Standards are still too tight for a normal market. If banks loosened up we could probably see an increase of half of million home sales a year and that would significantly help the market. The property management companies baltimore housing markets strong expansion from 2000-2006 caught Wall Streets eye and financial institutions created new mortgage instruments, including mortgage-backed securities, to help get a cut of the action. Exotic new loans that extended beyond the normal 30-year term were also introduced.
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The Effect Of Fed Tapering On The Economy, The Housing Market And Stocks
The strong demand has turbocharged home values for more than a year, but industry followers say the price spikes are unsustainable. Lewis Goodkin, a South Florida housing consultant, said prices will even out once investors scatter, giving more opportunities to traditional buyers. “To me, that’s the sign of a healthy housing market,” he said. The competition for homes has frustrated buyers, forcing some to extend their searches for weeks or months and depleting the supply of properties. Broward County had 4,440 homes for sale at the end of August, down 6 percent from a year ago.
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Housing prices rise again
Perhaps more important, have the financial markets become so accustomed to the Feds easy money policy that the addiction is deeply ingrained? In other words, has the stock market consumed so much punch that the withdrawals will be severe? It seems reasonable to assume that the actual process of tapering will be slow and gradual with the goal of minimizing any potential market disruptions. This is precisely where the difficulty resides. After all, everyone understands that the Fed cannot continue expanding the money supply at the current rate. Therefore, the key issue is to taper with the least amount of market disruption. I suspect this will include sending up trial balloons to gauge the markets reaction to various Fed actions, executing the tapering process, and having contingency plans in place to address any significant issues which may arise.
For the original version including any supplementary images or video, visit http://www.forbes.com/sites/mikepatton/2013/09/19/the-effect-of-fed-tapering-on-the-economy-the-housing-market-and-stocks/