TOLEDO -- If you're trying to sell a house in the current market, you know how tight things are. That's why sellers and realtors welcomed the news on Tuesday that the Federal Reserve was cutting short-term interest rates by one-half of one percent. The first rate reduction in four years is in response to the housing market slump and is aimed at providing some stability to financial markets.
The Fed announced it is cutting its target for the federal funds rate, the interest that banks charge each other, to 4.75%. The action is intended to boost economic growth by lowering borrowing costs for consumers and businesses. Commercial banks are expected to quickly cut their prime lending rates. The prime rate has been at 8.25% for the past 15 months.
The Fed reduced its discount rate, the interest it charges in making direct loans to banks, by a half-point as well. It earlier had cut the discount rate in August in response to the credit crunch.
Sellers in Toledo are doing everything they can to get rid of their homes, and they say this news has got to help. West Toledoan Randi Walters is not really looking to move just yet. She's simply anticipating a long selling process in Toledo's sluggish housing market. "If you're going to sell, you are going to have to drop your price low, and we're not willing to do that as of right now," said Walters.
Real estate expert Jim Loss says the interest rate cut may give the Toledo market the relief it needs. "We've been in a bit of a downward cycle, and the question is how far is the bottom?" said Loss. "I'm hopeful that this is the bottom, and this will be the catalyst to turn things around."
The rate cut lowers interest on everything from credit cards to car loans, a change even local car dealers are welcoming. They say they've seen vehicles sit on their lots longer. "People have to have the right frame of mind to come out and buy a car," said Joe Mehling of Dave White Chevrolet-Acura. "If cutting interest rates on a federal level make people feel better, and gives them a little more money in their pocket, then it's great for us."
Sellers like Randi say they're optimistic these new, lower interest rates will encourage sales. For now, they'll just wait it out to see if buyers respond.