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The Fed Has Spoken, Now How Will The Market React

Posted by Greg Moser on July 15, 2014
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The Fed Has Spoken, Now How Will The Market React – 

Good Morning.  It’s Tuesday and the Federal Reserve Chairman (woman) is on Capitol Hill testifying. She has been speaking now for a little over an hour. The primary line of questioning from congressional committee members is when will the Federal Reserve ‘raise interest rates’.
Mrs. Yellen’s response was a bit opaque at best. She stated when asked what the factors where that the Fed considers when creating policy. She cited jobs (of course), consumer consensus and REAL ESTATE. She said that
the Fed was watching the Real Estate sector due to the fact that the market has not performed as expected. Now, she did not say how much influence the Real Estate sector has, nor did she say what the Fed may do to help ‘spur’ things up. She did say QE (bond buying program) was something they will leave on the table for future consideration if need be.

Translation – rates will stay low for some time to come.

I wanted to discuss this topic as a hybrid of sorts. I know, I’m a Realtor and I should be telling you about a client’s kid I saw at baseball game last weekend. Maybe I should be telling you about the family I just moved into Hidden Meadows up in Escondido – why? My goal is to keep you informed of real-time matters that will help you be a successful homeowner. The ‘fluff” isn’t what I do.

As you know rates and real estate are directly correlated to one another. If rates are favorable we see an uptick in market activity. If rates increase, homeowners sit idly waiting and watching to see what will
happen. That’s a no-brainer. The trick to buying or acquiring a new mortgage is doing before anyone else. This is what I want to show you how to do.

We heard the Federal Reserve state two (2) things. She said that QRM (Quantitative Risk Management) and how the Fed evaluates the market will remain unchanged. This is good because that means they (the Fed) are maintaining
the guidelines that the former Fed Chair put in place. The second is that she said they (the Fed) would leave QE (Quantitative Easing) on the table as a tool if need be. That means they will buy Bonds to help stimulate the market if
things start to stagnate again.

 
So how is any of this important for San Diego Homeowners? We live in a high-cost market.  If rates
move up by half a point, we see market activity slow by double digits in some areas.  Costal North County is one of
those areas we see that occur. With a median home price will into the mid to upper 700’s, a jump in rates isn’t good. When I say this I’m focusing on a ‘jump,’ not a slower uptick that is normal for a recovering market. That eventually
will happen. If and when rates rise, it will most likely be an indicator that things overall have gotten better – that’s a good thing. It’s the rapid movement that we want to be watchful of.

Today’s news as an overall was positive. With the Federal Reserve watching Real Estate and the overall health of the sector, it’s safe to say that we’re going to see low rates for some time to come. If you’re
considering buying a new home or if you’re shopping for a new mortgage (refinance), contact my office today. I can provide you a detailed valuation report or put you in touch with my in-house lender.

 

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