NAR economist calls for cap raise and Fed rate cut
NAR Economist Lawrence Yun called for a 75bps rate cut at the January FOMC meeting, reasoning that there are indications the FED will cut and January and February by 25bps and he feels they should cut a larger amount at one time. When asked by what amount the FED should cut, Mr. Yun said 75bps. When asked about the effect on the dollar or inflationary pressures from such a move, Yun stated that most models are looking for benign inflation readings through next year and that 75pbs would stem buyer reluctance. Indeed the NAR thinks there is a good bit of pent up demand in the housing market with those refusing to buy are doing so because they are waiting for lower rates or for lower prices. Yun also mentioned the 90 to 100bps spread between conforming and Jumbo mortgages and said Freddie and Fannie should lift their Jumbo caps to help out markets where Jumbo loans proliferate, mentioning California (sales up 10.3% m-o-m) as an example of a market that would be helped. He said raising Freddie and Fannie caps would immediately drop Jumbo mortgage rates down to 6.2%, the conforming loan rate.