The Fed Takes The Training Wheels Off| They Are Done Spending

Most of you have probably seen in the news that the Federal Reserve has recently sewn up it’s $1.25 Trillion purchases of Mortgage Backed Securities. What does that really mean for the average real estate professional? Great question.

Here is the way I think this will play out.

The likely scenario that I see happening is a slight increase in interest rates. I don’t see the Fed getting to drastic and raising the rates several percentage points in an effort to keep the peace with the financial markets. An already slow real estate industry (generally speaking, if you have cash, and lots of it, you are having a field day right now), is going to see rates for conventional loans creep up and make just a little bit harder for a whole group of people to afford purchasing a home.

I am sure a lot of you reading this think that I am anti- Real Estate by some of my posts and other websites I run. Nothing could be farther from the truth. I love the real estate industry, however, the current economic conditions and policies are making it difficult to be super happy about the industry and the direction the entire economy is heading right now. There are no signals in the economy that point to the real estate market turning a corner any time soon. By the time all of the economic conditions return to a favorable position as far as the real estate industry is concerned, there is a very good chance that at least 3-5 years will have passed.

And there in lies my uneasiness with having all of my income eggs in the real estate basket and why I think that right now REAL ESTATE STINKS. You can agree or disagree with me, but the facts are the facts. The media and government are going to try to paint an “all roses” picture, but the realities and underlying fundamentals are what they are.

So am I full of it? A Lot, A little, Or Maybe Even A Little Right On

Let me know by commenting,

Eric McMillan

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Tagged as: Conventional Loans, Economic Conditions, Economy, Eggs, Eric Mcmillan, Favorable Position, Federal Reserve, Financial Markets, Good Chance, Interest Rates, Little Bit, Mortgage Backed Securities, Peace, Percentage Points, Real Estate Stinks, Realities, Roses Picture, Signals, Training Wheels, Trillion, Turning A Corner