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2011-10-31 20:14:40
How will the Europe news affect real estate at Bea

On Thursday, the world was cheering on the news that a deal in Europe was reached, with private banks and other holders of Greek debt accepting a 50% haircut on their principal investment. Once the write down takes place, Banks who are holding Greek debt will have to recapitalize themselves by year-end, and government support will be available to fill voids that private money won't fill. In addition, the Economic Financial Stability Facility (EFSF) rescue fund, which currently has $443 Billion in holdings, will be expanded and leveraged to $1 Trillion Euros or $1.4 Trillion US Dollars.

So the agreement is together…but like any effective plan, it now has to be put into action. And as this rolls out, the financial markets will be watching every step. When the sentiment is positive, like it was the day the plan was announced, Stock markets could benefit as investors would seek to take advantage of gains.

In fact, the Stock markets are set to have their biggest monthly gains on record as October comes to an end. The closely watched S&P 500 Index is up 13.5% for the largest increase since October of 1974, while the Dow Jones advance of 12% is the biggest gain since January of 1987. Optimism surrounding the European crisis, positive economic data and better than expected earnings reports have fueled the rally.

So what does all of this mean for Bonds and home loan rates? The deal that was reached in Europe is historic, and good news for the world's economies overall. However, the plan has yet to be put into action-and then it has to work. And if there are hiccups or issues along the way, Bonds and home loan rates could benefit with some renewed safe haven trading. We saw a little of that late last week, when Friday's less than stellar Italian Bond auction reminded the world that the European debt crisis is not yet entirely resolved.

The most important thing to keep in mind is that now remains a great time to purchase or refinance a home, as home loan rates are still near historic lows. 

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