Excellent point HLS, most people think that a fed funds rate has a direct relationship to mortgage rates. A 25 or 50 point bp drop in the fed funds rate may actually have no effect on long term mortgage rates. No matter what the fed does, rates and qualification for anything outside of conforming, fully doc’d buyers will not return to 2005. It is not the overnight rate that is funding 30 year mortgages, it is investors and they have soured on anything but old fasioned mortgages.
I visited two developments that were having advertised promotions today, they both had 5 3/8 5%down buydown programs in addition to 15%-20% price markdowns and all closing costs paid. I visited about noon Sunday, day three of the sale, not one house sold at either development. 50bp drop on tuesday is like giving a whale a tic-tac.
