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  • Royal Hartwig

Fed motions it will taper by the end of this year

The Federal Reserve has indicated it will likely start to taper its bond buying at the end of this year and bring it to zero by the middle of next year. This is no small feat. The Fed has been buying $120 billion per month of bonds and this has kept interest rates at ultra low levels.


I think the likely hood of this happening according to plan is low given how accustomed everyone is to these low interest rates. My take is they may start to taper but will not be able to fully complete it. We will see!


Below is a graph from the St Louis Fed showing the amount of bond buying from the Fed. You can see how much more they have done this time around compared to the housing crisis in 2008.


What does this mean for real estate? If they do go through with the full reduction of bond buying by the middle of 2022, in my opinion, you will see a noticeable increase in mortgage rates. The extent to which interest rates go up will have an impact on housing prices and sales. I'm not sure how ready home buyers are for 4% - 5% interest rates on a mortgage even though that is well below the historical average of 6%.




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