Interest Rates

Fed Tapering & Interest Rates

It is, without question, a fantastic time to buy a home.  I know, I know, I'm a realtor and you expect me to say that. I don't have time right now to dive into why I feel it's a great time (market, cyclical, etc...) to be a buyer, but if you are interested, give me a call.

What I do want to talk about quickly is interest rates and the news yesterday of the Fed tapering.

http://live.wsj.com/video/why-should-the-fomc-start-tapering-because-it-can/78E66E6A-024B-4E03-8D45-E8C0778A9542.html

http://www.youtube.com/watch?v=Fo4VNIBIJsQ

While it was a surprise that the Fed will be tapering its monetary stimulus, the market was pleased to hear that the Fed pledges to keep interest rates low until unemployment falls under 6.5% (currently US unemployment stands at 7%).  This was considered by many as very positive news for the residential real estate market and I agree with them for the most part. The difference I have in opinion has to do with my own market in Greenwich Connecticut.

In our small, but very diverse, town here we have seen some areas of real estate that can't sell quicker (Old Greenwich and Riverside priced under $3m) and areas that are fairly stagnant (back country between $2m and $6m).  We have seen cash, well financed, builders sweep in and buy land close to the town centers (downtown Greenwich/Greenwich Avenue & Old Greenwich/Sound Beach Avenue). In addition, inventory is rock bottom - though this is mid-December and that is fairly typical.

All signs point to a great 2014.

canada-cut-interest-rate

 

One area, though, that I am concerned about are those buyers who have been sitting on the fence (in some case for years) waiting for the right home, the right time, the right everything.  When asked why they haven't jumped the quick response has been "because we haven't found the right home." But upon further conversation you hear - "market isn't moving the way that it did years ago and interest rates are holding low, so Ill just wait another year, keep renting and save up more money." Saving up more money is always a good thing, though this post is about the real estate market and what is happening to prices.

You see, these on-the-fence buyers consists of a fairly large section of the Greenwich real estate demand. I may be in the minority here, but I believe that a quick sharp uptick in interest rates (just enough to scare many off the fence) could be a great thing for real estate in Greenwich.