Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. As always, let’s first take a look at interest rates which have again remained unchanged from last week. A client looking to purchase or refinance a home with a conventional thirty year fixed rate mortgage can expect an interest rate of approximately 3.625%. If you are in the market for an FHA mortgage, that rate goes down to 3.375%, which is of course a great deal for someone who needs to put a little less money down on their home.
In major economic news, the Fed announced last Thursday another round of Quantitative Easing to help stimulate the economy. I often get asked what this is exactly, and the short answer is that it’s an unconventional monetary tool used by central banks to stimulate the economy. Normally when the economy is having difficulty, the Federal Reserve will simply reduce short-term interest rates in order to spur more lending and spending. However, right now the Fed has cut interest rates as low as they can go and the economy continues having difficulties. So their second option is to try quantitative easing. Since the Federal Reserve can essentially create money, it can buy assets such as long-term treasuries or mortgage-backed securities from commercial banks. This helps to inject funds into the United States economy and reduces long-term interest rates further. When long-term rates go down, investors are more likely to spend their own money.
So what did the Fed actually say and what are they going to do? Well they have announced that short-term interest rates will remain low until mid-2015. Secondly, the Fed will buy up to $40 billion worth of assets each month between now and the end of the year, but unlike the first two rounds of QE, this new round of purchases will be more open-ended. Essentially they are stating that they will keep buying assets as long as it is needed to shore up the US economy.
In local real estate news, I thought it would be worth mentioning that year-to-date there have been 2,417 properties sold in New Hanover County. During the same time period last year, there were only 1,920 properties sold. This means that our county has seen a significant increase in closed sales this year. While I couldn’t say for sure, I would imagine that continued low interest rates and stabilized home prices have certainly helped this recovery along. Considering the amount of our local citizens who make their living based on the housing economy, this is good news indeed. Well that’s all for this week and until next week, Be Blessed and Numbers 6:24-26 be on you.