CNN Money: Fed cut impact on housing

[Guest]

The Federal Reserve's aggressive half-point cut Tuesday could provide support for a slumping housing market.

A quarter-point drop had already been priced into the market for Treasury bills and other instruments tied to mortgage rates, according to Richard DeKaser, chief economist for National City Corp. The deeper cut means mortgage rates may have a little more room to fall, giving support to prices.


http://biz.yahoo.com/cnnm/070918/091807_low_impact_rate_drop.html?.v=11&.pf=loans

[liquidity problem]

Excerpt from the article:

"Jumbo rates may come down if the cut makes consumers more confident, according to Mark Zandi, chief economist for Moody's Economy.com.

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.

As a result, Gumbinger said problems in the housing market problems are too entrenched for a Fed rate drop to have an immediate impact."