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Fed cut impact on housing
The Fed Funds rate affects a range of consumer loans, including home equity and mortgages. Lower mortgage rates would add to the number of home buyers able to afford to make purchases, increasing demand for properties and buoying home prices. Buyers generally care less about the actual purchase price than they do about the size of their payments. If rates drop, so will monthly debt obligations.
However, the real problem in the housing market is not interest rates, according to Keith Gumbinger, vice president for HSH Associates, a mortgage industry publisher. It is that there is not enough money available for making loans.
"The liquidity problem hasn't changed," Gumbinger said. "The primary issue is trust between buyers and holders of debt." Investors holding worthless or heavily discounted paper are not eager to buy more.
Home prices in many parts of the country remain out of reach for average Americans, leading to slow sales and lengthening inventories of houses on the market. Also adding to listings is a flood of new foreclosures hitting the market.