QE III – a Push to Sell Houses to Investors?

Maybe you heard that we now have QEIII, a $85 billion dollar push by the Fed to help the Economy and the Housing Industry.  One headline we read said , “The latest stimulus from the Federal Reserve may spur more home sales,  just not to the intended buyers.”  Why is that?  Because Institutional Investors may see the purchase of these Mortgage Backed Securities as a way to build profit.  Investors would sell these bonds for riskier assets, and since the crisis struck in 2007, there’s plenty of risk in housing.

“To the extent that the so-called portfolio balance effect of quantitative easing causes investors to demand alternative assets – such as direct exposure to housing – home sales to institutional investors could increase,” said Paul Diggle, property economist with Capital Economics.

In many parts of the Country, the fastest improving housing markets are growing because of cash buyers.   In fact, more than 43% of Phoenix home sales in July were made with cash, up from 40% a year earlier.  These Investors are looking at the Annualized Rate of Return on Real Estate, versus other commodities – and the riskier the Investment, generally the better the return.

Traditional investors in mortgage bonds were already looking to buy up properties. Two Harbors, a real estate investment trust focused on agency and private-label MBS, is launching another company to acquire homes and rent them out.

The rental market is so hot right now, because young, potential home buyers are afraid to jump into the market and lose money like they saw others do since 2007.  Rental Rates are going up too – and so it is now a positive cash flow proposition for Investors.

“My colleagues and I are very much aware that holders of interest-bearing assets, such as certificates of deposit, are receiving very low returns. But low interest rates also support the value of many other assets that Americans own, such as homes and businesses large and small,” Bernanke said during a press conference Thursday.

Mortgage Interest Rates

The headlines announcing the QEIII also alluded to the fact that Mortgage Interest rates might go even lower with the FED move… and initially – we did see a rally.  But since then, rates have actually gone up some.  Additionally – the Fed knew that any drop was goign to be offset by an increase in guarantee fees Fannie Mae and Freddie Mac are set to charge in November. The fee increases will certainly be passed on to home buyers…

The economy is weak – and the Fed seems to agree with many that during the next 12 months the US will face the possibillity of another “dip” (read: Recession) because of what is happening in Europe.  It appears that the Fed will continue to purchase MBS (mortgage backed securities) for at least six months… things could change with the Elections, as Paul is not a big Bernanke fan.

“The bottom line is that the housing market will benefit from QE3. Just don’t expect it to mark a step change in the housing recovery,” Diggle said.

Looking for a way to purchase a home now, and take advantage of this historic opportunity like the “big” Institutional guys?  Call Steve and Eleanor Thorne – we have many no money down program options available for First Time Homebuyers!