What is Tapering? and Why it is So Important to Real Estate
The Fed announced recently 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 comes as no big surprise as we have been seeing this discussed over the last several months.
The vast majority of economists who thought the Fed would wait until next year. Here is a quote from the well respected 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.”
What "Tapering" Means to You, 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 that time.
If you are either a retiree or a move-up buyer, you should make the move earlier in 2014 instead of later as mortgage rates will very likely increase as the year goes on.
Let us know if we can answer any specific questions about today's real estate market in Coastal Delaware.