Rates On The RiseRates on the Rise as Economy Improves
In the last week of May, Fed Chairman Ben Bernanke hinted that the Fed would cut back on its “Quantitative Easing” program. QE was initiated in efforts to stimulate the economy by buying Treasuries and Bonds, and Bernanke’s comments sent Stock and Bond markets reeling with volatility.

In the weeks following, the Dow Industrials experienced seven days of 200-point swings, ending lower on five of those occasions. By comparison, the blue chips had just four such moves prior to May 22 for the entire year.

As a reminder, the folks at the Fed are the nation’s policymakers who set the country’s interest rates and monitor its general economic health.

Bernanke ultimately confirmed “tapering” of QE at a late-June Washington news conference. And despite the average 30 year fixed rate increasing to just under 4 percent from 3.35 percent in early May, the rise was not “so dramatic” as he suggested the housing market may be strong enough to withstand higher borrowing costs.

Rates RisingEconomy Improving
Despite slightly rising home loan rates, the good news lies in the nation’s improved economic health. Home prices in 20 metropolitan areas have increased 10.9 percent in the 12 months through March, the biggest gain in seven years. Residential real estate has been bolstered by an influx of institutional buyers, limited supply and an improving job market, according to Bloomberg and a S&P/Case-Shiller index data released May 28.

Though home loan rates rose in recent weeks, they are still low by historical standards. Home loan applications rose in mid-June after falling for three consecutive weeks, and fence sitters locked in their rates for fear they will go higher.

International Influence
Adding fuel to U.S. Stock and Bond market fluctuations are European and Asian markets. May and June were relatively calm, but in Japan’s case the Nikkei Index moved into bear market territory in mid-June, causing markets here at home and in Europe to take notice.

In short, summer 2013 should be a very busy time for home buyers and realtors. Inventory is low and buyers are jumping on viable properties and locking in home loan rates. Housing is a key indicator of the nation’s economic health, and signs are pointing to a slow recovery.

This article was taken from my July 2013 issue of YOU Magazine. Click here to view the full newsletter. If you have any questions about your personal situation, please contact me.

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