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Tapering Begins!

Tapering Begins!

The Fed announced they would be pulling back some of their stimulus package which has helped the housing market by keeping long term mortgage rates at historic lows for the last few years. This should come as no surprise as the KCM Blog has been warning of this likelihood over the last several months.

We even went against the belief of the vast majority of economists who thought the Fed would wait until next year. In this month’s edition of KCM, we quoted Bill McBride of Calculated Risk:

“Although the consensus is the Fed will wait until 2014 to start to taper asset purchases, December is still possible.”

We also gave our members the following grouping of slides to help them explain the ramifications of the Fed’s decision during meetings with buyers and sellers.


What it Means to the Consumer

In an article in MarketWatch today, Lawrence Yun, the Chief Economist at NAR, explained that sellers looking to move-up (to a better school district or larger home) “need to realize that it could be more challenging a year from now.” Yun stated the average 30-year mortgage rate currently hovers at 4.3%, but that could rise to 5% or 5.5% next year.

What it Does NOT Mean to the Housing Market

Some reports will now claim that housing prices will have to drop as interest rates begin to rise. There is no historical evidence of this. Below is a chart showing the last four instances of mortgage rates rising dramatically and what happened to home values at the time.

12-23 Rates and Prices

Bottom Line

If a client is either a first time buyer or a move-up buyer, they should make the move earlier in 2014 instead of later as mortgage rates will probably increase as the year goes on.


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3 replies
  1. Teresa
    Teresa says:

    Ref.: Qualifications to become a KCM Member

    How can I get contact with a bilingual –Spanish–KCM Crew? Thank you
    Teresa Ruiz-Huidobro
    Real Estate broker
    California BRE # 01195472
    Cell # 707 704 7369

  2. Pat Lydon
    Pat Lydon says:

    Of course intrest rates will go up. This affects the middle class most. Politicians wouldn’t know someone from middle class if they bumped into them/or was saved by mouth to mouth resucitation.

    The best way help middle class is intrest rates. The wealthy (hate term upper class-they are so uppity) can absorb a spike in rates -might not like but can do(figure an additional write -off).Plus the attitude I am entitled to or can afford to. Lower income doesn’t really care as they are not buying anyway.

    SOOOOOOOOOOOOOOOO who does it affect most?!!!!

    Middle class -blue collar etc buyers basically using every dollar to buy. An increase by even 1/2 -1% difference of buying or renting. Just look at your KCM charts of increase $207 monthly payment.

    So the market most adversly affected is mid range buyer. Washington really wants to help middle class. Freeze mortgage rates at 5% for next 5 years on 30 year fixed. Property taxes next 3 for mid priced home (areas vary). The market booms economy moves.

    was at seminar about 25 years ago speaker said every transaction stimulates over 30 bussinesses -times that by 2 since their is 2 sides each deal.

    Brokers,banks,atty,movers,plumbers,electriciations,painters, food stores, etc



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