Fed Drops Rates By 1/4 Point
The Federal Reserve has cut interest rates for the 3rd time this year by .25%. Rate cuts can make mortgages more affordable and increase buyer's purchasing power. Typically, the Fed does this to stimulate economic activity through borrowing and investing. Simply, if you make the cost of money cheaper, people are more likely spend it.
Why does the Fed do this? Usually, it's done to brace for an economic downturn. However, according to the New York Times, the Federal Reserve is indicating that they will wait and see with the economy before making further cuts to interest rates. You can see their full article here.
How should you approach this interest rate cut?
Obviously, interest rate changes impact decisions to buy or sell. Lower interest rates make it easier for people to get a mortgage and increase the demand for homes. However if the cut is signaling an economic downturn, does that mean you should wait to buy? No, it doesn't. Here are a few things to think about:
1. Interest Rates are historically low but that could change. If you want to buy your first home, upgrade into a bigger home, or move into a more expensive neighborhood, it's cheaper to get a mortgage now than almost any time in history.
2. Appreciation. The overwhelming majority of the time, a home is a good investment if you want to live in it and can afford the payments. The reason why a home is usually a good investment is because historically property appreciates over time.
Here is the point: If you can afford to buy a home in a neighborhood that you want to live in while you know loans are cheaper, then short-term economic changes won't negatively impact you. Actually, if you can afford to move into a high-demand neighborhood because of low interest rates, then over time you can benefit from appreciation.