate comments before our staff does, so we ask that you click the "report abuse" button to submit those comments for moderator review. You also may notify us via email at feedback@sacbee.com. Note the headline on which the comment is made and tell us the profile name of the user who made the comment. Remember, comment moderation is subjective. You may find some material objectionable that we won't and vice versa.

If you submit a comment, the user name of your account will appear along with it. Users cannot remove their own comments once they have submitted them, but you may ask our staff to retract one of your comments by sending an email to feedback@sacbee.com. Again, make sure you note the headline on which the comment is made and tell us your profile name.

hide comments

On October 14, The Sacramento Bee will temporarily remove commenting from sacbee.com. While we design the upgrade, we encourage you to tell us what you like and don't like about commenting on sacbee.com and other websites. We've heard from hundreds of you already and we're listening. Please continue to add your thoughts and questions here. We also encourage you to write Letters to the Editor on this and other topics.

Jim Wasserman on Twitter

Follow "jimwasserman" on Twitter

October 2013

Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31