The Fed is not worried about the stock market. A rate cut will come because they are worried about an economic slowdown leding to a recession. Also, the credit crunch is in no way over. The mortgage market is still a mess. Especially in California where non-conforming loans are viewed by investors and lenders as poisonous.
If lenders like CFC were smart they would set up their own RE brokerage business (or partner with an existing one because I think NAR has successfully lobbied against allowing banks to become RE brokers) and hold onto 90% of the homes they foreclose on and use them as rentals or lease options. There are going to be 1000’s of sellers (I’m not talking about the guys who got foreclosed on) who are currently selling their homes and think they can qualify for a loan but they can’t in this environment. So where do they go? They are going to have to rent. I have a relative in this exact situation who has $400k in the bank after selling his home. He was going to rent for 6 months until he found the house they wanted to live in for the next 20 years, but now he can’t qualify for the 900k house he was going to buy. So he and his family are renters. That scenario is going to be replayed over and over unless the limits on conforming loans are raised significantly. The credit crunch is still in full force in the mortgage industry.
