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Are We There Yet?

Wednesday, July 10, 2013
by Don Roth

We refer to the point when the Federal Reserve will withdraw from the MBS market.

Job growth is the tipping factor, according to most market watchers. On that front, it appears the Fed will likely remain MBS buyers for a while longer. The Fed has targeted an unemployment rate of 6.5% before it seriously considers tapering QE3. The unemployment rate is a full percentage point above the Fed's target, so we still have a ways to go.

Job growth, therefore, is key. If the economy added 150,000 jobs monthly, the unemployment rate could fall to 6.5% in seven months. But there's an extenuating factor: participation rate. If more people enter the employment market, higher job growth will be needed to absorb more participants.

If we were to make an educated guess when the Fed will begin to taper its MBS purchases, we would guess that early next spring is the most likely scenario. So we don't expect rates to rise much higher, at least through the summer, but neither do we expect them to move lower either.

With that said, the probability of higher rates is higher than the probability of lower rates at this point; thus further buttressing our argument on the dangers of waiting.

Courtesy of Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

The Law of Diminishing Marginal Returns

Wednesday, June 26, 2013
by Don Roth

One reason we believe ultra-low mortgage rates are history is that the Federal Reserve is doing more, but it's getting less results.

Here's what we mean: Back when the housing bubble burst and the stock market crashed, all the Fed had to initially do was to assure markets that it would intervene with more money and low interest rates. Words alone were enough to placate.

Since then, the Fed has had to ramp up both rhetoric and action. In 2008, the Fed implemented QE1, which centered on buying $600 worth of mortgage-backed securities. In 2010, the Fed followed up with QE2, buying $600 worth of U.S. Treasury securities.

QE1 and QE2 were followed by QE3 in late 2012. QE3 featured the Fed committing to buy $85-billion worth of MBS and Treasury securities each month for an indefinite period of time.

Each successive action has had less impact on the margin, which is why we say the Fed is having to do more just to stand pat. This should be expected, because diminishing marginal returns are the norm. Here's a drinking analogy: Each successive glass of water has less impact quenching thirst, and then a point is reached where the next glass does more harm than good.

Now we hear chatter that the Fed is pulling back from QE3 – known as “tapering” in media circles. Should that occur, interest rates will rise. The odds of that occurring sooner than later is higher today than it was a year ago. After all, the Fed will reach a point where the next purchase of a mortgage-backed security will produce more harm than good. .

Courtesy of Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Harrisburg PA Mortgage Market Recap – March 5, 2013

Tuesday, March 5, 2013
by Don Roth

There was little to dislike about housing and the mortgage market this past week.

First, the former: Home prices continue to trend higher, as they've been trending for the past 12 months. S&P Case-Shiller reports that prices were up a very stout 0.9% in December for the 20 cities it covers. The year-over-year increase in the index closed at 6.9% for 2012, the highest increase since 2006.

New home sales also continue to adhere to an upward trajectory. Sales surged 15.6% to an annualized rate of 437,000 units in January, which easily beat the consensus estimate for 385,000 units. What's more, sales could have been higher. Like with existing homes, lack of inventory appears to be retarding new-home sales growth. Monthly supply fell to 4.9 months at the current sales pace from 5.6 months in December.

We're interested to see if existing home sales gain traction in coming months. It's no secret that inventory is scarce and sales are increasingly draining what inventory there is. That said, the pending home sales index points to higher sales, given that the number of contracts signed to purchase an existing home jumped 4.5% for February.

The most encouraging news of the week, though, centered on equity. Zillow finds that fewer homeowners owe more on their mortgage than their homes are worth. What's more, the improvement is significant. Zillow reports that two million borrowers were lifted above water in 2012. Looking at 2013, Zillow expects another million borrowers will find themselves above water by year's end.

This is obviously good news for the market. More homeowners with positive equity means more homes will be put up for sale, thus helping to alleviate the inventory shortage. The key to maintaining this important trend is continued job growth and a continued rise in home prices.

There is one trend that wasn't adhered to this past week, and that's the trend in rising mortgage rates. In fact, mortgage rates across most products actually reversed course, offering borrowers a chance to lock in at a significantly lower rate.

Low mortgage rates, low housing inventory, and high affordability means the trend in buyer demand will remain strong. In fact, we expect the demand trend to last through the year. Of course, it's worth keeping in mind that more demand will continue to keep prices adhering to their trend as well.

 Courtesy of Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Displaying blog entries 1-3 of 3

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