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Fed To Drop Rate To "zerro"?

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Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
A reliable source inside the banking business informed me that the Fed is seriously considering lowering the rate to Zerro. That should do wonders for the band of investment theory given the present equity rates. Can you see an appraiser telling his client that his property's market value is infinite? Local headlines this morning: Our city's unemployment rate is 14.6% is the highest in the state. Did Zerro interest rates solve Japan's economic problems? Keep them government checks comming, that is our only life line. Used cars and funeral homes are our only economic base industries left. Come here to die or buy a car, it is the place to be.
 

Ghost Rider

Senior Member
Joined
Apr 27, 2003
Professional Status
Banking/Mortgage Industry
State
Connecticut
Austin.....I don't doubt that it has been discussed, but that would be a full point drop in the fed funds rate - If they are considering doing it in one fell swoop, a full basis point drop would be HUGE - I would think it much more likely that you would see a series of smaller rate drops, like has been oging on for the last 18+ months - Did your source give you an idea of how they were talking about handling the rate drops??

I've been screaming about this and the Japan paralell for a LONG time, but no one was listening to me.....I'm just a stupid appraiser - just wait, were gonna slide deeper into recession before the recovery happens - the pain hasn't really been felt yet.
 

Willie

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Joined
May 30, 2002
Professional Status
Certified General Appraiser
State
Tennessee
I don't know what will happen. One thing is for sure, the Japs are savers, and the Americans are huge spenders and debtors. :usa:
 

EDWARD BERRY

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I asked a commercial appraiser to take a property he had appraised about 3 years ago and redo it using at least 3% less interest rate and keeping all other factors the same--and what would be the value.

Did not check it, but he said 18%.

The investor rate has jumped to about 31%.

Major investor got a 2.12 bank loan the other day on $31,000,000 (shopping centers) (weekly adjustable)

Crazy, but good for little old Arkansas. ed
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Austin,

Have heard the same thing. The sources have said that he will drop the rate slowly 1/4 to 1/2 point until it hits zero starting in the fourth quarter. The only reason for the drop is that real estate is keeping the economy going. Greenspan will do this only until the economy picks up.

Funny thing though he did not touch the Fed Rate yet the mortgage rate has risen this month almost a full point. Makes you wonder how it is really tied to the economy.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Originally posted by Ryan Nyberg@Jul 30 2003, 09:50 AM
{snip} though he did not touch the Fed Rate yet the mortgage rate has risen this month almost a full point. Makes you wonder how it is really tied to the economy.
Loosely at best....

Consider how many credit cards are out there floating at 0% interest...

The banks have to make some money someplace and if every one of them raises their rates just a teensy bit then it works for all of em... and you KNOW that they THINK they are going to make $$ on those 0% credit card rates ....eventually :rolleyes: ASSuming that everyone doesn't go belly up in the process

Appraisers could learn from this do ya think?
 

Alan Simmons

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Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
Smoke and mirrors.

The Fed needs people to believe that this is a viable alternative otherwise everyone just would be fixating at what point they think rates will start to increase. Who really knows if this is a card in their hand or if they are just bluffing? Unlike in real estate value in equity markets is based more upon future expectations.
 

Dale Smalley

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Does that mean the govt is giving away money so that they can tax you on it later?
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
It wont be long and the Fed will be paying banks to borrow the money.
 

Kirk Dameron

Freshman Member
Joined
Jul 26, 2003
Hi,

I'm not an appraiser but I just read through the several posts on this topic and find the subject rather fascinating.

Like several of you, I don't know whether the fed would be willing to take the discount rate to zero (or near-zero) or not. But I do know that the current fed has, through it's recent actions, shown a ready willingness to reliquify the economy through money (and mostly credit) creation. This has supported (fostered?) the continued rise of residential real estate prices, as well as some other classes of assets.

It has not had a similarly positive affect on the 'real' economy. And I'm inclined to think it won't be successful in the same way this strategy was not successful in Japan over the past 13 years.

It seems to me that how this question is answered would have a HUGE effect on the validity of the appraisals you folks do every day, and likely a MUCH BIGGER effect than the age of the kitchen appliances, the quality of the construction, or who lives next door.
 
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