Have home prices and interest rates reached harmonic convergence?

    I received an email from a real estate agent in North Carolina tonight, the first of many such appeals I expect to receive in the coming days and weeks.
    "I just wanted to drop you a line to say we are receiving updates from lenders today," she wrote, "saying that mortgage rates for new home loans and refinances are at 50-year lows in the 4.5 % range today."   She added that, "If you are in a position to buy a home, now is the time to do it, as both prices and rates are optimal."
    Even discounting the customary salesperson hyperbole, home purchase is
Despite salesperson hyperbole, this may be a good time to pull the trigger and buy a house.

beginning to look a lot more attractive as interest rates plummet.  The other day I wrote here that the U.S. Treasury was planning to manipulate mortgage rates down to the 4.5% level.  But now that the Federal Reserve has dropped the discount rate to a whisper above 0% (just ¼ of a percentage point), well, never mind.  It may be a matter of days before we see home mortgages in the 3% range for creditworthy customers.
     It is hard to imagine interest rates ever going lower than, say 3.5%, which would be a record low.  But with rates like that, could those sitting on the sidelines really afford to wait for home prices to drop much lower?  The purpose of the low rates is to get people to start buying homes again, and if the medicine works, that perfect point of lowest prices and lowest interest rates might not last for more than a nanosecond.  I still think the sheer numbers of foreclosures, uncertainty about Detroit and the overall employment crisis, as well as problems on the horizon with installment credit lenders, may send housing prices even lower.  But how much lower is the question, and would waiting for another 10% drop be worth giving up a percentage point or two on a 30 year fixed mortgage, for example?
    It is good to be cautious about salesperson hype about the "best time" to buy; a salesperson always thinks it is the best time to buy, and a good salesperson makes a persuasive case for it.  But events may be conspiring to make calls to purchase something less than hype.  New home construction has trickled to nearly nothing, which appears to be having a steadying effect on the national inventory of homes for sale, holding fairly steady at 10 months, or about four months more than the point of "balance."  Add to the leveling inventories the drop in interest rates, and the many Baby Boomers who must be tired of waiting to get on with their relocation to a warmer, better place may just make their move.  
    If this is not the best time to buy, we may be getting close.

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