What’s a trillion dollars worth in the mortgage market? About a half percent.That’s the fallout from this week’s announcement that the Federal Reserve plans to buy up to $1 trillion in treasury bonds and mortgage backed securities. The Fed’s new plan nearly doubles its previous commitments, and shows that if banks won’t freely lend, the government intends to create a vacuum to suck up loans and clear space for new originations to take place.
30-year fixed rates dropped into the 4’s on the news… and having been in the business for two decades, there’s a “shock” factor to seeing interest rates in the 4’s that’s just hard to shake.
When you factor in discounted prices with rates in the 4’s and massive spending by the federal government, what I see is an incredible opportunity to make a long term investment in a fixed asset at a payment that is artificially low.
On the backside of this whole thing, we’re going to have inflation – gold jumped over $26 yesterday on the news of the Fed’s action – and with new construction essentially on life support, the demand for existing resale homes has to get stronger over time.
The government has clearly chosen to focus on the demand side of this equation – incentivizing demand with low rates and a large tax credit for first time buyers – which means that bringing buyers into the market has to be our focus.
I’d love to know your thoughts – as always, we’ll keep doing everything we can to keep the CENTURY 21 name front and center with Southern California’s real estate consumers.
