The Fed raised interest rates again, and probably will do so two more times this year.

Today's L.A.Times ran this article about interest rate rises and what they might mean to you.  Interest rates up = home prices down, right? Not so fast.  From another article about how expensive homes are here: The UCLA Anderson Forecast said there is no sign of a correction in home prices around the corner. The report forecasts job growth of 2.2% this year, 1.7% in 2019 and 0.8% in 2020.

2014 is one-half month old now. What's the real estate market like?

Many people say that "calling" the real estate market this early in a new year isn't a good gauge of what's really happening. Personally, I usually see an uptick in activity by the end of the second week. Not this year. Not so far. I'm still seeing very short inventory in all price categories. I'm also not seeing lots and lots of new buyers, not yet anyway. And I'm also seeing buyers getting discouraged and dropping out. I think the perception of higher interest rates is to blame plus the no-inventory situation. However, interest rates haven't gone up that much. And yes, there is low inventory, but inventory has been low for the past several years. Because of last year's price rebounds, more people can afford to sell their homes this year. So stay tuned -- in real estate, the only thing constant is change.

U.S. to lower the size of mortgage it will guarantee - but I don't think that's going to have too much of a negative impact

Here's an article from today's L.A. Times about lower loan limits that will go into effect at the end of September.  While many of my colleagues are wringing their hands over this change, I'd like to point out three things. 1) The limit is reducing from $729,750 to $625,500.  So any loan amount over $625k will now need to have jumbo financing. Therefore this will really only impact home buyers, and home prices, between those two loan amounts only -- that's only a price spread of $104,000+.  2) Jumbo rates are at an all-time low. 3) Yes, many of the areas I serve have high home prices; but a greater amount of neighborhoods have home prices that don't exceed $600,000 in the first place.  So will there be wide-spread harm? It remains to be seen, but I doubt it.

Not good news for buyers or sellers

 

Here's a good article from the business section of today's L.A. Times.  In essence, it says that the government is going to stop buying mortgage bonds in March.  That will likely have the effect of pushing interest rates higher.  And we know what happens when interest rates go higher -- less people qualify for mortgages and homes sit on the market longer and sell for less.  Here are a couple of quotes:

"The Fed plans next month to end a $1.25-trillion mortgage-bond-purchase program that has helped keep mortgage interest rates near a record-low 5%...That exit is expected to push up rates, which could weigh on buyers at a time of high unemployment and anemic consumer spending." And "If those rates jump up to 5.5% or 6%, then [buyers] can't qualify for what they thought they could qualify for, and they're not going to be able to buy as much house as they thought they could."

If you're a seller, now may be the time to list your home.