THE FED EASING brought me two interesting and optimistic emails from my sources in the Las Vegas real estate market. They come from Mark Baker of the Mark Baker Team of Meridias Capital and Doug Bradford of Realty Executives.

First from Mark Baker:

The Fed surprised almost everyone today with a half percent cut in both the Fed Funds and Discount Rates. Stocks soared higher and enjoyed their largest gain since 2003. What a great deal for the economy right?

Here is what it really means: Rates on consumer debt, car loans, and Home Equity Lines Of Credit (HELOC's) will all benefit. But because Home Loan rates are tied more closely to inflation, it is not uncommon to see less of a reaction…or even an opposite reaction in mortgage rates.

Unfortunately, the Fed cut does hurt rates of return on investments, which gives foreign investors less incentive to invest in US securities. This is what drives mortgage interest rates. Don't be surprised to see home loan rates go up for a short time because of this but then turn around & get better in the next few weeks.

And from Doug:

The Bright Silver Lining in the Real Estate Storm Clouds

Low rates + low prices = good buys!
Every day we hear about another mortgage lender becoming the latest casualty of the credit crisis. Just in the past eight months, more than 100 national lenders have closed up shop. One of the largest lenders, American Home Mortgage left nearly $800 million in loans unable to close. Tens of thousands of borrowers have now been left without financing as a result of companies going under.

The current real estate/mortgage crisis is the result of mortgage companies letting people borrow up more than their homes were worth, or that they could afford, by offering special "teaser" loans that were attractive and allowed people to afford "the American Dream."

Clearly, the credit market is going through unprecedented turmoil that many financial experts say is broader and more serious than in the past. The credit crunch is likely to wreak the most havoc in California, Nevada, Florida, Hawaii, Arizona and New York, because relatively high home prices there have led many buyers to subprime, no-documentation or jumbo loans, says Thomas Lawler of Lawler Economic & Housing Consulting.

And, of course, that has an impact on foreclosures across the country. Nevada reported one foreclosure filing for every 165 households—more than three times the national average. The state had 6,197 filings in August, up 21% from July and more than triple the year-ago figure.

Nationwide, 243,947 foreclosure filings were reported in August, up 115% from 113,300 in the same month a year ago, RealtyTrac of Irvine, Calif., reported Tuesday.

Today, however, the Federal Government stepped in and reduced the interest rate by 1⁄2 a point to 4.75%, the first reduction in this key rate in 4 years. It will free up money to reduce credit card debt, car loans, and for some mortgages. Investors say the cuts are necessary to revive a wobbly economy dragged down by the sinking housing market and resulting defaults on mortgages taken out by folks with shaky credit.

What do these cuts mean?

• They could go a long way toward repairing investors' broken confidence,
• The cuts might also deliver a much-needed psychological boost, sending the signal that the Fed want to stabilize financial markets as quickly as possible
• Cuts also reduce the odds of the economy falling into recession

What does this mean to the real estate market?

– Sellers can no longer be reluctant to accept offers or reduce prices—now is not the best time to hold out for the "best price" possible.

– Buyers with credit issues or who have difficulty providing required documentation can no longer sit on the fence—buyers who qualify for a loan today may not qualify for the same exact loan a few weeks from now.

– Subprime and Alt-A refinance candidates, especially those with ARMs scheduled to reset over the next 12 months—even those with pre-payment penalties need to act now and refinance. Payments could double in some cases once an ARM resets.

What should you do now?

For Buyers, now is definitely the time to buy. With over 24,000 homes on the market, there's a home that's right for you. Let me help you find it. Low rates + low prices = good buys!

For Sellers, it is time to reduce your prices so you can get your home sold. Price reductions of 2–3 % below market value will help your home sell much faster. I can help you price your home properly so you will still achieve the highest value possible

As an educated real estate professional, let me assist you by using my experience and resources to help you navigate through these turbulent times. Give me a call today…and since most people know someone who is looking to buy or sell, I'd appreciate the referral as well.