QE3 initiative to spur Job Growth and maintain low mortgage loan rates
The highlight for this week is the Federal Open Market Committee’s announcement to buy mortgage bonds at a rate of $40 billion per month until the end of the year to stimulate job growth and contain inflation. The Fed will further maintain its current policy of reinvesting principal payments from its holding of agency debt into agency mortgage backed securities. These newest policy measures will put a downward pressure on longer-term interest rates and support mortgage markets. The FOMC will closely monitor the economy and will employ new policy measures until there is an improvement in job market. In particular, the federal funds rate is expected to remain between 0 and 0.25% until mid 2015. This is great news for a quicker turn around for housing industry, which is on a moderate recovery path; and sweet news for property investors.
Consumer Price Index
According to National Association of Realtors, the rents component of Consumer Price Index rose by 0.2% in August leading to a gain of 2.6% on the year-over-year basis. Rising rents directly improve Cash Flow and influence rental property investing. The main CPI index rose by 0.6% in August compared to last month.
August Foreclosures – Inventory Pipeline for investors
Illinois has the largest number of foreclosures for August, according to Realty Trac’s Foreclosure Report with 1 in every 298 housing units for a total of 17,781 properties. The number of foreclosures indicates future inventory for investors. In addition to Illinois, other HomeUnion Cash Flow zone states GA, PA, MO, AL and TN reported 9,478, 4662, 2396, 1880 and 2384 foreclosures respectively.
Consumer Sentiment and Mortgage Rates
According to a monthly survey conducted by Fannie Mae, US consumers remain optimistic about the housing market though they are unsure of the economy in general. Roughly 73% of the respondents surveyed say that it is a good time to buy. It is not a surprise then that residential investment continues to contribute to GDP growth.
The 30-year fixed mortgage rate averaged 3.55%, and the 15-year FRM is around 2.85% for this week.