Home buyers beware
A home is for sale in Glendale, Calif.
Bob Moon: Maybe Wall Street didn't quite see it this way, but that plan unveiled by the Fed yesterday is supposed to breathe some new life
into the critical housing market -- "critical" in all senses of the word. The Fed is aiming to push down long-term interest rates to make things like mortgages even more attractive.
But as Marketplace's Nancy Marshall Genzer reports, it's one thing for the Fed to drive rates down and quite another for consumers to actually buy a new home.
Nancy Marshall Genzer: Mortgage rates are already at the lowest levels in 40 years. And the housing market is still in the dumps. So, a day after the Fed's announcement, the reviews are not good.
ANTHONY SANDERS: It's not going to work.
KEN KUTTNER: It's really going to be a pretty small effect.
GREG MCBRIDE: Low rates aren't going to solve the problem.
That was economist Anthony Sanders, former Fed economist Ken Kuttner and financial analyst Greg McBride. McBride, who's at , says people are too scared to buy a house now, no matter how low the interest rate.
MCBRIDE: People aren't buying houses because they're worried about a recession or their own job security.
The consensus is: fix the economy, then people will plunk their cash down on new houses. But maybe ultra-low mortgage rates will spark a wave of refinancing. Our former Fed economist Ken Kuttner, doesn't think so. Because banks won't refinance people with shaky credit or who owe more than their homes are worth.
KUTTNER: That's something where, I think, banks have become much more conservative in the past couple of years.
And you can't force banks to lend, or refinance a loan. Some economists want the government to revamp its refinancing programs. The thinking is more refinancing would lower monthly mortgage payments. Then consumers would have billions of dollars more to spend. But economist Anthony Saunders, at George Mason University, says that might not happen. Even if a refi saved a family $400 a month, they might stash the cash, just in case.
SANDERS: Four hundred dollars a month is a lot of money. The bad news is, if you've lost your job, that may not be enough.
In Washington, I'm Nancy Marshall Genzer for Marketplace.