A Market Recap That Makes Sense to Everyone

Happy Tuesday Morning to YOU

Spring break is in full swing here in Summit County!  We have had countless blue-bird blue skies and tons of fluffy powder!  Ahhhhhh, just another day in paradise!

We hear so much in the media about the state of the market and interest rates that it can be so overwhelming.  I received this quick recap from a lender we work with, Rod Shuster with Universal Lending, that I can UNDERSTAND and is actually pretty INTERESTING!!  I thought you might enjoy it, too.  


The Fed Giveth; Will It Taketh Away?

More than 200 years ago, Mayer Rothschild, founder of the Rothschild banking dynasty, uttered one of the more profound observations on finance and power. “Permit me to issue and control the money of a nation,” said Rothschild, “and I care not who makes its laws.”

Rothschild recognized that money matters, and it matters a lot. Money is, after all, 50% of every transaction. The importance of how much money is in an economy and the interest to be charged on that money cannot be understated.

Because the quantity of money and the interest charged are so important, much time and attention are extended to the Federal Reserve. The Fed is, after all, our central bank and manages our money supply and the interest to be charged on that supply. When Fed officials speak, markets always listen.

Fed Chair Janet Yellen spoke to Congress this past Wednesday, and markets listened, and for good reason: Ms Yellen offered more insight on quantitative easing (QE) – the Fed's purchases of Treasury notes and bonds and mortgage-backed securities (MBS) – and the direction of interest rates. In short, QE is going down and interest rates are going up.

As for QE, it's likely to end by December. The Fed has already reduced its monthly purchases of Treasury notes and bonds and MBS to $55 billion per month effective in April. Should the Fed continue to reduce its purchases at the rate of $10 billion per month, as it has for the past three months, there will be no QE by January 2015.

As for interest rates, Ms Yellen hinted that they could commence rising within six months after QE ends. This means the fed funds rate, in particular, would likely begin to ratcheted up sometime in July 2015. The fed funds rate is currently near zero, and many market participants doubt it will stay there. Futures markets are now pricing a 0.50% fed funds rate by August 2015.

In short, we should expect meaningfully higher mortgage rates this time next year.

As for the here and now, Bankrate.com's and Freddic Mac's most recent weekly surveys actually showed the rate on the 30-year fixed-rate mortgage down week over week. But we need to note that these surveys were winding down just as Ms Yellen was winding up. On Wednesday, rates on most mortgage products moved higher, though not disconcertingly so.

We're even more convinced that we'll likely see 5% on the 30-year fixed-rate loan by this time next year. Note that we say “likely,” not “guaranteed.” Ms Yellen offered her projections with many caveats and hedges based on growth prospects. As it now stands, though, the Fed expects economic growth could run as high as 3.5% annually in 2015, with the unemployment rate falling to as low as 5.4%.

If the Feds more bullish forecasts come to fruition, rising mortgage rates shouldn't be feared. But that means it becomes more urgent to act sooner on locking in a loan rate. The window on the rates that prevail today will close sooner than many borrowers anticipate.



Date and Time



S&P Case/Shiller Home Price Index

Tues., March 25,
9:00 am, ET

(Year-Over-Year Increase)

Important. Slippage in price gains will likely be seen in more local regions.

New Home Sales

Tues., March 25,
10:00 am, ET

450,000 (Annualized)

Important. Weather will have slowed sales for the month.

Mortgage Applications

Wed., March 26,
7:00 am, ET


Important. Low purchase activity suggests owner-occupied buyers remain sidelined.

Gross Domestic Product
(4th Quarter 2013)

Thurs., March 27,
8:30 am, ET

2.5% (Annualized Growth)

Important. GDP growth has slowed due in part to atypically bad weather.

Pending Home Sales

Thurs., March 27,
10:00 am, ET

0.1% (Increase)

Important. The sales freeze in recent month is showing signs of thawing.


Enjoy the week! Here is our featured listing of the week: 

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Price: $429,000

Beds: 3

Baths: 3

½ Baths: 1

Sq Ft: 1915

In the heart of Wildernest, this gracious townhome was created to very comfortably accommodate a large family- retreat style! Lovely finishes & furnishings w/ pretty hardwood floors that shine. Loads of space for you & all your gear. Tucked away w m...

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