QE3 Tapering - Affect on SD Housing

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Submitted by lookingtobuy on August 5, 2013 - 3:26pm

With all this talk about possible QE3 tapering in September/December/Next Year, how do you feel it will affect rates and SD housing? I've noticed that absorption rates has slowed considerably within the past two months and wasn't sure if it was due to seasonality, or interest rate bump. Also, I was wondering how everyone feels about the current price level. Will prices continue to rise/remain stagnant/lower? Your opinions are appreciated, and although it's impossible to time the market, I was wondering where on the curve everyone feels we are at.

Submitted by The-Shoveler on August 5, 2013 - 4:01pm.

Just my 2-cents.
I think the SD market is a lot more sensitive to interest rates above 4.5% - 5% than most think.

But at the same time I think we have seen that if prices go down, sellers will go back into hiding unless they are forced to sell for one reason or the other.

Submitted by SK in CV on August 5, 2013 - 4:17pm.

When were sellers in hiding?

Submitted by The-Shoveler on August 5, 2013 - 4:35pm.

I got no hard stats but From 2008-2009 then from 2011 to early 2012, there were a lot fewer organic listings compared to 2013 IMO.

There were a lot more REO's however.

Submitted by spdrun on August 5, 2013 - 4:44pm.

SD market is sensitive period. Look at the graphs through the $8000 credit, then through the period of low interest -- much more volatile than the East Coast.

If prices go down, we'll see mostly short-sales (again) -- good for pigglords I guess since organic buyers don't want to wait 6 mos or more for bank approval.

Submitted by CA renter on August 11, 2013 - 1:43am.

The-Shoveler wrote:
Just my 2-cents.
I think the SD market is a lot more sensitive to interest rates above 4.5% - 5% than most think.

But at the same time I think we have seen that if prices go down, sellers will go back into hiding unless they are forced to sell for one reason or the other.

Agree with the first paragraph, but feel that sellers might come out of hiding if interest rates go up **IF** they feel that housing prices have reached a medium/long-term peak at this point.

It might have been worthwhile for a seller to have waited out the rather strong price surge that resulted from low interest rates and unusually low inventory levels. But if there is a perception that rates or inventory levels will begin to rise continually for some time, I believe that more sellers will start listing their properties.

Submitted by paramount on August 11, 2013 - 10:28am.

Does anyone really believe the fed will wind down QE?

Submitted by spdrun on August 11, 2013 - 10:43am.

In the short term, sure, why not? We've already had several breaks in continuity. Besides, the Fedheads need to create another buying opp for their corrupt cronies.

Submitted by paramount on August 11, 2013 - 12:47pm.

spdrun wrote:
In the short term, sure, why not? We've already had several breaks in continuity. Besides, the Fedheads need to create another buying opp for their corrupt cronies.

That's a good point: create another crisis...?

Wouldn't that hurt the dems in the 2014 midterms?

Submitted by spdrun on August 11, 2013 - 1:02pm.

You're assuming that most of the people on the Fed board are of Democratic persuasion. Besides, there's plenty of time between now and Nov of 2014.

Submitted by paramount on August 11, 2013 - 1:14pm.

I'm assuming the dems have the power to appt the next fed boss.

Submitted by Jazzman on August 11, 2013 - 2:07pm.

It would seem to depend on who you speak to. Some economists talk of a huge bond bubble, which will lead to a big unwind. Others, that inflation is key to interest rates rises. If June was anything to go by, then how many pension funds will still be sitting in bonds by September may telling. Tapering may be fine in theory, but the herd mentality seems to dictate what happens in practice. I think inventory will still dictate home prices as much as interest rates, and that the alignment of those two planets is what will drive home prices down. In the mean time, I'd be more worried about fixed income investments.

Submitted by paramount on August 11, 2013 - 2:14pm.

Schiller: No direct correlation between interest rates and home prices:

(Aug 2013 video)

http://www.youtube.com/watch?v=azP7NKQp1...

Submitted by spdrun on August 11, 2013 - 3:16pm.

Paramount: there isn't just one person running the show there.

Submitted by CA renter on August 12, 2013 - 2:52am.

paramount wrote:
Schiller: No direct correlation between interest rates and home prices:

(Aug 2013 video)

http://www.youtube.com/watch?v=azP7NKQp1BE&feature=share&list=UUG-G8LLr38fQUNZU8K0t-EA

That's not really what he said, though. He has always danced around topics when doing interviews over the years, never really wanting to commit to any one answer.

He said there were many issues that could cause housing prices to come down, and that many of these were quite probable. "Normalized" interest rates were one of the possible causes of a house price decline.

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