Interest Rate Adjustment

For the first time in more than four years, the Federal Reserve has cut the interest rate. This was a reaction to a slow economic growth the first half of 2007. The expectation by some was that the cut would be a rate adjustment of just a quarter-point to 5.0 percent, and was a surprise to many with the announcement of a half-point rate cut.

What does this mean for the Orlando real estate market? Well for starters, this will be reason for any buyer who has been patiently waiting to purchase a home. Lower interest rates will mean a lower mortgage, and coupled with already low home prices, there is certainly no better time to buy than the present. Even if home prices continue to drop, there will be a time in the near future when they stabilize. A long term investment such as a home may have potential to drop in price short term but the long term benefits of home ownership outweigh the hesitancy of waiting for something better, especially with the current drop in interest rates. Furthermore, according to the Orlando Sentinel, a division of the Tribune Company, Diane Swonk, chief economist with Mesirow Financial in Chicago was quoted as predicting, "This is some real action here, and they don't intend to come back with more cuts". Buyers who think waiting for another cut in rates is a wise decision may question their choice if they do not act now.

This also comes as great news for most anyone who already has credit cards or a Home Equity Line with an interest rate that is connected to the prime rate. You see, "major banks quickly cut their prime lending rate in tandem with the Fed's move, to 7.75 percent from 8.25 percent," according to the Orlando Sentinel's article from Sept 19, 2007. According to Dustin Owen, our on-site Sales Manager from Countrywide those borrowers can expect to see a decrease in their monthly payments.

Finally, with an economy that is seeing more and more foreclosures on the rise, this may be just the break Orlando sellers are looking for. The buyers market that we find ourselves entrenched in has proven difficult for sellers who are highly motivated to sell their homes. A bit of positive news can only bring a sense of relief to our sellers, even if only for the short term.