Can Lower Interest Rates Help?

I just wanted to jot down my thoughts on interest rates, since they seem to be coming down quite a bit recently. That's the good news.

The bad news? Well, I don't think that they are going to do a bit of good to turn this real estate market around. Interest rates have been at historically low levels for a long time now, and yet here we are in a recession with low real estate transactional volume. The reason to me is clear: consumer confidence.

Consumers are scared. I have a buyer client who recently said to me 'why should I buy now when things could get worse'? I agree. There really is no catalyst for change to move the market upwards right now. Perhaps Barack Obama has some tricks up his sleeve, but nothing is going to be a quick fix and effectively flip a switch and turn on the economy.

I do have another buyer client who understands this. We are working together in placing low low-ball offers on properties. And you know what? We're getting countered at reasonably low levels. Literally 6 months ago, the same seller would have laughed us off the property. Now, it's just a matter of time before we find a desperate seller and my buyer gets a great deal. Times have sure changed.

So the Fed can reduce rates all it wants. I don't believe anything will change in the short-run. Perhaps even lower interest rates will spur the economy, but I don't think we'll see anything substantially different until mid to late 2009.

Feel diffently? I'd love to hear your thoughts.

Cheers,
Ron