The Fed's GasolinePosted on Friday, September 14th, 2012 at 2:31pm.
To live and watch the MB market this past year has been to see individual homes' sale prices go notably above expectations repeatedly.
Supply has been low, demand high. Quick bidding wars are fairly common for good properties at almost all market tiers. Some listing agents plan for one once the property hits the MLS, announcing a "process" for handling multiple offers – they'll review them just a few days after the launch.
Low mortgage rates have been a part of the story in 2012, if not the whole picture. And now the Fed is promising low rates beyond the planning horizon, several months at least. It's crazy to say, but rates may go down.
One thing we've been saying to clients for a while is that these historically low interest rates are a kind of surprising benefit for buyers in markets like MB.
These low rates are supposed to help struggling markets nationwide, foreclosure-prone wastelands, crappy bubble-era developments, or new construction in underdeveloped pockets of the USA. Oh, the Fed really wants new construction.
But the mortgage market is national – you can't target challenged markets. So low rates, and a revived stock market, have made it easier for well-qualified MB buyers to enjoy 3%-range rates when they buy. That is half what would have been called outstanding just a few years ago. This can make some buyers less price-sensitive.
Former President Bill Clinton, who doesn't normally get much play here at MBC, said in his recent Democratic convention speech: "People are practically paying us to borrow money." True.
So Milton Friedman is dead, Alan Greenspan is (semi-)disgraced, but the recover-at-any-costs new Fed is pouring gasoline directly on the housing market, hoping that will drive new economic activity.
Meantime, folks who'd like Manhattan Beach homes get the benefit. (Not incidentally, so do sellers.)
A near-guarantee of long-term low rates beyond the horizon? Is that going to mellow out anyone?
|No relation to QE3|
** What makes a bubble market? When prices become disconnected from value. Are we there yet? Are we going there? Discuss.
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