by Dave Fratello
on Wednesday, December 17th, 2008 at 6:57am.
The Federal Reserve has set a target rate of 0.00-0.25%.
Rates will stay at these "exceptionally low levels" for some time, we hear.
Mortgage rates – even on refis – are dropping into the 5's, indeed, as low as 5%, as a result of a separate Fed action to manipulate long-term rates, er, to buy mortgage-backed securities and long-term Treasury bonds.
The outgoing national government has socialized trillions of dollars in losses and has tried, almost against all hope, to "restore confidence" in the financial markets. (A certain recently revealed gigantic, titanic, unfathomably huge Ponzi scheme may serve as another blow to "confidence.")
But, face it, the more you hand decisions about economic action back to individuals, the more action you'll see.
Which is what makes free money such a boon.
Keep pushing rates down, and homeowners will re-fi in droves. (A wave has already begun.) Give those actors another $300-$3,000/mo. to spend, and they might well spend it.
Make houses more affordable, and more people (with jobs) might take the plunge. And that might reverse declining house prices, which, after all, started this mess.