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August 17, 2007
Fed Cuts Discount Rate, Markets Rejoice
Everyone knew the Fed was considering cutting rates, but its half-point shave of the discount rate before markets opened this morning surprised investors, who responded by driving up the Dow 300 points. According to The Times, the move increases the possiblity that the Fed Funds rate could be cut before the next scheduled meeting on September 18, something that could have big implications for the housing market. For now, though, the question is what, if any, psychological impact this cut will have on the real estate market, here and around the country.
In Surprise Move, Fed Cuts Key Rate [NY TImes]
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Comments
Wow. Are you retarded? Discount rate has zero significance for the housing market.
Posted by: guest at August 17, 2007 10:13 AM
hey genius, re-read the post.
p.s. the fed cut the discount rate because of ATLANTIC
YARDS
EFFECT
happy friday!!
Posted by: Jimmy Legs at August 17, 2007 10:24 AM
historically a cut in the discount rate is followed by a fed cut - things are looking up. Keep your fingers crossed for 9/18 - which I am calling HAPPY MORTGAGE DAY!
Posted by: guest at August 17, 2007 10:25 AM
wow that's rude...discount rate is being looked at as a precursor to a major round of Fed easing...Goldman, Lehman and Merrill all calling for 75bps of easing by year-end others calling for at least 2...
time to get into those 18-month ARMs again..oh yeah can't get those!!
bigger issue is that even if mortgage rates come down big-time, the banks are squeezing off credit to everyone even prime...therefore I think it's a wash at best..."at best" because I think prices are coming down HUGE despite fed action due to Wall Street looking at a terrible H2 '07...and yes (before I get lambasted) NYC housing cycle is tied to Wall Street bonuses although not everyone works at a bank...
Posted by: guest at August 17, 2007 10:26 AM
it's all about investor confidence, specifically in non-agency MBS securities. If investors see this as a sign that they "threw the baby with the bathwater" by not buying any non-agency mortgages when subprime when to s**t and come back into the market, then banks can start issuing these mortgages, and the spread to jumbo will shrink, and guidelines won't be draconian... all a good thing if it happens.
Posted by: oe at August 17, 2007 10:28 AM
geez, 10:26, couldn't you have said something snarky and left it at that? all those facts and an actual opinion...it's making my head spin.
Posted by: guest at August 17, 2007 10:59 AM
The 1st poster sounds like a real winner. what an ahole. Anyway, the Fed cut in the discount rate was a smart move for liquidity and may be followed soon by a cut in the fed rate. While none of this will turn around the housing market significantly , any increase in liquidity is good for everybody. Although it does make it more expensive to travel to Europe.
Posted by: guest at August 17, 2007 11:03 AM
Not sure how juicing the market is "good for everyone". Won't this just prolong the pain?
Posted by: guest at August 17, 2007 11:38 AM
11:38, you're right, it doesn't help importers. But the housing market can only benefit in the long run , although I also think the fed got wind that a large fin'l institution(s) was in trouble and they needed to act fast. Look at today's stock mkt to see the impact that investors feel about the the discount rate reduction.
Posted by: guest at August 17, 2007 11:51 AM
The dollar sank on the news, and oil prices rise. Foreign mortgage bond investors are taking another hit, and the markets are worried about inflation.
Remember low mortgage rates despite all those FED rate increases? It can work the other way too.
Posted by: guest at August 17, 2007 11:51 AM
"Wow. Are you retarded? Discount rate has zero significance for the housing market."
Amen Amen!!!!! This means the market is in bad shape. The FED had to provide short term money.
Also, this move makes your money worth less.
Forget Real Estate, it's DONE!!!!!!!!!!!!!!!!!!!
Posted by: guest at August 17, 2007 12:07 PM
it's only done for you, 12:07 because you aren't in it.
you gotta play to win!
and most of us have already won, dollface.
Posted by: guest at August 17, 2007 12:15 PM
12:15 -must we really resort to name calling?
Posted by: guest at August 17, 2007 12:37 PM
Jeez, what louts in this thread. The Fed's move will likely exhibit a minor easing of mortgage rates over the next 4-8 weeks. Chances are also good that, with the elections approaching, the Fed will be reluctant to raise rates.
Now, all you PSlope lefties, lets just hope that Hillary loses to Mitt or Rudy so that the economy doesn't tank and veer towards socialism...
Posted by: guest at August 17, 2007 12:52 PM
Ah yes, the 2008 election question:
Socialist dystopia or Christian-o-fascist police state.
Posted by: slick at August 17, 2007 1:40 PM
12:52 The clinton years had budget surplusses compared to the present administration. And if Clinton were president we wouldn't be in Iraq and its billions upon billions dollars of costs. Bush's war is akin to Roosevelt saying during ww2, "forget about Hitler let's make sure we stop this Franco fella in spain, he's our real nemesis".
Posted by: guest at August 17, 2007 1:43 PM
anyone who thinks a continuation of current republican tactics in government is going to help the economy is beyond high.
Posted by: guest at August 17, 2007 1:47 PM
We should keep this forum on point, but let me at least say that if you think the Bush Administration's tax cuts haven't done wonders for the economy, you are high. As for your Leftist-colored glasses that create holograms of civil rights violation, Christiandom, etc., keep imagining that; and hopefully you will continue to lose elections...
Posted by: guest at August 17, 2007 1:58 PM
laughing now
Posted by: guest at August 17, 2007 2:09 PM
we all are, 2:09.
i have no idea how 1:58 managed to find his/her way to brooklyn.
screw being high. anyone who thinks that bush's tax cuts have done ANYTHING just smoked crack, snorted coke, injected heroin and woke up in a pool, of what i hope, was their own vomit.
Posted by: guest at August 17, 2007 2:43 PM
get your face out of the New York Times, and into the real world, please.
Posted by: guest at August 17, 2007 3:04 PM
why not also discuss these articles?
"Subprime lender NovaStar cuts 500 jobs"
"Pink slips hit Wall St.; Bear Stearns pares 240"
"Countrywide forced to turn to banks for help"
"The escape of the enablers"
"Mortgage rates rise for first time in four weeks"
"Jobless claims rise unexpectedly"
My point is, if you're going to "report" news, then report it all. Otherwise, just to bricks and kitchens and wallpaper and...
Offer a balance.
Posted by: guest at August 17, 2007 3:28 PM
But 3:28, if Mr. B were to list all those articles, it would be equivalent to saying something like, "Brooklyn real estate is a bad investment right now because, honestly, the market doesn't look like it's got anywhere good to go from here, and actually, all the rest of you who bought in the last 5 years just bought into the housing bubble hype, I hope you don't get screwed". He'd write himself out of a job, wouldn't he? Plus, that would probably involve admitting to himself that he probably paid too much for his house too.
And if he said "Brooklyn real estate is still a steal, you all better jump in now while mortgages are still available, it's the only thing to do", he'd be misleading people.
I think he's doing an ok job of not editorializing or giving actual financial advice. It does seem like he leans towards the everything's-hunky-dorey-nothing-to-see-here-move-along stance, but that's mainly because with no editorializing, the content of this blog ends up just being a list of places currently for sale. And the subprime mess hasn't really caught up with the Brooklyn market yet, so things are still selling for inflated, bubble-time prices.
Eh, we'll see what happens. I'm betting it's going to be awful, but I don't think it'll be awful starting tomorrow. I think stock crashes and hedge fund implosions take a while to trickle down to your average Joe Canarsie. Give it a little while, let a few million Americans lose their homes (flippers first, of course), retirement funds and any other investment they have, then watch them try to deal with inflated food prices (thank you ethanol), inflated gas prices (thank you peak oil), and inflated everything else prices (thank you rumoured future Fed rate cut). Everyone will be a leftist all of a sudden. It'll happen on its own.
Posted by: guest at August 17, 2007 8:27 PM
8:27PM, ain't gonna happen. Such would require (1) major recession (2) Manhattan residential prices to, basically, crash. (2) is even less likely to happen than (1).
Relax. The economy is more or less great, and short of a nuclear attack, is going to stay that way for years.
Posted by: BrooklynCouch at August 17, 2007 9:17 PM
PS: Since when is 300 points in a 13,000 Dow a big deal? It was a big deal 15 or 20 years ago when it was a much greater percentage, but not, its a non-event.
Posted by: BrooklynCouch at August 17, 2007 9:19 PM
Lots of folks misunderstand the real estate and financial markets.
First a real estate bubble starts in the urban areas, spreads next to the suburbs, and finally inflates the exurbs/rural areas near the bubble's end. When the bubble finally deflates, the process reverses itself. The deflation will eventually hit Brooklyn and Manhattan if it hasn't already.
In addition, a financial crisis is not an event but a process. Here's a quote that sums it up nicely:
"A financial crash is not a sudden, singular event. The way the Crash of 1929 is commonly misunderstood, the market crashed on Monday, October 31, 1929 and soup lines formed Tuesday.
A financial crash is a process lasting as long as a year, punctuated by a few notable grip-and-grin market events that make it into the history books. Underlying the process is the dissolution of a fallacious belief system that developed over a period of many years. Fallacies floated on an ocean of cheap credit. As the credit dries up, facts are revealed under the harsh light of reality..."
iTulip.com 08/17/2007
Personally, I wouldn't be buying any property in the area for several years. We may see big gains in the financial markets from time to time, but the downturn will eventually come and will have a long ways to go.
Posted by: guest at August 17, 2007 9:49 PM
hey 9:49 PM, me thinks you have never thought the time was right to invest; and if you did, it was not with much thought.
In most ways, the US economy is better than in was in the 1990's; even the late 1990's. There are no guarantees, but perpetual pessimist that eventually "proves right" is no better than not thinking at all.
Posted by: BrooklynCouch at August 19, 2007 3:27 AM
BrooklynCouch,
Me thinks you still don't understand business cycles. For the past 30 years, the credit markets have been expanding while real savings has decreased. During the next cycle, the opposite will occur.
As a result, housing as part of the economy will contract back to its "normal" level and may actually dip below the mean for a time. As part of the that contraction, housing prices will decrease or at least fail to keep up with inflation.
When individuals no longer look at housing as a means for wealth creation (housing does not add anything to productivity and manufacturing growth) that will be the time to invest again.
As for investing in real estate, I haven't owned since moving to New York one year ago. Before that I bought and sold four residence over a period of 6 years. The frenzy in the real estate market was evident, and I personally thought it was time to get out. Besides, who knows how long I'll actually be here.
Other bubbles will come and go. Perhaps infrastructure or alternative energy will be the next bubble, but housing is kaput.
Posted by: guest at August 19, 2007 9:54 AM
me thinks you don't know a darn thing about real estate, 9:54.
not one thing.
Posted by: guest at August 19, 2007 10:33 AM
Me thinks anyone who thinks real estate is sure bet in the next five years knows nothing about real estate or finance.
And probably has little understanding of history.
Posted by: guest at August 19, 2007 4:57 PM
me thinks this me thinks thing is weird.
Posted by: guest at August 19, 2007 6:54 PM
9:54 - you do not understand the NY real estate market - your ownership experience appears to be limited to out of state and some text book jargon. Buy and sell four prime residences in NY city and then come back to this forum and let's talk.
BTW - NY market will suffer some setbacks in this current environment, but it will never ever be "kaput"! Not ever!
Posted by: guest at August 19, 2007 7:02 PM
"BTW - NY market will suffer some setbacks in this current environment, but it will never ever be "kaput"! Not ever!"
Tell that to the folks who owned housing in Houston in the mid 80's, in California in the early 90%, and in Japan during the entire 90's decade. Yeah, it's different this time and housing never goes down.
Posted by: guest at August 19, 2007 8:58 PM
I agree with 8:58, and would only add ... tell that to the New Yorkers who bought in 1987. At the time, the average price for a 1-3 bedroom home/condo was $450k. It dropped to $250k by 1992 (45% drop in 5 years, more if you figure in inflation). The price didn't go back up to $450k until 1997, and didn't reach the inflation-adjusted level until 2001. So if you bought in 1987, your investment was either down or flat for almost 15 years.
Doesn't anyone here read curbed.com too? They had a link to the graph below on Friday. All info from the graph except inflation, which I looked up with a CPI calculator.
http://www.observer.com/2007/bloombergs-dour-graph-waiting-nycs-decline
Posted by: sloper at August 20, 2007 12:32 AM
This thread is a good example of why I stay away from the armchair Bernankes and stick to the threads about important things like sump pumps, termites and gardening.
I say to Mr. B, please keep the economy threads coming so the Gordon Gekko wannabes will spend all their time exerting their egos here and will leave the other threads to people who don't have some damaged-ego point to prove or some economics fetish.
It's not like ANY of them know what the hell they're talking about.
Want proof? If they're so damn smart and can look in their big economic crystal balls, why are they living in Brooklyn and posting on a blog and not living large in a nice big townhouse on the Upper East Side with better things to do like count their billions? Hmmmmm???
Posted by: guest at August 20, 2007 1:45 AM
"If they're so damn smart and can look in their big economic crystal balls, why are they living in Brooklyn and posting on a blog and not living large in a nice big townhouse on the Upper East Side with better things to do like count their billions? Hmmmmm???"
Wow! That's quite a comment. I guess one must be a second class citizen if they're living in Brooklyn. Talk about being old-school.
Posted by: guest at August 20, 2007 9:44 AM
Second class citizens? I would argue that there is more smarts, more vision in Brooklyn than Manhattan, per capita, as well as overall.
re the 1980's real estate market, you completely fail to recognize the factors that have driven, and are driving the real estate market in brownstone-dominated Brooklyn; its not a bubble, its the advent of the possibility of not having to move to the suburbs to be an adult/have a family. Its also the maturing of American culture to the point where quality of life is more important than quantity (space).
In other words, short of major catastrophic terrorism or war, Brooklyn (and NYC in general) isn't going to experience a major, sustained downturn any time soon; probably not for decades.
I would really like to know how much of the pessimism expressed in this thread is held by the same nuts who think the economy isn't good (nationally), or that "the deficit" is out of control, or any of the other fake maladies associated with the political left.
Sure, prices may not keep going up rapidly, or go up at all, but things are good, and will continue to be good for the foreseeable future.
Which doesn't mean, on some emotional level, I would not love to see a few real estate offices close on Seventh Avenue and replaced by real stores ;-)
Posted by: BrooklynCouch at August 20, 2007 10:55 AM
"Which doesn't mean, on some emotional level, I would not love to see a few real estate offices close on Seventh Avenue and replaced by real stores ;-)"
Ummm, there are already about 20+ empty storefronts on Seventh Avenue between Flatbush and 9th Street. Don't hold your breath waiting for those new stores until the owners of those spaces get a bit less greedy on the rents.
Posted by: guest at August 20, 2007 1:33 PM
tangent: can anyone explain the economic motivation for the condemned building formerly occupied by Zuzu's Petals sitting fallow for so many years?
Posted by: BrooklynCouch at August 20, 2007 2:08 PM
i'm dying to know the answer to that one also, brooklyncouch.
i heard there was a fire many years ago, but that entire block of 7th between union and berkeley is a nightmare for storefronts. former zuzu's is shuttered along with that building across the way next to the park diner as well.
and then a store sitting for rent from berman for months now next to the liquor store.
Posted by: guest at August 20, 2007 3:04 PM
the building, a one story structure, is condemned, and will have to come down. The most likely replacement is apartments with retail on the first floor, but its now been years, and, well, short of some bizarre legal battle as to ownership, I don't get it...
Posted by: BrooklynCouch at August 20, 2007 3:51 PM
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