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7 Things New Homeowners Need To Do

by Don Roth

Your first year as a homeowner is kind of like the first year of a marriage. There’s the honeymoon phase, where the fact that you never have to pay rent again feels freaking awesome, but there are also a bunch of new home buyerresponsibilities. You’re building a foundation that will last for decades to come, and small decisions can have large effects on the rest of your life.

People love to give relationship advice, but your friends and family may not be rushing to share tips on being a new homeowner. So, we’re going to help you out. Here are seven things to do during your first year of homeownership:  

1. Prepare for breakage. Being your own landlord has a lot of perks (you can kiss that whole “no pets” policy goodbye!). But it’s less exciting when your dishwasher craps out and you have to foot the bill. You can’t stop things from breaking, but you can set some cash aside to pay for unexpected replacements. As a general rule of thumb, you want to save 1-3 percent of your home’s initial price each year so that you can afford unexpected problems.

2. Form an inspection habit. Detecting certain issues early (like a rodent infestation or mold growth) can be the difference between a simple fix and an unaffordable disaster. Take the time to properly inspect your basement, attic, insulation and roof at least once during that first year. Then, make an annual habit of it!

3. Buy a bunch of furnace filters. Changing your furnace filter regularly is one of the easiest ways you can save money (since your furnace will last longer) and improve your health (since the air you breathe will be cleaner). But remembering to pick up a filter from the hardware store every few months isn’t always so easy. Nip that problem in the bud by purchasing in bulk! Take a look at your furnace and write down the filter size, then order enough to last for a few years (the exact number you need will vary depending on the type of furnace you have).

4. Get to know your appliances. Just like cars and televisions, the appliances in your home have different life expectancies. For example, furnaces usually last for 15-20 years, but water heaters tend to start wearing down after 10 years. It’s worth figuring out how old each appliance in your house is because then you can plan ahead for their replacements. A new furnace can cost as much as $5,000, so a little heads up can really help!

5. Take advantage of tax credits. Owning a home opens up a whole new world of tax incentives! For example, you can receive credits for things like installing solar panels or purchasing Energy Star appliances. Do some research early on about the different tax credits that may apply to you, and then reap the benefits when tax time rolls around! Tip: In general, your taxes will be much more complicated now that you own a home. It may be worth hiring a professional accountant (if you haven’t already) to guide you through the process.

6. Start keeping records. Every improvement or repair you make to your home – from adding caulk around your bathtub to installing a new roof – will increase its resale value. Make sure all of your hard work pays off by keeping track right from the start! Tip: If you’re not crazy about creating an enormous filing cabinet of records, BrightNest members can store their home details online (for free!) in the Homefolio.  

7. Beef up your insurance. Your new home is probably the most valuable thing you own, and you need to protect that asset! Take a good look at your homeowners insurance policy and look for any relevant gaps (this is a situation where professional advice can be really helpful). Two areas of coverage to consider are flood and fire protection, which aren’t always included in standard policies. Tip: It’s also worth taking another look at your car insurance because you now have a much bigger asset (your home) to lose in the event of a lawsuit.    

Information from BrightNest.com.

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.

 

Job Growth and Interest Rates

by Don Roth

Last week, we mentioned that Federal Reserve monetary policy is, in essence, closely tethered to job growth: The Fed won't reign in loose monetary policy and low interest rates until the unemployment rate is around 6.5%.

The problem, as we noted, is that the unemployment rate is a moving target. Yes, unexpectedly strong job growth can occur, as what occurred in June, with payroll growth hitting 195,000 for the month, roughly 25,000 higher than most estimates. At the same time, unemployment held steady at 7.6% because more people have entered (or re-entered) the job market.

So it would appear the Fed would be firmly committed to holding interest rates low for the foreseeable future until 6.5% unemployment is achieved.

It's becoming more likely that's not the case. The minutes from the latest meeting of Federal Reserve policymakers show that half want to wind down quantitative easing (money printing, low interest rates) by the end of the year.

Given the unimpeded rise in interest rates over the past two months, it's become obvious many credit-market participants are expecting the Fed to wind down sooner than later.

The point we need to emphasize is that waiting for 3.5% 30-year fixed-rate mortgages will likely mean waiting for quite a while. At this point, 5% is the more likely future rate, which makes today's rates, in the mid-4% range, look attractive in comparison.

 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 – July 16, 2013

by Don Roth

Mortgage Rates Hit Two-Year High

We know more than a few people who are smacking themselves on the forehead these days, frustrated they didn't take advantage of the mortgage rates that prevailed two months and 75-basis points ago.

Frustration stems from holding out for another 25-basis point drop. You may know it by the popular idiom “penny wise, pound foolish:” Hope to save 25-basis points, but loose 75-basis points in the process.

Of course, no one knows with certainty where mortgage rates are heading, but whenever a market has been in a sustained trend, and mortgage rates were in a sustained downward trend for years, the probability grows that each successive day will bring a reversal of that trend. (Economists refer to this phenomenon as Minsky's “Financial Instability Hypothesis.”)

To be sure, mortgage lending rates are higher, but not unreasonably so. Today's rates still remain attractive from a historical perspective.

The good news is that there have been a few positives associated with rising rates. Though they have slowed refinance activity considerably, they have prompted more homebuyers into action, for fear rates could go higher still. We're not surprised; we've noted many times in the past that anticipation rules people's actions.

With all the focus on mortgage rates over the past few weeks, it's worth noting that the housing market nationally is as healthy as it has been in years.

CoreLogic's latest data on distressed properties reveal just how healthier the market has become. The inventory of properties in a state of foreclosure fell 29% year over year in May, which means fewer than 2.3 million mortgages – or 5.6% of home loans – remain seriously delinquent. This is the lowest level since December 2008.

At the same time, Lender Processing Services data show the number of borrowers who remain underwater fell 47% from the first quarter of 2012 to the first quarter of 2013, which means the percentage of underwater borrowers has dropped to 14.7% of all active loans. This, too, is a multi-year low.

Rising home prices and rising consumer demand for homes will continue to reduce distressed inventory and lift more homeowners into positive equity. When stronger job growth is factored in, we're looking at a very healthy outlook for both existing- and new-home sales over the next 12 months.

With that said, many pundits remain focused on rising mortgage rates, but we believe unduly so. As long as the economy continues to improve and create jobs, the housing market will continue to improve regardless if rates rise.

We were in the minority a year ago when we said mortgage rates were no longer the key variable in the recovery. It appears we were right on that account.

 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.

Tips For the Solo Mover

by Don Roth

A lot of people may say they’ll lend a hand when it’s time for you to move, but when the big day finally arrives, good help can be hard to find. If your friends and family pull a disappearing act on moving day, don’t stress! Most items in your house can be moved with just one person.

moving boxesHere are six tips for the solo mover:

Safety Note: Don’t try to be a hero! If you don’t feel in control of a heavy piece of furniture, don’t move it! A hospital bill is a lot more expensive than a mover’s fee, and sometimes hiring help is the only safe option. If you’re on a budget, check out these eight ways to cut your moving costs by $100 or more.

1. Strip it. If you struggle to shift your dresser just a few inches, getting it down a flight of stairs can be downright intimidating. But, a lot of heavy furniture can be disassembled, which makes it much lighter and easier to move. Take out drawers, remove cushions, mirror or glass tops, knobs and feet. Basically, anything that’s screwed on can be taken off to lighten the load. Tip: Use an ice cube tray to keep track of small parts during the move.

2. Rent moving gear. One dolly can prevent a lot of sweat and frustration (and possibly a hernia). Plus, the cost of renting a few moving tools for the day is a drop in the bucket compared to hiring professional movers. Visit your local hardware store and check out their furniture jacks, scissor lifts and dollies. They’ll do the heavy lifting for you!

3. Don’t lift, slide. You could rent commercial sliders, but a large blanket or throw rug all work just as well! Lift the legs of your furniture one at a time and put them onto your makeshift sliders. Then, drag! Patience is key – move slowly to avoid damaging your floor, walls or furniture. Tip: If you get the furniture onto sliders, but still can’t move it with your arms, use your leg strength! Lie on your back, place your feet on the furniture and push with your legs.

4. Walk it out. If you don’t have a slider handy, and you’re moving a chair, use it’s legs. It’s time consuming, but you’ll avoid the heavy lifting! Put the chair on its back two legs and “walk” the chair left foot and then right foot. You’ll eventually get it out the door.

5. Remove the hinges. If you ordered some furniture and then had it assembled inside of a room, getting it outside can be tricky! Before you think about sawing that entertainment center in half, try taking the doors off of their hinges. You’ll gain a few inches of wiggle room – which can sometimes be enough to slide that bulky furniture right on out!

6. Beware of the second floor. If you have extremely heavy pieces of furniture on a second or third floor – such as a big sofa or desk – it’s really not safe to move it by yourself. This is because once you angle something down the stairs, gravity will actually increase the weight of the furniture, and it’s very easy to lose control!

Information from BrightNest.com.

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.

Are We There Yet?

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.

Harrisburg PA Mortgage Market Recap – July 10, 2013

by Don Roth

Mortgage Rates Take a Breather

You would think mortgage rates would need a breather after experiencing their biggest jump in 26 years. In little more than a month, rates on most lending products have risen at least a full percentage point.

This past week, it was all quiet on the mortgage front. Rates were mostly staid, as concerns over the Federal Reserve “tapering” its purchases of mortgage backed securities (MBS) waned. As we’ve noted frequently in the past, the Fed's demand for these securities keeps yields low, which, in turn, keeps mortgage rates low.

We've also reported over the past few weeks how rising rates have taken the steam out of refinances. Steam continues to escape: Refinances dropped another 16% last week and are at their lowest level since July 2011. The refinance percentage of market activity has dropped to 64%, which is the lowest percentage since May 2011.

Purchase activity remains relatively robust in comparison, falling 3% for the reported week. But when the longer term is considered, we find purchase activity is up 12% year over year. Despite the spike in mortgage rates, home affordability remains high. The good news is that higher financing costs haven't materially dampened enthusiasm to buy and finance a home.

The question is how long will affordability remain high?

Prices have moved considerably higher, to be sure. CoreLogic's latest home price index shows home prices nationally posted a 15 th consecutive monthly increase in May. The latest increase pushes the year-over-year increase to 12.2%, the largest annual increase in over seven years.

What's more, it appears we can look forward to additional price gains. Clear Capital forecasts the housing market could outperform historical average price gains by 4% to 5% for the remainder of 2013.

Prices are obviously an important variable in affordability. Rising prices will make homes less affordable. Indeed, price gains have lowered affordability in many local markets ( San Francisco and New York City come immediately to mind). On the other side of the coin, price gains have pulled many owners with negative equity into positive territory.

Rising prices are also helping to alleviate the supply shortage. Home inventory is up 16.7% year to date, and will likely continue to rise with rising home prices. A basic economic law states supply rises and falls with prices; rising prices induce more supply to come to market. That's exactly what we are seeing today.

But more supply will eventually slow price growth. That's not a bad thing. Today's double-digit price gains are unsustainable, because they far exceed economic growth. Yes, prices are starting from a deep hole in many markets, but eventually price growth must moderate, lest we find ourselves in another housing bubble.

A sustainable price-growth rate is one that matches inflation and economic growth. A rate above that is sustainable for only a limited time, usually no more than two or three years.

For now, keep in mind that higher home prices and higher lending rates will eventually impact affordability. We might sound like a broken record on this point, but it's worth repeating: waiting is the risk in this market.

 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.

Clearing Out The Clutter

by Don Roth

Are there unused items in your house that you’re reading to toss? Before clearing out the clutter from your home and throwing things away, consider this: Americans discard almost a TON of trash per person, per year. Stop the trash madness! Unloved MP3 players, under-worn rain coats and more could be put to use someplace besides the nearest dumpster.

  1. Electronics. In general, it’s best to avoid throwing electronics away. Once they’re in the landfill, they can leak toxic chemicals like mercury and lead into the ground. Despite that, they are still piling up to the tune of over 2 million tons per year! If your device is still working, it can be donated to senior centers, community organizations and children’s charities. Broken devices are in demand, too – they can often be refurbished and contain valuable parts worth harvesting. For more information, check out the EPA’s Electronics Donation and Recycling directory. Also, Best Buy accepts many items (no matter where they were purchased) and Dell has partnered with Goodwill to take unwanted electronics.
     
  2. Magazines Before you transfer that mountain of Vanity Fair or National Geographic magazines to the recycling bin, consider taking things a step further and passing them on to new sets of eyes. Hospitals, senior centers and homeless shelters often welcome old magazines. Also, contact local children’s charities that may use them for arts and crafts projects. You can even offer them up via a “Free Stuff” posting on Craigslist – your trash could be someone else’s treasure!
     
  3. Clothes. Fabrics like polyester, rayon and cotton make up 5 percent of all landfill waste. But, unless a piece of clothing is ruined beyond repair, it’s donate-able. Major donation centers like Goodwill and Salvation Army are popular recipients of unwanted duds, but you can also sell them at consignment stores. There are specialty charities like Donate My Dress that take used women’s formal wear and Dress for Success that welcomes women’s business attire. Tip: If you have high-quality vintage gear, try hawking it on Etsy.
     
  4. Pet supplies. Animal shelters often run low on essential items. These include actual pet products like toys, crates, leashes and collars. Other household staples like blankets, towels, storage containers and office supplies are also very helpful to them. It’s best to contact your local Humane Society to see what they need before bringing all of your stuff to them. (They often post this information on their website, too.). Tip: Be sure to wash your items thoroughly before donating them to creatures in need.

Information provided by BrightNest.com.

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.

Full Steam Ahead

by Don Roth

Sales of new and existing home are gaining momentum: More supply is coming to market and prices continue to rise. On the latter, the S&P/Case-Shiller Home Price Index shows prices up 1.7% in its 20-city index month over month; the year-over-year rate is exceptionally strong, at plus 12%.

But will rising mortgage rates derail the recovery?

We don't think so. Many people have the perception that rising mortgage rates lead to lower (or at least less growth) in home prices. The rationale goes that rising mortgage rates lower affordability, so home prices fall to compensate for higher financing costs.

The perception was recently refuted in the New York Times. Douglas Duncan, chief economist at Fannie Mae was quoted to say, “There’s no strong correlation between interest rates and home prices.”

Mortgage rates rose sharply in the late 1970s, but home prices continued to rise too. In the 1990s, rates were relatively flat and home prices continued to move higher. In 2007 and 2008, both mortgages rates and home prices fell. In 2013, rates have increased and so, too, have home prices. In other words, there really isn't much of a correlation.

To be sure, mortgage rates matter, but they're less important than many people believe. Job and economic growth are by far the more important variables, and both have been improving in recent months.

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 – July 2, 2013

by Don Roth

The Power of Expectation

Mortgage rates continue to be the lead story in the financial press, and for good reason – rates are up a full-percentage point over the past month and are now at July 2011 levels.

It's understandable that the spike in mortgage rates would slow refinance activity. Indeed ,that's been the case: Refinances have dropped considerably over the past month, and the latest weekly data show yet another drop, with activity falling 5%. Refinances are now at a two-year low, and their percentage of overall lending has dropped to 67%.

Purchase activity is a different story: Purchases were up, rising 2% from the previous week. Total purchase applications are actually up 16% year over year, indicating homebuyers have yet to be put off by rising mortgage rates.

We've written frequently about expectations. If buyers expect lower prices, they'll frequently (but not always) wait for lower prices. We saw a lot of that behavior when mortgage rates were trending lower. Many borrowers, especially on the purchase end, would wait and wait and wait. (Refinancers were more willing to act, knowing if rates continued to drop they could refinance again.)

On the other side of the coin, people tend to be spurred into action by rising prices. They don't want to pay more tomorrow for what they can get cheaper today. We've seen that in the purchase market over the past month. Home prices have been rising steadily over the past 18 months, but now mortgage rates are rising too. More borrowers (and most lenders, for that matter) don't expect to see a return to the ultra-low rates of a couple months ago. Many believe the trend has shifted and rising rates are the new norm.

We think rising rates are the new norm too. We say that because credit markets are much more sensitive to the Federal Reserve and the prospect of it curtailing its mortgage-backed securities (MBS) purchases.

When the Fed curtails (or even hints at curtailing) its purchases, interest rates will rise, which means today's bond investors will suffer losses. (When interest rates rise, the price of fixed-income investments like bonds fall.) Obviously, these investors don't want to suffer losses, so they'll sell if they think demand for bonds and fixed-income securities will fall.

Of course, we can't predict with certainty whether mortgage rates will move higher in the near future. After all, a significant macro event – a major terrorist attack, a large bankruptcy, a European bank run – could spur money to flow back into haven investments, like U.S. Treasuries and MBS.

That said, we see higher rates and more volatile rates as the likely scenario. For this reason, we continue to say that waiting is the real risk in this market.

 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

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.

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