End of quantitative easing - How will this affect RE?

9 Replies

The fed announced today that it would be ending its 6 year period of QE. The labor market has been  recovering and the feds expect national economic recovery to continue amidst a global economic slowdown. 

They also mentioned that key interest rates would stay low for a "considerable time" to help increase inflation. What implications will this have on the real estate market? Can we expect to continue seeing similar interest rates as we're seeing today?

Article below:

http://www.bloomberg.com/news/2014-10-29/fed-ends-...

from what I read, they will hold interest rates low for a number of months then slowly begin to stair step it up.  Which is bad for me in 2 ways.  As interest rates rise, home prices go down because less ppl are willing to pay more $$ for the loan so demand falls and so does my equity.  Also as interest rates rise so does the cost for me to continue to do deals!!!!

When interest rates increase, home prices will decrease. Foreclosures may also increase if there are a number of people on adjustable rate mortgages that can't afford an increase in payments.

Which is good for an investor that has capital and is buying. Bring on the foreclosureS again. I want a deal. The fed has been printing so much money, which brings down the value of the dollar. We need a correction soon to weed out the weak who have no money.

Contrary to popular belief, there really is no correlation between rising interest rates and decreasing house prices.  The reason interest rates rise is because the economy is improving.  An improving economy usually means more jobs, higher wages, and more mobility thus allowing for people to enter the housing market and support prices.  Also, if you are waiting for the next round of foreclosures to hit the market, you will be waiting a long time. People normally do not lose their homes when the economy is good and the unemployment rate is near 6%.  I think I just read that foreclosures are back to pre-crisis levels with no evidence that the foreclosure rate will rise anytime soon.

The economy improving is a falsehood. When a government spends more then they make, it's like putting everything on credit and continually raising your credit limit. I call it a fake economy. The ballon will burst again and those of is who are in a strong financial position will weather the storm.

The economy improving is a falsehood. When a government spends more then they make, it's like putting everything on credit and continually raising your credit limit. I call it a fake economy. The ballon will burst again and those of is who are in a strong financial position will weather the storm. Interest rates will only rise, they are at an all time low. When rates increase, competition for vying homes will decrease which will lower prices.

@Marcus Johnson  The US government has only run a budget surplus in 12 out of the past 74 years. 74 years is a lifetime.  My my point is, you can wait your entire life for the government to stop running a deficit but it may never happen or happen only sporadically.  You are correct in that the bubble will burst eventually. That is the nature of economic cycles.  Problem is, you don't know if the bubble will burst next year in five years or 20 years from now. 

My advice to you, coming from someone who's been investing in real estate for almost 20 years now, is if you find a good deal go for it. This nonsense about waiting for the bubble to burst it is just that, nonsense.

Just wanted to add that anyone trying to get a home loan knows that actually qualifying is part of the process these days, unlike before the bubble where having a pulse was the only qualification needed.  So I don't think massive foreclosures are part of the picture.  I do think mortgages will stall for a while once rates rise, and we'll be looking to purchase if prices drop while people adjust to higher mortgage rates.  6% to 8% used to be just fine, and likely will be again.  We wish we had more 30-year loans locked in at these low rates, but we're happy with the ones we do have.    As a bonus, it will be nice for many senior citizens who have seen their interest income plummet since 2008.  My mother used to use her interest income to keep her house fixed up as she wants to remain in her home, not downsize.  The last few years have meant cutting into principal as interest payments went to nothing.   

What the government says, what is the truth, and what the government actually does are three different things. If I can find another deal now, I am buying. There are millions of people that are renters and no matter what they need a place to stay. Prices will rise. Prices will fall. The majority of them will still rent!

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