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The Fed Speaks — Holiday Cheer?

Well after months and months of speculation, the Federal Reserve Board finally announced the start of their “tapering” program in which they will reduce the amount of their purchases of government and mortgage-back securities by ten billion dollars per month. Starting in January, the Fed will purchase $75 billion dollars monthly instead of $85 billion dollars. This program was instituted during the financial crisis both to keep long-term rates lower and provide some stability in a mortgage market which was devastated by the crisis. By lowering the amount of purchases, the Fed is officially proclaiming that America is well on the road to recovery.

This does not mean that the Fed is about to raise interest rates. What it means is that the Fed will be exerting less influence over long-term rates which are of utmost importance to consumers because fixed-rate home loans are influenced significantly by the direction of long-term interest rates.   The Fed has been going out of its way to say this does not mean that they are ready to raise short-term rates. The Fed has emphasized its commitment to keep short-term interest rates “exceptionally low” until either the unemployment rate falls to around 6.5% or the inflation rate exceeds 2.5% a year.

Why is this good news for the Holiday? Well, the stock markets rallied decisively on the news. The economy is recovering and this is a good thing. Long-term rates rise when the economy is stronger. This is especially the case when rates are bouncing back from the lowest point in history. But rates are still very, very historically low. And this is good news for homeowners because a stronger economy will translate into more buyers and this will cause the positive cycle to continue. All in a low rate environment. So, we have something to celebrate.

Real Estate News

The foreclosure crisis is showing signs that it’s finally fading away. The number of new foreclosure filings — which includes default notices, auctions and bank repossessions — dropped 15% to a total of 113,454 properties in November, according to RealtyTrac, an online marketer of foreclosed properties. That was the biggest monthly decline since November 2010, and foreclosure filings are now at the lowest level since December 2006. From a year ago, filings are down 37%. “The depth and breadth of the decrease provides strong evidence that we are entering the ninth inning of this foreclosure crisis with the outcome all but guaranteed,” Daren Blomquist, vice president at RealtyTrac, said in a statement. Along with general economic improvements that have made it possible for homeowners to stay on top of housing payments, people are also trying harder to hold onto their homes as housing prices continue to rise. “People have more to lose if they lose their home,” said Jed Kolko, chief economist at Trulia. While filings are much lower than the average of 300,000 filings per month during the height of the foreclosure crisis, they haven’t quite recovered to the level of around 86,000 that was seen in 2005 and 2006, before the housing bubble burst.”While foreclosures will likely continue to stage a weak rally in certain markets next year as the last of the distress left over from the Great Recession is dealt with, it is highly unlikely that there will be a foreclosure comeback that poses any major threat to the solid housing recovery that has now taken hold,” said Blomquist. Source: CNN/Money

For 75 percent of military families, owning a home is one of the most important things to accomplish upon returning from service, according to a Century 21 survey. Harris Interactive conducted the study of more than 400 responses of military members or spouses. “Home ownership is a top priority for many, but is especially significant to those returning from a tour of duty,” says Rick Davidson, president and CEO of Century 21 Real Estate. Eighty-eight percent of veterans said that owning a home makes them feel safer. Vets also say they have a strong desire for home ownership because they want to own their own residence (73 percent), establish a household (43 percent), and have financial security (36 percent). However, only 33 percent of military families say they look for a home within a year of returning from active duty. The biggest obstacles reported were the price of homes, the inability to come up with a down payment, and personal savings. For those who do a begin a home search, vets and their families report space—in terms of number of bedrooms and bathrooms—is more important than other specific features in finding the perfect home. Storage space, amount of square footage, outdoor space, and an updated kitchen were cited as the most important amenities. Source: Realtor® Magazine Daily News

Single-family new-home sales posted a sharp rise in October, up 25.4 percent from September, according to newly released Census Bureau data. That was a similar rate to last spring when the new-home market was taking off in recovery mode. Across the country, all regions posted double-digit gains in new-home sales in October. In the Midwest, they jumped 34 percent; 28.2 percent in the South; 19.2 percent in the Northeast; and 15.2 percent in the West. As sales gained, inventory levels fell to a 4.9-month supply. “The strong October results return us to the sales levels we saw earlier this year and negate the pause caused by the sudden jump in rates,” says David Crowe, chief economist for the National Association of Home Builders. “We expect sales to continue to rise as pent-up demand is released and first-time home buyers creep back into the market.” The average price for a new home was $321,700 in October, according to Census data. That puts it on par with the average price during the 2006-07 boom times. The average price for a new home was $321,700 in October, according to Census data. That puts it on par with the average price during the 2006-07 boom times. Source: National Association of Home Builders

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