THE HOUSING MARKET DIDN’T SEEM LIKE AN OBVIOUS BENEFICIARY OF the age of easy money. As the World Trade Center toppled on September 11, 2001, and Osama bin Laden’s lieutenants boasted of crippling the U.S. economy, the real estate market and the overall economy wobbled—especially around the key New York area. Home prices had enjoyed more than five years of gains, but the economy was already fragile in the aftermath of the bursting of the technology bubble, and most experts worried about a weakening real estate market, even before the tragic attacks. But the Federal Reserve Board, which had been lowering interest rates to aid the economy, responded to the shocking September 11 attacks by slashing interest rates much further, making it cheaper to borrow all kinds of debt. The key federal-funds rate, a short-term interest rate that influences terms on everything from auto and student loans to credit-card and home-mortgage loans, would hit 1 percent by the middle of 2003, down from 6.5 percent at the start of 2001, as the Fed, led by Chairman Alan Greenspan, worked furiously to keep the economy afloat.
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