The ‘Fiscal Cliff,’ QE3, and the Future of Interest Rates

Daily Real Estate News | Wednesday, October 24, 2012

Economists from the Mortgage Bankers Association sounded an optimistic note at a press conference yesterday afternoon during the organization's Conference & Expo in Chicago, with predictions that unemployment will go down, home purchase loan originations will go up, and mortgage rates will remain low in 2013. All of these point to a continued housing recovery, but they cautioned that major economic challenges loom that could bring about a reversal — particularly in interest rates.

"The most immediate threat is the fiscal cliff," said Jay Brinkmann, the MBA's chief economist and senior vice president of research and education, referring to the deep cuts in taxes and government program spending that will take place at the end of this year if some sort of financial compromise isn't reached by legislators on both sides of the aisle before then. The Congressional Budget Office estimates that U.S. gross domestic product will fall four percentage points in 2013 if an agreement isn't forthcoming, which would make it a recessionary year.

Mike Fratantoni, vice president of single-family research and policy development for the MBA, predicted there will be some sort of resolution. "It may not be clean, and it may not be timely," he added. Any major delays would likely lead to a spike in interest rates and, consequently, declines in home sales.

Over the long haul, interest rates will likely remain below historical lows because of the flight of global capital to the U.S. caused by the continuing European debt crisis and the Fed's rollout of another round of quantitative easing (often referred to as QE3). This Fed initiative — which will probably last at least a year and possibly as long as two — will involve the central bank purchasing tens of billions of dollars in mortgage-backed securities each month.

"[QE3] wasn't surprising," Fratantoni said. "The aggressiveness, the open-ended nature of it, and extreme focus on the mortgage market was a surprise."

However, if the Fed determines that they're crowding liquidity out of the market with QE3, they may shift to purchasing longer-term securities such as Treasuries, Brinkmann added.

—Brian Summerfield, REALTOR® Magazine

Read More

Action on Loan Standards Needed More Than on Rates

About Ady Simion (Realtor and Public Notary)

Ady Simion was named in the Top 1% of all agents for NRT LLC a subsidiary of Realogy that operates a variety of real estate offices under brands such as Coldwell Banker, Sotheby's International Realty, Century 21, The Corcoran Group, and the technology-based brokerages ZipRealty and Climb Real Estate. NRT has 787 offices and 47,000 sales associates. Selling and buying property can be very stressful but with the right agent it can be profitable and a fun experience. Ady is also a Notary Public and being a people person he wants to help negotiate for his clients making their transactions as smooth as possible. Ady’s goals are simple: He wants to be the best source of information on the Los Angeles area Real Estate market, as he assists clients through each transaction with care and professionalism. He is proud of his large referral base of clients who have placed their trust in him over the years. Why him, when there are so many good people out there?!?! • Sellers will have their property exposed to the largest team of sales professionals in the world by far. Coldwell Banker Agents sale more homes than anyone else. • Buyers will have the opportunity to view more properties exclusively. • And most importantly when you hire him you get a whole team working for you not just “only one person”. Ady Simion started his Professional Career as an Insurance Agent, and then mastered the Mortgage Industry focusing on helping buyers and sellers achieve their life dreams. He now is an Agent with the Largest Residential Real Estate Company in the nation and the world, Coldwell Banker, at the Pasadena office which is the leader in the areas in which he specializes. After finishing College Ady has consistently been a Top Producer in every office/business he worked at. He speaks English, Romanian and Spanish. Real Estate is constantly changing and working with an agent that has been involved in the Real Estate buying/selling process most of his life is always beneficial for clients. Call, text or e-mail him or just stop by to say Hi and ask any real estate questions you may have.

Posted on October 24, 2012, in Uncategorized. Bookmark the permalink. Leave a comment.

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