Positive news on the real estate front?
According to USAToday, pending sales of existing homes unexpectedly jumped in August to the highest level in more than a year. The National Association of Realtors Pending Home Sales Index, based on contracts signed in June, rose 7.4% in August to 93.4 from an updwardly revised index of 87.0 in July.
A major unknown is how the worldwide financial crisis and economic slump will affect the housing market.
Despite numerous efforts by the Federal Reserve to encourage banks to lend more, lenders have kept tight reins on mortgage lending, and average rates on 30-year mortgages have remained over 6% for most of the year.
The latest effort by the central bank came Wednesday, when the Fed and six other major central banks around the world slashed interest rates Wednesday in an attempt to prevent a mushrooming financial crisis from becoming a global economic meltdown.
There’s no guarantee, though, that mortgage rates will match the Fed’s cut.
That’s because long-term interest rates, which influence 30-year mortgages, don’t always move in sync with the Fed’s action, which lowered the interest rate banks charge each other on overnight loans.
However, the Fed action will reduce borrowing costs almost immediately for U.S. bank customers whose home equity and other floating-rate loans are tied to the prime interest rate. Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5% after the Fed announcement.
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