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Local Impact on Fed Action: One Consultant's Take

Will the Federal Reserve's decision to buy additional bonds have an impact on the local real estate market?

On Thursday, the Federal Reserve decided to try and inject some new life into the economy by announcing it will buy $85 billion in bonds this year. 

Economists said that in theory, the move will lower interest rates and possibly make it easier for companies to borrow money. This could, in turn, make it easier for companies to hire new workers, thus reducing unemployment. 

This could also result in lower interest rates on mortgages, (which are already very low, historically).

I wanted to know how this might impact the real estate market locally. There are still many people looking to sell their homes if they can, but also about 1,000 new rental apartments coming online at various developments in the Odenton Town Center. 

I spoke with Julie Orsini, a consultant with Primary Residential Mortgage, Inc., a Towson-based company that works with clients throughout the area, including Odenton. 

Here's what Orsini said in response to my inquiry:

"Wow, the markets are really responding to this new news! It is expected to move rates lower and today, we can see that. What I am also seeing is that it has not shown up in our rate sheet pricing that much today. I do believe we will continue to see improvement.

The purchase market has been improving. Interest rates are expected to continue to stay low and I believe more buyers will jump into the market.  Unemployment seems to be the biggest issue and until people are feeling confident that they will be able to keep the jobs they have now, we are not going to see the market heat up. I feel like we are back in 2008. We are less than 60 days from the election and everyone wants to wait to see the outcome before making any big decisions. 

...The rental market is doing great! It would be great if we could move those potential 1000 renters into homes in Odenton … based on the reaction I am seeing, this new round of bond buying will help to keep rates low. This Fed meeting was what the market was waiting for, direction. Now we will see how the markets do once the information has been processed. Great day for your 401K and if you wanted to lock in a rate for a purchase or refinance!"

 

Do you plan to buy a home in the near future? 

McGibblets September 14, 2012 at 03:21 PM
"Economists said that in theory, the move will lower interest rates and possibly make it easier for companies to borrow money. This could, in turn, make it easier for companies to hire new workers, thus reducing unemployment. This could also result in lower interest rates on mortgages, (which are already very low, historically)." "in theory"; "possibly"; "could, in turn"; "could also result" LOL There will certainly be an impact as the dollar slides against the Euro (an already weak currency) and gold (no mystery here). It will more likely be higher gas prices, higher consumer goods and less financial stability. Any alleged 'gains' will be negated by a loss in standard of living, as we have already seen from QE1 and QE2.
McGibblets September 14, 2012 at 07:57 PM
Further: "The Federal Reserve’s “money printing,” Hassiepen said, has not “really contributed to the improvement in the general economy” so far. Instead, all it has done is increase inflation and the cost structure in the general economy, as will the new round of QE just announced Thursday. “We actually think this is going to cause unemployment, not employment,” he said. the Fed’s policy will reduce household’s disposable income and raising costs will also “lead companies to lay off people,” he said. “Let’s say six months from now, you might see job actions” in some of the more commodity-sensitive industries that are particularly vulnerable to an increase in commodity prices and a weak dollar, he predicted. “This is going to cause the economy to completely stagnate,” he said, expecting the effect to start within three or four months." http://www.forexlive.com/blog/2012/09/13/egan-jones-analyst-hints-at-us-rating-downgrade-post-qe3/
Richard Hertz September 15, 2012 at 04:07 AM
Shocking news that someone in the mortgage market would would support this potentially disastrous move. A couple of questions: 1. Do we really need LOWER mortgage rates? Mortgage rates are already lower than they've ever been. 2. Did you ask anyone living off their life's savings about this? Don't forget, interest rates work both ways...sure some people are benefiting from borrowing at record low rates, but others are living off savings, which are currently earning less than 1% interest (against inflation that's running at least around 3-5%...do the math and savers are losing purchasing power every day). I wonder how they feel about keeping interest rates at less than 1% for the next three years, especially since they've been around that rate for the past 4 years. 3. Does any sane person outside the housing industry think it's a good idea to try get another housing bubble going? If printing money was the path to prosperity, Weimar Germany and Zimbabwe would be the envy of the rest of the world. Nations don't improve standards of living by printing pieces of paper.

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