Astute Real Estate market observers relate the actions of the Federal Reserve Bank to mortgage interest rates. Although the prospective home buyer is not likely to recognize terms like "quantitative easing" or "tapering," Real Estate news should typically include what the Fed is up to when it comes to stimulating the economy.
For example, at the end of 2013, the Fed finally made a move to "taper" the monthly purchase of $85 billion in bonds that had been going on for some time. A decision to begin to curtail this purchase was long expected by mortgage lenders and by Wall Street. The monthly bond purchase has now been reduced by $10 billion, to $75 billion per month.
Super Cheap Rates Gone For Good?
So, what does this mean for mortgage rates as 2014 gets underway? Most analysts suggest, quite simply, that it is another reason to believe that the days of 3.25 percent rates on 30-year mortgages are going to remain forever in the past. Realtors should expect to prepare their clients for the fact that a wait for significantly lower rates may be a long one indeed. It is incumbent upon Real Estate agents to convey, in a persuasive manner, the fact that rates in the mid-fours are still a true deal. Remind buyers of the three decades of mortgage rates prior to 2009 that ranged from 5.6 percent to 9.2 percent. That's right, anyone securing a mortgage in the mid-fours is still beating the best average rates experienced for over 30-years by over a full percentage point.
Upward Pressure on Interest Rates?
Now that Ben Bernanke has stepped down as the head of the Federal Reserve, most observers see little reason to believe that Fed policies under Janet Yellin will depart substantially from those under her predecessor. Therefore, if the Federal Reserve's economic stimulus continues to be scaled back, mortgage interest rates will likely creep higher still.
For Sellers, Is The Time Now?
This reality can be used to encourage prospective sellers to finally put their homes on the market at a point when they can still enjoy the combination of increased home values and a decent supply of buyers. Sellers should be reminded, in some sectors of the market at least, that many buyers already qualify for $30,000- to $70,000-less-home than they did just a year ago.
To the degree that the Fed succeeds in astutely managing the continued American economic recovery, it will also help to contribute to the continued resurgence of the Real Estate market. Many signs point to a more symbiotic market in 2014, as buyers, sellers, agents and lenders enter into a period where the interests of each group are addressed in a more balanced manner.