After their September 22nd meeting, the Federal Reserve left the Fed Funds Rate at 0-.25%, and the quantity of Bond and Mortgage Securities purchases intact at $120B per month… But they signaled that they feel comfortable scaling back on their bond purchases by the end of the year. The bond and MBS purchases (Quantitative Easing, or QE) have artificially kept mortgage rates at historic lows and below inflation levels. Essentially it’s free money when taking into account the time value of money.
The first QE tapering will probably be around $15B month, and primarily in MBS. There’s been pushback on the Fed by economists that their purchases are causing asset price inflation (mainly housing).
As you can see in the chart of the 10 year notes, the long side of the rates are already moving higher.
It’s been well communicated that the bond purchases will be tapered before a Fed Funds Rate will be increased. Theoretically, the QE tapering could be completed by June 2022, and Fed Rates can start to be pushed up by the end of 2022. The attached graphic shows the Fed Funds Rate Forecast. The Fed has shown patience in wanting to push rates up. Economic statistics, mainly inflation levels, and employment numbers will have a major effect on the speed at which the Fed moves.
Unless something unforeseen happens, 2.75-3.0% 30 year fixed rate mortgages will be history soon. When the Fed Funds Rate hits the targeted 2.5%, 30 year fixed rates will be around the 5.5-6.0% range. Still historically good, but the population will be spoiled when they think back to the good old under 3% days… Then again it took a pandemic and the subsequent economic fallout to get them.
Still a good time to crunch numbers to see if taking advantage of the present rates are worth taking advantage of.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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