I think it is a good policy, but it’s surprising that it took so long for them to realize that. Even the non-economists on this board know, the only problem for the housing market is that it was not priced right. However, because most people are borrowers when it comes to the house purchase. Mortgage rates play part of the role in the overall pricing. I will say lower rate is better than lower price…because for one thing, it would provide less incentive for capable homeowners to abandon their homes which makes less financial sense every single day. If some of you think that housing market is in a turmoil right now, wait until everyone has -$500K negative equity. That is depression in my book.
I think 2009 is a great year to buy house at such 4.5% rate because I firmly believe inflation is on the horizon. For the record, I am not and will never be a gold bug. But Fed/Treasury has consistently showed that they will do whatever take (including keep the money printing press running at full speed) to avoid economy crisis. And guess what, I don’t know what day it will come, when they averted the last crisis, they would already erred on the inflation side. But because job market is a delayed indicator, the political pressure will be so great that they will not be able to curb the inflation in time.
2009 will be the best year to be buying your house. Heck, I am even trying to buy a house at the listing price (as long as it is in great condition and list price is below the market price) here in Temecula at the end of 2008.
