In the middle of September, the Federal Reserve held a meeting and decided to continue their bond-buyback policy. Instead of tapering, the uncertain state of the economy was cited as a major reason why the current plan would continue.
Many people - from homebuyers, real estate agents and even financial regulators - have been keeping a close eye on the Fed over the past several months. The organization has been directly responsible for lower mortgage rates and a more affordable housing market, and many felt that potential changes could affect those conditions.
No Fed tapering just yet
In 2012, the central bank began its third round of quantitative easing, which included the purchasing of $85 billion in bonds every month, according to CNN Money. The goal was to keep long-term interest rates down, hopefully to encourage more people to buy homes and stimulate the housing segment.
Over the course of 2013, Fed Chairman Ben Bernanke announced that he intended to end the policy in 2014, and start tapering them before this year came to a close. A number of experts felt that this month's meeting was the time to announce the beginning of the end for quantitative easing.
Instead, it didn't happen. The expectations have factored into higher rates and bond yields, the news source reported, and conditions shifted after the Fed announcement to the contrary. The reasons given included the unemployment rate, which is still above 7 percent, and overall economic growth. The Fed continued to insist that tapering will begin when unemployment hits 6.5 percent, and inflation stays below 2.5 percent per year.
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Fed plan impacts real estate
After the announcement that tapering wouldn't begin just yet, mortgage rates dropped, according to Mortgage News Daily. While the lack of change wasn't what most people expected, there was a perceived shift in how the Fed is looking at the U.S. economy.
There is a chance that higher mortgage rates have already had an effect on housing, the news source noted. The Fed meetings illustrated a different tone - one that showed that the attendees realized many circumstances might not be felt yet. However, the lack of changes also demonstrated the Fed isn't feeling pushed into action, and that they also don't believe quantitative easing has been in place for too long.
Constantine Floropoulos, vice president of Quontic Bank, explained to Mortgage News Daily that the current economic and housing market situation is still a positive for many people.
"Couldn't ask for anything more," Floropoulos told the news source. "Although we have to consider that eventually the taper will occur and borrowing costs will go higher, we live to see historic lows for a while longer. This is an excellent opportunity to lock in, and for fence sitters to get back in the game. Remember, here today gone tomorrow, that's how rates work, don't take today's movement for granted."