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What the Fed Tapering Means for Your Clients

Last Wednesday, the Federal Reserve announced it would begin gradually paring back on its  purchase of non-traditional assets aimed at stimulating growth. Beginning in January the Fed will reduce it’s monthly purchase of Treasuries and mortgage-backed securities by $10 Billion, from $85 to $75 billion. The statement also outlined forward guidance for the Federal Reserve’s primary policy instrument, short term interest rates.

fed-tapering-and-mortgage-rates-real-estate-kw-research

Federal Reserve Chairman Ben Bernanke delivered remarks Wednesday in Washington, at his final planned news conference before he steps down.

Chairman Bernanke made it clear that the Fed’s easy money policy would continue beyond the previously indicated threshold of 6.5 percent unemployment. He also announced that that rates would not increase until 2015 at the earliest – a consensus among the committee’s voting members.

Our KW Research Department decoded the decision to find out what it could mean for you and your clients.

Because of the Fed’s purchase of mortgage-backed securities it’s likely that mortgage rates will continue to rise, though it may not be a dramatic increase given the modest reduction in the purchase of these assets. And buyers who are on the fence would be wise to whittle down their list and make an offer, especially those who want to purchase in areas where prices are spiking.

The decision could also encourage cash-rich onlookers to come out and buy – at least those who can afford it. Several industry experts from the National Association of REALTORS and RealtyTrac were quoted in an article on MarketWatch, stating their belief that despite the motivation,  these cash-only deals are unsustainable in the long-term.

Overall, the Feds increased clarity coupled with the expectation of continued monetary accommodation and low, short-term interest rates should keep the economy growing. This was well-illustrated last week when markets responded favorably putting the Dow Jones up nearly 300 points (1.8 percent).

Posted in KW Now
 
One comment on “What the Fed Tapering Means for Your Clients
  1. Fernando Pettineroli says:

    The massive purchase of mortgage backed securities of dubious origin by the Fed is one of the darkest business ever done with public funds. Gives away free money to other financial institutions. Mostly goes back to the same government at a higher prime or to Wall Street to the speculative market. Very little of those purchases had influence on today’s real estate market.

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  3. [...] Our KW Research Department decoded the decision to find out what the Fed's tapering could mean for you and your clients.  [...]

  4. [...] low but they are climbing and last wednesday, the Federal Reserve announced it would begin gradually paring back on its purchase of non-traditional assets aimed at stimulating growth which will also have an impact on home affordability.  As you can see [...]

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