Interest rate cut and effect on local housing (mortgage, homes)

[meanieme]

I'm not an economist so someone please enlighten me.

If the economy is so healthy (as Trump touts it), stock market is at all time high, and local housing prices have appreciated at all time high and there is still huge buyer demand, why did the Fed actually cut interest rate?

Shouldn't the Fed increase interest rate so things don't get overheated? Seems like cutting interest rate would artificially inflate things even further causing risk of a huge bubble everywhere, stock market, housing, etc as stock investors and homebuyers would think they have even more capability to spend.

[turkeydance]

effect on local housing?
my opinion, it just got "hotter".

[newbee2]

It’s helping the stock market. Increasing the rates will cause corporate borrowing to be more expensive and thus might indirectly impact the economy.

[m378]

Today's rate change doesn't affect mortgage rates.

[GVoR]

Originally Posted by m378

Today's rate change doesn't affect mortgage rates.

Not immediately it doesn't, but it does in time.

Fed Interest Rates-> MTG Rates are similar to Oil Barrel Prices -> Price at the pump....

It's all about the replacement cost.

When Oil prices go down, the price at the pump moves down slower/delayed

When Oil prices go up, price at the pump goes up same day (some times many times a day when the jump is big)

When Fed drops the rate, the rate on a mortgage goes down in delayed fashion.

When Fed increases the rate, mortgage rates can change same day.


As for the why in the OP, I am far from an Economist. However Rate drops tend to be the policy utilized when things aren't going as well as the seem. Between the report this week that growth was less than expected last quarter, and corps apparently have less capital to invest than previously thought (even with the tax cuts) plus the yield curve inverted in April/May (and didn't make a ton of news when it probably should have when it is our "best" indicator of recession prediction) I wonder if things aren't quite as nice as they "seem"


EDIT TO ADD - Maybe they dropped it specifically to combat the Yield Curve inversion.

[mvarghese84]

Dont forget the trade war causing uncertainty about capital spending.

[wizard-xyzzy]

There are three homes within 1000 ft of mine that have been on the market for several weeks now. I haven't seen that in quite a while. For the last year, homes in this neighborhood were selling within 72 hours of being put on the market.

Interest rates might be surgery with blunt instruments, but up or down they do have an effect.

[ucctgg]

Originally Posted by meanieme

I'm not an economist so someone please enlighten me.

If the economy is so healthy (as Trump touts it), stock market is at all time high, and local housing prices have appreciated at all time high and there is still huge buyer demand, why did the Fed actually cut interest rate?

Shouldn't the Fed increase interest rate so things don't get overheated? Seems like cutting interest rate would artificially inflate things even further causing risk of a huge bubble everywhere, stock market, housing, etc as stock investors and homebuyers would think they have even more capability to spend.

The chairman said they are concerned about the global economy and trade concerns. Local housing prices had nothing to do with their decision.

[meanieme]

Originally Posted by turkeydance

effect on local housing?
my opinion, it just got "hotter".

yes and that's my point, doesn't cutting interests just overinflate everything even more thus even higher risk of bubble?

in laymans terms, if things are going too well, shouldn't you tame and control it?

didn't know chairman was concerned about economy....seems president and american public feel economy is at all time high and getting even better!

[IHeartData]

Originally Posted by meanieme

I'm not an economist so someone please enlighten me.

If the economy is so healthy (as Trump touts it), stock market is at all time high, and local housing prices have appreciated at all time high and there is still huge buyer demand, why did the Fed actually cut interest rate?

Shouldn't the Fed increase interest rate so things don't get overheated? Seems like cutting interest rate would artificially inflate things even further causing risk of a huge bubble everywhere, stock market, housing, etc as stock investors and homebuyers would think they have even more capability to spend.

You're right but this has been the name of the game since Bush. What used to be a temporary booster is now a permanent method. We artificially expand by inflating the debt away. There are no proper returns on your savings account anymore. Being a saver has been bad for a very long time.