Some possible good news for housing this summer

Tuesday's stock market crash, along with the recent durable goods report has caused some major pricing changes in the Fed Funds Futures market. For those who don't know, this market is based on placing bets as to what the Fed Funds rate will be some time in the future (the rate is currently 5.25%). This rate effects investors as it is considered a sort of risk free rate. Residential mortgage rates dropped a lot in the 2002-2005 range because the Fed Funds rate dropped from about 6% to 1%.

Over the last couple months, the futures market has predicted about a 15% chance of a rate decrease by June 2007. Very recently however, this changed to 40% likely. If this happened, more buyers would (in theory) be able to get financing at a lower rate. Here is the Fed Futures probability chart for June 2007: