Where's the Federal Funds Rate headed? Currently sitting at 1.50%, the markets are now nearly split whether they think the Feds will drop the rate to either 1.00% or 0.75% (a 50 bps cut moves the Fed Funds Rate to 1.00% while a 75 bps cut would drop the rate to 0.75%):
The FOMC meeting is now upon us. The two-day FOMC meeting is scheduled for Tuesday, October 28, 2008 with the Fed Funds Rate decision made during the Wednesday, October 29, 2008 meeting:
Home equity lines, home equity loans, or any other loans tied to the Fed Funds Rate, barring any unexpected surprises, will be getting more attractive once again.
On a 100k loan, a 50 bps cut will make your money another $500 cheaper over the span of a year. A 75 bps cut will make your money another $750 cheaper of the span of a year.
Since the June 29, 2006 meeting, the Feds have dropped the rates from 5.25% to 1.50%, a drop of 3.75%. Again, on a 100k loan tied to the Fed Funds Rate, your money has gotten $3,750 cheaper over the span of a year, $312.50 per month, $10.27 each day!
For real estate investors using their equity to fund their purchases, these rate cuts translate into phenomenal savings. Couple these savings with home values that have dropped significantly in many locales and a volatile stock market, it's no wonder that real estate is beginning to look attractive once again.
A return to fundamentals and improving cash flow scenarios translates into more real estate investors. With deals to be had, investors will continue to enter the market in greater numbers; ultimately chipping away at these huge inventory levels one REO and foreclosure at a time.
