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How Interest Rates Could Be Affecting Your Home Search

by Mark Rieger, Mark Rieger Realty

Happy Spring!

I'm sure most of you have noticed that interest rates are on the rise. Have you asked yourself lately how the rise in interest rates might be affecting your home search? When rates rise, affordability goes down. Inventory levels also remain low and there are a lot of buyers out shopping right now. Are you ready?

Below I have attached a link to a March 2018 article in Realtor Magazine that will help enlighten you. More interest rate hikes are expected for 2018. If after reading this article you or someone you know is ready to kick your home search into a faster motion, contact me right away. I'm here to help! Let me know if you have any questions.

Click Here To Read The Article In Realtor Magazine

Why Are Interest Rates Rising?

by Mark Rieger, Mark Rieger Realty

Below is a CNNMoney article explaining why interest rates are moving upward. For those of you who have been watching this happen and were wondering why, this information should help straighten that out. I hope you find the information helpful.

Stocks had been more attractive than bonds with long-term rates so low. But that may be changing.

NEW YORK (CNNMoney)

Investors have been pulling money out of stocks that pay high dividends lately and putting it into shares of companies that stand to benefit from the economic recovery.

The shift is a significant change from earlier this year when investors were piling into dividend-paying stocks in response to historically low yields in the bond market.

But the yield on the 10-year Treasury note recently rose above the average dividend yield paid by companies in the S&P 500 for the first time in just over a year. The 10-year yield hit a high of 2.2% this week, up from an all-time low of 1.4% last July, as investors brace for a slowdown in the Federal Reserve's bond buying campaign. The S&P 500's dividend yield is 1.98%.

The rise in bond yields triggered a big move out of defensive sectors of the stock market, which typically include companies that pay high dividends, such as utilities, telecommunications firms and real estate investment trusts.

For example, the ETF that tracks utilities, the Utilities Select Sector SPDR Fund (XLU), is down 7% so far this month, while the S&P 500 is on track to gain about 5%.

"All of the safe-haven sectors have been underperforming," said David Lutz, head ETF trader at Stifel Nicolaus. "The defensive stocks have been overwhelmed by the rotation away from yield."

Related: Best deals in investing

While rising bond yields make dividend stocks less attractive, the shift also reflects investors' increased appetite for risk, said JJ Kinahan, chief derivatives strategist at TD Ameritrade.

"Investors had been chasing yield, now they are chasing capital gains," said Kinahan.

Related: Is bond bubble losing air?

It's the economy. Phil Orlando, chief equity market strategist with Federated Investors, said the move out of dividend stocks suggests that investors are looking forward to a rebound in economic activity during the second half of the year.

He said the rally earlier this year was led by defensive stocks because investors were worried that misguided fiscal policies in Washington would hurt the economy. But he said those concerns are beginning to fade and investors are now boosting their exposure to stocks that typically rise along with the economic cycle.

"Investors are beginning to price in an improving economic recovery," said Orlando. "We think that's a trend that that has legs."

Related: Bond gurus say Treasuries are still safe

Orlando pointed to a number of sectors that had been beaten down earlier in the year and are now finding favor as the economy strengthens, including energy, industrials, consumer discretionary and select technology companies. But the financial services sector has been the main beneficiary so far.

New Fed Actions

by Mark Rieger, Duke Warner Realty

On Wednesday the Federal Reserve concluded their two day meeting.  From their announcement (see below) it appears that they have agreed to increase the purchasing of Agency MBS (FNMA/FHLMC/GNMA) by an additional $750 billion for a total of $1.250 trillion.  This should ensure that the Fed will be supplying a stable source of funds for the government and conforming loan markets for at least the next 9 – 18 months.  As we have seen since December, the Fed seems to have patterned it’s buying of mortgages to keep rates in the high 4% to low 5% range.  It appears that we should have rates at these levels for some time.

Additionally, the Fed has indicated that they will expand the Term Asset-Backed Securities Loan Facility (“TALF”).  Previously the Fed has indicated that the TALF could expand to include purchasing private MBS (Jumbos) and with today’s announcement it appears that is likely to be the case.  While we don’t see Jumbos rates dropping on the magnitude of what we saw with conforming, this is welcome news.

All positive developments!  I will forward additional information as it is available.  


Text of FOMC statement

WASHINGTON (MarketWatch) - The Federal Open Market Committee released this statement Wednesday following a two-day, closed-door meeting.

For immediate release
Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen. End of Story

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