CALL INFO LINE: 801-859-6555
 Welcome to the Blog

2010-10-21 13:41:49
Can Mortgage Interest Rates Go Down Any More?

It appears they CAN and that they WILL.

The buzzwords today are Quantitative Easing. It is another of the weapons the Fed has at its disposal to impact the economy, as a whole, and interest rates in particular.

Let me explain. In so far as the Fed has already lowered the rates they charge to lending institutions as much as they can, and they still see a sluggish economy with weak employment numbers and growth, the Fed appears ready to enter a second round of Quantitative Easing (QE). QE is when the Fed begins to buy Mortgage Backed Securities in earnest. They do that by paying more than the market price for MBSs; therefore, pushing interest rates lower.

But why do it? I mean rates are historically low already. Is lowering rates another quarter or half percent going to get someone to buy a house that hasn’t already gotten off the fence? Maybe, but I can’t see the number of people deciding to buy at 4% rates being that significant as compared to those looking to buy at 4.5%. There HAS to be other reasons. Maybe….

  1. The Fed realizes that lower rates will stabilize home prices. Lower rates mean borrowers can borrow more money based on their income, enabling them to pay more for a home which can slow the decline of prices, stabilize prices, and in a few areas even raise prices of homes.
  2. The Fed needs to look like they are doing SOMETHING to energize the economy or get consumer confidence turned around.
  3. The Fed has an agenda other than lower mortgage rates. Maybe the Fed is using the lowering of rates, in an effort to devalue the US Dollar abroad. By lowering the value of the dollar, our products become a better bargain to buyers overseas. So, maybe, just maybe, this is actually an attempt to kick start the economy. If we sell more products overseas, we need to produce more products, hire more employees to make, sell, and distribute those products. Can I smell job growth through QE?

Understand that a weakened dollar will eventually force rates to move up (to re- strengthen the dollar); so, there is going to be a window of even more incredible mortgage rates, but, the window will need to be carefully watched because it can’t be left open forever.

There is no history we can point to predict if QE can or will work. Nor is there any real indication of the level of aggressiveness the Fed will take in this area. (Listen to the rhetoric between now and next week’s release of the Fed’s Beige Book as hints.) It may just be another shot in the dark, but personally, I am in favor of ideas that promote job growth more than government hand outs and bail outs.

Blog Archive
2017-04-16 09:49:56
Population Growth Shifting Out of SL To UT County

2017-04-16 09:49:01
State’s economy fueling population growth

2017-03-10 16:03:59
CNBC ranks Utah No. 1 state for business

2017-03-08 10:24:12
Toughest & Easiest States for 1st Time Home Buyers

2017-01-04 10:39:50
Housing Market 2017: The Positives & Negatives

2016-06-14 10:31:17
Salt Lake Monthly Housing Report

2016-05-20 15:42:35
Who Pays the Highest Property Taxes?

2016-03-31 15:49:40
Cities to Watch: 2016's Fastest-Growing Places

2016-03-29 13:19:08
Salt Lake Quarterly Housing Report

2016-01-28 08:37:27
Park City 2015 Year-end Statistics Press Release

2016-01-18 10:50:31
5 Things to Never Say When Selling a Home

2016-01-11 11:46:49
The ‘Missing Link’ in Housing

2015-12-23 12:08:43
5 Real Estate Trends That Will Dominate 2016

2015-12-15 10:56:50
How Will Higher Rates Affect Housing?

2015-12-04 10:39:02
Big Expectations for Housing in 2016

2015-12-01 10:07:30
6 ‘Tacky’ Home Décor Trends

2015-11-10 11:31:23
Home Buyers Don’t Need to Fear

2015-10-28 09:48:58
Home Prices Rising at Faster Pace Than Inflation

2015-10-20 15:23:54
Scammers Using New Chip-Based CCs as Fresh Phishin

2015-10-09 10:13:25
3 Home Inspection Deal-Breakers

2015-10-06 14:42:40
The Next Three Months: Best Time to Buy

2015-09-17 10:30:01
How High Will Mortgage Rates Actually Climb?

2015-09-11 14:14:05
Best Day of the Year to Buy a Home

2015-08-24 08:28:04
Home Resales at 8-Year High as Buyers Act Before M

2015-07-31 11:21:43
Utah Economy Newsletter June 2015 Now Available

Click here to see ALL articles.

Comment on this Article

Your Name:
Your Email:
Verify:  Please enter the numbers shown to help eliminate spam.