The United States has finally cut interest rates, and it's a substantial reduction of 50 basis points. In our previous discussions, we mentioned that in this battle between high blood pressure and hypoglycemia, it was ultimately our persistence that secured victory, while the United States failed to reap the benefits from us and was defeated. This is the macroeconomic perspective, but for the average person, the ordinary consumer, what we really want to know is how the U.S. interest rate cut will affect our daily lives.

Overall, after the U.S. interest rate cut, there will be a flood of liquidity, making funds more abundant in the world's major economies. This is a simple principle. In the past two years when the U.S. raised interest rates, various funds felt that the safest place to put their money was in the United States, doing nothing and receiving a 5.5% annual return was too high, so naturally, a significant amount of funds flowed to the U.S. As a result, the funds in the major economies became very tight, leading us to say that the environment was not good in the past two years, and our economy was not good either. Many people faced pay cuts and layoffs, and this was because the economy was cold. How did the economy cool down? Everyone thought that with the U.S. dollar interest rate hike, a lot of capital would flow out, and foreign investment would no longer come to us because they felt it was better to lie in the United States and earn interest.

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Entrepreneurs were reluctant to invest due to high loan interest rates, and consumers felt that deposit interest rates were high, so they could earn more money by keeping their money in the bank and not spending it. As a result, the economy gradually cooled down, which is not a good phenomenon. When the U.S. dollar interest rate is cut, a lot of funds will flee the United States because they feel that after the rate cut, it seems that they can't earn more money, and they need to look for hot investment lands. For businesses, after the interest rate cut, the cost of borrowing is reduced, and they can pay less, so entrepreneurs are more willing to invest rather than contract their operations.

For ordinary consumers, with lower deposit interest rates, they will think that they might as well take out their money and spend it now because there won't be such high interest rates in the future. Moreover, everyone knows that after the U.S. dollar interest rate cut, the dollar will become less valuable, and then the prices of various assets will rise, so everyone is more willing to spend money now to buy back assets. Therefore, overall, after the U.S. dollar interest rate cut, the funds in the major economies will be more abundant, and the so-called flood of liquidity will make the economy gradually become hot. How is this achieved?

After the U.S. dollar interest rate cut, more companies will invest, more business projects will emerge, and then ordinary people will be willing to spend money. If you spend, I spend, bosses can make money. They will hire more employees and pay employees more wages. When ordinary people earn money, they are also more willing to consume, so the economic snowball will roll better. We often say that for an economy, deflation is terrible, and a small amount of inflation is beneficial. Deflation means that the prices of goods are constantly falling, entrepreneurs are unwilling to invest, consumers are unwilling to spend money, and the entire economy will become colder and colder.

After the U.S. dollar interest rate cut, one benefit is that the flood of liquidity makes funds abundant, and the entire economy will quickly become hot. We ordinary people will find it easier to find jobs and earn money. The economic downturn of the past two years may be far away from us. The United States has had many large interest rate cuts in history, and almost every time after a large interest rate cut, our country's economy and the global economy can usher in a rapid rise. This is also why the Federal Reserve cut interest rates so much this time. As soon as Trump heard that the Federal Reserve cut interest rates by 50 basis points, he immediately said, "Is it the Biden government's judgment that the U.S. economy is terrible now and must use interest rate cuts to stimulate the economy?"A consensus within the field of economics is that interest rate cuts can have a positive stimulus and promoting effect on the economy. Hence, we naturally look forward to the economic boost that the recent U.S. interest rate cuts might bring to our country's economy and the global economy as a whole. On the other hand, many people argue that interest rate cuts directly impact four major markets. Which four? The bond market, the foreign exchange market, the stock market, and the real estate market. For the average person, we might be more familiar with the stock market and the real estate market. On one hand, after an interest rate cut, stock markets around the world tend to rise. Could our A-shares possibly break through the 3000-point mark? Of course, for the ordinary people, we pay more attention to the real estate market. Where will housing prices head?

The real estate ice age of the past two years has truly shown us what a decline in housing prices looks like. Previously, we often talked about how a rapid increase in housing prices in a short period is not a good phenomenon, as it makes it difficult for many ordinary people to afford homes. However, over the past two years, we have witnessed firsthand how a rapid decline in housing prices is also not a good phenomenon. Why? Because everyone's assets are depreciating. Today, although many of us complain about high housing prices, the majority of ordinary Chinese people own their own homes. Sometimes, when looking at the quotes from real estate agents, thinking about how our homes have increased in value by hundreds of thousands or even millions over the past few years, many people still feel pleased. Even if we don't plan to sell the house, the thought that we are at least millionaires because of our property is comforting.

However, over the past two years, our housing prices have plummeted, with prices dropping in all cities across the country, whether it's the first-tier metropolises like Beijing, Shanghai, Guangzhou, and Shenzhen, or smaller towns. So, theoretically, we have all lost a lot of money over these two years, and the more valuable your house is, the more you lose. For some people, it's really a loss of one or two million yuan. How many years would you have to work to earn that much? More importantly, looking back three to five years, if someone was demoted or laid off, but housing prices were rising, they wouldn't worry. Even if their house was bought on a loan with high monthly payments, they could say, "I'll sell the house, the money from the sale will be enough to pay off the bank loan, and there will be a significant appreciation. I can still start over with ease."

The situation has changed dramatically over the past two years, especially for those who bought houses in recent years. They have been hit with a double whammy. How many young people complain that, on one hand, they have been laid off and have no monthly salary income, and on the other hand, they still have to pay thousands or even tens of thousands of yuan in bank loans. Moreover, they suddenly realize that due to the plummeting housing prices, their entire down payment has been lost. Even if they choose to sell the house now, the money they get is not enough to pay off the bank loan, and they have become negative assets. So many people are complaining about whether they should continue to pay or stop making monthly payments. This is the consequence of falling housing prices; once the prices drop, you have no room to maneuver.

Conversely, if it were during a period of rising housing prices, and you bought a 5 million yuan house with a 2 million yuan down payment, which has now increased to 10 million yuan, then you wouldn't be afraid of pay cuts or layoffs, and you wouldn't be afraid of not being able to afford the monthly payments. So, many people have truly witnessed how a rapid decline in housing prices can have a greater impact on our daily lives. So, what impact will this round of Federal Reserve interest rate cuts have on our housing market? Many people say that real estate is likely to emerge from the ice age, and housing prices may indeed rise again, as it has a positive effect on the stock market, real estate market, bond market, and foreign exchange market. But especially at this time, we must remind our good friends not to think that the era of skyrocketing housing prices will come again.

Indeed, historically, several interest rate cuts by the Federal Reserve have led to a rapid increase in our country's housing prices, with the possibility of doubling the value of a house from the beginning to the end of the year. But now it's not possible. After more than two years of education, more and more people have realized that housing is for living, not for speculation, and more and more people no longer have the superstition that housing prices will always rise and never fall. Of course, we believe that after the Federal Reserve's interest rate cut, housing prices will have some room to rise, and some houses that were not easy to sell are now easier to sell. But if you hope that housing prices will suddenly soar by 30% or 50% again, that is almost impossible. So, I think the real estate ice age of the past two years has been very good for educating all consumers and investors. Today is indeed a good time to buy a house. Interest rates have reached their historical lowest point, down payments are also low, local governments are offering many preferential taxes, and developers are continuously reducing prices.

Even if you want to buy a second-hand house, many landlords, due to their own business difficulties, may really have to sell at a huge loss and sell the second-hand house to you. So, if you are in urgent need now, this period is indeed a good time to buy a house, with low prices and low costs. Moreover, the impact of the Federal Reserve's interest rate cut will gradually unfold, and it may take 3 to 6 months for real estate prices to rise. So now is really the bottom, a good time to buy a house. But this must be limited to the fact that you are in urgent need and have enough funds. What does this mean? Otherwise, you can buy with a full payment, or you can buy with a loan, but you confirm that in the next 10 years or 20 years, you can afford the monthly payment, and you won't be unable to pay the monthly payment due to a bad economic environment, pay cuts, layoffs, etc. In other words, people who want to buy a house today must meet the first condition of being in urgent need for their own residence, and the second condition is that they must have enough funds. These two conditions must not be like they were in the past, buying a house without money.A dozen or two decades ago, why did many people dare to buy houses even without money, when they had only 100,000 to 200,000 in their pockets for a house worth one or two million, yet they still dared to borrow money to make a down payment? It was because a large number of people believed that housing prices would keep rising forever without falling. Although they had only 200,000 to 300,000 today, they believed that by making a down payment, by the end of the year, the house would double in value, and they would make a fortune by selling it. Therefore, people at that time were irrational. The purpose of buying a house was for speculation, investment, speculation, and making money, not for living in it themselves.

They didn't even consider whether they could afford the monthly mortgage payments because they never planned to pay for 30 years. They would sell the house after half a year or a year when the housing price rose. It was also for this reason that a large number of people without money also bought houses, which led to more and more people buying houses in the market. As a result, housing prices were driven up. However, this time, more and more people have realized that housing prices may not rise forever. Even after the Federal Reserve lowers interest rates, housing prices at most rise moderately, and then houses lose their investment value.

The core purpose of buying a house is for living, and you must have enough money to buy it. You must not, like a dozen or two decades ago, borrow money to make a down payment and wait for the housing price to rise before selling it to make money. I'm sorry, but you may really lose your capital in that way. So even if the Federal Reserve lowers interest rates, which may thaw our country's real estate market from the freezing period, it is only beneficial to the demand for housing. Never speculate in the real estate market again.