Archive for June 25th, 2010

Are we Japan ??

Friday, June 25th, 2010

Twenty years ago Japan plunged into a severe recession after a highly inflated real estate and stock market bubble burst with devastating consequences. The Bank of Japan steadily reduced interest rates until they effectively hit zero in hopes of re-stimulating demand and re-energizing the economy. Did monetary stimulus of this magnitude do the trick? No it did not, and to this day Japan suffers from the “hangover effect” of excessive financial behavior originating over two decades ago. How does this correlate to the Las Vegas real estate market and the US economy? This week saw two important events in the US financial markets. The Federal Reserve announced that rates would remain at record lows for the foreseeable future and the average rate for 30-year fixed-rate mortgages hit their lowest level in recorded history. The price of money has hit record-breaking lows in the US economy, but will it be enough to stimulate demand for homes in particular and goods and services in general? Nobody really knows …