What effect will the end of QE2 really have?
I really feel that the #1 metric for the continuation of what has been a very strong rebound in the south Florida real estate market is interest rates. They have now been below 5% for over a year, in fact almost 14 months have past when we reported breaking through that level on May 6, 2010. There have been a couple times when we jumped briefly above that mark but once again have seen a wonderful multi-month extended drop.
That was until this week. Nobody is talking about it, I have searched, but to me the end of the Fed’s Quantitative Easing program where they went on a 600 billion dollar buying spree is the main reason we saw a very significant jump in rates this week. Without the Fed buying our own Treasuries someone is going to have to step to the plate and the chances of them wanting more that 0.0025% interest are pretty good moving forward. Double digit weekly jumps across the board; as of Sunday the average overnight rate on a 30 year fixed mortgage jumped 13 basis points to 4.57% from 4.44% a week prior.
The benchmark 15 year fixed rate also increased by 11 basis points last week to 3.73% from 3.62% while the benchmark 5/1 adjustable rate mortgage moved jumped 16 basis points to 3.14% from 2.98% just seven days ago.
Other factors effecting rates this week were the Greek parliament approving measures that will allow them to receive additional rescue monies and further avoiding default. Some good news out of the housing market also put upward pressure on rates. Home prices rose for the first time in 8 months per the latest Case-Shiller Index. Pending home sales also jumped and marked the 1st year over year increase since April 2010. Keep your eyes open but look for more volatility in the coming weeks and while I am hoping for rates to be kept in check it is hard to say.
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Tom Priester e-PRO
“Results Driven Real Estate”
Keller Williams Realty