This article is in responce to the ABC news article located here:

http://abcnews.go.com/Business/Economy/story?id=6976375&page=1

I certainly think 4% mortgage rates would get us out of the housing cruises as well as stimulate the economy. Lower interest rates and a 40 year mortgage will make home affordability for more people and this alone will reduce the inventory so home prices will rise again. The argument that it would not help because unemployment rates are too high is another poor argument. There are tons of jobs tied to the housing market, that when people started buying it would create jobs in many industries besides the obvious, including: Real estate, finance, insurance, home builders (plumbers, electricians, HVAC technicians, carpenters, building material suppliers) home furnishings stores, manufacturers of these products and many more. Just like millions of people are affected if the auto industry tanked, the same can be said if the real estate market revives.

The problem with this scenario was articulated in the ABC news article, where would the money come from? Investors have to provide the money for banks to loan to borrowers, and if the government mandated a 4% interest rate, many investors would rather buy a 4.5% CD and leave the money In the bank, or place it into the stock market which stand to make a significant recovery when the economy starts to turn.

It is my opinion if the government ever decided to mandate a 4% interest rate, they need to be prepared to provide the funding. This would allow the government to make 4% on an investment instead of dolling out billions to Wall street to bail them out with not guarantee of seeing a return.

In the meantime, 5-5.5% is a great rate to buy a home. And if the government decided to mandate the 4% rate, it would be well worth the time to refinance your home.

This entry was posted on Tuesday, March 3rd, 2009 at 10:45 am and is filed under Main. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.