Sudbury MA Real Estate

Lower mortgage rates alone won’t revive the ailing real estate sector

Don’t look for the Federal Reserve’s rate cut to revive the housing market.

Mortgage rates already sit near historic lows. But larger forces are aligned against a revival: Falling home prices, tighter lending standards, and rising unemployment all are limiting how many people can buy homes, and how much they can spend.

“No matter what happens to mortgage rates, housing is not going to turn around,” said Patrick Newport, an economist with the Waltham forecasting firm Global Insight. “Lower borrowing costs help a little, but the problem right now is that you’re buying something that’s losing value.”

The Fed acted yesterday to reduce the cost of short-term loans to businesses and consumers, including credit card and car loans, hoping to contain the economic damage caused by the housing downturn. The action doesn’t directly affect mortgage rates, which are determined by investors’ decisions on where to put money, between, for example, stocks and bonds.

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