Richmond home values + Fed rate cut = Time to buy

A lot of folks are asking the same question when it comes to real estate these days: "With the recent Fed rate cut, is now the time to buy?" Yes, it is. Richmond home values stay strong We've all heard a lot of negative press about Real Estate lately, particularly related to home values. It's important to note, though, that Richmond has not experienced the large drop in home values that other parts of the country have seen over the last year. The average home price in Richmond for 2007 actually increased from the prior year, to $275,106. That is up from $266,806 one year ago - a 3.1% increase. So while we continue to hear the doom and gloom from the media, Richmond homes buck the trend and continue to hold - and actually increase - their value. Why the rate cut is good news On Tuesday, January 22, 2008, the Fed dropped the federal funds rate by 75 basis points (3/4 of a %) to help stabilize the U.S. economy. The federal funds rate is the rate at which banks or other institutions lend each other money, usually overnight. The Fed uses this rate to control the flow of money in the U.S. According to Maria Clark of Prosperity Mortgage, the "Fed's goal in [dropping the rate] so was to try to stabilize the stock market. Although this rate drop typically has a positive effect on first mortgages, it mostly impacts equity lines of credit and second mortgages. The rate for equity lines and second mortgages are based on the Prime rate (the rate at which banks lend to their best customers). The prime rate is based on the discount rate. Therefore, when the Fed lowers the discount rate by 75 basis points, the prime rate (and therefore, the rate on equity lines and second mortgages) declines by the same amount." As a result of these changes, the 15- and 30-year fixed rates have dropped to levels not seen since March 2004. With rates now approaching 5% for a fixed mortgage, now is the perfect time to invest in a home. Contact your mortgage agent for exact rates and fees. Get more info If you have any questions about what your home is worth, or if you are interested in purchasing a new home, please let me know.