Mortgage rates are way, way down today. The lowest I've seen is 4.875% for a 30 year fixed with 0 points. That's truly incredible and probably the lowest mortgage interest rate I've seen in my lifetime.

The rates did not drop because of the Fed's drop of the Fed funds rate, but because of what else Fed Chair Bernanke had to say yesterday. He basically said he's going to do whatever it takes to get this economy moving again. And, he specifically said that can include buying mortgage backed securities. That's the big deal.

Because those mortgage backed securities are still sitting on the banks books. And regardless of what the federal government has tried banks still are not lending money as freely as the economy needs. The mortgage backed securities, which may, in fact, be worthless are a big part of why they still aren't lending. What the Fed did was signal that they will buy these possibly worthless assets and allow the banks to get them off their balance sheets. That should, finally, convince the banks to lend money again.

But, if you've been contemplating buying a home right now, your biggest question is probably, should I buy now or will rates go lower?

No one can answer that question for you definitively. But here's what I think. There's a fair chance that rates may go even lower. There are proposals floating around that would have the government subsidizing mortgage rates to lower them even more. No one knows whether any of these proposals will ever actually be implemented. But given the current environment and government's determination to get the economy fixed, it certainly could happen.

But, if you've found a home you love and the price is right and you can afford a mortgage with rates where they are, I'd suggest you move forward now. The risk of losing a home you want is higher than the risk of losing out on a slightly lower mortgage rate. Buy now, build a little equity and, if rates stay low you can refinance down the road.

If you're out there looking, I'd say keep looking. Inventory is lower than it has been in several years. These lower rates may actually make that worse as more buyers begin to make their move. Your selection isn't likely to improve in the short term and if you find something you'd like, jump on it.

If you haven't started looking yet, I definitely think you ought to at least be very closely monitoring inventory. You should know what's out there and what you get for your money in your price range. I can't tell you whether or not to wait for rates a little lower. But I can tell you that great rates now and a reasonable amount of inventory might be a better situation than even lower rates and buyers fighting over inventory. This is especially true in the lower price ranges where inventory has gotten very picked over.

I think it's shaping up to be a very interesting 2009!

I do know that the correct phrasing for yesterday's rate cuts is "50 basis points" but let's face it, all us lay people are thinking about it as half a percentage point!

Whatever you want to call it, it's good news for buyers and sellers!

Let me explain that this is NOT a half percentage point cut in mortgage interest rates. While the Fed rate does impact mortgage interest rates it's not a direct one to one correlation. And, some of the Fed rate cut has been gradually factored in already.

That said, this will put downwards pressure on mortgage interest rates. Today's release of CPI numbers showing almost no inflationary pressure will help that as well.

So...now what do you do? If you're a potential buyer it's a great time to think about buying a house. You probably qualify for a little more than you did a week or two ago. There are unlikely to be much in the way of additional rate cuts in my opinion. If you're even semi serious it's time to talk to a mortgage lender and find out what you can afford to buy. Then go looking! But read my advice to sellers as well!

Sellers, good news at last! But...don't blow this! This is not the time to raise your price. In fact, I'd argue just the opposite is true. You're likely to get a brief uptick in buyers. Lower the price now and get the place sold. This new, small surge of buyers isn't likely to last long and the spring market is a very long time away! I believe pricing pressure will continue to push home prices down. The bulk of foreclosures haven't begun to hit the market here locally yet. And, as always, make sure your home is in tip top showing condition and is easy to show! Always!